What do I do with my money during recession?

This week APEC announced that they expect 1 1/2 year for our economy to recover form the current recession. What does it mean? It means things aren't going to go better anytime soon in the next 1-2 years. In fact KLCI is expected to test the 800 level next year while over in the US the big 3 of the US automobile industry is trying hard not to go bust and recently the big Citibank with USD$200billion is only worth USD$20 billion today, trying hard not to follow in the footsteps of Lehman Brothers. Is everything all doom and gloom?

Fret not, for in recession lies legitimate oppurtunities. We always hear that cash in king during recession but if we don't have cash, how to be king? If you're an average Joe of Mary who worked and bought your house a few years back, you are in a good position to make use of the house that you've bought.


How to get more cash in your hand?


1) Refinance your property
Governments all over the world including ours is trying to stimulate the economy by lowering lending rates and this include ours. This is to encourage banks to offer low interest loans so that more people will purchase properties or borrow from the bank for the businesses. If you've bought your house/condo a good few years back you probably would have paid 6-7% interest for your housing loan. Why not make use of the current govt stimulus by refinancing your property? With the current refinancing rates as low as 4.35% p.a. that will mean you will be saving up to 2.65%p.a. What does this mean in $$$ ?


You will be paying less and saving more

If your loan amount is RM300,000 @ 7%p.a. :-
1) your monthly payment is RM1,995 for 30 years
2) interest over 30 years = RM418,526
3) Total paid over 30 years = RM718,526

At 4.35% p.a. :-
1) your monthly payment is reduced to RM1493 for 30 years
2) interest over 30 years = RM237,636
3) Total paid over 30 years = RM537,636

* Savings up to RM502 a month
* Savings up to RM180,890 over 30 years

You have more cash in hand if your property has appreciated

If you are one of the lucky ones who bought your property in good locations and your property have managed to appreciate in value, then you can refinance your property at a higher value and use the extra cash in hand :-

Property bought at RM300,000
Now valued at RM400,000
* You have close to RM100,000 in hand after refinancing (less moving charges etc if applicable)


Putting the extra RM100,000 cash to good use

You still have to repay everything end of the day so it is only beneficial if you can put the RM100,000 to good use. This is where CHGS can be one of your investment tools :-

RM100,000 with 4.35% refinancing interest = RM4,350
RM100,000 with average 8-17% at CHGS = RM8,000-RM17,000
* You have extra passive income of RM3,650 - RM12,650 p.a.


2) Convert your volatile unit trust / shares to investments with fixed income & guaranteed capital protection

If you have volatile unit trust /shares that does nothing but go down in value since 2007, then it is time to stop the rot otherwise you will miss the boat during the next recovery. Assuming recession takes at least 2 years to recover, this is what will happen if you keep your money in unit trust/shares instead of stopping the rot :-

For RM10,000 investment since 2007

2007-2008 at -20% = RM8,000
2008-2009 at -20% = RM6,400
2009-2010 at -20% = RM5120

Assuming recovery at 2010 onwards
2010-2011 at 20% = RM6144
2011-2012 at 20% = RM7372.8

* Even after 5 years you are still in negative


However, if you switch your funds to CHGS during recession :-

2007-2008 at -20% =8,000 (assuming your last year's investment has lost money)
Transfer to CHGS during recession :-
2008-2009 at guaranteed 8% = 8,640
2009-2010 at guaranteed 8% = 9,331.2
Convert to Unit Trust/Shares during recovery
2010-2011 at 20% = 11,217.40
2011-2012 at 20% = 13,460.88
* 34.6% gains after 5 years

OR
Continue at CHGS
2010-2011 at 12% = 10450.94
2011-2012 at 12% = 11705.05
* 11.7% div gains + 40% land appreciation = 51.7% gains after 5 years

* either way, you will be getting positive returns if you convert your volatile investments to stable investments temporarily. Besides that, you have yearly passive income in terms of dividends.

CHGS Events & Investment Talk

Find out how to take advantage of the current recession by attending our exhibition & investment talk :-

Nov 7-9 Mapex Property Exhibition, Level 3 Midvalley Exhibition Centre, Booth no. 3071

Nov 14-15 Penang Office :- 51-21-C, 21st Floor, Menara BHL, Jalan Sultan Ahmad Shah, 10050 Georgetown, Penang

Nov 15-16 Ipoh :- Jaya Jusco Ipoh (near Ipoh toll)

* For our Penang/Ipoh investment talk, please email me at danop2004@gmail.com should you wish to atttend so that we can reserve a seat for you.

New developments for Palm Oil - RSPO & Biodiesel

Recently new developments were made for the palm oil industry which will enhance the value of palm oil and to sustain the palm oil industry for many decades to come ie. RSPO & mandatory use of biodiesel.


RSPO - Introduction

Vegetable oil production around the world totals 95 million tonnes per year, of which over 28 million tonnes are produced by the oil palm, the world's second largest oil crop after soyoil.


