Ever since the CPFB introduced a colorful pie chart of our CPF savings a few years ago, I would look forward to mine every year like a teena...
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Back in 2018, when I announced that I was taking a long break from public appearances, I said it would last, maybe, two or three years.
Well, it is now 2021 but with the COVID-19 situation still wreaking havoc globally and Singapore's Phase 3 of reopening lasting at least a year, it seems that I am being given another year or two off.
Good news for lazy AK who decided long ago that he didn't want to work till the day he dies!
Back in 2018, when I made that announcement, I said to readers that F.I.R.E. which stands for "Financial Independence, Retire Early" isn't just a dream.
However, unless we are very lucky in life, we need to plan for F.I.R.E. to happen.
I planned very early on in life as a salaried worker to achieve financial freedom and to retire by age 45.
With a lot of work and bit of luck, I managed to do this a few months before I turned 45 almost 5 years ago.
I have blogged about this many times before and regular readers know that my approach to achieving F.I.R.E. is a holistic one.
The good news is this holistic approach to F.I.R.E. is accessible to most of us in Singapore.
Most of us are able to achieve financial freedom in Singapore as long as we are willing to work diligently towards it.
I know many have heard this before but if AK can do it, so can you!
If you want to achieve F.I.R.E. the way AK did, then, you have to embrace investing for income.
If you are new to investing for income or have been looking to do some structured learning, I have more good news for you.
The only investment course that AK promotes every year is "Dividend Machines" conducted by The Fifth Person.
"Dividend Machines" not only provides you with all the knowledge and guidance you need as an investor for income, it is also very affordable.
Go ahead and take a look before you decide if you should sign up for 2021's intake.
Readers left me a few comments on AIMS APAC REIT (formerly AIMS AMP Capital Industrial REIT) recently and I decided to do a quick blog on one of my largest investments.
Let us start with my reply to the latest comment:
"I get palpitations when people ask me if something is safe to invest in. ;p
"The one place where I would say our money is safe is the CPF which is risk free and volatility free.
"Having said that, I have been invested in AA REIT for more than 10 years and it has been good to me.
"You might want to read this and my other blogs on AA REIT for an idea:
This blog is in response to questions by readers, csky and linus.
On Wilmar, DBS, OCBC and UOB:
That price target of $5 for Wilmar which I suggested in November 2019 is outdated as Wilmar's chart pattern was damaged by the price action inflicted by the COVID-19 pandemic.
The chart has morphed since then.
For readers who don't know what we are talking about, see:
In that blog post, I noted that when Mr. Market was feeling very bullish about Wilmar's prospects (like now), Wilmar's stock traded at a huge premium to its NAV.
It was a really huge premium.
Today, Wilmar's NAV is significantly higher than it was in 2010.
Based on this observation, it is probably not irrational to think that Wilmar's stock price could go higher than $7.11 we saw so many years ago in January 2010.
Having said this, there is nothing wrong with taking profit.
So, selling some to lock in some gains is probably not a bad idea.
This blog is actually the second reply to a reader, csky, who is interested in knowing how much have I invested in DBS, OCBC and UOB, amongst other things?
I decided to publish this as a blog as there are probably other readers who might be interested in this.
The question started with why didn't I channel funds I used to increase my investment in IREIT Global into Sabana REIT instead?
In reply, I said:
"There isn't any brilliant reason behind this.
"It is simply timing.
"I like what Sabana REIT's activist investors are doing but I was not sure if they would be able to block the proposed merger.
"I only added to my investment in Sabana REIT in early December when the proposed merger was scuttled.
"The purchase of more IREIT units at between 58c to 62c a unit happened in October and November."
I ended that reply with just one sentence on the size of my investment in the 3 local banks as a whole.
It might have confused csky and here is my second reply to his follow up comment:
Just to be doubly sure you got the right message, it is the combined value of my investment in the 3 banks which is bigger than the combined value of my investment in AA REIT and IREIT Global.
As to the stuff I read to stay up to date, The EDGE is a weekly read for me and The Business Times can be interesting too.
I try to keep things simple during this crisis, avoiding speculation as much as I can, as there really isn't much clarity as to how long the COVID-19 pandemic and its deleterious effects might last.
Although we have some vaccines ready for use now, we also have new variants of the COVID-19 virus and more countries are imposing lockdowns again.
To be safe, my strategy in 2021 will probably stay the same as my strategy in 2020.
Doing so might mean to err on the side of caution, of course.
I mostly look at what businesses have and what they can deliver now even during a pandemic rather than what they might be able to deliver after we emerge from the pandemic.
