Spent money and now will spend more time.

If you are a regular reader of my blog, you must have noticed that I have not been blogging as much as before.

If you regularly send me emails, you must have noticed that I do not reply to emails as promptly as before.

This has been going on for many months.








What have I been doing?

I have been spending more time on my other hobbies and the one that is taking the lion's share of my time is online gaming.

Specifically, MMORPG.

I have blogged about this before but things are about to get more intense.








After almost a year of online gaming, I decided to get a dedicated gaming laptop.

A beauty, it is.

Serious gamers would probably scoff at this entry level machine but it is a big deal for me at $1,348.

The keys glow red.

So cool, right?

I won't be pressing the wrong keys anymore when I play at night with the lights off.








The fact that I only went ahead with the purchase after so many months of online gaming means that I enjoy online gaming enough to part with some real money to get the hardware to at least satisfy the recommended requirements of the game.

The PC I was gaming on didn't even meet the minimum requirements and labored excessively under an IT challenged task master.

Who?

Who IT challenged?

I blur.










Logically, this new purchase also means that I want to spend more time gaming.

When a friend found out that I read only the Money section of the newspapers many years ago, he joked that I had no life because I didn't read the Life section.

When he found out about my latest purchase, he gave me the thumbs up.









No more choppy movement and low resolution images for me. 

Example of a low resolution image,

Not very nice, it was.

Yes, for the last 10 months, in game, I was like a character exploring a new world while suffering from cataracts and palsy.









My Celeron processor driven PC has huffed and puffed enough.

No more demanding online gaming for it.

I think I hear it sighing in relief.

I could be spending a lot more time gaming than before as I revisit many places in the game world now that I can move and see a lot better.









You could say that I am going to be spending more time travelling.

Well, at least I won't be spending money travelling.

OK, I know.

Bad AK! Bad AK!

I got an atas mouse too.

A fellow blogger suggested that I blog about this purchase and what it means so that readers could manage their expectations.

Mission accomplished, I hope.





Related posts:
1. Freedom in retirement.
2. AK is playing Neverwinter!

Generous monetary legacy for children good or bad?

This chat happened after I shared again a blog on a reader's intention to top up his new born's CPF SA account (see related post #1 at the end of this blog).

Reader says...
Imagine if it works... put 171k at age 0, get 2.18mil at 65, that's 2 mil from the government.

AK says...
Haha... it is very amazing. I know





Reader says...
The figure makes me think that there's something wrong with my calculation.

AK says...
If you have money to spare, i think it is ok to do it.

It is legacy planning.

I dunno about the hazards related to character building tho...

Reader says...
I think a graduate can easily earn 5mil in their lifetime. 

But if their habit isn't as strong by the time they found out abt their SA account, I'm afraid they have no desire to work hard. 

And when they meet obstacles, they might say "ohh I will just quit, I have enough for the future anyways." 

That's my biggest fear, snatching away their burning desire and drive.






AK says...
Yes, I know. I feel that way too... 

I mean I didn't like the idea of having to work for money but I had to do it. 

If I had a lot of money in my younger days, I might have stopped working even before I started. 😛

Reader says...
Ohh gosh so that's normal right, we humans won't work hard if we know we have enough! 

Hiez how ahh I want the government's 2 mil but I don't want to steal his drive?





AK says...
Hahaha... 

I am glad I don't have that hot potato in my hand. 😜

Reader says...
How uncle AK? 

How how how? 

What should my mommy do?

AK says...
Mommy should ask daddy. 

I blur... 😛





When my niece was still in primary school, we transferred money in her savings account to her CPF account. 

That is her own money (i.e. savings from ang baos and pocket money).

I think that is OK.

Teach children the importance of saving money and also explain to them how the CPF works.

儿孙自有儿孙福, 莫为儿孙作马牛.





You might also want to read a blog I published earlier today:
Pay home loan and HDB grant fast.

Related posts:
1. Leaving a $1.4 m legacy?
2. Retire by age 45.

Pay home loan and HDB housing grant fast?

Reader says...
I hope you bear with me while I share the info about it - resale flat was purchased at 480k and I got a hdb housing grant of 50k for 1st timer.

My fiancee and myself went for a bank loan instead of hdb loan.

