"Purpose of CPF is to make the rich richer."

Reader:
My view is. Cpf is workable for rich ppl ......high educated/ professionals group. This system can help them richer.

It’s not really help those below average. Only can make sure they got food when they old n can’t work. No luxury.

In other word, cpf is workable for those above average n PR. But not for those below average Singaporean，who really need money to survive ( except 月光族）。So, what is the main purpose for CPF ?

AK:
Your question is rhetorical because you gave your answer in your first paragraph. So, is the main purpose of the CPF to make the rich richer?

The CPF is meant to help the masses. 

It is not meant to help the rich.

This is quite obvious when the CPF has annual contribution limit and a limit to top ups to the SA and RA. It prevents members with a lot more cash to exploit the system.

This is quite obvious when the CPF gives 2% more interest for the first $30K and 1% more interest for the first $60K of CPF savings. It is to help members with less savings.





The real problem lies in the lack of simple financial prudence and basic financial literacy amongst the masses.

Lacking in simple financial prudence, they spend all the money they make or more than what they make. 

They are too easy with spending money.

Lacking in basic financial literacy, they allocate capital foolishly. 

Some losing money to simple scams like magic stones or elaborate scams like PONZI schemes or buying expensive financial products or locking up funds in illiquid non-productive assets.






The CPF is a system that is meant to help the masses to help themselves.

If we think the system cannot help us, it is probably because we have not tried to help ourselves.

Of course, there will be some who are physically or mentally handicapped and these are people who genuinely need help. 

They cannot help themselves.

However, for most of us in Singapore, we don't really have anyone to blame but ourselves if we languish in poverty.





Read a couple of emails from readers who have helped themselves:
Power to become financially stronger is within us!

Chatting and charting in "Evening with AK and friends".

I hope that everyone had fun at "Evening with AK and friends" and, of course, I hope it was helpful in one way or another.

"Evenings with AK and friends" are chit chat sessions of epic proportion and this was probably the largest ever session as we had almost 100% attendance (160 strong audience). It felt a bit crowded and very warm!

We chatted about stocks, CPF, insurance, real estate and dieting. Yes, dieting too. Basically, anything I have blogged about was fair game.




I was surprised that almost everyone stayed until 10 pm when we called it a night. So, I guess it must have been fun. Learn nothing, never mind. Must at least be fun. Right?

A few readers made me work overtime. You know who you are. Ahem.

I also spent quite a bit of time talking about Technical Analysis (TA) this time. Here is the blog with the recommended books:
http://singaporeanstocksinvestor.blogspot.sg/2012/12/recommended-books-for-fa-and-ta.html

More recommended books in the right sidebar of my blog under "Food for thought".

A recent example of TA in my blog:
http://singaporeanstocksinvestor.blogspot.sg/2017/09/technical-analysis-of-comfortdelgro.html




I am not trading ComfortDelgro per se but the chart is helpful in showing where the supports are.

If we want to make some money trading stocks, we should learn TA. If we don't know TA, we are fighting blind.

Having said this, remember that TA is not the Holy Grail although some might think it is. 

TA gives us a glimpse into Mr. Market's psychology. 

TA is about probability and not certainty.

A stock can stay oversold or overbought for a long time. Refer to MFI.

A negative or positive divergence can have longevity. Refer to price, volume and MACD.

Always pay attention to the trend.

Fibonacci lines show us the support and resistance but not if they will hold or break. Look to the golden ratios 38.2%, 50% and 61.8%.





I joked that talking too much about TA diluted my reputation as an investor for income. Some might remember that I have revealed in my blog that I made a bit of money as a trader before. So, it really shouldn't be surprising.

Trading was helpful in growing my capital.

Refer to point number 5 in this blog:
http://singaporeanstocksinvestor.blogspot.sg/2015/06/how-did-ak-create-6-digits-annual.html





Finally, remember, that not everyone has the temperament to be a trader.  I feel that it is fair that I say this again after sharing about TA and trading in this session.

TA and FA are useful but the most important knowledge is self knowledge. We have to know ourselves.

Related post:
When to buy, hold or sell?

"Husband lost his job and my savings is zero."

Reader said:

I just recently read your blog but i really enjoy reading them. 

Hard truth with humor.






I am 35 and a mother of 2, and I am so embarrassed to said that I have no war chest, emergency funds at all. 

All I have is debt that I have to pay for another 7 years for the whole family etc.





Me and my hubby are not prudent in money and sad to say we always quarrel because of this especially when my hubby was asked to leave his good paying job.

I have to dig my own money to pay with a lot of stuff and seeing my account set back to zero really angers me.





I only came across investing few months ago and bought penny shares for 1 lot or half a lot. 

And also start to buy some blue chips shares and gold accumulation plan for $100 per month.

Oh, I have to admit I like shopping on Taobao and will spend few hundreds to buy things for myself and kids.

As much as I am aware my own problems but I really need someone like you to guide me in managing my financial better.








AK said:

Welcome to my blog. :)

Since you know my blog is about hard truths, I have more for you here:

1. You need an emergency fund. 

You shouldn't be investing in stocks and putting money in gold if you do not have an emergency fund. 

Read related post #1.





2. Review your expenses and see if you are able to cut back on expenses. 

I am sure Taobao can be Taotai (For non-Chinese reader, this is Chinese for "abandon"). 

Ask yourself a few questions. 

Read related post #2.





3. After your personal balance sheet has strengthened, then, think about investing. 

Be careful to differentiate between investing and speculating. 

Read related post #3.





Remember, no one cares more about our money than we do. 

If we don't care, no one will. 

Take care and do it properly. :)





Related posts:
1. Emergency fund.
2. 7 pertinent questions.
3. Investment philosophy.

Is investing in REITs right for you? (Rights issues hit 56 year old investor.)

Reader said...

I am 56 and I started investing last year. 

I invested heavily in reits because of the higher yields and belief that they will fund my retirement.

However, I have been hit by a string of rights issues including the recent one from cache logistics. 

I don't have much spare cash and I am not prepared for these.





Now, I wonder if I made a mistake in using my cpf money to invest in reits too.

My brother in law told me that reits will take back all the money they give out as dividends and sent me a newspaper article on the topic. 

I read your recent blog on your impressive passive income from reits. You are an expert on reits.

Could you help to shine light on this matter?

AK said...
(Reader attached the newspaper article "The REIT myth busted" in the email to me.)

The article generated plenty of discussion many years ago because REITs sank during the Global Financial Crisis and many REITs required capital injections to stay afloat.

I am sure there are many who were burnt and many who still do not believe in REITs.

I have some scary stories from those days which I can tell too.






Horror stories aside, however, I believe in being pragmatic and that all investments are good investments at the right price. 

We have to find the right tools to do what we want to do.

In my opinion, REITs are relevant to investors for income.

Having said this, as REITs distribute most, if not all, of their income to their investors, it is only natural to expect some form of fund raising if they are to grow.





So, should you stay invested in REITs?

Read these blogs first:

1. http://singaporeanstocksinvestor.blogspot.sg/2011/10/reits-and-rights-issues-dilutive-or-not.html

2. http://singaporeanstocksinvestor.blogspot.sg/2011/11/reits-and-rights-issues-singaporean.html






I hope they provide some of the light you are looking for.

To invest in REITs, it is important to be prepared for possible rights issues. 

Investors should be able and willing to deal with this possibility.

With this in mind, you have to decide if REITs are right for you. 

I cannot decide for you.





Related post:
3Q 2017 income from REITs.

"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