This made me avoid investing in SIA even as its stock price plunged, for example.
I might be missing out on some extraordinary gains now and in the future but, like I always say, peace of mind is priceless.
As for trying to stay up to date while actively gaming, Neverwinter's latest module is launching next month which will mean less time for blogging.
Over the weekend, when I was spending time with my parents, I talked to them about their CPF savings and how they should try to put more into their RA and not leave money in their OA.
They will get bigger monthly payouts and enjoy 4% interest instead of 2.5% too.
My mom kept saying the OA money is going to us children when she passes on.
I had to keep telling her that we don't need the money.
She and dad should not worry about us children.
I told her that if I were eyeing my parents' CPF savings as inheritance, I would be a sorry excuse for a human being.
I am not going to rehash and will do the easy (i.e. lazy) thing and share some of my old blogs here:
On to the next topic which I told another reader I would touch on in my blog reply to SnOOpy168.
People don't realize what a big opportunity cost there is (i.e. the accrued interest) in the use of their CPF savings for everything they can use it for.
This is partially the government's fault for over liberalizing the rules on CPF usage.
It has also given the fake news mills plenty to scare people with.
This is a good example of the anxiety some feel about their CPF savings and the deficit caused by accrued interest for OA savings used:
In another blog, I shared that for those of us who are more conservative and who are financially able to, we could consider returning the money we used from our CPF-OA savings in the purchase of our homes to stop the accrued interest from growing:
Not all of us are savvy investors and if statistics released by the CPFB is to be believed, most CPF members who invested with their CPF savings lost money.
They would have been better off leaving their money in their CPF accounts.
I would go for low hanging fruits first and CPF is a low hanging fruit and provides an unbeatable level of certainty.
I also shared the story of my CPF-OA because so many readers are incredulous when they see the figures and I did it also to stop the fake news mills from spinning fantasy stories about me:
If we have plenty of cash sloshing around, we should invest with our cash first instead of our CPF-OA savings which earns a risk free 2.5% interest per annum which is very good especially in a low interest rate environment.
I like to think of my CPF savings as the risk free and volatility free AAA investment grade bond component of my portfolio and would like to end this segment by sharing this blog:
Ever since the CPFB introduced a colorful pie chart of our CPF savings a few years ago, I would look forward to mine every year like a teenager would wait in line for a cup of bubble tea.
Do you know that bubble tea is wealth and health destruction incarnate?
Expensive carbohydrate and sugar.
Expensive empty calories.
Oops, I digress.
So, what does my CPF pie look like?
It looks different from previous years.
I shouldn't say "it" because this year we get more than one pie.
I prefer the old pie because it looked cheerful with bright colors.
These new ones look really dull.
Anyway, I will just show the first pie:
Are you disappointed?
Oh, you are but not with the colors of the pie but with the numbers?
Right, where is the one million dollars AK hinted at in the blog title?
Well, this is where AK got tricky.
Some of you might have guessed it.
Voluntary contribution of $37,740 this month to my CPF account means I have more than one million dollars in CPF savings now!
Maybe, AK is an overgrown hobbit.
"Stupid hobbitses, tricksy hobbitses."
Gollum reads Donald Trump's tweets:
Yes, I know.
Bad AK! Bad AK!
My CPF savings in January 2021:
Total:
$1,012,703.70
Hurrah!
We know of 1M65 which is to have one million dollars in CPF savings by age 65.
We might also have heard of people who have accumulated one million dollars in CPF savings before age 65 and now AK is one of them.
AK is 50 this year.
So, AK is a 1M50 CPF millionaire!
Technically, AK is a 1M49 CPF millionaire as he is a year end baby but 1M50 looks more wholesome.
So, 1M50 it is.
Anyway, 49 or 50, eh, who cares?
Indeed, I would argue that it doesn't really matter if it is 1M50, 1M55, 1M60 or 1M65.
I said before that the journey to financial freedom is not a race and as long as we achieve financial freedom, we win.
The same spirit should be applied to growing our CPF savings as just like the quest to achieve financial freedom, each of us could go at a different speed because each of us have our own circumstances to deal with.
Think of it as a rewarding journey that should provide some pleasure along the way.
No pressure, just pleasure.
As long as we are doing the right things as much as we can, we should give ourselves a pat on the back.
Growing my CPF savings over the years has been very satisfying and although I can only see the pie now, I will get to eat it one day.
Growing old is definitely not all doom and gloom if we are well prepared and we should help the CPF to help ourselves.
If we have not done so, start now.
Stay the course and, over time, we will see results.
