Answers to some Investing and Compouding Questions. How to Maximize Your Investment Profit. How to Open a Brokerage Account in Malaysia. Etc.
Oct 13th, 2007 by AhYap
scwong: The math that we studies before, 90% of it is not useful in everyday life. I speak for those who are not engineers or accountants or architects, etc.
True! We try to figure out things like Train A start from Ipoh at 8.00am at the speed of 80km/h and Train B start from Johor Bahru at 9.00a.m. at the speed of 100km/h, at what time and where will both the train meet each other? Zzzzzzzzzz.
ahbi: ah yap a….y no add me in msn le…i gave u my email last time mer
My ex-coursemate Donald (The #1 cibai according to Google) has answered it for me nicely. “You guys don’t need to check him on messenger coz i can’t even get him on email!” Yes, CibaiYap really don’t play messenger and reply to emails. He also off his handphone most of the time. Even when it is on, he can let the phone ring and ring and ring without picking it up, making the caller on the other side jump like a monkey. That’s AhYap, or better be called CibaiYap because of this.
taikor: I only knew how to save RM100k in 5 years even before I graduate. For those working in Singapore, that’s a lot easier. Just bring back around S$950 every month and you’ll be able to save Rm100k in 5 years.
Those making SGD should aim for SGD $100,000 to become a SGD millionaire! 
But if you are making Rupiah, don’t save only 100,000 Rupiah lar. 100,000 Rupiah is only RM39.10!!!
april: i also bought ICAP. but damn miserable .. bought at 1.74 and only 200 units coz super and extremely poor. :’( Plan to sell at 2.15 and wait for it to drop and the buy alot alot in the future. Currently bought under my auntie’s account so have to sell asap or else next year all the minimum rate will increase to RM40.
But sibeh good ah the share!!!!
I am very happy, so you are now the #4 people who listen to me. Did you buy 200 or 2,000? If one buy 200 units of ICAP at 1.74, his total cost would be RM361.14 including commissions and fees, making the averaged bought price 1.8057. In order to just break even, one need to sell it at 1.88! It needs to increase at least 8% before you can make any money.
The amount of units you bought affect your break-even point (the price where you sell and you don’t make or lose any money). If you buy ICAP at RM1.74 here are the break even points for different amount of units you buy.
100 – RM2.01
200 – RM1.88
300 – RM1.83
400 – RM1.81
500 – RM1.80
600 – RM1.79
700 – RM1.79
800 – RM1.78
900 – RM1.79
1,000 and above – RM1.77 (total investment around RM1,800)
When we buy or sell a stock, we need to pay the brokerage fee, stamp duty & clearing Fee. It’s the stamp duty and clearing fee that affect our break-even point because when you buy too little, stamp duty and clearing fee will account for a large percentage of your total invested amount.
Lesson 1: Every time you buy or sell, make sure the transacted amount is at least RM1,800 to maximize your return.
Online brokerage like HLeBroking and Maybank2u charge only 0.42% brokerage fee. If you are buying through a reminsier, you will need to pay 0.7%! If you know you can negotiate (most people don’t know), they will give you 0.6%. But that’s still more expensive than the 0.42%.
Lesson 2: Use an online brokerage house to save on brokerage fee.
yangsquare: I’m very prospective about this- but how do you manage to get 20% compound interest?? even 12% would be difficult to find, wont it?
It is very easy, if you know how. It is very hard, if you don’t know how. If you know how to swim, swimming is very easy. If you don’t know how to swim, swimming is very hard (and you can even get drown!). So is swimming easy or hard? Of course, I will share more and blog more later about how to get the 20%. Akan Datang.
yangsquare: Also remember there is also a negative force behind all positive forces; that is what we call INFLATION. inflation rate is currently around 2% for the whole country and 6% in big cities like KL. That means your money will diminish if you keep it in time.. meaning your 20% compound would only be like 18% after subtracting the inflation rate.
Brilliant. The answer is in the statement itself. Because inflation is unavoidable, that’s exactly the reason why we need to aim for a higher compound interest rate (and not the Amanah Saham’s 8%!). If you have live long enough, you should have witnessed the destruction-power of inflation. How much does 2 pop-piah cost 20 years ago? 80 cents. How much today? 2 Ringgit and 80 cents.
yangsquare: btw, how do i start a trading account? any minimum age for that?
