Singapore investment: Risks of Dollar-cost-averaging
Contributed by
www.PropertyBUYER.com.sg
(Authors or websites, if you would like us to post your articles, please drop us a note)
Contact them:
Tel: 6100 - 0608
sms: 9782 - 8606
Email: loans@propertyBUYER.com.sg
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What is dollar-cost-averaging?
Many people mistake investing in Singapore as naturally given them safety. In fact, no
matter where you invest in, you will still need to do your home work.
In shares, dollar-cost-averaging is used to lower the average cost of your
purchase.
Just as an illustration using shares: -
Jan 2009 - 1000 shares at $5.00
Feb 2009 - 1000 shares at $4.00
Mar 2009 - 1000 shares at $2.00
The average cost of the above share = ($5.00 + $4.00 + $2.00 )/ 3 = $3.67
The aim of dollar-cost-averaging is to mitigate a wrong timing of purchase. If
you purchased something at $5.00, the prices have now fallen, in order to
lower your overall average cost of purchase, you will have to buy more at
the lowered prices.
RISKS of dollar-cost-averaging
When the shares have fallen, people who blindly believe in dollar-
cost-averaging will put more money into the company whose shares have
fallen.
Then the shares fall further, he/she buys more, it falls further, he/she buys
even more. So much so that the cost of the shares is very cheap. If the
share price rebounds, the person can become very rich.
INFORMATION ASSYMMETRY
However, in many cases, there is a reason why the share prices have fallen.
We almost always have to assume that the insiders know better than we do.
It can mean that the company is seriously in trouble.
Despite years of making the market more transparent, efficient and with
timely dissemination of information, it is still the insiders and their inner circle
that knows what is going on in a company best.
Buying the shares when insiders are dumping is the easiest way for a
person to loose an entire fortune.
SO WHAT SHOULD WE DO?
The best way to do is to re-assess the company's financial fundamentals,
macro and micro economic fundamentals to establish a NEW fair value for
the company's shares and it's potential.
Once you have established that, you can then decide whether to throw more
money into the company.
If you have thrown in money in the past and it is lost, you must be able to let
go. So the key thing to do is: -
When markets rise, do not greed. (Do not rush to buy more without proper homework)
When markets fall, do not fear. (But do not become a "rambo" either)
In both cases, do your homework, then act on it. And when we say ACT on
it, we don't just mean, BUY or SELL. It could also mean do Nothing.
Some people emphasize and quote Warren Buffet, "When others are greedy, be fearful,
when others are fearful, be greedy" this is simply a contrarian style of investing. Do
not go into it blindly. Because what you didn't know is, Warren Buffet's been watching
and observing certain shares for YEARS waiting for the right moment. These shares may
have been consistently over-priced, but are nonetheless good companies. When these
shares suddenly and without reason are being dumped because people are fearful of the
general market, that is when Warren Buffet acts.
Do not use Warren Buffet's maxim when you only know half the story and didn't do your
homework. You will BET YOUR FARM and LOSE IT.
The key thing is, never take one or two simple concepts and treat it as
universal truth and apply it indiscriminately to all situations. There is no free
lunch!
Luckily physical properties have less the the problems associated with shares when
applying Dollar cost averaging.
www.PropertyBuyer.com.sg
is a Researched Focused Mortgage Advisory that helps individuals
refinance or obtain the best fit home loans. We do not simply emphasize
cheap rates, but rather focus on a risk versus savings approach.
You can approach us to evaluate refinancing of your home loan. The service
is free to you as banks pay us separately. You can click on "About us" to
know more about us.
You have nothing to lose and everything to gain.
www.PropertyBuyer.com.sg
also focuses on helping property buyers get the right property investment by checking
checking and ensuring a fair valuation so that they do not overpay or get excited when
an agent tells them the property is hotly in demand.
Find the right home loan package that fits the needs of the home property buyer,
process the loan till approval.
When the loan is finally approved, www.PropertyBUYER.com.sg helps you to check the
letter of offer to make sure the terms are exactly as agreed prior to the offer and
spot major mistakes and omissions.