Remember, compound interest might seem like magic but it really is simple math.
We don't have to be talented like Harry Potter to make it work for us.
When most people think about passive income, they think about investing in income producing assets like stocks and properties.
Most wouldn't think of interest income from saving money in a bank account given the very low interest rate environment we have been in and the even lower interest rate environment we are in today.
This isn't wrong, well, if you are not a Singaporean.
This is because we have the CPF in Singapore and all Singaporeans are CPF members.
Whenever I have conversations with foreigners about retirement funding, they are always in awe of the CPF system in Singapore.
Actually, they are envious.
The CPF pays relatively attractive interest rates of 2.5% to 5% to those of us who are younger and up to 6% for members who are more senior in age.
I just heard the jaws of some foreign friends hitting the floor.
Another quarter has come to a close and with the end of the final quarter of 2020, a rather terrible year has ended too.
It is probably a year which many would rather forget but we will probably remember this nightmare of a year for many years to come and for many reasons too.
A full year of COVID-19 has imposed a new and rather unpleasant reality on all of us.
This new reality is sticky and some of us are still trying to get used to it.
In a nutshell, COVID-19 is a black swan event of pitch black intensity.
COVID -19 has shown that things could go terribly wrong and we should not ever take the good things we have for granted.
Indeed, the only constant in life is change.
With the promise of multiple COVID-19 vaccines on the horizon, things are looking up and there is hope that COVID-19 will become a thing of the past soon.
However, once we are sure that the vaccines are safe and effective, even if we are very optimistic, it might take many months even at a fantastic rate of mass vaccination before sufficient people are vaccinated in order to achieve global herd immunity.
More likely, to be very realistic, this will take a few years to happen.
Don't be overly optimistic.
Even as optimism grows, it is important to stay pragmatic and not throw caution to the wind.
There is talk of "Disease X" and we don't know when it will strike but it is just a matter of time as we cannot bank on a rapid change in human behavior to be more considerate on a global scale.
Indeed, it might not be a simple case of being more considerate as cultural and social norms are involved and these are hard to change as they are usually deeply rooted.
What we can do as individuals as we try to return to a semblance of normality is to be aware of our own mortality, do not engage in risky activities and remain cautious to stay safe.
Be considerate in our behavior and we will also help to keep others safe.
If we always think of safety first, we can hardly go wrong.
Now that I have gotten that out of the way, what about the investment space or, rather, my investment space?
Well, many things happened to my investment portfolio in 4Q 2020.
Where to start?
Let us start with the two largest changes.
IREIT Global became the largest investment in my portfolio as I took part in the rights issue priced at 49 cents a unit.
Post rights issue, I kept on accumulating at between 58 cents and 62 cents a unit, increasing the size of my investment in the REIT further.
To understand why I took part in the rights issue, go to the link I have provided at the end of this blog in "related posts."
I also increased my investment in the local banks with the size of my investment in UOB increasing the most as I added aggressively to my position around the end of October at about $19 a share.
By doing so, I have achieved the goal of having my investment in all three local banks to be similar in size.
Of course, regular readers know that a big part of my strategy during this crisis is to accumulate local banking stocks as the local banks have strong balance sheets and the ability to pay dividends with relative ease.
I certainly hope that these much larger investments will pay good dividends in future.
Apart from increasing my investments in IREIT Global and the local banks, what else did I do in the investment space in 4Q 2020?
I also added to my investments in Centurion, SPH, ComfortDelgro, AIMS APAC REIT, Hock Lian Seng, Raffles Medical Group, Tai Sin and SingTel in 4Q 2020.
When a reader asked me about SingTel on 1 Nov 20, I said:
"No plans to blog about SingTel but I might buy some because it looks terribly oversold ..."
On 20 Nov 20, in reply to readers on Centurion, I said:
"I did buy more at 32c a share ... Mr. Market could be overly pessimistic ... especially with multiple COVID-19 vaccines on the horizon.
"Mr. David Loh bought 200,000 shares at 33.5c a share more than a month ago ..."
Then, I had this to say about Hock Lian Seng:
"Hock Lian Seng has a conservative management that is unlikely to create any excitement ...
"... for anyone who believes that the construction sector will recover once we have a handle on the COVID-19 situation."
Individually, these additional investments were relatively small five figure sums and unlikely to have a big impact but collectively they might move the needle a little bit into positive territory.
In 4Q 2020, I also increased the size of my investment in CapitaLand Retail China Trust significantly at closer to $1.20 a unit and also took part in the rights issue priced at $1.17 a unit.