The loan principle I have to service is 384k.






I would really appreciate your advice/guidance to my following questions:

a. I thought of repaying my housing loan using cash instead of cpf.

I think this is still manageable from my side from a cash liquidity perspective since I could save on the chargeable accrued interest (at the point of future flat sale) and at the same time continue to earn the 2.5% int.

What do you think about this approach in terms of pros/cons?






b. I took the housing grant of 50k which I know will be charged accrued interest.

I'm not sure how accrued interest is charged on this 50k but is it considered wise if I try to repay this?

Or in actual fact, it doesn't make a difference because it will net off from the interest that I earned for the OA that continues to reside in my cpf account?






c. If at any point in time I thought of partial loan repayment to my bank, say a sum of 30k in cash every beginning of the year so that principal amount will reduce and I look to repay the full loan in 7 to 10 years.

What do you think about this approach and possibly the risks that go with it?

Many thanks in advance, and I really appreciate your feedback and suggestions.

AK says...
As long as your home loan attracts an interest rate of less than 2.5%, it makes sense to pay your loan with cash instead of using money in your OA.

(I would also add that as long as money in your savings account is paid less interest than the interest paid by the OA, it makes sense to pay your loan with cash.)

If you have no intention of ever selling your HDB flat, you can worry less about accrued interest on OA money used or the grant as long as you hit the prevailing full retirement sum (FRS) by the time you are 55.






By 55, you can withdraw all money from your OA and SA in excess of the FRS.

So, if you were to sell the HDB flat after you turn 55, you could take out all the money which includes the accrued interest you owe your CPF account.

It would be like asking you to put in money only to immediately take it out again.






Partial capital repayment makes sense when interest rate goes much higher.

When exactly to do that?

It is up to you as it should also partially depend on what you feel you could get if you were to invest the money instead.

I remember when I paid the housing loan for my previous home in full, the interest rate on the loan went from 4.1% to 5.1%.

Ouch.






Congratulations on your new home.

Related posts:
1. How to stop accrued interest from growing?
2. Almost 55 and worried about CPF.

How to get a 12% dividend yield?

We should know but do we know what to look out for as income investors?

Here are the basics.





Reader says...

Recently, my friend intro my to allianz income n growth.

He mentioned that the growth is not a lot but dividend is relatively attractive around 12%..

omg.

But i better ask shifu level like u

AK says...

You should ask 2 very basic and important questions:

1. How is the income being generated by the proposed investment?

2. Is the income generated sustainable?

Asking these questions would very likely help us avoid investment scams and also products which are highly risky.







You might also want to read these:
1. Invest in high yield bond fund.
2. Get 14% return per year on investment.

Retirement money made to last longer without risk.

Reader says...

My mom is now 71 and she has $200k retirement money.

She is not on the CPF life scheme but on the past retirement sum scheme.





I am trying hard to help her get some passive income.

She has parked this money in short term duration funds but the returns has been really peanuts.

I am trying to see how to help her.

Do you have any suggestions?

AK says...

I would say that at her age, it is more about capital preservation and she should not take any risk with her savings.

The CPF is a good risk free tool in helping to fund her retirement and topping up her CPF-RA will ensure that her retirement money earns 4% to 6% per annum.

I would say that for any investor, 4% to 6% returns per year is difficult to achieve without taking any risk at all.





So, she should take full advantage of her CPF membership and max out her CPF-RA.

Doing so would most probably help to make her retirement money last quite a bit longer.

If her MA is maxed out, she could also consider doing voluntary contribution to her CPF to max out the CPF Annual Limit.

To her, then, the CPF is like a savings account that earns 2.5% interest per annum in her OA.






Related posts:
1. Elderly to use CPF as a savings account.
2. Insure against longevity risk but...

Sensible to do CPF OA to SA transfer?

Reader said...

Currently working, 31 years old.

Quick question - My current SA sits at $40k and MA sits at $40K.

Based on current MA limit = $54,500, remaining money will go to my SA account.

I have started contributing $7000 yearly into my SA account for tax relief.




Based on my calculation and projected increase of limit yield of 4.4% per annum on MA, my MA contribution will flow into my SA account in 3-4 years time.

