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Who Will Win the “Connected Car” Wars?

By Team Wall Street Survivor

Wall Street Survivor Courses

The connected car is here – a vehicle able to optimize the driving experience for comfort, performance and entertainment using onboard sensors and internet connectivity.

Consulting firm McKinsey & Company estimates the global market for connectivity components and services to be worth around $30 billion, and is expected to increase 5x over the 5 years. By 2020, one in five cars will be connected to the internet, delivering services through the car – internet radio, smartphone capabilities, information/entertainment services, driver-assistance apps, tourism information and more.

Today’s car is a modern wonder, carrying the computing power of 20 personal computers and processing up to 25 gigabytes of data an hour. In the past, the presence of onboard computers was meant to optimize a car’s internal functions but today, these components are all about user experience.

According to a study by Spanish broadband and telecommunications provider Telefonica, almost three-quarters of drivers surveyed are interested in or are already using connected car services. A similar number of people felt cars will soon have a level of connectivity on par with the smartphone most people carry in their pockets.

With so much real estate in the marketplace, established tech companies will be fighting to gain market share. Apple recently introduced Carplay, a vehicular-based operating system. Dubbed “the best iPhone experience on four wheels”, Carplay allows drivers to use their iPhone through their car’s media systems. Motorists can send messages, choose music, or even receive directions – all via voice command.

The Carplay system will be available across 29 car brands, including Ford, BMW and Toyota. Meanwhile, Google has formed the Open Automotive Alliance, an alliance of auto manufacturers and tech companies aimed at using the Android platform in automobiles. In June 2014, Google announced that it had 40 partners from all across the world.

One of the more unexpected competitors is Blackberry. The struggling company acquired Ottawa-based QNX Software Systems in 2010, providing a foot-in-the-door of the nascent connected car market. QNX was previously an industry leader in telematics –the blending of computers and wireless communications in vehicles – and today commands more than half of the rapidly growing market for in-car “infotainment”. While QNX only provides 8% of Blackberry’s revenue, it is the one area where the former giant still commands leadership. As of January this year, QNX said its software can be found in more than 50 million vehicles globally.

And so it would seem that Apple, Google and Blackberry are all jockeying for pole position, but the truth is there is far more collaboration going on behind the scenes. Carplay can run on a QNX-based system, a system that is also capable of running Android apps. In fact QNX’s VP of sales and marketing remarked that “I’ve never thought of us as a competitor…We have been working with Apple for many years”. He also said that “Google and QNX have been collaborating for years – including on the integration of Google Earth into Audi cars”.

g2

QNX will likely continue to lead the market for the next few years. Apple will likely continue to focus on their Carplay offering, making it the most elegant on-board infotainment solution out there. Apple sees the connected car as just another accessory. They want to be in as many cars as possible, and both companies want to make money but the difference is in where the money comes from. QNX’s prerogative is to strike deals with automotive partners while Apple targets the consumer directly – extending the Apple store into the car.

Google might be on a completely different path. Although they may start out with infotainment, Google is hungry for data. Google’s $40 billion in annual revenue is driven by advertising and “access to information about exactly how and where millions of people are driving would further its advertising ventures”. The fact that Google is building an automobile-specific Android OS shows how serious they are. Staking their claim in this market will only help them in their quest for dominance in another: the autonomous car. The seamless combination of both elements, autonomy and connectivity, is the big payoff Google is looking for.

Top automobile manufacturers have been working on components for autonomous cars for years. Automatic parking systems are evidence of that. However Google has the head start, having worked in the field for years.

It’s all coming together and the future looks exciting. In the long-term, Google is more of a competitor to automotive manufacturers than Apple or Blackberry; they are the ones who actually have the most to gain by entering the automobile market. It is easy to imagine a future where Google outsources the manufacture of autonomous vehicles under the branding of established players. They might even go so far as to produce autonomous vehicles under their own branding.

g1

No matter what happens, automotive giants will have to watch carefully and consider their strategy. Do they engage with Google on their own terms? Do they hold their stance? Should they put more resources into driverless technology or look into building autonomous technology of their own?

The connected car movement looks to give rise to the autonomous car, and they represent the short and long-term future of automobiles respectively. As technology improves, connectivity and driverless features may converge into a perfect autonomous driving experience spearheaded by Google. Imagine getting into your car, opening up your tablet or device – synced to your car’s on-board systems – to listen to Pandora and getting some work done while being driven to work.

I’d like to see that future. Make it happen Google!

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Philip Fisher – New Stock Investment Legend on meetinvest.com

By meetinvest
meetinvest

Philip Fisher — 68 Years in the Saddle This week we’re introducing you to American investment legend Philip Fisher (1907-2004). Fisher worked for a stock exchange firm for a short time before starting his own money management company, Fisher & Co., in 1931. He managed the company’s affairs until his retirement in 1999 at the […]

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Homeowners feel the heat from rising interest rate

It is like a rude shock to a sweet dream. Singapore homeowners are given a reality check since the start of the year when the key interest shot up like nobody business. Perhaps it is a sign of things to come but the trend is expected for a long time since the last financial crisis in 2008, which led to many countries to adopt loose monetary policies in the form of quantitative easing, notably from United States, Europe, Japan and China.

According to the Association of Banks in Singapore’s website, the latest three-month Singapore interbank offered rate, SIBOR, was 0.972% as of 20th March 2015. This was the highest level since 2008 amid expectations that United States Federal Reserve would possibly raise the lending rates mid of this year.

Obviously the above information is bad news for home-owners who borrowed a lot from the banks to finance their properties. Any slight incremental increase in the lending rate would affect their spending abilities.

I can relate to homeowners’ fear as I have home mortgage loan as well. Any form of market uncertainty is bad from a homeowner’s point of view because of budgeting concerns. Incidentally, in a few months’ time, the tenure of my mortgage loan will expire and I am looking to refinance my mortgage loan. The amount is not significant and I can choose to repay in full with my savings and CPF monies. However, doing so would reduce my cash flow and affect my ability to upgrade to a bigger house to cater to my growing family size. So my wife and I decided to go for refinancing after weighing the opportunity costs.

For HDB owners who have sizeable outstanding loans and choose to repay in 25 years, the best option is always to opt for HDB concessionary loan as it is probably one of the most affordable loans in town.  If your loan is less than $150,000, you may want to consider repaying the amount in 10 years so as to incur lesser interest fees. In this case, it make sense to opt for bank loans because the shorter the tenure, the lower the risk of swelling interest rates. Do note that there is always a market cycle and this applies to interest rates as well. The era of hot money and low rate interest environment may be coming to an end.

The market for housing loans is very competitive in Singapore, with many banks offering a variety of loans pegging to SIBOR, SOR and Board rates. There are some like DBS and POSB which offer interest-cap rates to protect homeowners from unexpected rise in interest rate.

Bewildered by the multitude of mortgage packages on the market? Turn to the FREE service of an iCompareLoan mortgage expert today!

For advice on a new home loan.

For refinancing information.

Magically yours,

SG Wealth Builder

When is the best time for you to invest in great businesses?

Investment moats is the competitive advantage of a company that allows it to fend off competition from its rivals and enable it to earn excess returns for many years. According to Morningstar’s Why Moats Matter, there is a stock research process which guides investors on how to invest in great businesses at the right time and make money from the stock market.

The process involves a bottom-up approach which requires investors to identify the company’s moat(s), establish the fair value and determine the margin of safety. On the surface, it may seem straightforward but when you put it into practice, it is not so simple.

Moat Sources

According to Morningstar’s investment framework, there are five main sources that a company may possess: intangible assets, cost advantage, switching costs, network effect and efficient scale. Now why is having a moat source important from an investor’s point of view? If you recall that 15 years ago, Nokia used to dominate the worldwide mobile phone market and boasted the majority market share for a number of years. However, the entry of Apple’s iphone in 2007 changed the game and led to a dramatic shift towards smartphone, leading to Nokia losing its status as the market leader. Therefore in a competitive market, a firm must have the ability to withstand the onslaught of competition for a long period of time. Otherwise, growth would not be sustainable.

Fair Value

If a house is worth $300,000, would you pay $450,000 for it? You might probably do so if you like the house very much and intend to stay in it for a long time. However, if the house is meant for investment purposes, you would benefit from the capital gain from the sale of the house if you sell the house above $450,000. But that is only if you have the holding power and patience to wait until it appreciate to a value much higher than $450,000. Likewise in the equity market, there are opportunities to buy stocks below their intrinsic values. Don’t buy stocks when the market is bullish and when many stocks are trading at ridiculous prices above their fair value.

There are several ways to establish a fair value of a company. One way is through looking at the current price and earnings, in short the P/E method. Based on this metric, you estimate the future cash flow and growth rate. Morningstar’s approach is to use the discounted cash flow metric which looks at the revenue, earnings and balance sheet for the next few years and then discount these values to the present using the weighted cost of capital (WACC).

Margin of Safety

If you go shopping, would you prefer to buy that watch that you desired for a long time at a bargain? In stock market, you stand a good chance of not losing money if you have bought the stock at a price worth than the value which you had estimated. This is the hallmark of a successful investor but it is not easy to achieve this because no one can accurately pin point the actual value of a stock.

To ensure that the odds are in your favor, the best time to invest in stock is during black swan events – stock market crashes.

Magically yours,

SG Wealth Builder

The Times – The New Trend Clicking with DIY Investors

By meetinvest
meetinvest

By David Budworth – The Times Social networking sites such as Facebook, Twitter and LinkedIn are used by hundreds of millions of people everyday and have revolutionised communication. Now, networking techniques are being employed by a growing number of websites that claim to be able to help you become a better investor. Each does things […]

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The Financial Planning Pyramid: Life After Debt

By Team Wall Street Survivor

Courses marketplace

There’s something about wrapping a geometrical shape around a complicated subject that makes it more manageable. So it is with financial planning, and the triangle in which its complex dimensions are so neatly contained is the Financial Planning Pyramid.

The Financial Planning Pyramid is a navigational tool designed to help individuals create sensible personal financial plans. It acknowledges that smart financial planning needs to consider the big picture and not just individual parts in isolation. So while retirement in the sun might be a person’s long-term goal teetering at the top of the pyramid, they first need to navigate a progressive path of shorter-term plans that logically ascend toward it.

In other words, you can’t advance to the next stage until you have fulfilled the one before it.

The pyramid’s hierarchical structure illustrates the maxim that the greater the risk, the greater the opportunity for reward. The higher up you travel, the less firm is the footing, but also the bigger is the potential return.

There are various iterations of the Financial Planning Pyramid on offer, but they all espouse a common philosophy of financial preparedness. As one’s financial life advances and grows in sophistication, income protection diminishes in priority, and wealth accumulation takes its place.

The tool’s useful, too, for the way its logic can be extended across a range of personal circumstances. So whether you are the penny pincher on the city bus or the spendthrift in the Aston Martin, there’s application for your scenario inside the pyramid’s bounds.

Approach the Pyramid from the bottom up.

The Base Level: Debt

A good financial plan builds upon a solid foundation that appreciates the importance of having the basics covered before launching a charge toward the pursuit of grander financial goals.

And so this first level is all about a clearing of the trees for a fresh harvest. In other words: getting rid of debt.

We’re talking the extraordinary kind of debt, like crippling credit card bills and massive student loans — the kind of dragging liabilities that see folks with subterranean credit ratings struggling to even cover their minimum monthly payments.

