Should you take up moratorium on your housing loan repayment?

During this COVIT-19 pandemic outbreak, I learn a new term which is “Moratorium”. When Bank Negara Malaysia (BNM) announcing this measures to help bank customers facing financial issues because of Covid-19, I was wondering what does it means? I did not know this is a term from finance. I never heard of this term for my life. It could be never happen in Malaysia or I was no need to worried about the financial when I was young.

I google it and simple explanation is “a legal authorization to debtors to postpone payment”, this will enables Malaysians to face the financial hardships during the COVIT-19 Movement Control Order (MCO) as a lot of business has to stop and not able to operates.

What does this Moratorium means for us? Below are the list available for reading if need more details.

• Bank Negara announcement
• PBB announcement
• HLB announcement
• CIMB announcement
• MBB announcement
• UOB announcement
• Affin announcement
• AmBank announcement

Below will be high level of the table comparison from Uni Suites.

In this article, I focus only on the housing loan calculations as it will be impacting the majority for house owners.

For example, if your one month instalment is RM2,500, interest charged is RM1,700 and principal is RM800. Thus by taking 6 months moratorium, your potential 6 months cash flow saving will be as below:

Original instalment pay is RM2,500 x 6 months =RM15,000.
That means you will be having RM15,000 enable you to used as emergency fund if situation needed.

Plus you pay higher interest cause your principal did not reduce by RM800 per months during that 6 months .
Assume your interest rate is effectively 4.2%, calculation as follow:

Compounded 6 months interest will be around RM58.95 (rough estimation). I am not financial advisor and I just calculate based on manual compounded way.
Impact to your cash flow is you have extra RM2,500*6=RM15,000 and your cost is RM58.95 extra interest.

If I go to the website and key in relevant figure, the total compounded will be around RM69.58

http://moneychimp.com/calculator/compound_interest_calculator.htm

The key message here want to deliver is that the borrowing cost is so low and personally, I will take this approach for the next 6 months.
Imagine if you have 3 rental properties and tenants ask you to have free rentals, what will you do if you do not take up this moratorium from the banks? Will you able to survive for the next 6 months cash flow if there I no rental coming in? RM15,000 x 3 properties = RM45,000
It will be a huge amount, isn't it?

Another calculations to share as below:

Bear in mind that the moratorium on debt servicing payments will enable borrowers to have additional disposable income to spend or SAVE. The keyword is SAVE and invest into higher return opportunity during this down turn. Even if I can afford to continue servicing the loans, I will still take advantage of the moratorium to generate extra income by channeling to investments that produce higher returns than the debt servicing cost.

Given the low interest rates in servicing housing loans, the loan payments could give higher returns when invested in stock market since it is heavily hammered down now. Of course in depth due diligent requires to be done before putting your money into it.

Now, the decision is rely on you on whether to take up the moratorium by Bank or not. As mentioned, I don’t know how the pandemic is going to progress and how long it will takes, I will take up this moratorium offer to ease the cash flow and take opportunity to invest in the depressed stock market.

MCO extended to April 14, what are you going to do?

Oh No, I believed everyone is shouting and banging their head when our PM announces that The government has decided to extend the movement control order (MCO) for another two weeks until April 14. It was a torturing for the past 8 days for practicing Stay At Home under the MCO, and now all of us has to extended another two more weeks due to the statistic doesn't look good out there.

Details of the announcement can be find here.

With MCO, I have to Work from Home to support the limited production activities. At the same time stay in close contact with my family to support each other in ways we never had before. I am not sure if this work from home can be the New Norm moving forward.

The main title of this article is, what are you going to do since MCO is extended now?
Are you still eat, sleep, exercise, catching up Netflix or Astro Movie (Offered Free till 31 March)? Or picking up a new skill like building up a website, learning how to become YouTuber, learning on the Japanese candlestick, way to grow your business, way to earn extra income and a lot more.