When that happens, my monthly contribution to MA and SA will be around $15K/year (Including VC of $7K), taking into consideration of the 4.4% increase limit of MA per year.

With that projection again, I will hit the current FRS of $171K in 7-8 years time.

Does it still make sense to transfer my CPF OA account money to my SA account?

AK said...

Once you CPF-SA hits the prevailing Full Retirement Sum (FRS), you will no longer be able to do Top Ups to your CPF-SA to enjoy income tax relief.

So, if getting income tax relief is hugely beneficial to you (i.e. you are in a high tax bracket), you might not want to do OA to SA transfer.

However, this option of topping up the SA is also only viable if you have the free cash flow to do top ups each year.





If income tax relief is less important to you or if you do not have the free cash flow to do top ups, doing OA to SA transfer would be less demanding as it is simply moving money that is already in your CPF account. 

Bigger OA to SA transfers will also, of course, help to give your SA a bigger base faster for compound interest to work its magic.

Make sure that you do not need your OA money for any other purposes before doing this.






Related posts:
1. Know how to grow our CPF savings.
2. Purpose of CPF is to make rich richer.

Singapore Savings Bond short term more rewarding.

Many readers asked me about Singapore Savings Bond recently and apparently it is because the coupon is now 1.55% for the first year which is much higher than what any local bank I know would pay for a 1 year fixed deposit.

I was not interested in the Singapore Savings Bond for various reasons and to avoid repeating myself, if you are not familiar with the reasons, please read the following blog (plus details on eligibility and mechanics):

Singapore Savings Bond: Good or bad?








When I blogged about the bond in the middle of 2015, the bond's coupon for the first year was 0.9%.

At that time, we could get 1.45% interest for a one year fixed deposit easily.

The Singapore Savings Bond was unattractive for money in my emergency fund and war chest, therefore.








Interest rates for one year fixed deposits have declined although I am puzzled why they would because with interest rates on the rise, short term interest rates should be impacted first.

Singapore Savings Bond's coupons.

Whatever the reason, the lower interest rates offered by local banks for one year fixed deposits make the Singapore Savings Bond's 1.55% coupon for the first year more attractive.








So, what to do?

I am going to have some of my war chest money in this bond.

Closing on 26 Jan at 9pm.

I am going to think of this as another fixed deposit.

With the higher coupon for the first year, having some money in the Singapore Savings Bond now gels more with my methods.

Taken from DBS internet banking.

Application or redemption is also very easy because they made it available through internet banking.

Very good for lazy AK who doesn't want to leave home to queue at an ATM.

Related post:
Use fixed deposits (FD) for emergency fund and war chest. (And now we say SSB too.)

My final word on Bitcoin and friends.

"January’s cryptocurrency selloff got fresh impetus on Tuesday when Bitcoin slumped as much as 25 percent, as the prospect of regulatory crackdowns appeared to spread..."

This story continues at the end of this blog.





AK says...

The key is to understand that Bitcoin is for trading.

Bitcoin is not an investment.

People can invest in Blockchain technology but with Bitcoin, it is really a trading game.





There are FOREX traders.

There are no FOREX investors.

Since Bitcoin is a virtual currency, people can be Bitcoin traders.

There are no Bitcoin investors.





People who call themselves Bitcoin investors are really Bitcoin speculators.

When people tell me that they invest in Bitcoin, I get the impression that they are either confused or they are out to confuse other people.

If we understand that Bitcoin is for trading and we cannot invest in it, we should remind ourselves that:

"The trading market is occupied by very large players who are just waiting for newbies to come in and throw their money away by trading aimlessly."

Know what we are doing.

Have a plan and a viable plan at that.






"While the largest digital coin was down 25 percent, it was still at the lowest level since early December, according to composite pricing on Bloomberg.

"Rival cryptocurrencies also tumbled. Ripple sank as much as 40 percent and Ethereum dropped 26 percent."

Read the full story here:
Crypto-currencies resume slide as Bitcoin tumbles.







Related post:
I should have invested in Bitcoin.

Was Soilbuild REIT a shabby investment?

Soilbuild REIT had to juggle not one, not two but three hot potatoes up until last month.

