Upgrading from 4 room flat to executive condominium.

Reader:
Hi AK, I have been scouring your blog and other cpf articles but need your advice.

I currently have about 67k in my cpf OA (I refunded my OA with cash for my hdb installments which I previously paid using OA, thus considered cash payment for my hdb) And 63k in my SA (due to yearly top up).

I am turning 30 this year. I started using cash to continue paying for my hdb installments which is slightly less than $1k a month-4 room hdb.

My question is this. I am thinking of doing additional transfer from OA- SA to make it 100k in my SA. 

What is holding me back is that I plan to buy a executive condo in the next 5 years. Proceeds from my flat can cover more than the downpayment.

Can you talk to yourself to see what would you do?



AK talks to himself:
Eh. If you have enough cash, don't use your CPF-OA money to pay for new place.
If no choice, then, use the CPF-OA money. Don't transfer to SA.



Reader:
I intend to keep a lump sum in OA worth at least 2 years of installments in case of emergency. I calculated if I continue paying cash for my hdb, by the time I get the condo, my OA will still be able to cover 2 years worth of installments.



The reader sounds like a prudent fellow.

Of course, we should remember that our home is a consumption item. If we could lower our cost of housing, we should probably give it some serious consideration.

Related posts:
1. Should I do CPF-OA to SA transfer?
2. Options for CPF-OA with flat on the way.
3. How to stop accrued interest from growing?

Make money from Croesus Retail Trust and no worries?

I said before that if an investment is still doing what we want it to do for us, there is no reason to sell unless we have found a another investment that can do a better job, bearing in mind to compare apples with apples.

Reader:
Hi AK, noticed you mentioned you would prefer not to accept any privatisation of Croesus. Just curious about the reason?

Supposing they pay a 20 percent premium, you'd be getting back effectively 3 years of dividends. Together with the large capital return (which would be more than 120 percent since your average price is much lower than current price), you could easily put that money on some other REIT, which itself would generate income moving forward.

So it seems that it's definitely good to take any deal that comes by. Or am I missing something?

AK:
It is like killing the goose that lays the golden eggs. 😉

Reader:
Haha true
Except with what you get back, you can buy another golden goose 😛
and have some more leftover because of the premium.

AK:
If you can find another golden goose. Not so easy. 😞


Well, sometimes, we don't have a choice and are forced to sell. Will just have to be philosophical about losing the goose then.

Related post:
History with Croesus Retail Trust.

History with Croesus Retail Trust and current thoughts.

When I found out that Croesus Retail Trust could be privatised, I had a feeling of deja vu.

It wasn't too long ago that something similar happened to Saizen REIT and, because of that, I lost a significant income generator.

Now, it seems that I may lose another significant income generator.




As I invest primarily for income, this creates a headache for me, especially when it is a relatively big investment in my portfolio. 

Mallage Saga, a CRT mall in Saga.

Some might remember that Croesus Retail Trust is one of my more significant investments as I shared this in a blog earlier this year.

In any case, the news got me nostalgic. Hence, this blog.





I first blogged about Croesus Retail Trust in July 2012 and, it was obvious, I was not too enthusiastic about it then.

See:
Croesus Retail Trust: IPO planned.


However, all investments are good at the right price and I became an investor in late 2013.

See:
Croesus Retail Trust: Long position.

I like to think that patience will be rewarded and I guess I was in this case.

Then, some readers were worried about Croesus Retail Trust and I wrote a piece titled:
Croesus Retail Trust: Motivations and risks.

When Mr. Market was feeling depressed, I bought more as I believed that an attractive investment just got more attractive. 

When Croesus Retail Trust offered rights units, I bought more because they were going to use the money for reasons which I liked.

See, for example:
22 for 100 rights issue (at 61c each)






Rights issues are not necessarily a bad thing and this is a topic I have blogged about many times in the past.

For example:
REITs and rights issues: Dilutive?

Over time, Croesus Retail Trust became a very significant investment that it is today for me.

