Heart to heart talk on achieving financial freedom (UPDATED).

I have heart to heart "talks" with readers sometimes and those whom I have "talked" to know that the conversations could last an hour or more sometimes. 

Although I am not a financial planner nor a trained counsellor, I try my best to put things in perspective for everyone and, hopefully, throw some light on issues.





I know that Singapore can be a bit of a figurative pressure cooker sometimes and a topic that is evergreen in our very green garden city has the same color. 

Green is the color of money or so they say. 

Yes, the topic is "money".

There are more than a few readers who have, in the past, left me comments, sent me emails and chatted with me in FB who told me that they want to be like me. 

They want to achieve financial freedom. 

However, they think it is really hard to do so in just 20 years which is more or less the time I have taken to do the same.





Some readers even told me that although they are inspired by my blog, they also feel some depression at the same time. 

This, of course, is not what I want to achieve through my blogging efforts. 

If this is what my blog is doing to people, then, I should stop blogging.





Not too long ago, I had a chat with another reader in FB and I think that a few "bubbles" from me neatly encapsulate what I want to say to readers who are 

1. married with children, 

2. who make above average salaries, 

3. who have a mortgage to service 

and 

4. a car to maintain. 





Here it is:

I keep saying that all of us have difference circumstances in life. 

We might make very different choices in life and with those choices, there are pluses and minuses. 

We must make the best of our situations and, if possible, improve on our situations. 





Incidentally, I believe that it is almost always possible to improve on our situations. 

More often than not, it depends on how badly we want things to change.

So, some might take 20 years, some might take less than 10 years and some might take 40 years or, maybe, more. 





The important thing is that we all get there in the end or at least try our very best to do so.

Anyone who is diligently working towards financial freedom in a responsible manner is, in my opinion, already a winner and we should never forget that.





Related post:
Journey to financial freedom is not a race.

If I had done this, I would have hit the minimum sum too.

-------------------------
This is my reply to a comment by a reader and because I want as many people to read this as possible, I am publishing this as a regular blog post.

See qook's full comment: here.
".... I just ran some numbers and they were illuminating. If I'd done the same as AK, I would have hit my minimum sum too!"

AK's voluntary contribution in March 2014.

AK's reply:

Hi qook,

Yes, absolutely! That is what I have been trying to tell people for a long time. :)

Feed our CPF-SA early and feed it well. If we do it early enough and well enough, we would only have to do it for a few years and time will do the rest for us.

4% compound interest is powerful. 4% compound interest risk free is very attractive. 

However, we need a more substantial base to see more meaningful results. 

So, we need to help it along to help ourselves. ;)







Once you hit the ceilings for the SA and MA in any year, your monthly CPF contributions for the rest of the year will go to your OA and SA but not the MA.

So, the money in the SA will continue to grow into something much bigger. 

At age 55, there could possibly be a small windfall for us and not just a $5,000 payout. 

The rest of the money goes into a newly created RA and at age 65, CPF Life will kick in.

Like many things in life, the outcome depends on the decisions we made in the past. :)







Want to create a risk free and more conservative portion for our portfolio and not very sure about bonds? 

I hope this blog post has provided some food for thought. 

There is still quite a bit of time before the year ends.

Related posts:
1. Towards retirement adequacy before the year ends.
2. Videos on reaching 55 and CPF Life. (6 minutes in all.)
3. Build a bigger retirement fund with CPF-SA.
4. Do the right things and transform our lives. (Real story.)
5. We do better managing our savings than the CPF?

A way towards retirement adequacy before the year ends.

A reader sent this message to me in FB and agreed to have me share it in my blog:

Hi AK,


Many thanks for your blog post "How to grow my wealth as I approach 40 years of age" and the other cpf related posts.


After poking around our cpf site, finally decided to move my entire 2013 OA contributions into SA. While it is nowhere near the MS, i feel it's a step in the right direction despite the fact that i am closer 40 than 20!