And so emergency funds and vacation savings be damned, individuals dwelling at this level of the pyramid need to get a handle on the B word — budget — before they can even fathom advancing to the next. The basics of budgeting are well explained on a whack of sites, and some offer smart, free money-mastery courses — see www.youneedabudget.com and www.mint.com — but the essential trick requires establishing how much you have got coming in and making sure it exceeds how much you have got going out.

Next Comes “Protection.”

The guy who’s reached this level of the pyramid may well still have the odd debt to his name, but it’s manageable stuff. And he’s gotten a handle on his expenses-versus-earnings ratio. In other words, he’s above water, but still just one big wave away from crashing into a sea of troubles.

It’s here that preemptive action kicks in to guard against potentially bank-busting calamities. Think death, illness, accidents, job loss and other of life’s uncertainties that can rack up massive out-of-pocket expenses. By undertaking some basic defensive financial actions, individuals can protect themselves against their economic hits.

Yanking yourself above this level requires prudent forethought. Here, investors are reminded of the importance of maintaining a savings reserve; taking out life, liability, health and disability insurance; amassing emergency funds (financial advisors recommend saving between three and six months worth of expenses); creating a will; and continuing along your debt-reduction path. The concept of cash flow is critical at the protection level, so don’t lose sight of your budget.

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The Next Step Up is “Wealth Accumulation.”

Here, having secured a certain amount of security by way of preemptive financial moves, investors can begin to consider a financial future that extends beyond the basics. The person who’s reached this level has more than enough money to deal with his debts, has covered all his emergency needs and now has extra income enough to start investing.

This is the most important layer of your pyramid.

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The individuals at the wealth-accumulation level aren’t as concerned with saving for retirement — outside of IRAs and 401ks — as they are with building a diversified portfolio, assessing their risk tolerance and establishing their investing goals. Here’s where you’d do well to score yourself some investing education, like the concepts of behavioral finance, the principle of compound interest and how to choose a broker. Acquiring this kind of knowledge fortification reassures a newbie investor with an appreciation for the long-range growth of the markets, and furnishes him with the confidence to invest assertively.

The various vehicles in which that investment might take place include savings, retirement funds, education savings, bonds, shares, mutual funds and exchange traded funds (ETFs).

At the Top is “Wealth Distribution.”

At this, the top tier of the Financial Planning Pyramid, we have moved into the surplus-and-succession stage. Here, the efforts an individual has put into accruing wealth during the lower tiers of the pyramid get to be joyfully played out. Having built their wealth to a level that sustains their desired lifestyle, it’s at this pinnacle point that investors consider the particulars of how to most effectively and satisfyingly expend it. Perhaps they’ll buy a new car or a condo. Maybe they’ll start a business or travel the world. Or they might dedicate their fortune to their children, either via college funds or through establishing trust funds whose proceeds might be distributed upon their demise.

For individuals who own their own businesses, succession plans should also be spelled out now.

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And while tax and estate planning need to be considered at every step up your orderly ascent of the pyramid — taxes are facts of life, after all, and their reach is long enough to cast a shadow throughout — they’re particularly critical now, as individuals consider transferring it to the next generation through these means.

At the least, this is when these well prepared investors can start planning their retirement with more intent, and start living their lives without having to suffer the crushing burden of money anxiety.

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Get your Home’s Gain or Loss in 3 Fast and Easy Steps

SG Wealth Builder is pleased to form a partnership with SRX Singapore Property to bring you the latest information on how to build your wealth through property in Singapore. Below article is based on information provided by SRX Research and readers must not interpret it as a form of financial advice. Many Singaporeans want to make money and become rich quick but very few bother to acquire the investment knowledge needed to build wealth. Check out how to be a successful wealth builder in Singapore.
Big data and computers bring transparency to the real estate market.
This means, going forward, you will never be in the dark when it comes to the market value of your home.

SRX Property’s X-Value combines big data and computers to give you a single point.

Developed with government agencies, academics, and valuers, it sources from the nation’s most comprehensive property database and instantaneously calculates a single value for every home in Singapore using best practices methodologies including comparable market analysis.

As a computer-driven price mechanism, X-Value, factors in all the comparables and adjusts for important variables like location, size, floor, and age.

It also factors in macro trends from its proprietary price indices; and important on-the-ground information from thousands of market participants interacting with SRX Property apps and pricing data on a daily basis.

It’s impossible for a human, even if it had access to all SRX Property’s raw property and geospatial data, to do what a computerized price mechanism does in seconds in terms of accuracy, data completeness, relevancy, and objectivity.

Already, people are requesting over 60,000 X-Values per month. Last year, 93.8% of HDB homes were transacted within 10% of the X-Value.

Monitoring the market value of your home is fast and easy.

Follow this three step process:

1.  Write down your purchase price on a piece of paper.

2.  Go to srx.com.sg and select the X-Value calculator and enter your unit details

3.  Subtract the X-Value from your purchase price.

 

The result shows your gain or loss.  In this example, your gain is $980,000

Colin Nicholson – New Stock Investment Legend on meetinvest.com

By meetinvest
meetinvest

This week we’re launching Australian private investor, author and teacher, Colin Nicholson’s strategy. A man who’s been investing his own money for over 45 years will surely resonate with many of you. An Active Approach Colin Nicholson approaches investing actively, and looks to take advantage of trends running from several months to several years. He […]

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Apple Joins Dow Jones but Who Cares?

By Team Wall Street Survivor

Courses marketplace

Apple will join the Dow Jones Industrial Average (DJIA) on March 19, replacing telecommunications giant AT&T, according to S&P Dow Jones Indices – the subsidiary of McGraw Hill Financial Inc. that owns the Dow Jones.

The addition is a historic event, as Apple gains entry to an extremely exclusive club. Yet even though the DJIA is well-known and remains the most followed stock market index, it is also one of the most inaccurate and distorted.

What Is an Index?

A stock market index is an group of selected stocks that attempts to describe the market according to the index’s goals. For example, the S&P 500 is an index made up of 500 of the most widely traded stocks in the U.S. and makes up about 70% of the total value of the overall U.S. stock market.

The Original Dow

The Dow, as it is simply known, is a stock market index created by Dow Jones & Company co-founder Charles Dow in 1896. At its conception, it consisted of just 12 stocks. They were:

American Cotton Oil Company
American Sugar Company
American Tobacco Company
Chicago Gas Company
Distilling & Cattle Feeding Company
General Electric
Laclede Gas Company
National Lead Company
North American Company
Tennessee Coal, Iron and Railroad Company
U.S. Leather Company
United States Rubber Company

These 12 companies were purely industrial stocks, and only General Electric is still part of the Dow – the rest either defunct or removed over the last 112 years. Today, it is an index of 30 blue-chip stocks, companies with a reputation for quality, reliability and consistency; it shows how 30 publically traded companies have traded during a regular stock market day.

The Dow Today

Company Stock Market Ticker Market Cap (Billions)
3M MMM 103.3
American Express AXP 82.2
AT&T T 170
Boeing BA 106.8
Caterpillar CAT 48
Chevron CVX 191
Cisco Systems CSCO 142.6
Coca-Cola KO 174.4
DuPont DD 72.9
ExxonMobil XOM 351.8
General Electric GE 252.1
Goldman Sachs GS 82.5
Home Depot HD 151.3
Intel INTC 146.5
IBM IBM 152.5
Johnson & Johnson JNJ 275.9
JP Morgan Chase JPM 227.4
McDonald’s MCD 92.6
Merck MRK 159.5
Microsoft MSFT 339.5
Nike NKE 82.8
Pfizer PFE 208.8
Procter & Gamble PG 221
Travelers TRV 34.3
UnitedHealth Group UNH 109.9
United Technologies UTX 107.7
Verizon VZ 198.9
Visa V 162.7
Wal-Mart WMT 264
Walt Disney DIS 180.9

Why the Dow Is Useless

Despite its popularity the Dow has many weaknesses as a benchmark for the overall U.S. stock market. The above 30 companies represent just a quarter of the entire U.S. market. There are over 10,000 companies in the overall market, and a one-percent change in the Dow does not equal a one-percent change in the entire market. This has to do with the way the index is put together.

The Dow Jones is constructed using a price-weighted function rather than using a market cap weighting. That means if two stocks are the same price, say $100, then a 1% change in either stock will have the same effect on the Dow regardless of the size of the stock – even if the company is Apple, with a market cap of $700 billion, or Caterpillar with a market cap of just $48 billion.

Source: The Walt Disney Company

Basically a Dow component with a high stock price can cause significant changes in the index with smaller moves than can a Dow component with a low stock price. A $100 stock will have 10x the weight of a $10 stock.

As of today, Goldman Sachs ($192) and Visa ($270) have the highest priced stocks in the Dow and as a result wield the most influence on it. Imagine if Warren Buffet’s Berkshire Hathaway were included! (Current share price: $219,502)

The other problem is that the DJIA is a fluctuating index in its construction. In 1896 the index consisted of 12 companies. In 1916 that number rose to 20 and then again to 30 in 1928. That number has stayed constant for the last 87 years but since then the component companies have been changed more than 50 times. This makes it hard to compare the performance of the index over time.

Not Enough Tech

Finally, the index is not representative of the true economy. As it stands the Dow has four true-blue tech companies. They are Cisco, IBM, Intel and Microsoft – which together account for 10% of the Dow index. On the other hand, the tech sector is one-fifth of the overall market (as measured by the S&P 500).

If you consider that the National Science Foundation cites data that “technology-intensive” industries contribute 40% of U.S. GDP then we begin to see how the Dow grossly undervalues the tech sector. If the Dow is attempting to be a facsimile of the U.S. market then it is definitely falling short.

So What About Apple?

The inclusion of Apple could make the Dow more vulnerable to sharp moves. The index generally is made up of more-mature, less-volatile companies and Apple’s shares have nearly double the volatility of AT&T’s.

At the same time, Apple has cemented its status as a blue-chip stock. The Dow is known as an index of blue-chip stocks and Apple’s entry is proof enough of its reliability for many stock market trackers and analysts.

What we can now expect is a price increase for the MacBook and iPhone maker. In the past, studies have shown that being added to indices such as the S&P500 have resulted in gains in the company’s stock price. This happened mainly due to a rise in purchases of the stock by index funds and ETFs tracking the index. Remember, you can’t invest directly in an index like the Dow Jones; you have to invest obliquely through an ETF. This is unlikely to happen with the Dow because the funds that track it are much smaller than the ones that track an index like the S&P 500. The smaller the amount of money going around and thus the smaller the total purchase, the less effect there will be on a stock as large as Apple.

What about the Dow?

The Dow Jones chugs on. The market shifts and changes the Dow adapts, reflecting the changing face of U.S. blue chip stocks. Like some sort of stock market spouse, GE is the only company that has stuck through it in the good times and bad. The addition of Apple to the Dow is just another one in a long line of entries and exits and we can expect more in the future. While the Dow is not the best indicator for the overall market, its not going anywhere.

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Capital Match: Singapore’s Peer-to-Peer Lending Fintech

Capital MatchKevin LimCapital Match

Capital MatchSince SG Wealth Builder was founded in 2010, I had the opportunities to meet CEOs and entrepreneurs who unselfishly shared with me their visions and investment insights. Today, I am excited to be granted an email interview with Pawel Kuznicki, co-founder of Capital Match. The company is a peer-to-peer lending fintech start-up in Singapore.

