Early retirement is possible

COMMENT By CAROL YIP

ANYONE contemplating an early exit from the rat race faces just as many rewards as they do risks. The most obvious reward: Early retirement means more time to live life instead of working. On the other hand, there is always the risk of running out of money needed to survive the later years of life.

If the purpose of early retirement is simply ceasing to work because you are tired of working, this in itself may not lead to a fulfilling retirement lifestyle. Be sure you have something to do that occupies your time, interests and takes advantage of your talents. It will be even better if you know your life goals and purpose for your early retirement because doing something meaningful will keep you mentally healthy. You don’t want to be waking up everyday wondering what to do with your life.

You may experience these different stages if you decide to retire early:
Stage 1. The active years: This phase may be typified by a “very active self-indulgent behavior”. You start doing things now that you were constrained from doing before. These new opportunities can require spending of your financial reserves.
Stage 2. The legacy years: In this period, you may to be less self-indulgent and more concerned with legacy or relationship building with people. This can also be a time of “giving service to others,” either to the community, family and friends. Otherwise, you may experience loneliness or mental depression, which can affect your physical health.
During this legacy phase, you also need to plan for a permanent dwelling including a support system and medical assistance for old age. You have to review your financial situation to ensure that your financial nest egg continues to generate growth for stage 3.
Stage 3. The golden years: This is when life’s endgame is played out. You may look back on life and feel a sense of fulfillment. Success at this stage leads to feelings of wisdom, while failure can result in regret, bitterness, despair and financial depression.
The risks of not having enough
You need to be “in the driver seat” of your investment portfolio to ensure constant growth because your retirement lifestyle will depend on what your investment portfolio can generate for you. Your investment profits must replace your career income. Hence, you cannot second guess in making financial decisions. You must know the answers to the following important questions about your financial reserves:
● What kind of retirement life do you want for yourself so that your financial reserves can last a lifetime?
● If you are presently single, would you want a family, children or companion during your retirement? Be aware that this may deplete your financial reserves.
● If you have a family now, what kind of lifestyle does your family want that can affect your financial reserves?
● How good are you in your investment skills and choosing the right investment products for your financial reserves?
● When your financial reserves run out, what is your contingency plan?
Actions speak louder than words
To the early retirement wannabes, realising your early retirement dream means investing your money and getting into a debt-free situation as soon as possible. It is about making sensible decisions about your life and financial matters.
You can begin by creating a process of gradual change with plenty of mental planning and making adjustments to fit an early retirement mindset and life expectations.
Mastering your investment skills and getting good advice will become your retirement priority. So, start your investment process today by considering the following:
● Can a bad economy and financial markets destroy the value of your financial nest egg?
You need to be cautious of being lulled into investment products that project average returns. An average doesn’t take into account the possibility that there may be several years of below-average returns that could force you to dip into your investment principal.
● Will inflation cut down your purchasing power? Watch out for the ravages of inflation.
A portfolio can earn handsome returns, but if the cost of living increases at a faster clip, retirement can be jeopardised.
So you will need assets that will grow over time and provide a hedge against inflation.
● How reliable is your investment income? Weigh this carefully when you need a continuous stream of income to pay your daily expenses.
When there is a need to cash out your investment principal during retirement, you will need to review your lifestyle and practice frugal living.
● What kind of investment choices will fit your financial needs? Take your time to understand the types of investment products in the marketplace because a choice of investments that are risky or not easily converted into cash can affect your retirement living. Unless you can quickly find a job, you can be caught in a cashless situation.
At the end of the day, only if you are proficient in your investment skills and can build sufficient wealth, will you be in control your retirement destiny. But a poorly planned and executed transition into retirement can mean you may end up living dangerously!

Hey Traders ! Running out of idea what to trade ? See d list here.

hng said...
Both of my biggest core stocks Hingyap and Protasco are performing well. If everthing go as plan, portfolio stand to reap highest profit in this yr :D)

Core portfolio

Hingyap 69.6%

Protasco 66.3%

Lonbisc 11.4%

Crestbld 10.6%

Glomac 8.9%

Cheetah 3.3%

KSL 2.6%

Trading portfolio

Genting 8.4%

Stocks that offer dividend yields higher than fixed deposits

Personal Investing - By Ooi Kok Hwa

DUE to the current low interest rate environment, a lot of investors may be wondering whether there are investments that can provide returns higher than fixed deposit (FD) rates.
Despite the current high stock prices on Bursa Malaysia, there are still many stocks providing dividend yields higher than the current FD rate of about 2% to 2.5%.
Based on our estimation, the average dividend yield for all stocks on Bursa Malaysia is about 3.5%, which is higher than the current 12-month FD rate of 2.5%.
Nevertheless, investors need to have critical financial information, adequate investment skills as well as be willing to spend time researching information.

There are many research companies providing information on Main Market companies on Bursa Malaysia based on their highest dividend yield, lowest price-earnings ratio (PER) as well as lowest price-to-book ratio (P/BV).
For serious investors, they need to familiarise themselves with these terms. In addition, investors need to know how to analyse the information.
In this article, we will explain how to use the dividend yield ranking. The table shows the top 10 Main Market companies according to highest prospective dividend yield.
Prospective dividend yield is calculated by taking the market price divided by the estimated current year dividend per share (DPS).
For example, Hektar Real Estate Investment Trust (Hektar REIT) shows a prospective dividend yield of 9.53%, which was computed based on the market price of RM1.07 (as at Oct 18) and estimated 2009 DPS of 10.2 sen.

