Seri Perencanaan Keuangan Keluarga: Mengantisipasi Risiko by Safir Senduk

Seri Perencanaan Keuangan Keluarga: Mengantisipasi Risiko by Safir Senduk

My rating: 4 of 5 stars


Safir Senduk probably may not be Indonesia's first financial planner, but he certainly is the first financial planner who popularize the subject of financial planning and make it accessible as a general household topic.

His Seri Perencanaan Keuangan Keluarga (Family Financial Planning Series) covers wide-ranging personal finance topics from investment to child education fund and retirement. My review this time is on his topic of insurance, which he dubbed Mengantisipasi Risiko (Anticipating Risk).

In this book, Senduk introduces readers to the basic purpose of insurance, that is to cover risks which could render an individual's finance in disarray. He counters the popular myths of insurance in Indonesia -- such as its association with gambling -- and points out the most common mistakes people make in purchasing insurance products, like taking too much coverage or too little.

I like Senduk's Financial Planning Series because of its topic-specific material, conciseness, and sufficient case studies. While calculation examples made in his book can be too aggressive or too conservative, readers are expected to understand the concepts and apply them to their own respective financial cases.

This book is published in Bahasa Indonesia. My particular edition has the author's signature in it even though I bought it from Gramedia's book shelf.

View all my reviews >>

Pages

Early this year, Blogger has launched Pages functionality into its blogging customization. With a revamped indrayudha blogspot, I've also added Pages into my sidebar navigation.

I intent to use Pages as complementary space to further classify my postings into specific topics. Since my blog spans into multiple categories which can take me to write a topic into multiple postings across periods in no particular order, it should help to put them into a specific Page. The Page in question then acts as an anchor, a static index pointing out to the topic's postings which already been scattered in the blog.

Categories and Labels do help in classifying blog postings, but there will be instances where the topic is specific enough to warrant its own Page. As my first Page, I have posted My Investment Portfolio Allocation where I put my postings on the securities I use to build my retirement portfolio under my own framework of 5 themes of asset allocation, which I had thought of a year ago.

A Year Later, Twitter

One year and 2,605 tweets later..

I didn't realize it has been one year since I jumped at the microblogging bandwagon. A tweet was directed to me earlier this afternoon by @jak_twop_1000,  which I thought at first to be a machine, but turned out to be conversational. My foray at the Twitter world turned out to be fun (aside from the occasional "floods"), and very useful. I have been using Twitter mostly as news aggregator just like Google Reader or similar RSS aggregators, that's why I didn't tweet that much (you think 2,605 is a lot? well, wait until you see my 10,000+ tweets of my friends, yeah those in just a year).

The way the aggregator thing works is that I follow several Twitter accounts belonging to news station and field experts. Therefore, all I need to do in mid-afternoon at work or night at home is just look at their tweets to get the latest updates and links. I can then follow the link to a more comprehensive writing. For this purpose, I use a software application instead of directly read them from Twitter. This is because Twitter has limited showings and it takes a bit long to show more tweets. Plus, the app I used allows me to flag the tweets I like but rather read it some other time. The software I used is Socialite by Realmac, which was EventBox before they got bought by Realmac. Honestly, I kinda like EventBox better because it had less bugs and caused less stress.

Second, I also use Twitter as bookmark, like del.icio.us. The way it works is that I put a favorite star on those tweets I like to bookmark or tweets those articles I found on the web myself. This is why my tweets are dominated by finance and investment related news and websites.

What's for the next one year? Well, more or less the same I think, unless I got the sudden urge to post more of my original writings. Until next year...

The Big Freeze

I came across a video on Financial Times website. The video is a report by investment editor, John Authers, on the financial crisis that has hurt the world's economies, developed and developing alike. A financial crisis that was rooted from the US subprime mortgage sector.

As Mr. Authers said, it may started from US subprime mortgage, but the implication is far and wide. Financial companies are collapsing, bringing with them others in different industries. As purchasing power hit by streams of layoffs, profits across the board are tumbling down. In an interconnected economy, the effects are felt globally and rapidly.

