Ever since the CPFB introduced a colorful pie chart of our CPF savings a few years ago, I would look forward to mine every year like a teena...
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Hi AK, I wrote to you a few months ago and told you a prominent blogger sold all his investment in Croesus. I asked you if you would be selling too. You gave me one of your typical AK answers. Now, a few months later, I am kicking myself because I sold half of my investment since I was not sure if I should stay fully invested. It was my biggest investment. If I had your conviction, I would have avoided this loss...
Hi R,
I have the feeling that you might not have understood the investment enough to give you the conviction to hold on to a substantial position in Croesus Retail Trust. Your position could have been too big and peace of mind eluded you. Money not made is not the same as money lost. By holding on to half of your original investment, you are still making money. Lesser by half but you are still making money.
Peace of mind is priceless. By reducing your investment by 50% when you did, know it or not, that was what you were after. Now, please don't lose something precious like this by saying you should not have sold. Best wishes, AK Related post: History with Croesus Retail Trust.
Reader: Hey AK, what do you make of Accordia Golf Trust latest results? Looks pretty dismal, all important numbers are down. Any positives to it at all? AK: eh... you say leh? Reader: From the numbers I don't see anything good. But management says that tourism may have a positive impact in mid to long term And they said there was bad weather, maybe the weather might improve. That's about all the good I could see from the report AK: I would ask if the dip in results is due to something more enduring. If so, the decline would become a trend. Reader:
True. But difficult to say how much is due to earthquake and bad weather. And how much due to fundamentals. AK:
You will have to make a judgement call 😉
Reader:
I have small position only so I think I'll hold for now , at least the dividend is good AK:
If we are investing for income and if we got in at a lower price, this fits. 🙂
Reader: Just checking can you comment on SINO GRANDNESS rights issue? Is it worth subscribing to the rights? Thanks AK: Always ask what is the reason for issuing rights. It seems like they have trouble repaying debt and, hence, the rights issue. If so, the rights issue does not add value for investors. Subscribe if you believe that the company is able to do much better in future.
Reader: ok thanks for the advise. AK: If you are putting in more money but the performance declines, it is a bad deal. Reader: yeah
Remember, not all rights issues are created equal. Some will enrich investors and some will impoverish them. In general, I do not like rights issues which happen because the balance sheet needs strengthening. They weaken our own balance sheet and do nothing to improve our cash flow. Related post: A lesson on rights issue from 2011.
Hello! I only found out about your blog in Jan this year and have benefitted a lot from your analysis and sharing.
I have been reading your recent posts about upgrading to private housing. I happen to work in a landuse planning agency, hence i would like to share my views.
While i agree that one should not upgrade to a condo if it means overstretching your finances, i think getting a freehold property might be the only way to preserve the value of your property. For 99 year leasehold properties, they would eventually need to be returned to the state, and the value of the flats will depreciate after it hits around its half life.
From the capital preservation point of view, especially for couples who have kids and intend to pass down their properties to their kids, wouldn’t it still be worthwhile upgrading to a freehold property? The truth is that freehold land is scarce.
Was wondering when you bought your freehold condo, was the lease a major consideration? Would like to hear your thoughts on this 😊 Thanks!
I won't say anything about myself but if legacy is a consideration, then, buying FH or 999 years leasehold makes more sense than a 99 years leasehold property here. Oh, I don't mean buying a FH property in JB is better than buying a 99 years leasehold property in Singapore hor. That is not an apple with apple comparison. Sorry, I couldn't resist that.
What happens to our CPF money used to buy a HDB flat when the lease ends? Reader: can I assume that whatever has been used to pay for the flat will be forfeited and we still need to pay back the accrued interest? I have friends who are paranoid over the lease issue cuz they keep on reading the anti hdb and anti CPF articles. End up frightening themselves.
AK:
Tell your friends it is the same anywhere in the world. Leasehold means there is a limited life. Once it is gone, it is gone. Money from CPF used in the purchase of such flats at the end of the lease is gone. Logically, if the money is gone, how to pay back?
Reader: My friend just bought a 940k EA resale 30++y flat recently.
Simplistically, if there is 65 years left to the lease, the reader's friend is paying about $15K a year to "lease" the flat. Of course, if we take into consideration time value of money and interest on a housing loan (or interest he could have made if he had not used his CPF money in the purchase), it would be more than $15K a year. It is good to know that more people are thinking about this issue but don't over think. There is no conspiracy to impoverish anyone.
BTO HDB flats are the most affordable form of housing for Singaporeans and they come with a 99 years lease. Even if we were to live to be a hundred, the lease is more than enough. The worry is when people pay top dollar for much older 99 years leasehold properties.
