Saturday, July 28, 2012

Exchange Trade Bonds (ETB)

When I first heard of Exchange Trade Bonds (ETB), I just wonder, what's that. Luckily, Bursa gave us some explanation. According to Bursa, this is the "product" that they will introduce to all retail investors by 3rd quarter of 2012. In fact, I don't understand why make the name so complicated, it a bonds, so just call it a bonds, simple and straight forward.

For retail investors, what we more interested is how to make money? Usually, bonds yield range from 3% to 4% (unless you buy a junk bonds which provide high return), buying bonds and keep till maturity, the return is just similar to Bank's FD. The question is how to find oasis in the middle of desert?

However, if you understand the relation between country's economy and interest rate, then trading in bonds will become very exciting! For example, if generally people expect a country's economy will become worst, then their bond price tend to trade high in value. The reason is because investors seek safe heaven and avoid taking additional risk and switch funds from equity to bonds.

Today, if interest rate going down and expect to down further, then the bonds will sell like hot cake, investors tend to rush and buy the bonds of that country. Some will wonder why bonds price become bullish when interest rate go down.

Generally, history will repeat, fund managers usually buy bonds and make money in three different way. First, buy bonds and keep till maturity. Second, make use of short term interest rate movement to earn the price different from buy and sell bonds. Third, buy the bonds of strong currency, as strong currency will always support the bonds price plus the coupon rate as bonus.

Once you understand this and know how to capture the timing, invest in bonds for period of 5 to 10 years will become very profitable. The interest receive from bonds can be used to invest again when the bond price drop to very attractive level. In this way, we can make use the effect of compounding to grow the principal. Perhaps it's time for Bursa to organised courses for retail investors on how to make money from bonds investment.

Wednesday, July 11, 2012

Dance with Stock Market

Ten years ago, if anyone tell you Greece and Spain will go bankrupt, you will think he is insane. Today, this is the fact. I am not an economic expert, I don't know about their problem and also don't know how complicated is it. But I do know one simple quote, if you want to be poor, focus on spending. If you want to be rich, focus on earning, keeping and investing the money. Borrow money just for spend it to enjoy now and pay later is a bad idea. Rich people know how to borrow money, or use other people's money to earn the higher return.

I like the investment in stock market. It's the best way to keep your money against inflation. In fact, it's the friend of inflation if you choose the right company to invest. Over the years, you will be able to see your asset grow double or triple. In fact, I would say, Stock Market is the greatest invention for people to create wealth! The beauty of stock market is the price movement. Through the up and down trend, it provide opportunity for many's to earn extra money.

Small investor can learn how to value the company and invest to make money. The corporate will learn how to grow their business and profit, investors communities will then give mark which reflected into their company's stock price. The market participant will give each corporate a value base on their current prospect and future growing strategy. This will create the market movement for the share price.

For a mature stock market, no one can predict or control the share price. The only way, you need to accept and respect the trend, ride on it and use it to your advantage. Once you involve in stock market, you will learn that, we are facing with a very big ocean, and how small we are, learn to be hamble. We don't know what will happen in tomorrow's stock price, the only way is learn to accept and adjust our step according to the trend. It's the most practical place for us to learn how to overcome fear and greed.

We should appreciate, there are many things we can learn from the stock market. Over the years, you will know how small you are when facing the whole market. The most important, we can control and drive our direction to reduce the risk and at the same time enjoy the way of making money. Feel proud and appreciate!