I like what I see. 

So, I stay invested.





Oh, if you think this blog title sounds familiar, it should be because it is a play on this blog:
History with Sabana REIT and current thoughts.

Of course, regular readers would know that a big part of my investment in Croesus Retail Trust was funded by the proceeds from selling my investment in Sabana REIT years ago.

See:
Added more Croesus Retail Trust and reduced Sabana REIT.




I made pretty good money from my investment in Sabana REIT and I have made good money so far from investing in Croesus Retail Trust.

Even though I would prefer to continue receiving income from Croesus Retail Trust, if it should be privatised, then, I would probably enjoy (with misgivings) another round of capital gain.

Croesus Retail Asset Management Pte. Ltd. (the “Trustee-Manager”), as trustee-manager of Croesus Retail Trust (“CRT”), wishes to announce that it has been approached in connection with a potential transaction which may or may not lead to an acquisition of all the issued units in CRT (“Units”). 

Related post:
My investment portfolio.

How do I protect my assets before marriage?

My last blog post probably didn't sit well with most female readers, if not all, even though it is quite a common view among the guys. 

I know, sexism is alive and it is very much the case for both guys and girls, if I may add.

Then, a reader brought up the issue of prenuptial agreements.

Source: HERE.

What is a prenuptial agreement or prenup?

A prenuptial agreement, antenuptial agreement, or premarital agreement, commonly abbreviated to prenup or prenupt, is a contract entered into prior to marriage, civil union or any other agreement prior to the main agreement by the people intending to marry or contract with each other. The content of a prenuptial agreement can vary widely, but commonly includes provisions for division of property and spousal support in the event of divorce. (Source: Wikipedia.)

I have always thought that marriage should happen because a couple want to have children. If they do not wish to have children, they don't need to be married. Marriage becomes a want in such a case.

Of course, in Singapore, a couple might get married just because they need (or want) to get a HDB flat but stay childless. Uniquely Singaporean.

In any case, I feel that there should be trust before a couple embark on such a major decision. If they don't trust each other, then, why get married and have children? Indeed, not just why but how?

I am mostly a pragmatic person but I dislike prenuptial agreements because I think they are like the thorns on roses. They are ugly things in what should be beautiful.

However, like the thorns on roses, I have come to accept that they could be necessary for some people, the rich people. See, told you I am pragmatic.

Having said that, would girls marry guys who want to have prenuptial agreements? 

Indeed, would guys want to marry girls who want to have prenuptial agreements? 

After all, it could be a case of a rich wife and a poor husband. 

See? AK is not sexist.

"Women are like the rake in poker."

I was chatting with a reader on FB about saving money and I gave him a link to one of my old blogs: http://singaporeanstocksinvestor.blogspot.sg/2011/12/common-piece-of-advice-on-saving.html

I was scrolling through the comments section and found this:

Reader: Hah, while I definitely agree with what you say about the tips on drinking water from coolers, for the large part, it is a very male perspective. Women are like the rake in poker, once you are dating/married, its not easy to get the lady to agree on such things. They like to eat at fancy restaurants and so on and so forth. Once that happens, its not easy to save.

AK: I think a third or at least a quarter of my readers are females. Ahem... I am not going there. ;p

I don't know how many of us guys have faced or are facing this issue. 

Of course, if we are the "OK with spending money" type, I don't think this is really an issue but if we are the "AK the giamsiap fellow" type, then, it could be a problem.

For those of us who don't have the ability or the willingness to spend big money on dates, what do we do? 

For me, it is quite simple, junk the date! No date, no problem.

Remember those days?



OMG! There is a website that teaches girls how to make guys buy stuff for them!

"How To Get A Man To Buy Me Things."

Guys, be careful. OK, since the video says click on the link for more advanced tips, maybe, girls should be careful too.

Now, I am going into hiding.

Spend more money to make more money!

Reader:
I am from a humble working class family, staying with my grandmother, parents, and younger brother in a 4 room flat.