As Americans spend more than they earned, fueled by ever-increasing debt, the momentum has carried them deep in debt. So deep, that it would take years to unlever it. Historically, housing price has always been increasing, but in drying demand caused by mortgage defaults, price no longer holds. Since the price is declining, would that increase further defaults as people holding mortgage higher than the actual price of their homes?

James Melcher of Balestra Capital, called the subprime mortgage meltdown a year ahead, profiting tremendously from crisis. Mr. Melcher believes that the worst may have yet to come. People are desperate to believe the market has bottomed, that it can only go up from now on. Opportunities to profit?

5 Themes of Asset Allocation

In continuation with my retirement portfolio building, I've been thinking of dividing the portfolio into five themes of asset allocation. I could have gotten away with only two of them (core equity and core debt), but where's the fun? The five themes are as follow:

1. Core Equity Holding - Geographic
• This theme will act as the core holding for equity in my portfolio. As mentioned in my previous post the other day, the maximum allocation for equity is 62%. As I get older, that allocation will decrease to reflect declining tolerance toward risky assets.
• It's based on geographical diversity to achieve the widest market coverage in fewer instruments.
• Due to its sizable holding, this theme will pretty much steer the direction and movement of the whole portfolio. Its allocation will be the first to be reduced for any addition beyond core equity and core debt.
  
2. Yield Producers and Cash Equivalent (a.k.a. Core Fixed Income/Debt Holding)
   
• This is the core holding for cash and debt instruments in my portfolio. In conjunction with the core equity holding, the allocation for these instruments should be 28% (remember, rule 90). Consequently, that allocation will increase as I get older to reflect increasing preference toward safer assets.
• This theme will act as the ballast for the whole portfolio. As such, it should give stability to the volatile movements found in other themes.
• As the "safest" holding, I'd rather leave its allocation alone after what had happened to my portfolio in 2008. I would consider its reduction only after taken into account the reduction I've made in the core equity allocation first.
  
3. Satellite Equity Holding - Sectoral
• The satellite equity holding is intended to enhance the expected return of the core equity holding. Its risk profile is higher due to its more concentrated holding and higher return expectancy.
• It is based on sectoral diversity to give the theme more flexibility for fine-tuning and re-balancing, while still maintaining its "spicy" sector bets.
  
• Obviously, allocation enlargement in this theme will reduce the 62% I've allocated in the core equity theme.
  
4. Alternative Assets
• Alternative asset will act as the main diversifier for the portfolio as a whole. This is because alternative asset is expected to have low correlation with the other themes in this portfolio.
• As the wild card, alternative assets are expected to work in conjunction with the other themes both as a return enhancer and a volatility stabilizer. By itself, alternative assets can be highly unpredictable.
• By far, this is the most difficult theme to assemble due to the limited instruments available for retail investors and my limited experience in this type of investment. It should be most interesting area to explore, albeit gradually.
  
5. Green Investments
• Green investments, in this case, are meant for socially responsible investment (SRI) instruments not falling into one of the other themes. As a rule, instruments chosen to represent the other themes, especially core equity and core debt, should be of SRI alternatives including shariah-compliant instruments. Once they're exhausted, further SRI consideration should be placed here.
  
• Depending on the weight of its instruments, this theme can be very volatile, even more than the satellite equity holding due to its extremely concentrated sectors.
  
• Allocation for the green investment include the 10% in philanthropy account. Thus, a 100% allocation for all the five themes can be made.
  

There you go, five themes for the retirement porfolio. Although it may be spread over different accounts, the retirement porfolio should adhere to these five themes, which can be a laborious effort. I didn't know of any easier way at this point, but I guess I have to make do with Excel for the time being.

The 90 Rule

Let's start the new year by talking money. I have been thinking of an appropriate portfolio allocation model following the wrath of the crisis that have wiped half of my portfolio value. As I have tinkered in different accounts mixing different asset classes, I have found something that further confirmed the mainstream adage of "don't put your eggs in one basket". It turns out that my 529 account which hold the most bond allocation (some 30%) have declined the least, while other equity-dominant accounts have fared worse, some actually fell by 60%.