With the sale of KTL Offshore's property to its sponsor, they have two hot potatoes left (i.e. Technics and NK Ingredients).






In a blog in September last year (see related post at the end of this blog), I said that with the reduced DPU assumed then, if we demanded an 8% yield, we should only be buyers at 66c a unit.

Now, with KTL Offshore gone, with lower income, we won't be wrong to downgrade the REIT.

I wonder also if the REIT would see lower valuations which would impact its NAV and, therefore, its gearing level?

Estimating a more aggressive 10% reduction in the DPU assumed in September 2017, all else remaining equal, we might be looking at a full year DPU of 4.8c.

At 71c a unit, that is a prospective distribution yield of 6.76%.

From an industrial REIT with leasehold properties in Singapore, to me, it hardly seems adequate.

I say this partly because a REIT distributes cash flow and does not retain earnings.

So, the relatively low distribution yield is just not attractive enough for me.





If we demand an 8% yield, then, we should only be buying at 60c a unit with the reduced DPU assumption.

If we are less demanding, a 7.5% yield means we should pay no more than 64c a unit.

However, if we demand a 7.5% yield, we can get that by investing in AIMS AMP Capital Industrial REIT which has a lower gearing level too.








How has the investment in Soilbuild REIT turned out for me?

To be fair, Soilbuild REIT's business parks (with relatively long remaining land leases to boot) are attractive and they were the main reason why I invested in the REIT in 2H 2014.

Unfortunately, bad things happen sometimes.

I believe that selling at NAV is a good outcome although I estimate a capital loss of around $4,000 from the sale.







Having said this, I have received more than $17,000 in income distributions from the REIT since I first became a unit holder.

Yes, I did say before that my investment in the REIT was a relatively small one.

So, roughly, the investment returned more than 8% per annum.





Not fantastic but, as an investment for income, not too shabby either.

Having plonked quite a bit of money in SingTel and ComfortDelgro in 4Q 2017, the money from this sale will shore up my cash position.

Related post:
Decline in Soilbuild REIT's DPU likely.

8 years AAA bond with 2.5% and 4% coupons.

UPDATED IN JULY 2018:

Find out more:
https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/retirement-sum-scheme




-------------------------------------
Conventional wisdom tells us that we should have some investment grade bonds in our portfolio because they help to smooth out volatility.

Investing in good quality equities is probably more rewarding in the longer term but we have to develop a stomach for the volatility that comes with the territory.






Whatever the case may be, when I turn 55, there is no way of knowing if equities would be in a rough patch or not.

So, having some money in investment grade bonds makes sense to me.

It gives me peace of mind.

The CPF is as good as a AAA rated sovereign bond and it is one that pays relatively attractive "coupons".

OK, to be fair, for a younger person, the "coupons" are less attractive than they are for an older person like me.

The closer we are to 55 years of age, the more attractive the "coupons" because the waiting time is shorter.

For anyone who has met the Full Retirement Sum (formerly known as the Minimum Sum) and who believe in having investment grade bonds, taking full advantage of the CPF Annual Limit is a good idea.






Why mention specifically people who have already met the Full Retirement Sum?

Well, at age 55, we will be able to withdraw all CPF money (from OA and SA) in excess of the Full Retirement Sum (formed by savings in our SA and OA) which would go into the newly created RA.

So, for people who have met the Full Retirement Sum, maxing out the CPF Annual Limit, we are setting the stage for a bigger "windfall" when we turn 55.

CPF Allocation Rates.

The CPF Annual Limit is $37,740 for now.





If mandatory contributions (MC) fall short, we can do voluntary contributions (VC) to hit the limit.

So, what am I doing?

I am buying an 8 year tenor AAA rated sovereign bond (i.e. making voluntary contributions to my CPF accounts) with "coupons" of 2.5% (OA) and 4.0% (SA and MA).

Now, you know my age. Alamak.





Read also the blog before this one:
CPF savings grew almost $200K in 3 years.

Related post:
Buying a AAA sovereign bond.

CPF savings grew almost $200K in 3 years!

I don't know if you would agree with me but I think the CPF Board has improved by leaps and bounds when it comes to communicating with CPF members.

I especially like the graphics they have produced to make things easier to understand.