1) Can you share with the readers your background and business model?
I started my career as a consultant with McKinsey & Company in Europe and Africa. Then I moved to Rocket Internet, global venture builder, to build their portfolio companies in Southeast Asia (Zalora and Lazada). Last year I started my current business, Capital Match.

Capital Match is a peer-to-peer lending online marketplace to SMEs. Peer-to-peer lending is essentially banking without a bank as an intermediary – investors lend money directly to companies with Capital Match facilitating the transactions by providing credit risk assessment, legal documentation and debt collection services.

We mainly serve SMEs who cannot get a bank loan (a majority of SMEs in Singapore). We provide them loans of SGD 50,000-200,000 for a term of 3-12 months. Loans are syndicated with multiple investors providing funds to one borrower. The interest rates vary from 1.5% to 2.5% per month (on top of it there is additional processing fee of 0.2-0.5% per month). Investors have full discretion which loans to invest in and what amount. Their return is interest rate less 20% commission that Capital Match collects.

2) What are the needs that your business is addressing?
Two-fold:
1. Of SMEs: Providing SMEs with a substantial alternative financing option to improve their working capital or stimulate the growth
2. Investors: Providing alternative investment option with full operational support offering 1.2-2% return per month (15-25% annualized) and a minimum investment of S$1,000

3) How does peer-to-peer platform works?
Let me explain it in step-by-step process:
1. Borrower and lenders have to first register on the platform by providing required identification documents (list is available during registration process)
2. Once user’s account is activated, they can engage in a funding process
a) Borrower submits a loan request to us specifying the loan details
b) We perform credit risk assessment, proposing a final loan request proposal to the borrower for his approval
c) Subsequently, the loan request is made available on the platform for investors to commit funds
d) Investors can view all the open loan requests and commit funds as they wish – they decide which company to fund and in what amount
e) Once the commitment of a company reaches minimum 80%, the borrower can accept the loan request
3. Upon borrower’s acceptance of a sufficiently funded loan request, we prepare the legal documentation for both parties to enter in
4. Subsequently, the funds are disbursed to the borrower and we set up GIRO to collect monthly repayments

4) Who can apply for the loan and who can apply to be an investor?
Any private limited or LLP that is registered in Singapore can become a borrower with Capital Match. Regarding investors we accept both corporate and private investors with the only requirement being a Singapore-based bank account.

5) What is the expected rate of returns for investors?
The interest rate we charge to borrowers is 1.5-2.5% per month depending on the credit risk involved. Our commission is 20%, so investors can expect 1.2-2% net return per month.

6) What are your views on SME borrowing money to fund their business expansion?
I expect the SME market for borrowing funds from alternative sources to expand, mainly due to mainstream banks scaling down their lending operations, especially in commercial space. Also alternative financing options are also attractive to corporate borrowers who are currently not served by banks at all.

7) Peer-to-peer lending is growing rapidly in the US, UK and China but it has yet to really take off in Singapore. In your view, what do you think could be the reason?

It is still in its infancy in most countries around the world (except those three who are just at the forefront of Internet disruption). Other countries are slowly adopting it. I don’t see any particular barriers for adoption in Singapore – in fact, Singapore in many ways closely resembles mature markets, like the UK, so I would expect for the market to quickly catch up with the mentioned countries.

BullionStar Financials 2014

BullionStar

In a step to further increase customer transparency, BullionStar published its financial information such as sales revenue, number of orders, average order, medium order, website visits and other key data in its website on 14th March 2015.

Sales revenue was impressive and amounted to $53 million with average order of $6475. BullionStar.com also had more than 850,000 visits from 268,000 unique visitors in 2014. Among the 180 different products that BullionStar carries, gold bars were the most popular products, consisting of 52% of its total sales, followed by silver bars (18%).

The company was started in 2012, straight after the Singapore government announced GST removal for investment grade precious metals, and became operational in 2013. SG Wealth Builder is honored to partner with BullionStar to bring new exciting technology into the precious metal industry since 2013!

BullionStar Financials 2014 - Year in Review

 

CPF Medisave Minimum Sum to be scrapped on 1 January 2016

Health Minister Gan Kim Yong announced in Parliament yesterday that the Medisave Minimum Sum will be scrapped next year January. For many Singaporeans who had been lamenting that their CPF monies “don’t really belong to them”, this is definitely a form of greater flexibility on the uses of their Medisave accounts. This is because when Singaporeans withdraw their CPF monies at age 55, they will no longer need to first top up their Medisave accounts to the MMS. Instead, they will only need to meet the withdrawal rules.

Another change would be the Medisave Maximum Ceiling, which would be fixed for each cohort of Singaporeans when they turn 65 years old. Mr Gan reiterated that the ceiling has to be raised every year to keep pace with rising inflation and increasing life expectancy. Given a choice, I would not touch my Medisave monies even if I am 55 years old now because the interest earned in Medisave account is so much higher than the current bank saving rates. However, going forward, the interest rate environment might change, so I really appreciate the scrapping of the Medisave Minimum Sum.

The revised Medisave rules is a sign that the government is beginning to soften its hardline approach on CPF monies. The previous approach involved a blanket rule that assume all Singaporeans can’t manage their personal finances and health-care costs in their retirement years. Henceforth, the need for minimum sum to prevent Singaporeans from using their Medisave before they reach retirement.

This development was in line with what PM Lee had announced a while ago – giving Singaporeans more flexibility in the use of CPF. Given our government’s conservative style, I think there would be more changes coming along for our CPF Ordinary and Special accounts. I am hoping for more good news!

Magically yours,

SG Wealth Builder

Monetary Authority of Singapore (MAS) is proposing new rules on securities-based crowdfunding

Crowdfunding is the latest investment trend that uses online technology platforms to address both the needs of investors and small-medium enterprises (SME). At one hand, retail investors are looking for viable fixed income sources to grow their wealth. On the other hand, we have start-ups and SMEs which lack access to alternative pools of private financing, other than commercial banks. This is where crowdfunding can help to bridge the gap.

In a recent consultation paper issued, the Monetary Authority of Singapore (MAS) is proposing measures to facilitate crowdfunding involving securities.

Generally there are four types of crowdfunding – donation-based, reward-based, lending-based and securities-based. According to MAS, donation-based and reward-based are not subjected to securities regulation as there are no exchange of securities and promised of financial returns. However, for lending-based and securities-based, MAS deemed that they are subjected to securities rules.

Henceforth, MAS’ proposed framework for securities-based include the requirement for companies operating lending-based or securities-based crowdfunding platforms to hold Capital Markets Services (“CMS”) licenses. In addition, MAS would restrict offerings from lending-based and securities-based to only Accredited (AIs) and Institutional Investors (IIs). The rationale for this approach is because MAS aims to safeguard the interest of retail investors as there is a certain amount of risks in such investment products and MAS deemed that AIs and IIs are better positioned to handle the level of risks involved as they have more capitals and experiences.

In the paper, MAS listed a number of risks involving securities-based funding platforms, such as lack of liquidity of the investment products, potential loss of capital, frauds and closing of platforms. My view is that MAS’ concerns are probably valid because crowdfunding is something very new and is gaining tract globally in the investment community. As such, the regulatory framework is still not established in many countries. Therefore, retail investors may not be aware of the kind of risks involved in such investment schemes.

MAS’ new proposed measures would also mean that those weaker industry players would be impacted directly because of the base capital requirements. The restriction of retail investors’ participation would also mean that crowdfunding platforms have to step up their game to attract better quality of investors.

Magically yours,

SG Wealth Builder

Robert Hagstrom – New Investment Legend on meetinvest.com

By meetinvest
meetinvest

Robert Hagstrom — Professional Investment Strategist This week we’re launching American investor Robert G. Hagstrom’s investment strategy. From 1984 to 1989, he was a financial advisor for Legg Mason Wood Walker, Inc. and then portfolio manager with First Fidelity Bank from 1989 to 1991. Later he served as President and Chief Investment Officer of Legg […]

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Go Online to Avoid Student Debt

By Team Wall Street Survivor

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The cost of getting a college degree is out of control.

Since the 1980s the price of college has risen much faster than inflation. Since 1985 overall inflation was 115% while the college education inflation rate was 550% over the same period!

For the 2012-13 school year, the average annual price for undergraduate tuition, fees, room and board was $15,022 at public institutions and $39,173 at private non-profit bastions of higher learning.

The benefits of higher education are clear. Nearly 2 million bachelor’s degrees will be awarded in the United States each year . An adult working full-time with a bachelor’s degree earns an average of $46,000 compared to $30,000 for those with a high school diploma. To many, attending university means improved job prospects and earning potential.

And people are willing to leverage their future to do it. The amount of student debt that students are taking on has increased 2x over the last twenty years. The total amount of student loan debt in the United States is over $1 trillion! That’s twice the gross domestic product of Belgium!

In fact, the class of 2014 is in the record books, being the most indebted class in history. The average graduate in the class of 2014 has student loan debt on the order of $33,000 – according to data by Edvisors, a group of web sites that talk about planning and paying for college.

There are various explanations as to why college is so expensive. Schools all over the country have added improved services like having mental health counselors on staff or emergency alert services. Some of the costs are due to increased spending on construction of buildings and equipment.

But that’s not really the whole story. The main culprit is labor costs. Between 1993 and 2007 administration costs rose 61%, nearly twice as much as total university costs. Enrollment in that same period increased by 15% but administrators employed increased by 40%. Finally there are government cuts to state funding. Think about how every time there is a recession the first cuts made are often to education budgets. These cuts add up over the decades, with the cumulative effect being felt in the bank accounts of college graduates.

What About Learning Online?

An explosion in online learning options means that attaining the knowledge that comes with going to a brick-and-mortar university is easier and cheaper than ever. Some of them are even offering college credit. The University of Phoenix has a student body of 250,000 – making it the largest university in the United States.

These days colleges themselves are starting to throw up their own online classrooms as evidenced by MIT OpenCourseWare – a web-based publication of virtually all MIT course content, open and available to the world. They are not alone. Harvard, Princeton and Berkeley have all embraced the online model, offering massive open online courses (MOOCs).

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And it’s not just general education that is popping up online. There are very specialized options out there now. Learning to code is a niche e-learning segment that has absolutely blown up while websites like us at Wall Street Survivor focus on personal finance and investing.

The Death of the Classroom?

The argument for classroom learning is the mentor model: the idea that traditional college education will survive because, as an educational experience, it just cannot be replicated by online forums. George Mason University professor Peter Boettke says “online chat and social media do not compare to hands-on, face-to-face working through difficult issues that the physical clustering of learners provides.”

Online learning is here to stay but rather than killing off universities it is more likely that a hybrid model will win out. The demand for a quality educational experience will never go away. There is just something about online learning that doesn’t compare with classroom learning.

How Do We Solve the Student Debt Problem?

It’s hard to say. Demand for higher education is stronger than ever. The baby boom flooded colleges with willing students. College enrollment has risen by 138% over the last 40 years. This rising demand meant that increased costs had to be tolerated.

A lot of people consider community college as a way to keep their costs down. Especially when you consider that the average annual cost at a two-year college is $3000.

No matter where you go to school or what you intend on studying, the first two years are typified by a focus on general education. Why not take those classes at a community college for a fraction of the cost at a private university?

