Wing Man&a Novelist Extraordinare

How long does it take to boil an egg? 5-7 minutes would be the answer of most people. But at 35,000 feet above sea level, would it take the same 5-7 minutes to boil an egg? This is where most people would find it difficult to come up with the correct answer. Most people, except Khun Voravat Utamote, our first guest for this issue of Money Make Over, who has been flying with the national carrier, as a flight attendant for almost 17 years. Although, these days only first class passengers get the full nine yards treatment of soft or hard boil eggs for breakfast but Khun Voravat, has been around long enough in the airline business to know a few things or two about in-flight catering and entertainment services. As for our second guest, she is a novelist, a speechwriter, a columnist, a TV presenter, a florist and she does not use a pen name. Many of you may have heard of Khun Jittra Kornanthakiet or have read many of her books on Chinese arts and culture. As the old saying goes, the pen is mightier than a sword, and the life of Khun Jittra is more interesting than most because not only is she a successful writer but she also publishes her own books. As always in this issue of Money Make Over, we will look at the personal portfolios of two distinct people with different life styles and hopefully the made over portfolios are of some use to readers who are either in the airline business or a free lance writer.

Khun Voravat must be one of those rare birds who went to a boarding school in England and graduated with a degree from Oregon University in the US but instead of joining the boring corporate world he decided to SEE THE WORLD instead by joining the national carrier in 1987 straight after graduation. Life as a flight attendant is not as glamorous as people make them out to be. Due to the constant traveling, in the case of Khun Voravat, it's about 15 days in a month or 70 flying hours, it can be a real strain on social and family life. May be that's why Khun Voravat is still single because dating people in the same profession is difficult enough as it is. Aircrews change from flight to flight and one rarely gets to fly with the same group of people more than twice. In addition, it is hard work up there, pushing heavy food trolleys up and down narrow alley ways between seats and you need strong arms to carry those coffee pots! Lack of sleep and jet lags are part of the job as well, especially on long haul flights. Normally, one gets about 3 hours sleep on these flights. The only bonus is that male flight attendants get to sleep first because they have to prepare breakfast before landing.

New recruits normally start work in economy class for about 4-5 years in domestic and regional flights only, after that you get to serve business class and only after 7 years of service do you get to go on the more glamorous intercontinental routes to Europe and the US . A typical crew of a 747-400 would comprise of 6 male flight attendants, 10 air hostesses, 1 in-flight manager to take care of business and first class passengers and 1 purser to look after the on board duty free goods. Aircrews carry special ID cards so they do not need visas when traveling abroad, the only exception being the US . Salaries are quite standard with 3-4 months fixed bonus. However, on intercontinental flights, one gets special allowances calculated on a daily basis, which can be as much as 120% of base salary. Allowances are paid in three main currencies: $, Pound sterling and Euro depending on flights destination.

Current Portfolio : Khun Voravat has a positive monthly cash flow with 50% savings rate. His current portfolio comprises of 35% cash, 10% 10-year government bonds, 40% saving co-operative and 15% in equity mutual funds.

Proposed Portfolio: Being single and debt free means that Khun Voravat does not need to keep so much cash, about 5% or 6 months worth of living expenses should be enough. As for savings co-operative, I am not really a great fan of these institutions for 2 reasons, first, one can get better investment return elsewhere for the same amount of risk, secondly, although they are regulated by the Ministry of Finance but I find their financial numbers to be non-transparent, almost like a pyramid chit fund. Therefore, I would recommend that Khun Voravat withdraw from the savings co-operative and put about 20% in fixed income funds and government bonds instead. Khun Voravat already has about 10% in a 10 years government bond, therefore the other 7% can go into a short term fixed income and 3% in a longer term maturity fund.

Current equity exposure of 15% is far too low for a debt free bachelor with 50% monthly savings rate. Although, he has done the right thing by investing in AJF equity and RMF funds as well as Vayupak Fund but he needs to increase his equity exposure to about 75% of the overall portfolio. Khun Voravat currently contributes about 5% of his monthly salary into the airline's provident fund but in order to maximize his tax deduction entitlements, I would recommend that he puts as much as possible into Retirement Mutual Fund (RMF) and Long-term Equity Funds (LTF) which should come to about 30% of his gross income or Baht 600,000 which ever is lower. In order to achieve a much broader diversification and potentially achieving better performance in the long run, he should put about 35% of his portfolio in either a SET or SET-50 Index Funds and keep the remaining 20% in an actively managed funds such as AJF and Vayupak. Being a frequent flyer, it would be a good start to keep about 10% off-shore via Foreign Investment Funds (FIF). Life Insurance : Khun Voravat has a 20 years term life insurance with health rider on top of his group life cover, provided by the airline. Since 9/11 and the breakout of SARS epidemic, being a flight attendant can be considered a hazardous profession. But unfortunately, the airline's sum insured life cover still remains the same and Khun Voravat had to make do with a specially provided masks during the SARS epidemic. After having been in this profession for almost 20 years, Khun Voravat has seen his fair share of excitement such as unruly and most often drunk passengers but no hijackers! His favourite city is Munich and his least favourite is Taipei .

