"E-book" on AK the investor in 7 chapters.

Over the years, I received several requests from the media for interviews. 

Due to the fact that I would only do these interviews in disguise, these interviews did not materialize.





I am a very private person. There is no reason good enough for me to sacrifice something as valuable as privacy. 

OK, maybe, if someone were to offer me $1 million, I would consider. I am only half kidding. Seriously.

Anyway, when I received another request recently and apparently this is going to be a campaign in collaboration with Temasek Holdings, I offered them a series of blogs that tells my story instead. 





I don't know if they will use them but I thought I could organize the blogs into an "e-book" to share with my readers too and here it is.

Chapter 1:
My family almost went bankrupt.

Why am I the way I am? 

We are all products of our past experience.

Chapter 2:
Life was difficult and I wondered if Santa existed.

Be self-reliant. 

No one is going to help us if we don't help ourselves.

Chapter 3:
To retire by 45, start with a plan!

What I have today started with a plan.

Want to achieve financial freedom? Have a plan.





Chapter 4:
Secret of my success.

Our philosophy in life will guide all our decisions.

Having the right philosophy is essential.

Chapter 5:
6 digits annual passive income.

It is mostly a lot of work but luck plays a part.

This is the honest truth.

Chapter 6:
How to make $1 million investing for income.

Do the right things and time will do the rest.

Be patient.





Chapter 7:
A wealth building strategy that has worked.

We cannot predict but we can prepare.

I will be happy if my story is able to inspire many more readers to seek financial freedom.

Gambatte!

3Q 2017 passive income from non-REITs.

I continue to invest more in non-REITs, reducing my reliance on S-REITs for passive income in the process.

The largest investment in non-REITs in 3Q 2017 was in SingTel.

See: SingTel and Netlink NBN Trust.

I accumulated a relatively large investment as SingTel's share price declined to below $3.70 a share.

I am more interested in the entity's ability to pay consistent and meaningful dividends although a special dividend from the sale of Netlink NBN Trust would be a nice bonus.

In 3Q 2017, I also nibbled at the following:

1. Wilmar.

2. Tuan Sing Holdings.

3. Comfort Delgro.

As usual, there is an investing for income angle in all my investments but that is where the similarity ends for these nibbles.

Adding to my investment in Wilmar when I did was to pay a fair price investing for growth. It is important that I am paid while I wait and Wilmar pays regular dividends.

See: Accumulating Wilmar.






Tuan Sing Holdings, similar to Guocoland, is an asset play. However, the gestation period is going to be longer because their recurring income engine is yet to be completed.

See: Invested in Tuan Sing.

ComfortDelgro is the newest member of my non-REITs portfolio. Sold down terribly due to Mr. Market's intense pessimism and with so much blood on the streets, I was curious enough to take a look.

See: Analysis of ComfortDelgro.

I feel that these new investments will probably strengthen my passive income stream from non-REITs in future.






In 3Q 2017, income received from non-REITs:

$ 24,538.58

Missing Croesus Retail Trust in future will result in much reduced passive income from non-REITs as the Trust accounts for more than half of the income received in the quarter.

Other than Croesus Retail Trust, the other more significant non-REIT income contributors in my portfolio in 3Q 2017 were Centurion, VICOM and Wilmar.





In 4Q 2017, my war chest will receive a tremendous boost in the form of a final distribution from Croesus Retail Trust as the sale of the Trust is completed.

Related posts:
1. 3Q 2017 income from S-REITs.
2. 2Q 2017 income from non-REITs.

3Q 2017 passive income from S-REITs.

Although I did blog about REITs in 3Q 2017, I didn't make any changes to my investments in S-REITs. Pretty much the status quo.

Well, not entirely the status quo because there is the rights issue by Cache Logistics Trust which will close this evening. 




Since I have a small legacy position, I took up my entitlement and also applied for some excess rights.

As it is an exercise to strengthen the REIT's balance sheet, it does nothing to generate more passive income for me.

See:
Cache Logistics Trust Rights.




Anything exciting happened?

What would be the equivalent of something exciting in the world of investing for income?

Maybe, this. 

