What did AK tell a reader who aims to save $1.8K a month?

Hi AK shifu,

I have been following your blog for quite some time now (2-3 years)! I am 26 this year and have recently graduated and will be starting work next week. Over the past few years, I have made some money from trading physical goods and right now I have a warchest of about 30k. Once I start work, after accounting for all expenses, I will foresee myself saving around 1.8k a month.

Over the last one year, there have been a couple of corrections and on hindsight, its easy to say "damn! i should have bought some". However, a part of me is telling myself to hold on to the bulk of my money till the market crashes so that I start off at a good position. I think that is important. 

I see myself as a 'lazy' investor, so I am looking to invest in telecomms, various gov linked services and perhaps some reits for passive income which I believe to have upside in the next decade or two (healthcare and retail). Could I get your opinion on how to time my entry with this little money I have?

On a side note, I like what you have been doing with your CPF monies....

Why are cacti able to grow in deserts?

Hi,

You sound like a very down to earth kind of guy when it comes to money making. You are also financially prudent.

As for investing for income, timing the market is difficult. Time in the market is easier unless you are not the disciplined or patient type or if you are using money not meant for investing.

Timing the market is not impossible though. It boils down mostly to luck. Did I know that the GFC was going to happen? No, I could not have predicted it. However, I could prepare for it. That is where our war chest comes in.

We cannot predict but we can prepare.

However, if we keep waiting for another GFC to happen (and quite a few people I know have been waiting for years now), all the while leaving our money in our savings accounts, then, it is a little silly.

While waiting for that big crash to come along which inevitably will happen one day, put some of our money to work with each correction in the stock market.

Do you believe in having some assets that do not move in the same direction as the equities market? My CPF money, I treat it as the investment bond component of my portfolio. A risk free, volatility free component which pays relatively good dividends.

I treat my CPF-OA money as the ultimate war chest only to be used in the event of a huge crash in the stock market as the opportunity cost of using it is quite high. I treat my CPF-SA money as the ultimate in investment bonds with an unbeatable coupon plus the magic of compounding.

I believe you will do well, given time. Gambatte!

Best wishes,
AK

Related post:
Graduating soon?

Why investors for income buy gold and silver?

It has been a long time since I blogged about having some precious metals in our portfolio and some newer readers might not even know I blogged about gold and silver before.


What do gold and silver have to do with investing for income?

Sounds like a scam?






If you think like this, congratulations! 

You will never fall victim to Geneva Gold and their friends!


Gold and silver coins can be mesmerising. 

I know. 

They look so shiny and beautiful. 

They twinkle, reflecting light. 

They look almost like they are winking at you.

I have a friend who fell so much in love with the two silver coins I gave him as birthday presents that he went and bought many more in different designs. 

I gave him bullion coins but he went and bought proof coins with numismatic value (i.e. worthy of collection). 

Oh, dear.


Anyway, why do I have gold and silver in my investment portfolio? 

Are they investments?






Many people say that we should have some precious metals in our portfolios. 

The late Dennis Ng had 7% of his portfolio in gold and silver, if I remember correctly. 


Dennis was concerned with the excessive money printing in the world and this is also why Jim Rogers says we should have some gold.


Fiat currencies are flawed. 

Governments around the world can print as much of their own money as they like. 

The supply is, theoretically, limitless. 






This infinite supply of paper money is unlike gold and silver as their supply is finite. 

Technology has not found a way to synthesize gold or silver.

Basic economics tells us that, over time, excessive money printing leads to immense inflationary pressure.

So, if you think that I buy gold and silver as an insurance against fiat currencies, you are right.






Of course, if we are traders, we can trade some gold and silver for profit. 

However, if we are investors for income, then, buying gold and silver requires an understanding that although precious metals are not income generating assets, they are probably important enough assets to keep some.

I can hear some protesting.


Yes, gold and silver are not income generating assets and it will even probably cost us some money to hold them. 

OK, even if we do not keep our gold and silver in a safe storage facility, we would still incur opportunity cost as the money used to buy gold and silver could have been invested in income producing assets instead.


Ouch. 

Yes, I know the feeling.

Do you believe in insurance? 

In the purest (and correct) form, insurance is an expense. 

It is not free of cost. 

It is not an investment. 

It doesn't generate income.

The elderly understand and believe in gold as they see it as a store of value.

I remember when gold got cheaper in years past, my grandma would go to the goldsmith to buy more gold. 