Thank you for always sharing your thoughts, journey AND nagging at us


P


P.S.
CPF website has an "Ordinary Account-Special Account Savings Transfer Calculator". It estimates how much MORE interest we earn by moving $x amt from OA to SA account. Unfortunately, it only calculates up to age 55 and not the 65 you mentioned. However, it is still a great gauge. Perhaps this may be useful for your readers to convince themselves of how wonderful this 4/5% interest is!

Here's the link:
https://www.cpf.gov.sg/cpf_trans/ssl/financial_model/oa2sa/oa2sa_cal.asp

if you feel it will help others, please (share)

the exchange between you, Endrene and a few others were very helpful to me.

If you like what you read here, there are still a couple of weeks left before the year ends.

Related posts:
1. How to grow my wealth as I approach 40 years of age?
2. How to upsize $100K to $225K in 20 years?

Investing for income and position sizing for peace of mind: Inspired by an exchange of words in Kallang Wave Mall.

Some time back, a reader said it must be a good feeling to be out and about and overhearing people talking about AK71 without them knowing that AK71 was listening in. I replied saying that it had never happened before and AK71 was not as popular as he thought.

Well, you know what they say about never saying never.

I was out one evening, visiting the new Kallang Wave Mall to take advantage of the opening promotional deals when it actually happened. I don't know about having any good feeling. In fact, the experience was rather spooky.

Before I go on, in case you are wondering what lobang (Singlish for "a good deal") I had in Kallang Wave mall, it was this:

I spent $200 in NTUC Fairprice using the Citibank SMRT Card and got a 7% rebate. At the information counter, I showed them the receipt and the Citibank SMRT Card and I was given a $10 Kallang Wave voucher, an Olaf plush toy (Olaf as in the Olaf from the Disney animation "Frozen") worth $19.90, a chance to spin the wheel to win more "Frozen" products and to take part in the grand lucky draw to win a trip for 4 to Hong Kong.

OK, now, you know why I went to such an ulu (Singlish for "in the middle of nowhere") mall.

Now, back to the spooky experience I had.

I was in an aisle in the supermarket looking for some biscuits when I overheard 2 ladies talking about me behind my back! I mean, literally, they were behind my back!

A: "This AK recently like very bad luck. Bought SembCorp and price dropped so much."

B: "Ya. I followed him and bought too. Now, lost about 20%."

A: "OMG! Did you buy a lot?"

B: "Not cheap. Buy a few lots also a lot of money. Now stuck. (Sigh)"

A: "Don't worry. AK says strong company. He buy for the dividends..."

Then, they walked away. I was wondering if I should follow them discreetly to see what else they had to say. I know, terrible! I was eavesdropping! Anyway, I decided not to. Imagine them calling security because an old, fat and ugly man was stalking them. Yikes!

Anyway, if you know me, I didn't write to simply share a spooky tale. There is enough stuff in that short exchange between the two ladies which disturbed me enough to blog about my thoughts.

It is true that I started buying SembCorp Industries at $5.04 per share not too long ago and I blogged about my motivations for doing so, admitting that it was not a cheap purchase at the time. It ticked all my boxes but because it was not undervalued, I nibbled. I initiated a small position.

As its share price fell, I nibbled again at various points. Some might be interested to know that I actually nibbled a bit more at $4.14 a share just yesterday. I will probably continue to take small bites because although I feel that the stock is now undervalued, I am reminded of the saying that Mr. Market can stay irrational for a long time.

Although my initial entry price of $5.04 has lost almost 20% in market value, it might be useful to know that the nibble formed less than 1% of my entire portfolio. So, it means that my portfolio has lost 0.2% in value because of that purchase. If we add my other recent nibbles and their paper losses along the way, the total paper loss due to these is probably between 1% to 2% of my portfolio's value.

