Borrow $100,000 to buy a car in Singapore?

Hi AK, 

When I get back to Sg next year, i'm planning on getting a car (depreciating asset boohoo!)

Now, on my previous car purchase, I felt i made a mistake of buying too early and had to take a full car loan. It ate up a lot of my monthly pay. So this time round, I wanted to do my sums right before diving in. 

I do have enough to pay upfront for a car (eg 100k). But could you talk to yourself if paying upfront for a car is a good idea? 

My alternative could be taking this 100k and throwing it into the Sg savings bonds/safer type of bonds, and earning the interest. As long as this "bond interest" is more than the "car loan interest", this would make it worthwhile? Am I missing a blind spot here? 

Can I just compare a 2% car loan interest vs a 3% interest earned from bonds and conclude that I will earn 1% interest? 

Could you talk to yourself on this issue? I will be eavesdropping!

thank you!!!

Hi,

You have to understand that when they say your car loan interest rate is X.X%, it is really more than that:

http://singaporeanstocksinvestor.blogspot.sg/2014/04/a-car-loan-is-different-from-home-loan.html

I don't like the idea of borrowing money to fund consumption and if we have to borrow money to buy a car, keep the loan quantum as small as possible:

http://singaporeanstocksinvestor.blogspot.sg/2016/05/what-new-mas-rules-for-car-loans-mean.html

Welcome back to the land of expensive cars!

Best wishes,
AK

Free money from the government is good.

Reader:

I don't know if this is the correct avenue to ask you a question. I'm hoping that you can give your insights if you're faced with this situation.

I bought a HDB flat and took a bank loan plus used a bit of my OA to pay for it. I have about $240k of bank loan left and now I 'owe' my OA $85k.

Since the market is kinda 'overvalued' now, so nothing to invest in. What would you do if you have some spare cash. Would you pay off the Bank loan or CPF loan?

Actually, I have enough money in my OA to fully pay off the Bank loan, but I decided that 'free money' from the government is good. Besides, the interest of 2.5% in OA is higher than 2% Bank loan.

Or I can use the money to invest if Mr Market gets very depressed.

What would you do?

Best regards,

AK:
I am not allowed to give advice. I am only talking to myself in my blog.

From your email, I get the impression that you have been reading my blog. So, you know about the accrued interest we owe when we use our OA money to pay for our home.





I am not saying anything new when I say that we should avoid using OA money to pay for our home unless we don't have a choice. CPF money is primarily for retirement funding purpose and not to fund consumption.

Since you already decided that 'free money' from the government is good, act on that belief. ;)





I say frequently enough that I treat my CPF savings as the investment grade bond component of my portfolio, generating relatively good returns. That is good enough for me.

We can never have our cake and eat it too.




Related post:
How to stop accrued interest from growing?

The best insurance in life revisited.

Reader:
I like your view on how to see term insurance as paying a sum of money for the protection from the accidents in life. Also how passive income is an alternative to paying for disability insurance. 

I like to seek your views, since it take time to build up passive income, would u view buying disability insurance as an temporary expense before we reach our passive income targets?






CPF Dependants Protection Scheme.
Start watching from 1.40 minute.

AK:
The best insurance in life:
http://singaporeanstocksinvestor.blogspot.sg/2014/07/the-best-insurance-to-have-in-life.html

But before we get there and if we need our earned income, yes, please be well insured:
http://singaporeanstocksinvestor.blogspot.sg/2014/08/in-my-40s-married-with-kids-what-would.html

Related post:
Term life insurance.

Old Chang Kee and AK the chef.

A reader complains that I no longer blog about my cooking. When I told her I share in Facebook, she says that she does not follow me on Facebook. 

So, this is a special blog for her.

I found an Old Chang Kee curry puff in my fridge. Don't ask me how old it is.

I dug out the insides.

Heat up some coconut oil. Add a couple of eggs. Stir the mixture around a bit.

I don't know if it is because I am such a good cook but it is delicious! Really!

Yes, I know.

Bad AK! Bad AK!

Related post:
Have our Old Chang Kee curry puff and eat it too.
Time really flies! It really does not feel like I have been a shareholder of Old Chang Kee since October 2011 but it is true!

Choosing a primary school for your child.

Reader:
i need your self talk about my situation. My only child, a girl, will be P3 next year, likely she will have a chance to attend the good primary school like RGPS or NYPS...after GEP selection by the end next year. 

However she feels dizzy whenever sitting inside a public bus or school bus... from my home BTO to these schools takes 1 hour by bus and i don't wish to own a car due to not enough budget. 

So I thought of buying a tiny condo 300~500 square ft due to up to $750k max budget in early 2019.