Fortunately, I still have the bulk of my accounts, set aside for further schooling purposes, in safe cash-equivalent instruments. Therefore, no adverse impact caused by market gyration. However, the Rupiah depreciation of some 20-30% last month have caused heavy burden on my side to continue saving for school. Thus I've decided to postpone further schooling for at least another year, bearing economic stability.

By taking lesson from the crash, I've come to believe more in the virtue of diversification, extending to debt-instruments. According to the popular advice of the Vanguard founder, John Bogle, one should have bond allocation proportionally to one's age. This simple allocation model advocate for picking a number (as a proxy to one's life expectancy) and substract it with one's current age (as a proxy for bond allocation). The result will be the appropriate allocation for equities in one's porfolio. While aggresive investor will use 110 or higher as the basis, the rule of thumb is to use 100. For example, a 40 years old should have 60% of his portfolio in equity and 40% in bond (100 - 40 = 60).

With slight modification, I've decided to use 90 as my basis. The idea is to put 10% of my portfolio in a managed account to generate continuing benefit for philanthropical purposes. The 10% allocation is arbitrary and exclude charitable expenses. Examples of financial instrument for this account might be a special-purpose mutual fund (like what I had wrote sometime ago), or a self-managed microfinance account. With that in mind, my portfolio allocation should be 62% equity and 28% bond. It seems that I've had larger equity proportion than I should, to my detriment. I'll try to reach this allocation for my retirement portfolio by mid-year. Wish me luck!

Mare Forum Maritime Indonesia 2008

Tonight, I got mentally exhausted, yet relieved. I just had my speaking engagement earlier this afternoon. Pfew!

Okay, about two weeks ago, I got a phone call from the organizer, one Mr. Jannis Kostoulas, the managing director of the Mare Forum. The Mare Forum are organizers of Mare Forum conferences, specializing in conference management, project development and policy marketing. They bring together policy makers and chief executives of an industry to have dialogue and debate so everybody can be on the same page in strategizing business and deciding on policies. Today's Mare Forum conference held in the Four Seasons Jakarta was discussing about the maritime industry, and was titled Maritime Indonesia 2008.

The conference was attended by some 140 guests (as told by the organizer), mostly from the shipping industry, both Indonesian and foreigners. There were three large groups as I had observed: shipowners, shipbrokers, and financiers. Other small groups were lawyers, analysts, journalists, and none from the government. Quite a dissapointment since a lot of the discussion needed the government's perspective as the policymaker. But their absence is understandable, since the policymakers would almost certainly be put in a hot seat. Nonetheless, the conference moved on ahead with minor delays on the schedule.

I was scheduled to present my case shortly after lunch. The topic of my presentation was regarding cabotage. Cabotage is a hot topic in the Indonesian shipping industry. It presents an opportunity for tilting the balance of the bargaining power toward the shippers and away from the charterers. I think the future landscape of the domestic maritime trade will be at the favor of the shippers due to implementation of the cabotage law. Of course, holding the premise that it will be implemented, and on time. My presentation have been archived by the Mare Forum here.

Why did I choose to present a topic on cabotage, much less on maritime trade? Well, I think the organizer felt strongly about the cabotage issue, and I happened to write an article about it on the Jakarta Post. They even admit to have invited me because of that article.

Overall, it was a good experience for me, a change of pace from my daily work in the cubicle pondering the state of my valuation (sigh). I met a lot of people here, and a fellow Indiana alumn (yeah, a small world after all).

A New Paradigm on the Management of Zakah

It's the day of the year again, October 15, the Blog Action Day. The topic for this year's event is Poverty. So, I'm writing briefly on Islam's religious duty to combat poverty and how a new paradigm of managing religious alms may do it more effectively.

In Islam, we have the five pillars of the religion. The five pillars of Islam constitute the obligatory foundation of which Muslims must satisfy during their life in order to prove their devotion to their faith. One of the pillars is Zakah. Zakah is the fourth pillar and can be considered as a form of religious alms, mandatory for able Muslims. It is probably the only pillar that put the focus on a believer's relationship with his/her society since the funds pooled from Zakah are then distributed as a part of the state's social welfare program.

