Yap Ming Hui is the managing director of Whitman Independent Advisors Sdn Bhd, a licensed financial planning firm. Recently, he launched his seventh book, “Financial Freedom Investing”.
Through his writings, Yap shares how people can grow their assets and be more secure in the future. Here are five highlights.
1. Greed and incompetence
In his book, Yap shares many stories of how the well-to-do have either incurred losses or failed to optimise their wealth through their investments in products such as stocks, real estates, unit trusts, gold, and even unregulated schemes.
These losses, he posits, stem from the following:
- greed: a desire to obtain quick and unrealistic returns;
- fear: concerns of financial losses owing to a wrong investment decision;
- lack of holding power: investing without consideration of financial liquidity; and
- incompetence: the inability to tell a good investment from a bad investment.
Through his stories, readers can take heed and avoid pitfalls detrimental to their financial health. Doing so is already half the battle won.
2. Invest objectively, not conveniently
Instead of sales pitches and hype, Yap strongly emphasises making holistic investment decisions after taking into account one’s current and desired financial positions, life goals, values, and so on.
Understanding ourselves, he argues, allows us to be more objective while investing, and limits one’s tendency to make ad-hoc and emotional investment decisions that could lead to unnecessary losses.
True, drawing up a holistic financial plan and knowing what one wants to accomplish in life might not be exciting, especially for those who want a piece of the action quickly. But this process is vital if you intend to build a sizeable portfolio.
As such, everyone should adopt this attitude of objectivity in investing.
3. The SRB framework
In the early pages of his book, Yap details three strict criteria for choosing an investment, which he calls the “SRB standard”. This is an acronym for “Safe”, “Rises”, and “Best of Breed”.
“Safe”, he says, is about the test of regulation, underlying assets, and a trust-trustee structure of an investment. “Rises” refers to the overall increase in value in the long term; while “Best of Breed” is about choosing the strongest performers within the same asset class.
If readers follow these criteria, they could shield themselves from losses arising from unregulated schemes and scams.
Note, however, that while the framework includes a focus on the underlying assets of one’s investments, not much is mentioned about valuation. This could be owing to Yap’s focus on professional management through unit trusts. Which leads to:
4. Unit trusts
Yap places positive and strong emphasis on unit trusts as a vehicle to build a diversified portfolio. According to him, it is a good way to help one to diversify money across various asset classes – equities, bonds, REITs, commodities, and so on.
In addition, a portfolio of globally diversified unit-trust funds is one of the primary vehicles that meet the SRB framework, as introduced in his book.
In truth, not every investor will build their wealth using the unit-trust route. But for lay people who find it too troublesome and challenging to evaluate stocks and properties, it just might be the best investment option.
5. Investment case studies
In the last section of Yap’s book, he features investment case studies and offers invaluable opinions on them. These include various schemes on land banking; gold and oil palm commodities; conventional vehicles such as EPF i-Invest; and newer asset classes such as cryptos and robo-advisers.
While such stories are educational, it would have been more interesting had Yap included stories of successes and failures by Malaysians who invested in these vehicles. By offering contrasting experiences, readers could learn not just what to do, but what NOT to do – and, therefore, have a clearer understanding of the formula for successful investing.
It would also have been beneficial if Yap had demonstrated how his SRB framework could have applied when it came to these case studies.
Overall, though, “Financial Freedom Investing” is a highly educational book that is suitable for local investors. It can help you recognise potential investment mistakes, which will not only help you preserve your capital but boost your gains, helping you sustain or improve your financial standing.
‘Financial Freedom Investing’ is available here or via MPHOnline.
This article first appeared in kclau.com. KC Lau’s first book ‘Top Money Tips for Malaysians’ has sold thousands of copies. He launched the ‘Money Automation System’, the first online personal finance course specifically designed for Malaysians. He also co-founded many other online financial courses including the Bursa Method, Property Method, Founder Method and REIT Method.