In my previous post regarding the market is falling down,there are more opportunities to invest right now. In early March, I initiated few position such as Maybank, Public Bank, Dutch Lady, Rohas, SP Setia, Astro. Who knows a week later, the fears of the coronavirus pandemic hit Malaysia and the market have dropped over 15% since then.

You may say, it is so unlucky. With all the bad news everywhere, it’s important for us to keep pushing forward with hope and courage. There are always upsides in a crisis. Warren Buffett once said that as an investor, it is wise to be “Fearful when others are greedy and greedy when others are fearful.”
Look back in the history, what do we learnt from the previous economy crisis back in 2007-2008 (also known as the global financial crisis)? At that time, I still a hardworking employee, I did not made any investment be it property or stock market? I still remember my boss asked me, did I invest in any shares? He told me that his investment has evaporated at least 50% at that time. This has made me freak out at that time and shunned away from stock market.
Now I am research back some of the previous businesses how they performed since the 2007-2008 crisis, below is some of the finding:

• Maybank: grew 100%
• Tenaga: grew 140%
• PBB: grew 67%
• Nestle: grew 347%
• Dutch Lady: grew 277%
• Visa: grew more than 1000%
• Netflix: grew more than 2500%
• Apple: grew more than 2000%
• Starbucks: grew more than 1300%

So, do you think there are such opportunity during this time?

Fear of the market not yet at bottom

On March 16th, 2020, our Prime Minister, Muhiyiddin Yassin announce that on March 18th, 2020, all of Malaysia is effectively under a “movement control order” or MCO until the end of the. This action is needed that hopefully able to reduce the dramatic increase in confirmed Covid-19 cases throughout the nation. What are you planning to do during the MCO period?

At the same period, Global stock markets plunged as well as the coronavirus outbreak continued to spread, stoking fears of global pandemic and an economic slowdown. In just few weeks time, the Coronavirus pandemic has shaved off nearly a third of the global market cap. Making things worse is the crude oil war between Saudi Arabia and Russia, which has injected volatility into other assets. After a crash of this magnitude, market confidence usually does not come back in the near term, it going to take a while before it recover.

Wait,wait, before 2020, some of us or a lot of people out there, are keep waiting for market to crash and only invest into it. But went it happen now, are you ready to invest in or afraid to buy good companies at cheap price. Or maybe you are wondering which companies to buy since all are crashing down.

Let’s be honest here, if before the market crash and we done our homework which are the companies we want to invest in, this is the right time now. But you may wonder ‘How much lower will the stock market go down until it hit bottom?”

I have absolutely no idea. I do not have answer if this is the lowest now. Whatever sharing in this blog here, these are just my views on what could potentially happen with this continued downturn in the stock market. The only one reason why there is chaos in the market right now is because of the Coronavirus. Businesses are shutting down, cities are being shut down and police and army forces deploy on the road to prevent the spread of this global pandemic locally and globally. In order to have the market return to the good days, first is to contain the virus spreading so that people can go back to normal life before bull return to stock market .

Now where do I think we will hit the bottom in this market?. But when panic and fear are at all time highs, that is usually when we see all time lows. When the headlines are stating the entire economy is set for financial doom then that might hint we are getting near a bottom. 

The critical thing to remember here is to take advantage of these stocks and the current priced they are at. Are we prepare for it? Other common questions are “Is it time to buy?” or “What should I buy?" Below is what I am targeting now or already initiated small position into it:

KLSE: Maybank, Public Bank, Dutch Lady, Rohas, SP Setia, Astro

SGX: OCBC

US: Disney, Starbuck, Exxon Mobil, Pepsi, VISA

To wrap up this, the MCO is necessary but hard for a lot of people to just stay at home. It better to be safe to stay at home and take this opportunity to study more companies which to invest in order to make smart decisions. 

Data as of 7 April 2020

What are the important factor in growing your wealth?

From the post "Believe you can make Million through Investing", what is your thinking? What are their commonality?

