How did STE who is married with children retire at age 44?

It has been a while since STE last wrote to me. STE is now enjoying his early retirement and has generously decided to share some thoughts with us here:

Hi AK ,

Yes , is me , STE. I have stop working since end last year and still on “sabbatical leave“ till now (it might become a “permanent leave without ending date“ haha ..

Escaping from 9-5 working environment is really something different and is a big change for me and my life style. Now, I have more time with my kids and doing more exercise (be more healthy now, I guess less stress also partly contributed to my better health, I used to have migraine and gastric for long time, but after almost 6 months after staying at home and doing nothing, all these medical symptoms seem gone. :)

Well, I thought of sharing my latest financial portfolio and some thoughts on investment strategies. 

My friends wonder how am I going to survive without a job for past 6 months. the answer is, yes, “Passive income through long term investment.“

Allow me to tabulate my “passive income“. Since day 1 of my investing journey, I like dividend very much, you may notice from my earlier post, the share I brought in early days on Malaysia stock market for counters like “Perlis Plantation / BJ TOTO/ PB Bank / Oriental Holding / Tan Chong / Malakoff /BAT etc “ were those with high Dividend Yield and good fundamentals.

Dividend Matters:

To show the importance of Dividend in process of wealth accumulation through investment, I would like to append below table. YTD accumulative Dividend and Qtrly dividend I received. I kept record on all the dividend I received since day one of my investing journey.

• Current Qtr dividend range from $40-50 K and total accumulated dividend is hitting $ 1 MIL soon
• About 42 % of total profit from our portfolio came from Dividend Income .
• Notes : Jump in dividend collected since 2009 was due to fund transferred from my Malaysia’s share portfolio and house since we decided to convert our citizenship. I was really "Lucky" as mentioned in my previous post on your blog.
• Notes : Quarterly dividend seems smooth out from early 2015 after Asia Pay TV change to pay their dividend on Qtrly basis.

Does size matter? Definitely. To have such amount of quarterly dividend, one needs to have quite substantial amount of portfolio but look at the chart, everything must start with “small steps“  and remember “Rome was not built in a day“. "Gamba Teh"!

What is your CAGR  and “power of compounding “ …

I think all the serious investor need to know what is their own investment CAGR. Well, our portfolio manage to achieve 11.13 % for past 17 years. Gone through various market cycles … dot com/ SARs/ 911/ GFC / etc. I hope my portfolio could sustain in next crisis.

Since market’s long term return on investing was around 8-9%, sorry, I have taken some of your money from market. Based on quotes from the book  “The incredible shrinking Alpha“, ”Alpha is a Zero-sum game (before cost ), meaning that for some investors to generate Alpha, they must exploit the mistakes of others“.

Picture worth more than thousand words :

Other than two investment strategies I have shared previously ie "Margin of safety" and "Mean Reversion vs Market Cycle", I would like to share few pictures which I deem important for all serious investors.

< On Market>

< Andre Kostolany: "Psychological create 90% market ">

"I can calculate the movement of the stars, but not the madness of men.” , Sir Isaac Newton

"Investors want certainty, and we cannot give them certainty. We can give them high probability; we cannot give them certainty" by Charles William Hamilton

Note: Of course, one needs to know how to avoid the “pit fall“ of investing in “hot or hype“ stocks from time to time.

< Sun Zhi : Know yourself , Know your enemy (market ), hundred battles, hundred wins.> 

< On Forecasting :>

Warren Buffet : “Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.”

< Short term vs Long term >

• Short term is full of noise and volatility, only long term will show result.

When we invest in property or setting up own business, we could afford to wait for years to see the result, but our expectation change when we invest in stock. We buy today and hope the price will increase much tomorrow.

Patience. Wait for the durian to drop.

< Investing during Crisis time >

Investing in crisis time can be really rewarding and it has shortened my journey to Financial Freedom. I still hold most of stock I bought during crisis which gave me double digit Yield on cost.

Warren Buffett: 
The incorrect lesson often preached that volatility is a proxy to Risk is dead wrong. Volatility is far from synonymous with Risk. Volatility can create opportunities or risk at the same time.