My younger brother is very intelligent but doesn't like school. 





He ventured into MLM last year and enjoyed some early success. 

Now, he wants to buy a car and it has to be a Mercedes Benz or BMW. 

I told him to save the money. 

He said he must look successful and rich to make more money as he can convince people to join him more easily.






I am just a simple person working in the civil service. 

I don't know how the business world works. 

I follow your blog because you give down to earth advice about money and life in general.


I am worried about my brother. 





What should I do?

Thank you for the generous sharing of your time and knowledge.









AK:
Alamak. I don't know what you should do.
I will say that there are many ways to make money in this world.

Hopefully, we can find something we like, are good at, which makes lots of money and is legal.

I know, that is the dream and not many people get to live the dream. I didn't.





Then, of course, it is about being prudent with money, being pragmatic in life and being patient as we grow wealth.

For my own safety, that's all I will say. :)
Related post:
1. If we are not rich, don't act rich.
2. Prudent, patient and pragmatic.

Why join the Supplementary Retirement Scheme?

Reader says...

I just like to share one of my view on SRS account.

When I first decided to contribute to SRS, it was mainly to reduce my income tax.

However, I realize that a lot of people between 55 to 65 years old have to work because their CPF is not enough for them to stop work before the CPF life pay out at age 65. 

This is assuming that CPF is their only retirement fund.

By contributing to SRS, we will have a sum of money which we can withdraw at age 62 penalty free. 

I do realize that you can withdraw up to $40k (per year) to avoid paying income tax on them.

Hence, SRS form a safety net for us between the age of 55 to 65. 

Knowing that we have something to withdraw for our old age at 62 instead of 65 (which the earliest  CPF Life can start paying).

Maybe this might convince more people to contribute to their SRS?

AK says...
I feel the same way. I will be very happy to share your POV in my blog. Thank you. :)

Related post:
SRS e-book and analysis.

Centurion Corporation Limited to double in price?

Reader:
Hi AK, I invested in Centurion Corp. 

I am thinking if I should sell or if the price will go higher with the dual listing in HK.





Chinese money floods into HK stocks.





AK:
Dual listing in HK doesn't change anything in terms of business fundamentals.

Centurion Corporation could be seeking what, to them, is a fairer valuation of their business.

The EDGE wrote that in 2007, Want Want China Holdings was trading at 15x PE ratio in Singapore and when relisted in Hong Kong, it traded at 45x PE ratio. 




Mah Wah Holdings was trading at 3x PE ratio in Singapore but trades at 16x PE ratio in Hong Kong.

Centurion is trading at about 10x PE ratio. 

Could it trade at 15x or 20x PE ratio, perhaps, even higher after the proposed dual listing? 

Looking for a calculator now? 





So, would it be 70c a share or 80c a share or 90c a share in future?

All in the realm of speculation but all quite possible.

When I invested in Centurion earlier this year, it wasn't because I had a crystal ball which told me that dual listing was on the way and that the share price was going up.




I know why I invested in Centurion.

I hope you know why you did too.

Related posts:
1. Added Centurion Corporation Limited.
(See updates in the comments section.)
2. Centurion Corporation Ltd. FY 2016 report.

HDB flat is 37 years old and son is only 8.

Reader says:
Good morning AK!
I am your avid follower since I attended the Tea with AK session some time back.
Have started my retirement planning since.

My wife n I have this HDB lease concern. Flat is 37 yr old (and my son is only 8). Recently Lawrence Wong brought it up again. My wife want to sell and buy new flat in Seng kang. New lease 99 years so that can give my son and also preserve the value but I don't think it is a good idea. From mature to non mature estate. How ah? Appreciate your advice .

AK says:
It depends on what matters more to you. 🙂
Location or legacy? 😉


http://www.straitstimes.com/singapore/housing/to-buy-an-old-hdb-flat-or-not-that-is-the-question
Of course, this is not a new topic in my blog. Newer readers of ASSI who are interested might want to read the related posts below.