There is regulation in place to guard against CPF members from buying much older 99 years leasehold properties using their CPF money:
We have to pay for the roof over our heads.
There is no free lunch in this world.
If we get something for free, someone else is paying for it.
If we are staying for free with our parents, it is because they paid for the roof.
People who want the CPF money which they used to buy their HDB flat returned to them after the expiry of the 99 years lease are looking for a free lunch.
As my blog's readership grows, a question that gets asked more and more often is: "When will I have as much passive income as you?"
Of course, one of the things I would say is that we have different circumstances and that financial freedom is not a race. All of us who reach our goals are winners. Some might take longer than others but they are still winners at the end. Distilled to a word, patience.
In my retirement, I spend quite a bit of time gardening and, a few months ago, I took three cuttings from the mother Rosemary plant and planted them in a trough.
Today, I transplanted one into its own pot. It has been a few months but, for a Rosemary plant, its growth has been quite fast.
The other two cuttings are still nice and green but they have not grown much. Their time will come too. They are probably late bloomers. They are not in a rush and neither am I.
"When I find a stock that sells for 50 per cent of what I have determined it is worth, my job is basically done. Now it is up to the stock. It may move up toward its real worth today, next week, or next year... There is simply no way to know when a particular stock will appreciate, or if, in fact, it will."
(See related post no. 2)
Businesses can either be price setters or price takers. In a fiercely competitive environment where there is perfect competition, businesses are mostly price takers.
Customer:
"How much is this?"
Shop:
"$20.00"
Customer:
"Aiyoh, internet selling $10.00 only."
Shop:
"Oh... OK, $10.00."
If I were the shop owner and if this were to happen on a daily basis, I have something to worry about.
Of course, businesses could engage in anti competition moves and set prices if there are only a few players in the industry. So, in an oligopoly, there is always a temptation to fix prices. This, by the way, is illegal in many countries, including Singapore.
A business is in a sweet spot if they are price setters and consumers are willing to pay a higher price for what they offer.
Customer:
"How much is this?"
Shop:
"$20.00"
Customer:
"Internet selling similar for $10.00 only."
Shop:
"Then, you buy from internet lor."
Customer:
"No, I like this. OK, $20.00"
Ka-ching!
How does a business get to be in such a sweet spot?
Differentiation.
Better quality, better features, better design etc. Something that differentiates them from the competition in a positive way which makes consumers willing to pay a premium.
This is not an easy feat.
It is even more difficult to maintain this edge these days because copy cats are fast to act.
What? You have a patent? Try telling the Chinese factories.
So, if it is a product, be prepared to see copies within a matter of months, if not weeks.
What about businesses which are providing a service?
Well, they are not safe from copy cats either. Business models can be copied too.
Some are worried about the competition faced by Centurion when it comes to workers' dormitories as more players jumped on the bandwagon.
It is a valid concern and I did say that I would keep an eye on this relatively new investment of mine. So far, so good.
Of course, I am not the only one keeping an eye on Centurion and a reader recently sent me a report by PhillipCapital dated 19 May.
I am sharing the stuff which I find more interesting here:
1. Higher occupancy for workers’ dormitories at Westlite Woodlands (c.95% in 1Q17 vs. c.90% in 4Q16) and ASPRIWestlite Papan (89% in 1Q17 vs. 75% in 4Q16). We estimate rental rates increased c.1%. 2. 1Q17 net profit margin improved to 33% compared to 32% a year ago. The improvements to net profit margin was due to ASPRI-Westlite Papan becoming more profitable in 1Q17 but slightly offset by higher Cost of Goods (“COGs”) and higher interest expense. 3. Centurion continues to enjoy a high operating leverage where they will be able to grow revenue faster than costs through positive rental reversions. 4. Singapore Workers’ Dormitory Portfolio have almost hit full occupancy by 1Q17, well ahead of our expectation of hitting full occupancy by end of 2017. We expect the supply constraints in workers’ accommodation to continue while the strong pipeline of public sector construction projects which are expected to last till 2020 will keep Centurion’s Singapore workers’ dormitories fully occupied. 5. We are pleased to see Centurion’s ability to command a price premium for its Singapore workers’ dormitories and yet ramp up its occupancy faster than expected. All these despite competitors slashing prices and weaknesses from the oil and gas industry that we have witnessed in 2016. 6. ... expectation for stronger operating cash flow as a result of Centurion’s continued ability to exercise pricing power in its student and worker accommodation business across markets ...
In a competitive environment, we want to invest in a business that is able to retain pricing power.