18 is the minimum age. Open it online at HLeBroking.com. But you still need to print out the final application form and go to any Hong Leong bank to have your signature witnessed and IC certified. Then you can ask them to mail it for you to Hong Leong securities. To trade, you can bank in money to your brokerage account via Maybank or Hong Leong bank.
Huiying: I agree with the compounding theory too.. it really requires a lot of discipline to reject all kinds of temptations to make that type of saving. Meaning, if you are earning around 3k, while you are still young, no outings, no trips and no fun. Really tough. And so, I think balance is really important. A balance of lifestyle and having saving at the same time.
This is a very open topic like politics and religion. Always can’t get a right or wrong from it. If you are honest with yourself and look at all the people around you, do you think there is more rich people or poor people? Is there more healthy people or unhealthy people? Is there more successful people or fucked-up people? If you do what most people do, you will get what most people get – poor, unhealthy and fucked-up. But this arrangement is good and nothing need to be changed. If not, who is going to sweep the street? Who is going to tar the road? Who is going to be police (haha)? 
But what different now is that most people don’t know they have a choice. You know you have a choice now. So you want to be like most people or you want to join the less-people club? But as I said earlier, it is okay to be like most people. If everyone has money, who is going to work at the bank’s counter? Who is going to be our accountant? Who is going to be a brilliant engineer to design better stuffs for our livings? Who’s going to repair our car when it is broken?
Huiying: Just wondering, when you purchased ICAP, you are using the rule#1 method?
No, I don’t. You don’t evaluate ICAP using Rule #1 method because ICAP is a fund and not an ordinary business. ICAP is currently holding 15 stocks. You can happily evaluate it’s holdings using rule #1. ICAP strategy is value investing, and rule #1 is one kind of value investing which is more ‘aggressive’. There are many ways to implement value investing and ICAP is using a more conservative value investing approach than rule #1, making you sleep easier at night. I will discuss what I mean by aggressive and conservative in some other posts.
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yo ah yap….aiya..should buy ICAP la if i know you got intro. can i ask yo usome question? I know there are 3 types of fees namely brokerage fee, stamp duty and clearing fee. Is it the brokerage fee is the 1 tat they have changed to minimum fee RM 40? So we must pay at least RM 40 whenever we want to buy a share? The stamp duty is fixed at RM 2 per trade? clearing fee is the percentage 0.7% issit, where this is the variable that you can manipulate to get a cheaper fee? Is my understanding on those fees correct? And besides ICAP which is now trading at RM 2.10(too late for me to buy already), do you have other better stocks at the right price that we should be aiming for? hope to see your reply. I really enjoyed your posts! Keep it up!
Yap, you turned out to be the make-money-online guru in stock investing version.
lol….i hope ahyap dont charge me for give some advice to me..lol
Bro;
Great website bro……
Im newbie for the Investmnt field …wat us suggest me to do for me to start invest n making money..
Do i need to open any account in order to do so…!!!
bro, i am new to your blog. interesting posting. thanks for your generosity in sharing such valuable info. I am looking forward for your ‘akan datang’ posting on how to get the 20% things.
When I read the blog about how good is ICAP, i took a few weeks to research about the company. This blog is on the research outcome.
We need to look at two sides of the coin here; just to make sure there are no two heads or tails. My research started with looking at the advantages and disadvantages of a closed-end fund in general. Since icapital.biz website overemphasized on the advantages side, you cannot really find any useful there. So, i go to Closed-end Fund Association (http://www.cefa.com/).From a non-bias third party view, you can see what is a closed-end fund in details. Compare ICAP with other international closed-end funds, what do you understand? Please read more from the website.
After reading about closed-end fund, i go into researching about ICAP. The first thing i tried to find is the prospectus from Bursa Malaysia. To my disappointment, I cannot find any from the internet. If you have a copy, please post it here. Usually, a prospectus will contain a section called, ‘Risk Involved in Closed-end fund’. At the end of the prospectus, you will see disclaimers. Read it if you have it.
The nearest source is the annual reports. From two annual reports of ICAP, I noticed a few issues which I think, are important to highlight them here. I will show you the page to find the information, sections and excerpts.