What would have been a big deal in 3Q 2017 in the S-REITs universe failed as Cromwell European REIT's IPO was pulled out. 

The reason was probably insufficient interest from investors and this was after the size of the IPO was cut too.







I had a disturbing vibe about the failed REIT IPO as it felt as if the sponsor was trying to dump a mish mash (i.e. rojak) of assets.

See: 
Cromwell European REIT cuts IPO size. 

Even so, it would have been interesting to have a new addition to the number of S-REITs available. I have no doubt that the REIT would have attracted retail investors who are yield focused.

When we plonk money in REITs, we must not think about them like how we would think about fixed deposits. 








REITs are more complicated than fixed deposits. They are investments, not savings.

It is perhaps worth reiterating here that we should avoid the instant gratification of yield. 

See: 
SingTel, Starhub and REITs.

Having said this, REITs remain relevant tools for income investors and I like to remind myself that all investments are good investments at the right price. 







My portfolio of S-REITs continues to benefit from investments made in 1Q 2017 as I received distributions from Starhill Global REIT, CapitaRetail China Trust and also an enlarged investment in IREIT Gobal.

Income from S-REITs in 3Q 2017:

$20,783.43

I was hopeful that there would be a slight increase in income compared to 2Q 2017 but there is a 1.36% decline instead.




This decline took place because industrial S-REITs continue to face headwinds due to general oversupply of industrial space and weak demand in a slow economy. 

See, for example:
Decline in Soilbuild REIT's DPU.

As there are many industrial S-REITs in my portfolio, as a group, their weaker performance in the quarter was a drag.

There is talk of a pick up in the global economy which will give Singapore's economy a lift. If it happens, it should benefit industrial properties too.




In the meantime, I am happy with the investments made in 1Q 2017. 

If I did not make those investments, the decline in income generated by my portfolio of S-REITs would have gone unmitigated.

The top 3 income contributors for the quarter are the following:

1. AA REIT
2. FIRST REIT
3. IREIT Global

Related post:
2Q 2017 income from S-REITs.

Is 2.02% interest attractive? It depends.

Reader:
Good day, have been reading your blog for few month. found many useful tip . esp the CPF sa. should have transfer once hdb loan paid off. 😞 

Would like to ask for your view on an endowment plan which is 3year at 2.02%per year. It stated protected under Singapore Deposit Insurance. Thanks for your time.

AK:
2.02% interest per annum for a lock in period of 3 years is unattractive to me. Liquidity is important to me as an investor.

Unlike a fixed deposit where the only thing we give up is the interest if we should break the deposit, premature termination of insurance policies is usually punitive and we might not recover all our money.

For a lock in period of 3 years, the interest rate offered would have to be much higher. Otherwise, I would rather settle for a lower interest rate offered by some banks for fixed deposits (e.g. 1.55% p.a. for a 2 year FD) and retain some flexibility.







Even if you are not an investor, if this is money from your emergency fund, this would not be a good choice as money in such a fund should be something you can get at immediately without delay nor suffering a loss.

If you are not very savvy when it comes to investments and the money to be put away is merely extra money on top of your emergency fund (i.e. liquidity is not a major consideration), then, this might be something you could consider.

You might be interested in related post #1 below and take note of the 6 points mentioned when it comes to buying insurance.

If you are 55 or older and a CPF member, you might be interested in related post #2 below.

Related posts:
1. Sumiko Tan's expensive lesson.
2. Use CPF as a savings account.

Technical analysis of ComfortDelgro.

It has been a long time since I shared a technical analysis (TA) here in ASSI.

I used to do a lot more TA when I was trading more actively but I have not been trading as much for quite a while now.

Alamak. You don't believe me?

Why? AK is lazy? OK, you win.

I too lazy to defend myself. ;p






Anyway, since I haven't done this for a while, I am probably rusty.

(RIGHT CLICK AND CHOOSE 
"OPEN IMAGE IN NEW TAB".)

Looking at the chart, it should be obvious that the trend is down.

However, what is more noteworthy is that the downtrend is a strong one.

There is no sign of any positive divergence as the MACD has formed a lower low and so has the CMF.

