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Investment professionals love complicating things. Trust me on that. I was once like that. You don’t believe me? The next time you meet people from the investment industry, try asking them to give you a definition of the word “risk”. Investopedia defines “risk” as “the chance that an investment’s actual return will be different than expected...risk is usually measured by the standard deviation of the historical/average return of a specific investment.”   Don’t get me wrong. This is actually a pretty good definition of "risk”... that is if you speak finance. But most people don’t, and if you are like most people, you probably struggled to understand even the first sentence (actual return vs expected return...huh?). Good luck attempting to measure risk! Then, what does RISK mean? Complicated definitions aside, many investment professionals define “risks” consistent with the above definition i.e. in terms of “ uncertainty ” (or “volatility...

After months of buildup, Europe’s sovereign-debt crisis has finally wreaked havoc on the U.S. stock market, as a wave of anxiety has prompted a major sell-off on Wall Street. We’ve seen a dramatically “risk off” environment with the Dow Jones Industrial Average dropping 3.52% — the biggest one-week decline since November — and the S&P 500 falling 4.3% . Among the hardest hit stocks were small caps and tech, with the Russell 2000 and the Nasdaq Composite falling 5.4% and 5.3%, respectively. To further underscore the risk-off environment, the yield on the 10-year Treasury still appears to be searching for a bottom, finishing at 1.702%, but falling below 1.700% intraday this week — a modern-era low. Spring Swoon? History may not be repeating itself, but it certainly is rhyming. Like the spring of 2010 and the spring of 2011, investors’ fears are coming to fruition and we are once again experiencing a “spring swoon.” Stocks a...

We cannot deny that we are in for another round of hard times since 2008 global financial crisis. Some experts are saying that we are facing the Great Depression wave coming in the next few months, if no concrete efforts put in by global leaders. Meanwhile, some experts think that opportunities arises again and put off the double-dip recession speculation. The downgrading of US's AAA rating re-ignite the fears over the sustainability of its sovereign debt. However, please be mindful that US rating remains extremely sound and reflecting a very low risk of default in the long term, still. USD remain the preferred and most widely traded currency in the foreseeable future, and there is no reason to worry about. Sovereign Risk scaring investors away? Meanwhile, in Eurozone, the situation remains very complex and greater political will is needed to maintain Euro as regional currency. Between Eurozone breaking up and resolving the situation, which one is easier? Of course, the economic ...

Unlike real estate, assets type such as commodities and resources investments tend to be highly volatile . This kind of assets classes is suitable for high risk takers. Knowing the characteristic of the assets classes is important to suit your investment objectives so that a correct investment decision was made. However, I noticed that many investors confused about Commodities and Resources, and they often lumped them as SAME . Is it true? Let's look at it separately (not together). Commodities vs Resources? Yes. Both is similar, yet there are some differences between them. First, let's talk about commodities. Commodities for me were comprised of metals such as copper, iron ore, silver, gold, platinum... Although many of us includes energy assets such as oil and gas into it, we can categorize it as an asset class which we can't consume with our mouth. Sometime, it was called hard commodities. Meanwhile, Resources are soft commodities. They comprises agricultu...

While celebrating Father's day, I have a meaningful story to share with you. I visited a hospital in KL recently and to my surprise, I came across a little boy who was diagnosed with leukemia. More surprising, his age was only 8 years old. Oh my god, this little boy doesn't even know what leukemia was, and he had to suffer from such a young age!!! Through these torturing times, I believe his father's love is what he needed the most. God bless him. Do you know that almost 9/100 Malaysians aged above 35 suffer from diabetes ? Do you know that over 1/5 are expected to get cancer in their lifetime? The fact is, because of the stressful and unhealthy way of life today, lifestyle diseases are on the rise. Do you have any real example from your own little circle? We can, however, spare our self and our loved ones a lot of anxiety with comprehensive medical plans, which provide a financial cushion in times of need. Although these plans cannot prevent illnesses, it can help us to ...

Now, every cars can get covered... RHB Research: Bank Negara Malaysia (BNM) announced last week that effective immediately, members of the public will be able to obtain motor cover from all general insurers and their branches as well as at Pos Malaysia and its branches nationwide. All general insurers are committed to provide motor cover to all motorists including the "displaced vehicles" which generally comprise private vehicles exceeding 10 years old and motorcycles currently underwritten by the Malaysian Motor Insurance Pool (MMIP). Obligation to provide cover with NO excessive loading Based on this new ruling, general insurance players are obligated to provide cover to all insurance seekers, without excessive loading and cross selling of other classes of insurance to mitigate the risk. Although, general insurance players could still load the policies, albeit at a more reasonable amount and not 200-300% as previously charged by the MMIP for the so-called high-risk ...

