Say VES and make $35,000 selling my car?

There was the CEVS and, now, we have the VES.

Lucky for my readers, ASSI is always just ASSI.

Anyway, the CEVS stands for Carbon Emission-Based Vehicle Scheme. Basically, cars with lower carbon emission were given rebates and I benefitted from this scheme when I bought a diesel car about a year ago. It reduced the price tag of my car by more than 10% which was a big deal.

In January this year, when the government announced that they were looking into the real environmental cost of diesel cars, I expected them to disallow diesel cars eventually. It would take many years to achieve this but, in Singapore, if the government wants to do something, we better believe it will be implemented.

So, to discourage higher consumption of diesel, last month, we saw an additional tax on diesel. 10c per litre. That is a few percentage points higher in price but still about 30% cheaper than RON95 petrol. It was 40% cheaper but 30% cheaper is still a lot cheaper. Diesel cars still make more sense for the cost conscious car owner.

Negligible impact.


I was also pleasantly surprised that the government decided to reduce the special tax on diesel cars. I am paying about $1,200 in annual road tax for my diesel car whereas I was paying $700 for my petrol car, both are 1.5 litre cars. 

Apparently, I will be paying less in annual road tax in future. I guess I am lucky that taxis make up the bulk of the diesel car population in Singapore and the government has quite a few (very good) reasons not to rock the boat too much.

Zero impact.

Now, what is the VES? This is the new Vehicular Emission Scheme and will stay in effect till end of 2019. Vehicles will enjoy rebates or suffer surcharges based not only on carbon dioxide emission but nitrogen oxide and particulate emissions as well.

So, diesel cars, with their lower carbon dioxide emission which enjoyed rebates in the past will suffer surcharges. Now, this, in my opinion, will really discourage diesel car ownership. It will do what the 10c per litre increase in diesel price cannot do.

If I were to buy my diesel car under the VES, I would be looking at a price tag that is some 15% higher whereas it was 10% lower with the CEVS before!

Earth shattering impact!

10%? 15%? No big deal?

OK. Let's put it in dollar terms.

Imagine a $140,000 price tag receiving a CEVS rebate of $15,000 which brings the price down to $125,000.

Now, imagine the same car receiving a VES surcharge of $20,000 which brings the price up to $160,000!

We are looking at a $35,000 difference!

For most middle income households, that is a big deal.


I really enjoy driving my diesel car and I am lucky I paid a lot less for it too.

Now, I wonder if I can sell my car for a higher price. Yes, I know. Bad AK! Bad AK!

(Oh, I hope you enjoyed the 3 video clips too. I laughed a lot and my jaw also dropped many times. Think I need to see a doctor liao.)

Related post:
5 reasons to buy a diesel car.

References:
1. Diesel vehicle taxes.
2. Vehicular Emission Scheme.

NikkoAM-StraitsTrading ex-Japan REIT ETF or "AK REIT ETF"?

I am feeling lazy, as always, and didn't want to write about the new REIT ETF but I received so many messages that I decided, maybe, I should say something.

I didn't want to blog about the ETF because it is easy enough to understand. 

It will hold a basket of REITs, 23 to be exact, from countries such as Singapore, Hong Kong and Malaysia. 

It will distribute income quarterly and the distribution yield is estimated to be 5% at IPO.

The ETF is probably a good choice for people who want to have exposure to REITs but are too lazy to be bothered with researching individual REITs. 




OK, I understand the lazy bit but they will have to take the good with the bad in the ETF.

For people who know more about REITs, they are probably better off investing in individual REITs. 

I don't know about you but a 5% distribution yield from a REIT product is unattractive to me.

Why?









Well, remember that REITs are leveraged instruments. 

Leverage magnifies gains. 

So, the 5% yield is after magnification. 

Taking into consideration that they distribute 90% to 100% of their cash flow (i.e. they have zero retained earnings), a 5% yield doesn't seem attractive.

To me, the only good thing about the ETF is that having a portfolio of 23 REITs reduces concentration risk. 

However, if diversification is what we want, we can try to form our own REIT ETF.










Taking from my portfolio, for example, we could put together an "AK REIT ETF":

1. AIMS AMP Cap. Ind. REIT

2. FIRST REIT

3. Frasers Log and Ind. Trust

4. Ascendas Hospitality Trust

5. IREIT Global

6. Croesus Retail Trust

7. Religare Health Trust

OK, I am being a bit liberal here since not all are REITs but you get the idea.




Assuming equal weight given to the 7 components in "AK REIT ETF", we are looking at a distribution yield of more than 7%. 



"AK REIT ETF" would generate at least 40% more in income than "NikkoAM-Straits Trading ex-Japan REIT ETF".


Oh, did you notice that my REIT is also less of a mouthful? 

Yes, I know. 

Bad AK! Bad AK!










Of course, we would also have control of what we want in and what we want out. 

We could also change the weight of each component.

If we are investing in REITs for income, if we want some diversification, then, perhaps, NikkoAM-StraitsTrading ex-Japan REIT ETF is a decent option. 

Otherwise, the ETF really doesn't seem attractive to me at all.





-------------------
UPDATE (16 March 2017):
What happens if one of the REITs (or a few) in the ETF had a rights issue?
A reader found out from the horse's mouth:
"Investors in the ETF have no direct access to the rights issues.... Manager has the discretion whether to take up the rights/sell the rights..."

Ron and Dave dissect some of today’s most important REIT ETFs.