I am holding approximately 20% cash now. I was 100% fully invested 2 years ago. Since then, I have taken some money off the table and keeping my dividend received as War Chest as well.
I always look at CPF money as “investing in triple A rated bond“. I’m not using any of my CPF money to invest at this moment but I will use that once crisis hits same as during GFC.

AK’s idea of maximising our CPF-SA account is absolutely right. $25K of interest p.a (both me and my wife ) is really a good money to accumulate in next 10 years before we hit 55 . By then , we would have more than $1 MIL in our CPF accounts combined. This is another cushion in case market crashes drastically. Not forgetting the "power of compounding ", the CPF returns around 3% average (combine OA/SA/MA) is good money in the long run.

Last but not the least, on <Money Management and Life style >

As I mentioned in previous blogs, our lifestyle is rather simple and I’m staying in a HDB flat and eating at hawker centres or cook our own meals. With current our dividend income, we still could save up to 60% from total dividend amount. I think that is another cushion in case market crashes and dividend drop by half. I guess we still can survive .

Even before we talk about investing, living below our means and saving the difference for investing is the most important or key to Financial Freedom .

Cheers to all and I hope all could have smooth and wonderful journey to achieve your own financial freedom (and knowing how much is enough in your life).

NOTE: I think some readers did ask me on what books I recommend to read in previous blogs where I failed to answer that time. Below is a list of books I would recommend for all the serious investors. One may notice that I would recommend more Market History and Psychology as compare to Economics or pure Finance / Stock analysis. As I mentioned before, Market is 90% of people and 10 of Economy. And History repeats itself without fail.

- END -

I am sure we get a bit tired of hearing the same old stuff from AK all the time. So, thanks to STE for sharing. Much appreciated. Some points STE made are great reminders for me too.

So, make some time to meditate on what STE has shared with us and maybe read a few of the books he has listed too. Go to a nearby public library or do a bit of charity by buying pre-owned copies from BetterWorldBooks.

We also want to remember what Charlie Munger said before:

"It takes character to sit there with all that cash and do nothing. I didn’t get to where I am by going after mediocre opportunities." Charlie Munger

Oh, most importantly, congratulations to STE on his early retirement and improving physical health!

Related posts:
1. "Patience is the hardest part..."
2. Mystical art of wealth accumulation.
3. STE's story: Millionaire Next Door.
4. STE's story: Investment strategy.
5. STE's story" Personal finance.

How to meet 2 requirements with 1 act for OCBC 360?

A conversation with a regular reader of my blog:

Hi AK,

How's it going for you AK?

This is in regards to the OCBC 360 account and in particular to the criteria of generating an additional 0.5% interest amid the payment of 3 unique bills in a calendar month. 

I am wondering do you know that the topping up of our CPF-SA is considered a bill payment because I was so amazed when i discovered it.

My excitement behind this is that most bill payments are expenses and the topping up of our CPF-SA is not an expense at least in my opinion, considering that it is our own money at the end of the day.

In addition, for the younger ones who do not own a house and have minimum bills to pay yet (no utilities or mortgage), clocking three unique bills in a month may be a challenge. 

The discovery of this means that a single person like myself can essentially use a combination of monthly CPF-SA top up, credit card bill payment and mobile phone plan to qualify for the 0.5% additional interest!

What's even sweeter is that, other forms of mandatory payments can be soaked into my credit card component where an individual is required to incur a $500 monthy expenditure through an OCBC credit card in order to qualify for the separate 0.5% additional interest.

1% additional interest could never have been easier!

Warmest Regards,

P

AK asked for some clarification as his ageing brain couldn't keep up with the excitement:

Hi P,

I would like to share your discoveries in my blog very much. LOL.

I didn't know that topping up of the CPF-SA is considered a bill payment.

What "other forms of mandatory payments can be soaked into my credit card component"? Could you provide some examples?

Best wishes,
AK

P readily obliged:

Hi AK,

Yea for sure!

There is a very big list of organisations here, http://ocbc.com/personal-banking/help-and-support/payments-billing-organizations.html?#billing-organisations

Maybe using the word like "mandatory" may not be the most appropriate word, I think a better one would be "common". 