Centurion Corporation Limited is a relatively substantial investment for me and if I were to update the list: From $350,000 to $499,999:
AIMS AMP Cap Ind'l REIT From $200,000 to $349,999:
ACCORDIA Golf Trust CROESUS Retail Trust
FIRST REIT From $100,000 to $199,999:
ASCENDAS H-Trust QAF Limited WILMAR Int'l
Centurion Corporation Limited
Reader: Hi AK, apologies for the multiple questions from me. 🙂 I am looking to help my parents with their retirement planning and hope you could shed some light. For convenience of calculation and discussion, assuming the following hypothetical figures, can you share how you would do the planning? Parent A - 500k cash parent b - 300k cash, Zero CPF for both, No existing loans at all Children all financially independent Require about 2k per mth for expenses Occasional traveling Given the above I was thinking of topping up their retirement account to the ERS and opt into cpf life at 65. The remainder will be kept in minimum risk instruments like FDs etc and maybe just a small percentage into shares. Hope you can help me out in your free time. Thanks a lot! Both parents have basic health insurance. I am thinking of getting them to surrender their whole life policy bought donkey years ago with low sums assured as we children are all financially independent.
AK: What you are planning to do sounds like what I would do if I were in your shoes. Spooky! Old folks should not be too adventurous with their money. Reader: I read your blog daily! I guess that's where I get all my thoughts mainly. Can't thank you enough!
180 sq ft micro apartments sold like hot cakes. Do you know that a car park lot in Singapore must be at least 124 sq ft in area? That is the rule by LTA.
Do you know how big is the smallest flat in Hong Kong? According to an article in The Sunday Times, it is 61.4 sq ft! That is smaller than the smallest hotel room I have ever stayed in!
There are more and more homes which are less than 200 sq ft in size being built in Hong Kong and they cost about HK$4 million or S$725,000 each.
Now, for those who wonder how I could stay comfortably in an apartment that is a bit bigger than 400 sq ft in size, what about one that is smaller than 200 sq ft in size?
200 sq ft is probably the size of a decent hotel room with a bath. I feel that it is good enough for a short stay of maybe a few days but to stay for a longer period, it could be difficult for me. I actually stayed in a junior suite before because I got a good deal.
Similar in size to my current place but missing an outdoor space, it was very comfortable. See the photos: HERE. I feel that my apartment gives me just the right amount of space for living comfortably long term. A kitchenette, a living cum work space, a bedroom, a wardrobe, a bathroom and a small outdoor space. Everything I need in the smallest apartment I ever stayed in.
With only 200 sq ft, I think I would be left with just the bedroom and the bathroom. I would have to eat out all the time and I would probably want to go out a lot more because there is no outdoor space.
Hmmm, OK, I guess these nano apartments (yes, they are even smaller than shoebox apartments) could work for people who don't cook and who spend very little time at home.
When are we going to see some nano apartments in Singapore, I wonder?
(AK is an IT dinosaur.) I am too lazy to visit forums or chat groups. I am also too lazy to visit other blogs. So, when I do leave a comment in other blogs from time to time, it is an "OMG, give me a set of lucky 4D" moment.
Listening to a friend and setting up a Facebook page was a giant leap forward for me. Some might not know this but I abandoned that effort after a while donkey years ago, preferring to just stick with blogging. I didn't see any need for Facebook.
Then, how did I become so active in Facebook in recent years? I was getting bored with just blogging. Sounds familiar? Yes, boredom was a big reason why I started blogging too. Anyway, there is enough interaction with people through my blog and Facebook page to keep me busy. Add the liberal number of emails and PMs on Facebook, I am kept quite busy online.
Human beings are social creatures and they need some social interaction. How much interaction we need will differ from person to person. For some time now, I very much keep to myself and, fortunately, I like my own company. I don't know if it has anything to do with ageing or, maybe, it is a mental illness. Whatever it is, I do what makes me happy. Although I do not visit forums, sometimes, I hear things from readers especially if these things involve me. A friend once joked that ASSI has its own vigilante corp. Perhaps so.
This was from a reader this morning:
AK: AK: If I am in the business of investor education, I would show face but I am just a blogger. I do this for fun. Reader: leong revealed his portfolio size Liao He full time like u lah Unbelievable 34yo 2-3 yr of your dividends can form his portfolio I dono how he survive leh considering he getting married, commitment sure a lot 300-500k portfolio size how to retire? now got human capital don't leverage
AK: I think his CPF account is probably wasted One should have a holistic approach towards financial freedom, I feel.
Of course, all of us have different circumstances and there are many ways to build wealth. It is never my way or the high way.
(You might want to watch what I feel is an interesting video clip below.) Related posts: 1.What makes us powerful? 2. Holistic approach to financial freedom. "My philosophy in wealth building might be boring and it probably isn't suitable for everybody. Some are happy adopting it and it is only normal that some will brush it off."
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!
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.
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?
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!
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?
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.
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