From Islam's perspective, the poor and the needy (along with the other six eligible recipients) have the rights to a small part of the income and wealth of able Muslims. It is through Zakah, that the transfer of rights are conducted. Under mainstream interpretation, Zakah funds are distributed for consumption use by the eligible recipients. I've been looking for a ruling on alternative use of the funds but haven't found it yet. Most of the rulings deal with the method of Zakah collection, types of wealth and income subject to Zakah, and the people who are either the donors or the recipients of Zakah. Very little are discussed regarding the method of its management.

With the advent of microfinance (especially on microcredit), it brings up a new possibilty for managing Zakah funds. Instead for consumptive use, Zakah can be managed and distributed for productive use. It is more sustainable that way, I think, and more people can get out from poverty at a faster rate. After each repayment, the Zakah can then be distributed again as a new loan ad infinitum, barring default. Profit sharing schemes (instead of interest-based return) can be devised up since the purpose of the loan is to fund productive business. The profit then can be used for operational expense incurred by the management. Examples for this type of microlending endeavor include Kiva and Microplace (although one may object due to their interest charging practice, it's a working model that is certainly can be replicated with some modification, like instituting profit sharing schemes as an alternative to interest-based return).

Perhaps a new paradigm on the management of Zakah is needed for the Muslims to join the world in responding to the call to arms against poverty. God willing.

Astrocenter Report - Part 13

[Shifting to career and wealth, I suppose.]

Material Assets and Resources:

YOGA seeks work which will engage his passions, and which makes use of his talent for exploring the hidden side of individuals or social relationships.

Friends could be an important factor in YOGA's financial success.

YOGA invests a great deal of energy in his work in order to provide for his needs. He tends to watch his financial assets and resources closely, because he tends to be something of a spendthrift, and has been known to run short before the next paycheck arrives. When he is in straitened circumstances, it is usually because he squandered his money, or invested in unwisely, under the influence of more or less irrational and reckless impulses. He will have to adopt a more cautious and reasonable attitude towards money if he does not want to be broke on a regular basis.

[For some reason, I feel this time it's a bit generic. Seeking work which will engage one's passion is ideal for a lot of people. I always think of a job where I would wake up in the morning feeling energized just thinking of the work I'd be doing that day. Not there yet, close though. As for the talent of exploring the hidden side of relationships... nah, not me.

Friends is important to one's financial success. Well, no man is an island. Whether it correlates with a tarot reader who foresaw my entrepreneurial path is yet to be confirmed. If I'm about to meddle with a start-up business, it'll take a partner or two.

Tends to watch financial assets closely... hmm.., I suppose the report does not consider me working in a financial service industry. There were circumstances where I ran short before my next paycheck, but I've learned better.]

~ to be continued ~

Market Riding

I didn't remember exactly how I stumbled into MarketRiders website. My guess is that I saved the link when I browsed through Seeking Alpha's RSS newsfeed. I'll tell you more about Seeking Alpha some other time, let's get back to MarketRiders.

The premise behind MarketRiders wasn't new. It was based on the idea of allocating your investment assets (asset allocation) by using ETF (Exchange Traded Fund) instruments completely (or almost completely). What make MarketRiders different is because not only it provides asset allocation recommendation to its users, but also the ETF instruments suitable for them based on the asset recommended. Sophisticated investors may customised their portfolio further, for a modest price (some 8 bucks a month).

With the myriad types of ETF currently traded, it is highly possible to construct a 100% ETF-based portfolio (see here for an article). And since most ETFs are constructed based on a form of market index, an ETF-based porfolio is expected to mimic the market return (index investing), hence the name, MarketRiders. Mitch Tuchman, the founder of MarketRiders, has developed the idea further by enabling the general public to custom design their ETF portfolio in an inexpensive way, coupled with a user-friendly interface.

