Lessons on investing from Ravi Menon (Singapore)

Lessons on investing from Ravi Menon (Singapore)

(This is an extract of speech by Mr. Ravi Menon, Managing Director of the Monetary Authority of Singapore at the launch of Tamil Financial Literacy Guide, Singapore, 16th Nov 2014 courtesy of Bank of International Settlement) Invest wisely As we build up our savings, some of us may wish to invest part of it to obtain higher returns. Investments in bonds, equities, mutual funds (or unit trusts) and other financial products typically yield higher returns than bank deposit rates over the medium to long term. But they also carry higher risks. For the majority of financial investments, neither the returns nor the principal amount invested are guaranteed. This means we could potentially get less than what we have put in. MAS has set stringent disclosure requirements for financial products. We also require that information be provided in a clear and concise manner, through the use of Product Highlight Sheets, for example. But the responsibility ultimately lies with the investor. Every month, MAS receives, on average, about 10 complaints from the public involving the sale of investment products. To be sure, some of them involve mis-selling or poor disclosure, for which the financial adviser or institution is responsible. But there many...
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Opinion: Thoughts on Implementation of Cashless System in Kenya

Opinion: Thoughts on Implementation of Cashless System in Kenya

Earlier on in the year the Kenyan government gazetted regulations that were to outlaw the use of cash for bus fare payments from July 2014 but the deadline was pushed further to December. Since then mobile service providers and banks have launched varied payment systems in a bid to capture market share. It is a move that the government is ideally aiming at achieving the level of success Hong Kong has achieved in implementing the cashless system in the public transport sector. But, I think the whole implementation process is flawed and may face challenges until one of the participating competitors decides to move a step further and make changes within their systems as an anticipatory move. As a participant I feel that they fail to tackle fundamental issues of which I shall discuss some in this article. To start with, the idea is good and we will undoubtedly reap numerous benefits on adoption of the system. Benefits of cashless system pointed out by the authorities and other participants around the world are numerous. The amount of cash that exchanges hands every day in the public transport system is a lot and small commission on each transaction is bound to reap...
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Providing Financial Education is Important for Meaningful Inclusion: Central Bank Speeches

Providing Financial Education is Important for Meaningful Inclusion: Central Bank Speeches

  Dr Zeti Akhtar Aziz, Governor of the central bank of Malaysia recently gave a speech that was captured by Bank of International Settlements on the importance conducting financial education to the general public in both businesses and educational institutions. As the government works hard to promote financial inclusion, other problems are bound to arise as financial consumers are likely to be marginalized by market forces. There are numerous examples of people who have been caught up in mortgages and other financial services packages simply because they didn’t have sufficient knowledge on how the market as whole operates or the provider didn’t adequately educate them. Among those that qualify, aggressive marketing practices and more complex financial products can also lead to poor financial decisions at a time when economic and financial reforms are also shifting greater responsibility to individuals to plan and provide for retirement and unexpected developments. Marketing practices that target select groups of consumers often further deprive the broader segments of society from new products that can better meet their financial needs. Involvement of technology and more efficient methods of communication is making it difficult for institutions to provide adequate advisory to individuals The way in which financial services...
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Markets round up

Markets round up

Commodity linked currencies have continued to come under increasing selling pressure. OIL Recent developments;  Oil managed to rally on Wednesday on rumors of a pipeline explosion in Saudi Arabia which later turned out to have been a fire during construction repairs that was quickly brought under control. EIA data also came out relatively weak as per market expectations but oil was quickly rejected on move above $79. CFTC data shows that smart money has been reducing oil sell positions by record amounts. Libya planning for biggest oil field to resume output soon Iraqi Kurdistan Hawrami said 3 more oilfields online in next 2-3 months, exports to rise to 500,000 BDP by Feb It is not clear why money managers are reducing short-sell positions and could simply be profit taking after sharp drop from $107 in June given that sentiment still leans on bearish side. Opinion is split among notable participants, some seem to think the move may be overstretched in the short-term, but the general consensus is that in the long-term, down move is likely to be sustained. There is an OPEC meeting to look forward to on 27th November and market will be looking for clues as to whether major...
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Dealing with the Fear of Missing Out (FOMO)

Dealing with the Fear of Missing Out (FOMO)

Most of us are or at least have been victims of the fear of missing out (FOMO) at one point or the other especially if you have been actively involved in the market or in investments outside the market. Personally I think FOMO could particularly to blame for the creation of most of the asset bubbles, where success stories of an individual or individuals collectively results in investors rushing into an asset and gains made influence other investors to start making irrational decisions as well. I came across this article and thought I should share it with our readers as it touches on an important negative trait. As Blackrock’s Heather Pelant notes    In a noisy marketplace, it can be easy to get unnerved by promises of big gains and “success stories” of colleagues and friends. …FOMO, or the fear of missing out, can lead you down the wrong investment track and offers ways to avoid it. The diagnosis? He notes; It’s a familiar scene: the party or ball game where you start a conversation with a neighbor or friend you haven’t seen in a while. After a few niceties, he casually tells you all about the 48% return he’s making on an...
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Markets round up

Markets round up

Chances are very high that quantitative easing from the US will end next week; as a result, US data has assumed more significance in influencing market volatility recently in the financial markets than it would ordinarily have as market looks for clues on the status of the economy. Good data means chances of another round of easing would be very slim and interest rates rise sooner. Bank of International Settlement alongside other institutions have  warned on numerous occasions on the dangers of prolonging low interest rate periods and the potential impact they might have on the financial markets in future. Participants continue to express concerns over the Eurozone economy and Chinese economy as well. I think we should expect high volatility especially in stocks. Oil Oil fell back to retest major support zone at $80 area after inventory data on Wednesday and as I type is trading at $80.20.  A number of investment banks have come out saying that the move lower may be overstretched and that we might see price recovery heading into summer. Goldman Sachs said although they are bearish on oil prices over the long-term, in the short-term they think that the market reacted to a supply...
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Weekly round up

Weekly round up

There have been concerns of slow growth in global economy. World bank lowered growth forecasts for most of the big economies. Blackrock (World’s largest fund in terms of asset base) warned that we might potentially see capital flight from China. US stocks A number of participants have been expressing concerns over the stretched valuations of most of the listed companies. Icahn said he is short-selling the index as a hedge against some of his stock buys. Warren Buffett maintained he is not concerned about the overall index performance and will continue buying companies/businesses based on individual performance rather than a collective evaluation. Oil Oil has been on a steady decline since June with Brent having declined around 20%. The move lower was triggered by increase in oil supply in the market and declining demand mostly due to slow global growth rates (Especially with concerns over hard landing in China’s economy) and increased energy efficiency. At the moment, an increasing number of market participants seem to think that we are unlikely to see cut in oil supply to the market from Saudi Arabia given the economic impact the move has previously had on Saudi Arabia in cases where it has acted...
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