CPF to help fund our retirement but what about our parents'?

Reader says...
I am a new reader to your blog and have benefitted greatly from the nuggets of wisdom that you have shared within these first 2 weeks of reading your blog.

I have transferred money from my ordinary account to special account and managed to convince my Husband to do the same as well! Hopefully, we will be able to help the gov help us hit the minimum sum by the time we reach 55. We are in our mid 30s now : )





Because of your blog, it got us started thinking abt our parent’s cpf as well. We realised that our parents cpf balances are very dismal. Each one has less than $10,000.

We are hoping to top up their RA until it hits $30k eventually. However, they have the option of choosing between the old retirement sum scheme or the current cpflife.





The draw of the retirement sum scheme for me is that the 6% earn still belongs to my parents but under cpflife, once it is under the annuity, the 6% goes to a common pool for the gov to maintain this plan.

Could you talk to yourself and share what your through process would be in such a scenario?

AK says...
Welcome to my blog.

CPF Life is attractive because it pays us a monthly income for as long as we live but it is an insurance product and, so, it is about sharing risk.

Some people think they won't have a long life and brush aside CPF Life but, statistically, people are living longer.

How like that? ;p





You might also be interested in this blog:
How younger CPF members get 6% a year?

Related post:
When to get a private annuity?

1Q 2018 passive income from non-REITs.

I feel that I should mention a non-REIT here which might not be considered an investment by most people.

I should mention it because, logically, it should be considered a part of my portfolio.

Of course, I am talking about the CPF.

If we would include bonds in our portfolio, then, we should also include money in our CPF accounts in our portfolio which I have said before is like a AAA rated sovereign bond.

I have also mentioned that, lacking mandatory contributions, I would voluntarily contribute to my CPF account and that was what I did in January.

The CPF is a risk free and volatility free component of my portfolio which pays a reasonably good coupon and to promote peace of mind, I would like for it to stay a meaningful size.

Regular readers might remember that I talked about it before but if you don't, you might want to read the blog: The AK passive income strategy after making $1 million.

Related to this, I also bought some Singapore Savings Bonds.

If you are interested in the reason why, read the blog: HERE.

As for investments in equities, what did I do in 1Q 2018?

I added to my investment in SingTel at under $3.40 a share.

I added to my investment in Wilmar at under $3.00 a share.

I added to my investment in ComfortDelgro at under $2.00 a share.

1Q 2018 passive income from non-REITs:

$ 10,871.45

Or about $3,623.00 per month.

Enough or not?

Enough for me but I don't know if it is enough for you.

Related posts:
1. 1Q 2018 income from S-REITs.
2. Largest investments updated.

UBER and GRAB why you so like that?

Reader says...
Hi Ak! I'm sure you'll be getting this a lot now. What do you make of the news that uber is giving up sea? What does this mean for cdg should the purchase of lcr go through or not?

Seems like there will be less promos from grab, but they will also have larger market share than cdg post merger.

Can't seem to decide if it's positive or negative!!

AK says...
The move to purchase a stake in LCR was not even a consideration when I decided to invest in ComfortDelgro.

I looked at the numbers and decided that the dividend was sustainable.

Of course, what I did suit my purpose.

It probably does not suit everybody and, I am willing to hazard a guess, the speculators. :p

(I try to keep things simple because I am not a very smart guy.)

Bad AK! Bad AK! ;p





Related post:
Analysis of ComfortDelgro.

1Q 2018 passive income from S-REITs.

If you have read my last blog on S-REITs, you would know where I stand when it comes to the issue of whether they are still relevant investments for income. 

If you cannot remember the blog, you might want to read it: HERE.

In 4Q 2017, my S-REIT portfolio grew a little and if you cannot remember why, read the blog: HERE.

What about 1Q 2018?

If you are a regular reader of my blog, you shouldn't have to worry about making a guess.

Yes, the size of my S-REIT portfolio shrank in 1Q 2018 and if you have followed the links above to read my past blogs, you would know that it isn't because I have lost faith in S-REITs as a class of investments for income.