1. Icaptal.biz was listed 2 years ago on 19 Oct 2005. Whatever ICAP is doing, it will be under scrutinised by Bursa starting from that date only. Before the listing, ICAP self-claimed in (http://www.icapital.biz/english/trackrec_1.asp) about the performance of Capital Dynamics without any supporting documents or evidence. No one can certify the performance of Capital Dynamics before the listing of ICAP. Since ICAP is has two years of track record only, I cannot make any good judgement about the fund. By the way, did you read the disclaimer in the website? Past performance is not an indication for future performance. See it here: http://www.icapital.biz/english/disclaimer.asp
2. Annual Report 2007: Go to Page 1 (Letter to shareowner).
“In appraising the performance of your Fund, its net asset value (NAV) is the key variable to focus on. The NAV of your Fund rose from RM1.13 per share on 31 May 2006 to RM1.65 per share by 31 May 2007 or an impressive gain of 46%. The KL Composite Index rose 45.1% for the said period”
This performance is during KLSE bullish time. So, ICAP makes money during bullish time. What is so impressive? KLCI rose 45.1% while ICAP 46%. My mutual fund rose about 45.5% too. You called that IMPRESSIVE? I would say it’s normal. ICAP will try to beat the frequently efficient market. Can ICAP do it? I’m not so sure about that. We’ll see after 5 to 10 years.
3. Who is Tan Teng Boo?
According to http://www.cdam.biz/contents/home.php?cat=4&sub=0
“Tan Teng Boo is the highly experienced managing director and founder of Capital Dynamics Asset Management Sdn. Bhd. and Capital Dynamics Sdn. Bhd.
He graduated with an honours degree in economics from Sussex University, UK but his fascination with the stock market for the last 33 years have led him to acquire an uncanny insight into the workings of corporations, Bursa Malaysia, various foreign equity markets and the listed companies. In addition, he possesses an innate understanding of the Malaysian economy and is very well versed with the major foreign economies.
A “fanatic’s” interest has enabled him to be very familiar with the different methods of investment analysis and approaches – understanding their strength and weaknesses and suitability of each to different investment objectives and circumstances.
As a result, he has the truly unique ability to blend his investing skills with his business experiences. As Warren Buffett, the world-renowned investor, said, “It’s been awfully good to have a foot in both camps”.
As a highly regarded investment expert, the views and opinions of Tan Teng Boo are very frequently sought after by the foreign and local media such as CNBC Asia, Financial Times, The Wall Street Journal, Bloomberg, Business Times, Reuters, The Star Publication, The Far Eastern Economic Review, Bernama, Sin Chew Jit Poh, Nanyang Siang Pau, China Press, Oriental Daily, The Edge, AFP, Radio Television Malaysia, TV3, Astro and many more”
Besides an honours degree in economics from Sussex University, UK, any other qualifications he has? Or he is just a celebrity covered widely by the media. What are his working experiences? Did he receive any training under a famous value investor? Any references from anyone famous like Warren Buffet? Can someone provide me with his details? (Please state a reliable source)
ICAP keeps on quoting from Warren Buffet and Benjamin Graham. Is ICAP trying to hitch hike their popularity like we have seen in many investment books? Does ICAP have its own stand? I dislike copy cat.
4. Annual Report 2007: Go to Page 12 (Profile of Directors) and Page 26 (Significant Related Party Transaction)
“YM Tunku Tan Sri Dato’ Seri Ahmad Bin Tunku Yahaya and Michael Vitus Wong Kuan Lee are Directors and substantial shareholders of Capital Dynamics Asset Management Sdn. Bhd., the Fund Manager of your Fund.”
Do you know the responsibilities of a Board of Directors?
According to http://www.investopedia.com/terms/b/boardofdirectors.asp ,
“A group of individuals that are elected as, or elected to act as, representatives of the stockholders to establish corporate management related policies and to make decisions on major company issues. Such issues include the hiring/firing of executives, dividend policies, options policies and executive compensation. Every public company must have a Board of Directors
In general, the Board makes decisions on your behalf for the company in which you invest
Most importantly, the Board of Directors should be a fair representation of both management and shareholder’s interests, because too many insiders serving as directors will mean the board will make decisions more beneficial to management. On the other hand, possessing too many independent directors may mean management will be left out of the decision-making process and may cause good managers to leave in frustration.”
