AK was at Breakthrough Conference 2015.

I was invited to give a talk at an event that happened earlier today. It was called "Breakthrough Conference" where every speaker was given 15 minutes to deliver one key idea on diverse topics such as communications, marketing, beauty, business, real estate and stocks.

Naturally, I was to talk about investing in stocks although I tried to convince the audience that I could be a candidate to talk about beauty as well since I blogged about hand moisturisers before. Don't believe me? See these blog posts: here. Say "no" to paper cuts.

I was given a lot more time than the other speakers because the organisers know that I am very long winded. They even gave me some time for Q&A. Overall, I was given almost an hour as the last speaker of the day.

Anyway, as my memory of the event slowly fades, I should quickly make a few notes on what I said at the event for readers who might want to know:

First, an introduction. AK is a blogger. AK is a retail investor. AK is a regular salaried manager who made a mid to high 4 digit monthly salary (not anymore because AK is semi retired).

I shared my journey and how I wanted to retire at age 45. See blog post: here. I realised that for a person like me, I must listen to Warren Buffett and “Never depend on single income. Make investment to create a second source.” 

I referred to a free "e-book" which is really a compilation of some blog posts which the audience could read in my blog. Click on: Retiring before 60 is not a dream. Just AK talking to himself, of course.

Investing in income generating assets is what helped me achieve financial freedom and because the organisers said in the ticketing website (i.e. Eventbrite) that the audience will learn "how to build a portfolio of stocks that pays year after year" from AK, I had to share something to that effect.

I hope the audience were not disappointed with what I shared.

AK with his FREE pre-owned iPad.
Credit: Ho Khinwai

Basically, it all starts with being financially prudent. Save money, invest and reinvest the dividends. See: The Millionaire Next Door.

Then, I shared three points:

1. Be patient. Remember what Charlie Munger said about the big money being in the waiting. See: Revisiting AK's simple strategy with Charlie Munger. Go take a look when there is blood on the street.

2. Always have a war chest ready. Unless we are born with a silver spoon in our mouth, we need to save money and build our war chest. If we do not have a war chest ready, how are we going to fight a war? Without a war chest, we won't be able to take advantage of opportunities. See: If we want peace, be prepared for war. I also made a point on how money in the war chest is not the same as our emergency funds.

3. Know what to look for as an income investor. Ask 2 questions that matter: How is the income being generated by the proposed investment? Is the income generated sustainable? I also said that asking these questions would very likely help us avoid investment scams. The second question is probably more difficult to answer than the first and I used two examples to help illustrate my thought process: Old Chang Kee and QAF Limited.

During the Q&A, I answered two questions. The first one was on SembCorp Industries and the second one was on REITs and how a rising interest rate environment would impact REITs.

Here are a couple of blog posts which I hope would be useful to the gentleman and the lady who asked the questions: 1. SembCorp Industries: Partial divestment and 2. How should we approach REITs as investments for income now?

Investing for income, depending on our circumstances, some might achieve financial freedom earlier and some later. However, if we remember to do all the right things which I hope I have neatly encapsulated in my talk, then, there will come a day when we work because we want to and not because we have to.

Of course, as always, remember that I am only sharing what has worked for me but remember that if AK can do it, so can you. Gambatte!

Related posts:
1. Journey to financial freedom is not a race.
2. Don't depend on wage increases for higher income.
3. Nobody cares more about our money than we do.

UOB One Account or the (new) OCBC 360 Account?

People have been talking about the UOB One Account and some readers asked me what I think of it. 

I said that I would like to see what the revamped OCBC 360 Account is going to look like and make a comparison.





Now, first, we look at the UOB One Account. At its simplest:

1. Start an account.
2. Get a UOB ONE VISA card.
3. Charge $500 a month to this card.
4. Maintain $50,000 in the account.
5. Get an effective interest rate of 1.6% per annum.

Now, if we were to credit our salary monthly or make 3 GIRO debit transactions per month, all else remaining equal, we will get an effective interest rate of 2.43%.

What I don't like about the UOB One Account is that the interest rates are tiered in the first $50,000. So, we really have to maintain $50,000 in the account to get the highest effective interest rate possible. If someone should maintain $30,000 and charge $500 to the UOB ONE VISA card, then, the applicable interest rate on his deposit would be 1.33%, not 1.6%, for example.




If we were to compare this with the old OCBC 360, this isn't really attractive because it was really quite easy to get 3.05% interest from OCBC 360 with their old requirements of:

1. Monthly crediting of salary.

2. Charge $400 to any OCBC Credit Card per month.

3. 3 online payments per month with the 360 account.

What about the revamped OCBC 360 account?




People who credit their salaries on a monthly basis will now be rewarded with an additional 1.2% interest for up to the first $60,000 in the account! Bonus interest is up from 1% to 1.2%. Total balance which will receive bonus interest is up from $50,000 to $60,000. Good stuff!

