Minimum Acceptable Returns

If you have been reading financial books or articles from the United States, it will suggest that return lower than 5% is mediocre. We all want high return for our funds, but how? In US, I guess it is much easier. You can easily buy S&P500 and get about 10% average annualised returns for past decades. However, many of us are skeptical whether STI ETF can do the same. Reason being is that US ETF has much lower management fee and the performance is better. Like it or not, US is the economy powerhouse, a place where everyone at least have some respect on. In Singapore, we can't say for sure in the long term.

I am an advocate for "Not losing is winning half of the battle". There are so many strategies and temptation to do cherry picking in stocks, buy high and sell low, or buy mid and sell mid. When you see fellow investors buy and sell, especially in good years, you will be wondering should you be doing the same.

My philosophy is simple. I am racing against myself. As long as my money grow at an acceptable rate, I will be contended. I don't need to compete with others. I would want a >5% return, but to be "sure win", the strategy is actually to deploy some high interest instruments such as bonds, fixed deposits. I will settle down for any interest >2.5%.

Here, you will be wondering, how 2.5% can help in building up a sound retirement fund. Agreed that it is tougher than if you can earn 10% return, but if you are frugal and effective in your finance, it is actually quite doable. You may be surprised it is our saving/prudence that helped most people accumulate their first pot of gold, not some lottery in stock market. Again, I have to highlight that frugal is not cheap (click here).

When opportunity arises to get better returns (spotted undervalued quality stocks/property/bonds), this is when I will increase my base interest rate to limitless. From historical data, I should be able to average out between 5-8% return. Not impressive, but there is a cushion of "sure win" minimum of 2.5% return. I don't believe market is a 1 way street that keep going up, there will be plenty of buying opportunities. If you are worried about missing the boat and opportunity cost, employ Dollar-Cost Averaging strategy (click here) and permanent portfolio (click here).

What are your views and your minimum acceptable returns?

China has a $1.2-trillion Ponzi finance problem

Chinese borrowers are taking on record amounts of debt to repay interest on their existing obligations, raising the risk of defaults and adding pressure on policy-makers to keep financing costs low.

The amount of loans, bonds and shadow finance arranged to cover interest payments will probably rise 5 percent this year to a record 7.6 trillion yuan ($1.2 trillion), according to Beijing-based Hua Chuang Securities Co., whose lead fixed-income analyst was top-ranked by China’s New Fortune magazine in 2012 and 2013. Dubbed “Ponzi finance” by Hyman Minsky, the use of borrowed funds to repay interest was seen by the late US economist as an unsustainable form of credit growth that could precipitate financial crises.

Chinese companies are struggling to generate the cash flow needed to service their obligations as economic growth slows to the weakest pace in 25 years and corporate profits shrink. While the debt burden has been eased by six central bank interest-rate cuts in 12 months and a tumble in corporate borrowing costs to five-year lows, the number of defaults in China’s onshore corporate bond market has increased to six this year from just one in 2014.

“Some Chinese firms have entered the Ponzi stage because return on investment has come down very fast,” said Shi Lei, the Beijing-based head of fixed-income research at Ping An Securities Co., a unit of the nation’s second-biggest insurance company. “As a result, leverage will be rising and zombie companies increasing.”

China Shanshui Cement Group Ltd. became the latest company to default on yuan-denominated domestic notes last week, as overcapacity in the industry hurt profits and a shareholder dispute stymied financing. State-owned steel maker Sinosteel Co., which pushed back an interest payment on a bond last month, postponed it again this week.

Metrics of corporate health in Asia’s largest economy have deteriorated as growth slowed. The number of Shanghai- and Shenzhen-listed companies that have less cash than short-term debt, net losses and contracting revenue has increased to 200 as of June, from 115 in the year-earlier period, according to data compiled by Bloomberg.

The amount of bad debt among Chinese banks rose 10 percent in the third quarter from the previous three months to 1.2 trillion yuan, about the size of New Zealand’s economy.

Total debt at listed companies has climbed to 141 percent of common equity, based on a market-capitalization weighted average, the highest level in three years.

While the total amount of debt issued to pay interest is projected by Hua Chuang Securities to increase, it’s taking up a smaller portion of overall new credit. The firm predicts such borrowing will account for 45 percent of new total social financing—which includes bank loans, shadow banking credit and corporate bonds—down from 50 percent last year, according to a November 4 report.