So where can i find such a tiny place which is nearby these schools and also within my budget?

Many thanks and wish to hear your self talk soon.


Tania Cheng from Guangyang Primary School.

AK:
The prudent thing to do is to go to a school nearer to your current home.

I have blogged about how we have to be prepared to spend quite a bit of money having children, especially in a country like Singapore. 

Trying to give the best to our children, it is important to draw the line somewhere. 

Somewhere? Where? 

Alamak. Don't ask me. I blur.

Related posts:
1. Have children and retire comfortably?
2. Married with children and retire at 44?
3. Why do I choose to stay in a condo?

To rent or to buy: Rule of 15 revisited.

Reader:
My bf and me are both PR. And the topic of housing is always a big question mark to us.

Both of us is not eligible to buy BTO, unless one of us convert to SC and this option will take longer time (apply SC, BTO...)

We are not married yet, so not eligible to purchase resale HDB flat.

My bf and his brother in law invested in a shoebox apartment in Singapore. So, even if we marry, we are still not able to purchase resale flat untill he dispose the shoebox apartment.

We have discussed buying a private condo under my name. This option is the most expensive, and also create financial stress.

We also thought to leave Singapore so we can have our own house without much hassles.


AK suggested that the reader considers the Rule of 15. For those who don't know what I am talking about, take a break from reading this blog and read this first:

To rent or to buy: Rule of 15.

Now, this rule really isn't a rule. It is more a guide which encourages prudence for anyone who believes that having a healthy positive cash flow is more important than having lots of assets and little or no positive cash flow.

In Singapore, considering the Rule of 15, a BTO HDB flat is the best choice. 

A 4 room HDB flat in CCK could probably fetch about $2,000 in monthly rent and the BTO price tag is probably less than $300K. So, to rent would be silly as the monthly rental would pay for the flat in 12 years or so.

Buying a shoebox apartment in prime district 9? A price tag of about $1.2 million would not surprise me. A monthly rental of $3,000 is about right. It would take more than 33 years for the monthly rental to pay for the condo.

Of course, in both scenarios, the assumption is that the properties were fully paid in cash without taking a housing loan. Yes, interest rates are going up and it will add to the cost.

We have to consider that it is also more costly to own a condo than a HDB flat in more ways than one.

To be fair, compared to some other places in the world like Hong Kong, Singapore is still relatively cheap. 

Years ago, Anita Yuen and her husband made the decision not to buy a property in Hong Kong but to rent instead. Why?

In order for them to buy a property in Hong Kong, they must believe in the Rule of 130.

What is the Rule of 130? 

If you have read my blog on the Rule of 15, you would be able to figure it out.

Related post:
Rule of 15.

Did I work too hard in my younger days?

Dentsu has banned its employees from working late hours following an overwork-related suicide.

------------------------------------------------------------------------------------------






A chat with a friend who is working in the Singapore Armed Forces:

AK:
You block leave?

F:
Ya

AK:
You have best job!

F:
You cannot meh?

AK:
I don't have best job. I have no job.

F:
Previous job

AK:
Aiyoh. Slave.

F:
Slave earn big bucks

AK:
Big bucks?

F:
Bigger than mine

AK:
Aiyoh. You don't work 6 days a week mah.
That's why I worked on Sunday too for extra money when I was younger. In the end 7 days a week.

F:
GOM states 5.5 days though

AK:
Also worked on some week nites for extra money... Very cham as a young working adult.
Your life so good in comparison lor.

F:
Dont compare😁
Thats what you said

AK:
Now, I don't liao. Irrelevant to me now. 😀








This friend is a super investor and trader, by the way. 

He doesn't have to work anymore but he has a job that is pretty undemanding and pays relatively well.

He works because he wants to and not because he has to.





Sometimes, I wonder if I worked too hard in my younger days and missed out on having fun. 

Oh, well, I will just have to catch up with having fun now.

All work and no play makes Jack a dull boy. What about all play and no work?

Bad Jack! Bad Jack!

Oops. 

Bad AK! Bad AK!





Related post:
Financial freedom and not enough time.

Sit with all that cash and do nothing?

Reader:
A year ago, I lend $20k to help a friend pay off tuition loan. That was when interest rates were rising and I managed to snap up AIMS AMP Reit and Capitaland retail China on the cheap.




Fast forward to today and with prudent savings and by not spending her bonus, my friend has paid me back. However, stock prices seem to have gone up now given the exuberance over positive Q1 news and I can’t seem to find any other counters that I would like to be vested in. 

Should I continue to add to counters that I like but are trading close to NAV or wait till a correction while risk not having the passive income in between?

