Free income producing assets. You want?

Has it really been 10 years since the Global Financial Crisis?

Time really flies.

What triggered this blog post?

Messages from two readers.

Reader #1 says...
First Reit dropped quite a bit recently.

Not sure if it is due to rising interest rates.

Am thinking of buying more for retirement income.

What is your view? Thanks.

AK says...
I have not been paying attention but it is probably because I am not thinking of adding.






Reader #2 says...
BTW i was looking to increase my shares in first Reit but Cloudy Outlook On Sponsor Ownership for them made me feel wary.

not sure will it be market noisy or a good opportunity.

current price was my entry price years ago.

AK says...
I haven't been paying attention to First REIT much because my entry prices were so low. 😛






Of course, regular readers know that no matter how sneaky they are, they cannot out sneak AK.

Trying to get me to tell you to buy or to sell?

Sneaky!

OK, I know.

Bad AK! Bad AK!

Anyway, sneaky AK has a few things to say in this blog.






1. Ignore the noise.

When I bought First REIT in a big way and blogged about it, I received messages from people telling me not to.

I ignored them.

It wasn't the first time and it wasn't the last time.

As long as we feel that we have our facts and reasons right, ignore the noise.





The fact that many people disagree with us does not mean that we are wrong.

Of course, we might not always be right but if we spend our time listening to the noise, it messes up our minds.

We might not always make the best decisions but if we are approximately right more often than we are wrong, it is good enough.






2. Time matters.

I have been invested in First REIT for many years and it is probably as old an investment as AIMS AMP Capital Industrial REIT in my portfolio.

It is an investment that generates income for me year after year.

The longer I stay invested in First REIT, the safer the investment becomes.

In a blog published in 2010, I said that my investment in First REIT made during the Global Financial Crisis would be free of cost in five and a half years.





In fact, I have recovered all of my capital and more by now.

This is including investments made in First REIT before the Global Financial Crisis.

Want an absolutely free of cost investment that generates a regular income?

Unless we are lucky enough to inherit income producing assets, with some work and a healthy dose of luck, dreams do come true.

I haven't been paying attention to the share price for a long time.

Why?







When we buy an asset, thinking about its income generating ability, we are investors.

We should be able to value the asset and decide on how much is worth paying for it.

When we buy an asset simply because people who bought such an asset made money in the past or because everyone else is buying it now, we are speculators and more concerned with prices.






Of course, both investors and speculators, if they know what they are doing, can make money.

I am both investor and speculator although I invest more than I speculate these days.

So, to buy more First REIT (or any other asset) or not to buy?

First ask if you are an investor or speculator?







Related posts:
1. First REIT is for keeps.
2. Investing or speculating?

Buy a private condo and wage slaves we become?

Over the years, quite a number of male readers have asked me if they should upgrade from HDB flats to private condos.

For some reason, it is always the wife's desire for an upgrade.

I wonder if the husbands were being honest with me.

Hmm...

I wonder also if there is some truth in the saying that it is easier to sell luxury goods to females than males?

Hmm...






Aiyoh!

Did some (female) readers throw shoes at me?

Ouch!

Wait, I see some branded ones.

Maybe, I can sell these later.

OK, yes, I know.

Bad AK! Bad AK!






Well, these readers should know that, easily, on a per square foot basis, a condo is going to cost 3x to 4x more than a HDB flat.

Just getting something that is the same size as their current HDB flat would be quite a big deal.

So, it is not surprising that many who upgraded from HDB flats ended up downsizing.






A home is probably the biggest purchase we will make in life especially with home prices being what they are in Singapore.

If we want to upgrade, be sure that we can pull it off comfortably and this should also be in the unfortunate event if we should lose our job (or if we cannot continue working for some reason).

That is the ultimate stress test.

We should also bear in mind any other financial objectives which we might have and how this upgrade in housing could impact our ability to meet those objectives.






Even if we can afford the upgrade, remember that it is not just about affordability.

In order to upgrade our housing, if we have to become wage slaves, the price, to me, is way too high.

Not overstretching will allow us to stay financially resilient in good and bad times.

Of course, if you are financially a "jin satki" (very capable) person, please ignore this blog.






Related posts:
1. https://singaporeanstocksinvestor.blogspot.com/2018/09/free-ourselves-from-wage-slavery-now.html
2. http://singaporeanstocksinvestor.blogspot.com/2016/08/wife-wants-to-sell-hdb-flat-to-buy-condo.html

How to be ready for unemployment? (He took a 50% pay cut but was unemployed again one year later.)