Plunging borrowing costs have made it less expensive for Chinese companies to gain access to fresh cash. The rate on five-year corporate debt with AAA ratings dropped to a five-year low of 3.69 percent on October 29 and was last at 3.95 percent.

At the same time, policy-makers are taking steps to insure credit keeps flowing to borrowers in need. Chinese banks shouldn’t cut or withdraw lending to companies in “temporary” difficulties, Premier Li Keqiang said last month, adding that the government will take steps to prevent systemic risks. The People’s Bank of China has cut its benchmark one-year lending rate to 4.35 percent, from 6 percent a year ago, helping to fuel 6.6-percent growth in outstanding corporate bonds this year to 19.2 trillion yuan as of October. “The lower funding rates have lessened the interest burden on Chinese companies,” said Xia Le, a Hong Kong-based economist at Banco Bilbao Vizcaya Argentaria SA.

-- Bloomberg News

Prudent Suppliers of Custom Products

New businesses often enter an industry populated by well-established and respected businesses. These existing businesses already have a loyal customer base and don't need to make a first impression. If businesses like this get lazy in their packaging or customer service, though, it leaves an opening for new businesses to make their own first impression.

Strategic suppliers of custom products

Custom products are one way to make a terrific first impression on customers. Appearances aren't everything, but when packaging items, customers have been shown to pay attention to packaging. It's one of the extra flourishes that show customers you exemplify professionalism and take pride in your products.

Hang tags

Custom hang tags are among the most popular of all supplier products. These simple square pieces of paper hang on doors and prominently display in-depth information about a business. They have a large advertising space and room for graphics, too, which make them perfect for non-obtrusive advertising that can get a lot of information to the customer without seeming to bombard them with too much information at once. Many businesses use these as free hand outs to customers.

Custom address labels

Digital printing services frequently supply address labels that bring a professional and sleek look to all mail communication from a business. These addresses are clearer to read than handwritten addresses and make a great first impression on customers who order a product from a new business. Suppliers work with businesses to analyze the reputation of the business and determine what the best colors and text fonts are to represent the business.

These are just a few of the products that suppliers use to make memorable first impressions for new businesses that want to win over customers in their industry. This requires a great deal of marketing analysis, strategy, and quality printed products. If a business needs printed business cards, hang tags, and address labels, suppliers need to be readily available to collaborate on the project and reach an agreement on the best style and fonts to use for all printed products. Materials need to be high quality printed materials that make the business look professional and available to help customers. Information is king and printed products contain all the information a business might need to communicate in order to win over or retain customers. Digital printing suppliers are both marketers and businessmen themselves and know how to win over new customers.

Esquire Financing offers non collateral & Biz Loans to SMEs

Esquire Financing Inc. opens its first branch in Cebu City in its bid to boost presence and service-base in the SME market in the region. EFI President and Chief Operating Officer Navin Uttamchandani said recently that the firm offers non-collateral loans from Php100,000 to Php10 million to SMEs.

With 99.6% share of about one million registered businesses and employing 64.9% of the workforce, according to the Department of Trade and Industry, strengthening the competitiveness of the small and medium enterprises (SMEs) is critical to the Philippines’ inclusive economic growth. However, due to collateral requirements, revenue-driven structure of banks, and high minimum loan amounts, only 20% of these SMEs are served by formal financing institutions.

Esquire Financing Inc. (EFI) is a direct response to the need of the underserved SMEs for a trusted financing partner. EFI provides fast, hassle-free non-collateral business loans tailor made to each SME’s needs, goals, cash flows, capacity, and financial position.

Uttamchandani pointed out that SMEs are crucial for the country's economic growth, job creation and innovation. However, their lack of access to financing, due to high minimum loan amount and extensive documentation requirements, has often been cited as one of the constraints affecting their growth, he added.

Approved  loans

In its one-month operation in Cebu since it started in September this year, the financing company had already released six loans totaling to Php6 million to its clients here. And its potential loans to businesses in Cebu and the region are seen to go up amid the growth of business expansion here, Uttamchandani said.

EFI has catered to various industries such as wholesale and retail trade, manufacturing, construction, accommodation and food service, and administrative and other support services.

