Amanah Saham 1Malaysia - Dividend NOT 3.7%-4%

In the past few days, several middle-aged women have approached and told me that they are not going to invest in the newly launched Amanah Saham 1Malaysia because its return is only about 3.7% to 4%, much lower than the usual 6%-7% return consistently achieved by Amanah Saham Malaysia (ASM) and Amanah Saham Wawasan 2020 (ASW 2020).

I was dumbfounded. How did they know about its return when 70%-90% of the fund's total portfolio is going to be invested in equities and the rest in fixed incomes? Amanah Saham 1Malaysia, like the ASM and ASW 2020, is mainly an equity fund. And equities, as we know, had gone through a roller coaster ride in the past one year. Shanghai Composite Index, for example, after reaching a high of nearly 6000 at the end of 2007, had plunged to low of 1700 before staging a tremendous recovery to 3400 lately.

To find the answer, I checked the website of Amanah Saham Nasional Berhad and downloaded the prospectus for Amanah Saham 1Malaysia.

From page 12 of the prospectus:

5.3 PERFORMANCE BENCHMARK

The performance of the Fund is benchmarked against the performance of other instruments that have similar features with that of the Fund. Being a fixed price fund, the return to unitholders of the Fund will mainly be in the form of the Fund’s income distribution yield. The return will be benchmarked against the average of 5-year MGS yield which can be obtained at Bank Negara Malaysia’s (BNM) website and Bloomberg.

Well, the current average of 5-year Malaysia Government Securities (MGS) yield is about 3.7% - 4%. They must have misinterpreted what they read in the newspaper, I thought. So I spent some time explaining to them, that Amanah Saham 1Malaysia is benchmarked to 5-year MGS yield which is around 3.7% to 4%, and that is not the return of Amanah Saham 1Malaysia. We will not know the return of Amanah Saham 1Malaysia, as it is largely depended on the performance of its portfolios.

Then, this morning I read the following excerpt from Nanyang Siang Pau:

理财界人士指出，一个大马基金的年利率介于3.7%至4%之间，不比之前推介的利息至少6%高，因此都掀不起太大购兴。

I nearly fell from my chair.

Clearly, the public has been misguided. I can understand when the typical person can't fully apprehend the prospectus as they don't study finance, but the people who say this are professionals, they are the experts. What are they doing?!

From the master prospectus that I downloaded:

ASB, ASW 2020, ASM and ASD
Being fixed-price Funds, the performance of these Funds are expressed in terms of the respective Fund’s Annual Income Distribution Yield, benchmarked against the 3-month Kuala Lumpur Interbank Offered Rates (3- month KLIBOR), which is obtainable at any commercial bank.

You can obtain the 3-month KLIBOR here.

Do I need to say more?
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There you go, 4 posts per month

WARNING: CRAPS ahead!

When I started writing for this blog many months ago, I set myself a clear goal. A goal to have around 100 posts posted by the end of the first year, which would mean an average of 2 posts per week, or 8 posts per month, or 24 posts per quarter. At a time when everyone was talking about Project 365 and Mars landing, this couldn't seem easier.

Well, I'm glad to announce here that there is no longer a need to track and analyze my performance anymore, as it is shown blatantly at the blog archive that - I have failed miserably. Hmm, maybe not.

Weeks into writing boring and unfathomable posts, I decided to tweak my goal. Yes, even writing two posts per week proved to be too much of a hassle for a pathetic procrastinator like me.

"This is bullshit!" My mind yelled at me. "I can't possibly handle two posts per week, it's too much work!"

"OK, OK." I said. "I'm gonna reduce that by half, one post per week, alright?"

This was good news. Now I only need to do 50 percent of what I'm initially expected to do. Great.

July came. July went. And I'm stuck with 3 posts.

So here I am, writing this piece of crap, in order to fulfill the quota of 4 posts per month. Please don't hate me. I have to do this, seriously, so that my contract won't be terminated by, well, myself.