Please read more about Corporate Governance and Board of Directors from the websites below and you will understand me. The point is substantial in Capital Dynamics Asset Management Sdn. Bhd (CDAM ) board of directors are also the board of directors in ICAPITAL. Will ICAP’s Board of Directors give a fair representation of both management and shareholder’s interests, because insiders serving as directors will mean the board will make decisions more beneficial to management and not to the shareholders.
http://www.investopedia.com/articles/fundamental/03/070903.asp
http://www.investopedia.com/articles/basics/03/022803.asp
5. From Annual Report 2007 Page 26 (Significant Related Party Transaction)
Fund management fee paid to a related party Capital Dynamics Asset Management Sdn. Bhd has doubled from 638,479 in 2006 to 1,363,494 in 2007. Can Tan Teng Boo explain this? Is the Board of Directors trying to take money from the shareholders in ICAP through CDAM? From loss after taxation of RM1.217 million in the last financial year,
ICAP Fund recorded an after tax profit of RM14.600 million in 31 May 2007. A simple calculation shows that 9.34 % of the net profit goes to the fund management’s pocket. Will the management fees given to CDAM increase in the next financial year? We shall see then.
6. From Annual Report 2007 Page 26 (Income Tax Expense)
ICAP is taxed at the statutory tax rate of 27%. Compare with other types of funds, ICAP is losing a big chunk to taxes. In 2007, the tax is 2,153,669, which is about 14.75% of the net profit reported. In long term, ICAP’s performance will be affected by taxation compared with other funds which have tax advantages.
7. From Annual Report 2007 Page 29 (Fund Manager’s Interest in your Fund)
“As at 31 May 2007, the designated person has a direct interest in 10,000 shares and an indirect interest in 515,700 shares”
Mr. Tan Teng Boo has a total of 525,700 shares in ICAP. Assuming he bought it during IPO at RM 1.00, he only has RM 525,700 in ICAP. He cannot even make it to the 30 largest shareholders’ list. Is he poor? Does he feel uneasy putting his whole wealth in ICAP? Will you put your whole wealth in ICAP? Then, why he urged for more loyal and bigger shareholders? Meanwhile, Warren Buffet has almost 99% of their wealth tight down to Berkshire Hathaway. That is what you want from a fund manager. A quick browse on the thirty largest shareholders shows that the total ownership of the thirty largest shareholders does not exceed 30%. The thirty largest shareholders must have attended annual meeting in ICAP. What did they see, hear or feel there? If they are convinced by ICAP, shouldn’t they already increase their holdings after the 1st annual meeting? What does this tell you as a retail investor?
I hope these information will guide you to make a prudent investment decision on ICAP. Thank you for reading my post.
ICAP depends solely on Tan Teng Boo.If he involved in an accident and die tomorrow, what will hapen to ICAP. Any successor?
[...] I read the blog about how good is ICAP in http://www.ahyap.com/blog/answer-compounding.php#comment-7425, i took a few weeks to research about the company. This blog is on the research [...]
i personally know a friend who invested rm100k with CDAM in 1990. it is now worth over RM1.0M
currently CDAM doesnt take private investments for lessthan RM2.0M. CDAM was the fund managed by TTB before Icap was listed. i think its still being managed now
CDAM starts to invest real money in April 1998. Current minimum amount to open an account is RM4 million. For more info, you can check at http://www.cdam.biz
ICAP is selling at a very high premium now.I think ICAP has done a good job on marketing.In the current hot market,it is very easy for people like Tan to reap millions from bullish investors.
Hello..
I came accross this blog when I search on how to maximise our money. This site seems very interesting but I dont know where shall I start. Iam a complete beginner in investing unit trust or anyinvestmtment. Anyone can guide me?
some POV on investment found here http://globalcookie.blogspot.com/
the cheapest online trading is RM8.88 per trade fr cimb IF YOUR TRADING volume is big, IF ur volume is small, take jupiteronline. I just open. AhYAP i ve been trying to contact u for 20times,pls stop continuing ignoring me. As said, there r imp things to tell u
Vinext@yahoo.com
There may be a second tsunami.Everyone watch out.
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My brokerage with hlebroking only 0.1% to 0.3% for overnight counter. They give me huge sum of trading limit without any collateral at all. Well i make quite some money in stock and would like to share with anyone interested here. Anyway no harm to share with others like what sohai yap share with us. hehe