Not the best way to buy gold as I would have bought gold bullion coins instead but why did she think the way she did and did the thing she did?

I like to think that I understand.







So, should you buy some gold and silver? 

I suppose it will depend on what you believe in.


Related posts:
1. Where to buy gold?
2. Silver bullion coins.
3. Silver savings account.

Watch out as we look for gold in the ASSI jungle.

ASSI has been around since 2009 and will be celebrating our 7th birthday in a few more months. 

Many things happened in the past. 

Some things good. Some things not so good. Some things not good at all.

Some of the good things that happened are the friendly banter with some readers and I am sharing one such conversation here:

• 
  
• 

  12:04pm
  

  Assi AK
  

  
  

  
  

  It is just a place where I talk nonsense.

  
  

  When I am bored, it is an outlet. ;p

  
  

  I guess if one day someone offers to compile my blog posts and pay me a royalty, I can consider. :)
• 12:05pm
  

  R
  

  
  

  
  

  Your 'nonsense' is sensible to lots of people...
• 

  12:05pm
  

  Assi AK
  

  
  

  
  

  My blog is a jungle.... Just like my brain.
• 

  12:06pm
  

  Assi AK
  

  
  
• 12:06pm
  

  R
  

  
  

  
  

  If a people hungry enough, he will dig your jungle as there are many gold in it...
• 

  12:07pm
  

  Assi AK
  

  
  

  
  

  I think have yam, bananas and potatoes.

  
  

  gold cannot eat de

  
  

  lol
• 12:07pm
  

  R
  

  
  

  
  

  I did it few year ago when I chance upon your blog... learn lots of investment tips, IQ, EQ...
• 

  
  

  
  

  :o
• 12:08pm
  

  R
  

  
  

  
  

  Convert gold to $$$
• 

  12:08pm
  

  Assi AK
  

  
  

  
  

  I was wondering why I couldn't find any... You found them first!
• 12:09pm
  

  R
  

  
  

  
  

  Frankly, I only start equity investing ~5 year ago...

  
  

  You're humble lah...
• 

  12:10pm
  

  Assi AK
  

  
  

  
  

  I am full of nonsense lah... Life is too short to take myself too seriously. ;p
• 12:11pm
  

  R
  

  
  

  
  

  I choose and pick some of your nonsense... which make sense to me.

A jungle is full of resources but it could also be a dangerous place.

You are welcome to explore the jungle that is ASSI but tread carefully and be careful in deciding what are the resources you can use.

Related post:
Get the most out of ASSI.

STE says to see crises as opportunities and accumulate.

I am happy to publish another blog post by a fellow investor and one of ASSI's more prolific guest bloggers, STE:

“Creative Destruction”
and
The Business Cycle

“Millions saw the apple fall, but Newton was the one who asked why.” By Bernard Baruch .

 “The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions.” By Seth Klarman

We have seen market move and swing viciously since mid of last year due to event such as “Yuan devaluation “ , “Oil and Emerging Market crisis “ , “ China’s Debts and Shadow Banking issues”  and the recent one “ Brexit “.

All these event has created huge market volatility and because of investor’s psychology swing together with these market news … we have seen the index swing up and down wildly.

One need to always remember that “"Psychological create 90% market”as quoted by Andre Kostolany.

Whatever things involving “people “ … it tends to be “ chaotic and messy “ , for me .. stock market looks like this :

Nowadays, Stock Market became more intricated and complex due to fast moving news by click of second and much intergrated / connected world by IT revolution in recent years.

News move in Nano-second and always being “magnify “to attract viewers’ attention or increase subscribers …

     

Some of the event may have long term impact on the market but some are just “ noise “ which affect the stock price in short term … but even for those major event , remembered that market always move in cycle and “mean reverting “ eventually .

Joseph Schumpeter, an “Austrian Economics “ coined the phrase of  “ Creative Destruction “ and also written great books like “ Business Cycle “ / “ Capitalism ,Socialism and Democracy “.

According to him , “Creative Destruction is the essential fact about capitalism “ and he gave example like “ blacksmith  being wiped out by factory , the car superseded the horse and buggy, and corporation overthrew by proprietorship “..

And by Wikipedia , according to Schumpeter, the "gale of creative destruction" describes the "process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one". If  you are interested on “Austrian School of Economic thought” , you may refer to this link ..   ^{https://en.wikipedia.org/wiki/Austrian_School  and further reading on works from “Austrian Group of Economist like}  Ludwig von Mises  and Friedrich Hayek .