Specifically, in 1Q 2018, I sold my investments in Soilbuild REIT (HERE) and ESR REIT (HERE).

The top 3 contributors in 1Q 2018 are:

AIMS AMP Cap. Ind. REIT

FIRST REIT

IREIT Global

Regular readers and even newer readers would be quite familiar with my narrative on the first two.

If you are a newer reader or if you are forgetful (like me) and cannot remember why I invested in IREIT Global, you might want to read a blog: HERE.

How much did I receive in 1Q 2018?

$19,461.07

Or $6,487.00 per month.

There will be different reactions to this number but, remember, everyone's circumstances are different. 

Some might find that what I have is still insufficient and some might think it is more than enough.

To achieve financial freedom, how much passive income do you need?

Don't look to me for the answer.

The answer is within you.

Related post:
Largest investments updated.

Dumping all my investments in REITs.

Reader says...
I recently started buying REITs and following online blogs online.

I do my own diligence which I think is sound but cannot help but be worried when I see negative things about REITs being posted.

Classic consumer economics behaviour from me cos scared Liao lol.







Anyway, I know there is a difference between Traders and investors.

There is one particular trader that says REITs and dividend stocks will suffer soon.

Should I be concerned? Because my investment strategy is buy and hold.

AK says...
It depends on what you are looking for and if your investments can deliver.

In an inflationary environment, (interest rates should go up and, naturally,) bonds will suffer but we should not mix up bonds and REITs. They are not the same thing.

Bond holders get paid a coupon and that is fixed. 

As interest rates rise, bond prices will fall (as Mr. Market expects a higher yield to buy those bonds and as the coupons are fixed, the bond prices must fall to give a higher yield).







Businesses and REITs have the ability to raise prices and that is what they usually do in an inflationary environment.

Invest in what we understand and disregard the noise.

When we buy bonds, we are money lenders. We charge interest for lending money.

When we invest in a business, we are partners and we share the ups and downs.








REITs remain a relevant tool for income investors but, to be fair, not all REITs are good investments.

Regular readers know that I have reduced my exposure to REITs but it is not for as simplistic a reason as interest rates are rising.


Rising interest rates alone is not strong enough a reason for me to sell down REITs.

Try not to be overly pessimistic nor overly optimistic. Try to be pragmatic.








Related posts:
1. Why bonds and which ones?
2. Largest investments updated.

Get paid for (or get dividends from) blogging?

Someone asked me if I get paid for blogging?

More specifically, he asked if I get paid for promoting "Dividend Machines".

My answer?

Yes, of course, I get paid.





The blog on "Dividend Machines" was labelled "Advertorial".

Anytime you see a blog labelled "Advertorial", it means the blogger will receive a fee.

OK, not all bloggers would do this but honest bloggers would.

I was prepared for some nasty remarks from him as I know there are people who are unhappy with bloggers being paid to blog. 






I really don't want to go into a debate on the subject.

It isn't a productive use of my time.

What?

Spending hours each day in the virtual world of an MMORPG is a productive use of time?

Ahem. Weather today nice right?

Bad AK! Bad AK!





So, you can probably understand that I was pleasantly surprised when, instead, he asked why am I not blogging more regularly if I get paid to blog?

Apparently, he is thinking about becoming a blogger to make a living and is trying to learn from my experience.

I told him quite bluntly don't learn from AK.

Why?


I did not give him the usual "AK is lazy" type of reply because something like this should be addressed seriously.





AK is a hobbyist blogger which means blogging is a hobby and if I do make some money blogging, it is a bonus.

There are bloggers who blog for a living and he should learn from these bloggers instead if he wants to make money as a blogger.

Who are these bloggers?

Don't ask me lah. I blur.





Having said this, I believe that blogging in itself is not a good way to make money but it can help someone with products or services to sell.

AK has no products or services to sell.

AK is, however, helping to promote "Dividend Machines".

Yes, I get paid for doing this but, frankly, I believe in this product and the people behind it so much that I would do it even if I were not paid to do so.





