Why did AK want an early retirement?

Hi AK,

Possible to share some of the reasons which led to you opting to retire?

Thks.

Ben

Hi Ben,

I don't want to spend all my life working for money because there are so many things I want to do in life. 

My time is limited.

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






Don't want to be in a situation where I do not have enough time to do what I want to do.

See:
Financial freedom and not enough time.

I really have so many things that I enjoy doing and I need more time for them.

See:
Preparing for retirement.






Did I work too hard in my younger days and sacrifice too much? 

Well, I think achieving financial freedom makes it all worthwhile. 

See:
Did I work too hard in my younger days.

Yes, I know.

See:
Financially free AK should be ashamed!






Related post:
Passive income and a higher purpose.

"My investment program costs $4K and AK is like Xiaxue."

Reader:
Hello Ak,
I was at (an investment event) over the weekend and one of the very good speakers from XXX had me sold immediately on the spot. 

So out of impulse purchase, I've signed up a >$4k worth of investment program on value investing.





Now back home and doing abit of research on XXX reviews, its hard for me to further convince myself to further go on the course due to the mix reviews. 

I know you are one of the most straightforward person on the blogosphere other than xiaxue, and with your knowledge in the investment and finance world, may I know what's your take? 

I really need your brutal honest advice.

You can talk to yourself on this and accidentally reply my email. Thanks!

AK:
Alamak. AK straightforward like Xiaxue?

OK, maybe, I take that as a compliment. ;p

What would Xiaxue say to you in this case? Hmmm... 

OK, I don't know but I know what I would say.




Let me guess. 

It was a free event but there was plenty of aggressive selling going on?

Impulse buying har? 

Bad! Baaad!

$4K is a lot of money too and I know for a fact that you have to pay a few K more after that to get into an "inner circle".




I have never attended atas investment courses nor paid lots of money to be in any related program before and I probably never would. 

Despite this, I think I have done OK.

Alamak, I accidentally tapped the "send" button!

Please ignore my email. 

It was an accident. 

Really, please ignore me.






Education is essential but how much should we pay for education? 

Cheap things not good? 

Good things not cheap?

Aiyoh. 

Don't ask me. 

I blur.

OK, I confess. 

I don't know if I am like Xiaxue but I like Xiaxue. :)

What? 

Wrong answer? 

Cham lah liddat.




Related posts:
1. Little Book of Value Investing.
2. Secret of my success.

Evening with AK and friends 2017.

As promised, here are the details of the only session of "Evening with AK and friends" in 2017:

Venue:
Lifelong Learning Institute
11 Eunos Road 8
Event Hall 1-1
Singapore 408601

Date:
6 October 2017 (Friday)

Time:
7:00 PM – 10:00 PM

Buy tickets: HERE





This is, as usual, a chit chat session with AK. Nothing too cerebral. 

Just bring along your sense of humour and, if you like, a pen and notebook.

Bring a pen and notebook for what? Take note of AK's jokes? Er...

You blur? I also blur. 

---------------------------------
I am absolutely amazed that all 160 tickets were sold out in less than 4 hours.

However, readers who are still interested in getting tickets should check the ticketing site regularly up to 7 days before the event. 

It is possible that some tickets could become available again as some readers give up their tickets for various reasons.

Related post:
Attended "Evening with AK and friends"?

Do this to inject more funds into CPF-SA?

InvestSg:
Got a question: Is it possible to max out SA, use the money to buy SG gov bonds, then top up SA again to max, and then sell the SGBs and return money back to SA? workable bo?

From AK's FB wall:

Click to enlarge.

AK:
I have yet to see anyone do this. Personally, I don't think it is advisable unless we want much more of our funds in our CPF-SA which we cannot access till we are 55. Liquidity should be a pertinent consideration.

Definitely, like I have always said, it is prudent to treat the CPF-SA as the investment bond component of our investment portfolio but, for the average investor, going beyond the FRS is probably overdoing it.