Reader says...

I am with you on achieving Financial Independence.

It's a fallback plan in the midst of a super competitive employment environment flooded with Foreign Talents.

Government can raise the retirement age to whatever they want but how many companies are willing to offer those above 50 YO decent paying jobs, except fast food outlets and a few others.






Speaking from experience on this.

Once retrenched, even in our 40s, it is hard to get back the same job.

I took a 50% pay cut for a 1 yer contract job and then became unemployed again.

Every year that passed, my market value is dropping.

I will go to McDonalds to be a cleaner soon.






I also know of a 30 YO friend who studied finance in NXX (a local university) and was retrenced from finance industry after working for 5 years.

After 1 year of job searching, he gave up and resorted to joining WSG program to find a job which paid $2K+ a month and restarted his life all over again.

My engineering cohort, 30% are unemployed by now and not by choice.






With so many government assisted programs on WSG website, we can make a guess how "good" the situation is.

So, no surprise that many young people are talking about F.I.R.E. (Financial Independence Retiring Early) these days.

It's a by-product of the current day situation and fear.

I also started reading your blog when I became unemployed 4 years ago.






What does AK have to say?

Don't ask 

"When we need to stop working, are we ready?"

Instead, ask 

"If we want to stop working, are we ready?"





How to be ready?

The best insurance in life is having sufficient passive income to maintain our lifestyle.

Be ready!

If AK can do it, so can you!






Related posts:
1. Freedom from wage slavery.
2. Best insurance in life.

Free ourselves from wage slavery now.

I have blogged about how someone told me that I should be ashamed of myself.

I should be ashamed that I am unemployed although, more accurately, I am economically inactive.

See:
AK should be ashamed!

I have also explained why I worked hard to achieve financial freedom and why I chose early retirement.

To put it quite bluntly, I didn't want to be a wage slave forever.

See:
Why want an early retirement?

What is a wage slave?

If we are 100% dependent on our monthly wages to support our lifestyle, we are wage slaves.

What does this mean?








If we need $500 a month to live and if we make $500 a month, we are wage slaves.

If we need $10,000 a month to live and if we make $10,000 a month, we are wage slaves.

So, even if making $50,000 a month is considered very high income, if we need $50,000 a month to live, we are wage slaves.

Wage slaves are absolutely dependent on their monthly wages to survive.






Now, although I do not fancy being a wage slave, there are people who seem to be quite happy being wage slaves.

Ignorance is bliss, after all.

Ask those who lived next to a dormant volcano which decided to erupt one day.

Horribly blissful!

This video shows an example of what could happen to wage slaves:






To break the chains of wage slavery, I start by asking three questions.

1. How much money do we need in life?

Are the needs really needs?

Or are some wants disguised as needs?

We should keep our needs simple and our wants few.

After all, we only need so much money in life and the rest is for showing off.






2. How much money are we saving?

To save more money, we should increase income and reduce expenses.

It is quite simple.

Not easy, perhaps, but quite simple.

Find legitimate and ethical ways to increase income.

Reduce expenses where possible but remember to be reasonable.





3. How hard is our money working?

If we are leaving the bulk of our money in savings accounts with low interest rates, we are doing ourselves a disservice.

Make our money work harder.

Make sure to ask if the investment is legitimate.

Ask how is it generating income and how is it rewarding us?

If we do not find a way to make money in our sleep, we will have to work till the day we die.

One way to make money in our sleep is to make use of weaknesses in the stock market to accumulate some stocks that will generate income for us.






Dividends will start as a trickle but after some time, we will see dividends pouring in!

We should take a long term view and invest in companies which are here to stay.

Investing for income for the long term, market volatility is nothing to fear.

This video is pretty succinct as to what we should do:







If we want to be free from wage slavery, we have to free ourselves and we have to start now.

We should work because we want to and not because we have to.

Related post:
Happiness and slavery.

83 yo Ah Gong can do it, so can we! 孙子都跪服!

A reader sent me a video clip and had this to say:

"saw this and reminded me of u, ak.

"u have close to 40 yrs to compound to be super experience gamer like this chinese uncle!"






There is much that we can learn from Ah Gong in this video clip.

【83岁大爷每天打3小时游戏，20年玩遍500张碟，孙子都跪服】


The video clip is in Mandarin and with Chinese sub-titles.

So, unfortunately, some might not be able to understand it.





Ah Gong's grandson calls him a 老頑童 (i.e. a senior who is a child at heart).