OK, there you go. End of the crap. Hope you are not choking by now ;p

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How to Deal with Naysayers, Complainers and Pessimists

If you read my previous post, you will know that naysayers, complainers, whiners and pessimists turn me off. Most of the time, I would try my best to draw the line, but what if they are someone close to me? I can't possibly distance myself from family members, relatives or best buddies when they are naysayers and chronic complainers, can I?

The following newsletter from Learning Strategies on dealing with naysayers, pessimists and complainers hits the bull's eye:

Do negative people rub you the wrong way? A negative, pessimistic, and complaining person can wear on your nerves and deplete your energy faster than you realize.

And trying to change their attitude wastes even more of your energy. Your effort has no chance of success when they do not want to cooperate.

When you believe that positive thinking is desirable and negative thinking is undesirable, then you are empowering people to irritate you when they think and talk in negative ways.

Dr. Al Siebert, author of The Survivor Personality and our Resiliency personal learning course, calls that kind of thinking "The Theme Song of the Human Race."

This belief, "If only other people would change, things would be much better for me," may indeed be correct, he says, but it also makes it possible for negative people to control you. When others are negative they can upset you, cause you to spend time and energy trying to cope with their negativism, and frustrate your positive efforts.

The solution to regaining control is not to change them but to change how you respond to them.

Start by giving the negative person permission to be here on Earth the way they are.

"When you feel frustrated or feel an energy drain, treat the difficulty as a test in the school of life," Al says. "Look at it as an opportunity to learn about your blind spots. Appreciate opportunities to learn better ways of handling people who knock you off balance emotionally."

Next, replace the thought "If only they would change, my life would be much better" with questions.

Ask, "How might I respond differently so that I am less vulnerable? What could I do to regain control? How can I handle negativity in positive ways?"

When someone says something negative, try one of the following:

* Say, "You may be right," then change the subject.

* Pretend you didn't hear them. Attention is a big payoff for people with pessimistic attitudes, so stop reacting to their negative statements. Withdraw attention. Be selectively impolite.

* Be playful. Say, "It's much worse than you know." Describe more things to be upset about, and then be quiet or leave.

* Say, "Now that you've identified the problem, what is your plan for dealing with it?"

* See the benefit of their negative thinking. Develop an appreciation for the ability of chronically pessimistic people to see potential risks and problems that others overlook.

* Make the negative person a useful resource. Ask them to help you anticipate difficulties. If you thank them for their critical thinking, your relationship will probably improve.

Rehearse what you might say the next time you are around a negative person. Notice how much more in control you feel when you develop a positive plan of action.

The key to making your life better is to stop blaming others for triggering reactions in you that you don't like and to focus instead on discovering better ways to respond. When you change how you react, your emotional strain is reduced.
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Overcoming Procrastination

I have a secret.

I procrastinate.

Many of us have a penchant for procrastination. Almost everyone occasionally procrastinates. However, to say that I procrastinate is an understatement. I would put off doing certain tasks for days, even weeks. I told my friend I would write a post about banks creating money out of nothing when I visited her, but I didn't start writing until two weeks later. My habit of procrastinating has spiraled into a disruptive problem in my personal life. I am a chronic procrastinator.

The seed of procrastination was first planted during my college days. I would put off completing assignments until the last possible minute. I would always print out all the lecture notes and tutorials at the start of a semester, and placed them on a shelf. Then, 24 hours before the exams, I dusted off the notes and buried myself in a frenzied revision. By the time all the exams were over, usually two or three days later, I was like a zombie, an animated corpse starved of sleep. Of course, my penchant for procrastination took its toll. Mediocre results, stress, anxiety, guilt and resentment ensued. Yet, I procrastinated, again and again, without fail. Then, I lacked the will to change.

There are many causes to procrastination. Laziness, stress, lack of discipline and poor time management are some of them. Those symptoms attack me from time to time. Yet, I now realize that there is one particular behavior pattern rooted deep within me that is triggering my procratination habit - the strive for perfection.