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The student loan problem is real. After all, early this year President Obama outlined a proposal to offer two years of free community college tuition to students saying that “two years of college should be as free and universal in America as high school is today.”

The take-away is clear. For those who are entering college today the decision is not as clear cut as it was for previous generations. In the past people entered university because they were supposed to, or because that was what they were told the path to success looked like. They were willing and eager to take on the debt needed to complete their education.

Now students need to think carefully about their options. Higher education is still important, but so is graduating without debt. The multitude of e-learning options out there means it’s easier than ever to get a world-class education without breaking the bank.

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BullionStar is hiring!

Below is newsletter from BullionStar, a Singapore online bullion company where you can buy gold and silver at competitive prices. To be a successful wealth builder, investors must always stay ahead of the the curve and keep abreast on the latest development in investment trends. For the past few years, the government has been trying to establish Singapore as a precious metal trading hub, with the aim of creating good job opportunities for Singaporeans. The salaries offered by BullionStar is really attractive and competitive. So Singaporeans should have no valid reason to complain the lack of good paying job positions in Singapore. Read on to find out more

BullionStar is currently hiring for customer service roles. Singapore is the go to place in the world for precious metals. If you are passionate about the bullion industry, now is the time to join our team!

 We are hiring 1-2 people for customer service roles which include serving bullion customers, handling transactions, handling bullion and carrying out various administrative tasks.

BullionStar is a fast paced company. To contribute to our team you will have the following skills:

– Accurate and meticulous
– Versatile and hard working
– Communicative taking initiatives and giving feedback

The job location is BullionStar’s bullion shop, showroom and vault at 45 New Bridge Road.

Salary and benefits: The starting salary is SGD 2500 – SGD 5000 depending on knowledge, experience and skills plus one month’s bonus, reimbursement of medical bills and public gym free of charge.

Knowledge, interest and passion for precious metals is a big plus.
Please feel free to send your CV and personal letter in which you describe why you are suitable for the position and what you can contribute to BullionStar to career@bullionstar.com

Kind Regards

The 4 Most Common Investing Myths People Fall For

By Team Wall Street Survivor

Courses marketplace

Warren Buffett often tells people not to focus on day-to-day movements of the stock market; he prefers to take the long view.

That’s good advice; getting caught up in the daily movements of the stock market is enough to drive anyone crazy. There’s a lot of investing tips floating around out there, but for every good piece of advice there are two or three stinkers.

Have you ever heard someone say “investing in the market is gambling”? You hear this being thrown around when people are trying to dissuade others from getting involved in the market, but it’s just untrue. Gambling is when the money from the losers is used to pay the winners, a zero-sum game. In the world of investing, wealth is being created. You buy stock in a company which then goes on to produce goods that add value to the world – that’s wealth creation, not gambling.

Here are some of the most common myths of the market:

1. Set it and Forget it Investing

Target date funds, also known in the investing business as life cycle funds, are designed to be convenient. Invest your money in a fund, leave it in there for years while others take care of the asset allocation and diversification part, and then profit once you are ready to retire. Easy game, right?

The simplicity of this investing solution is tempting and target date funds are very popular in the U.S. In theory these funds mimic behaviour that you as an investor should be following anyway: invest in equities when young while becoming more conservative as retirement draws nearer.

The Reality

You are still at the mercy of the market and when you choose to retire can have a big impact on your returns. For example, all 264 target-date funds sold by 39 mutual funds performed poorly after 2008. Even the most conservative – designed to weather any storm – fell on average 17% in 2008.

Additionally, it is unwise to think your portfolio is complete with a simple set-it and forget-it approach. There are other asset classes beyond equities, bonds and cash and being exposed to real estate and commodities are all part of an all-round investing strategy.

2. What Goes Up Must Come Down

Mean reversal, or the school of thought that says prices and valuations in the market tend to fluctuate, is an idea that has been around for a long time.

my2

The graph above shows U.S. and European corporate profits for the last 35 years and we can see them clearly oscillating around a long term level.

Next, let’s take a look at the Dow Jones.

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We see that in general stocks tend to march upward over time, but to be specific the stock market consists of a series of upward AND downward moves that result in a net increase over time.

The Reality

While there is some truth to the concept of mean reversion for parts of the market, (earnings etc.) we aren’t so much concerned with IF mean reversion will happen but WHEN it will happen – and therein lies the problem. Knowing how to time the market is no simple task and requires meticulous analysis.

3. Invest With Me, I Can Pick the Winners

Every fund manager out there is asking for your business, banking on their reputation and ability to turn your endowment into a hefty sum. There are plenty of names out there. Peter Lynch was one of the more well-known stock pickers and he did very well for himself.

If only you could get the secret to Warren Buffet’s approach and you’d be a mega-millionaire right?

The Reality

No one has ever been shown to be a consistently good stock picker. Yup, not even Warren Buffet. According to Seeking Alpha, Buffet does very well compared to almost every fund manager out there but falls short when compared to a popular market index, the S&P Midcap 400.

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That’s right. If you invested in the S&P Midcap 400, you would have outperformed Warren Buffet. In fact, depending on what time period you use, the S&P 500 will generally be ranked halfway amongst all the actively managed funds. That means the S&P 500 outperforms at least HALF of all actively managed funds out there!

You’re better off putting your money in a low-cost index fund that tracks the overall market.

4. Gold is a Good Hedge

Gold bugs will not hesitate to tell you where to put your money. When inflation gets out of hand you’ll thank the savvy investor who told you hold onto your stocks of gold. Unlike currency, gold holds its value. A brick of gold today will preserve its worth from one generation to the next.

It is widely believed that gold is just a good hedge. People often buy gold on anticipation of market and currency drops as gold is expected to rise when the dollar or the stock market falls.

Gold is also known as the crisis commodity, because people tend to buy up the precious metal when geopolitical tensions rise. When threat of coups rise and confidence in governments is low, gold tends to do well.

my5

The Reality

It was observed that gold fell nearly 1/6th of the time when stocks fell – hardly making it a good hedge. Additionally it was found that changes in gold prices are independent of currency changes – again making it a bad form of protection against another asset class.

The bottom line: gold is not a reliable hedge during periods of stock market turbulence.

What is true is that gold has been a good hedge of inflation over the very long run (100 years+) but not so much in the medium to near-term investing horizon.

In the right allocations gold can be a useful component of any portfolio, but gold does not provide the amazing protection that many people claim it does. Many portfolio constructionists recommend holding less than 3% of your assets in precious metals such as gold and silver.

Those are just a few of the myths in the investing world but there are plenty more out there.

Have you heard of any stock market urban legends? If so, share them in the comments below and we’ll debunk them in part 2!

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meetinvest founders reveal £1 million personal investment portfolio on platform homepage

By meetinvest
meetinvest

• UK guru portfolio reveals fully transparent access to current investments • Homepage refreshed, updated and re-developed to enhance user experience and information access • Research shows 45% of UK adults find the stock market and data available to them “confusing” – many more would be likely to invest if given access to comprehensive information […]

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Sheng Siong Group’s net profit grew 22.3% yoy to S$47.6 million for FY2014

Singapore, 25 February 2015 – Sheng Siong Group Ltd. (“Sheng Siong”, together with its subsidiaries, the “Group” or “昇菘集团”), one of the largest supermarket chains in Singapore, reported a 22.3% year-on-year (“yoy”) increase in net profit to S$47.6 million for the full year ended 31 December 2014 (“FY2014”), mainly because of higher turnover and improved gross margin.

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Revenue increased by 5.6% yoy in FY2014 of which 2.3% was contributed by the new stores which were opened in 2012, and 3.3% from comparable same store sales for the old stores. The increase in revenue was driven mainly by growth in the new stores, longer operating hours, marketing initiatives and renovation to some of the old stores. Most of the new stores, which are now in their third year of operation, continued to grow within expectations. Revenue contraction in the Bedok and Tekka stores appeared to have bottomed out in 4Q2014, despite growth remaining negative for the full year, though of a lesser magnitude compared with FY2013.

sheng siongGross margins increased to 24.2% in FY2014 compared with 23.0% in FY2013, driven mainly by lower input costs derived from the distribution centre, better sales mix, and stable selling prices.
Administrative expenses increased by S$6.4 million in FY2014 compared with FY2013, mainly because of the increase in staff costs. The increase in staff costs came from salary adjustments as well as a higher provision for bonus arising from the improved financial performance of the Group in FY2014. The increase in bonus was in line with the increase in net profit. Rental expenses remained at about 2.7% of revenue, despite an overall increase of 3.2% in rent compared with FY2013. Operating costs were tightly controlled and administrative expenses as a percentage of revenue remained stable at 16.2% in FY2014.

The Group continued to generate healthy cash flow from operating activities in FY2014, with cash flow from operating activities of S$71.7 million being higher than FY2013’s operating cash flow of S$45.1 million. This was mainly due to the higher level of operating profits and cash generated from working capital changes. Total cash outflow in FY2014 for property plant and equipment of S$80.9 million comprised of the purchase of Block 506 Tampines, progress payments for Yishun Junction 9 which is still under construction and maintenance capital expenditures. On 9 September 2014, the Company issued, by way of a private placement of 120 million new shares raising a net amount of S$79.0 million, which will be utilized to purchase retail space to expand the grocery retailing business in Singapore.

The Group’s balance sheet remained strong with cash of S$130.5 million as at 31 December 2014.

Business Outlook

The Monetary Authority of Singapore said in their policy statement dated 28 January 2015 that the mixed outlook for the global economy will weigh on the external-oriented sectors (of Singapore’s economy) while the domestic sectors should stay broadly resilient. They added that the outlook for inflation had shifted significantly largely due to the decline in global oil prices, with imported inflationary pressures receding as global oil prices are likely to remain subdued in FY2015.

Against this backdrop, the supermarket industry is expected to remain competitive. In December 2014, the Group opened a new store in Penjuru and another in January 2015, following the completion of the purchase of Block 506 Tampines. Finding retail space to open outlets remains challenging and the plan to open new stores in areas, where the Group does not have a presence in, could be hampered if suitable retail space cannot be found. All the eight new stores which were opened in different months in FY2012 would be entering into their third year of operation, and growth is expected to normalize.

Besides competitive pressures, gross margin, which had improved steadily throughout FY2014, could be affected if input cost is increased due to food inflation resulting from disruption to the supply chain or other factors. The Government’s restriction on the supply of foreign labour would continue to put upward pressure on manpower cost and increase operating expenses. However, the Group expects some savings in utility charges arising from a lower oil price.

The Group will start to derive property income from the units in Block 506 Tampines which are rented out to non-related parties. The net income arising from this activity is not expected to be significant in FY2015. The Group will look into re-configuring the building to expand and/or re-position the store when most of these tenancies expire in FY2016.

The Group has entered into a conditional Joint Venture Agreement with LuChen group Co. Ltd to set up a joint venture to operate supermarkets in Kunming, People’s Republic of China. Applications for licenses and registration of the joint venture with the relevant authorities in China are being made and it is envisaged that, in view of the pending approvals and grant of the licenses, operation will not commence till the second half of FY2015. The Group’s will hold a 60% stake, amounting to US$6 million in the joint venture. The joint venture is not expected to be profitable in FY2015, but the financial impact on the Group is not expected to be significant either.