(Some home owners were promised some terms and pricing, but when the offer came, there were some mismatch. One of the home owners signed on it and only to realize months later that instead of a No-lock in period, he was locked-in for 3 years, with a penalty of 1.5% on FULL redemption. His property was 700k and his loan was only 400k. In case he were to get an offer to sell his property within 3 years, he would incur a $6,000 loss)
ABOUT US Contact us
Tel: 6100 - 0608 sms: 9782 - 8606
Email: loans@propertyBUYER.com.sg
Contact us
http://www.propertybuyer.com.sg/contactus.php
Read More articles
http://www.propertyBUYER.com.sg/articlesnews.php
Understand Property Investing and Sub-prime
http://astore.amazon.com/httpwwwpro0ad-20?%5Fencoding=UTF8&node=55
Refinance and Mortgages DIY steps
http://www.squidoo.com/Singapore-homeloan
Thursday, April 30, 2009
Sunday, April 26, 2009
Singapore Investment: Understand your irrational investment behaviour
Singapore Investment: Understand your own irrational investment behaviour.
If you think you are rational every time you make a decision? You cannot be more wrong. The brain (specifically out brain) fools us most of the time. And almost predictably, like a computer program, our human decision making follows a certain pattern.
We think we are in control, but often the choices are made for us, without us even knowing it.
For example, you offer your child Milk or water, most child will likely choose Milk. But if you ask your child what he/she wants to drink, you are in trouble... It will end up with... "Waaa I want Cola, I want grape juice....!!!! I want the super duper power ranger drink because it gives the special doll."
Similarly, in finance and investments, you choices are often skewed by your brain.
You will also understand why people flock in herds, because people feel safer. Therefore in order to invest well, it is not about intelligence, it is also about temperament. Why some are more rational than the others? It's all got to do with how the brain is wired and how much of certain chemical signals we have in our brain that controls the Fight or flight response.
Thursday, April 23, 2009
Going Back to Australia?: Australia Property Update April 2009
Article brought to you courtesy of Rich Harvey of www.PropertyBuyer.com.au
1. MARKET UPDATE
The Reserve Bank again cut the cash rate this month by 0.25% with
the cash rate now sitting at 3%, the lowest they have been since 1960.
Unfortunately the big four banks haven’t passed on the full rate cut
with the National Australia Bank not passing on any cut and the other
three major banks passing on a cut of just 0.10% rather than the full
0.25%.
Market expectations as at market close on the 7th April 2009 show an
expectation that the cash rate will bottom at 2.37 percent in October
this year. Just how much of the further anticipated 0.6% cut gets
passed on is anyone’s guess however, if this week’s action (or
lack thereof) by the banks is any indication, it appears unlikely the
full benefit would be passed on. It also seems apparent that gone are
the times where we see big cuts by the RBA, it appears they will now
be taking a more measured approach to any further rate cuts.
It isn’t all bad news though, interest rates are still lower than
they have been in more than 45 years and with petrol prices down from
last year’s peak, the average home owner is enjoying having
significantly more disposable income than they did during mid 2008.
Whilst there has been uproar about the banks not passing on rate cuts,
anyone with a mortgage must remember that nothing is certain and you
always need to account for potential changes to interest rates. When
working out whether or not to purchase one must always include
sensitivity for increases in interest rates and should have a trigger
point at which time they lock in their rates. Remember, good budgeting
at the time of property purchase can help overcome most fluctuations
in interest rates.
Consumer sentiment figures released this week by Westpac-Melbourne
Institute show that during April, sentiment increased by 8.3% to 92.7
points. Although the index remains below 100 points suggesting
pessimists still outweigh optimists it is a further positive sign that
the market is showing an improvement in health. With news of share
price increases, property value increases and an improving Australian
dollar over recent weeks it is unsurprising to see a lift in
confidence. Looming increases in unemployment are likely to see
pessimism in the market outweigh optimism however, it is encouraging
to see sentiment improving from its recent low.
2. WINNER BUYERS AGENT OF THE YEAR 2009
Rich Harvey, was awarded the “Buyers’ Agent of the Year 2009”
Award for Excellence by the Real Estate Institute of Australia at the
National Awards Ceremony in Melbourne.
“We are absolutely thrilled and honoured to be the recipients of
the 2009 REIA Award for Excellence, and to be named the Best Buyers’
Agents in Australia” said Rich Harvey.