Related posts:
1. Resale flat or BTO in Bidadari?
2. Purchasing HDB flat new or old?
3. Buy 99 years leasehold or freehold?
"As many people have observed, owners of 40-year-old flats may find it harder to offload their homes to new buyers now, as people become more aware of the risks involved in taking on a home with a fading lease. "
Source: The Straits Times

Lending money to family and friends?

Reader:

Dear AK,

What do you do when people borrow money from you?

Everytime a friend called to borrow some money, I will always remind myself that many years ago I also seek help, a friend lend me a few thousands dollars. I worked hard and repay. So whenever friends seek help, I help them.

After a while, I found that most are unable to pay back... Actually, one of them even bought a few property investments later but did not return money he borrowed from me. It has become difficult for me.

Last week, a friend want to borrow 1K. He is fed up that for only 1K, I ask this ask that... So, I told him that I am financially tight and unable to lend him money.

AK replies:

Hi,

I can understand your situation and this is something that I have blogged about too.

"I was taught that if we should lend someone money, we must do it with the mindset of a donor."
See:
http://singaporeanstocksinvestor.blogspot.sg/2013/01/the-difference-between-lending-and.html

Of course, there are always reasons which I find more acceptable and in those instances, I am prepared to part with some money. Yes, the operative word here is "part".

"Imagine that the money has vaporised and gone to a better place. If it should come back one day, well, go celebrate!"
See:
http://singaporeanstocksinvestor.blogspot.sg/2013/10/lending-money-to-someone-you-care-about.html

Sometimes, for legitimate reasons, people need a helping hand and if they are people who matter to me, I will help. :)

Best wishes,
AK

$100,000 lesson from Marco Polo Marine.

I always say that I have been mostly lucky as an investor. The operative word is "mostly".

Long time readers would remember the narrative for Marco Polo Marine, a business which transformed from a tugs and barges operator, it was doing all the right things to grow stronger, adding value over the years. 

In fact, Marco Polo Marine weathered the Global Financial Crisis well and remained profitable even through bad times. That says something about their management.




When I decided to invest in Marco Polo Marine, I noticed persistent insider buying a few years ago and their prospects were good. They started to pay meaningful dividends too. 

It was likely that, conditions permitting, dividends would continue as the founding family had a 60% stake in the business and they still do.

So, what went wrong?

Marco Polo Marine is in a cyclical industry and in a cyclical industry, we have to expect down cycles. They managed to survive previous down cycles because they were more conservative. 

That is a lesson from this episode.




Any company in a cyclical industry might want to be more conservative because we don't know when things might go down and for how long they might stay in the doldrums. Trying to do too much with a weak balance sheet could be dangerous.

I have said before that if a highly geared business has strong cash flow, then, it could cope with its debt. Yes, it is about having a healthy interest cover ratio. This was from 2015:

This was why I avoided the likes of Otto Marine although some of us might remember how there were write ups on how they changed their business model and things could become better. It was all too speculative for me. 

I didn't buy into Nam Cheong as well because they were building vessels in anticipation of buyers which looked smart during good times. 




Swiber, I avoided and I probably blogged or talked about avoiding their bonds too.

Comparatively, Marco Polo Marine, to me, was a safer investment although it was a smaller business. 

Unfortunately, when bad times strike, cash flow could dry up, especially when the bad times have lasted as long as they have for the O&G businesses. This dry spell has been the worst and the longest for the industry.




I am not writing off Marco Polo Marine yet because it is not over until it is over. However, although they are not a Swiber, there is a chance that Marco Polo Marine might suffer the same fate. If that should come to pass, I will have to write off what was once upon a time a $100,000 investment.

Related post:
Cutting or holding MPM?

Good time to buy investment property now.

"There were no worries. It was easy money."





Dear AK,
Morgan Stanley thinks that property prices in Singapore will double by 2030. 
Is a good time to buy investment property now?

Source: AsiaOne.

