Investing Won

As you may have guessed from the increasing scarcity of posts, I have decided to stop updating InvestingWon. I will leave the site up as is until at least the end of the summer. I believe there is still a need for Korean investing and personal finance information in English, so I hope that someone else will take up the mantle by starting their own blog or forum. If you are interested in taking over this site, please contact me. 

The reason for my decision in short is that my heart wasn’t in the site enough to put in the time that it deserved. You also become known for the things you do. I realized that I didn’t want to be the “investing guy”.

I have begun blogging about things I’m passionate about over at sungwonchoe.com. The first post, Aligning Yourself with the Creative Impulse, explains in more detail my decision. 

Thanks most of all to our contributors for their excellent articles and to the score or so of our regular readers!

Those looking for additional resources on investing in Korea might be interested in the Seoul Investor’s Business Daily meetup group. I haven’t myself attended a meetup, but it looks promising. 

May you become rich and follow your bliss!

Rock \m/

Hey everyone,

I’m sure you’ve heard from one source or another about how the world economy is collapsing and the whole “doom and gloom” scenario that follows.  I don’t know how the media in Korea is currently presenting it, but in America the media is very much presenting that gloomy scenario over…and over…and over again.  Then you go outside and you see that people are still creating and running businesses, deals are still being made, and loans are still being given out.  I’ve even seen “now hiring” signs.  By the way, I’m currently vacationing in Florida USA, one of the States “reputed” for being hit the hardest by this recession.
So what’s going on? I thought that the economy was hurting, and yet not only do I see that money is still circulating but most importantly, I see opportunity everywhere.  I see entrepreneurs building businesses, traders making money, and people working jobs.

A good friend of mine who is a business owner named Joe Pici (piciandpici.com) has a business whose income has DOUBLED in the last year.

Another friend of mine who’s a Community College professor claims that the College doesn’t have enough classes for all the students coming!

So what is my point?  My point is that, first off all money is still being made in this economy and that as Henry Ford said “if you think you can or you can’t you’re right”, you can make money in this economy too.  My second point is that I believe that world economy is not “down”.  The world economy is simply changing.  Some industries are failing and are crashing, but others are taking their place and are prospering.  Real Estate sales prices are crashing since no one is buying, but the renting industry is booming!  Another example is how desktop computer sales are falling, yet notebook computer sales are booming!

So money is still being made in this “economy” but there are many questions that need to be answered. For example: In the last depression, how come so many people were depressed?  And which people were depressed?  Was ‘everyone’ depressed? Who wasn’t?  Who was prospering and more importantly, how can we?  Also, we’ll look at just how ‘attached’ the world economy is towards the United States’s consumption?

Until then, continue reading this blog and learning.

감사합니다!

Daniel

ME, THE NEWBY ON FOREX, the story of my start~

Interested ?

My temper and will to play with real money on Forex didn’t took more than 2 months. I had earned that extra 1000$ from a job in japan which made me think, yeah well let’s gamble (my first mistake). Because right after I lost that money, I just cried wishing I hadn’t gambled but instead had made a more informed choice (trading forex with my heart not my luck).

Why did i chose AVAFX (one of my current FOREX brokers) ?

avafx trading platform

Well, first of all the bonuses:

• regular promotional events when you upload money (10 to 20% bonus, + some conditions to be fulfilled)
• multiple ways to upload money (opening online)
• the spread is rather small and fixed (3 pip for EURUSD, 4 for the other majors)
• cool spreads on exotic pairs of currencies (KRW not available yet T.T)
• a leverage of 1/200 (enormous): but good traders do not use huge leverage (how could I have known!)
• New: you can withdraw your profits using a master now (possible with any broker who is linked to a bank)
• New: Can trade Oil, gold, silver, natural gas, several food indexes (~10 or so)
• New: Can trade on indexes like Nasdaq, SP500, DJ30, FTSE100, DAX 30, CAC 40

Avafx also provides a platform that is I would say among the simplest ones on the market.