The exceptions would be investors who are very rich and the FRS is too low a percentage of their total portfolio.

Even in such cases, it could be a good idea to consider genuine bonds (like the Singapore Savings Bond) and not a pseudo bond like the CPF to park the spare cash.

It is my belief that I should use the CPF as a cornerstone and not as the entire foundation of my retirement funding strategy.
----------------
Update:

Oliver Tan:
What you have in SA +any investment (using SA money) cannot exceed prevailing FRS. So answer to InvestSg should be "impossible".

Related posts:
1. 4 ways to boost our CPF savings.
2. Build a cornerstone in retirement funding.

To invest or not to invest in Centurion Corporation?

I only became a shareholder of Centurion Corporation Limited in February this year and, since then, its share price has gone up by quite a bit. 

A question I have been asked more than a few times recently was whether Centurion was still good to buy?

Of course, regular readers know that, for a long time now, I don't answer such questions. 

Even if I do answer, it is usually cryptic which could be quite valuable an answer looking at the trend in cryptocurrencies now.

What? Not funny? Alamak.

The thing to do is always ask what do we want out of something, see if that something does the job and we will know if that something is suitable for us.




What I do in my blog is only to share my thoughts and how they guide my decisions. Think of my blogs as simply sharing an approach and not the answer.

I don't know if there is any value in this but I like to think that there is some value from learning someone's approach, good or bad.

Ultimately, your decision should be guided by your own thoughts and not someone else's.







With that out of the way, I am going to talk to myself a bit about Centurion.

Almost all my investment decisions have investing for income as a consideration. 

When I looked at Centurion earlier this year, this was also an important consideration as I was looking for reliable income generators to replace certain income stocks which I voluntarily or involuntarily sold in the recent past.




I am prone to repeating myself as I grow older. 

So, if you are interested in my initial analysis on Centurion, please see related post #1 at the end of this blog.

Of course, what I did not know was that Centurion was planning a dual listing on the HKSE which was approved earlier this month. 

I see this as a good thing. See related post #2 at the end of this blog for some speculative flavor.





Centurion is heavily in debt but it is good debt because they are using borrowed funds to generate more earnings from their investments. 

However, debt fueled growth can be dangerous as my misadventure with a certain locally listed O&G related company constantly reminds me.

So, raising funds from a secondary listing to help fuel their growth in the student hostel business in Australia instead of borrowing more money is a good idea. 





Of course, there were other reasons given for the decision to have a secondary listing in Hong Kong but I zoomed in on what I thought was more important to me as a shareholder, as an investor for income.

A larger equity base without any increase in borrowings would mean a lower gearing level. 

A stronger balance sheet is a good thing especially for an entity as highly geared as Centurion.

However, when there are more shares issued, something must give. 

We cannot have our cake and eat it too, after all.







Centurion is preparing to offer another 36,000,000 shares in Hong Kong. This will lead to some dilution for existing shareholders. 

On a per share basis, earnings would be impacted, everything else remaining equal.

So, is my original thesis to invest in Centurion for income still valid?

If we look at related post #1, back then, I assumed an EPS of 3.7c a year. I also assumed a payout ratio of 40%. 

I decided that a dividend yield of about 4% from a growth company was attractive enough.




Centurion has about 737.4 million shares in issue. Now, with the offer of 36,000,000 new shares in Hong Kong, we would see EPS diluted to 3.5c a year.

If the almost 74.8 million warrants (with an exercise price of 50c per warrant) expiring on 27 October 2017 should be exercised as well, we would see EPS diluted further to 3.2c a year.

OK, math was not a strong subject of mine. 

So, I hope my calculations are up to scratch.




Anyway, if we go with the numbers above, a 40% pay out ratio would mean a DPS of 1.28c. 

Based on my entry price, that is a dividend yield of 3.37% and based on 54c a share, it is 2.37%. 