I tried its free service and chose the 'Advisor' method to create my first porfolio. The site threw several questions such as age, investing time span, investing experience, and risk tolerance. Based on my answers (twenty-something years old, 10+ years until I need the money, extensive experience, and moderate risk tolerance), MarketRiders came up with a suggested portfolio like this:

• 40% US Equities, represented by Vanguard Total Stock Market ETF (ticker: VTI).
• 25% World (non-US) Equities, represented by Vanguard FTSE All-World ex-US ETF (ticker: VEU).
• 12.5% Bonds, represented by 5% SPDR Lehman 1-3 Month T-Bill ETF (ticker: BIL) and 7.5% Vanguard Total Bond Market ETF (ticker: BND).
• 10% Real Estate, represented by DJ Wilshire REIT ETF (ticker: RWR).
• 7.5% Inflation-linked US Bonds, represented by iShares Lehman TIPS Bond ETF (ticker: TIP).
• 5% Commodities, represented by 2.5% PowerShares DB Precious Metals ETF (ticker: DBP) and 2.5% iShares S&P Global Energy ETF (ticker: IXC).

I intend to use the suggested portfolio as a benchmark against my own portfolios, real and virtual alike. The benchmark portfolio began its tracking on 23 September 2008. Started with US$ 9,984.29 of initial investment, the benchmark has lost US$ 320.56 year-to-date in 26 September 2008 (or 3.2% loss in just 3 days). For the same period, S&P 500 had gained 2.1%, although this is arguably a short-term observation and should not be considered for the 10+ years investment time span. We'll review it again in the next quarter at the earliest.

Vanguard Emerging Markets Stock ETF (VWO)

Vanguard Emerging Markets Stock ETF (VWO) is an ETF that seeks to track the performance of the MSCI Emerging Markets index. VWO holds 823 securities (as of June 30, 2008) and is fully invested in common stocks of companies located in emerging markets around the world. The ETF is passively managed with average annual turnover of only 9% (as of June 30, 2008). Its total net assets is USD 7.1 billion and the average market cap of its holdings is USD 17.9 billion. Since its inception date (March 4, 2005), the Fund has returned 19.84% (as of July 31, 2008). It tracks the MSCI Emerging Markets index very closely with an R-Squared of 0.98 and a Beta of 0.98.

MSCI Emerging Markets index is an index created by Morgan Stanley Capital International (MSCI) that is intended to measure the equity market performance of the global emerging market nations. It is a float-adjusted market cap weighted index and consisted of shares from 25 emerging economies in Europe, Asia, Africa, and Latin America. As of June 30, 2008, VWO's five largest country holdings are Brazil (17.6%), South Korea (12.7%), China (11.1%), Russia (11.1%), and Taiwan (10.6%). Its ten largest company holdings make 18.5% of total net assets.

The emerging markets are known to be volatile compared to their developed counterparts. Compared to MSCI Europe, Australasia, and Far East (EAFE) index - a popular proxy for the developed markets - MSCI Emerging Markets index has a higher standard deviation (3-years trailing of 21.13 vs MSCI EAFE's 12.38) with Beta of 1.52 (to MSCI EAFE index). However, MSCI Emerging Markets index has shown to give higher return to compensate for its higher risk, as evidenced by its 3-years trailing Sharpe ratio of 0.84 (compared to MSCI EAFE's 0.53). Since the performance of emerging markets is generally less correlated with developed markets, the instrument can play a diversifying role in a portfolio of developed markets to reduce its risk. As a proxy for lower correlation, both indexes showed an R-Squared of 79.

Morningstar category for VWO is Large Blend (as of March 31, 2008). I placed it under my core holdings, with target position of up to 15% of my portfolio (since emerging markets represents some 15% of the global economy). Although a bit volatile as an anchor, VWO is diversified with its large-cap tilt, long-tenured and proven management, wide countries and sectors coverage, low turnover, and low expense.

With expense ratio of 0.25%, VWO is the better alternative to emerging markets exposure compared to its older and bigger rival, iShares MSCI Emerging Markets Index ETF (EEM), since the latter's expense ratio is 0.75%.

The management of the Fund is led by Duane F. Kelly. Mr. Kelly has been with Vanguard since 1989 and has managed the Emerging Markets Stock Index Mutual Fund, among others, since 1994. Mr. Kelly has advised the ETF since 2005.

VWO recently performed a 2-for-1 stock-split on June 17, 2008

Be Careful on How You List Contacts in Your Cell Phone

[I got a forwarded email warning me regarding stolen cell phone. I think the scenario presented is very plausible, though I'm not sure if it actually occurred. I guess it's a bit of common sense when you read it, but like I did, you'd probably unaware of the potential fraud that can occur from simple stuff like naming your contact lists.]