Money is still flowing out of the stock and chances of a trend reversal at this point are slim.






Today is a white candle day but it is a short white candle with an upper wick of equal length which suggests that Mr. Market wasn't a very enthusiastic buyer.

Although with all the selling pressure, some people say ComfortDelgro is oversold, the MFI shows that the stock is yet to be oversold.

Yes, the bleak picture could get worse.

Are you vested at much higher prices and don't have balls of steel? OK, stop reading now.






Still reading?

OK, you have been warned.

Short sellers are probably having a field day here and any half-hearted recovery in share price would probably be seen as an opportunity to short sell.

The strong downtrend could see the support provided by the 138.2% Fibo ($1.97) broken. It was merely punctured but recovered last week. 

We could see the 150% Fibo at $1.90 tested then. If that goes, the 161.8% Fibo at $1.83 is next.

These are golden ratios and are theoretically stronger support levels.

If these supports were to break, more blood will flow on the streets.






OK. What if this does not happen?

Alamak, remember that TA is about probability, not certainty.

If it does not happen, then, treat this as a horror story lor. ;p

Related post:
Incomplete analysis of ComfortDelgro

An incomplete analysis of ComfortDelgro (Updated).

Video added in July 2018:


Why is AK sharing this video when he is a self professed IT dinosaur leh?

Guess lah! ;p

Still clueless?

Must support my businesses lah! :p




----------------------------------
UPDATED (5 Oct 17).
-----------------
Retail investors have limited resources at their disposal and very rarely are able to do a thorough analysis of any business.

Time is one of those limited resources.

OK, I admit. I am lazy and I want to spend more time watching anime, K-drama and playing MMORPGs.

Bad AK! Bad AK!






Anyway, like what I have done in so many other instances in the past, I just zoom in on what I feel is the crux of the matter and try to make a decision based on what gives me peace of mind.

The biggest problem facing ComfortDelgro now is its taxi business.

Taxi business accounts for a third or so of its revenue. 

The revenue might be lower compared to its public transport arm but because it is a higher margin business than its public transport business, a loss in revenue will dis-proportionally lead to a higher loss in earnings. 

When we remember that it will also impact another segment of its business and that is the sale of diesel to its taxi fleet, the picture becomes gloomier.






However, all investments are good investments at the right price and to find the right price, we need to look at valuation.

During the Global Financial Crisis, in October 2008, ComfortDelgro traded at $1.19 a share and with full year EPS at 9.59c then, the PE ratio was 12.4x.

ComfortDelgro's 1H 2017 EPS was 7.5c. 

Annualising this gives us 15c.




So, if we should assume that things don't get worse from here, paying for a stake in ComfortDelgro at a PE ratio of 12.4x would give us a target buy price of $1.86 a share.

Of course, we are not in another Global Financial Crisis, so, paying a PE ratio of 13x could be considered a peace time bargain. 

This would give us a share price of $1.95 per share.






This line of thought makes sense to me but the assumption is that things don't get worse for ComfortDelgro from here.

For sure, I do not know if things would get worse from here but, just from my observation, I have an inkling that things probably would get worse before they get better. 

Grab is very aggressive and ComfortDelgro's taxi fleet size could shrink further.




How much worse would it get?

If we think that its taxi business could shrink another 20% from here (which is pretty grim) and since it is likely that ComfortDelgro would roll out some remedial measures to retain taxi drivers, we should expect profit to decline somewhat.

Given these assumptions, since its taxi business accounts for about a third of its profit we could see ComfortDelgro's EPS declining by another cent or so.






Assuming EPS declines to 14c, a crisis valuation would dictate that we are buyers only at $1.74 a share. 

If we are more sanguine about the macro environment, then, a 13x PE ratio would give us a target buy price of $1.82 a share.


When would things get better? 

Surely, I don't know.






I do know that ComfortDelgro pays out more than 50% of its earnings as dividends to shareholders. So, if EPS falls to 14c a share, a DPS of 7c is not excessive.

At $1.82 a share, that is a dividend yield of 3.85%.

At $1.74 a share, that is a dividend yield of 4.02%.