Same for other crisis , eventually , people will need to move on and market will not even remember those crisis e.g Oil crisis in 70s , Asian Financial crisis , Dot-com bubble and the latest GFC caused by Housing bubble .

Look at above chart on Dow Jones since 1884 ,, market gone through many cycles and even with 2 “world war “ and various bubble & panic .  GFC in 2008 may become insignificant if we look at this chart in long term …

BUT ,,, one may argue that as investor ,, we may not have such longer time to go through the market …well , that’s fair enough !! One may need to look at shorter time frame and react to our own investment cycle / need accordingly.

For me , as per previous blog post , I will only use one chart  and react to it accordingly to adjust my portfolio allocation from time to time. That’s the “ Linear Regression Chart on market and Mean Reverting concept “ , by doing this , I hope to avoid buying high when market is in “euphoria “ and taking advantage on situation when market is in panic and over-react.

As rules of thumb , we must also avoiding those “highly speculative and  hot stock “ in the market and be realistic to our “ expectation of return on investment ”.

Also , as I mentioned before on the “Fallacy of Indexing “ … when we talk about long term index return of 8-10% … it is base on average  of very long time frame … in shorter time frame ,, index could swing by +/- 20-30% easily .

There is also “ survivorship “ biases on the stock component in the index… for those stocks who have destroyed by business cycle and lack of innovation (e.h NOL/ Noble ) been taken out from Index and new one being added . I guess this is also part of the process of “Creative Destruction “. When the old one being destroyed and disappear in the Index , the new one being added and continue to create value for the Index. 

“ Crisis = Opportunities “

If we look at  Singapore’s context ,,, market has also gone through many cycles with up and down … if one could take advantage on one or two of these crisis ,, it could really shortern our time to achieve F.I.R.E.

< I have not added the latest event on BREXIT ,,, it may turn out much more serious or may not in the list at all … it is anybody’s guess . I think>

< Credit goes to one of the bloggers who have created this table , which I have forgotten from where I got this >

For the past 20 years , market have corrected more than 9 times which have resulted negative return of -20% to -62%. This is to show that how often and crisis prone our market is.

“ Linear Regression and Mean Reverting “

My investment strategy for coming years remain the same …where I will take advantage when stock index gone down to 2500 level +/- and start to accumulate war chest again when stock rebound from that level .  Please ensure to keep some cash buffer if index went down to 2200 ( which is equivalent to crisis level in 97/00/08 ).

As mentioned earlier , market will be much more  volatile due to “flooded liquility “ couple with psychology effect due to “market NEWs ( noise ??)  “ .

Let’s tighten our seat-belt and ready for this “bumpy ride “ !!!

< Dividend update >

"Do you know the only thing that give me pleasure ? It is to see my dividend coming in …" John D Rockefeller

YES! This is most important event for investors who have invested for “passive income “ ….regardless of market volatility ,,, dividend income continue to flow in …

Total dividend collected for  1^st Half 2016 = $102,426 .  (my methodology of calculation is different from AK as I did not include the privitazation return from Saizen as “dividend “ ,, instead , I would treat them as “ return of capital “).

** Total dividend increased substaintialy in 2 Qtr 2016 due to more investment in 1^st Qtr 2016 on some of the blue chips by taking advantage of the market turmoil during early 2016 . Also, partly contributed by better div from Accordia Golf Trust.

Lastly , allow me to re-quote below which I have quoted before : by Warren Buffet in 1999

Stock have always come out from crises “Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”

After year 2000 , stock market have experienced another 2 major crises i.e Dot-com Bubble in 2000 and GFC in 2008 … but yet .. Dow Jones stand at above 17,000  while watching at the episode of BREXIT crisis unfolding .

Happy Investing and stay focus on your Long term Investing strategy, hope & wish all could achieve F.I.R.E soon!!

Cheers!!

---------------------------------
AK:
"What does F.I.R.E. stand for? Make a guess. I did and got it right! I so clever. Ya, I know. AK is so shameless! Bad AK! Bad AK!"

Related post:
STE's investment strategy.

Compare apples with apples and learn something.

Many readers think that I don't take enough fruits and vegetables and I have been making an effort to increase my intake. 

I enjoy a particular brand of apples a lot, Envy. Crisp and sweet, it is probably more expensive than some apples but, hey, I am learning to be nicer to myself.