If you have read my blogs on Guocoland and Tuan Sing, a dividend yield of 2.37% is still relatively decent.







However, things have progressed quite a bit since February and Centurion reported an EPS of 3.5c for 1H 2017. 

Could we see a full year EPS of 7c?

In such an instance, after listing in Hong Kong and with all the outstanding warrants exercised, Centurion's fully diluted EPS could be 6c. A 40% payout ratio would give a DPS of 2.4c. 




Based on 54c a share, it would give a dividend yield of 4.44%.

Centurion is still in growth mode and it is very likely that the management will deploy funds from the warrants, if exercised, into new projects as well. 

So, debt is likely to remain high. 




It would be prudent to retain the assumption that I made in February that we could see 0.8c knocked off from its EPS from a future 1% increase in interest rate.

In such an instance, fully diluted EPS could be 5.3c and a 40% payout ratio would give a DPS of 2.1c. 

Based on 54c a share, dividend yield would be 3.88%.

What? 

Should you buy or not?




Alamak, how to buy 4D? 3.88. Only 3 numbers lah.

What? Wrong answer?

Aiyoh. I blur.

Related posts:
1. Invested in Centurion
2. Centurion to double?
3. Centurion's earnings sky rocketing.

Attended "Evening with AK" and bought books from BetterWorldBooks?

I have been an affiliate of Better World Books for a while now because I like the idea of doing my part for the environment and also to improve literacy for underprivileged children. 

I have not been blogging about them for a while and here is a recent chat with a reader.

Reader:
I went to better world books to get my books. but i only received 2 out of 6 books i bought. to me it's ok since i got them for much cheaper than getting them new. but since u r still endorsing this website on your blog, thought u might want to know. maybe they are not as reliable since you first endorse them...

AK:
Actually, it happened to me once before.
You just have to write to them and tell them you did not receive your books and they will send you replacements.

Reader:
i did, just letting u know since u endorsed them on your blog. just a disclaimer.

AK:
They sent me a replacement and it arrived with the original book I ordered.
So, I concluded that the problem was with the shipping and not BWB.

Reader:
Yes i understand. it's tough for them since they are just the middleman. ok good to know u still hv faith in them.





AK:
Not faith or not lah.
It is just that if I have to buy a book, I rather buy it pre-owned, cheaper, good for environment and help the poor. 🙂
Charity lah. 🙂

Reader:
haha you have become my favorite Santa Claus. Real in person and giving real gifts!

AK:
We are very fortunate people. If we can help the less fortunate, why not?

The world can do with a bit more charity and I am only doing my part. 🙂

All proceeds from "Evening with AK and friends" go to helping needy students, for example.

There will be one session later this year but only one. I really lazy this year. 😞





If you are thinking of buying a book, go to related post #1 below and you will be doing more than just buying a book. You will be saving money, saving the environment and saving lives.

To everyone who has attended "Evening with AK and friends" in the past, thank you too for helping needy students.

Also, look out for the next session of "Evening with AK and friends" which is going to be the only one this year. I will blog about it once all the details are firmed up.

To those who don't know, "Evening with AK and friends" is a chit chat session. If you have high expectations of me, it is best to give it a miss. ;)

Although I want to accommodate a larger group because the tickets usually sell out very quickly, it probably isn't going to be possible. 

So, if you want to get a ticket to the event, check my blog regularly in the next few weeks and, of course, once you see the blog, fast hands fast legs.

Related posts:
1. Donate a book to the needy.
2. AK helps needy students.
3. AK gets invited by NUS

4 ways to beef up our CPF savings! (InvestX Congress and the CPF.)

I hope everyone who went to InvestX Congress today had a good time. 

To my regular readers who were there, I hope it wasn't too boring listening to me repeating the same old stuff about the CPF. 

Anyway, for the benefit of some in the audience who told me that they might have trouble remembering everything I shared today, here are some salient points from my segment:





Beef up your CPF account.