Nibbling earlier today at $1.96 a share could have been premature but it gave me an incentive to take a more detailed look at the numbers.
--------------------------




UPDATE (5 Oct 17):

Read another incomplete analysis: HERE.

Decline in Soilbuild REIT's DPU likely.

In its 1H FY2017 report, Soilbuild REIT's management said that the biggest challenge they were facing was to lease the entire space at 72 Loyang Way because of the weak oil and gas sector.







Now, they are going to have to deal with 2 hot potatoes instead of 1.

NK Ingredients, one of the REIT's top 10 tenants by revenue, has defaulted and the fact that they accounted for almost 6% of Soilbuild REIT's revenue is going to hurt.

The loss might not be as traumatizing this round but to be hit by another loss before being able to recover from an earlier one is very unfortunate.

The trauma is cumulative.

The rental guarantee from NK Ingredients' insurance will provide another 4 months of rental income.

So, Soilbuild REIT has 4 months to secure another tenant if it is to reduce the negative impact the default has on its revenue.







NK Ingredients signed a 15 years lease which was supposed to provide some earnings visibility till the year 2028 for Soilbuild REIT. 

Such a long lease agreement is necessary because being in the chemicals industry, I believe that the asset was probably purpose built.

It probably means that it would be rather difficult to find another tenant to move in within a short period of time.

So, we should logically expect another reduction in the REIT's DPU with this development.





We could also see the REIT's NAV come under pressure if the asset remains vacant for a prolonged period.

See related post #1 below.

In the worst case scenario, going by the above statement, if the asset remains vacant, with a hypothetical half year DPU of 2.64c, if we demand at least an 8% distribution yield, we would only be buyers at 66c a unit.

Related posts:
1. An opinion of Soilbuild REIT.
2. 2016 income from S-REITs.

In 2H 2016, I added to my investment in Soilbuild REIT due to a rights issue. This was at 63c per rights unit. I took up my entitlement and also applied for excess rights. From that exercise, I increased my investment in the REIT by more than 10%.

See slides presentation: HERE.

Cromwell European REIT cuts IPO size.

UPDATED (15 NOV 17):
After cancelling its IPO after cutting its IPO size, Cromwell European REIT is making another IPO attempt with a much smaller offer of a billion units instead.

"Cromwell European REIT's prospectus Wednesday showed that the company is offering 428.54 million units to institutional and retail investors, and another 581.8 million units to investors who have agreed to take them up ahead of the IPO (at 55 European cents each).

"Cromwell had, in September, offered 1.91 billion units at up to 57 European cents each. The company has also reduced the number of assets that will be in the REIT--down from September's 81 assets."

Source: WSJ




-----------
Earlier this month, when I blogged about Cromwell European REIT, I mentioned that the sponsor, post IPO, would be holding a rather smallish stake in the REIT. 

To me, it seems as if the REIT is a place for the sponsor to dump their rojak portfolio.

"It gives me the feeling that the sponsor wants to dump everything into a pot and be done with it." (See related post at the end of this blog.)






Well, things have changed. 

I don't know why but it seems that they have decided to shrink the size of the IPO and the sponsor will now have a stake of 25.9% to 26.8% in the REIT. 

These are much better numbers.

There will be a better alignment of interests with other investors in the REIT, for sure.

Simply put, if Cromwell European REIT should do badly, the sponsor will hurt much more now compared to when they were going to have just a 12.7% stake. 

So, unless they enjoy pain, with a much larger stake in the REIT, they have a stronger incentive to do better.






Although this is a positive development for retail investors in the REIT, I still cannot help but feel somewhat uneasy with the rojak nature of the portfolio from the get go. 

I understand that they bought these properties from various funds looking for exits but it seems rather hasty to me.

Having said this, all investments are good investments at the right price. 

Trading starts on 28 Sep (Thu).

Related post:
Cromwell European REIT IPO.
Reference:
Cromwell REIT cuts IPO size, ST, 18 Sep 17.

https://www.theedgesingapore.com/negative-view-cromwell-european-reit-down-under

"Is this ILP good for my mother?"

Reader:
My mum's insurance agent sent this. Would you consider this ILP? It's also being marketed at an event at the sports hub...