Important or interesting information is clear at a glance when graphics are used well.





While waiting for the updated pie chart to be ready (see past pie charts: here), I will share this bar graph:

It is so easy to see how my CPF savings grew almost $200K in 3 years from end-2014 to end-2017!

The total amount was slightly more than $600K at the end of 2014.

By the end of 2017, it was almost $800K!





The CPF is about the government helping us to help ourselves.

For most of us, this is as close to State welfare as we can ever get in Singapore.

The government offers help.

Let us not foolishly reject it.

For those of us who play the MMORPG "Neverwinter" and have explored Sharandar, this should sound familiar.

Bad AK! Bad AK!





The growth of my CPF savings is really stunning when we remind ourselves that a big chunk of that growth is made up of contributions from the government.

Interest received in 2015:
$20,106.27

Interest received in 2016:
$21,641.52

How much was the interest income for my CPF savings in 2017?






See related post:
Helping to fund my retirement.

My CPF money forms a cornerstone in my retirement funding strategy.

Risk free and volatility free, it helps to give me peace of mind.

Confession and what AK thinks of retirement.

AK said...
"I have left behind the prescriptive world of responsibility and routine which demanded that I made regular and meaningful contributions to the establishment and clients (in ever more difficult conditions)."
(See related post at the end of this blog.)

Reader says...
I see things quite differently. I never felt the world demanded anything from me.





It’s more like what I wanted from the world. And now that I have most of what I want , I do feel a moral need to give back to this world. 

Ranging from being a good son (which you agree) to a good father/husband/friend but also to help other less lucky humans whom I do not know.

As for structure, disciplined people usually remain rather disciplined even in retirement. 

I find myself disciplined in exercise and the way i run portfolio. I am sure you are extremely disciplined on your portfolio thinking and actions too.





Structure and routine is not a bad thing even in retirement. I spoke to quite a few retirees and all speak of having some loose routine and structure. Of course no need to be siao on like during wealth forming days.

Anyway thanks for sharing. I believe each of us have different philosophies and happy that you have found your own balance! 

Was it always so stable or did you take a few years? I took about 3-4 years since retirement to reach this stage of thinking

AK says...
Ultimately, for me, financial freedom is but a stepping stone to a life of freedom.

I guess this is why I can identify with Charlie Munger when he said he wanted to be rich because he desperately craved freedom.

As I have always known what I want, it was easy to slip into retirement when it finally happened.

Mentally, I have always been prepared for it.






There are things which I have always wanted to do or to spend more time doing.

So, I am also prepared for a busy retirement.

I keep saying that I am busier in retirement than I was before.

However, I am happier because I am doing things I want to do which includes being charitable to the needy and this is something I have blogged about many times before.





Unlike you, I don't feel a strong moral obligation to give back to society but I am quite happy to contribute because I can and because I want to.

The only strong moral obligation I feel I have is to my parents.

OK, yes, you are right about having some degree of discipline and loose structure in retirement.

In my case, probably very little to the extent that I don't feel it is there. 　

Definitely not "siao on" which I probably was a little when I was a young working adult.





To be honest, I do not feel that I am a very good investor.

A fellow blogger told me before that he thinks I am financially very comfortable because I am better at personal finance matters than most people, all else being equal.

I agree with him.

Financial prudence is the foundation of wealth building and preservation.

For people who make a lot of money, if they have a modest lifestyle and save most of their money, in a relatively benign inflationary environment, they don't really need to do much else to have a comfortable retirement.






As an investor, I have an approach that is pretty forgiving if I were to make mistakes.

I also don't aim to beat any benchmark.

Again, it is all "agar agar".

Enough of KPIs at work.

I tell myself that as long as I don't do anything ridiculously stupid, given time, I should do well enough.

If I am right more often than I am wrong, given time, I should do well enough.

So, I have to be very clear what is an investment and what is a speculation.

Having said this, I do allow myself to speculate but I keep speculations relatively small.





Apologies but AK is very long winded.

Finally, to me, structure and routine are not bad nor good things in retirement.

Some people have a greater need for them and some don't.

In retirement, we shouldn't have to worry and  we should be free to choose whatever makes us happy. :)

Related post:
Financial freedom or freedom in retirement?