This is a follow up to my earlier post about Paypal stealing money during withdrawals, I criticized Paypal for automatically converting currencies at a high exchange rate. I sent at least three emails highlighting my dissatisfaction with this new “upgrade”.

There must have been more than just a handful of customers voicing out their dissastisfaction. Recently, I made two withdrawals and Paypal no longer converts these withdrawals to my local currency. This is good for me because my bank will convert these withdrawals at a cheaper exchange rate.

I’ve read several books on value investing. In my mind, I’ve always regarded myself as a value investor. However, my first experience in trading stock proved otherwise.

My first trade has all the hallmarks of a speculative trade. I bought the shares of Zelan on the rumor that MMC will privatize Zelan. I targeted to dispose the shares on the same day with a gain of 1.5 cents a share. However, market momentum soon waned and I wasn’t able to sell the shares as intended.

Luckily the following day, market buoyed on the news of Citibank bailout and the Central Bank lowering the borrowing rate by 25 basis points. I was able to dispose off my shares. Hours later, the market was abuzz with news that MMC will not privatize Zelan.

This experience has taught me how easily it is to fall into the pitfalls of stock investing. I was tempted to speculate because I wanted to join the crowd and the temptation of a quick gain. If the positive news had not come out at the right time, I could have been stuck with an overvalued stock.

“Price is what you pay, Value is what you get.” – Warren Buffett

There are no good stocks, or bad stocks. There are only underpriced or overpriced stocks. Great companies with great businesses may not be great investments if you overpay for the stocks. Similarly, moderate or even mediocre companies or businesses could be worthwhile investments if bought at low enough prices. And that is the gist of this book.

Benjamin Graham (1894 – 1976) was the mentor and teacher of Warren Buffett. He was the founder of the discipline known as “security analysis”.

I bought The Intelligent Investor, after a few authors of value investing books I read made references to Graham and his book. And I am grateful to Graham for the knowledge, effort and time he had devoted into writing this book.

Graham outlined the model portfolio for defensive and aggressive value investors. He had also made references to the many bull and bear runs in the last century, highlighting the many different stocks that were overpriced or underpriced and their subsequent performances.

Graham introduced the of “Margin of Safety” as the central concept of investment. This concept is frequently used by Buffett to his great benefits.

I didn’t feel hyped when reading this book. I felt down-to-earth. Graham didn’t promise the sky or the riches. Rather, he highlighted the many rewards as well as pitfalls of stock investing. If he had written only about the rewards, I could have fallen into a false sense of security and over confidence, which could lead to undesirable consequences.

This book is a must read for all investors.

Today, I opened my very first share trading account. I chose Jupiter Securities because of its low transaction costs. Also, I haven’t heard bad news or complaints about them yet.

The RM10 CDS (Central Depository System) account opening account fee is waived. Saved RM10 there.

I chose to trade with “upfront cash” instead of “margin”. There are 3 reasons for me to choose this option.

1. The transaction fee for “upfront cash” is lower.

2. I am a long-term investor. Not a speculator. The shares I buy, I will keep. Hence, it only makes sense to me to buy shares I could afford to pay for in cash. If I use a “margin” account and buy more shares than I could pay for, then I will not be able to keep those shares. I will be forced to sell the shares even if at a loss.

3. The trading account pays interest on idle cash sitting in this account. And the interest rate is higher than what my savings account interest rate. It makes sense for me to park my cash into my trading account and leave a only minimal sum in my savings account. By keeping my money in my trading account, I will enjoy a higher interest rate while at the same time be ready to take any opportunities that arise in the stock market.

Two days ago, the Government announced some measures to combat the economy slowdown, one of which is to reduce the employees contribution to retirement fund. This will put more disposable income into the consumers hands. The Government hopes that this additional disposable income will be spent on the economy.

However, this move has drawn fierce criticisms from workers and employers. And they are not without merit.

By reducing the amount of contribution to the retirement fund, the tax relief will be reduced and so the employees will be taxed more. This is true if the employee has not maximized his tax relief. The additional tax burden is higher the higher the person’s tax bracket.

Many view the retirement fund as a long-term savings account for the retirement years. By contributing less to the fund, we are saving less for our future.

When announced, this scheme was said to be voluntary. But the EPF has come out to say that everybody is automatically enrolled into this scheme. One can choose to opt-out by going through a formal application process. Many believe that “voluntary” means people who wants to contribute less will opt-in rather than having those who wants to contribute more to opt-out. No doubt the Government opted for this route because many people are too lazy to take action, hence the Government would have more people enrolled into this scheme.

There are some people who will be happy contributing less to the retirement fund. One often cited reason is the rate of return on the fund is low. These individuals believe that they would earn a higher rate of return than the fund. So they would prefer to manage their own money rather than having the fund to manage for them.

Others prefer to have more disposable income to pay for bills. Rising cost of living in the last 6 months have greatly eroded disposable income. The prices of many goods and services that have gone up in tandem with the energy costs increase have not gone down despite the reduction in energy costs now. Many families are finding it difficult to make ends meet and having more disposable income gives them some breather.

Also, some people who are opposed to bailout of companies will choose to contribute less. These people believe that the Government would use the retirement savings of the people to bailout companies.