You could do these:

1. Top Up your SA (not beyond FRS)

2. Voluntary contribution to your MA only (together with mandatory contributions, not beyond CPF annual limit and, on its own, not beyond BHS)

You will also get income tax relief for doing the above. For #1, only for the first $7,000 each year.






3. OA to SA transfer (not beyond FRS)

4. Voluntary contribution (allocated to OA, SA and MA) (together with mandatory contributions, not beyond CPF annual limit)


These will not get any income tax relief.





We don't have to do everything to capture all the benefits. It is not like Pokemon GO and we gotta catch them all. Just do what we can.

For me, the big thing was doing OA to SA transfer in the first 4 years of my life as a working adult. I emptied my OA into my SA. 

Did this in the first 4 years of my working life instead of the last 4 years of my working life. 







That makes a big difference because compound interest needs time to work its magic and a bigger base earlier makes it more magical.

Also, have enough in our CPF-MA and the interest income we receive yearly from the government will pay for our insurance. Who says there is no free medical insurance in Singapore?

See:
http://singaporeanstocksinvestor.blogspot.sg/2013/12/how-to-get-free-medical-insurance-in.html 

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

Here are links to some of my other blogs on the topic:

1. http://singaporeanstocksinvestor.blogspot.sg/2017/01/ak-showing-off-his-cpf-oa-and-ma-2017.html

2. http://singaporeanstocksinvestor.blogspot.sg/2015/01/how-did-ak-amass-so-much-money-in-his.html

3. http://singaporeanstocksinvestor.blogspot.sg/2016/02/the-cpf-is-really-national-ponzi-scheme.html



If AK can do it, so can you! Gambatte!

23yo bought 40yo HDB flat and worried.

Reader:

I am currently 23years old & married. My husband and I purchased a resale flat last year.

Back then we did not read nor have knowledge about financial planning. 

We purchased what we want and our desired location...

Our resale flat is actually quite old. I think is 40 years old this year...

Many people called us stupid for buying resale flat instead of BTO ones. 

And since we didn't have proper financial planning, we exhausted our entire CPF to pay for the flat.

So, our CPF is 0 now. 

We also took a loan of 25 years...

I am beginning to learn how to invest and starting small. May I ask how can I actually do better in planning my finance? 

Thank you for taking your time to read my email. Hope to see your reply.

AK:
How do you start doing better in your finances? That is a very broad question. It is very difficult for me to answer with specifics. 

Here are a few blogs you might want to read:

1. http://singaporeanstocksinvestor.blogspot.sg/2014/03/graduating-soon-take-steps-towards.html

2. http://singaporeanstocksinvestor.blogspot.sg/2015/05/how-much-should-we-have-in-our.html

3. http://singaporeanstocksinvestor.blogspot.sg/2017/04/hdb-flat-is-37-years-old-and-son-is.html


4. http://singaporeanstocksinvestor.blogspot.sg/2017/07/buying-properties-with-short-remaining.html


There are many other relevant links in my blog. 

Go to the right sidebar of my blog and read those suggested especially those listed under "WEALTH CREATION".
-----------------------------
If we to learn from mistakes, we will avoid them and make better decisions in future.

Don't beat ourselves up.

This reader has the right attitude. Gambatte!

Is early critical illness insurance necessary?

I have blogged about the importance of having critical illness insurance before and because I get questions from readers now and then on whether early critical illness insurance is essential, I decided I should blog about it.

Please bear in mind that this is just my opinion and some might disagree.

Reader:
I've started my investing journey and I am quite amazed I've learnt quite a lot ever since I started reading your blog last year. 

I would like to seek your talking to yourself opinion. 

Is it essential to get an early critical illness term insurance? 

The premium is really high.





AK:
When we buy insurance to cover ourselves against critical illnesses, it is so that we get paid a lump sum of money if we should be diagnosed with one of the dread illnesses.

The difference between regular and early forms is that the latter will pay the insured once diagnosed with a dread illness even if it should be at an early stage. 

