Financial security in Singapore plain and simple.

Singapore retrenchment: Will Malaysia share the same fate?






Reader:

I found your blog over the past week, and I have been looking your posts when I have the time.  

I don’t want to be a slave to my job when I am in my late 40s or 50s. 

I know that being an average salaried employee, it is quite difficult to ever be financially free.

Some facts about me:

• Working since 2013, earning $5.7k a month
• 
  
• Save about $900/month in cash
• 
  
• Invest $300/month in STI ETF (I read blogs for beginner investors that said STI ETF as a low risk, simple, long term investment that seemed to be ideal for young investors without much capital)

I have just bought a 3 room BTO for my mom and myself. 

Hence, I have emptied out my OA for house payment and spent my cash savings for renovation. 

In a way, I am starting over from scratch again, with $0 in CPF OA and very little in cash savings.

I understand that since my loan interest rate is much higher than the OA interest rate of 2.5%, I should look to repay the loan as soon as possible (assuming I don't re-finance with a bank loan).
(Parts of the email omitted.)

For only $300, you gain instant diversification.

AK:
What you do depends on what you want to achieve but what you do should also depend on the resources available and your ability to stomach volatility and some risk.

Investing through an STI ETF is good for someone who does not have the inclination nor time to research into specific stocks. 

It is a long term strategy that should yield decent results over a 20 to 30 years period. 

This is your exposure to the local stock market.
http://singaporeanstocksinvestor.blogspot.sg/2013/07/tea-with-matthew-seah-posb-invest-saver.html







You can think of the CPF as your exposure to an investment grade sovereign bond. 

In this respect, you might want to use less of your CPF money for housing loan repayment and use more cash instead. 

This will give you better returns than leaving your savings in the bank right away. 

Remember, this is a long term savings tool and you won't be able to access the money till you are 55 and, later, 65.
http://singaporeanstocksinvestor.blogspot.sg/2015/11/retire-with-investment-grade-bond-and.html







Of course, please ensure that you have an emergency fund first. 

How big should it be? Read this:
http://singaporeanstocksinvestor.blogspot.sg/2015/05/how-much-should-we-have-in-our.html

Also, you want to be adequately insured because you have to take care of your mom. 

I would suggest buying a term life insurance for yourself.
http://singaporeanstocksinvestor.blogspot.sg/2014/09/term-life-insurance-why-buy-term-how.html







We don't need some magic formula or complicated strategies to be more financially secure in Singapore.

Of course, if you decide to become an active investor or trader, you could make more money but you should know if you have the temperament for this. 

That is all I will say. :)







Related post:
Taking steps towards financial security.

See: PMET took a 30% pay cut but thankful.

5 reasons why PMET who took 30% pay cut is thankful (UPDATED).

This is an email from a 37 year old PMET, sharing his experience and thoughts on getting a pay cut:

Reader says...

I recently took up a job offer that pay me 30% less than my previous employment.

I had to look for a new job as my current job is in the oil and gas industry and the office in Singapore might be closing soon.

The new job is much more stable and in view of slower growth in Singapore going forward and me hitting 37, I decided to settle for this job. 

So many stories of PMET with no job I am worried.






Retrenchment On The Rise.

From here, finally I realize and understand what you say in your various blogs. 

Let me highlight a few:

1) My job in the oil and gas sector pays me well. I admit that they are over paying me for what I am doing currently. Hence, I have enjoyed the good years and looking back no regrets.

See:
Find a job that pays you at least what you are worth or better if more. 





2) However, as I have more than 6 months of emergency funds, I was quite relax about this and could take my time to look for a job. 

Just to share, I started looking actively for a new job for 4 months and I only have 2 interviews so far. 

This tell me the economy is not good. 

I realized the prudent habit of myself finally was useful here.

See:
Taking a 30% pay cut is a lot but... 






3) I think you mention before in your blog that even if you don't invest but live prudently, you will not be in a too bad shape if something drastic happens. 

If I no emergency funds then I sure stress. No peace of mind!

See:
Attributes of a wealthy peasant.