As usual, another episodes of tension in the Middle East pushes global oil prices higher, and surpassing $100 per barrel this time. We did seen this kind of scenario before in the Middle East during 1973-74, 1979, and the Iraq war in 1990. Are there any different this time? Libyan leader Muammar Qaddafi By Credit Suisse ,  We believe the rise in oil prices is manageable . Each 10% rise in oil prices only takes about 0.1% off global GDP and 0.2% off US growth. With Western wage growth muted, central banks are unlikely to raise rates on account of oil alone. Our analysts see oil prices below $100 pb this year, supported by the following reason which differs from previous oil crisis:- There is enough spare capacity in the global oil market to deal with supply-side disruptions as long as they are not too extreme The energy intensity of global GDP has fallen by around 40% over the past 40 years There is unlikely to be the same inflationary follow-through as in the 1970s Oil producer...

In Part 1, we have discussed the importance of nomination in insurance. But, what happens if it is someone else, like an uncle, niece or even a friend was named as nominee(s)? www.financemalaysia.blogspot.com   When a nominee is not automatically a beneficiary Under a non-Muslim's policy, the nominee in such a case is not entitled to the policy monies as a beneficiary. He or she only receives them as an executor , and must pass it on to the deceased's estate to be distributed according to the will . If there is a will, but the nominee in this case is not named as a beneficiary under the will, he or she will not get a single sen. If there is no will, then the property will be distributed according to the existing laws of distribution. What if I named my siblings (brother or sister) as a nominee? Well, it will form as a trust policy , and your siblings will act as an executor instead. So, please take note. Anyway, you can change your nomination, but must sought the consent from ...

Well, one of the most important objective of having an insurance policy is to ensure that our loved ones are always financially well-prepared. However, that objective will failed if we did not make the necessary nomination in our policy. By naming our loved ones as nominees, you can ensure that they will receive the monies from your policy fast and easy . This is where an insurance policy will be the most useful to them. Think about our loved ones !!! What if I did not make a nomination? Failure to do so means that the insurance company would not be able to make payment until a court has given your loved ones a Grant of Probate (where there is a will) or Letters of Administratio n (where there is no will). In other words, WAIT for months if not years. What if I did make a nomination? Good. If you are a non-Muslim and you have nominated your spouse, child or parent (where there is no surviving spouse or child), they are entitled to the policy monies without having to wait for the ti...

Recently, theStar highlighting a serious issue pertaining to insurance claims - Fraud Claims . It even started with staggering paragraph "Fingers have been chopped off, medical ailments exaggerated and even death faked - all for the purpose of fraudulent insurance claims". Among the issues: RM500 mil in bogus insurance claims are detected each year At least 2 insurance firms have folded as a result of high compensation claims compounded by fraud Insurance firms fight back by setting up special fraud detection units Regarding to this topic, Finance Malaysia would like to shares some views here pertaining to the effects on Malaysians as a whole. And, most importantly, the impact of insurer would definitely pass it to people insured. Why I said so? First, you must understand how insurance companies compute their premiums charged to each clients. If the insurer is financially stronger, it may charged a lower premium for the same amount of coverage on its policies. In other wor...

KLCI is grappling up for a successful 4 days in a row this week, and perhaps today is the 5th day of record breaking level. However, I am concerned about the health and the sustainability of the market, after reading a report by Food and Agriculture Organization of the United Nations (FAO). And, one of the popular Mandarin Dailies highlighted the potential food crisis as its main topic today. Finance Malaysia did some analysis, and would like to comment on the issue which could be a hot topic for many nations very soon, including Malaysia. In fact, international prices of most agricultural commodities have increased in recent months, some sharply. This has led to a level near to its peak in June 2008. What causing the prices to increased? worsening outlook for crops in key producing countries, which require large draw downs of stocks and result in tighter global supply and demand balances of course, weakening USD, which continues to sustain the prices of nearly all commodities continuo...

Due to weakening USD and record low-interest rate in the US, Europe and Japan, emerging markets have been a popular spot for excessive liquidity to park their money. Main reasons being: Emerging markets are the fastest growing economies currently Emerging countries are having  higher interest rate Banking system of emerging countries are stronger (safer) While develop countries are facing a currency downfalls, emerging countries are experiencing continuous inflow of hot money. This in turn causing a chaotic in currency exchange market, where emerging countries' currencies are hitting years high against developed nations. The imbalance forex market prompt central banks around the world to act or to curb any excessive flows of money which could jeopardised a particular countries, like 1997 Asian financial crisis. In the latest developments on this hot topic, Thailand announced a  15% withholding tax on interests and capital gains on Thai bonds. I...

Still remember Obama’s health care bill which was passed recently? Why Obama want every citizen of US to have a chance to insured themselves? Because Obama knows the reasons below… In reality, insurance cannot protect property or lives, but it can protect those insured against the adverse financial consequences of losing property and lives. Likewise, an insured person cannot be protected against dying or disease, but the dependent is protected financially if such events occur unexpectedly. In any of such similar cases, the insured would be in economic dire straits if not for the financial protection conferred by insurance. In short, insurance as an economic device provides the insured with financial certainty in an environment that is filled with the possibility of losses. In providing such benefits, insurance brings peace of mind to people – and to society at large. Another benefit of insurance is its ability to provide for more optimal use of economic resources . Without insuran...