All of the three examples are not high income earners. They are typical income earners working as employee from 8am – 5pm like all of us. They do not spend luxuriously. They do not buy liabilities like branded name, big house etc. they live frugally. They save to invest and never touch those money they invested in. This part can conclude that, it does not matter how much you make, but important is how much you can save.  You just need to saved and invested consistently.

I am not very sure when they what is the economy status when they invest into the share market. However, one thing for sure is they did not time the market. I heard a lot of people saying that “I am waiting for market to come down”, the “market is too high for now” etc. The real message is the time in the market. For all the three classic cases, they consistent investing and keep in the market that make them multi millionaire. As such time in the market - not timing the market, is most important. 

Lastly, the eight wonders of the world - compounding effect that play an important role. Three of them had stay long enough in the market incorporated with the power of long term compound interest. Starting off with investing $500 per month isn’t much, but over decades, this can grow into something substantial. 

With above sharing on the important three factors, so the youngster or anyone, hope that stories like this can give you hope that even though you might not be making a lot of money right now, the possibilities are limitless in long run. Plan for it and execute it.

Believe you can make Million through Investing

I heard a lot of my circles of friends or relatives do not believe that investing in stock market can reach millionaires. In fact there are a lot of real examples surround us. The purpose of this blog site also to create awareness of investing that is essential to everyone.

I am sharing with you 3 classics real stories from USA. Three of them are employee just like you and me working 8am – 5pm every day till retired. This is a great example of what can come when someone invests often and lives frugally, while only earning a modest salary working a 9-5 and how that can snowball into something massive, to the tune of over few million dollars over the course of a lifetime. 

1^st Example: Syvlia Bloom

(Original Story:https://www.nytimes.com/2018/05/06/nyregion/secretary-fortune-donates.html)

This story is about a woman named Sylvia Bloom, from Brooklyn, New York. She worked as a secretary for a Law Firm. She made a modest salary. She took the bus and subway to get around. She never flexed on them haters. She also accumulated a fortune of about $9,000,000. She grew up in Brooklyn New York during the Great Depression. In 1947 she began working at a Law Firm as one of its first employees, where she ended up working for 67 years until she retired at 96 years old. But how she lived day-to-day is an indication of how she became so wealthy.
They lived in a Rent controlled apartment. She took the Subway to work. She’d opt to take the bus over spending the money for a cab. She never talked money, never called attention to herself, and she lived extremely modestly. This allowed her to secretly invest her money, instead. She’d save her money, live modestly, and invest everything she could. In her lifetime, thanks to compound interest, this lead to over a $9,000,000 Fortune…$8.2 million of which was donated to charity for college scholarships.

2^nd Example: Leonard Gigowski

(Original Story:https://www.jsonline.com/story/news/columnists/jim-stingl/2017/11/21/stingl-frugal-alum-gives-thomas-more-students-13-million-reasons-say-thanks/882913001/)

Leonard Gigowski worked as a Navy Cook during World War 2 and shortly after worked as a meat cutter. That company gave him company stock, which he held on to - and later opened up his own grocery store. He expanded to a night club and rental properties over his lifetime, but maintained a frugal lifestyle. When he passed away at the age of 90, his thrifty living and investing habits left him with $13,000,000 which he donated to charity.

3^rd Example: Grace Groner

(original Story: https://www.businessinsider.com/an-old-ladys-three-60-shares-from-1935-are-now-worth-7-million-2010-3?IR=T)

Another secretary who amassed a $7,000,000 fortune for charity by the time she passed away. Like earlier two examples, she didn’t have a high income - but she lived modestly and invested her money. In 1931 she began working for Abbot Laboratories, and in 1935 she saved up enough money to buy three shares worth $180.00….and she never sold them. Despite the stock skyrocketing in price, she never increased her lifestyle. She never bought expensive things. She lived in a small apartment for most of her life. And during her retirement from the company, she’d spend some money on travel and would actively volunteer…but she never touched the principle of her investment. And that led a $7,000,000 donation for college scholarships when she passed away.

Hope during this COVIT-19 Movement Control Order (MCO) 18- Mar to 31 Mar 2020 will able to inspire you to think about investing.