Khun Jittra Kornanthakiet, on the other hand, leads a much more down to earth life style than Khun Voravat. In addition to being an author to more than 20 books, she is also a columnist for the Nation and Sakul Thai. On top of being a writer, she hosts a radio programme on FM 101 and co-hosts “Open Kitchen Chef” programme on Channel 7. If that was not enough, she also owns a florist call Bloom Bliss, which is located in the Diethelm Towers on Wireless Road . The good thing about being self-employed is that one has the freedom to pick and choose what to do in life without being tied down by the so-called 9-to-5 chain. However, the other aspect of being your own boss, especially as a writer, is that monthly income can not be guaranteed. Khun Jittra's income is derived from two sources: monthly and seasonal. On a monthly basis she gets income from hosting radio shows and on a seasonal basis, it usually comes in the form of big lump sum from publishing pocket books. Therefore, her income may vary up and down a bit but she still has a positive cash flow on a monthly basis.

Current Portfolio: Like many people, Khun Jittra's portfolio is heavily tilted towards property, but in her case may be a bit too extreme because 60% of her portfolio is tied up in properties comprising of empty plots of land and town houses. She keeps about 20% in cash in a form of bank deposit and the remaining 20% is in near cash items such as gold and jewelry. Khun Jittra has no equity at all but she is waiting for a market correction opportunity to get into the market, which in my opinion is an unwise strategy. In addition, she also suffers from the “once bitten, twice as shy” syndrome because her money was caught up in the 56 finance companies that were forced to close during the 1997 economic melt down. Although, she didn't lose the principal due to the deposit guarantee programme but she did not get any interest when the fund was frozen.

The case of Khun Jittra is not untypical because several thousands depositors were also caught up in the melt down. However, this is not an excuse to be overly risk- averse. Most people fall down once in a while in their lifetime but it is how quickly one gets up is the most challenging part. Understandably, some people who were caught up in the situation will never deposit money with finance companies ever again and avoid investing in the stock market completely. But the smart ones, will learn from their mistakes and try to recoup their losses through better diversification professional management through mutual funds and learn about the relationship between risk and return. A major shock for many ordinary will come when the government abolishes the current “blanket guarantee” of all financial institutions and replace it with limited deposit guarantee where by the maximum guarantee limit shall be Baht 1 million per person per account. This is politically unpopular, of course, but the government does not really have a choice and in a way it will be a good learning curve for people to realize that even bank deposits have risks.

Proposed Portfolio : Although, Khun Jittra may not agree with my recommendation but I really do feel that she has too much money tied up in illiquid properties without any rental income because all her town houses are empty. If at all possible, I would suggest that she should gradually reduce her property exposure down to about 40% from the current level of 60% of the overall portfolio, or at the very least try to get rental income from the town houses. Secondly, gold and jewelries are not really investment. Although, diamonds are a girl's best friend but they are extremely difficult to value and middle men tend to take big commission when these stones actually do change hands. Although, the price of gold has been going up in recent months but this is mainly due to the rising oil prices and repercussions from the war on terror and volatile situations in the Middle East . My recommendation is to keep the current limit of “near cash” items to no more than 20% and preferably lower if possible. It is understandable that there are lots of emotional attachments to these jewelries but one must distinguish between investing and luxury collectibles.

Cash holdings of 20% is too high for someone who is debt free and single. As a rule of thumb, 5% or 6 months worth of living expenses, which ever is lower, should be observed. This would free up about 35% of the overall asset for other investments such as equity and bonds. Since the bulk of the portfolio is tied up in illiquid properties, I would suggest, at least as a starting point anyway, putting about 10% in fixed income funds and about 25% in equity. Since Khun Jittra is a new comer to the stock market, I would like to offer a few of my humble advices about shares. First of all, don't waste time trying to time the market. It has been proven many times before that it is impossible to buy at the bottom and sell at the peak. But the sad truth is that many people, professional fund managers included, are still caught up in this wishful thinking mode that they are smarter than the market. A better strategy would be to invest early and invest often by using Dollar Cost Averaging technique to invest the same amount of money every month to smooth out market volatility.

Since Khun Jittra is self-employed, she does not have anything set aside for retirement. Therefore, I would strongly recommend that she should maximize her Baht 600,000 income tax deduction via RMF and LTF. Although, Khun Jittra may be comfortably well-off today but it is imprudent to have no safety net for retirement savings. Moreover, women tend to live longer than men and it is not uncommon anymore to live until the age of 85, implying that one has to provide for 25 years worth of living expenses assuming a retirement age of 60. Unfortunately, Khun Jitrra's current portfolio is not providing the kind of growth needed for a comfortable retirement because 60% is in an illiquid property without any rental income, 20% is in collectibles, again without any income and the remaining 20% is in a bank deposit earning only 1% interest rate. Therefore, Khun Jittra's portfolio is in a precarious position and needs a complete make over badly. As a good starting point, I would recommend a 25% equity exposure comprising of RMF, LTF, FIF and of course SET Index Fund and gradually build up the exposure over time to about 60%. Moreover, the sooner Khun Jittra starts investing in equity the better. When it comes to investment there is nothing worse than procrastination. As for life insurance, Khun Jittra does not have one which may not matter that much since she is still single and does not have to support elderly parents, however, I would strongly suggest that she look into BUPA/Blue Cross health insurance or better still life privilege programmes of one of the leading hospitals such as Bamrungrad or Bangkok General Hospitals. Healthcare will only get more expensive as we grow older and as the old saying goes, nobody lives forever. Therefore, a healthcare safety net is more crucial than ever for single women without children to care for them in old age.

By the way it takes 10 minutes to boil an egg at 35,000 feet in the air. A good 3 minutes more than on the ground. If you don't believe me, next time your fly first class, you can ask your flight attendant to prove me wrong. Until the next issue, keep well and I can be contacted at teera@finansa.com