The National Award for Excellence in Buyers Agency recognizes
superior service, creativity and contribution to the industry. The
awards are judged by three independent interstate judges and a
chairperson. They examine the buyers’ agents’ ability to deal
with challenging assignments, show innovation, leadership, information
technology, risk management and exceed client expectations.
The award substantiates propertybuyers’ achievement in being named
the best small business of the year in the prestigious 2007 National
Telstra Business Awards.
“Buying a home, investment property or a commercial premises is
probably the most expensive purchase a person will make in their
lifetime. Yet we see so many people make poor decisions based on
emotion, ending up with classic ‘buyers remorse’ or paying over
market value.
“This award helps to reinforce our message about ‘buyer
beware’. In the current volatile financial market conditions, it is
critical that buyers get totally independent advice on a property’s
true value.
“While the interest rate cuts and increased home buyer grants are
creating a much needed economic stimulus, it will still take time to
fully restore consumer confidence. Sydney is likely to be the market
that rebounds first as NSW has the largest undersupply issue due to
lack of infrastructure investment,” Rich said.
“We are getting good inquiry from expats, home buyers and savvy
investors that understand counter-cyclical investing. While many
buyers follow the herd, those that take advantage of negative
sentiment and appreciate the strength of our property market
fundamentals will win in the long term.
More information can be obtained from: -
www.Propertybuyer.com.au
Email:
info@propertybuyer.com.sg
1. MARKET UPDATE
The Reserve Bank again cut the cash rate this month by 0.25% with
the cash rate now sitting at 3%, the lowest they have been since 1960.
Unfortunately the big four banks haven’t passed on the full rate cut
with the National Australia Bank not passing on any cut and the other
three major banks passing on a cut of just 0.10% rather than the full
0.25%.
Market expectations as at market close on the 7th April 2009 show an
expectation that the cash rate will bottom at 2.37 percent in October
this year. Just how much of the further anticipated 0.6% cut gets
passed on is anyone’s guess however, if this week’s action (or
lack thereof) by the banks is any indication, it appears unlikely the
full benefit would be passed on. It also seems apparent that gone are
the times where we see big cuts by the RBA, it appears they will now
be taking a more measured approach to any further rate cuts.
It isn’t all bad news though, interest rates are still lower than
they have been in more than 45 years and with petrol prices down from
last year’s peak, the average home owner is enjoying having
significantly more disposable income than they did during mid 2008.
Whilst there has been uproar about the banks not passing on rate cuts,
anyone with a mortgage must remember that nothing is certain and you
always need to account for potential changes to interest rates. When
working out whether or not to purchase one must always include
sensitivity for increases in interest rates and should have a trigger
point at which time they lock in their rates. Remember, good budgeting
at the time of property purchase can help overcome most fluctuations
in interest rates.
Consumer sentiment figures released this week by Westpac-Melbourne
Institute show that during April, sentiment increased by 8.3% to 92.7
points. Although the index remains below 100 points suggesting
pessimists still outweigh optimists it is a further positive sign that
the market is showing an improvement in health. With news of share
price increases, property value increases and an improving Australian
dollar over recent weeks it is unsurprising to see a lift in
confidence. Looming increases in unemployment are likely to see
pessimism in the market outweigh optimism however, it is encouraging
to see sentiment improving from its recent low.
2. WINNER BUYERS AGENT OF THE YEAR 2009
Rich Harvey, was awarded the “Buyers’ Agent of the Year 2009”
Award for Excellence by the Real Estate Institute of Australia at the
National Awards Ceremony in Melbourne.
“We are absolutely thrilled and honoured to be the recipients of
the 2009 REIA Award for Excellence, and to be named the Best Buyers’
Agents in Australia” said Rich Harvey.
The National Award for Excellence in Buyers Agency recognizes
superior service, creativity and contribution to the industry. The
awards are judged by three independent interstate judges and a
chairperson. They examine the buyers’ agents’ ability to deal
with challenging assignments, show innovation, leadership, information
technology, risk management and exceed client expectations.
The award substantiates propertybuyers’ achievement in being named
the best small business of the year in the prestigious 2007 National
Telstra Business Awards.
“Buying a home, investment property or a commercial premises is
probably the most expensive purchase a person will make in their
lifetime. Yet we see so many people make poor decisions based on
emotion, ending up with classic ‘buyers remorse’ or paying over
market value.