So, although the absolute dollar value might look substantial to some, we must remember that it is about percentages. We should always look at our own circumstances and decide how to size our positions in the stock market accordingly. Don't bite off more than we can chew.

Finally, because I am more interested in investing for a regular income, most of my portfolio ensures that I always have funds coming in on a regular basis. Yes, even my badly timed investment in SembCorp Industries will, in all likelihood, generate income for me in 2015 and beyond. This is an important reason why I am able to stay level headed, well, most of the time.

I thought for a while whether to blog about this because the two ladies I mentioned will probably read this blog and I don't know how they would feel but I guess I should just do it for everyone's benefit, including mine.

Related posts:
1. How to make recovery easier?
2. Motivations and methods in investing.
3. Do not love unless it is worth the loving.
4. Managing exposure in investment.
5. What should I do when I am down 25%?
"... the important thing to know is "What should I do?" given a certain set of circumstances." AK

Hock Lian Seng: Robust order book at a 3 year high.

I have been a shareholder of Hock Lian Seng's since 2010. 

I accumulated a core position in the stock and also did a bit of trading for extra pocket money. 

In the last couple of years, however, I have mostly been accumulating the stock because I thought Mr. Market was too pessimistic.





The last time I bought more of the stock was in February 2014 at 25.5c a share. 

Before that, I bought more in May 2013, at 26c a share. 

As some readers might have guessed, I developed an interest in Hock Lian Seng because of its attractive dividend payouts. 

Hock Lian Seng pays out about 40% of its earnings as dividends to shareholders every year and the yield is upwards of 5%.

I was waiting for more weakness in its share price to accumulate and since the stock was hardly covered by analysts, I thought the chances were quite good. 

Well, I think I can stop waiting.

Why?



There could be much more interest in the stock now that The EDGE published an article on it and after UOB Kay Hian published a report that highlighted a few points regarding Hock Lian Seng:





1. Company has a net cash position of $88 million or about 58% of its market cap.

2. Its two industrial properties, Ark@Gambas and Ark@KB, in Sembawang and Kaki Bukit are 80% and 99% sold. They are expected to obtain TOP in end 2014 and early 2015, respectively. So, Hock Lian Seng's cash position will improve as it recognises net proceeds of $60 million to $70 million from the projects.


3. Consistent and attractive dividend payout of a third or more of its earnings. Special dividends possible. See point 2.

4. Order book with contracts worth $345 million as at September. This is a 3 year high.






If Hock Lian Seng should attract coverage from more analysts and if they are mostly positive about the stock like I am, I think opportunities to accumulate the stock on weakness could be harder to come by in future.

Click to enlarge.

Looking at the chart, Hock Lian Seng's share price could retrace to 27c, the support provided by the trend line. 

If it should happen, it could be an opportunity for me to buy more although I would have liked to buy at prices lower than that.




Related post:
Hock Lian Seng (My last done analysis in April 2014.).

Home made waffle with a twist for Sunday lunch.

What did I have for lunch today?

I had some leftover waffle made by my sister but instead of having them with maple syrup and butter, a style more in keeping with breakfast, I decided to prepare a savory version instead for lunch:

Heat up both sides of the waffle on a frying pan.

Layer on cheese, cucumber slices and cherry tomatoes.

Voila! A warm and savory waffle sandwich is served!

Bon appetit!

Now, what should I do for dinner? Hmmm... I wonder.

Related post:
Save money and have a good dinner.

How to grow my wealth as I approach 40 years of age?

"Big money prefers practicality over opulence."
This is my reply to a recent email from a reader approaching the big 4 in life:
Welcome to my blog. :)
I have to say that I am not a financial advisor. So, I can only share with you what I think makes sense to me. There are a few issues here:

1. Emergency fund - Generally, people keep 6 to 12 months worth of routine expenses in this fund. Personally, I keep a lot more, about 24 months. So, ask if your emergency fund is excessive. Could the amount actually be lower?