On the future plans of the Group, Mr Lim Hock Chee, the Group’s Chief Executive Officer, added, “We are pleased to be back on track for our store expansion plans with the recent opening of two new stores in Penjuru and Tampines in December 2014 and January 2015 respectively. Looking ahead, we will continue to expand our retail network in Singapore, particularly in areas where we do not have a presence. In light of the uncertain economic environment, we will remain prudent and firmly focused on improving our operating margins by leveraging on our Mandai Distribution Centre to lower input costs, optimising our sales mix and improving productivity to deal with the tight labour situation.

To reward shareholders for their continued support, we are pleased to declare a final cash dividend of 1.5 cents per share, taking our total dividend for FY2014 to 3.0 cents per share. The total payout amounted to about 91% of our net profit after tax. We also remain committed to distributing up to 90% of our net profit for FY2015 and FY2016.”

What is an IPO: Why Companies Go Public

By Team Wall Street Survivor

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There are as many glorified tales of triumphant IPOs as there are devastating ones about companies whose entry into the public markets proved their ultimate undoing. Not surprisingly, the logistics behind issuing an Initial Public Offering are supremely complicated — in both making the decision to go there and in actually getting there.

An IPO can be a great strategy for a business to grow, but it’s not for everyone. Indeed, the fact that fewer than 1,000 businesses a year are successful at IPOs (says the Small Business Administration) is reason enough to give the consideration pause. Here’s some counsel to help understand the nature of the beast.

What is an IPO?

An IPO is the first offer of a company’s stock on the public market. “Going public” thus is the sought-after destination of many emerging companies. Here, organizations are compelled to assemble various detailed public disclosures — with the assistance of a lawyer — that they present to an investment bank who handles the underwriting. This procedure involves setting a price for the stock, and arranging participation of large institutional investors.

After that, company execs and the underwriter participate in a road show, wherein they meet with potentially interested parties and look to drum up public interest in the their firm. Traditionally, the IPO has been used as a financing vehicle. Today, it’s a little more complex than that. After all, going public is an expensive proposition. An IPO can cost hundreds of thousands of dollars — and there’s no guarantee it’ll even become a reality.

Why Companies Go Public

When you’re a fuzzy and bootstrapping startup, you’re the darling of the business world. People admire your tenacity and speak glowingly about your selfless efforts. But when you’re a public entity, there’s considerably less sympathy on offer. More than that, such a move exposes all kinds of vulnerabilities. For one, it subjects a company to new rules and regulations by various governing bodies. For another, it opens it up to the risk of takeover. A public company’s shares can be snapped up by anyone — even its competitors.

While the IPO’s primary reason for existing is to provide liquidity to investors and employees (with some companies forced into it as a means to pay back investors), an IPO also furnishes a company with some collateral that can later be traded upon for future purchases or mergers. Before anything else, though, the execs of a would-be public entity need to be clear on what they’re trying to achieve before taking a step in this direction. Importantly, the objective cannot solely be to make money, a caveat Mark Zuckerberg clearly understood when he said in his letter to Facebook investors upon its IPO filing, “We don’t build services to make money; we make money to build better services.”

When is the Right Time?

This is the heart of the matter. Undertaking an IPO too early can have catastrophic effects on the future health of a business; waiting too long might allow a competitor to steal their thunder.

Its not a foregone conclusion that a company will always issue an IPO. Such a venture requires founders who have a plan that includes a defence of the company and a financial spreadsheet that’s tight and within the grip of strict controls. The public markets need to be able to trust an operation’s ability to make — and keep making — money. Investors aren’t fans of weaknesses in an IPO prospectus.

Going public involves selling your vision and future results to others. That’s where the storytelling pitch comes into play. Critical to that is the piece that describes how your business is different from — and superior to — the competition. Here’s where you need to fasten on a sustainable competitive advantage that’s definitively yours. Some questions to consider when pondering whether you’re in a position to go public:

  • Does the business have processes built into the business plan that defines a path for growth while accounting for possible change?
  • Are they delivering at least $60-$100 million in annual revenue (or $15-$25 million in quarterly revenue) — the commonly accepted benchmark for this move?
  • Can they demonstrate cash flow profitability?
  • Can the business point to a track record of accurate business-result forecasting? Knowing with reasonable precision what next quarter, or even next year, is going to look like, you’re golden.
  • Is the business reasonably invulnerable? (In other words, do they have a couple of very large customers and a dominant supplier or distributor, or are they beholden to a single platform, technology or regulatory regime?)

Wrapping it Up

There are many advantages to a company going public, including the acquisition of capital to invest in R&D or pay off debt as well as increased public awareness. But there are downsides, too, the requirement of added disclosure, the sudden presence of regulatory oversight, the time commitment of maintaining a public face, and the added cost of complying with regulatory requirements among others. Before deciding whether or not to issue an IPO, companies need to spend some time evaluating the big picture.

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What is it like to catch a falling knife?

One of the golden rules in investing is never to catch a falling knife. Yet when it really does occur on one, most of the time, most investors would enter into self-denial mode and refrain from exiting their investments or cut losses early. You can term it as a classic investor’s symptom or attribute it to ego, greed and fear of cashing out too early. Whatever the case it is, catching a falling is a very painful experience and investors must not confuse it with the technique of dollar-cost-averaging. In my early days of investing, I made this folly in one of my investments – China Enersave.

About 10 years ago, the renewable energy sector was seen as a hot prospect because of the sky high fuel prices and the Clean Development Mechanism (CDM) under the 1997 Kyoto Protocol. Many companies were engaged in various alternative fuel solutions and one of them was China Enersave, a Singapore company which operated biomass power plants in China. When I came across the profile of the company, like many novice investors, I was intrigued by the business model and therefore invested in the stock. In my excitement, I threw all caution to the wind and ignored the early warning signs – poor management execution, lack of company’s track record and the high risks of doing business in China.

Enter the 2009’s financial crisis. The company could not fulfill its target of opening 20 biomass power plants in China and was suffering from consecutive years of operational losses. To make things worse, it deviated from its business goal and switched to investing in a coal powered plant in China. Not surprisingly, the stock price started to fall but still, I kept faith and continued to accumulate more shares. I thought with a strong backer like the Dubai Sovereign Wealth Fund, nothing could go wrong. But apparently I was dead wrong!

To cut a long story short, the company was too ambitious and faced difficulties repaying the debts used for the business expansion in China. As a result, it issued several rounds of rights to raise funds to repay the creditors. Eventually it faced the prospect of winding up on at least two occasions because of the massive debts incurred. But incredibly, it was saved by white knights time and again and changed its business directions twice. The company changed its name from China Enersave to YHM to Charisma Energy. Arising from these changes, there was also changes in the management.

On looking back, some of my stupid mistakes included:

1) Being too stubborn and not setting cut-loss price level. I was too emotionally attached to this stock and refused to admit that I made a mistake.

2) Not doing enough research on the company’s capability, experiences and the risk involved behind the technology.

3) Confused dollar averaging cost with catching a falling knife. The former, if done correctly on a company with strong fundamentals, can reduce investment costs while the latter can cause investors to lose big money.

4) Based my research on one year of company’s financial statement when I should have at least 5 years of data to validate my investment thesis.

5) The company had no moat sources – intangible assets, cost advantage, network effect, switching costs and efficient scale. So it is easy to suffer losses when the renewable energy concept failed to pan out.

I have not sold off my investments in Charisma Energy but had written off the invested amount of $9000. I regard this amount as a form of tuition fee to remind myself never to make the above mistakes again.

Regards,

SG Wealth Builder

Singapore Memories: Chinese TV Drama – The Unbeatables

As we celebrate Singapore’s 50th birthday this year, I can’t help but look back at how much our society has transformed and progressed over the years. I grew up in the 80s, a time when smart phones and Internet were non-existent. Though life was simple, the pace was also less stressful. In fact, my generation’s main sources of after-dinner family entertainments were television and radio only. To capture the memories of this past generation, I decided to blog about this beautiful chapter of my life in a series of articles starting with this one.

Widely seen as the trail-blazer TV drama serial in Singapore’s Channel 8, The Unbeatables was the first show that featured gambling as the core theme and took the Singapore’s audience by storm more than twenty years ago. Even though the show was produced in 1993, an era without the distractions from cable TV and Internet, most Singaporeans would agreed that it was one of the greatest shows that SBC (the predecessor of Mediacorp) has ever produced, even until today. In my view, I would say that The Unbeatables, was truly unbeatable, and had set the gold standard for the media industry. For more than two decades, no other shows had come close to matching The Unbeatables’ quality, class and enthralling twists. Even its two sequels failed to match the high standard set by the 1993’s version, so you can imagine the incredible level of enduring success this show has achieved.

The Unbeatables aimed to entertain, not to educate, the audience on the vices of gambling. The story was set in a fictional island called Coral Isle and the plot centered on the intense rivalry between the gambling families – the Longs and the Yans. The main storyline was a bit cliche – male protagonist fell in love with the father’s arch enemy daughter. Notwithstanding this, the show’s recipe of high tempo, good acting and exciting twists made it a top show with rave reviews from the audience.

From the strong cast, it is evident that SBC had every intention to make this show a success. Li Nanxing, who was already a rising star back then, was Yan Fei, the male protagonist who fell in love with Long Jiajia, played by Zoe Tay, the reigning Queen of Caldecott Hill. The other leading roles included the devilishly charming Zhu Houren who starred as the evil King of Deception, Long Tingguang and Chen Shucheng, who starred as, Yan Kun, the King of Gamblers.

There were several classic scenes that I remember clearly, including the first episode in which Yan Kun challenged the Eight Great Swindlers and the scene in which Yan Kun trained his son’s gambling skill with the Chinese classic, Romance of the Three Kingdom.

The show also featured great theme songs by Chinese pop singer, Zhao Chuan. The songs, combined with the novel theme at that time, firmly entrenched The Unbeatables as one of the most memorable Chinese TV dramas in Singapore’s history. It has also propelled Li Nanxing and Zoe Tay to King and Queen of Caldecott Hill until today.

Do you have any favorite shows from the 80s to 90s?

Magically yours,

SG Wealth Builder

New Course: Investing Teacher!

By Team Wall Street Survivor

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Hey Wall Street Survivors!

We are excited to announce the brand new Investing Teacher course pack!

Want to learn how to read stock charts and advanced techniques for trading?

Check out this fully interactive course now and take advantage of our special launch offer.

About Investing Teacher

Investing Teacher isn’t like other WSS courses. This time, quizzes are integrated directly into the course so you don’t have to wait ’til the end of a chapter to test yourself.

Stock charts are visual representations of data over time – so what better way to teach how to read stock charts than having you draw directly on them?

Investing Teacher is so jam-packed with content that we had to split it into two different courses. Start with the basics and move your way up to becoming expert in stock charts.

it part2 curriculum

So what are you waiting for? Get started with Investing Teacher and learn how investors see the stock market.

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How to Budget: The 50/30/20 Rule

By Team Wall Street Survivor

Wall Street Survivor Courses

Ever wonder where all your money goes? It can be easy to spend a few dollars here and there on non-essential goods, but over time these costs can add up. That’s why its important to identify your spending hot spots so you can reclaim your cash. The theory is that identifying those areas of financial vulnerability — the products and services upon which you have demonstrated a proclivity for spending the most money — is the first step to addressing them.

For more help on this topic, check out the Building Money Saving Habits course.