“This award helps to reinforce our message about ‘buyer
beware’. In the current volatile financial market conditions, it is
critical that buyers get totally independent advice on a property’s
true value.
“While the interest rate cuts and increased home buyer grants are
creating a much needed economic stimulus, it will still take time to
fully restore consumer confidence. Sydney is likely to be the market
that rebounds first as NSW has the largest undersupply issue due to
lack of infrastructure investment,” Rich said.
“We are getting good inquiry from expats, home buyers and savvy
investors that understand counter-cyclical investing. While many
buyers follow the herd, those that take advantage of negative
sentiment and appreciate the strength of our property market
fundamentals will win in the long term.
More information can be obtained from: -
www.Propertybuyer.com.au
Email:
info@propertybuyer.com.sg
Monday, April 20, 2009
Singapore Property Investor: Is the US recovering in Q3, 2009?
Is the recovery going to be V-shape, U-shape or L-shape?
Some leading indicators are looking positive. If property investors can time it right, they can easily become richer. The doom and gloom is affecting judgement, but these are very real fears. Even the very rich are getting burnt or feeling the uncertain sentiment.
According to www.PropertyBuyer.com.sg, there has been increased House Hunting and Mortgage Refinancing activities. Many of these are from people who already own 2 to 3 properties. So there is indeed some cash flushed buyers out there shopping for good value deals.
Contact them: -
http://www.PropertyBUYER.com.sg/contactus.php
Email them: loans@propertybuyer.com.sg
Friday, April 17, 2009
Singapore Investment Career: Wealth Management career
http://www.propertybuyer.com.sg/viewnews.php?article=93
Click above to find out more.
Click above to find out more.
Monday, April 13, 2009
Singapore Refinance Home Loan: CPF Limits your Borrowing
Singapore Home Loan Refinancing and Mortgage: CPF limits your borrowing
Contributed by: www.PropertyBUYER.com.sg
Tel: 6100 - 0608 sms: 9782 - 8606
http://www.propertybuyer.com.sg/contactus.php
Singapore Refinance Home Loans and Mortgage: CPF limits your borrowing
How CPF can seriously limit your cash flow! Most people forget that after all these years, CPF is still king. When you sell your
place, you think you have cash, only to have the large part of your money being returned to your CPF account. You end up
"RICH" in your CPF account, but you can't use that money.
Even if you want to obtain a Term Loan "CASH OUT" from your house/Property, CPF can also severely limit the amount you will
get.
Here is an illustration on TERM LOAN - also known as "CASH OUT"
Property valuation = $1m
Loan outstanding = $200,000
In this case, the bank can usually lend you up to 80% of your valuation, that means $800,000.
So the term loan (Cash out) is = $800,000 - $200,000 = $600,000
That means the bank will lend you $600,000 of cash as Term Loan while
taking over your outstanding loan of $200k, right?
Yes, this is right if you have not used a single cent of CPF in paying for this
property.
Just as another illustration of if CPF was used: -
Property valuation = $1m
Loan outstanding = $200,000
CPF property withdrawal = $300,000
At 80%, the bank can lend you up to $800,000. After deducting the outstanding loan, they can still lend you $600,000. But
they will consider the CPF draw down.
The term loan (CASH out) obtainable = $800,000 - $200,000 (loan outstanding) - 300k (CPF accrued usage) = $300,000
The Term loan is only $300,000
So although it may seem that there is substantial equity in the property. In fact, the amount that can be borrowed is not that
much.
SOME GET CAUGHT OUT
Some home owners who initially thought they could build/ A&A or re-construct a home suddenly find themselves short of
money and go into hardship after CPF comes into the picture.
So do take note of this. It can be easy to forget about this part of the calculation.