The platform includes:

• monitoring of multiple accounts
• Multiple graphs and indicators (not many)
• Monitoring of economic news
• Technical analysis (by ava specialist, pretty useful for newbies)
• and a tutorial on how to use the platform (Chandra, if you read it, everything is in there)

This post was a small introduction to AVAFX (avafx.com) and its platform, this is an excellent time also if you have any question on the broker(s), platform and others~

Cheers

kskusanagi

This is the 3rd of 3 posts in collaboration with SeoulSteves. Part 1 is posted over at SeoulSteves. Part 2 is posted here at InvestingWon.

So you’ve got some ideas on how to reduce your expenses and increase your income, generating a positive cash flow. What should you do with that extra cash? Should you pay off your debt first or began investing right away? What about building an emergency fund?

Different personal finance authors have slightly different advice in this regard, but the order that makes the most sense to me is this:

1. Build an Emergency Fund
2. Pay Off Debt
3. Invest
4. (Rinse & Repeat!)

Building an Emergency Fund

Your first inclination might be to think that you should pay off your debt first. Well, yeah, you should, but not before you’ve built up an emergency fund. Why? Because being debt-free will not help you if you are an in an accident and need to pay for surgery. Nor will it help if you lose your job and are unable to find another for a month or 3. So my advice to Steve would be to build up at least a month of expenses in an emergency fund before paying off the rest of his debt.

If you are currently living paycheck-to-paycheck, this should be your top financial priority. Start by building up an emergency fund of one month of living expenses. Your monthly pay-yourself-first amount, whether 10%, 20% or 1% should be going into this emergency fund until you’ve met your goal amount. Windfall income, i.e. unexpected amounts of “free” money like bonuses and gifts, should be going into building this fund faster rather than, say, into an IPod Touch.

Put your emergency fund into a separate bank account so that you don’t spend it. An HSBC Direct account is a good place to put it because you might as well be collecting interest (currently 3% APY) on your emergency fund while it’s sitting there. (See How To Open an HSBC Direct Account)

Once you’ve built up one month in expenses in your emergency fund, you can decide if you want to build it up to a safer 3 or 6-months of expenses or if you want to pay off your debt and start investing first. If you have a lot of debt, you will probably want to pay that off first.

Paying Off Debt

The earlier you start investing the better, so why are we putting it off ’til last? Basically because many kinds of debt (e.g. credit card) have higher interest rates than what you can safely estimate you would get with an investment vehicle (if you want to optimize the best mix of saving/investing and paying off debt, see this article). Perhaps more importantly, you gain peace of mind by being debt free.

If you have more than one debt, the optimal way to pay off all your debt is to start with the one with the highest interest rate. Psychologically, though, it’s more satisfying to pay off the debt with the lowest balance first and cross it off your list. This is called debt snowballing.

In Steve’s case, he’s paying of his Korean credit cards as soon as he can for peace of mind. I think that’s a good way to go. I’d recommend that he pay off his US credit card debt afterwards just to be done with it. I’m not familiar with how student loans work, but if income-contingent is the way to go for Steve, I recommend he makes that change as soon as possible.

Investing

Phew! Now that you have an initial emergency fund and have payed off most if not all of your debt, you can finally use some of that hard earned pay-yourself-first cash to invest!

The number of investment options are truly overwhelming and there is no single best investment vehicle for every person in every situation. The important thing is simply to get started as Steve did with his annuity, and then make more informed investment decisions as you learn more.

However, one of the easiest ways to get started is to invest in an index fund using a dollar-cost-averaging strategy (or rather won-cost-averaging in our case). An index fund is simply a mutual fund that consists of the stocks in an index like the KOSPI200 (indexes are a collection of selected companies’ stocks that are used to track the performance of the overall stock market). Even better than index funds because of their lower fees, are index-based ETFs, which are like funds that are bought and sold like stocks.