AK replies:
No one can say what the future holds with total confidence. Of course, people could and some would continue to make predictions for any number of reasons.

I do know that there were times in the past and also the recent past when we could get rental yields of 5% and even close to 6% in Singapore for a residential property. Although it does not adhere to the Rule of 15, in Singapore, that is probably pretty good.





Now, we are probably looking at rental yields of around 3% or, often, even lower and I have said before that this only looks attractive because of the very low interest rate environment. I don't know but did Morgan Stanley say interest rates are rising?

See: 
Rule of 15.





Having said this, I will say that there are always good investments to be found. It might be more difficult to find them but, probably, they are out there somewhere. What is a good investment? Well, it is probably safe to say that it is one that offers good value for money.

See: 
Affordability and value for money.





I acknowledge that I do not know everything there is to know and I definitely do not know what the future holds but I do know that if we wish to speculate, we must have deep pockets. 

Speculators should know that they are speculating and not investing.





See: 
Questions to ask.

Finally, of course, we could make quite a bit of money from speculating. We just have to be lucky.

Related post:
Disastrous investments in real estate.

Structural Unemployment. (Having face more important than having food?)

Someone told me a friend of his has been unemployed for more than a year and recently approached him for a loan. 

Apparently, the kind of work his friend was doing is increasingly hard to find.

It sounds to me like another case of structural unemployment.





It brings to mind a comment I made not too long ago here in my blog:

"The world has been disrupted and will continue to be disrupted by technology.

"It is happening faster than ever.

"If we were to go to sleep and wake up 5 or 10 years later, we might get a shock.

"Many will lose their jobs because of the disruption.

"The old economy is under siege.

"I know because I belong to the old economy.

"If I am not financially healthy today, I would be very worried."




Being financially literate is important but being financially savvy is even more important. 

However, there is an even more important point of this blog post. 

We should be pragmatic.




This person has been offered a job in a different industry but he rejected. 

It is a "dirty" job, apparently, and doesn't pay as well as his old job.

Is having face more important than having food on the table?





Related posts:
1. Be a plumber or be unemployed?
2. Compared to anger, shame is worse.

Know how to grow our CPF savings.

I think there are quite a few readers who are confused about the difference between contributing to their CPF account and topping up their CPF account. 

I understand their confusion. Once upon a time, I was confused too.




1. There is such a thing as the CPF annual contribution limit. Basically, our mandatory contribution (MC) and voluntary contribution (VC), if any, cannot exceed the annual contribution limit. 

See:
CPF Annual Limit and VC.

If we are working, chances are we are contributing to our CPF account. That is required by law. So, it is called mandatory contribution (MC).

If our MC does not hit the annual contribution limit, we can do VC to hit that limit.

VC can either be done purely to our CPF Medisave Account (MA) which then gives us income tax relief or it can be a regular VC which the CPF Board will apportion to our OA, SA and MA (or just the OA and SA if our MA has already hit the ceiling). A regular VC does not give us income tax relief.

For more information, see: 
Online contribution to MA.
and

VC to my CPF accounts.






2. There is also the option to top up our CPF Special Account (SA). Known as minimum sum top up (MSTU), this is not subjected to the annual contribution limit. 

The MSTU is instead limited by the prevailing minimum sum (MS) or what is now known as the full retirement sum (FRS). We get income tax relief for the first $7,000 of MSTU every year.

For more information, see:
MSTU and interest computation.




So, do you want to contribute to your CPF account or do you want to top up your CPF account? 

To the CPF Board, this is not simply a case of semantics.

Please read the following blog for updates:
CPF Amendment Bill 2021.

Emails on investments and the CPF.

I have been spending more time on a new hobby. Online gaming! 

No, don't worry. It is not of the casino variety. It is a MMORPG. 

What is this? Massively multiplayer online role-playing game. For more information: MMORPG.





The game is "Neverwinter" by Dungeons & Dragons. I am amazed that something like this is available to play free of charge! 