What would you do? I just started on my investing journey but I have an adequate emergency fund.




AK:
Aiyoh. I also dunno what to do. Stress.
I buy when I see value.




Reader:
i guess saving and investing when i see value would be the best way to go

AK:
Sounds like a plan 🙂

Reader:
does it bother you that your large warchest goes untouched 90% of the time?

AK:
Nope.
Charlie Munger says it takes character to sit on money. Remember? 




Reader:
haha. i guess patience is a virtue
thanks for your response
i tot i had a 50-50% chance of getting a response

There are two extremes.

On one end, there are people who are almost 100% in cash. I think they are doing a Chicken Little.

On the other end, there are people who don't like to see money sitting in their bank accounts. They imagine the money is rotting away.




I don't believe in being too pessimistic or optimistic. I believe in being pragmatic.

Related posts:
1. My simple investment strategy.
2. Revisiting my simple strategy.

Seeking help with $400,000 inheritance.

Dear AK,

Good day to you.

I was introduced to your blog as my friend highlighted that you are one of the most eminent bloggers online and I am wondering if you have any interest in offering specialized advice for individuals.

I have zero experience in investments except for some ILPs which according to what I have read recently are an absolute mistake. I am in my early 30s and have zero debts with modest savings. However, I recently inherited $400,000. 

An adviser will be compiling a report for me that contains recommended strategies based on data on my finances that I have provided him with. I am wondering if you are keen to also do the same for me.  

I understand that you are always reading up and sharing the good stuff with people and could be very busy. I do not want to impose on you like many other people who could possibly be emailing you for free advice. Hoping that you can be my mentor. 

Sincerely wishing that you can consider helping me. Do tell me if you welcome this idea and we can discuss about remuneration.

Thank you.

Hi,

Welcome to my blog. It is a place where I talk to myself and readers eavesdrop. ;)

I am quite happy to share my experience and what has worked for me. Whether readers do the same is entirely their choice.

I generally shun work as I am enjoying my early retirement.

If you have yet to read this blog, you might want to:
http://singaporeanstocksinvestor.blogspot.sg/2017/01/holistic-approach-to-secure-financial.html

I can be quite repetitive in my blog. I hope you don't get bored.

Best wishes,
AK

Related post:
Why seek help from AK?

Why do I choose to stay in a condo?

This is for readers who do not follow me in Facebook and for those who do not read comments in Facebook.





Reader:
By the way , there is nothing wrong to stay at condo also what ... ( AK also stays at condo ) , so long you can afford it , why not ? 

You work so hard , deserve to upgrade and enjoy also . 

Save tons of money and not using it also can't bring them with you one day . 

So , we don't have to keep comparing la . 

If I can afford GCB , I will go for it too ! Why not ? 😁😁

AK:
I would have bought BTO HDB flat if I had qualified. 

I like good quality subsidised housing from government. 

99 years lease at a discounted price is OK for me.





I thought of buying a resale flat but:

1. I had to wait till I was 35.

2. I was reluctant to pay non-subsidised price for an old flat with about 70 years left to the lease.





In buying a condo, I chose to buy freehold and I chose to buy what was, at that time, the smallest format available. 

I didn't need a bigger unit.

I was lucky that the property price more than doubled from when I bought it. 

I decided to sell it because I thought it became too expensive for me to stay in. 

It felt extravagant.





I was also lucky that smaller format one bedroom condo became quite popular and I was even luckier to find one freehold option that offered great value for money a year after I sold my place. 

My current place is practically free of cost since the capital gain from selling my old place could pay for this in full.

Now, you know why I stay in a condo and why it is a small condo.





Related post:
More passive income than richer friends.

Good entry price for QAF Limited (Part 2).

Source: Bloomberg.

Reader #1:
QAF price dropping. Any change in your opinion of QAF?

AK:
Any reason to change?

Reader #1:
probably not

DON'T MAKE THIS TERRIBLE MISTAKE.

Reader #2
QAF is getting lower, wondering you have done any change to your holding, raised up or reduced or still the same?

AK:
I am too lazy to make any changes but what you do should depend on what you believe in.

Related post:
Good entry price for QAF.

More passive income than "richer" friends.

Reader says:
"I would like to share a personal experience.

"My wife and I have relatively high paying jobs - and we work like dogs for it. 







"But unlike our friends who make about the same amount and stay in condos and semi-d, we are the only couple staying in HDB 5-room.

"We find it very comfortable already. Altho I often have to answer younger colleagues (I work in a very big organisation, very hierachical) why I still stay in HDB.

"But one outcome of such a choice is that my housing consumption is very low, compared to my friends who consume the terrace or semi-d.






