Invest in Singapore: Risks of Dollar Cost Averaging

Singapore investment: Risks of Dollar-cost-averaging
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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)


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Understand Property Investing and Sub-prime

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Refinance and Mortgages DIY steps

http://www.squidoo.com/Singapore-homeloan

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.

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