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Ask the Money Doctor
By AMY BICKERS
My income-tax bill is larger than I expected. Frankly, it is more than I can afford to pay. How should I finance the payment of my taxes? I don't want to pay late, because I will incur interest and penalties on top of the original debt. I'm considering taking a large advance on my credit card.
--Taxed in Singapore
Given your cashflow problem, I would strongly advise against a credit-card advance, as you will then face high interest charges and possibly other fees from your credit-card company. For instance, an advance on a credit card from DBS Bank carries an interest rate of 34% a year, with an additional 3% fee when you draw the money. I suggest you take out a personal loan, though in Singapore you must be a permanent resident or Singaporean to do so. Such loans carry fees of about 14% a year, but many banks will loan you no more than twice your monthly salary.
How important is the price/earnings ratio when evaluating which shares to buy? Should I always know a stock's so-called "p/e ratio" when choosing my investments?
--Cebu Stock-Picker
The price/earnings ratio is a valuation that many investors check before they buy a stock. By definition, it is the price per share of a stock divided by its past 12 months of earnings. The p/e ratio indicates how popular a stock is by reflecting how much investors are willing to pay for its earning power. Many companies with high earnings growth potential--new technology stocks, for example--may command high p/e ratios because investors believe their shares will rise as earnings increase. With Asia's markets so volatile, p/e ratios in the region rise and fall dramatically, just like share prices. Miron Mushkat, global head of economics and investment strategy for Indocam Asset Management in Hong Kong, says the p/e ratio can play a useful role as long as investors also look at other valuations and stay abreast of news that could affect the shares they own. "The price/earnings ratio can be helpful sometimes, as long as it is put in the appropriate context and is not viewed in isolation," says Mushkat. But, he adds, "Some Asian companies have had no earnings at all over the past few years, so for them one should use other yardsticks, such as price relative to trend earnings."
I spend 10% of my monthly income at the horse races. I know it sounds crazy, but I view it as an investment, and I hope to generate a comfortable retirement income through my bets. So far I have just about broken even. Is there any way I can improve my chances of winning?
--Horsing Around in Hong Kong
Let's face it, racing bets, along with other forms of gambling, don't qualify as investments. For a start, the gambling industry is structured to benefit the bookmakers, not the customer. At best, gambling is recreational, at worst, it's addictive and potentially ruinous. Certainly, there are far less risky ways to grow your retirement dollars. I suggest that you go to your local bank and have a look at the mutual funds on offer. Find one that suits your needs and set up a monthly direct debit so that you make regular contributions to your retirement fund. I'll bet that as your retirement day draws nearer, you will be glad you did it--and you may even have a little left over for a day at the races now and again.
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