AK:
Generally, I would say to anyone not touch ILPs even with a 5 feet pole. 

However, ILPs are especially unsuitable for older people as the cost of life insurance jumps after age 55 and from age 60, it becomes very costly. 

This is because mortality risk increases as we age.

In an ILP, the cost of insurance is deducted from the policy value by selling units. 

As we age, the cost of insurance goes up and in our golden years, it goes up more rapidly.

So, imagine units in the ILP being sold down more rapidly to pay for the cost of life insurance as we age.

Unless the unit price of the ILP goes up more rapidly and significantly than the increase in deduction, when the value of the ILP becomes zero, the insurance coverage is terminated.






In my opinion, this particular insurance agent who is trying to sell the reader's mother an ILP does not have her interest at heart.

It is no secret that ILPs are probably the most lucrative products available to insurance agents.

So, I am not surprised that less scrupulous agents would try to sell them to any Tom, Dick or Harry or, in this case, Mary.

Related posts:
1. 20 years and $29K.
2. Reader regrets ILP.

Bribed to buy a diesel car and regretting now.

Earlier in March this year, I blogged about how I could sell my car for a higher price when the Vehicular Emissions Scheme (VES) is introduced. 

This new scheme replaces the Carbon Based Vehicle Scheme (CEVS).

The VES will come into effect in the new year and we will see some vehicles which used to enjoy green rebates from $5,000 to $20,000 being slapped with surcharges of up to $20,000 instead. 

My car, for example, will go from receiving a $15,000 green rebate to being slapped with a $20,000 surcharge. That is a $35,000 difference!





Many car models which do not meet the EURO 6 standards will also disappear from the showrooms. 

A couple of popular examples are the Toyota Vios and the Toyota Camry. Apparently, all the models from Chevrolet being sold in Singapore do not meet the new environmental standards.

Of course, I am just a little guy in his little car and I am very much concerned about how everything affects the money in my pocket.

For those who don't know, I have a diesel car. Diesel technology has gone from dirty to green and, now, back to dirty. 

So, apart from the higher price that a diesel car would attract from 2018, there is also a usage based diesel tax. 

Diesel, for many months now, costs an extra 10c a litre.





So, the more diesel I use, the more I pay.

Fortunately, diesel engines are pretty economical compared to petrol engines. This coupled with the fact that I do not drive as much as I used to, I buy only about 40 litres of diesel a month. 

This means that I pay $4 more for automotive fuel each month. 

OK, that is hardly a disaster.

Actually, with the usage based tax, it seems that I will end up paying less because the government is reducing the lump sum tax (road tax) that diesel cars will have to pay by $100 a year.

I read an article titled "First bribed to buy diesel cars and now they want to tax us" and had a good laugh.







The article is about the predicament of diesel car owners in the U.K. and although I had a good laugh, it is no laughing matter for them.


"When I bought my diesel-powered Citroen C5 estate six years ago, the last thing on my mind was that I would end up being treated as an environmental vandal by a government minister.

"It is quite a shock, then, to hear Transport Secretary Patrick McLoughlin warning motorists like me that we face a hike in taxes designed to punish us for doing what we thought was the right thing and buying a diesel car."

Read the full article: HERE.









Although I am somewhat disappointed that my diesel car is not as environmentally friendly as I once thought it was, when I do drive, I still enjoy the car very much and I am glad that new measures taken by the Singapore government are more reasonable than punitive.

In fact, it might even help to lessen the monetary loss of selling my car if I decide to do so in the new year.

Bribed to buy a diesel car and regretting now? 

If I were in the U.K. maybe but not when I am in Singapore. Heng ah!

Related post:
1. Make $35,000 from selling my car.
2. How much to spend on a car?
3. 3 good reasons to buy a car.

When to get a private annuity?

Reader:
Been reading your blog for a while now and wanted to ask you what do you think of XXXXXXXXXXX as a retirement plan.

My financial consultant suggested this (product) to me recently but I wanted to get a second opinion on this.

Could you talk to yourself about this please?

AK:
As a retirement plan, there is nothing out there that can beat the returns offered by CPF Life.