Ah Gong spends 3 hours a day gaming and says playing video games has made him a bit smarter and a bit braver!

I don't even have a PS4!

Ah Gong, you win!





So, what can we learn from Ah Gong?

Retirement is not about staying at home the whole day and being bored stiff.

There is always something new to learn and something fun to do.

Retirement can be full of fun and it should be fun.

If Ah Gong can do it, so can we!






Related posts:
1. AK is a full time gamer! (宅男?)
2. Retirement adequacy 101.
2. Financial freedom or freedom in retirement?

2nd update on largest investments in 2018.

This blog is in response to some readers' requests for an update.

Not heavy on reasoning, I will be sharing more in my quarterly passive income updates for both REITs and non-REITs.

This would happen end of September or in early October.

Patience.





For many years, AIMS AMP Capital Industrial REIT was the biggest investment in my portfolio but it has been unseated.

It is pretty amazing as this did not take place within the same bracket either.

A new bracket has to be created for the largest investment in my portfolio by market value now.

$500,000 or more:
SingTel


Yes, SingTel and it should not come as a surprise to my regular readers.

Of course, this is the result of constant accumulation of shares in SingTel in recent months as I stick to my investment thesis and plan.





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

I haven't done anything to my investment in AIMS AMP Cap. Ind. REIT in a long time and it is unlikely that I would be doing anything to it soon.

I like sitting back and receiving quarterly income distributions.

The REIT is probably one of the better run REITs in Singapore and, over the years, it has been amply rewarding as an investment for income for me.

From keeping AIMS AMP Cap. Ind. REIT company, my investment in ComfortDelgro now keeps First REIT company as they are now in the same bracket.





From $200,000 to $349,999:
FIRST REIT
ComfortDelgro
WILMAR Int'l

Of course, regular readers know my investment in ComfortDelgro moved into this lower bracket because I booked a nice capital gain as its share price recovered pretty significantly and this was after receiving a very nice dividend as well.

Although reduced in size, I still have a relatively significant investment in ComfortDelgro.

Quite comfortable with staying invested in ComfortDelgro as my investment thesis remains intact.





Next is my investment in WILMAR Int'l which has joined this bracket as well but unlike my investment in ComfortDelgro, it moved up from a lower bracket.

I bought more shares in WILMAR Int'l, accumulating on price weakness in 3Q 2018.

I like the idea of being paid while waiting for the cyclical upturn to happen.

I don't know how long it is going to take but I am in no hurry.

All in good time, no doubt.





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

I have also been buying shares of Centurion Corporation Ltd and ACCORDIA Golf Trust in recent weeks but, even so, they have not crossed into the next bracket and are staying put in this bracket.

I had to check to see if DBS dropped out of the list as its share price declined recently.

DBS is staying.





Like I said, I will share more in my coming quarterly update which is likely to be quite massive.

Don't bombard me with more questions, please.

Why not watch this video instead?






Related post:
Largest investments updated (Early 2018).

Money from RHT Health Trust past and future. (We are responsible for our own financial future.)

I want to share an interesting video before starting on the blog proper.

There is a lot of wisdom in this 5 minutes video clip and, unless we are born with a spoon made of some precious metal in our mouth, everyone, especially the young, should watch it.

1. Delay gratification (i.e. discretionary consumption),

2. understand the danger of taking on too much debt,

3. save money (that is what 401K means in USA and, for us, it would be the CPF and SRS),

4. start investing early,

5. let time and compound interest work their magic!

We are responsible for our own financial future.






This blog is in response to a recent comment from a reader:

AK says...

Hi Ruby,

For RHT, I believe that it will become a shell company just like what happened to Saizen REIT after they sold their portfolio of assets, if you remember.

RHT's shareholders will receive the bulk of the proceeds from the sale of the Trust's assets but RHT would still be around.






In the case of Saizen REIT, it was finally liquidated and any remaining money was distributed to shareholders.

It could happen to RHT in future or it might not.

Just have to wait and see.

But this deal really helps to crystalise for RHT shareholders on what each unit in RHT is worth.

So, if readers bought into RHT like I did in more recent times at 72c per unit thereabouts, they will be OK.





We should also bear in mind that there is still residual value after the proposed special dividend to be paid to shareholders.

What about investors who got in earlier?

Well, I expect that their investment in RHT would have done quite well.

Of course, you would remember that I first bought into RHT at 88c a unit back in August 2015.