Last year 95% of SMEs EFI served are located in Luzon, majority of which are in Metro Manila, while the Visayas and Mindanao regions accounted for the remaining 5%.

After four years since it started in 2011 EFI had already released a total of 17,849 loans worth P15.02 billion to 3,233 clients. From then on, it has since served over 5,000 businesses across the country.

In 2014 the company recorded a total of 5,590 loan releases, covering 1,821 clients.

The company also generated total revenue of Php641.4 million, up Php5.5 million from the 2013 revenue of Php635.9 million, according to its 2014 annual report.

7 reasons why you need community in transforming your finances this coming year

Registered Financial Planners
Photo Credits to Henry Ong

Are you having issues in managing your finances such as saving, investing and even getting out from poor spending habits? How about having a hard time making your last year’s resolutions become a reality, such as I will save more and spend less?  There are a lot of people who get scammedso easily because they kept on doing it themselves. I remember an African proverb that says “if you want to go fast, do it alone but if you want to go far, go with others.” We, as human beings tend to seek out friends who match our core values. If you want to transform your finances this coming year never forget the following reasons you need to be a part of the right community.

They expand your vision- Research shows that this group of people will help you to see things differently. When you are starting to manage your finances you would like to set your mind to success because that is primarily end goal. You should win without any shadow of doubt but if you will be with a person who doesn’t see success happening in their lives absolutely you will fail. If you want to see great results, you need to act differently and be with the people who are ahead of the game, success is different to everyone but to be with the same boat with the achiever’s who can see the future is essential. 

They can help you find your personal finance hero – You already made a decision to change the pace of your saving and investing, you also developed a goal how to tame your spendingand have an idea where you are now however you don’t know how to get there. The right community has plenty to offer such as mentoring and leadership. When you are ready to learn something new then look for someone who can walk the talk. As you develop your relationships with them you will get an effective strategies when it comes to investing that can give you advantage among others. 

They give you a sense of support - You are down and trouble making the right decisions. Are you going to buy or sell your stocks? It seems like the economic downturn is making you crazy than ever. In addition to it, you are giving into the peer pressure and you don’t know how to handle the negative vibes from your materialistic friends. This vital people will prevent you from going down but instill hope to do what is right and necessary. I remember that they helped me to prioritize my emergency funds and prevented burying myself in debt. A constant encouragement and consistent modeling help me grew my knowledge, skills and discipline that resulted to a bigger wealth.

They are your accountability partner - You keep on cheating yourself for many years now and you are wasting so much time.  Study shows that when you are tied up with big spenders, your expenses will go overboard but when you have an accountability partner it will give you a sense of responsibility and confidence. Your behavior changes because they remindyou why you need to do the things that you do. Start looking for a friend who can stab you in front and gave you brutally honest feedback.

They promote safe haven - Whenever you are in the right place, you get to feel a sense of security and authenticity. They pushed you to be excellent that can help you attaining your financial goals, dreams and aspirations. They educate and give you insights on how to manage your funds effectively without cutting corners; the right one protects you like a family while wrong group will just push you to their own misery. In a longer perspective wrong community will ask you to spend so much without a blink of an eye and when you are broke they will leave you behind. 

They will grow your understanding about yourself – Being consciously aware about your behavior and identity gives you an edge. Every person is a restless wanderer until such time they find their purpose. You get a chance to simply educate those people who are also hungryfor personal finance strategies. It is also an avenue to share what you have learned to the people who are also part of the family. Personal finance is about values in life and by knowing who you are that means you are having a higher consciousness to do what is right with your finances without being insecure.

It will make the journey way better – Investing and saving is like a marathon because you should do it for a lifetime. The harder the battle, the sweeter the victory when you have a community backing you up. Have you seen Manny Pacquiao’s boxing career, without the people walking with him, his coach and team, he won’t survive the training all along. With the combination of your determination, right support group and your skills, sooner or later your net worth will grow exponentially. 

Whether in business or in personal finance the cost of being not connected with the right people will give you more headaches and heartaches, while the benefits of staying in a group will give you a leverage to look at long-term instead of snapshot of life. In addition to it, you can get an access to hi-tech information and hi-touch experiences that they already have. Now, where do you belong?