I always want to deliver the best. Because of that, I am afraid of making mistakes. "If I make mistakes, the outcome will not be perfect." I would convince myself. The fear of making mistakes and eventually succumbing to imperfection gives me a reason to put off a task that would be better accomplished ASAP. I will give myself excuses to avoid the task until I can find a better way to do it. And this usually means indefinite delay until the last possible minute. Now, there isn't enough time for me to complete the task perfectly. Poor results follow. But I can still let myself off the hook by telling myself that I could have done it better if I had more time. I guess in some ways I act instinctively to protect my fragile ego, that I am a imperfect human, that I can't get the best results all the time.

Procrastination is self perpetuating. The act of procrastinating can become automatic and ingrained. That's what I'm experiencing. Procrastination has become part of me.

People told me it is hard to change one's habit or nature. I do not believe that. It is a question of whether one can find the will to change. Breaking a habit is not an easy task, but it certainly can be done.

The simplest way to beat procrastination is to just get started. I have to allow myself to be human and admit that I cannot get everything done perfectly. Start small. As long as I get started, I can always revise the way I do it later. Miraculously, the task always turned out to be less daunting when I started early :)

Life is short. If we procrastinate and dally one hour per day, we would have wasted 15 days after one year. 15 days! We can accomplish so much more if we don't procrastinate. Act with a sense of urgency. Work on yourself. Then, you will find out that the world is an awesome place after all ;)
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How Banks Create Money

Yes. You heard that right! Banks create money. No, they don't have smoke-filled basement rooms in which counterfeiters work vigorously. Banks don't make currency as in notes and coins, what they create is deposits, and they do so by making loans.

Now banks are not magicians either. They can't create money out of thin air. In order to create money, they need a raw material - money. This money comes from customers' deposits. It is the money we deposit into the banks.

Armed with these deposits as reserves, banks can now make loans. Note that banks don't have $100 of reserves for every $100 that customers have deposited with them. If banks behave this way, they wouldn't earn any profit. Banks loan out more money than the reserves they possess, thus in the process, banks create new money that did not exist before.


Bank's required reserve ratio determines the maximum amount of loans that banks can make. Banks are required to hold a level of reserves that does not fall below a specified percentage of total deposits. This percentage is the required reserve ratio.

The required reserve ratio is a bank regulation set by the central bank. It normally ranges from 3-10%. A 3% reserve ratio means that the banks must keep $3 for every $100 deposits, and can loan the remaining $97. A 10% reserve ratio means the banks have reserves of $10 for every $100 while the rest $90 can be loaned out. These reserve levels, albeit low, are adequate for ordinary business needs.

To illustrate this, let's assume the required reserve ratio is 10%.

One day, Roger deposits $100,000 into a certificate of deposit at Citibank. Now Citibank can use this money to create loans. With a required reserve ratio of 10%, Citibank can loan out a maximum amount of $90,000 and keep only $10,000 as reserves. On the second day, Andy approaches Citibank for a loan of $90,000. The bank manager approves the loan and opens an account for him with a credit balance of $90,000.

The story does not end there. According to Citibank's balance sheet, the $90,000 loan to Andy is also a $90,000 asset for the bank. Andy has to repay the $90,000 (plus interest) to Citibank at a future date. As you can see here, Citibank has effectively created $90,000 out of nothing.

Since Citibank has now an additional $90,000 asset, it can make another loan based on this asset. Hence, a second $81,000 loan is created.

This process will keep on repeating itself. Loan #3 is $72,900, loan #4 $65,610 and so on and so forth. A initial deposit of $100,000 will eventually create $1,000,000 of money (the original $100,000 deposit and another $900,000 loan).

Now you should see that banks only have tiny amount of reserves, reserves that are needed to meet depositors' demand for currency and to make payments to its creditors. When confidence towards a bank falters, a bank run occurs. And this is what happened to many US banks in the current crisis - Huge bets on CDO and other derivatives turned sour, confidence eroded, followed by large withdrawals from their depositors. The banks failed when they couldn't repay all their creditors and depositors at once.
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