The latest actual dividend yield of 10.01% for Hektar REIT was computed based on the same market price but divided by last year’s actual DPS of 10.71 sen.
Even though the dividend yield for 2009 is anticipated to decline slightly to 9.53% from 10.01% in the previous year, it is still much higher than the current FD rate of 2.5%.
However, investors need to be careful as some of the high dividend yields may be due to one-off special dividend payments.

The companies may not repeat these dividend payments in the following year. Besides, we need to make sure that the latest PER is lower than the overall market PER.
This is to prevent us from paying too high a price against its earnings level. For Hektar REIT, its latest actual PER of 9.45 times is lower than the current market PER of about 11 to 12 times.
This method does not require a lot of time to carry out research. Once we identify good fundamental companies that are paying high dividends every year, we only need to monitor them.
We may not even need to sell the stocks for a long period of time if the companies continue to reward good dividend yields that are higher than FD rates.

Genting Malaysia Bhd (Price: RM2.79  ACCUMULATE  TARGET: RM3.30)

Pending for a breakout

Business Background

 Genting Malaysia (GENM) is one of the leading leisure and hospitality corporations in the world. Listed on Bursa Malaysia
with a market capitalization in excess of RM 16bn, it owns and operates Genting Highlands Resort (GHR), a premier
leisure and entertainment resort in Malaysia.

 GHR has 6 hotels with a total of 10,000 rooms, theme parks with over 60 fun rides and attractions, 170 dining and retail
outlets, as well international shows and business convention facilities. It was voted the World Leading Casino Resort
(2005, 2007 and 2008) and Asia’s Leading Casino Resort for four successive years (2005-2008) by World Travel Awards.
The Resort received 19.2m visitors in 2008, of which 27% were hotel guests and 73% were day-trippers.
Outlook & Comments

 A laggard in the KLCI rally. GENM share prices have underperformed the KLCI by 2.7% in 1-month, 13.4% in 3-month
and 11.8% in 6-month, respectively. We believe the discounts are mainly attributable to: 1) investors’ concern on the
potential competitive risk emanating from the Singapore integrated resort, 2) disappointment on the group’s inability to
unlock the value of its cash reserves, 3) fears of another related party transaction.

 Current valuations have more than priced in the negative news. GENM’s valuations of 13.6x FY10 PE and 12.9 FY11
PE are cheap against its 2-year historical average 17x PE as well as its regional peers which trade at an average of 43.5x
FY10 PE and 20.5x FY11 PE. If stripping out its net cash/share of 86sen, the stock is only trading at 9.4 FY10 PE and 8.9
FY11 PE.

 Ready for a valuation catch-up: As we head into 2010, we expect investors to shift focus from liquid index-linked stocks
that have significantly outperformed FBM KLCI to laggards such as GENM. Apart from being a natural beneficiary of
improving local consumer spending, GENM's attractive valuations, liquidity and price’s under-performance (relative to
KLCI) are likely to draw interest from those investors who are looking for rotational play.

Valuation and recommendation

 Visible earning and strong cash flow. We believe GENM’s wide valuations gap against its regional peers will narrow
given GENM’s stable earnings visibility and solid balance sheet. Based on Bloomberg estimates, GENM is expected to
record an average RM1.24bn PAT for FY 09-11 while having a RM5.9bn cash pile which is continuing to grow.

 RNAV at RM3.28/share Based on a 14xPE to FY10 PAT,GENM’s operations are worth approximately RM2.28/share while
based on Star Cruises’ closing price of HK$1.68per share, GENM’s 19.3% stake is worth RM0.18/share. Applying a 20%
discount to the above valuation while adding the net cash of RM0.86/share shall give us a RNAV of RM3.28/share.

 Based on the RM3.28 RNAV/share, GENM is trading at 15.1x FY11 PE, which is about 11% discount to its 2-year historical
average 17x and 26% discount to peers average of 20.5x.

 Accumulate around RM2.70-2.75. GENM’s share price has been hovering around the RM2.60-3.00 level for the past 5
months and was unable to break the downtrend line (DTL) which started from the RM4.60 peak in July 07. For the uptrend
to commence, it is crucial for GENM to consolidate above the 150-day SMA around RM2.70. The next critical support is
RM2.62 (76.4% FR from RM2.49-3.02).

 Technically, the momentum and trend indicators are gradually bottoming up. A breakout above DTL, which currently stands
at RM2.78 will drive prices higher to RM2.82 (38.2% FR), RM2.89 (23.6%FR) and YTD high at RM3.02. A tougher
resistance level is RM3.30.

Current price 2.79
Upside 17.7%

Can Student Claim Tax Back from Shares Dividend ??

Greenleaf said...

Hi hng,
I would like to ask you about dividend from stocks.

I am still a student and I started trading stocks last year (1.5 years) using RM7000. Now, I have around RM8200 in total after trading some stocks and gain the profit.

I would like to add more money to my account and go for dividend style.

If I am still a student, I receive dividends from stocks, how can IO claim my part dividend that is being Taxed?

I read from a forum saying that dividend is taxed 26%. Since I am not working and my income does not hit the 26% bracket, can I claim my dividend?

Hop to hear from you soon. Thanks. :)

November 3, 2009 2:29:00 PM MYT

Interesting question posted to hng to answer....hahaha

My reply is why not, so long as you are above 18 years of age, you are eligible to make your claim back from the IRD unless of course the dividend vouchers do not carry your name... :)

Who care you are student or jobless !! Just submit your claim Greenleaf....