So, without having to do anything else, the interest rate on the first $60,000 is now 1.25%.

Then, just pay 3 bills online (yes, it doesn't have to be GIRO like UOB's requirement) and a bonus interest of 0.5% will apply. If we charge $500 (up from $400) to an OCBC credit card monthly, get another 0.5%. So, effectively, get an interest rate of 2.25% on the first $60,000.

NEW: Purchase any eligible financial product of at least the minimum amount, such as Endowment of at least S$8,000 in annual premium, or investment products such as Unit Trust or Structured Deposits of at least S$40,000 to get an additional 1%.

What about the 1% bonus interest for 12 months if we were to buy an insurance or investment product from OCBC? Er, regular readers would have the answer to this one. I won't bother with this "bonus".

For disciplined savers, OCBC 360 is going to be more rewarding too because they will pay 1% per annum bonus interest on monthly incremental balances (not the entire balance in the savings account).

To qualify, your current month’s account balance has to increase from previous month’s account balance. Incremental account balance is the difference between current and previous month’s account balance. This bonus interest will be paid on incremental account balance of up to S$1,000,000.

Since both UOB One Account and the new OCBC 360 Account will pay us bonus interest for crediting our salary monthly, unless we have 2 salaries (each exceeding $2,000) every month, we will be wondering which product is better for us.

So, how?




Ask the following questions:

1. How much do I charge to my credit cards monthly?

2. How much do I have in my savings account?

If we hardly spend any money using credit cards, the OCBC 360 Account will pay 1.25% for the first $60,000 if we simply credit our salaries monthly to the account. Paying 3 bills online is a really easy requirement to meet too. So, we will get 1.75%. With the UOB One Account, we will get nothing unless you consider 0.05% to be something.

If we charge at least $500 a month to a credit card, then, with the OCBC 360 Account, on top of what have been considered in the previous paragraph, we will get 2.25% for the first $60,000 deposited. With the UOB One Account, we will get 2.43% for the first $50,000 deposited.

In terms of interest rate, therefore, UOB trumps OCBC by 0.18%. However, remember that OCBC will pay bonus interest on the first $60,000 (i.e. 2.25% = $1,350 a year) while UOB will pay bonus interest only on the first $50,000 (i.e. 2.43% = $1,215 a year). Anything more will get an interest rate of only 0.05%.

So, if we have $50,000 in savings, go with UOB. If we have $60,000, go with OCBC.





What if we have less than $50,000? If we have less than $50,000, then, UOB's effective interest rate starts falling. Remember, UOB's bonus interest rates are tiered.

So, if we have $40,000, for example, and if we meet all the requirements discussed in the prior paragraphs, then, the effective interest rate from UOB is not going to be 2.43%. It is going to be 2.2%.

So, if we have $40,000 or less in savings, then, the OCBC 360 Account is a more rewarding choice than the UOB One Account, all else remaining equal.




I did this blog post because the question of how to choose one product or the other is a pertinent one as most of us have only one salary to credit monthly.

For those who do not have a salary to credit monthly and do not spend at least $500 a month (which could be charged to a credit card), then, the best choice could be CIMB's 0.8% interest rate for a regular savings account.

UPDATE (9 NOVEMBER 2016):

I have been too lazy to blog about the Bank of China SmartSaver which I also have. This is another product which makes people jump through hoops to get more interest income on the first $60,000 of savings.

Those hoops have just become a little harder to jump through:

Click to enlarge.

The changes to Bank of China SmartSaver will benefit higher income customers and bigger spenders. So, it might be good news for some people.

To find out more about Bank of China SmartSaver, go to their website.



-----------------------------
OCBC 360 UPDATED AGAIN:
See: OCBC 360 updated (and downgraded) again.
(1 March 2017)

Related posts:
Getting paid more while waiting for opportunities.

What did AK buy in the stock market in the last 12 months?

A reply to a fellow blogger inspired this blog post as I looked back at my "nibbles" in the stock market in the last 12 months (since May 2014). They are:

1. Ascendas Hospitality Trust
2. Wilmar
3. Soilbuild Biz Space REIT
4. SembCorp Industries
5. SembCorp Marine
6. OUE Limited
7. ST Engineering
8. SATS
9. Accordia Golf Trust
10. WingTai
11. Marco Polo Marine
12. Singapura Finance
13. Hong Leong Finance
14. NeraTel
15. PREH
16. Yongnam


Quite a mixed bag.

I am sure all of us have our reasons for our investments. To be doubly sure, it is always good to see if we are able to articulate the reasons through writing, even briefly, and see if they make good sense.

Ariake Sunroute.