4) I have no debt or loans to pay. This gives me peace of mind too.


See:
Becoming richer!






5) I have dividend income from my stocks & REITS. Income investing is important.

With the pay cut, I definitely need to watch my expenses even more but this will not kill me. 

I cannot imagine if I have over stretch my finances what is going to happen to me?

I just like to share and hopefully people will be aware and be more vigilant on their finances.

Lastly thank you for your blog and I have learn so much from you.

See:
Best insurance in life!





Related post:
Holistic approach to a secure future.

Strategies and suggestions for consistent profit.

I approved this friend request on FB and I thought it should be pretty safe since 28 of my FB friends are his friends. So, what happened?

JG:
Hi sir
Thanks for accepting my request 🙂
seems like we have some similar interest
like investing and trading
do you trade in sgx stocks?

AK:
I don't trade much anymore.

JG:
ok
I am from a research expertise firm
we provide trading strategies and suggestions for consistent profit.
would you like to see those strategies?

AK:
nope

JG:
may I know your concern please?

Alamak. Could anyone consistently profit as an investor? Always right and never wrong? Better block.

Related post:
180% to 216% returns annually!

Buying properties with short remaining land leases.

Reader:
I was looking to buy a shoebox condo until I read your blog. 

I turned 35 recently and will try to get my own BTO 2 rm HDB flat. 

This will help me achieve financial freedom earlier. :)


However, a friend (same age) just bought a 40 yro HDB flat. 

He didn't think age was important but I told him about the lease decay issue. 

He cannot sell the flat right away because of the MOP. 

Do you have any thoughts on this?




AK:
I will share what I feel are situations when it might make sense to buy properties with relatively short remaining land leases.

1. If we are making it a home with no intention of reselling or leaving a legacy, make sure that the remaining lease is enough to last us till we are 90 years old. 

People are living longer and we are expected to live till almost 90 these days. 




In fact, to be safe, let's make it 95 years old. 

So, if your friend is 35 and bought a resale flat that has 60 years left to the lease, that is not too bad. 

Well, let us hope he doesn't live to be a hundred. 

Alamak. Bad AK! Bad AK!





2. If we are buying a property with a relatively short remaining land lease as an investment, the rental yield should be far higher than a property that has a longer remaining land lease or is sitting on freehold land.

So, if a property has 50 years left to the lease, it should, simplistically, have a rental yield that is way higher than that of a comparable property with a 100 years left to the lease. 

Otherwise, everything else being equal, it would mean offering a significantly lower price for the property with a shorter remaining land lease.





(There is lesser room for error buying a property with a much shorter remaining land lease. A one year vacancy for a property with a 50 year land lease is 2% of its productive life gone while it is 1% for a property with a 99 year land lease.)

Of course, point number 2 should be relevant to someone considering point number 1 as well. 

It will help to ground us in our decision making process and, hopefully, not pay ridiculously high prices for properties.






Guide for Resale Flat Sellers and Buyers.
Related post:
Buy 99 years LH or FH properties?

Which HDB flat to buy?

Reader says:

I have read your posts and have been following you for quite some time. 

Have been reading your posts on purchasing properties and following up on the replies. Really interesting :) 

I would like to seek your advice for choosing a HDB flat. Hope you don’t mind helping me out.





I want to buy a flat that is more accessible and convenient, closer to the central region. 

I plan to sell the unit after 5 years of stay when my financial is ready for an upgrade. 

However the flats in the estate I am interested in are older. 

My agent keeps telling me NE region is newer and have more potential.






I really like the 20 year old resale flat which is closer to town but for the same price, I can get a 5 year old flat in NE Singapore.

I feel that the flat in NE is not so convenient even with the LRT lines and bus service there. 

It is still quite a distance away from central area.

For the amount of money I can afford I know I can’t get both new and centralised HDB flat, 鱼和熊掌不可兼得.. Please teach me how to 取舍..





AK says:

If you are buying a home to stay for the rest of your life, an older flat which has more than 70 years left to the lease is OK.

If you are thinking of selling the flat a few years down the road, an older flat could have issues especially now that more people are aware of what a shorter lease means.