The regular form would only pay if the illness is at an intermediate stage.

I am of the opinion that we need regular critical illness coverage because it could be that we must stop working to undergo treatment. 

We could be too ill to work. 





Critical illness coverage gives us a lump sum payment. 

Now you know why this is necessary. 

We need this in case we have to stop working. 

It provides us with money to continue living our life as if we were still working (for a long while, hopefully) until we get better.

At the early stages of an illness, it is conceivable that we would still be well enough to work and would not have to give up our regular income. 




So, it is my opinion that it is not essential to have early critical illness insurance. 

We don't need it.


Any medical treatment required if we should be diagnosed with a critical illness in the early stage should be covered to a large extent by our H&S insurance. 

Think Medishield Life, for example. 

We don't need early critical illness coverage to pay for our medical treatment.


The early variant of critical illness insurance is also unattractive because it is very pricey. 

How much more does it cost?







For example, 

A 30 year old male might have to pay almost $800 per year for a $200,000 death with regular critical illness benefit till age 65 but he might have to pay more than $2,000 per year if he were to opt for early critical illness benefit.

That is 150% more! 

If it were 10% or 20% more, maybe, but 150% more? 

Mind boggling.

I have blogged about what I feel is the best insurance in life and I feel that the extra money used to pay for early critical illness insurance could be better used towards this project.






If you don't know what I am talking about, see related post #2 at the end of this blog.

Insurance is absolutely necessary against events which we will not be able to recover from easily without financial help.

For all other events, insurance is probably a "nice to have" and not a "must have".

Buy what we know we need and not what sales people want us to think we need.




Related posts:
1. Without CI coverage?
2. Best insurance to have in life.

Avoiding the instant gratification of yield (SingTel, Starhub and REITs).

My blog has pretty useful content in the comments section but many do not read the comments section, I found out a long time ago. 

So, there was a time when I would share the comments in a blog post so that they reach more people. I stop doing that after I found out that Google didn't like it and it affected my blog's page ranking. 

However, I have decided that it really should not matter to me and that making sure that the content reaches more people is more important. 

This was a recent conversation:

redponza said...
Hi AK,
There is a 4th telco getting into Singapore, don't you worry about the intensified competition?

Also, unlike REIT where there is minimum capital expenditure, telco needs to upgrade their network consistently to maintain competitiveness. With the lower yield, and meh growth potential, not sure why it is better than REIT.

In the telco space, isn't Starhub better with a much higher dividend yield?

Thanks.



AK said...
Hi redponza,

SingTel derives less than 20% of its revenue from Singapore. It is truly an MNC.

(Added on 21 Aug 17. Reader:
I look at Singtel's annual report. I can't derive the 20%. It is 40+ % to my calculation. How did u derive it? 

AK:
Well spotted. I meant to say its Singapore mobile business which is, of course, what would probably be impacted by the entry of a 4th Telco next year. That business segment accounts for 13% of SingTel's total revenue.)

As for CAPEX, selling away most of its stake in Netlink NBN passed a heavy baby to other investors. SingTel retains only a 25% stake in the newly listed entity.

If you are worried about the 4th Telco and increased competition in Singapore, you should be more worried about Starhub.

This is also probably why Mr. Market demands a higher dividend yield from Starhub which incidentally also has a higher payout ratio compared to SingTel.

One more thing, we really shouldn't be comparing Telcos with REITs. The yields are not comparable.

SingTel pays out a percentage of its earnings as dividends while REITs pay out from their operational cash flow.

If we were to use the same yardstick for both, we would worry about REITs since their DPU is usually higher than their EPU.





redponza said...
Is telco attractive?

From my point of view, return = dividend yield + dividend growth, taking debt into consideration.
There is lower growth and lower yield in telco, thus I am puzzled why telco is even considered in the first place.