Keep Track

It’s critical to review your credit card statements and receipts to track where your money went. Once you gather several months’ worth of data, its time to start sniffing out patterns. Eventually, you’ll be able to isolate the categories where you spend the most. Some unavoidable costs just have to be absorbed but you may find yourself saying “I spend that much on coffee(or something else)!?!?”

Now you’ll not only be able to identify your spending hot spots, but to rank them too. This will help you focus your cost-cutting efforts by tackling the biggest problem first.

The 50/30/20 rule

Before tackling your specifics, look to implement the 50/30/20 method. This rule takes some of the hard-core challenges out of the ugly task of finding out how to budget by providing a compassionate set of guidelines to go by.

Here, your needs are allotted 50 percent of your after-tax expenditures. These are essentials, like your rent, utility bills, food, medications, minimum credit card payments and transportation costs.

Cap your wants, meanwhile, at 30 percent. Discretionary spending encompasses those small pleasures that enhance your life, such as movies, concerts, cable and nights out at the pub. Obviously a person’s wants list could trail on endlessly (who doesn’t want a month in Tahiti?); but if you want to save for the possibility, you must hold the ceiling at 30 percent.

The 20 percent in this directive is to devote at least 20 percent of your after-tax income to your financial goals. Here, you pay down (more than the minimum requirement of) your debt, bulk up your savings, add to your retirement stash, launch an emergency account or start saving for a down payment on a house.

If it helps, set up three accounts according to the 50/30/20 algorithm and stick to it!

The Standard Categories

Conventionally, the biggest spending classifications are as follows: home and living; food; entertainment, celebrations and vacations; and body and personal care. Yours might differ, however, and you need to be honest with yourself about what your biggest weaknesses are. If you’re a particularly avid collector of electronic gadgets, for example, or are such a fan of your pooch you can’t help but lavish her with expensive accoutrements, take note.

Home and Living

This is likely the spending category with the biggest appetite of all. Here, your budget groans with expenses like your rent and mortgage, utilities, home furnishings, home maintenance, banking fees and transportation costs.

If you spend more than 35 percent of your net income on your accommodation and costs associated with maintaining it, you’re spending too much. Consider cutting here by refinancing your mortgage or moving to cheaper digs. If none of these is an option, you’ll have to slash elsewhere.

Food

This is likely your single biggest variable expense. Take care to include not just groceries in this bucket, but all the money you spend eating and drinking outside of the home. That means coffees, snacks, gum runs and every last of your restaurant meals.

There’s a fair bit of room for movement in this arena, though the sting of associated deprivation can be rough. Cutting down on just two store-bought coffees a week, for example, could score you more than $400 a year in savings. Bringing your lunch one more day than you typically do, or suggesting potlucks with friends in lieu of pricey trips out can also add up to some serious sums.

Entertainment, Celebrations and Vacations

This feel-good spending classification can get unwieldy very quickly. The catchall for good times, this is where you’ll find everything from nights out with your peeps to spring-break jaunts to sunnier climes. Gifts clock in here, too.

Explore house swaps for vacations, or downgrade your accommodation needs by a star. And start focusing your gift-giving efforts on thoughtfulness instead of costliness.

Body and Personal Care

This category includes every single thing you spend money on to enhance your appearance. That means gym memberships, personal care products, haircuts, clothing and so on.

groomed

There’s a fair bit of elasticity in this spending category, too, so long as, again, you’re willing to forego a bit of the pleasure it delivers. In some cases, your choices here a just a case of bait and switch. Drugstore shaving and skin-care products are way cheaper than their brand-name counterparts, you might run outside or exercise at home instead of signing on for the gym, and there’s a huge swath of choice in where you go to buy your haberdashery.

Emotional Shopping

Often, your emotions are the biggest enemy to your ability to stick to a budget. That’s why identifying the emotional triggers for your spending impulses is paramount to staying on target. Are you spending in an effort to relieve tension, maybe? Boredom? To reward yourself for enduring some ordeal? Or are you making a link between your worth as a person and those material things you’re able to amass?

If your inner plumbing efforts reveal your self-esteem to be tied up with your spending on the latest toy or fashion, tuck that knowledge away for regular reference. And if you think you might have a shopping addiction, check out 4Therapy.com’s compulsive shopping quiz to confirm the diagnosis.

impulse

One way to cut down on emotional spending is to avoid making impulse buys. The next time you’re considering a purchase, whether it be in the flesh or on line, give yourself 24 hours to mull it over. You’ll often forget about the object of your affection as soon as you leave the store or flip to another web page. If it helps, keep a wish list of the items you’ve resisted buying so that you can return to them when you come into some cash or ask for them on your birthday.

You might also limit your exposure to what’s out there vying for your money on the premise that the less you’re aware of what’s available to buy, the less likely you’ll be to develop a sudden need for it. So unsubscribe to the rivers of advertising that stream into your inbox every day or download a program that prevents ads from appearing on your screen.

Remind Yourself

Scribble yourself a note to keep your reasons for introducing financial responsibility to your life front and center. Write, I’m getting serious with my money because and then fill in the balance with something meaningful to you, like “I want to visit New Zealand” or “I need to finally kill that student loan.”

The best budgets are flexible, personal and always subject to adjustment. Having identified the what and where of your personal expenditures, you can start to unravel the why.

The post How to Budget: The 50/30/20 Rule appeared first on Wall Street Survivor Blog.

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Isolating Your Spending Hot Spots

By Team Wall Street Survivor

Wall Street Survivor Courses

The chilly scene currently frosting up your window notwithstanding, now is always a good time to take stock of your “spending hot spots.” The theory is that identifying those areas of financial vulnerability — the products and services upon which you have demonstrated a proclivity for spending the most money — is the first step to addressing them.

Here’s some help.

Initial research

The critical launch point requires you to review your bankand credit card statements and receipts to track where your money went. Gather several months’ worth of the things, and use different colored highlighters to suss out patterns. Eventually, you’ll be able to isolate the categories that characterize your spending.

Ideally, you’ll not only be able to identify your groupings, but to rank them, too, from biggest culprit on down. This will help you focus your cost-cutting efforts.

The 50/30/20 rule

Before tackling your specifics, look to implement the 50/30/20 method. This rule takes some of the hard-core challenges out of the ugly task of budgeting by providing a compassionate set of guidelines to it.

Here, your needs are allotted 50 percent of your after-tax expenditures. These are essentials, like your rent, utility bills, food, medications, minimum credit card payments and transportation costs.

Cap your wants, meanwhile, at 30 percent. This venture into more discretionary spending encompasses those small pleasures that enhance your life, such as movies, concerts, cable and nights out at the pub. Obviously a person’s “wants” list could trail on endlessly (who doesn’t want a month in Tahiti?); inside this guideline, you must hold its ceiling at 30 percent.

The 20 percent in this directive requires individuals to devote at least 20 percent of their after-tax income to their financial goals. Here, you pay down (more than the minimum requirement of) your debt, bulk up your savings, add to your retirement stash, finally launch an emergency account or maybe start a house fund.

If it helps, set up three accounts (or label three mason jars) according to the 50/30/20 algorithm.

The Standard Categories

Conventionally, the biggest spending classifications are as follows: home and living; food; entertainment, celebrations and vacations; and beauty and style. Yours might differ, however, and you need to be honest with yourself about what your biggest weaknesses are. If you’re a particularly avid collector of electronic gadgets, for example, or are such a fan of your pooch you can’t help but lavish her with expensive accouterments, take note.

Home and Living

This is likely the spending category with the biggest appetite of all. Here, your budget groans with expenses like rent and mortgage, utilities, home furnishings, home maintenance, banking fees and transportation costs.

If you spend more than 35 percent of your net income on your accommodation and costs associated with maintaining it, you’re spending too much. Consider cutting here by taking on a boarder, refinancing your mortgage or moving to cheaper digs. If none of these is an option, you’ll have to slash elsewhere.

Food

This is likely your single biggestvariable expense. Take care to include not just groceries in this bucket, but all the money you spend eating and drinking outside of the home. That means coffees, snacks, gum runs and every last of your restaurant meals.

There’s a fair bit of room for movement in this arena, though the sting of associated deprivation can be rough. Cutting down on just two store-bought coffees a week, for example, could score you more than $400 a year in savings. Bringing your lunch one more day than you typically do, or suggesting potlucks with friends in lieu of pricey trips out can also add up to some serious sums.

Entertainment, celebrations and vacations

This feel-good spending classification can get unwieldy very quickly. The catchall for good times, this is where you’ll find everything from nights out with your peeps to spring-break jaunts to sunnier climes. Gifts clock in here, too.

Explore house swaps for vacations, or downgrade your accommodation needs by a star. And start focusing your gift-giving efforts on thoughtfulness instead of costliness.

Body and personal care

This category includes every single thing you spend money on to enhance your appearance. That means gym memberships, personal care products, haircuts, clothing and so on.

groomed

There’s a fair bit of elasticity in this spending category, too, so long as, again, you’re willing to forego a bit of the pleasure it delivers. In some cases, your choices here a just a case of bait and switch. Drugstore shaving and skin-care products are way cheaper than their brand-name counterparts, you might run outside or exercise at home instead of signing on for the gym, and there’s a huge swath of choice in where you go to buy your haberdashery. And so on.

Emotional shopping

Often, your emotions are the biggest enemy to your ability to stick to a budget. That’s why identifying the emotional triggers for your spending impulses is so important to this hotspot-finding mission. Are you spending in an effort to relieve tension, maybe? Boredom? To reward yourself for enduring some ordeal? Or are you making a link between your worth as a person and those material things you’re able to amass?

If your inner plumbing efforts reveal your self-esteem to be tied up with your spending on the latest toy or fashion, tuck that knowledge away for regular reference. And if you thinkyou might have a shopping addiction, check out 4Therapy.com’s compulsive shopping quizto confirm the diagnosis.

impulse

One way to cut down on emotional spending is to avoid making impulse buys. The next time you’re considering a purchase, whether it be in the flesh or on line, give yourself 24 hours to mull it over. You’ll often forget about the object of your affection as soon as you leave the store or flip to another web page. If it helps, keep a wish list of the items you’ve resisted buying so that you can return to them when you come into some cash or ask for them on your birthday.

You might also limit your exposure to what’s out there vying for your money on the premise that the less you’re aware of what’s available to buy, the less likely you’ll be to develop a sudden “need” for it. So unsubscribe to the rivers of advertising that stream into your inbox every day or download a program that prevents ads from appearing on your screen.

Remind yourself

Scribble yourself a note to keep your reasons for introducing financial responsibility to your life front and center. Write, I’m getting serious with my money because and then fill in the balance with something meaningful to you, like “I want to visit New Zealand” or “I need to finally kill that student loan.”

The best budgets are flexible, personal and always subject to adjustment. Having identified the what and where of your personal expenditures, you can start to unravel the why.

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How SpaceX Plans to Colonize Mars

By Team Wall Street Survivor

Courses marketplace

Space Exploration Technologies, better known as SpaceX, just raised one billion dollars through Google and Fidelity. The pair now own around 10% of the space transport services company with Google hoping the collaboration leads to a global internet.

The company is known for its outrageous mission statements. It was founded in 2002 by billionaire entrepreneur Elon Musk with the goal of making space transport cheap enough to allow humans to colonize Mars.