2. 2 room BTO flat - I gather from your email that you are a single. So, I think this is a super choice for a home. Good value for money and most practical. You will be paying for this with your CPF-OA funds, I guess. Of course, you want to set aside some money for furnishing and stuff. Call this your renovation fund or something. For me, I think $10K is probably enough.

3. Endowment policies - These sound like they are going to behave like annuities (for you). Sounds like good retirement income tools although without further details, it is hard to tell if the returns are attractive. If the returns are attractive enough for you and they give you peace of mind, just keep them.

4. Take a look at your CPF-SA. You can do minimum sum top ups yearly up to $7,000 a year. Try to hit the MS ceiling as soon as possible. Let the magic of compounding do the rest. It will ensure that you have a meaningful monthly income from your CPF Life annuity from age 65. It could be as much as $1,300 a month (for now).

5. As for investments, the first rule is that you must only use money you can afford to lose. This means that you should be able to suffer short term losses on paper without having to worry. Money that has been earmarked for specific purposes or might be needed in an emergency should not be used. Then, you have to read up. Pick up some knowledge. If you do not have the inclination to do this, you could consider regular investment plans offered by OCBC or POSB.

Many of the things I have mentioned in this reply are found in my blog. So, just do a search and you will find them. ;)
Best wishes,
AK

All genuine and constructive comments are welcome. No direct or indirect advertisements, please. Thank you.
Related posts:
1. Why emergency fund is important?
2. Affordability and value for money.
3. About life insurance and grapes.
4. $100K to $225K? (CPF-Life)
5. POSB Invest-Saver account.

Exodus: Gods and Kings.

I was invited to a buffet dinner and a movie treat complete with popcorn and Pepsi.

The movie was educational and entertaining at the same time. Although Biblical, I believe that there are certain lessons here which have universal value.

We should treat every human being equally. It doesn't matter what is the color of our skins.

Efforts to enrich ourselves or to make our lives better should not be at the expense of fellow human beings. Unfortunately, examples of "beggar thy neighbour" are rather common and I am sure all of us have tales to tell.

Related post:
The Amazing Spider Man 2.

A nibble at Wing Tai Holdings Limited.

On 22 October, I did an incomplete analysis of Wing Tai Holdings Limited to arrive at what I thought would be a nice entry price. 

Any reader who might have missed that and would like to read it, please see the related post at the end of this blog.

Today, I became a shareholder of Wing Tai Holdings Limited. 

Entry price is $1.655, a 56% discount to NAV and a few bids higher than the $1.64 per share that I mentioned on 22 October.

At this price, I am basically paying for their investment properties at book value, their development properties at a huge discount to valuation and I am basically getting their retail businesses for free. 

I shared some of these numbers in my incomplete analysis mentioned earlier.

Technically, the downtrend is intact but the momentum oscillators are forming higher lows. 

So, it seems that the stock could be forming a base and further downside could be limited. 

The chart shows stronger supports are to be found at $1.59 and $1.55 a share.

$1.55 also happens to coincide with the low formed more than 2 years ago on 15 November 2012.

Related post:
An incomplete analysis of Wing Tai Holdings.

Accordia Golf Trust: A distribution yield of 12.16%?

Some time in August this year, I was a trader for a day. The stock traded was Accordia Golf Trust. I got in at 78c a unit because I thought I saw a positive divergence in the chart and I subsequently divested at 82 and 82.5c in the same day.

The unit price went higher to touch 92.5c a month later. Some asked if I regretted selling too soon. Well, I entered for a quick trade and I had minimal risk holding on to my position for only a few hours. I made pretty good money when I exited. My action matched my motivation. What's there to regret?

Today, I became a unit holder of Accordia Golf Trust's again. This time, at 74c a unit and it is not a decision based on technicals. This time, it is a decision based on what I think is a safer entry price for the level of income the Trust is expected to distribute to unit holders.