You decide. ;)






Related posts:
1. HDB flat is 37 years old...
2. Buying a 99 years LH property?
3. Buy resale flat or new BTO flat?
Which one would AK choose?

A great crash is coming and I am ready (UPDATED).

Reader says...
Grateful if you could please talk to yourself on what are criteria for stock selection when buying stocks using my CPF OA?

Given that cpf money is sacrosanct, naturally we have to be more selective and careful.

Grateful for your self talk please?







AK says...

CPF-OA money? 

It is quite simple. 

I wait for a market crash. ;)







Is a market crash coming soon? 

Your guess is as good as mine.

I cannot predict a crash. 

I can only prepare for one.

WAH!!!

Say:

"I am ready for a great crash."

How to have peace of mind as investors?
I explained how the CPF-OA money should be the last war chest we use because it earns 2.5% per annum in interest, risk free.





I also said many times before not to borrow money for investments.

The reason is simple.

We don't want to be caught in a situation where we might have to liquidate our investments at times and prices not of our own choosing.

If a market crash happens, we would be glad we did not borrow any money to invest with.

There is no free lunch in this world.

Banks (and brokerages) are fair weather friends.






Related posts:
1. Simple investment wisdom.
2. Holistic approach.
A bird in hand is worth two in the bushes (provided that they are of the same size). If AK says so, it must be so.

Vote for or against selling Croesus Retail Trust?

Some might remember that the money I used to invest in Croesus Retail Trust was mostly from selling 90% of my investment in Sabana REIT a few years ago.

Since my investment in Sabana REIT was as big as my investment in AIMS AMP Capital Industrial REIT, the amount of money involved was pretty big for an average retail investor.

For those who have been following my moves over the years, they would know that I got into Sabana REIT at depressed prices, collected dividends over a 3 year period and sold as its unit price retreated from a high on the back of various red flags. 

Off the top of my head, I probably made about 13% per annum from my investment in Sabana REIT, all in.

Getting into Croesus Retail Trust after its price retreated significantly from its post IPO euqhoria and also by taking advantage of the rights issues later, I am probably looking at a total return of between 70% to 100% for the investments made at different times. 

On an annual basis, if I were to accept the offer of $1.17 a unit, the return on investment is probably between 17% to 60% per year. 






OK, please note that all numbers are off the top of my head and are only approximately right.

Now, quite understandably, not everyone is happy with the offer to take over Croesus Retail Trust at $1.17 a unit. We would be losing a good investment for income, after all.

A few readers wrote to me, asking if I would vote against the sale and a couple of readers also asked that I mobilize my army of readers to vote against the sale.

 ------------

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

Alamak. AK is just another retail investor. AK is no king maker. So stressful.

Seriously, I will not ask anyone to vote for or against the sale but I will share a few points to put things in perspective.

1. With a DPU of about 8c, at 85c a unit, we were looking at a yield of 9.4%. At $1.17, we are looking at 6.8%. Yield has compressed by quite a fair bit.

2. Gearing is almost 50%, if I remember correctly. So, much of the yield we see is leveraged yield. If we should reduce leverage and that is possible through equity fund raising, distribution yield would drop. That makes for a fairer comparison against some retail S-REITs which have less than 40% in gearing.






3. It is not useful to say that $1.17 is X% higher than its price from X months ago. We should be interested in value. $1.17 is about 20% higher than the NAV per unit. 

Now, if we remember, Saizen REIT was bought over at a premium of about 3% above NAV and that was when I thought Saizen REIT's properties were probably worth more than what was carried in the books too. Also, remember, Saizen REIT's gearing was much lower than 50%.

4. It is true that even a compressed distribution yield of 6.8% is higher than comparable J-REITs' yields but we have to remember that the rules governing J-REITs are different which was an important reason why Croesus Retail Trust decided to list in Singapore. If they were to list in Japan, their DPU and, consequently, their distribution yield would have been lower.






Unfortunately, investors of Saizen REIT grew weary of waiting for value to be unlocked and agreed to its sale of assets. 