With “won-cost-averaging”, you regularly invest your pay-yourself-first amount of, say 10%, into an index fund or ETF every month. The idea is that although the stock market fluctuates up and down constantly, over long periods of time (3, 5, 10 years), the market goes up. This simple strategy has been shown to even beat most day traders who try to time the market.

In Korea, you can buy index and other kinds of mutual funds through your bank. We’ve explained how to do this with Woori Bank (Part I, II, and III), and we’ll be writing how-tos for other banks in the future as well. When looking at funds, make sure you get one with the low fees (Korean fund fees are explained here).

To buy ETFs and stocks, you’ll need an investing account at a securities company. Our regular contributor amandaminchung has written an article on how to open an account.

Once you’ve started investing in a basic index fund or ETF, you may want to diversify by building a lazy portfolio of funds or ETFs.

Rinse & Repeat

Once you’ve payed off your debt and started investing, you should go back and build up your emergency fund to a safer amount, at least 3 months of expenses.

If you’re able to build up a large emergency fund, you should consider CD laddering. In CD laddering, you save a year’s worth of expenses in CDs, or time deposits, so that every month one of your CDs matures. You then reinvest that money into another CD if you don’t need the emergency cash. Right now, time deposit rates in Korea are extremely favorable with some banks offering rates as high as 8%.

You should also review your finances regularly (every 3 months or so) to keep on track.

Financial Planning

Now that you have your short term finances under control, you can begin to plan for your long term financial future. What amount of money do you want to have saved and invested in 5 years? What would you like your net worth? If you are serious about building wealth, you should start making such goals.

As Steve pointed out, there are more and more unknowns the further out your time horizon is. He might not even be in Korea in 5 years. I would recommend that he choose his ideal situation 5 years from now, and simply plan for that.

When you do long term financial planning, or any kind of long term planning, you want to set goals that are challenging but achievable. You want to set goals that reflect your best possible future. Given your circumstances now, do you want to be living in Korea in 5 years? Do you want to own your own house? Do you want to be married? Plan for the life that you want. Head in that direction and make course corrections as you proceed. Of course, life doesn’t go exactly according to plan. But having a plan means that you are more likely to arrive much closer to the destination that you want than leaving your life to chance.

Just by reading through these articles, you’re in the minority of people who are interested in taking control of their finances and their lives in general. Even fewer of you will go on to make plans. And fewer still will commit to taking action. Be one of those few. Success in any endeavor is not so much about being smarter or more talented, it’s about staying committed to your goals and to yourself. If you get off track like I have, no problem. Just re-focus your attention and move forward.

Sad news today, my friends. HSBC has lowered their interest rates for their Direct account again. It’s now at 3%.

You can still get 5% APY if you have between 30 and 40 million won in the account. But if you had that much cash, you could probably find better things to do with it anyhow.

This is the 2nd of 3 posts in collaboration with SeoulSteves. Part 1 is posted over at SeoulSteves. Please read that post first as it sets the context for this one.

These are indeed rough economic times. All the more reason to learn how to manage your money and plan for the future. After reading through Steve’s post and preparing my own, I realized that I need to get my finances organized and back on track as well!

Living Below Your Means

Did you get an allowance when you were a kid? Allowances are supposed to teach you the value of money, but, in my case, it didn’t. It taught me how to spend. I spent my entire allowance on toys, then comic books. In high school and college, I spent all my money on records and CDs. As adults, most of us continue this trend, spending as much as we earn. Is this living within your means? Yeah, but it also means you aren’t saving anything. Often, when we earn more, we spend more. So it’s not the size of the paycheck that makes you rich, it’s how much of it you are able to save and manage wisely. You want to be living below your means.

In Steve’s case, when he found himself forced to cut back on expenses, he realized how much money he could’ve been saving. Once he’s payed off his debt, he knows that he can live below his means and use the remaining difference to achieve his financial goals.

Money Management

You will need some way of tracking your spending to get in control of managing your money. You don’t necessarily need to use a complicated budgeting system (envelope budgeting seems like a good, simple one, though), but you should at least have a general idea of how much you are spending month to month.

