Thursday, September 10, 2009

Financial Literacy

I just joined the local Toastmaster club in my company. Their meetings are held in the company auditorium. It’s a small club but the quality of the speeches and evaluations are not bad. The club president is the district governor or something and she is the chair person for the conference to be held in nearby Spartanburg. I think it will be a challenging experience for me. I cannot say enough of the benefit that one gets in Toastmaster. The transformation is subtle and the skill and confidence that one gets is not available anywhere else.

Yesterday I started studying the investment options for me. Normally, for people where investing is not a profession, the usual recommendation is to buy Exchange Traded Funds or ETFs. It’s the safest option with the less risk. I did some research by just searching via Goggle the best of the best ETF’s. I got the prices of these ETFs and got a short list by picking the ETFs that seem to be on a few experts lists. The popular ETFs are: ETFs based on overseas stock, ETFs based on GOLD and ETF’s based on preferred stock of financial firms. I took the prices of these ETFs from Yahoo and they are not cheap. Some ETFs based on Japanese and Chinese stocks are cheap though and maybe an attractive choice.

Next I compared the stock prices of stocks that met my criteria. I used Yahoo Finance screener which is quite a powerful tool. These types of tools exist in private or fee-based features of banks or brokerages in Singapore. But it is readily available to the public here in the US. The prices of some stocks here are more reasonable as compared to the ETFs. For instance, blue chip stocks (high cap, low P/E ratios, high dividend yields) like Comcast or Disney or even Microsoft seem to be at relatively attractive levels as compared to ETFs. So I am now at a quandary on what investment option to choose. From my experience, I have been modestly successful in price appreciation of m mutual fund investment, while I have done poorly on my stock investments, although I have had a good dividend yield.

I guess in the recent years, most investors would have done poorly considering the recent global economic problems. I had chosen this stock traded in the Singapore exchange using the same data mining tools existing in Yahoo Finance. I had chosen the stocks that where high caps, good dividend yields and at a cheap price, i.e. below SGD $ 5.00. These stocks have given a modest dividend yield when compared to a savings or money market account. But the stock prices have disastrously tumbled along with the rest of the world. So I guess the decline in stock values was not a problem in my choice but phenomena experienced across the board in world wide markets. On the other hand, my mutual fund investments have struck out evenly despite the decline though the jury is still out.

So I will do a little more reading, researching and studying before I finally proceed. Other questions still need to be ironed out: how to I invest, where do I invest and in what amounts. These days the USD $ dollar is declining and the price of Gold is skyrocketing. The oil price is also going up. Usually Gold and oil price increase mean that money is leaving the stock market and moving into commodities especially with the decline of the USD $ dollar as more articles predict. So the bearish sentiment in the stock market may indicate that it’s a good time to go in and buy now. So the choice is either ETFs or picking stocks which I need to determine soon.

I am glad I have increased my financial literacy for me to understand these things. Aside from a natural inclination as well as my academic degree, reading books my Robert Kiyosaki, Benjamin Graham (mentor of Warren Buffet) and George Soros have been helpful. Now it’s all about action and the implementation of one’s training and knowledge. I guess this will be the major themes for me for the short to medium term: increasing my financial literacy towards the US market and increasing my speaking skills with an American audience. Other themes I would continue to pursue are project management and writing although I did not join any local PMI chapter but instead just start reading the magazines.

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