Forex Investment: Is it for REAL?

For so many times, I've been asking myself this question. Is forex investment is FOR REAL? Is it really open up to anyone who dare to invest their money to make (or lost) more money through foreign exchange trading?

For those who doesn't familiar with the currency trading, here are some of the most popular currencies:
USD = US Dollar => also known as Buck
EUR = Euro => also known as Fiber
JPY = Japan Yen => also known as Yen
GBP = Great Britain Pound => also known as Cable
CHF = Switzerland Franc => also known as Swissy
CAD = Canada Dollar => also known as Loonie
AUD = Australia Dollar => also known as Aussie
NZD = New Zealand Dollar => also known as Kiwi

Most of us might been asking, is it legally conducted?

Well, there are legal brokers out there who're legally trading forex. BUT, there are also some kind of scams who are trying to take advantage on us. Therefore, you should be really, really careful.

Hmmm... so many questions should be asked before you start your investment in forex. The risk is too high. You might lost all your money. But, perhaps you are one of the few lucky enough to make lots of money trading currency.

Forex investment is not as same as gambling. I repeat: Forex is not for gamblers.

There're market trend that you need to know and watch closely before you make any decision: either to buy or sell any currency. Also, whatever happens around the world might give impact to the currency trading.

Oil price, gold price, war, natural disaster, change of government, election, etc, has an impact on the trading activities.

There are also some graph or trends that you need to analyze before making any decision. This could help to maximize your earning, and also to minimize your loss.

You need to build up your knowledge and trading skills before you start to trade real money.

YES! You can start trading with virtual money provided by most of the forex brokers.

This is call the "Practice Account", whereby you can learn how to BUY/SELL currency during live market open.

For more info, search the internet using any search engine: just type "forex" or "forex investment" or "forex account".

Who knows, this could be one of your goldmine?

Investing in Gold

Hah! This is a very interesting topic to talk about. GOLD!

Click here if you want to know more about gold.

Have you ever see a pure gold? I mean that 99.99% pure gold.

Most of us will never ever have the chance to hold it, or even to touch it (unless if you're working at the goldmine or gold processing factory or financial institute or at the gold bank).

Everyone knows that gold is one of the most sought-after precious stone on earth. Owning huge amount of gold shows that you're a very, very rich person. In the medieval time, it becomes the status symbol. The more you have it, the higher your ranking and the more powerful you are.

But, today, there is almost no more restriction for anyone to own pure gold (but, of course the only restriction is either you have the money or not to buy it). If you want to diversified your investment, therefore, you should add gold into the list.

WHY? Just see the gold price chart below and you will know the answer:

Surprise??? You should be!!! Because, in the past 10 years the gold price had climbed from about $275 per ounce to more than $900 per ounce. By the time you're working so hard to make money just enough for your family needs, the rich are getting richer and richer and richer just because they own golds... plenty of them.

But... don't worry. This is not the end of this world. You too can become rich. You too can start to have your own gold investment. Nowadays, there many ways for middle-class workers to start their gold investment.

1) Buy physical gold - coins, bar.
2) Buy gold certificates
3) Open a gold accounts at bank
4) Gold Exchange-Traded Funds (Gold ETX)
5) Gold Futures and Gold Options
6) Gold mining shares
7) Gold mutual funds

But, before you start to invest in gold, bear in mind that every investment does have its risk. The market might go up. And, it may also go down. Investing in gold is for a long-term investment. Therefore, please consult with the related institutions before you start buying gold.

Why Warren Buffett chose Coca-Cola

Personal Investing article by Ooi Kok Hwa*

GIVEN the weak stock market, we think now is the best time to search for the good and solid blue-chip stocks for long-term investment. However, most investors always have difficulties in choosing the right stocks.

Today, we will look into how world famous investment guru Warren Buffett identified his favourite stocks. At present, The Coca-Cola Co is one of Buffett’s key stocks that he will practically hold forever.

We believe a lot of investors would like to know why Buffett chose Coca-Cola as one of his key long-term holdings when one Wall Street analyst at that time labelled it as a “very expensive stock”.

Established in 1886, Coca-Cola is the world’s largest manufacturer, marketer and distributor of carbonated soft drink concentrates and syrups. At present, it operates in more than 200 countries and markets more than 2,800 beverage products. Besides, it also owns four of the world’s top five non-alcoholic sparkling beverage brands: Coca-Cola, Diet Coke, Sprite and Fanta.

Why did Buffett choose Coca-Cola? He likes caffeinated soft drinks. He acquired 7% of Coca-Cola stocks in 1988 for a total investment of US$1.02bil or at an average price of US$5.46 per share. As at Dec 31, 2007, Berkshire Hathaway owned 200 million Coca-Cola stocks, or 8.6% of the company’s outstanding shares.

Buffett’s original cost in this company was US$1.3bil. Based on the latest market value dated Dec 31, 2007, he achieved an annual compounded capital gain of 11.9% for 20 years. However, if we include all the dividends received, we believe his return from this stock may be more than 20% per annum!

Buffett considers Coca-Cola “inevitable” where it has low business risk and is suitable for long-term holding. To him, buying Coca-Cola has far less business risk over the long term than any computer company. Being the most recognised international trademark, Coca-Cola enjoys global power with very high competitive dominance and economies of scales.

Coca-Cola sells 1.5 billion servings everyday worldwide. As a result of its strong brands, the attributes of its products and the global distribution systems, it has a very high business consistency and performance throughout the years. Given the certainty of its long-term prospects, Buffett may choose to hold this stock forever.

He also finds that Coca-Cola has a simple and understandable business. Besides, Buffett likes to acquire companies with high profit margins and return on equity (ROE). When he acquired Coca-Cola in 1988, it reported a pre-tax profit margin and ROE of 19% and 31.8% respectively.

Apart from that, Coca-Cola also showed very high cash flow or “owner earnings”. Buffett defined owner earnings as reported earnings plus depreciation and certain other non-cash charges, minus the average annual capital expenditures required for a company to maintain its unit volume and competitive position. In 1988, the company showed an increase in owner earnings to US$828mil against US$262mil in 1981.

Buffett always advises investors to study the raw data in the financial statement and trust our own eyes rather than analysts’ summaries. When Buffett acquired Coca-Cola, he paid quite a high premium compared with the overall market average. He paid about 15 times and five times for Coca-Cola based on price-earnings ratio and price-to-book ratio respectively.

Given the strong performance and certainty in management quality, Buffett felt highly confident that he would be rewarded by the management’s ability to generate more owner earnings and to realise the full potential of the business.

A good company should pay dividends to its shareholders. If the company decides to retain its earnings for future expansion, every dollar it retains must translate into one-dollar market value. Buffett labels this as a one-dollar premise.

Since 1987, apart from paying good dividends, the overall market value of Coca-Cola has surged much higher that its retained earnings.

In summary, even though it is not easy to identify the next Coca-Cola, with hard work, the current downturn provides us a golden opportunity to hunt for good fundamental stocks for long-term holdings.

*Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.