CapitaLand Retail China Trust should have a much bigger and positive impact on my passive income in future.
At my purchase prices, apart from trading at about a 20% discount to NAV, it was also offering the possibility of a normalized distribution yield of about 8%.
I also like that the REIT would see reduced sectorial and geographical concentration risks after the exercise.
In 4Q 2020, I also increased my investment in Sabana REIT substantially after its proposed merger with ESR-REIT failed to materialise.
Long time readers might remember that Sabana REIT was one of the largest investments in my portfolio and how I made some money from it.
I have not done anything to my investment in the REIT since that time it had a rights issue.
So, I have been holding on to this smallish legacy position which has been a free of cost investment for quite some time and it still generates an income for me.
I feel that there is really no reason to sell a free passive income generator, especially when it is being undervalued by Mr. Market.
With the recent proposed merger with ESR-REIT scuttled in part due to the efforts of activist investors, Quarz and Black Crane, I am more confident now that we could see fair value unlocked for Sabana REIT's minority investors in future.
Peter Lynch said that he liked asset plays but he liked them more if there were people involved who would help to unlock the fair value of the assets.
Late last year, Quarz suggested that a fair offer for Sabana REIT should be around $0.545 per unit.
Given the less certain economic outlook even though there are multiple COVID-19 vaccines on the horizon, even a $0.48 per unit offer, which was how much ESR paid Vibrant Group to take control of Sabana REIT, would be better than the more recent low ball offer to merge Sabana REIT with ESR-REIT.
ESR-REIT seems to be pursuing a growth at all cost strategy which I don't like and I thought their merger with VIVA Industrial Trust (VIT) was flawed as they valued VIT too highly.
For anyone who value sustainability, I suggested that VIT's high yield was unsustainable because a big chunk of their assets had very short remaining land leases which would create other problems as well.
ESR-REIT's proposed merger with Sabana REIT recently, however, grossly undervalued Sabana REIT.
Actually, the merger is worse than that because Sabana REIT's investors would eventually have to help bear the cost of the mistake that was the merger of ESR-REIT and VIT.
Unless a much better offer is made, Sabana REIT is better off without the merger as any increase in DPU as a result of the merger is unsustainable and does not tell the whole story.
Sabana REIT has a conservative gearing ratio and also the potential to improve the occupancy and income generated by its portfolio of properties significantly on its own steam.
With occupancy lower than 80%, the REIT has ample room (pun intended) to do better especially when a rising tide should lift all boats.
While waiting for things to improve and also for fair value to be unlocked, a normalised distribution yield of about 7% on the back of a relatively strong balance sheet does not seem like a bad deal to me.
Of course, it now depends on Sabana REIT's manager to deliver and I hope Mr. Donald Han does not disappoint.
No longer a small legacy position, my investment in Sabana REIT is significantly larger in size now.
Now, I will say a few words about First REIT which, for many years, was one of my largest investments for income.
Some readers might remember that I sold my investment in the REIT more than two years ago when I blogged about it.
Recently, the blog entry on my sale of First REIT saw an increase in readership despite being more than two years old probably due to the slew of bad news about the REIT and its rights issue.
I also received questions from some readers on what should they do now?
Should those who are vested sell?
I had this to say:
"... ask yourself if you did not buy at $1.30 a unit, would you buy at $0.20 a unit now?
"Peter Lynch said before that all investments are good at the right price.
"... if you feel that you would be a buyer at $0.20 a share, you wouldn't want to sell what you have now."
We should know what we are investing in and what could be in store for us.
So, anyway, in 4Q 2020, my war chest saw big outflows but passive income also received a big boost from Accordia Golf Trust which declared two bumper income distributions as they sold all their assets.
As Accordia Golf Trust was one of my larger largest investments, the distributions were pretty significant.
Total passive income received in 4Q 2020:
S$ 336,922.24
Of course, it must be noted that much of this will not be repeated and missing Accordia Golf Trust's regular distributions, passive income in 2021 could take a hit if the other investments in my portfolio are not able to sufficiently pick up the slack.
This remains a real possibility especially if the deleterious effects of COVID-19 linger for a longer time and dividends from my investments remain reduced or suspended.
Of course, it remains speculative as to when the economy will fully emerge from the shadow of the COVID-19 pandemic and I tried to do more investing and less speculating in 2020.
I remind myself that I do not know everything.
So, I can only do what I feel are the right things and hope for the best.
Something I will continue to do is to grow my CPF savings by making voluntary contributions at least till I am 55 years old.
January is the month when I make voluntary contributions to my CPF account to max out the CPF Annual Contribution Limit.
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