Envy apples sell out quickly and many times I find them sold out at the NTUC Fairprice in the HDB estate near my place. So, when I saw them on sale at a branch in a shopping mall this morning, I bought some.

This evening, after dinner in a warm and crowded kopitiam near my place, I popped into the NTUC Fairprice I usually patronise just to enjoy the air conditioning. Clever, right?

Then, I saw the apples. 

Ah, new stock has arrived, I thought to myself. Out of habit, I looked at the price and, then, I looked again.

Sure or not?

I was pretty sure I paid a higher price just this morning.

Anyway, I bought a pack, came home and checked. You know lah, we should compare apples with apples, right?

AK so witty? I also say.

See the difference?

OK, magnified for the optically challenged:

Alamak. How come like that?

Now, I know. 

Moral of the story:
"Don't buy fruits from NTUC Fairprice found in more atas locations."

A 10% difference is a big deal. 

Well, to me it is, anyway.

I know. It is hard for me to change my ways.

Comparing apples with apples, I learned something this evening.

Related post:
What a visit to NTUC Fairprice could teach us?

Sell 2 condomiums to buy 1 landed property?

Hi AK,

I chanced upon your blog recently while searching for landed property and found your blog very interesting.

I would like to have your opinion on my property search.

I am in my late 40s and owns 2 condos in the OCR with my wife.

One of the property is fully paid off and rented out. The other property where we live in, still have a loan of $800k for 20 years.

I am confidence of paying off the loan when I reach 55 because of the rental and we have a combine income of more than $20k per month.

We are considering selling off our 2 condos and purchasing a landed property. I did my sum and conclude that we still can have the similar loan of $800k if we purchase a landed home at $2.2 mil.

Now my Questions

1) Does it make economic sense to swap 2 condo for 1 landed if everything remain the same or similar? interest rate, loan tenure and amount etc.

2) Although with the landed, I will have no more rental income. But I will still be able to reduce the loan significant when I reach 55 with my CPF withdrawal.

3) Any pitfall that I need to consider seriously? Like is it realistic to have a $2.2mil landed?

Thanks in advance for any advice (professional or unprofessional) :-)

Best Regards

B

Hi B,

Welcome to my blog. :)

Financially, I believe that you are in a comfortable position now and buying that $2.2 million landed property doesn't seem like a demanding thing. It is affordable.

However, you did not mention how much you have in your emergency fund or what are your plans to help fund your retirement if you were to purchase the landed property.

Like you said, buying the landed property would mean giving up your rental income and it could also mean drawing upon your CPF money (which is really meant for retirement funding) to reduce the loan for the landed property at age 55.

I am just raising some pertinent questions and you don't have to tell me anything else if you don't feel comfortable to do so.

In closing, I just want to say that it is probably OK to up our consumption level if we have certainty we will avoid financial hardship later down the road.

Best wishes,
AK


Related posts:
1. Do I need a bigger home?
2. 2015 passive income all gone.

Solace says winter is coming and he is taking action.

Sharing a comment from Solace, an ASSI guest blogger. It has been a while since he wrote and this piece is a heartfelt one.

Solace says:

In trying to navigate through personal finance, I have learnt not to set conventional limitations on myself.

When I first started out, I thought I should only work from 8am – 5pm, Monday to Friday. No work for me on public holidays and on weekends.

Such thinking limits options to increase our income.

I know people who monetise their free time on weekend and public holidays to give tuition. Others work as relief taxi drivers on weekends.

I have 2 friends who are passionate about sports and music, respectively. Both hold full time jobs in the corporate world. One transforms himself into a swimming instructor during weekends and evenings while the other teaches music on his off days.

My industry and skillsets have allowed me to change from working regular hours to doing shift work. 

Now, I am required to work on some weekends and public holidays. Sometimes, I am also rotated to work night shifts. I would also volunteer for overtime as long as I can make it. All this translates into higher income as a result.

Human capital is limited, make hay while the sun shines.

Try our best to make more money while we are younger and healthier.

"Winter is Coming" is a motto in Games of Thrones.

The meaning behind these words is one of warning and constant vigilance. There are always dark periods (“Winter”) in our lives even if things are good now ("summer").

In our context, winter can come in the forms of economic recessions (leading to retrenchment, pay cut, pay freeze, for examples). Of course, sickness and old age are inevitable.

I do hope that I am well prepared when “Winter” eventually comes into my life.

AK hopes that all of us are well prepared.

Do the right things because our lives can be and should be better.

Related post:
A young father says money not enough.