ABOUT US Contact us
Tel: 6100 - 0608 sms: 9782 - 8606
Email: loans@propertyBUYER.com.sg
Contact them
http://www.propertybuyer.com.sg/contactus.php
Read More of their articles
http://www.propertyBUYER.com.sg/articlesnews.php
Understand Property Investing and Sub-prime
http://astore.amazon.com/httpwwwpro0ad-20?%5Fencoding=UTF8&node=55
Refinance and Mortgages DIY steps
http://www.squidoo.com/Singapore-homeloan
Contributed by: www.PropertyBUYER.com.sg
Tel: 6100 - 0608 sms: 9782 - 8606
http://www.propertybuyer.com.sg/contactus.php
Singapore Refinance Home Loans and Mortgage: CPF limits your borrowing
How CPF can seriously limit your cash flow! Most people forget that after all these years, CPF is still king. When you sell your
place, you think you have cash, only to have the large part of your money being returned to your CPF account. You end up
"RICH" in your CPF account, but you can't use that money.
Even if you want to obtain a Term Loan "CASH OUT" from your house/Property, CPF can also severely limit the amount you will
get.
Here is an illustration on TERM LOAN - also known as "CASH OUT"
Property valuation = $1m
Loan outstanding = $200,000
In this case, the bank can usually lend you up to 80% of your valuation, that means $800,000.
So the term loan (Cash out) is = $800,000 - $200,000 = $600,000
That means the bank will lend you $600,000 of cash as Term Loan while
taking over your outstanding loan of $200k, right?
Yes, this is right if you have not used a single cent of CPF in paying for this
property.
Just as another illustration of if CPF was used: -
Property valuation = $1m
Loan outstanding = $200,000
CPF property withdrawal = $300,000
At 80%, the bank can lend you up to $800,000. After deducting the outstanding loan, they can still lend you $600,000. But
they will consider the CPF draw down.
The term loan (CASH out) obtainable = $800,000 - $200,000 (loan outstanding) - 300k (CPF accrued usage) = $300,000
The Term loan is only $300,000
So although it may seem that there is substantial equity in the property. In fact, the amount that can be borrowed is not that
much.
SOME GET CAUGHT OUT
Some home owners who initially thought they could build/ A&A or re-construct a home suddenly find themselves short of
money and go into hardship after CPF comes into the picture.
So do take note of this. It can be easy to forget about this part of the calculation.
ABOUT US Contact us
Tel: 6100 - 0608 sms: 9782 - 8606
Email: loans@propertyBUYER.com.sg
Contact them
http://www.propertybuyer.com.sg/contactus.php
Read More of their articles
http://www.propertyBUYER.com.sg/articlesnews.php
Understand Property Investing and Sub-prime
http://astore.amazon.com/httpwwwpro0ad-20?%5Fencoding=UTF8&node=55
Refinance and Mortgages DIY steps
http://www.squidoo.com/Singapore-homeloan
Saturday, April 4, 2009
Singapore: Growth Investing
Simple enough... But how do they spot companies with off balance sheet risks? How do they spot companies whose treasury engages is swaps?
But anyway, we think it's good to know some of the parameters. Should you get the book?
Its up to you, but the book will probably try to sell you the benefit of the software so you will subscribe to it. Some of these parameters can help you make less mistakes, but you cannot invest in a company looking at such signals alone.
These type of investing styles are "quants", which means they depend on some parameters, algorithms and formulae to spot price trends and profit from these trends. However quants tend to miscalculate or zero rate risks that are highly improbable.
Highly improbable events are not impossible events. When the improbably happens, quants fall flat on the face.
Friday, April 3, 2009
Elevated Risks for Uncompleted under-construction Pre-TOP Properties
Singapore Mortgage and Home Loan: Elevated Risk for Uncompleted pre-TOP Properties
Elevated Risk for yet to be complete Pre-top properties.
Courtesy of www.PropertyBUYER.com.sg
Contact them
Email: loans@propertyBUYER.com.sg
http://www.propertybuyer.com.sg/contactus.php
Financial Institution reduces loan quantum for Rivergate Condominium
Singapore
There is now elevated risks for home owners with building under construction (pre-top)
properties. Some of these properties were sold during the boom time in
2006 and 2007 with TOP in 2009, 2010 and beyond. Valuations have
dropped, some heartless financial institutions do not stand behind their
home owner.
Rivergate Condo owner gets "betrayed" by Financial institution.
Someone who has bought a Rivergate Condominium unit during the launch
around 2007. He told us he bought it for $2000 per square feet for a property
of 2025 sq feet. The price bought was $4 million dollars.
At that time, he arranged financing for 80% of $4 million from a financial
institution (which we shall not name, there are more than 1). The loan size at full
disbursement is $3.2 million dollars.