Be careful when you list names on your cell phone! Be Safe!

This lady has changed her habit on how she lists her contacts on her mobile phone after her handbag was stolen. Her handbag, which contained her mobile phone, credit card, purse, etc., was stolen and 20 minutes later she managed to call her hubby from a pay phone to tell him what had happened. Her hubby says, "I've just received your SMS text asking about our PIN number. I replied a little while ago." They rushed down to the bank and the bank staff told them all the money was already withdrawn. The pickpocket had actually used the stolen cell phone to text 'hubby' in the contact list and got hold of the PIN number. Within 20 minutes, he had withdrawn all the money from the bank account.

The lesson:

• Do not disclose the relationship between you and the people in your contact list.
• Avoid using names like Home, Honey, Hubby, Sweetheart, Dad, Mum, etc.
• And very importantly, when sensitive info is being asked through texts, CONFIRM by calling back.
• Also, when you're being texted by friends or family to meet them somewhere, be sure to call back to confirm that the message came from them. If you don't reach them, be very careful about going places to meet 'family and friends' who text you.
  

[I think the story was a bit off since there is a limit on how much money can be withdrawn from ATM on any given day. So, unless the couple had little in their account or they had special higher withdrawal limit, it'd not be possible to fully withdraw the account in just 20 minutes. Further, a very much likely scenario to occur would be for your phone to be temporarily 'stolen', most likely by someone you knew. And then, that person can do 'harmless' stuff (like peeping through your text messages) to something criminal (like searching for important data such as PIN numbers) before 'returning' the phone back to you. I guess that phone lock is not just for securing keypad.]

iShares KLD 400 Social Index ETF (DSI)

[In light of my postings on my Facebook's FSX application, I'll also do the same here for my other portfolios (with real money as opposed to FSX's virtual money). Though I won't put the amount here, I'll still put the position I have or currently targeting. I do have several portfolios, though I am still undecided how to categorize them. For the moment, my postings will comment on the all ETF, multi-purpose, and taxable portfolio.]

iShares KLD 400 Social Index Fund (DSI) is an ETF that seeks to match the performance (price and yield) of the Domini 400 Social Index, which is the DSI's underlying index. The ETF holds 401 securities (as of July 27, 2008) and puts its 99.8% holdings fully invested in stocks. Average annual turnover is 4% and total net assets is USD 58.3 million. Its inception date was November 14, 2006 and has returned -5.61% (as of June 30, 2008) since then. For comparison, S&P 500 has performed by -5.15% during the same period (the market has been in a difficult period).

So, what makes the Domini 400 Social Index? The Index is a float-adjusted, market-capitalization weighted (much like S&P 500), common-stock index of US equities. The Index excludes companies with main businesses in tobacco, alcohol, firearm, gambling, military weaponry, and nuclear power plant. Also excluded are companies that have controversial issues on human rights, labor standards, diversity, accounting, and product quality. The Index puts positive screen on companies that have strong relationships with its stakeholders: communities, customers, ecosystems, employees, shareholders, and suppliers. As a result, the Index tends to overweight Information Technology sector (22% weighting as of June 30, 2008) and underweight Energy (6%) and Utilities (2%).

When selecting companies for the Index, KLD Research & Analytics, the Index maker, maintain the composition of the holdings to 250 companies under the S&P 500 Index, 100 additional large and mid cap companies for sector diversification, and 50 smaller companies with exemplary social, environmental, and governance records. Its five largest holdings (as of July 27, 2008) are Microsoft, Procter & Gamble, Johnson & Johnson, AT&T, and Apple.

With expense ratio of 0.5%, DSI is a viable alternative to mutual funds. And with Beta of 1 (to S&P 500), it is also a viable alternative to S&P 500 Index-tracking securities. Morningstar category for DSI is Large Blend (as of July 27, 2008). As such, I placed it under my core holdings, with target position of up to 20% of my portfolio (subject to change, but for the moment, that is the maximum position I put for large cap US equity portion). As an anchor, DSI fits the bill due to its diversified, large-cap tilt, US-based, market-cap weighted, low expense, low turnover, and especially being the only socially responsible instrument at the moment with all those characteristics.

