Book's Gist: Investing Your Savings

1. General Stats
- PE Highest 30X in 1994 when KLCI @ 1300
- PE Lowest in 1987 when KLCI @ 230
- PE 12-18X historical average
- 13-15% average yearly returns for 5 years investment
- Recessions 1960, 1985, 1998
- Differences of risk to returns
FDs 3% is like Composite Video
Bonds 5-9% is like S-Video
Stocks 13% is like DVD Component Input

2. General Stocks & Bonds Picking
- Value Investment = High ROE + Low PE (low teens) + Low PB (<=1) + High Dividend Yield
- IRR >=15% good deal
- Buy cyclical stocks (technology, banking, properties, construction) when specific sector down BUT ensure NOT structural issues with sector
- Shift Stocks to Bonds when stock market in doldrums
OR CULS(Convertable Unsecured Loan Stock)
OR ICULS(Irredeemable Convertable Unsecured Loan Stock)
- Get Bonds with credit rating >= A
- Bonds rated BBB defaults 9.6% within 3 years
- Long term stocks - Life insurance, Medical Care, IRR>=15% AND special concessions (Malakoff, YTL Power, Puncak Niaga, Litrak)

3. Derivatives / Options - Warrants / Rights / Call Options
- VERY risky = Lose capital used to buy warrant BUT possible high returns
- Rights to buy mother share @ specified $ (excercise price) within specified timeframe (maturity)
- Warrant $ X Gearing = Mother $
- Buy cyclical warrants (technology, banking, properties, construction) close to its trough
BUT ensure NOT structural issues with sector
AND ensurem co holds cyclical business
AND good co only
AND maturity date >= 3 years
AND excercise price <= 2X mother $
- eg. maturity date = 5 years AND excercise price = 2X mother $, thus mother $ have to rise 15% @ year (compounded yearly thus 100 X 1.15POW5 = 201.1357) for warrant to be worthwhile (15% @ year possible with cyclical co @low)

4. Mutual Funds / Unit Trusts
- Shift to Equity funds when stock market act
- Shift to Bond funds when stock market in doldrums
- Balance funds = Equities + Bonds mix BUT be careful on possible mix ratio
- Malaysia market - Funds usually beat index