CPF interest is passive income and real money.

Reader says...
We were talking about the CPF during lunch and I said it is good passive income.

It is like investing in bonds and getting interest income.

Who said that? 

Who? Who? Ha ha.






My colleague said he would not refer to CPF interest as passive income especially interest in MA.

He said anyone who says CPF interest is passive income must be twisting logic. 

He insisted normal people will not think of CPF interest as passive income.

AK, you blur or not?

I very blur.






AK says...

You very blur?

I more blur than very blur.

However, that colleague of yours is the most blur of us all.

So, your colleague is normal and we are abnormal?

Ouch.

Alamak, I fell off my chair.






Interest income is income that is passive.

Interest income is passive income and it doesn't matter if it is paid on our savings in our bank accounts or in our CPF accounts.

Just like money in our bank accounts, money in our CPF accounts is real.






If it is not real, we would not be able to use the money in our MA to pay for H&S insurance.

If it is not real, we would not be able to use the money in our OA to pay for our homes.

Would insurers and property developers accept Monopoly money in payment?

You tell me.

I blur.





Related post:
A cornerstone in retirement funding.

Reduce volatility by having fixed income as we age?

Reader says...
Morning AK, as you get older, will you consider to be more defensive in your portfolio?

Means shifting more to SSB, CPF etc instead of blue chip stocks for example?

Just in case touch wood financial crisis then your portfolio less time to recover.

Appreciate your thoughts as always. 😉







AK says...
I guess your question is about reducing volatility in our investment portfolio.

Well, for most of us, that should be the job of our CPF savings. 😉

Why do I say "for most of us"?

Remember my blog on "unless we are very rich"?






Too defensive an investment portfolio and the returns would be compromised too much and might not be meaningful enough for us to have a comfortable retirement.

Again, this is "for most of us".

For those who have plenty of money sloshing around, they don't have to be as particular. 😉






I am investing for income mostly.

Volatility which could result in plunging share prices doesn't bother me.

I am more concerned with receiving dividends from my investments, during good and bad times.

In fact, I welcome plunging prices as that means I could buy more on the cheap. 😉






Related post:
CPF is all we need unless very rich.

How to maintain lifestyle in retirement?

Reader says...

My friend each month spends about $2k on tuition for her only child! 😮

4 tuition each cost about $500!! 😱







Money is a scarce resource for the vast majority of us.

What do we do when a resource is scarce?

We try to conserve it.

That is what the government keeps telling us when it comes to the use of water in Singapore.








We should have the same attitude towards money.

Of course, if you are very rich and have money sloshing around, ignore this blog.

I believe that for the rest of us, we can easily strengthen our balance sheet just by reducing unnecessary expenses.






A reader in his 40s who makes more than $8,000 a month told me that he used to save about $500 a month of his take home pay but now he saves $2,000 a month.

What motivated him to save more money was my blog on how we can save 100% of our take home pay.

$2,000 is not 50% of his take home pay but it is already a vast improvement from $500.








Some of the changes he made:

1. He downgraded his car and although not what I would advocate, has a much smaller car loan to service.

2. His family eat out less often and he was very impressed by how much money they could save by not going to restaurants.

3. Extra classes for their two children were reduced to only what they thought were essential.

He also decided not to upgrade to a condominium but will continue to stay in their HDB flat.

Becoming a better saver is the first step towards a financially secure retirement for him and his wife.






What kind of lifestyle we can have in our golden years, to a large extent, depends on the kind of lifestyle we have today.

Don't want to downgrade our lifestyle in retirement?

Don't upgrade our lifestyle too much before our retirement.

Quite simple, really.






Related post:
Saving 100% of our take home pay.

"Should I give up on my husband?" (Warren Buffett's late wife saw him as a challenge.)

Reader says...

I simply LOVE your blog!

However, reading your blog makes me a bit regretful.

I got married a year ago to a very kind and loving man.

He is very obliging and we never had an argument, ever.

I decided he was the one after a short courtship.

He is not rich and doesn't make a lot of money at work but it doesn't bother me because I earn my keep.

I did not think that it could be a problem until a few months into the marriage.





He is very caring and sweet but he doesn't seem to know much of anything and doesn't seem interested in learning.

A big problem is his inability to understand basic money management.

I thought he understood budgeting but had trouble with impulse buying but by now I don't think he understands.

I feel bad for flaring up but he would literally spend the very last dollar of his salary by end of each month.

When I tried to show him how bad his financial situation was, he would hug me and said I was worrying too much.

I love him but I am also thinking of giving up.







AK says...

Welcome to my blog. :)

First, I must say that I mostly blog about personal finance matters.

I am definitely not an expert on relationship matters and I am definitely not an expert on marriage.

So, based on this, I know if I were in your shoes, instinctively, I would dump that guy like a sack of rocks.

Too heavy a burden to be carrying around for even a moment, I would not dream of dragging the sack around for life.

Yikes!

Who threw a shoe at me?

Who? Who?





Let me continue.

However, there is a Chinese saying:

爱屋及乌
"Love the house and love the crows on the roof."

It is about taking the good with the bad.

So, although, instinctively, I would dump that guy, rationally, I would urge you to consider the big picture.





If not being financially prudent is his only shortcoming, maybe, you shouldn't give up.

"Love the house and love the crows on the roof."

As long as the number of crows are not too many, it isn't too bad unless you care about appearances.

However, if the crows are so numerous that the roof might collapse under their weight, you should run for the hills.





I always tell people that investing in stocks is a little like getting married.

We could also say that getting married is a little like investing in stocks.

There is bound to be some rough patches.

For example, Warren Buffett's late wife, by his own admission, saw him as a challenge. ;)

I am just borrowing someone else's wisdom here.

I don't have any in this area.





Related post:
Scolded by wife!

1H 2018 passive income exceeded $96k.

Reader says...

I just started reading your blog last week and I am already a fan!

Your passive income is amazing!

Totaling first two quarters for REITs and non-REITs, you have already exceeded $96k!

How old are you now?






AK says...

Welcome to my blog. :)

I am 47 this year.



Reader says...

Oh, I see.

I thought you might be a retiree in your 60s or 70s.

A bit difficult for me to reach your level by 47.






AK says...

When you say you are my fan, it follows that I am your idol.

Honestly, I don't want to be your idol.

Seriously, you should not be my fan.

Don't compare what you have with what I have.

Don't focus on what I have achieved.

Instead, focus on what you can achieve.





Whenever I say,

"If AK can do it, so can you!"

I am referring to achieving financial freedom.

I am not referring to an early retirement from employment.

I am not asking readers to have the same amount of passive income that I have or more.






AK's 1H 2018 passive income exceeded $96K?

So what?

You don't be "kiasu", ok?

Alamak!

Who threw a packet of tissue paper at me?

Who? Who?

In Singapore, a packet of tissue paper is not just a packet of tissue paper hor.





Related posts:
1. 1Q 2018 income non-REITs.
2. 1Q 2018 income S-REITs.
3. 2Q 2018 income non-REITs.
4. 2Q 2018 income S-REITs.

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.