For those unfamiliar with Musk – he is the South African born, Canadian-American billionaire behind companies such as Paypal, SolarCity and Tesla Motors and has been described as a mix of Steve Jobs, J.D. Rockefeller and Howard Hughes. The entrepreneur knows how to think big and SpaceX is arguably his most ambitious project to date.

SpaceX developed the Falcon 1 and Falcon 9 rockets and the Dragon spacecraft. The Falcon 1 was the first privately-developed liquid-fueled rocket to successfully reach orbit. The launch on September 28, 2008 came after six years of hard work and three failed launches going back to 2006.

In 2012, they followed up that achievement by becoming the first private company to send a spacecraft to the International Space Station. The Dragon launched on May 25, 2012, bringing a load of cargo to the astronauts on the ISS. As of January 2015, SpaceX has flown five missions to the ISS and launched 13 Falcon 9 rockets with many more launches planned for the future.

Source: SpaceX.com

Elon Musk has bigger dreams than delivering cargo to the ISS or lining up commercial launches. He wants to get humanity to Mars. In 2011, Musk boasted that he would put a man on Mars by 2021.

To do so, SpaceX will have to use reusable rockets. A basic, traditional rocket might consist of a rocket core, payload, and boosters where much of the apparatus is thrown away each time.

spacex rocket

Currently there is no launch system that allows reuse – at least in a manner similar to the simple reusability of an aircraft. A few are under development, including SpaceX’s reusable rocket launching system – planned for use on the Falcon 9 and upcoming Falcon Heavy rockets.

SpaceX has accomplished a lot in its short history. What really distinguishes the company is that they have succeeded in making the field of space travel more competitive. SpaceX’s low launch prices – especially for sending communication satellites into orbit – have placed a lot of pressure on their competitors. As of September 2014, French aerospace company Arianespace claimed 60% of the global satellite launch market. By November 2014, SpaceX was already taking market share from them.

Competition in the arena of space launches can only be a good thing. Arianespace has been around since 1980 and before that space travel was the domain of nationally funded government organizations. SpaceX has come in as a disrupter; their Falcon 9 rocket being the cheapest in the industry. By late 2013 the published price of a launch to low Earth orbit stood at $57 million.

falcon 9 rocket

Source: SpaceX.com

The Falcon 9 can bring one pound of material in low Earth orbit for about $2100. The Falcon Heavy rocket is even cheaper, able to send one pound of material to space for around $730. Elon Musk insists that this is just the beginning, saying in testimony to the U.S. senate that he believes” $500 per pound or less is very achievable”.

The journey has not been easy. When Musk went out to buy the first rockets, suppliers strong-armed him with exorbitant prices. The experience prompted him to build the rockets he needed himself. During this time, rocket development and other costs kept climbing and it wasn’t clear that SpaceX would survive. By March 2006 Musk had invested $100 million of his own fortune into the company but three consecutive failed launches of the Falcon 1 rocket between 2006 and 2008 meant that prospective clients were reluctant to sign contracts. The global economic collapse made things even more complicated.

It was in 2008 that Musk decided to open SpaceX up to investors, selling a small piece of the company to Founders Fund – a private equity group. Musk was quoted as saying “it was never my intention to take outside investments but I simply didn’t have the money to put in.”

The latest round of funding from Google and Fidelity coincides with news that NASA has awarded Boeing and SpaceX lucrative contracts to develop and operate “space taxis” capable of ferrying astronauts to the International Space Station. It seems that with nearly 50 launches booked through 2017 – a mix of commercial satellite launches and NASA missions, – SpaceX is sitting pretty, expecting to bring in roughly $5 billion over the next few years.

Spacex chart

Source: Wall Street Journal

The company is red-hot and Google is interested. The Wall Street Journal reports that Google put up the majority of the $1 billion investment, valuing the company at $12 billion. That places it ahead of companies such as Dropbox, Snapchat and Airbnb. According to multiple reports the search giant could soon make another investment into SpaceX, with the goal of supporting the creation of a satellite-based Internet system that could bring internet access to the whole world.

If SpaceX looks to be an all-conquering force it is down to the relentless efforts and sheer strength of will of its founder Elon Musk. A recent study found that it cost SpaceX $440 million to go from drawing board to first Falcon 9 launch. The study goes on to say that is NASA tried to do the same thing it would have cost three times as much. When Musk asked his propulsion chief Tom Mueller how much he thought SpaceX could discount the cost of a rocket engine, Mueller estimated that they could bring it down by a factor of three. Musk said they would do it for a tenth of the cost.

In the end Musk was closer.

SpaceX is pushing the limits of technology and benefits from having a simple plan. They have one vision, three vehicles and an incredibly talented and dedicated workforce.

We might just put a man on Mars yet.

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5 Ways the Psychology of Investing Tricks You

By Team Wall Street Survivor

myopic

It’s comforting to imagine that investors are highly logical creatures whose money-centric decisions are made with an abundance of rational consideration alone. But the truth is, a great deal of emotion is in play when we contemplate where to invest our bucks.

According to BMO Financial Group’s most recent Psychology of Investing Report, only one in three investors relies completely on research, and just 28 percent report being in control of their emotions at all times. For those who do allow emotion to figurAdd Mediae into their investment decision-making, optimism, anticipation and confidence are the feelings that most commonly come up.

Broadly speaking, a variety of identified dysfunctional psychological influences regularly encourage investor behavior to leave logic in its dust. From individual personality traits to fatigue to the impact of the weather, emotions simply have a lot of sway for investors when it comes to decisions around their money.

Here are five emotional heavyweights that might threaten to knock your logic off track — and some advice on how to keep them in check.

1. Recent-events Preoccupation

The power of recency is a biggie when it comes to those external influences that have dominion over our choices. Whatever just captured our attention, after all, naturally races to top of mind. More than that, if something happened once, we convince ourselves, it’ll likely happen twice. Find the adherents to this philosophy at the casino, stalking the slot machines that just delivered payouts with the conviction that they’re bound to do so again.

This approach to investing, where it’s also known as “chasing returns,” is best countered by a long view that considers not just top performers from the last four weeks, but from the last four years.

2. Myopic Loss Aversion

Long recognized by psychologists exploring behavior motivation, this phenomenon refers to the short-sighted view to which anxious individuals with money in play are prone to falling prey. Here, investors become consumed with the coming minutes and hours, and put themselves at risk of making potentially foolish kneejerk decisions rather than waiting things out. These are the folks who sell stocks in a panic or linger too long on the outside of a poised-for-turnaround market slump.

For individuals prone to such thinking, it’s prudent to remember this: a return to the mean is inevitable. Patience is a virtue, after all. So sit tight, and lift your gaze.

3. Overconfidence

As much as your mom might have had you believe otherwise, you’re probably not nearly the hotshot investor you imagine yourself to be. Reckless money-shifting conducted under the influence of such unwarranted cockiness — men, research shows, are more susceptible to these overblown self-valuations than women — can deliver big losses.

A realistic assessment of one’s knowledge and abilities is essential in investing. That translates into steady, thoughtful investment decisions that are based on truth rather than fiction. And if you’re still struggling to rein in your sky-high confidence, force a worst-case mental scenario on your situation. If you lose it all, ask yourself, how will you survive?

4. The Herd Mentality

sheep

It takes a lot of personal resolve to move in the opposite direction of the crowd. But sometimes you should. Celebrated investor John Templeton understood this maxim implicitly, and so removed himself from the reach of the prevailing winds by moving to the Bahamas during his management tenure of the Templeton Group.

In order to similarly avoid such all-consuming weather patterns, you need to focus your sights. Do your research, consider the uniqueness of your distinctive investment situation, and remain flexible to new sources of information, no matter how singular you may be in adopting them.

5. Sunk-cost Fallacy

There’s something primitive in the self-protective impulses that kick in when you’ve made a decision that’s tanking. Rather than cut bait, investors who are given to this psychological malfeasance keep right on fishing, imagining the lake will suddenly fill with cod.

But as hard as it is to accept that you made a bad decision, if your investment is or sinking, you must abandon it.

The thinking behind the sunk-cost cognitive bias is that people are trying to avoid the losses because it simply hurts too much to acknowledge them. But sustaining emotional commitment to bad investments is never smart.

Instead, consider that the money you’re sinking into the losing venture could be doing good work in a more lucrative opportunity. Plus, you can use capital losses to offset capital gains, and so cut your tax bill.

Human psychology is a complicated beast, and investors are just as likely to fall victim to its inherent weaknesses as the next guy — but it stands to cost them more. An awareness of these tendencies, however, is the first step in sidestepping them.

Have you made any of these errors while investing? Share your stories in the comments below

.

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5 Ways Knowing How to Bargain Can Save You Money

By Team Wall Street Survivor

Courses marketplace

Everyone knows that they should bargain when buying a car, but the idea of haggling for some of life’s lesser charges is not so widespread. Who knew, for example, that you could talk down your dry cleaning bill or beat down the price of your mattress?

You should have, and now you do.

Here’s how to handle 5 situations where knowing how to bargain can save cash.

Cellphone Bills

You’re most likely going to score a win near the end of your contract, because your provider is scared of losing your business. That’s because it’s harder for them to score a new customer, than to retain the one that they already have. Use this to your advantage.

Go into battle well armed,and do some research on your options. Check out Billshrink and Lowermybills to get a sense of what plans are out there, then compare them with what they’re proposing to you.

If the first rep you speak with says they can’t help, ask to speak with someone in customer retention. That’ll shake them up.

People often sign on with a cellphone company on the strength of a promotion. Then, when the promotional period ends, they find themselves subject to a price hike. Your best bet on this front is to make a note of when your graces end, and to place a call just prior to that with a threat to cancel. More than likely they’ll have another promotional rate on the table in response to your I’ll-take-my-business-elsewhere noises.

Don’t get emotional. Be brief and to the point.

Take notes during your conversations. Make sure to get the names and employee numbers of everybody with whom you speak.

Most of all… Mean it when you say you’re ready to cancel.

Gym Memberships

Timing is really important forthis one, and you’re in luck! That’s because Gyms are generally hungry for members at thestart of the year, and are willing to negotiate with folks they know are only there to make good on New Year’s resolutions. Slow seasons like the dead of summer are also ripe for wrangling. These are the times when gyms’ promotions are at their sweetest, too.

As always, do some homework on your options before going in. Check out the best offers at competing gyms, and ask your friends what they’re paying. This way, you can lay down hard numbers as evidence and insist that they’re matched.

Hold your tongue before accepting a counteroffer. If you pause for a bit, the guy at the other end of the phone may well sweeten the deal in a hasty bid to stave off rejection.

If you can’t get much budge on the membership fee, ask for another perk, like free personal training sessions or towel service. The worst they can say is no!

Credit Card Debtcreditcarddebt

Credit card debt is a biggy when it comes to the value of the time you invest in negotiating with creditors. After all, with a big balance comes loads of interest, and serious bucks are at stake.

Credit card interest rates may not seem negotiable, but you can get certain fees waived, especially if you have a flawless payment history. If you have a good track record with your credit company, they’ll feel more inclined to forgive a late fee.

All creditors want is to collect their money from you and to get you to keep spending more, so suggest cutting a one-time payment, or work out a payment plan on a lower amount.

If you can’t talk down the principal, work on negotiating the payment terms to a place that is more manageable for you.

If you’ve fallen behind on your bills by more than 90 days, you could end up dealing with a collections company. Here, it’s useful to remember that this third party is interested only in making a profit on your debt, and it doesn’t require payment on the entire balance to achieve that.