What about investors of Croesus Retail Trust? Obviously, many have a different attitude and are more willing to wait for a better offer, if any. Of course, being paid while waiting is not a bad deal.

This is interesting to me because Saizen REIT was a big investment for me and Croesus Retail Trust is a big investment for me too. I wonder.

Related post:
History with CRT and current thoughts.
"I like what I see. So, I stay invested."

2Q 2017 passive income from non-REITs.

After my blog on 2Q 2017 passive income from S-REITs, of course, it has to be a blog on 2Q 2017 passive income from non-REITs.

Well, 2Q 2017 was also pretty quiet for me in the non-REIT space as I also pretty much kept the status quo here.

Total income received from non-REITs in 2Q 2017 was:

$52,045.09


If we were to include dividends from 1Q 2017 which saw a total collection of $13,543.31, total dividend received in 1H 2017 is 

$65,588.40


The portfolio saw a rather significant reduction in contribution by SPH since I trimmed that investment by 50%.





However, contributions from the enlarged investment in QAF as well as dividends received from a pretty significant investment in Centurion more than made up for this.

I must also mention that the quarter's dividend income received a big boost from Hock Lian Seng which declared a generous special dividend.

This is unlikely to be repeated anytime soon. So, everything being equal, I would expect lower dividend income in 2018.

Of course, everything is probably not going to remain equal.

Last quarter, Croesus Retail Trust was the biggest non-REIT income contributor. Accordia Golf Trust is the biggest contributor this quarter.

With Croesus Retail Trust being one of my biggest investments and likely to go the same way as Saizen REIT, future passive income from non-REITs would naturally take another hit.

The upside is that I will be receiving many years of "income distributions" in advance and the cash position in my portfolio will see a big increase.

I would probably have to sit on more cash for the foreseeable future.

"It takes character to sit with all that cash and to do nothing."
- Charlie Munger

My seat is likely to be quite cushy.

Related post:
1Q 2017 passive income from non-REITs.

2Q 2017 passive income from S-REITs.

Once every quarter, I would spend half a day or so going through my dividend vouchers and checking my bank accounts. It is that time again.

2Q 2017 was a pretty quiet quarter for me as I maintained the status quo for my portfolio of S-REITs.

The portfolio received contributions from a couple of new investments made in 1Q 2017:

1. Starhill Global REIT
2. Frasers L&I Trust


Industrial Real Estate Market Update Q4 2016 | JLL Australia

Total income distributions received from S-REITs in 2Q 2017: 

$21,069.52

This is about a 2% reduction from 1Q 2017 which saw $21,477.10 received.

What happened?

We are missing contributions from IREIT and CRCT this quarter as they distribute income half yearly.

Keeping the status quo should see more income collected from my portfolio of S-REITs in 3Q 2017.

How much more? 

We will have to wait and see.

For now, $7,000 a month in "salary" is pretty comfortable for me.

Related post:
1Q 2017 passive income from S-REITs.

Frasers Hospitality Trust (FHT).

Reader:
Frasers Hospitality Trust. I like this and invested in it last year and applied for excess rights.

I find FHT attractive because mostly freehold and spread across many countries. Yield is 7%+. Plus strong sponsor and brand name.

I am not good in analysing. Hope you will talk to yourself. :)


AK:
I don't like it when a REIT purchases properties and DPU goes down.

And the rights issue was in part to strengthen balance sheet which did nothing to improve DPU.

"The issue would also reduce FHT's debt levels and strengthen its balance sheet."
http://www.straitstimes.com/business/companies-markets/frasers-hospitality-trust-to-raise-266m-in-rights-issue

I don't like it when total distributable income goes up but DPU goes down.

"Distribution income for the quarter was up 3.1 per cent year-on-year... DPS in the three months as at end December 2016 was down 18.9 per cent year-on-year..."
http://www.businesstimes.com.sg/companies-markets/frasers-hospitality-trusts-dps-down-on-enlarged-stapled-security-base

As a shareholder, I should be very interested in what happens to the DPU. I feel that the shareholders could have been better off without the rights issue.