That earlier investment has received income distributions over the years and also a special dividend of about 25c per unit in 2016.

We booked a very nice capital gain back then.

This time, an estimated 76.6c per unit will be distributed.

If not for the rather weak Indian Rupee, the number would be higher.

Without taking into consideration the regular periodic income distributions received in the past, the two special distributions together amount to more than a dollar per unit.

Like before, there is capital gain for us in this proposed special distribution but it would also include the return of our investment capital.

The returns are not stellar like in the case of Saizen REIT or Croesus Retail Trust, but, the outcome is not a bad one.

Investing in good income generating assets is comforting because our investments should become safer over time.






Related post:
1. Increased investment in RHT (Early 2017).
2. Initiated position in RHT at 88c (2015).
See announcement by RHT:
Disposal of assets.

10.5% yield but must take a 200% loan.

Reader says...

I have some money in bank and my Relationship Manager is pushing me to buy unit trusts with leveraged.

Recommend me to take 100% loan so the yield will be higher from 5% to 8%.

I could also take a 200% loan to get 10.5% yield.

Good or bad?






AK says...

Gear up 200%!?

Sack your Relationship Manager.

Of course, the bank he works for won't sack him.

You sack him!

I don't borrow money to invest with.






When you buy a unit trust, the only people guaranteed to make money are your Relationship Manager, the bank he works for and the fund managers.

You are the one bearing all the risk.

Do you want to increase that level of risk?

(It is a fact that if you leverage up, they will be guaranteed to make even more money from you while you are only guaranteed more risk.)





Someone I know bought into a REIT mutual fund before the Global Financial Crisis.

It lost about half of its value.

Imagine if he had financed that investment with 200% leverage!

His losses would have been hugely magnified!

Shudder...

Remember that no one cares more about our money than we do and don't ask barbers if we need a haircut.







Warren Buffett believes investors should avoid using borrowed money to buy stocks.

"It is crazy in my view to borrow money on securities," he told CNBC on Monday.

"It's insane to risk what you have and need for something you don't really need."

"My partner Charlie says there is only three ways a smart person can go broke: liquor, ladies and leverage," he said.

"Now the truth is — the first two he just added because they started with L — it's leverage."





He shared the data that revealed Berkshire Hathaway's stock declined by a range of 37 percent to 59 percent multiple times over the last five decades.

"There is simply no telling how far stocks can fall in a short period."

"Even if your borrowings are small and your positions aren't immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary." (Source: CNBC, 26 Feb 18)





AK agrees.

Peace of mind is priceless.

You might want to read these blogs:
1. A great crash is coming!
2. Lost life savings and now in debt.

And also this "e-book":
Survivability and opportunity in times of crisis.





In case you just joined us, another blog was published earlier today.
See: Make investing easy.

Make investing easy by saying 'here are three things'.

Reader #1 says...

I attended few of your "Evening with AK and friends" sessions and like the way you analyse stocks.

Can you share how you filter stocks, any key criteria before you put in your shortlist and start going through in details?






AK says...

Well, I cannot give you a set of criteria.

Like Charlie Munger would say:

"I can never make it easy by saying ‘Here are three things’. You have to derive it yourself to ingrain it in your head for the rest of your life."





However, I would tell you my starting point.

I invest mostly for income.

So, whether a stock pays a dividend is an important consideration.

Then, pick it up from there.





If you were to invest for growth, you would have a different starting point.

It is important to match our motivation and our methods. :)

I have a section in my blog's right sidebar titled "Food for Thought".

You might want to read the books listed there. Good primers. :)

Reader #2 says...
Capital Expenditure is shown in the Cash Flow Statement for some companies like WXXXX but Capex is not shown for other companies such as XXX Holding.

How do I tabulate the "hidden" capex?





AK says...
Hide and seek is something I am really bad at.

If it is hidden, I give up.

Just don't invest in that company. ;)





AK is a simple minded person and tries to keep things simple.

OK lah. AK is just being lazy, as usual.

Bad AK! Bad AK!


Remember what Warren Buffett said.

"Just looking at the price is not investing!"






You might be interested in these:
1. Invest for income, ignore the Ms.
2. Get 12% yield? Ask 2 questions.

Unfair FRS and ERS' CPF LIFE payouts compared to BRS'?

Reader says...
Singapore government seems to be steering the country to be more inclusive.

What does that mean?

It means if you have a lot of money in CPF, it will be used to tilt the balance or contribution to the needy individuals who do not have enough in their CPF.