From the list, it is clear that there is a slant towards investing for income but with less reliance on REITs and business trusts. Although I turned cautious some time ago on REITs and business trusts as their valuations became less compelling, bearing in mind also that they distribute most of their income to unit holders, leaving little to fund growth or to pare down debt, I still believe that they remain relevant instruments for the income investor. The REITs and business trusts in the above list are #1, 3 and 9.

I continue to like NeraTel (#14) for income and potential growth. I added to my position as its stock price declined not too long ago. I believe that a DPS of 4c is undemanding and could be maintained as there are indications that future growth will be funded through debt. A judicious amount of leverage is good for the company if they are able to improve ROE.

I also increased my investments in selected blue chip companies as their stock prices declined. I believe that their businesses are going through temporary bouts of weakness. These are companies which are likely to do well in future, current rough patches notwithstanding, and are unlikely to go kaput in the meantime. They also pay dividends and I like to be paid while I wait. These are #2, 4, 5, 7 and 8.

SembCorp Industries.

As interest rates are rising, financial institutions are likely to do better. I increased my investment in Singapura Finance (#12) and also initiated a position in Hong Leong Finance (#13) on weakness in their stock prices. Interest income accounts for about 80% of their total income as compared to 60% for banks. I believe that earnings will likely improve as interest rates normalise (i.e. rise) in future. Trading at a fair bit of discount to their NAVs, they are also known to pay meaningful dividends. I am quite happy to be paid while I wait (again).

There are a handful of investments which I made in property companies in the last 12 months. These are #6, 10 and 15. Although things are likely to remain challenging for them in the near term, I chose to invest in these three companies because of rather specific reasons apart from the fact that they are pretty undervalued relative to their NAVs. In short, I believe that there could be specific catalysts for each of them to do better in time to come. Built on expectations with margins of safety, these positions are smallish in size.

Marco Polo Marine (#11)  and Yongnam (#16) are probably not going to pay dividends for a while. They were both relatively big investments for me at one time or another but they were pared down under different circumstances. As their stock prices suffered, I feel, excessively from Mr. Market's pessimism, I added to my much reduced long positions recently. Both companies are trading at huge discounts to valuations and have potential catalysts which could excite Mr. Market again in future.

Marco Polo Marine.

CONCLUSION

I will continue to receive meaningful income from my investments in the stock market this year even if stock prices should decline. As long as the businesses I am invested in are able to do well in future, I should stay invested, have a war chest ready and buy more on weakness. If valuations do not become more compelling, I will simply channel dividend income to my war chest. There is nothing wrong with sitting on money and doing nothing if nothing is worth doing.

I have a handful of positions which I feel are more speculative in nature and, although they could turn out to be hugely rewarding in time to come, I have been careful to size them appropriately. In total, they do not cost more than what I could recover easily within a year from my other investments in the stock market.

It doesn't matter how big or small our portfolio is. If we are clear minded as to why we are invested, if we have a war chest ready and if we have sized our positions appropriately, we should be able to sleep well at night. Having peace of mind is most important.

Some related posts:
1. Ascendas Hospitality Trust: A nibble.
2. Soilbuild REIT: A nibble.
3. Accordia Golf Trust: A yield of 12.16%?
4. AK went shopping in the stock market.
5. OUE Limited: A nibble.
6. Incomplete analysis of Wing Tai Holdings.
7. PREH: A nibble?

What is AK's way of investing in stocks?

This was a rather amusing exchange (which went on to become quite exasperating):

E:
saw your blog
can i know how you invest?

Assi AK:
If you want to learn how to invest, I don't really teach in my blog. 

I am just blogging my experience.

You might want to go to the right side bar of my blog and you will find some recommended reading material under "Food for Thought".





E:
Why don't you share how to invest?

Assi AK:
Everyone will find his own way. 

I share my way in my blog. 

You are welcome to read my blog but you will have to decide if is suitable for you.





E:
After reading your blog I still don't know your way???

Assi AK:
Alamak...

Read a bit more and see if you can find the way. 

If still cannot, then, I think I lost my way liao.

E:
can lost your way like you?

Assi AK:
Yes, people follow me and fall into longkang sometimes... -.-"

E:
why?

Assi AK:
then no chance to fall into longkang lor

E:
Then how?

Assi AK:
Don't follow me lor ;p





E:
Why not?
How?

Assi AK:
You can follow me using the options available in the left side bar of the blog.

E:
What options?

Assi AK:
Check my blog. 

You will see in the left side bar.





E:
u are value investor?

Assi AK:
I like good deals, for sure, but I am not pure value investor.

Mostly, I like stocks which generate meaningful income regularly for me.

E:
so you buy dividend stocks only?

Assi AK:
nope
I am not a pure income investor either

E:
so what are you?





Anyone has an answer?

Related post:
Have peace of mind as an investor.