And from a price to book standpoint, they can never beats a REIT =.=

But on the other hand, I saw famous investors grabbing telco companies, hence I must be missing sth here?





AK said...
Hi redponza,

Like I said, they are different animals.

It depends on how we look at investments and how value is created.

Most REITs pay out more than they earn. They do not retain any earnings.

SingTel pay a percentage of their earnings and they retain some earnings so that they become more valuable over time.

I like some REITs and my portfolio is rather heavy in REITs. So, it is sensible to become less dependent on REITs especially when conditions have become less benign for them.

It is about having a more holistic approach.

Frankly, not all REITs are good investments.

We should wonder at the sustainability of distributions.

A REIT could have high CAPEX down the road:

http://singaporeanstocksinvestor.blogspot.sg/2015/08/is-keppel-dc-reit-attractive-investment.html

A REIT could see their assets disappear in the not too distant future:

http://singaporeanstocksinvestor.blogspot.sg/2017/03/viva-industrial-trust-more-attractive.html

So, we must be careful when we lump REITs together to say that REITs can never be beaten in terms of return on investment. The quality of returns and the sustainability are pertinent considerations.

To new readers of ASSI, please read related post #1 below.

Related posts:
1. Instant gratification of yield.
2. SingTel and Netlink NBN Trust.

SingTel and Netlink NBN Trust.

Some people keep asking me what have I bought recently. 

Hmm. Let me see.

Eggs, extra virgin olive oil, butter, dark chocolate, matcha ice cream and some other stuff.

What? Wrong answer?

Jokes aside, to those who like asking me what did I buy or if XXX stock can buy or not, you should know you would be disappointed most of the time with my answers.

You have been warned. ;)

Anyway, in an interview a few years back, when asked what was the first company I ever invested in, my answer was SingTel. 





Like many Singaporeans then, we were given a chance to buy discounted SingTel shares by Mr. Goh Chok Tong who wished for Singaporeans to think about investing in stocks to help grow our wealth. People my age or older would probably remember this.

I am still holding on to those shares and collecting dividends, year after year. 

Is that the best way to achieve greater returns? 

I don't know but I know it generated pretty decent and safe returns.

Since then, over the years, I went on an adventure as an investor, trader and speculator in the stock market. 

I made some money and lost some money. 

I think I must have made more money than I lost or else I would probably be in IMH by now.

In my retirement, I tell myself that I must not be too adventurous with money. So, I bought more SingTel shares in 2015. 

Informed by charts, I added to my investment in SingTel as its share price retraced to what I thought were supports and I did that again recently.




My decision is now partly emboldened by the listing of Netlink NBN Trust which effectively strengthens SingTel's coffers by some $2 billion. 

So, SingTel has become a more valuable company after the sale, more valuable than it was in 2015.

When asked whether I was interested in Netlink NBN Trust at its IPO, the answer was in the negative. A 5% yield just didn't cut it for me.

With relatively high depreciation and replacement costs to be considered as well, a structure that pays out most of its cash flow to shareholders probably means much higher debt in time to come. 

I wonder about the sustainability of its dividends in the longer run. 

To invest in Netlink NBN Trust, therefore, I would demand a much higher yield than 5% as a compensation. 

This could be achieved through a higher DPU which is unlikely or a lower unit price which is probably more likely to happen.

In comparison, I believe that SingTel's dividends are more sustainable. 





There is talk of a special dividend but whether there is going to be a special dividend from SingTel or not does not matter to me. 

With a payout ratio of 60% to 75% of net profits, I will be quite happy with a 3.5% to 4.5% regular dividend yield. Lower than Netlink NBN Trust's 5% but it gives me peace of mind.

Looking at the chart, it looks like there is a chance that SingTel's share price could weaken again in future but it could bounce up first. This is the trader in me talking. 

Don't ask me what could cause this because I don't know.

However, I do know I would like to buy more if SingTel's share price should go much lower, all else remaining equal.

Related post:
1Q 2017 passive income.