Some might remember that I mentioned 74c in a blog post in July when I wondered at what price was Accordia Golf Trust a buy. The IPO price of 97c a unit was unpalatable to me for various reasons although the Trust promised a 7% distribution yield. I said then that 74c a unit seemed like a more reasonable price to pay for the Trust.

For the 8 months from its listing date, the Trust is expected to distribute 6c per unit to unit holders. Subsequently, the estimate is for a DPU of 6.8c per year. I am of the opinion that the first income distribution is probably safe but I am not so sure about subsequent income distributions. This is the main reason why only a much lower entry price would interest me in the Trust.

The first income distribution will happen in 2Q 2015. It is likely to be in May or June. So, there are still many months before that happens.

Click to enlarge.

Technically, unlike in August when I turned trader for a day, there is much weakness in Accordia Golf Trust's chart. The downtrend that started in late September is very much intact. There is no sign of a positive divergence. There are no reversal signals.

So, it would not surprise me if the Trust's unit price should go lower although it is testing its channel support. 74c is, coincidentally, where we find the 150% Fibo line but support could break and if it should break, the next support is at 72.5c where we find the 161.8% Fibo line.

Related posts:
1. Accordia Golf Trust: A hole in one.
2. Accordia Golf Trust: At what price to buy?
3. How to size our more speculative positions?

2014 full year income from non-REITs.

This is the first time I am blogging about my full year income from investments in non-REITs. As my passive income generated from investments in S-REITs has for many years overshadowed income received from non-REITs, it wasn't very meaningful to blog about the latter.



Now that passive income received from S-REITs took a plunge, it has become more essential to talk to myself about what I have done in the non-REIT space which has shored up dividends received this year, making income contributions by non-REITs a more significant part of my total annual income from the stock market.


Before I continue, readers might want to bear in mind that a few of my investments in the non-REIT space have been with me for many years. They are not all new investments, therefore.

Anyway, non-REITs which have contributed to my passive income in 2014 are:

1. Croesus Retail Trust
2. Hock Lian Seng
3. Perennial China Retail Trust *
4. CapitaMalls Asia *
5. NeraTel
6. Wilmar
7. Yongnam
8. APTT
9. ST Engineering
10. SPH
11. QAF
12. Old Chang Kee
13. K-Green Trust *
14. SATS
15. Ascendas Hospitality Trust
16. Singapura Finance

* Sold and will not contribute any income in 2015.

New or old, I have blogged about all the above stocks before. So, if you should be interested in understanding why and when I invested in these stocks, just do a search for them in my blog and you will find the relevant blog posts.

Of these 16 stocks, I increased my long positions or initiated long positions in the last 12 to 15 months in Croesus Retail Trust, Hock Lian Seng, NeraTel, ST Engineering, SPH, SATS, Ascendas Hospitality Trust and Singapura Finance. 

Apart from Singapura Finance, it is quite obvious that I increased or initiated exposure to these stocks because of their relatively attractive dividend yields. I am still an income investor at heart.

I wouldn't say that all the stocks are of the "good to hold forever" variety but it should be obvious to regular readers that I am not averse to selling a stock if I am no longer impressed by its prospects. 

There are many examples which I have blogged about in the past and examples from this year are Perennial China Retail Trust and K-Green Trust in the list shared earlier.

Anyway, the total amount of dividends from non-REITs in 2014 is beefed up mostly by my rather big investment in Croesus Retail Trust which happened when its unit price took a severe beating shortly after its IPO. 

The relatively large increases to my investments in SPH and NeraTel also helped.

Income from non-REITs in 2014:
S$ 61,752.66

This figure could increase in 2015 despite losing the contributions from Perennial China Retail Trust, CapitaMalls Asia and K-Green Trust. This is because Ascendas Hospitality Trust will make a full year income contribution in 2015.

Of course, it is hard to say at this point in time if I could divest partially or fully some of the investments mentioned here in 2015. 