Utility Bills

Write yourself a script before calling the customer service arm of your public utility provider. If you know what you want to say ahead of time, and have notes to keep you on track, you’ll increase your chances of getting what you want.

Be polite. You won’t win points and you’ll draw out the drama if you lose your cool.

At the very least, suggest you negotiate a payment plan that fits your budget.

Furniture and Mattresses

mattresses-main_full

Before you shirk at the audacity of making a claim on a furniture store, bear in mind that furniture and mattresses are sold at as much as a 200 percent markup.

Asking for a price reduction on your purchase is only one gambit in this arena. Also think free box springs, complimentary shipping and upgrades to higher-quality products.

Offer to pay in cash and skip the tax.

If you’re not getting any joy from the salesperson, ask to speak to the manager. If it’s a small, family-run operation, you’re probably already dealing with the owner.

Everything but everything can be had for a price, and the fact is that almost any bill is negotiable. In any case, it never hurts to ask; the worst thing that can happen is you don’t get a deal.

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Alibaba Stock Price Falls After Counterfeit Goods Scandal

By Team Wall Street Survivor

ali1 (1)

Alibaba’s IPO was met with great enthusiasm last year as it broke the record for the largest US-listed initial public offering. Last September the company raised a total of $25 billion, overtaking the $22 billion IPO of the Agricultural Bank of China – listed in Hong Kong. Fortunes have soured slightly as the Alibaba stock price tumbled 20% over the last two weeks, falling from $104 to $86 a share in response to criticism by the Chinese State Administration and news of disappointing revenues.

What is Alibaba?

Alibaba is a Chinese e-commerce company that dominates the Chinese market. It’s like Amazon, PayPal and eBay of China all-in-one package. In 2012 the Chinese giant had $170 billion in sales, which is more than eBay and Amazon combined! Founded and led by a former English teacher named Jack Ma, Alibaba has since become a $200 billion company. It was all going so well. But then, on January 28th, China’s State Administration for Industry and Commerce (SAIC) released a white paper bashing the e-commerce giant over the ubiquity of fake goods on its online retail platforms. The report stated that “Alibaba Group hasn’t been paying enough attention to the mismanagement of the Alibaba Internet transaction platforms for a long time, and hasn’t implemented effective controls to solve the problems”. ali2 The white paper went on to highlight that Alibaba failed to properly regulate what merchants were allowed to sell, that their product information was often inadequate, and that their system for ranking sellers was flawed. Alibaba has been trying to fight the cloud of counterfeit goods for a while now. In December, Alibaba Group announced that it had been successful in taking down more than 90 million fake signings. That’s like the entire population of Vietnam! Then news of disappointing earnings came. The company reported profits of $2.1 billion between October and December 2014, a 25% increase from year-ago levels. The problem was that a very specific metric (GAAP Net Income as seen in chart below) was nearly 30% less than year-ago levels. Total quarterly revenue, at $4.2 billion, also came slightly under Wall Street estimates of $4.45 billion. The lower than expected earnings combined with anxiety regarding the State Administration’s concerns was enough to send the share price back to September 2014 levels even though profits had nearly doubled from Q3 to Q4 2014. ali4Source: alibabagroup.com It would seem that fears are overblown. Many analysts see the stock price falling to $75 on fears of rising margins. Others believe that the SAIC’s white paper has highlighted risks investors were unaware of – which is now priced into the stock.

Alibaba will be just fine.

It appears that the company is in prime position to surf the wave of beneficial macroeconomic trends. Online retail sales are about 10% of total retail in China, of which Alibaba represents 80%. The share of online retail sales in overall Chinese retail sales is expected to exceed 15% by 2017 so as more and more Chinese move online. Alibaba stands to profit massively so long as they consolidate their position. Internet penetration in developed countries is around 77%. Even though China has about 632 million internet users, internet penetration in the country is only around 47%. That represents a lot of growth opportunity and as the online landscape in China diversifies that only gives Alibaba more opportunity. Its investments in Lyft, a ride-sharing app, and Tango, a messaging app, indicates their intent to aggressively expand their online empire. The company is also targeting international expansion. They hope to partner with e-commerce players in India and are also targeting countries in Europe, South America and the Middle East. Right now more than 80% of Alibaba’s revenue comes from Chinese retailing but there has been incredible growth in other, smaller areas of the business. The international retail segment of the business has grown revenues by 110% over the last year and cloud computing and internet infrastructure has seen growth of 85% in revenues over the same period. ali5Source: alibabagroup.com So it seems that this price wobble is just a temporary setback. Wall Street appears to agree; “[o]f the 42 analysts covering the stock, 34 rate it a Buy while only three advocate a Sell.” The consensus price estimate is above $110 and the price dip is generally seen as a good chance to pick up Alibaba at discount.

Here’s why you should NOT buy Alibaba.

The company that is listed on the New York Stock Exchange as BABA does not really represent the actual company. The Chinese government forbids foreigners from investing directly in Internet services in China so Alibaba had to get around this by creating a Variable Interest Entity (VIE) which has contractual rights to the profits of the e-commerce firm. Foreign investors can invest in the VIE, but should you? Unlike a normal investment, investing in the security offered on the NYSE means you are investing in a contract, not the actual company. Alibaba set up a VIE and an offshore holding company, Alibaba Group Holding Ltd, registered in the Cayman Islands. The Chinese VIE pays fees and royalties to the offshore holding company according to a contract between the two. It’s all a bit shady isn’t it? ali6 Furthermore, VIEs are somewhat illegal in China. VIEs are designed to circumvent Chinese law and Chinese courts have previously ruled against foreigners’ claims on Chinese companies via VIEs. The Chinese government has purposely kept their stance vague so as to be flexible enough to backtrack when the concept does not work in the country’s favour. Basically when it comes down to it, your investment has no legal protection in Chinese courts. Generally as a shareholder you are part-owner of a company. As a shareholder of the stock BABA you are part-owner of a contract. Most of the actual assets of the company are still owned by Chairman Jack Ma and another founder, Simon Xie. It’s enough to make you think twice. Or maybe you can just take billionaire entrepreneur Mark Cuban’s view. “They shouldn’t be allowed based on what I know today, but if they’re in, it’s just one more stock to trade or invest in depending on your perspective,”

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Apple Car: Investing in the Future of the Automotive Industry

By Team Wall Street Survivor

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Move over Tesla, Apple Inc. is exploring the development of a car – well at least the inside of one. The Wall Street Journal reports that the company has a team of hundreds working on the design of a battery powered minivan-like vehicle, code-named Titan.

The news has got people spreading rumours like a teenage girl.

Tim Cook, CEO of Apple, appointed Steve Zadesky, a former Ford engineer, to lead the project, giving him permission to create a 1000-person team. According to the WSJ, the team is researching metals and materials consistent with automobile manufacturing – lending credibility to the idea that Apple is building a car of its own.

Apple also hired Johann Jungwirth, former head of R&D at Mercedes-Benz, last September. Before Johann defected he was VP of Connected Car, User Interaction & Telematics at Mercedes.

It’s hard to say what’s going on with any certainty, but Jungwirth’s former title seems to hint at the bigger picture. It’s really hard to make a car, as Elon Musk and Tesla have found out. Apple also only has a team of hundreds…where Tesla employs 10,000 people. It’s clear that Apple has only just started in the auto industry.

Consider this: Apple has a market cap of $750 billion; Tesla has a market cap of $25 billion. Even if Apple were to build a Tesla-sized competitor that would only add 3% to their valuation; and who knows how many decades that would take? General Motors, which employs over 200,000 people and has a market cap of $60 billion, is worth less than 10% of Apple Inc.

Is Apple Making a Car?

So is Apple really betting on an Apple Car to create explosive start-up like growth in their massive company?

I think we’re missing what’s happening right now for seductive visions of what might happen.

It’s far more likely that Apple is creating an R&D division aimed at dominating the in-vehicle user experience. Our cars are on the cusp of enlisting in the global army of interconnected devices; it is the last “untapped frontier when it comes to mobility and connectivity”.

Last year, Apple introduced its Carplay system – allowing integration of Apple software into automobile dashboards. Siri is in your cars, you guys!

Source: CNBC.com

This is truly where Apple is able to compete, not in building an electric car. Although they certainly have the resources to build one if they so desired.

Mark Boyadis, an analyst at IHS Automotive, puts it well when he says “They want your eyes, your purchase intent and so many other things in the hour or two you are driving”.

About 600,000 vehicles were equipped with some form of ‘phone projection’ system (AKA a Carplay type of system) in 2014. That’s nothing when you consider that 88 million vehicles were sold in 2014. Boyadis estimates that by 2017, 40 million vehicles will come equipped with such systems, ballooning to 250 million by 2020. Apple will want to be in the majority of those 250 million cars.

What’s more likely? Is Apple building an electric car or is the hiring of the former VP of Connected Car at Mercedes Benz a signal of things to come?

We can’t really say for sure, but the furore and wild speculation occurring in the public sphere is reflective of a larger sentiment. Electric cars are on people’s minds.

Actually, there are three futuristic trends that are in play right now.

How far away are Driverless cars?

Driverless cars, electric cars and smartphone hailing; imagine all three converging into a crazy-wonderful future where all cars are eco-friendly, autonomous, and available at the push of a button.

a3

We’re further along than you think. On February 18th, The Telegraph published a video showing how a driverless car beat a race-car driver on the track at Thunderhill Raceway Park in California.

Fully autonomous cars available to the public are still many years away. Economic and political reasons abound. For instance, the sensors used to convert a regular vehicle to a driverless vehicle cost about $75,000. You’re probably not going to disrupt an industry with those kinds of numbers. A professor specializing in the field, Prof. Rajkumar, stated his belief that Google would be able to bring those costs down to about $10-15,000 per vehicle in 3 years. In the mean time we may have to make do with incremental advancements in driver-assisted technology, such as camera feeds or self-parking features.

Taking the Tesla Challenge

On the electric car front Toyota recently announced their first hydrogen fuel cell car, an obvious competitor to the Tesla Model S. This shows that big car companies are taking the Tesla challenge seriously. Both cars are priced similarly but the Toyota is estimated to have a cruising range of 465 miles to Tesla’s 265 and a refuelling time of just three minutes compared to one hour for a Tesla vehicle at one of their supercharger stations.

Widespread use of electric cars is also far away. Remember how 88 million vehicles were sold globally in 2014? Well, the total number of all the electric cars ever sold is less than 1 million. One reason we don’t use electric cars more ubiquitously is that they are expensive. They also don’t work the way we’re used to our cars working. The Tesla Model S costs about $100,000 and takes an hour to recharge (if you use a supercharger station). If you don’t use a supercharger station it can take up to 9 hours on a regular wall socket!

tesla222

The price of electric cars is going to go down. Tesla has plans to bring a $35,000 vehicle to market by 2017. Bringing down costs while also making sure the driving experience remains fairly unchanged (i.e. not having to wait 3-4 hours to recharge your electric car vs. filling up at the gas station in a few minutes) is what will bring about the electric car revolution. Competition from the giants (Volkswagen, Toyota, and GM) will help as well but without the perfect union of all those elements the electric car will remain a niche market.

We live in exciting times, and it may be that the expert’s predictions are extremely generous but it seems that market forces have put us on an unstoppable collision course with autonomous, electric vehicles. I can’t wait!

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