Tuesday, April 19, 2011

Dividend Reinvestment Plan

Dividend Reinvestment Plan (DRP) is very new concept in Malaysia, till now, only two company provide DRP,  namely Maybank and AMMB (one more REIT company going to implement DRP soon). This is suitable for those who think they do not have time to monitor the stock market or read through the research reports and ideally want to keep on invest the great company for next few years.

From the history record, in US, if someone invested Pepsi in 1980, $2000 with became $150,000 at 2004. (start with 80 shares will become 2800 shares through DRP)   

If invested Philip Morris in 1980, $2000 will worth $300,000 at the end of 2004. (start with 58 shares, turn to 4300 shares) - data took from Ibbotson Associates:

What is the advantage DRP to investor?
Since last year, Maybank gave share holder an option to choose, share or cash during dividend announcement. Those who opt for DRP will entitle to buy share with the dividend pay at 10% discount from VWAP. For example, current share price for Maybank is RM8.70, those who opt for free share is base on RM7.70. Hence, every dividend you can reinvest with 10% discount and no need to pay brokerage. Sound great? 

DRP will also cause share price become more volatile. Just monitor the stock price before dividend announcement, after Ex Date and Payment date. This is another opportunity for those who would like to trade on this stock.

DRP work best if you want to invest in great company and don't foresee to sell for few years - the convenience, easy and cost effective way to build share holding by using cash dividend to buy additional shares. 

Monday, April 4, 2011

After you have million dollar!

Have you ever think of what are you going to do if you already save and achieved one million? Let the passive income always more than expenses, it will turn you become financial freedom, if not a millionaire, it's just timing issue, whether you reach destination earlier than others. It really does not matter, if you know this is achievable target, sooner or later you will be there, what's the point to rush and give yourself pressure? Do you really feel more happy after having one million? 

Most of people think that they will feel more happy if they are millionaire. May be you should ask those millionaire, they will say, you wear the same cloths as yesterday, eat more or less the same meal, live in the same house. You may not feel extra happy as when you have 900 thousand, 800 thousand or even 500 thousand previously when you first achieved that target. Perhaps you may go out to celebrate with friends, travel to some places, but after some time, everything back to normal. 

Happy or not is just a feeling, the way how you look into your life. Perhaps more mature, the way look into the money is different, the way how to spend the money to obtain the happiness. Like the journey of life, one million is just like a “road mark” at road stated 10,000km from the destination. There's not much meaning looking at the mark when you pass through, may be we need to enjoy waterfall, the green trees, beautiful birds singing and many more along the journey.