Unless I have maxed out my CPF account, I would not consider putting money in a private plan.

http://singaporeanstocksinvestor.blogspot.sg/2015/02/an-annuity-would-you-rather-have-it-or.html




I have done a case study of a private plan before and how it could not beat CPF Life. 

You might want to use this as reference when looking at the product offered to you:

http://singaporeanstocksinvestor.blogspot.sg/2014/07/an-annuity-proposal-case-study.html




In summary, max out your CPF account first (i.e. top up your CPF-SA to hit prevailing FRS) or if you are above 55, think about maxing out your CPF-RA.

Only then, think of possibly getting a private plan to supplement CPF Life.

Related posts:
1. 4 ways to beef up CPF savings.
2. CPF savings 10 years from now.

Cannot do this in Singapore because...

Most of us are amateurs when it comes to anything that has nothing to do with our full time job. It stands to reason.

However, even if we spend hours each day doing something, we might not be very professional about it. So, we could remain amateurs. This stands to reason too.

AK is an amateur this and an amateur that in retirement. 

I do the things I enjoy but I am not necessarily good at them. 

It is about having fun and not making a living. 

So, I am not going to set professional targets or high standards. Just thinking about doing this is stressful. 

Naturally, this is how I treat gardening as a past time too. For an amateur gardener, I think I have done OK.

To be honest, it is probably because I have mostly chosen plants which are easier to grow. 

Yes, AK is a lazy fellow and always likes options which have lesser resistance.




A friend told me that it is too difficult to grow Lavender in Singapore because the weather is too warm.

Then, a friend told me that it is impossible for Lavender to flower in Singapore because it is too warm.

I would need to have a cool environment like in the Flower Dome in Gardens by the Bay for Lavender to bloom.


I told him I didn't know that and, by the way, I think my Lavender plant might just be flowering:

(Photos taken on 1 Sep 17.)

Some people tell me that they can never achieve financial freedom in Singapore. It is impossible because it is just too warm hard.

(Photos taken on 12 Sep 17.)

This final photo was taken moments ago this morning:

OK, maybe, AK is just lucky.

Related posts:
1. Gardening and investing.
2. Financial freedom for Singaporeans.

Reduce home loan with CPF OA or do OA to SA transfer?

Reader:
I have an existing HDB loan of 270k over 30 years with my spouse and we are deciding whether we should try to reduce the loan amount with our CPF OA or transfer some to CPF SA.

Objective is to pay the housing loan - debt free and to have a good retirement amount at 65 (hopefully to hit at least 500k in CPF).

We are 35 this year and we have around 80k in our CPF OA each with around 30k in CPF SA.

Hope to get your kind advice on this!

AK:
When we use our CPF-OA savings to pay for our home, we stop earning interest from the government. Instead, we have to pay ourselves interest if we should sell our home.

Once we realise this, it becomes pretty obvious that in an environment of prolonged low interest rates, it would probably be a better idea to pay for our home using cash if we can afford to do so. Don't use our CPF-OA savings.

Central to the idea is to receive more interest income for our CPF savings with an eye on achieving a higher level of risk free and volatility free retirement funding.





Before doing any OA to SA transfer, I would keep enough in the CPF-OA to service at least 24 months of mortgage payments. Bad things do happen unexpectedly.



Savings in our CPF-SA receive a base interest rate of 4% per annum.

If you use your OA savings to pay your HDB loan, you are saving 2.6% in interest payment but you will be losing 2.5% in interest income. So, you have a net saving of 0.1%...






Reader:
Thank you so much for the prompt reply and words of wisdom.

I will keep in mind your kind advice and work out a long term plan.

It has been very kind of you to share your knowledge and wisdom especially for many of us who are caught at a junction, not sure what is the best way to move forward and yet we would want to maximise the returns for our efforts/assets/decision. Sometimes, there is really no right/wrong way to make a decision.

Once again, thank you so much for sharing your knowledge selflessly!






Interested in making good use of the CPF to help achieve retirement adequacy? See related post #2.

Related posts:
1. Average HDB household and $1M.
2. 4 ways to boost our CPF savings.