There are probably things to consider beyond that but my plate is full. ;)

Related post:
REITs and rights issue. 

AK is speaking at InvestX Congress 2017.

Quite a few readers have been asking me whether I am going to have another session (or two) of "Evening with AK and friends" this year. 

Yes, I know. AK has been so lazy this year. Lazier than last year.

Bad AK! Bad AK!

Well, I am not sure if I want to do it this year but I did promise my friends at The Fifth Person to make an appearance at InvestX Congress 2017.

Yes! So exciting, right? 

So, if you really want to take a photo with me badly, here are the details:

Date: 19th August 2017.

Time: 9am to 6pm.

Venue: NTUC Auditorium Level 7.

Address: 1 Marina Boulevard.


At the last InvestX Congress a couple of years ago, some readers complained that I had to share the stage and I had too little air time. 

Alamak, what air time? AK is just full of hot air lah but the organisers have taken the feedback seriously.

I will be alone on stage for a full hour this time and I will also be on the panel at the end of the event.

I wonder how many songs would I have to sing to fill up that one hour? Hmmm.

If you decide to go, you will find out on that day.

How much will the ticket cost?

Get it by 19th July: 

$127.00.

Get it later: 

$147.00.

For those who drag their feet:

$197.00 at the door.

But I doubt anyone will have the chance to buy a ticket at the door. The last InvestX Congress sold out 3 weeks before the event!

Still, who wouldn't want to pay less? So, do you want to get a cheaper ticket? What is the lobang?

Come in pairs! 

Then, you get the second ticket at $97.00.

On a serious note, go to InvestX Congress not because you want to hear me sing or take photos with me. I am just the event mascot lah. ;)

Get more information and also to purchase tickets: HERE.

Downsizing flat and upsizing parents' retirement adequacy!

Reader:
Thank you for sharing your financial journey and thoughts on your readers’ queries with us.

My husband and I bought a BTO 4 room HDB flat 4 years ago.

We are thinking of changing our HDB from a 4-room to a 3-room flat some time after the MOP (5 years).




We are thinking of transferring the monthly CPF-OA contributions, excess of our monthly repayments, to SA for the 4% interest.

My father is 63 years old and my mother is 57 years old. 

If I am not wrong, topping up $60K to my father’s RA means he can apply for CPF LIFE. 

The monthly CPF LIFE payouts will be about $360.




AK:
If you have no other use for your CPF-OA savings after the move, transferring the money to the SA is always a good idea if you are thinking about a more secure retirement. 

Let the magic of compounding do its work. Your savings will amount to much more 20 years later.

With more cash in hand, you are planning to top up your parents' CPF accounts? I like that too. 

If you have only $60K to spare, you might want to consider splitting it so that both parents get $30K in their RAs. 

This is because the first $30K will get 6% interest. The next $30K gets 5%. Of course, above $60K, it is 4%.




If you have $120K to spare instead of only $60K, of course, topping up both parents' CPF-RA with $60K each is a good idea. 

Make the government do some work in supporting your parents financially. ;)




Related post:
Mom is stunned by her CPF-RA.

This job is unpaid but offers exposure.

From time to time, I would receive emails like the following:

Example 1:

I wrote to you some time ago and was essentially rejected by you. maybe you are more open to it now...please allow me to suggest two ways where we can collaborate...

--------------------------
Example 2:

...we do not pay panelist. However, we still hope that you would consider to be a panelist... talking about how each individual should build their portfolio at every stage of their life which also fits into our theme for this year.... looking forward to your favourable reply.
--------------------------
Watch this! ROFL!

"Oh, this job is unpaid but it does offer excellent exposure."

Yes, the word "exposure" is used pretty much all the time when people want me to work without pay.

Hey, see how I disguise myself? Do you think I want "exposure"?

I am just a hobbyist blogger. I don't have any product or services to sell. I won't make a ton of money if I have more "exposure".

When I am asked to do some work, I am giving up my time and putting in effort. I think it is fair that I get paid.

"When I am asked to give talks or make public appearances or do any kind of work, one way or another, I am always paid a fee because I am doing something on request.