Manga Mark Mobius - An Illustrated Biography of the Father of Emerging Markets Funds by Kaoru Kurotani

Manga Mark Mobius - An Illustrated Biography of the Father of Emerging Markets Funds by Kaoru Kurotani

My review

rating: 3 of 5 stars
[My review is based on the Bahasa (Indonesian) translation of this book]

Certainly not the first economic/finance book using comic style that I've read. But, the manga style proved the be the first for me and so far the best at conveying the topic in a comic book format. It is a short biography of Mark Mobius, and a crash course to investing in emerging market countries. There are plenty of historical examples where Mobius had encountered various situations that called for important investment decisions and his rationale behind them. Also illustrated in the manga, side stories that adds to the overall nuance of the biography.

The book has piqued my interest to read more on Mobius some time in the future, and also on Templeton, the firm where he worked as a fund manager specializing in emerging market.

View all my reviews.

Go Green, Live Rich: 50 Simple Ways to Save the Earth and Get Rich Trying by David Bach

Go Green, Live Rich: 50 Simple Ways to Save the Earth and Get Rich Trying by David Bach

My review

rating: 3 of 5 stars
David Bach is the writer of the popular Finish Rich series. I haven't read his other books, so I can't comment on the series yet.

In Go Green, Bach starts with a chapter on knowing your impact on the environment, opening up the setting for the whole book. For the next nine chapters, Bach outlines some fifty tips on changing your behaviors so not only you would save the planet, but also save up some cash in the process (much like what William McDonough advocates that being green equals being efficient equals saving money). Those cash, if invested at certain percentage of return, will bring pretty sum thanks to compounding effect. The fifty tips cover a whole gamut from transportation, housing, water use, food, recycling, work environment, to traveling among others. Almost all are relatively easy and not as time consuming as one would expect. It just a matter of getting it started, habit will continue the rest.

Of course it won't be an investing book, if there's no tips regarding personal investment. Well, in chapter 10, Finish Rich: Make Your First Green Million, Bach gives some ideas on investing green and starting your green business.

Lastly, a good quote from the book regardless whether you ends up living and investing green or not, "It is not what you earn that makes you rich or poor; it is what you spend."

View all my reviews.

Learn to Earn: A Beginner's Guide to the Basics of Investing and Business by Peter Lynch

Learn to Earn: A Beginner's Guide to the Basics of Investing and Business by Peter Lynch

My review

rating: 5 of 5 stars
This book holds sentimental value to me, for it introduced me to the world of investment. A world which, later, not only becomes a personal interest but also a professional one. I started my first investment in stocks and mutual funds shortly after I finished the book. Fast forward, I started my career five years later in an Indonesian state-owned investment bank in the equity research department.

In this book, Peter Lynch starts with a brief history of what would become Corporate America and later, describes how it can change and have changed the fortune of ordinary Americans who participate by owning the shares of those companies. It pays to start early, and only invest in what you know, as often as possible, compounding works.

View all my reviews.

Kehati Lestari Mutual Fund

In support to the Blog Action Day 2007, I'm writing about a new mutual fund which was just launched last July. That mutual fund is Reksa Dana Kehati Lestari. So, what is so special with this mutual fund? Well, the issue of this year's Blog Action Day is about the environment. Reksa Dana Kehati Lestari is the first socially responsible mutual fund in Indonesia focusing on the issue of environment sustainability. It is co-managed by a local investment company, Bahana TCW Investment Management, and an environmental foundation, Yayasan Keanekaragaman Hayati (Kehati Foundation).

The Kehati Foundation is a fund raising non-profit entity and its main mission is to facilitate local organizations and build their capacity to benefit from the natural resources and at the same time conserve the natural biodiversities. The Kehati Lestari mutual fund enables individual and institutional investors to participate in the philanthropic activities to benefit the foundation. Investors would be able to invest and donate at the same time, by allocating either their full investment, full return only, partial return only, or just the management fee, as streams of donations for the foundation as long as the investment is kept in the fund. This investment structure is called quasi-endowment fund, where investors still hold ownership to the investment principal, though they can also opt to donate the full principal as well in the full endowment scheme.