Palm oil is an important and versatile raw material for both food and non-food industries, which contributes to the economic development of the producing countries and to the diets of millions of people around the world. Although palm oil is entirely GM free and has the highest yield per hectare than any oil or oilseed crop, it is recognized that there are environmental pressures on its expansion to eco-sensitive areas, particularly as oil palm can only be cultivated in tropical areas of Asia, Africa and South America. It is vital that production and use of palm oil must be done in a sustainable manner based on economic, social and environmental viability. The role of RSPO is to promote sustainability in our palm oil industry.(source - http://www.rspo.org/)


RSPO Certified Palm Oil

RSPO Certified Palm Oil is now introduced and the first shipment has already left from Malaysia to EU, arriving Nov 11, 2008. Palm Oil certified by RSPO also gives a 10% higher value compared to normal CPO price.


Mandatory use of Biodiesel by Govt

What is Biodiesel? Biodiesel is an alternative fuel for our diesel cars which is environment friendly. It has 0% carbon dioxide emission, 50% less co emission and almost 0% other forms of emission & can be blended directly into our diesel cars without any change of engine parts.

In Malaysia our govt has recently imposed a mandatory use of biodiesel starting with govt. vehicles and full nationwide implementation by 2010. The result is that 500,000 tons (approx 30%) of our palm oil production will be used for our local consumption alone.

Impact of new developments on Palm Oil demand & CHGS

With the introduction of RSPO & mandatory Biodiesel, our palm oil industry will have many decades of sustainability besides its other major use ie. vegetable oil for consumption. With 6.5 billion population growth yearly the demand for palm oil for food as well as non-food industry will continue to increase every year & with biodiesel getting more widespread usage, our palm oil farmers and owners of today will be the oil tycoons of tomorrow. As long as more people need to eat and use vehicles, there will be more demand on palm oil.

For CHGS investors, we stand to reap the benefits of the increased demand for palm oil the price our our land. With more demand on palm oil land vs land scarcity, the price of palm oil land also appreciates.

CHGS compared to FD & Property

CHGS investment is meant for risk adverse investors who wish to have regular yearly income with higher interest than FD/Amanah saham, while at the same time grow their initial capital every year to hedge against inflation with capital protection. It is similar to property investment except that the rental income is guaranteed every year & you don't have to look for tenant or pay land tax, mantenence, agent fees etc.

Comparison for RM320k investment over 23 years

1) CHGS investment
(8%)year 1 to year 3 - RM25,600pa / RM2,133pm
year 4 onwards - RM38,400pa / RM3,200pm (at conservative 12% average)
Capital growth At maturity -
1) RM1,1-1.5 million +/- 400% (from sale of land),
2) RM1.9-2.3 million +/- 600-800%(including dividens)

2) FD at 3.75%
year1-23 - RM12,000pa / RM1000pm
Capital At maturity -
1)RM320k (original investment) ie. 0% capital growth
2) RM596k ie. 186% including dividens

3) Property (single story house in PJ)
Average rental - RM15,000pa (not guaranteed, depends on tenant availability) / RM1250pm (4.7%)
not including real estate agent fee, land tax, maintenance, legal fees etc)
Capital at maturity -1) RM1.1-1.5mil After 20+ years sale - +/- 400% return
not including real estate agent fee, legal fees, property gains tax etc
2) RM1.7-2.2 mil +/- 500-800% (incl dividens)

* all 3 comparisons does not take compounding into consideration. Returns will be higher for all 3 if compounding is used ie. money is re-invested.

How can I use my CHGS income?

Since the returns are guaranteed payable every year, it can be used as an addition to regular retirement income, children's education, holiday income or even pay for your yearly commitments ie. insurance premium, car/house loans. When you use your dividens as part of your passive income, it does not eat into your actual capital while it keeps growing every year from land appreciation.So in terms of portfolio spread, CHGS will fall into the area of your FD/AmanahSaham/Insurance spread, while you may have another portion for other speculative investments (shares, currency, unit trust, real commodity trading).

History of CHGS

CHGS was launched March 2007 initially for MCA Wanita by our Datuk Ng Yen Yen who made a personal site visit with MCA Wanita. With a 8% guaranteed yearly return, and 12-17% average during harvest years, it was used to encourage women to make better use of their hard earned income and to encourage savings. After the initial launch, CHGS was then made open for public investment. CHGS palm oil land is located at Gua Musang, Kelantan.

During the first launch, each 1/4 acre plot was sold at RM5,000 then went up to RM8,000 currently. With 36,000 plots for sale, it was quickly taken up by Malaysian public as well as foreign investors. Currently its 8th phase has less than 1000 plots left & 2000 plots have already started harvesting ahead of schedule. To view the latest development and site tour please click here :- http://www.chgs.com.my/sitetour.asp

CHGS is the first 2-in-1 farm sharing land investment available in Malaysia with both yearly dividens as well as capital appreciation to hedge against inflation.

Country Heights Grower Scheme

Malaysia's first CCM approved palm oil land investment with a guaranteed 8% yearly returns during the planting stage (year 1 - 3) & average of 12-17% yearly returns durign the harvesting stage (year 4-23). Being a land based investment, your original capital is also hedged against inflation with an average of 10-20% yearly capital appreciation.

Country Heights Grower Scheme (CHGS) is governed by CCM and protected by BLHB Trustee Berhad which is under CIMB Bank. It is open for both local and foreign investors.

Full details can be seen at http://www.chgs.com.my/