1) I paid a household utility bill which amounted to $50 in May with my Ocbc credit card (that's 1 out of 3 bills clocked to qualify for that 0.5% additional interest rate )

2) the same 50 dollars will also be counted as an expenditure on my Ocbc credit card since I used the card to pay for it. ( that's 50 out of 500 dollars of expenditure "soaked" into my credit card to qualify for the other 0.5% interest rate)

So my example previously was that for a single person who may not or has yet to own a property, may encounter difficulties when finding for 3 unique bills to pay. In this case, he or she may top up his cpf account and choose the option to pay via billing an Ocbc credit card to qualify for the additional interests. I like this option a lot because topping up our cpf is our money at the very end of the day isn't it?

I'm not sure would you find this useful since ur sa is probably maxed out, but for someone like me since I'm single, I think this is one of the very useful discoveries I have made for myself to qualify for higher interest rates on a savings account.

B,
P

If you have an OCBC 360 account, I think P has shared some pretty amazing stuff. :)

Related posts:
1. Attain financial freedom sooner.
2. Do the right things and transform our lives.
3. UOB ONE Account or OCBC 360 Account?

A chat on FDs, SSBs, OCBC 360 and CPF Top Ups.

Solace is a regular guest blogger here at ASSI and he has shared generously, without any agenda, his thoughts on personal finance and investment matters. He is sharing with us a conversation he had with a friend recently:

I had a conversation with a friend recently about FD, Singapore Saving Bonds (SSB), OCBC 360 and CPF.

Friend: u know hor, now got SSB, very good, very stupid to put money in FD.

Me: if u aim 10yrs, then it is better than FD, but if gt saving targets of 1-4 yrs, yearly renewal in FD for 1.X% is higher.

Friend: Then like that, isn't OCBC 360 better than FD. But I think I looking for long term risk free like 10 yrs.

Me: ocbc 360 can be better than FD only if u meet all their criteria plus they could change their terms and conditions anytime. since u want to look at risk free rate for long term time frame, why not consider your CPF SA risk free rate 4%?

Friend: erm, I don't trust or like CPF system, I might not even get my money back. I think Singapore bonds more "Reliable" than CPF

 

Me (internal thoughts): wah Lao aey, Singapore bonds more reliable than CPF? CPF is used mainly to buy govt bonds. Their nature is the same......

 

I gave up without speaking further. Cos need to spend too much time to explain further. Plus my friend might not listen to it as I sense that he is fixed in his views......

We need to do a very common sense when treating topping up SA

U know ppl in their 30s and 40s easily earn mid 4 figure pay. I am sure they hit the 7% tax bracket one of the year. U know what I talking abt right.

A 7% tax saving and a 4% interest, combine together, isn't it like 11% return in a year!

Sth we can't even get in equities market!

Or I shld say, majority cannot achieve 11% return in a yr....

Count it as my short version of guest blog haha

This is my version of "common sense investing" LOL

"Starting 2016, members 55 and above will enjoy an additional 1% extra interest on the first $30,000 of their combined balances. This is on top of the current 1% extra interest earned on the first $60,000 of their combined balances." CPF Board.

It seems that many more CPF members are warming up to the idea of topping up their CPF-SA and RA. This, I believe, is a good thing.

We should make full use of the CPF and make it a cornerstone in our plan for retirement adequacy. It is, quite simply, the sensible thing to do.

In investments, we go for low hanging fruits first. Why should it be different when it comes to planning for retirement adequacy?

Some blog posts in which CPF-SA was discussed:
1. Do you want to be richer? (2010)
2. Build a bigger retirement fund with CPF-SA. (2012)
3. Don't see money, won't spend money. (2013)
4. Upsize $100K to $225K in 20 years. (2014)
5. AK reveals his CPF-SA numbers. (2015)

Related posts:
1. Singapore Savings Bonds: Good or not?
2. Why fixed deposits over structured deposits?
3. UOB ONE Account or OCBC 360 Account?

Get ready for investment with Solace: here.