While quasi-endowment structure may not be uncommon in the western world, a mutual fund is probably the better vehicle, if not the only vehicle, for large number of Indonesian investors to invest and donate consecutively as the trust (the common vehicle in the west) law is virtually non-existent at the moment. Although one may argue that the law of waqf (religious endowment) may undergoing better progress and can substitute for the trust as the investment vehicle for this type of philanthropic needs.

I think this innovative product is suitable for a wide range of investors who want to support the environmental cause in a long-term and sustainable way. Investors may increase their participation level and switch their investment allocation to more generous options as their overall net worth grew and their wish to leave a legacy present itself. Moreover, institutional investors may claim their good act of corporate social responsibility (CSR) by investing in this mutual fund.

My Top 5 Financial Goals

Okay, I told you about the financial goals which I have to identify before making sense of my investment strategy, right? Well, the following are my top 5 major financial goals as of this writing, and the approximate time when I should reach those:

1. Graduate study -- before turning 30 (about 3 years from now). By far, this is the most immediate, and the most time-consuming in term of preparation (admission form, test, interviews, essays, etc. not mentioning choosing the school itself). There are at least two alternatives to a regular Master degree of which I expect to take, 1). Get a professional certificate instead (such as CFA), or 2). Go all the way for a Doctorate degree (PhD or DBA). For financial planning purposes, let's assume the regular option.
   
2. Retirement -- around the age of 50, give or take 5 years. Honestly, I don't think I would ever retire in the usual sense. My boss said that she'd like to have the option to work, meaning that she'd like to work out of choice instead of necessity. Ideally, I'd like to retire as soon as possible in a sense that I only work because I want to in a job that I like without sacrificing my standard of living. Yeah, who doesn't?
   
3. Getting my own place -- assuming graduate study takes 2 years, then 5 years from now, after I graduate. This one is tricky, since I don't know where I'd end up. Depending on the situation 5 years from now, I could be in Jakarta or other continent altogether. Or, my job could require me to be nomadic, without permanent location. Should that happen, then instead of having my own place, I could rent it for awhile.
   
4. Getting my first car -- the most affordable, yet facing the same problem as Goal # 3. Unlike a roof for you to stay, a car would most likely depreciate and a nomadic condition would just burn a hole in my pocket faster than keeping one car for several years. I like my car compact and small, and among today's options, the most expensive in the list would be a BMW Mini Cooper.
   
5. Pilgrimage (Hajj) -- before turning 40. Arguably cheaper than a car, but this one needs spiritual readiness which is not readily affordable.

That's all the top 5 I could think about. As for the amount of money I need to fulfill those goals, that'd be another discussion with my financial planner.

Investo-Financia

Earlier this month, I made an appointment with a financial planner from Quantum Magna Financial, a financial planning firm I got to know when its founder, Ligwina Hananto, came to Danareksa to promote Danareksa's own employee investment program.

So, on that Friday evening I went to its office and consulted with the planner regarding the three "kinks" in my financial life. My first question was about the lack of investment purposes underlying my investing activities. Aside from a little portfolio dedicated for retirement, I have been practically investing blindly. I have practiced what I had known of good investing habit, but virtually for no clear purposes. Miss Tedja, my planner, suggested me to define several clear purposes and worked from there. This is one of the reason I made the "investo-financia" category blog to help me work through the process and monitor it periodically.

My second question was about personal financial leverage, specifically whether I'm ready for mortgage. It's a bit lengthy and I will describe it some other times. Suffice to say, that I'm not up for it yet at my current financial situation.

My third question was regarding personal insurance since I am covered by two insurances at the same time, one from the company I worked for and the other was a life insurance I subscribed before I got the company's coverage. I will tell you more about it in the near future. For now, I'm seriously considering whether I should continue with the subscription since the current term will expire next month.

Well, I guess that's enough for the introduction. It's late, and I'd like to get some sleep before going to the independence day ceremony tomorrow morning. Sigh.