Recently, just 3 days prior to the TOP, the financial institution sent valuers to
re-value the place. They arrived at a figure of $1200 per square feet. This
valued the property at $2.4 million. A 80% loan to valuation equals $1.92
million. From a loan size of $3.2 million to $1.92!!!
This leaves the home owner short of $1.28 million dollars!!!
He has to let go of the property at fire sale prices or work out a plan with the
developer. The consequences are dire. A few more such cases can
really sink an already weak economy. Yet another bad example of
pro-cyclical behaviour.
Financial institutions have every right in their legal contract to exercise this
adjustment in loan size. However such a scenario was never fully explained
by the bankers on lending him the money.
The owner has a choice, forfeit all the proceeds paid up till this point or work
out a mutually acceptable plan with the developer. But the consequences
are dire as the properties may be dumped into the market with few buyers
depressing the prices for all properties, which in turn lead to more financial
institutions pulling the plug on borrowers.
Our question has always been, why lend in the first place and then to pull it
back at the very last moment?
This is another example of pro-cyclical behaviour that typically makes a
recession worse or a boom time bubble bigger than it is. This totally
destroyed that person's wealth as there is no way he could have come up
with $1.28 million in 3 days and he may have to dump his assets cheaply.
Opinions
There is now an elevated risk of buying new launches of uncompleted and
yet to be TOP properties. Home buyers who commit to pre-top and
uncompleted properties with completion dates in 2009, 2010 and perhaps
even 2011 is likely to be exposed to risks whereby the financial institution(s)
reduce the loan size at their whims and fancy. Do think twice.
contact them at:
loans@propertybuyer.com.sg
Elevated Risk for yet to be complete Pre-top properties.
Courtesy of www.PropertyBUYER.com.sg
Contact them
Email: loans@propertyBUYER.com.sg
http://www.propertybuyer.com.sg/contactus.php
Financial Institution reduces loan quantum for Rivergate Condominium
Singapore
There is now elevated risks for home owners with building under construction (pre-top)
properties. Some of these properties were sold during the boom time in
2006 and 2007 with TOP in 2009, 2010 and beyond. Valuations have
dropped, some heartless financial institutions do not stand behind their
home owner.
Rivergate Condo owner gets "betrayed" by Financial institution.
Someone who has bought a Rivergate Condominium unit during the launch
around 2007. He told us he bought it for $2000 per square feet for a property
of 2025 sq feet. The price bought was $4 million dollars.
At that time, he arranged financing for 80% of $4 million from a financial
institution (which we shall not name, there are more than 1). The loan size at full
disbursement is $3.2 million dollars.
Recently, just 3 days prior to the TOP, the financial institution sent valuers to
re-value the place. They arrived at a figure of $1200 per square feet. This
valued the property at $2.4 million. A 80% loan to valuation equals $1.92
million. From a loan size of $3.2 million to $1.92!!!
This leaves the home owner short of $1.28 million dollars!!!
He has to let go of the property at fire sale prices or work out a plan with the
developer. The consequences are dire. A few more such cases can
really sink an already weak economy. Yet another bad example of
pro-cyclical behaviour.
Financial institutions have every right in their legal contract to exercise this
adjustment in loan size. However such a scenario was never fully explained
by the bankers on lending him the money.
The owner has a choice, forfeit all the proceeds paid up till this point or work
out a mutually acceptable plan with the developer. But the consequences
are dire as the properties may be dumped into the market with few buyers
depressing the prices for all properties, which in turn lead to more financial
institutions pulling the plug on borrowers.
Our question has always been, why lend in the first place and then to pull it
back at the very last moment?
This is another example of pro-cyclical behaviour that typically makes a
recession worse or a boom time bubble bigger than it is. This totally
destroyed that person's wealth as there is no way he could have come up
with $1.28 million in 3 days and he may have to dump his assets cheaply.
Opinions
There is now an elevated risk of buying new launches of uncompleted and
yet to be TOP properties. Home buyers who commit to pre-top and
uncompleted properties with completion dates in 2009, 2010 and perhaps
even 2011 is likely to be exposed to risks whereby the financial institution(s)
reduce the loan size at their whims and fancy. Do think twice.
contact them at:
loans@propertybuyer.com.sg
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