"AND that allows me to invest! Albeit haphazardly. Even then, that helped me to create a passive income that is way bigger than that of my friends who consumed a lot of their salaries via terraces and semi-d.

"Imagine if I have been more financially-literate and had read AK's blog earlier. My passive income would have been stronger.

"So, some points I want to make :






"1. don't consume so much via housing choice regardless whether it is invstment or consumption, live below your means,

"2. be financially-literate,

"3. don't bother to keep up with Jones'

"4. be comfortable to ignore people who wonder why you so kiam-siap and stay in HDB,

"Do an honest day's job by paying full attention to your organisation's business do make it a point to mind your own business and your own financial literacy and passive income portfolio building."







Looking for a spacious home in Singapore.

AK says:
I know many people believe in buying the largest home and, sometimes, the most luxurious home they can afford. 

Embedded somewhere in the belief is that our homes are investments. 

Of course, regular readers know my money mantra by now when it comes to our homes.






What we want to remember is that we could see home prices rising over the years but unless we are willing to monetise our home in some way, in Singapore with property prices the way they are, we could become a member of the asset rich and cash poor club.

Our home might be worth twice as much as when we bought it years ago but unless we are willing to sell it, we don't see the capital gain. 

We don't see the money.






For those of us who invest in stocks, if we find an investment that holds assets which do not generate cash flow but instead drains cash every month, what would be a good reason to plonk some money down?

There are many rich people in Singapore. 

There are also many people who stay in private properties and who drive luxury cars to look rich.






When the tide goes down, we will know who was swimming naked. 

Now, who said that?

Related post:
Worried about upgrading your home?

Safe investment tip for married couples.

Reader says...
I started following your blog about 6 months ago. 

I will like to seek your advice on my financial aspiration.

I did purchased some stock during my early work year and most of them are below IPO price. 

My paper lost is around 16k and my investment sum is around 35k. 

Due to this experience, we are very scare to do any stock purchase. 





However, we try our very best to save up as much as we could since we have not much idea on investment. 

We have around 200k in a FD account and two 60k BOC smartsaver account.

As we are both employee, we wish to be obtain financial independence by having a backup income. 

But we were divided on how to start the cycle.





My wife prefer purchasing another property for rent while i prefer your way which is to invest in REIT as i believe with our current cash reserve we are unable to get any good property.

In your opinion, which is a better way?
(This is not the full email.)







AK says...

Alamak. I don't give advice. 

I anyhow talk to myself in my blog lah.

You eavesdrop at your own risk. ;p

You have to decide for yourself what works for you and what gives you peace of mind. ;)








Reader says...

Thank for your reply.

Let say if you are in my position, what will you do? 

I will be eavesdropping.

Thank you.









AK says...

I would do what gives me peace of mind.

What gives me peace of mind would be different from what gives you peace of mind.

I don't have a wife but my friends who do tell me "happy wife, happy life". ;)







Sometimes, it is too dangerous to be a kaypoh and AK knows it. 

"Honey, who told you something like this?

"Tell me. I kill him!"

You better believe it.





Related post:
Buy that second residential property!

Worried about upgrading your home?

Reader:
I remembered you mentioned that our home is consumable. Not a asset.


AK:
Our home, if fully paid, is an asset. It is just not an income generating asset. ;)






Reader:
I'm contemplating job change after many years in same company so upgrading also a bit worried.


AK:
It would be very nice to do something you love.


Reader:
Just like you now.. be farmer at home and watch Anime😄


AK:
Alamak!

How a 30-something couple got rich and retired by not joining home ownership 'cult'. (See related post at the end of this blog.)






If we upgrade our home, we should not downgrade our mental health. 

If we have good reason to worry about upgrading our home, don't upgrade.

Most of us are not super rich but even for the super rich, peace of mind is priceless.

Is there any guarantee that we will make a capital gain when we sell our home in future? 

Can we treat money paid for our home as money in a Fixed Deposit which is, in case you don't know, almost risk free?

There are usually many perspectives on any one issue. 





Who is right? 

Who is wrong? 

I don't know. 

Maybe, you know.

Salesmen would want to sell. 

They have to. 

It is their job. 





Our job as consumers is to separate facts from opinions and then decide if we should buy.

Related posts:
1. Wife wants to sell HDB flat to buy condo.
"Our home is a consumption item. It would not be wise to overstretch our finances to stay in a more expensive home and I know a few people who overstretched."

2. Financial independence over home ownership.
"...would you rather have $1 million in income producing assets (e.g. income stocks) or a $1 million home (which doesn't generate income but instead would incur expenses)?"

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.