"So, to be fair to others who have paid me for my time and effort in the past and to be consistent, I will have to decline your invitation."

If I am blogging for a living, then, I would probably want more "exposure".

However, the day I have to blog for a living is probably the day I will stop blogging. Very cham.

Related post:
Life is about many things and my time is in short supply.

My investment portfolio or my investment philosophy?

I am an investor but I am probably not a very good investor. Why? 

I also do a bit of speculation but when I do speculate, I know I am speculating and not investing.

When we speculate, we should know we are taking on more risk. There is less certainty. 




So, when I do speculate, I try to size my positions more conservatively. For me, speculation is to investment like spice is to food.

Those who like to ask me if prices are going up or down in future should take note.

For example, when I decide that I would like to have some Rosemary herb in my food, I don't fill the entire bowl with Rosemary leaves. That would be too much.

Reader:
Hahaha AK now I know why u don't show your portfolio numbers Liao ... ppl will start questioning about the integrity and performance but missed the whole point on the method to financial independence ... hahaha

AK:
Aiyoh. So cheem. You need to decode that for me please. I very stupid one.




Reader:
no la I shared my portfolio then share the mode I use to achieve financial independence just to motivate those just started and those that are planning to start.
Hahah kana question on performance lah but that's not the point.

AK:
I always say don't focus on my portfolio. Focus on my philosophy. 🙂







Reader:
yea so I think don't show numbers better else ppl will focus wrongly especially those with ill intention


It's much easier to buy companies that are already well-run. Warren Buffett shares his investment philosophy.



-------------
Philosophy is the bedrock of all knowledge or so I was told. Our philosophy will guide all our actions in life, including those we make as an investor.

Related post:
Impressive passive income but are you lying?
Why? Why? Why?

What to do if we don't trust the CPF system?

...




I have been sharing quite a bit of stuff on Facebook regarding the CPF in recent days. 

Nothing new, really. 

They are mostly conversations with readers on stuff I have blogged about.




I shared how I grew my CPF savings and also why it is an important part of my overall retirement funding strategy. 

I have also shared my numbers to exemplify the magic of compound interest.





Of course, we know that there are people who do not believe in the CPF. 

This is nothing new.

I am constantly amused by the reasons put forth as to why we should not trust the CPF system.

People are free to trust or not to trust. 

Hey, I am not dogmatic. 

Don't believe me? 

OK, you happy can liao.

What do we do as investors when trust is lacking? 

Avoid investing any money.

For example, I no longer invest in S-chips although some of them might have fantastic looking numbers.

I used to. 




Remember China Minzhong?

I simply don't know if their numbers are bona fide.

Don't trust the CPF? 

Don't top up. 

Don't make voluntary contributions.

Simple.




Wait a minute.

How do I know if the companies which I do invest in have bona fide numbers? 

What if their books are cooked too?

Alamak. 

Stress!




Is our country financially sound? 

Is the government going to default on its obligations?

Alamak. 

Don't ask me lah. 

Stress!





Hey, do you believe in feng shui? 

The late Mr. Lee was asked why did he want his house demolished? 

AK is trying to change topic, right? 

Shhh...





What? 

You really want to know? 

These posts might interest you then:
1. Do better than the CPF?
2. Worried about retirement adequacy in the right way?

What should I do with my bonus?

Reader:
I received a bonus and I was wondering which of these should I do:

1) voluntary top up my CPF SA

2) contribute to SRS

3) help my parents to buy hospitalization insurance

4) keep it as warchest

I would be required to pay income taxes for this year of assessment. I would like to ask for your opinion.


AK:
You have to decide what is more important for you. No one can do this for you. 😉

For me, having insurance is important. Bad things happen and could wipe us out.

Having said this, your parents should be covered under Medishield Life. Check to be sure. If they are OK with staying in class C or B2 wards, there is no need to buy private shield plans.

You might be interested in this:
http://singaporeanstocksinvestor.blogspot.sg/2015/03/should-i-top-up-my-cpf-sa-cpf-ma-or-srs.html

Related post:
Enough H&S coverage for parents?