Since I am on the topic, for those who are interested, the 2018 intake for "Dividend Machines" will end 2 days from now on the 18th.

If you are clueless about investing for income or would like to polish your skills, the sooner you learn more, the faster you would achieve your goals.

Everyone should work because they want to and not because they have to.

Investing in income generating assets will go a long way to help achieve this.

I know this for sure because I have done it and, for sure, so can you.

My blog on "Dividend Machines":
Create Dividend Machines in 2018.

Sign up: HERE.

Pay less income tax in future.

It is that time of the year again.

Remember to file your income tax.

Ouch.





Taxes are a necessary evil because a country's revenue is from taxes and a country like any modern day entity needs revenue to be viable.

So, if we have to pay some taxes, we are contributing to nation building.

Not a bad thing, really.






However, if it is possible for us to pay less income tax, why not?

I am talking about doing it legally, of course.

As I don't have any significant earned income anymore, I don't pay any income tax.

When was the last time I paid income tax?

You might want to read it: HERE.


Investing for income has helped me to increase my income but not my income tax and you can do it too by creating dividend machines: HERE.





Related post:
Income tax payable.

Creating Dividend Machines in 2018!

I have not been blogging much as I have been spending a lot more time on another hobby.

I know many people are envious of me.

"Wah! Can spend so much time playing games online! So jelly!"

Well, I believe anyone who is not severely disadvantaged could do it too.

It doesn't have to be playing games online per se, of course.

All of us could free up time to do things we enjoy instead of exchanging our time for money working.  

Of course, regular readers know one very important reason why I am able to do this is because I invest for income.

Many readers have asked me to teach them how to invest for income and some specifically asked me to teach them how to invest in REITs.

I would tell them that I do not think I am good teacher material.

OK lah. I admit lah. AK is lazy lah.

Anyway, many readers don't seem to learn very well through self study.

For them, to learn effectively, it seems that they need a structure.

So, thank goodness, structured learning is available!

Also, thank goodness it is available at a very affordable price.

Yes, not everyone is charging an arm and a leg to impart investment knowledge.

Want to learn how to invest in REITs and non-REITs for income?

DIVIDEND MACHINES.

If your answer is "yes", sign up for this year's Dividend Machines: HERE.

Limited places available, as usual.

So, fastest fingers first.

Do you want financial freedom?

Of course, you do!

Remember, if AK can do it, so can you! Believe it!

Create Dividend Machines: HERE.

Chinese New Year of the Dog (2018).

This is going to be a quick blog post before I head back to my parents' place for dinner.

It is time for Reunion Dinner again.





Mom:
"Ah boy, come back earlier for dinner, OK?"

AK:
"(Playing Neverwinter) Yes, mom."

Mom:
"Er, you sharing any 4D in your blog? Any zhen zhi?"

AK:
"(Busy killing cyclops) No inspiration this year wor."




Now, I wonder what was my mom's primary reason for calling?

Yes, I know.

Bad AK! Bad AK!

Anyway, I know I haven't been blogging much but I really don't have anything new to say anyway.

Mr. Market seems to be in a slightly depressed state and I have used the opportunity to buy some SingTel and Wilmar from him.





Of course, I do not know if prices could go lower.

I only know there is a lot more value after a 10% correction in their prices.

I invest mainly in relatively strong companies for income and I know that they will pay me.

That is what really matters to me.







I have received some emails from readers who are concerned about prices falling and I will tell anyone feeling the same way that if they do not have the stomach for volatility, stocks might be a bad place for their money.

We are all wired differently and if we want peace of mind, we must know ourselves.

Having said that, take a break and have a happy Chinese New Year!

Woof! Woof! Wang! Wang!

As we grow our wealth, always remember that there are more important things in life than money.

Still, GONG XI FA CAI!
Related posts:
1. Don't have to be smart. Be rich.
2. What to do when prices fall?

We must pay a premium for "best" healthcare.

Reader says...
I would like to ask you regarding H&S insurance. I have spoken to a few agents to understand more about the H&S products that they are offering.

They would frequently mention “Do you want to stay in private for the best healthcare?” “With riders, you don’t have to worry about co-insurances or deductibles..”