As in FRS CPF Life is NOT exactly twice payout from BRS CPF Life.






AK says...
Of course. People who have greater ability to help themselves should do so and not lean too much on the government for assistance.

Reader says...
Should do so? Based on?

Retirement planning for someone who painstakingly TOP up with CASH should NOT be used as handouts to others.

This should be done in the domain of income tax... or those with CPF way above FRS or ERS...

FRS and ERS are for the sandwich class.






AK says...
The top ups you are making to your CPF account are not being used as handouts to help others.

It remains your own money as any excess above the FRS, you are allowed to withdraw at age 55.

Your CPF money is not being given away if you have the FRS in your CPF account compared to members who only have the BRS.

You CPF money is simply paid a lower average interest rate in comparison.

Reader says...
It is NOT equitable.

Your statement of “Your CPF money is simply paid a lower average interest rate in comparison” doesn’t bode well for the middle income who works hard and TOP up cash periodically to secure a comfortable retirement life.

It should NOT at any away tweaked so as to achieve FAIRNESS.

This can be achieved via OTHER means/Policies.






What does AK have to say?

When we reach 55 years of age, we will enjoy 6% interest on the first $30K, 5% interest on the next $30K and 4% interest for the balance in our CPF-RA account.

So, it is true that members who have the BRS will get a higher interest rate on average compared to members who have the FRS or ERS.

It also means that although the FRS and ERS are 2x and 3x more compared to the BRS, the monthly payouts from CPF Life will not be 2x and 3x more than the BRS'.







Although some with the FRS or ERS might think of it as being unfair to them, remember that the extra interest is really a bonus given on top of the floor interest rate of 4%.

Also, although the government might be seen as giving more aid to members with less in their CPF savings, in actual fact, all members are being given the same extra interest on the first $60K in their CPF-RA.

I don't think anyone should be complaining.







As Singaporeans enjoy longer life expectancy today, CPF LIFE helps guard us against running out of money during a long retirement.

Find out how CPF LIFE ensures monthly payouts for life in this video.





Related posts:
1. CPF LIFE Payout Estimator.
2. Remove the CPF Annual Limit and...

Keep $20K in CPF OA when taking HDB loan. (Growing CPF SA after OA was wiped out by home purchase.)

Just as I was about to publish this blog, I saw the news hot from the oven.

"Flat buyers will have more flexibility in using their Central Provident Fund (CPF) money, the Housing Board said as it launched 5,101 flats for sale from Tuesday (Aug 28).

"Buyers can now keep up to $20,000 in their CPF Ordinary Accounts (OA) when they take a Housing Board loan. Before, they had to use all the funds in their OA first.

"The funds can be used for their monthly mortgage instalments in times of need and will improve retirement adequacy if left unutilised."

Source:
The Straits Times





........................
Reader says...
Thank you for sharing so freely.

As like many others, I feel inspired and in awe.

I hope to get some advice if possible.

I recently emptied by OA to purchase a flat (on hindsight not such a great move).

Since then OA has been accumulating till it's about 10k now.






I plan to sell in 5-6 years time (depending on market).

Should I already start to transfer all my OA to SA?

Will there be any repercussions upon selling my BTO in 5 years time?

I am sorry if some of these questions look abit directionless.

Never been good with numbers, learning the hard way now.






AK says...
5 to 6 years from now, if you are not at least 55 years old or if you would be 55 but do not have the FRS in your CPF, you would have to pay back the accrued interest on the CPF money you used to purchase this flat.

I don't give advice but I will talk to myself.






If I had a mortgage now, it would not be a good idea to transfer all the money in my OA to my SA because if things do go terribly wrong, the OA money would go some way to pay the monthly mortgage.

I would keep enough in my OA for 12 to 24 months of mortgage payment (or any number of months that I think I might need to find work offering similar pay I had before).






Then, if I am certain I do not need the remaining OA money for any other purpose, I can consider transfering any balance to the SA.

Please remember that OA to SA transfer will not enjoy any income tax relief.

So, if income tax relief is important to you, you might want to do cash top ups to your SA instead.

Fresh funds from you will be required.






The first $7K of cash top up to the SA each year enjoys income tax relief.

Although OA to SA transfer does not enjoy income tax relief, it is financially less demanding as it is simply moving money that is already in your CPF account and not a demand for fresh funds.

Saving more in the SA is a long term plan to help fund our retirement but we should not do it without first considering our circumstances and what might go wrong.








You might want to read this:
Topping up our CPF savings can wait for some.