David Isaiah Angway currently helps young, urban and educated millennial (Gen Y) set and achieve their long-term financial goals by educating them about investments, asset allocation, risk management, retirement planning, and estate planning. His role as a financial planner is to find ways to increase the client's net worth and help the client accomplish all of his/her financial objectives.

Photo Credits

mashable.com

www.littlelearningschool.com.au

johnbarban.com

digitalbloggers.com

womenmakingmoves.com

www.stopthebombs.org    

www.ishafoundation.org

ferrall.radio.cbssports.com

Voyager Innovation, Cash Credit collaborate for consumer microloans

Voyager Innovations and Bulgarian-based finance technology company Cash Credit are collaborating in bringing easier and more convenient consumer microloans to mobile subscribers in the Philippines.

Under the strategic deal signed recently, Voyager Innovations will be using Cash Credit’s proprietary credit-scoring system to offer Filipino consumers quick credit decisions, with convenient service and billing through Voyager and Smart Communications Inc.

“As a global leader in financial technologies, we’re particularly excited at Voyager Innovations for this service. This is about technology extending an economic lifeline to the great majority in emerging markets,” said Orlando B. Vea, president and CEO of Voyager Innovations.

“Voyager Innovations has a clear vision and commitment in the role of financial-technology platforms in providing people with access to consumer microloan services. This partnership will help us expand our reach,” said Georgi Krumov, Cash Credit founder and CEO.

“This provides our informal sector access to finance through their mobile devices which is part of our commitment in promoting inclusive growth and development,” said Lito Villanueva, Voyager Innovations vice president and head of Financial Innovations, Digital Inclusion and Alliances.

Voyager Innovations is the digital innovations unit of Philippine Long Distance Telephone Co. and Smart. Cash Credit partners with platform providers like Voyager Innovations and mobile-network operators in bringing micro consumer loans.

The partnership is in line with the vision of Voyager Innovations together with affiliate unit Smart eMoney Inc., in further promoting digital financial inclusion among the unconnected, unbanked and uncarded segments of the population through mobile and digital technologies.

The Chinese Yuan is Going Global

Yuan Part of Selected Basket of Currencies

According to the International Monetary Fund – IMF, the Yuan is now part of selected basket of currencies which till now included only the US dollar, the Japanese yen, the euro and the British pound. The Yuan would not generally be a part of the basket till September 2016 and this move would not be having any immediate influence on the financial markets.

This gesture seems to be a significant one and an indication that China has been progressing faster and further on the global financial stage. It has been predicted by Nomura Securities that by 2030, the Yuan would become one of the highest three major international currencies, `a peer to the US dollar as well as the euro, as the most used currencies in the world’.

However, it all depends on whether China tends to continue its financial reforms which have been one of the major reasons of the IMF’s verdict of including the Yuan in this choice basket currency. The IMF has informed that` the decision was an important milestone in the integration of the Chinese economy in the global financial system’. It would bring a more robust international monetary as well as financial system.

China – Important to the Global Financial System

Nomura has informed that though the share of yuan’s trading volumes in the international currency market tends to be small, less than 2% comparative to China’s share of global gross domestic product, its daily trading volume had tripled between 2010 and 2014 from $34bn to $120bn. This indicates that there is a lot more yuan on the markets.

For the last few years, China had been working towards this and it is amazing that their extremely managed currency seems fit to enter this special basket of freely traded currencies. Beijing considers the inclusion of the yuan as an indication of how important China has become to the global financial system.

The world’s second largest economy had to push through numerous changes in recent times inclusive of enabling foreign investors in accessing its stock markets, to make this happen. The main determinant as to whether the yuan gets to the next step will depend on how transparent China would be about the way it tends to run its financial market.

Chinese Official under Pressure/Scrutiny

Considering the slowing economic growth in China, analysts have accepted that there have been some disturbing signs which the government is trying to either roll back on some the key financial changes or that those in charge may not know what they are doing. The point is that earlier this year, the effective devaluation of the year had taken the markets by surprise and the People’s Bank of China was disapproved for mishandling the communication around how the events had unfolded.

Chinese officials are now under more pressure as well as scrutiny in getting their message right. Moreover the world would also be watching to see what type of influence more yuan would have in circulating in the international markets. Should the yuan tend to be a fixture of the global economy, there is a possibility that the rest of the world would become even more exposed to what Beijing does, which will make it more important that the leaders of China push through meaningful financial changes.