Sounds enticing but I got a shock when I looked at the premiums I have to paid in the long term run and also, I am wondering how am I be able to pay for the premiums once I stopped working in the future. Premiums are highly likely to increase in the future.

So, I asked myself do I really need the ‘best’ healthcare? I am quite contended with decent healthcare that has government subsidies.

As such, I thinking of getting a H&S + rider that has coverage for B1 and below.





The reasons being:
• The premiums paid in the long run is still within my range

• I don’t want to be slapped with a huge bill that cannot be claimed and end up worrying about it

• I hope to have affordable out-patient treatments as a subsidised patient. As some illness need permanent follow ups and not everything can be claimed. 






For Ward B2 and below, one will be considered as subsidised patient. The rest will be considered as private

Can I ask for an unbiased third party view? I am ok with staying in B1 and below + decent healthcare from the public hospital. 

Do think the coverage is sufficient for my requirements? Or am I missing something? Thanks for talking to yourself again.

AK says...
If you are OK with staying in B2 or C ward, then, you only need Medishield Life.

If you wish to stay in B1 or better ward, then, you need a private shield plan.

I am inclined to believe that a higher class ward will provide a more comfortable stay which could help promote recovery.





However, whichever class we are warded in, I believe that we would have access to the same quality of healthcare. :)


Related post:
Is my insurance agent scaring me?

When not to do voluntary contribution (VC) to CPF?

Reader says...
It's the first time I did a VC to my CPF as I have already hit my FRS.

I was surprised to see that part of my VC actually went into my SA account.

I thought all of it will go into my OA.






I am still employed and I will be getting Mandatory Contribution to my OA and SA.

But after going through my last year's CPF statement, I realised that I am very close to the $37,740 annual limit.

I know that any excess will be returned to me interest free next year.






My questions are,

What happens when my MC reaches $37,740?

How is the interest in my OA and SA affected?

This $2,378.20 will be earning 4% compounded interest in my SA for the next 12 months.

How will this interest be affected when I hit $37,740?

Do they stop paying interest?





Let's say, for easy calculation my yearly MC is exactly $37,740. And in this case, I did a VC of $11,000 in Jan.

I know that they will return to me $11,000 next year. But what about the compounding interest of $2,378.20?

From your experience when you were working, what happened to your CPF interest when you did VC?

If the compounding effect of a VC in January is not affected.

A working person can earn more interest by doing a VC of $37,740 every January and get the VC back the next year, only to do it all over again.

AK says...
In the past, having met the CPF minimum sum, I would wait for closer to year end to see how much my year to date MC was and I would then do a VC to hit the CPF annual limit for the year if possible and if I had the spare cash.

Some years, I would estimate my MC for the year and do a VC earlier in the year.






In such cases, usually, I ended up overdoing it and CPFB would refund the excess contribution and also deduct any interest earned by the excess.

This is also something I have blogged about before.

Related posts:
1. CPF is a PONZI scheme!
2. Know how to grow our CPF.

Largest investments updated (Early 2018).

My last blog on this subject was published in October 2017.

If you don't remember, see the related post at the end of this blog.






After making some changes in 4Q 2017, with the addition of two new members, this is the new A-list of my investment portfolio:

From $350,000 to $499,999:
AIMS AMP Cap. Ind. REIT
SingTel
ComfortDelgro

I certainly look forward to the dividends from SingTel and ComfortDelgro in 2018 which would hopefully make my primarily income focused portfolio more robust and less dependent on S-REITs.

Next up are the smaller but still rather significant investments in my portfolio. 

They are members of the $100K to $350K club:

From $200,000 to $349,999:
FIRST REIT

From $100,000 to $199,999:
ASCENDAS H-Trust
WILMAR Int'l
Centurion Corporation Ltd
ACCORDIA Golf Trust
Development Bank of Singapore







Some might notice that there is a new member in this club.

DBS was a business I kept buying into at around $15 a share and bought more of when its share price sank below $14 a share.