The way I do it is, every several months or whenever my finances change significantly, I calculate my budget by going through all my expenses and income sources. I come up with a reasonable budget amount of cash to spend on food and entertainment for the week and keep that amount in my money clip. I keep my check card spending to a minimum or remove the amount of cash from my money clip that I spend with my check card. Every Monday I simply check my bank account balances and cash-on-hand and compare it to the previous week. If I’ve spent more than I expected, I look into where the money went.

Check out our regular contributor DanielP’s series on how to read a financial statement for more on tracking income and expenses.

Once you know where your money is going, there are two basic ways to live below your means and generate a positive cash flow.

1. Reduce Your Expenses
2. Increase Your Income

Reducing Expenses

The easiest way to begin reducing expenses is to look at your recurring expenses: rent, phone bill, gym membership, magazine subscriptions, etc. First, eliminate all the recurring expenses you don’t need or don’t use. For Steve, he got rid of the housekeeper and is considering giving up his gym membership. In his case, it sounds like he really enjoys going to the gym, so I wouldn’t recommend getting rid of that. You want to be frugal, but not to the point where you are taking the joy out of your life. Steve seems to have found that balance by spending money on things that he really enjoys and values (e.g. the occasional beer and ice cream).

Then, look at cheaper alternatives for your recurring and incidental expenses. Steve did this by cooking at home instead of eating out and by drinking 1 or 2 premium beers rather than half a dozen cheap ones when he goes out.

Don’t just look at the big items, think about your daily spending habits. Getting a cup of coffee at Starbucks instead of from the office pot every day can really add up. Personal finance guru David Bach infamously coined the cheesy but useful phrase “The Latte Factor” in reference to this kind of spending.

Increasing Your Income

Steps you can take to increase your income are to:

• Look for tutoring or other part-time jobs, if your visa and/or contract allows it
• Look for ways to make money from your interests and hobbies.
• Look around your house for anything that you don’t use and you could sell for some relatively easy cash.

If you’re an employee, consider negotiating a higher salary or looking around for higher-paying jobs in your field. Look at hidden costs and benefits beyond salary like transportation costs and time, housing benefits or cost of housing in the area, etc.
You may also want to consider moving if the costs of your current location outweigh the benefits (Blueprint for Financial Prosperity has an article on how to calculate this).

Committing to Saving: Pay Yourself First!

Steve was forced to reduce his expenses through some unexpected circumstances. How can he make sure that he maintains that buffer between his spending and his earning after he pays off his extra expenses? How can you?

Pay yourself first! This is one of the fundamental precepts of personal finance. Basically, once you’ve committed to an amount to save every month, the first thing you do with your paycheck is to save or invest that amount. This is before paying any bills or other expenses. A reasonable amount is 10%. If that’s too difficult at first, try 1%, then 2%, working your way up month-by-month. If you are able to save more, say 20% or 30%, even better.

Where to Put your Money

In the next article, we’ll talk about planning for the future, starting an emergency fund, paying off debt and investing with that money you’ve now figured out how to save. Rock. On! \m/

The first part in a collaborative series on personal finance in Korea between SeoulSteves and InvestingWon has been posted on SeoulSteves!

The DOW had its biggest one-day drop in history. Banks are being nationalized to prevent their outright failure. Worldwide economies are in tatters. What does it all mean?

Well… I have no idea. All I know is that when I sent money home to pay my student loan bills last week I sent 150,000 won more than usual and it still wasn’t enough to cover my minimum payments. To be honest, though, my personal finances in general need a serious makeover. Am I making intelligent decisions in regards to my debt? How do I save money as an Expat in Korea? Should I try investing?

I didn’t know where to even start on these questions, and I was sure that if I didn’t know, then there are probably a lot of other expats in Korea in a similar boat. Thankfully the blog Investing Won recently came on the scene and when I wrote Sungwon asking if he’d be interested in doing a joint posting project, he didn’t hesitate to take me up on it.