I remember "Diablo" by Blizzard was quite pricey. I waited for the price to come down before buying many years ago.

Anyway, if you get the feeling that I am spending less time blogging, you are right. So many hobbies and so little time. Cham.

It is so realistic but nowhere like SAO (Sword Art Online) of course. I wonder whether SAO's gaming technology would ever become reality.

Can you spot "Neverwinter"?

Reader #1:
Hi AK, I'm your new blog follower since last mth and wanted to ask you what's your advise on an effective approach to investment planning.
I remember you were saying need to have war chest (to take advantage when mkt downturn), emergency funds, investment etc but how do you apportion if let say I have $100k? Thank you.





AK:
Welcome to my blog. 🙂
I dun give advice. I am not allowed to. I am just a blogger talking to myself 😉
Anyway, without knowing your situation well, I can only talk in general.
So, I believe this blog post might interest you:
http://singaporeanstocksinvestor.blogspot.sg/2014/03/graduating-soon-take-steps-towards.html
And this:
http://singaporeanstocksinvestor.blogspot.sg/2015/05/how-much-should-we-have-in-our.html
Watch the video:

"How To Build A Budget?"





Reader #2:
Hi AK, i have been one of your silent reader and have benefited much from your blogs.
Today, i saw that AEM share price has dropped by quite a lot. But i don't understand why
I suspect it may be due to the bonus offer that was exercised today
But i don't understand what does the bonus offer means
And i cant find much info on it as well
Hence, i will like to consult you and learn at the same time





AK:
I am not a consultant. I am just a blogger. 😉
I am not allowed to give advice de. 😞
Anyway, this is the first time I have heard of AEM. Not familiar with this.
Bonus issue?
"Bonus shares are shares distributed by a company to its current shareholders as fully paid shares free of charge."
Source: https://en.wikipedia.org/wiki/Bonus_share






Reader #3:
Hello sir,
Would you advise for
1) OA = 40%
2) SA = 60%
or ????
No need for MA ? Bcos got insurance liao.





AK:
Always need MA. 😉
http://singaporeanstocksinvestor.blogspot.sg/2013/12/how-to-get-free-medical-insurance-in.html
How much you want to put in each CPF account depends on what you want to achieve.
SA is for retirement funding. Cannot be used for anything else. 😉
(Of course, if our CPF-SA were to exceed the FRS by quite a bit when we are 55, we could withdraw a tidy lump sum from our CPF-SA while the FRS goes into our CPF-RA. We could then use the withdrawn money for anything we want.)






Remember, AK is not a consultant. 

AK doesn't give advice. 

AK is just a blogger.

Go hit CPF MS or FRS by age 40!

Reader says...

I am currently 37 years old. 

I am working towards the target of hitting my CPF mininum sum by the age of 40.

The current balance in my SA is about 80k. 

My OA account balance is zero as I have transferred all my OA to my SA account. 

I have already hit the max limit for my MA of 52k. 

After reading your blog, I top up at the start of the year to receive free $88 ang pow. :)

I have fully repay my 4 room HDB loan and me and my wife have more then 6 months of emergency funds. 

Me and my wife has no other loans or liabilities.

I am thinking of contributing a lump sum cash contribution of 30k into my CPF SA so that the base amount is bigger and compounding at 4% a year means I can probably reach the minimum sum of 181k when I am 40. 

After that I just let time be my friend and let it do the compounding magic.

I am currently still working as well so I will have CPF contribution as well.

Do you think this is a good idea? 

I do understand that only up to 7k of cash contribution is entitled to tax relief.

Thanks for your help and looking to hear from you.

AK says...

It would depend on whether that tax relief from doing Minimum Sum Top Up (MSTU) is important to you. 

If it is, limit yourself to a MSTU of $7K a year. 

This is especially pertinent if you happen to be a high income earner. ;)







Related posts:
1. VC to MA and get a $88 ang bao.
2. $1.2 million in CPF by age 65?