As its share price recovered over time, in several transactions, I reduced my investment to the point where my remaining investment became "free of cost". 







Of course, one could say that if I did not sell any of my investment in DBS, I would be sitting on a much bigger paper gain now. 

Ouch.

Well, I always say that hindsight is perfect and seller's remorse is pretty pointless.

I reduced my investment in DBS because it was no longer the undervalued proposition that it was when I bought its stock.

I had a plan and I stuck to it.







Having said that, doing something I often do with businesses which I have good reasons to like, I held on to my remaining investment in DBS which had become "free of cost".

Some regular readers might remember I have described this as trading around a core position before.

Mr. Market could be quite irrational and high could, of course, go higher.

How long could Mr. Market stay irrational for?

Your guess is as good as mine.

Meanwhile, as the share price has almost doubled from my lowest purchase price, my remaining investment in DBS is now one of the largest investments in my portfolio.








I am pretty comfortable with my portfolio now and, all else remaining equal, it is unlikely that I would be making any changes anytime soon.

If lazy AK does not change anything in his investment portfolio this year, the above investments are most probably going to contribute the bulk of his passive income in 2018.






As I have rationalized the moves made in 4Q 2017 when I shared my full year passive income in  blogs published towards the end of last year, I shall not repeat myself.

You might want to read those blogs if you have not done so (or to refresh your memory if you have read them before), starting from Part 1: HERE.






I know some might be tempted to shadow my moves but please do your own due diligence.

Even after doing your due diligence, remember you are not me and I am not you.

Remember the importance of position sizing, taking your own financial situation into consideration.





It is rarely a good idea to throw everything including the kitchen sink into investments no matter how attractive they might look.





Related posts:
1. Largest investments in my portfolio.
2. Position sizing, nibbles and gobbles.
3. AK was buying DBS shares.

Keeping friends without spending money?

Reader says...
Can I ask your opinions regarding friendship? 

I do like my small circle of friends but I am thrifty in nature. 





Given a choice, I would rather spend money in hawker center rather than places that cost more than $10 or 20 +. 

And also, things like drinks, movie ticket during peak hours, Sing K and etc can be costly. 

As such, I have to reject quite a few outings which are not good for friendship-wise. 





If there are free activities, I am more than willing to go out. Haha. 

How do you cope with it? And also, for work-wise how did you maintain working relationship with your colleagues even though you brought your own food from home?

AK says...
Unfortunately, no man is an island and as long as we are out in society making a living, we have to make an effort to socialize or else life could become difficult in many ways.

Having said this, we cannot choose our family but we can certainly choose our friends. ;)





If these are people who matter to you, explain your situation to them. 

If you are someone who matters to them, they will understand and accept you for who you are. :)




Related post:
Are you forced to be extravagant?

"When can I quit my full time job?" (Keep your needs simple and wants few.)

Reader says...
I am thinking of quitting my job when i am 40 years and do freelance work. 

I am pretty sure my freelance and dividends can cover my living expenses of about $8,000 pa. 

By 40 years old I will have a fully paid flat, about $120,000 stocks and bonds, $200,000 savings, CPF Oa $100,000, sa $70,000 and MA $52,000. 

Do you think i can retire from full time work given my financial status? 

Is my net worth good enough for a 40 years old





AK says...
If you are not a big spender, I think you can 🙂

And $8,000 expenses a year definitely not big spender to me 😀

Especially if your part time job is able to generate $8,000 or more a year. 😉





Reader says...
Do you think my finance is on the low end? 

Should I reach a more secure level?

AK says...
It depends on whether you feel insecure. 

If you do, work for a few more years to build a bigger buffer. 

Peace of mind is priceless.





Reader says...
I dunno what is a comfortable level.

As in how much I should have lol

AK says...
I would say that a comfortable level is when your passive income is able to cover your $8,000 a year expenses.

Then, whatever you earn in your part time job in future is extra money. 

You don't need the earned income then. 

It is just nice to have 😉




If we keep our needs simple and our wants few, we can achieve financial freedom more easily, for sure. 🙂

Related posts:
The best insurance in life!