In the following segment, I will layout some details of my financial situation that are probably fairly common to a lot of people. I’ll mention some of the strategies I’ve taken up to date. I’m going to put it all out there, and then Sungwon’s going to pick it apart…

[Read the rest over at SeoulSteves]

Parts 2 and and 3 will be posted here on InvestingWon over the next 2 days. Stay tuned!

Stafford over at Hub of Sparkle has publicly thanked President Lee for his tax rebate. Apparently the economic stimulus is not just for Korean citizens, but for anyone who’s payed taxes. Check with your employer to see if you’re eligible.

[update 12/08] Brian has pointed out in his comment that the deadline was back in October. Check his blog post for more.

Maeil Business Newspaper, Korea’s leading publisher of daily business news, launched an online news service called “MK English News” in 2006 to deliver accurate, high quality news and financial intelligence in English. “MK English News” offers the latest business, finance and company news as well as comment and analysis.

Currently, we are providing “Free Email Service” to thousands of business owners, operators and students.  Email offerings include daily local business news, breaking news and editorials.

We would like to offer you “Free Email Service”, which will bring the latest financial news to your email inbox for free everyday. ( englishnews@mk.co.kr ).

The website is linked here: http://news.mk.co.kr/english/

kskusanagi

DanielP continues to break down how to read financial statement. See his previous article for the first part.

Hey everyone,

So how did your reading about ‘income vs expenses’ go?  Were you able to apply it to yourself in real life, and to the businesses you’re looking at buying stock from (or simply buying)?

Now we’re going to look at the other main part, which is called ‘assets and liabilities’.  If you go back here you’ll find a tab that says ‘balance sheet’.  On it you’ll notice a few dates, such as (period end date) and followed by three important items:

- Total Current Assets  (go into these)

According to Robert Kiyosaki, author of Rich Dad, Poor Dad and ‘asset’ is something that puts money into your pocket.  Assets in this case also refer to things that have a financial worth for the owner.

Examples of ‘cash-producing’ assets can be: A business, an e-book, a blog, etc…

Examples of ‘financial worth’ assets are: Silver, cash, a house

For Activision Blizzard, they have assets such as: short term investments, cash-on-hand, their inventory, etc…

For now you want to focus on the total number, which in this case is 437 (millions of dollars) in 2007.
If you look at the trend from 2004 to 2007, you can tell that the numbers have gone up until the last quarter of 2007 (2005, 2006, and first quarter of 2007 the numbers were above $1 billion.  That’s bad right? well, we’ll see soon enough.

- Total Current Liabilities: A liability is, according to Robert Kiyosaki, something that takes money out of your pocket. A liability is also something that lowers your financial worth.

Examples of ‘money-taking’ liabilities are: debts, mortgages, loans, etc…

Examples of ‘value-lowering’ liabilities are: expenses, expenditures, etc… (by the way, do you know the difference between the two?)

If you look at the Balance Sheet, you can tell that the ‘liabilities’ column has gone up from $136 million back in 2006, to $606 million in the last quarter of 2007

- Total Equity (go into these)

The definition of ‘Equity’ ” refers to total assets minus total liabilities, in which case it is also referred to as shareholder’s equity or net worth or book value.”(source).  In practical terms, I like to see it as our value in an escrow account that you have access to if you sold your assets and paid off your liabilities all at once.

For Blizzard’s case, the amount in owner’s Equity is $239.81(million).  The number, being in the positive (or ‘in the black’) shows that the owners of the company (or the shareholders in this case, who own Blizzard because it’s a publicly traded company), have a positive net worth.

Now, having a positive net worth doesn’t mean making a profit.  Common knowledge of making a profit, as we know is to buy stock low and sell high.  But what is a stock?  What do people mean when they say “buy low and sell high?” Is that the only way to make money via stocks?  Is there any way to make ‘passive income’ off of stocks instead of only ‘capital gains’?  What do those words mean, anyway?

In my next entry, We’ll learn about the different ways of making a profit via stock trading, and what kind of income you can generate.
Until then, have fun!

Dan P.