Indeed, I could also put more money to work in the stock market. So, nothing is set in stone. However, I do know that if valuations should go closer to crisis levels, I will be buying more.

I understand that the stock market could get a bit bumpy but my investments for income should provide me with much comfort and also help to fill my war chest in the meantime.

Related posts:
1. 2014 full year income from S-REITs.
2. AK went shopping in the (stock) market.
3. Be comfortable with being invested.
4. Mystical art of wealth accumulation.
5. Portfolio review: Unexpectedly eventful.
"... my decision to increase my level of investment in SPH and NeraTel last year so that my overall portfolio is less reliant on S-REITs for passive income was pre-emptive. Enlarging investments in Hock Lian Seng and Croesus Retail Trust earlier this year has also helped to reduce reliance on S-REITs for passive income."

2014 full year income from S-REITs.

For my investments in S-REITs, the biggest thing that happened this year was the reduction in exposure to Sabana REIT.

Some might remember that I first invested in Sabana REIT in March 2011 at 92.5c a unit. As its unit price declined to under 90c, I bought more. It became one of my top two investments in S-REITs for about three years, delivering a distribution yield on cost of about 10% during that time.

I actually started reducing my investment in Sabana REIT in late 2013 and not this year as I started to build a larger position in Croesus Retail Trust then. I chose to reduce my investment in Sabana REIT instead of AIMS AMP Capital Industrial REIT because I felt that the latter was doing a better job of building value for unit holders as an industrial properties S-REIT.

After the major divestment of Sabana REIT early this year, my remaining exposure to the REIT is barely 10% of what it was at its peak. Now, my top three investments in S-REITs are:

1. AIMS AMP Capital Industrial REIT.
2. First REIT.
3. Saizen REIT.

AIMS AMP Capital Industrial REIT's Mr. George Wang constantly adds to his investment in the REIT, aligning his interests with those of minority shareholders'. The management have shown themselves to be capable in creating value for unit holders in their exploitation of existing properties' plot ratios. They have also improved the financial resilience of the REIT by securing other forms of funding and in strengthening its debt maturity profile.

This year, I took part in AIMS AMP Capital Industrial REIT's rights issue and sold the rights units for a profit some time later. Although the REIT has been doing well, it is my single largest investment in the S-REITs universe and I want to keep my exposure to a level I am more comfortable with.

In January this year, I wrote a blog titled "A simple way to a double digit yielding portfolio". It was an account of my journey as an investor with First REIT, more or less. First REIT is another example of how a REIT, if properly managed, could be a very good investment for both income and growth. It is also a REIT in which the CEO constantly puts more of his own money in.

With its DPU growing while its balance sheet stays relatively strong, my blog post titled "First REIT: This one is for keeps." in March 2010 could turn out to be quite prophetic. As long as the management continues to be prudent and as long as there is stability and a gradual pace of growing prosperity in the economies of Singapore and Indonesia, the REIT should continue to deliver good results.

Saizen REIT, my third largest investment in the S-REIT universe, has been a very rewarding investment so far. It seems to be a more complicated investment in more ways than one and as an income investor, the fact that it receives income in JPY and pays its investors in S$ is something we must consider.

The weakness in the JPY is definitely a concern. Although the downside can be hedged, it is not cheap to do so. So, realistically, I would expect some decline in future income distributions in S$ terms as the BOJ continues to expand money supply. Whether Prime Minister Abe's QQE will work or not is still a matter of contention but a weaker JPY is the new reality.

However, Saizen REIT remains a strong value proposition and the fact that a substantial shareholder has been fighting to unlock its value is proof of this. I have said time and time again that patience will be rewarded for investors of Saizen REIT's. I am sure it is beginning to sound rather tired but I will say it again. Patience will be rewarded.

For both First REIT and Saizen REIT, I have not done anything to add or reduce exposure this year. I have simply sat back, relaxed and collected income from them.

So, what did I buy this year in the S-REITs universe? I nibbled at Soilbuild Business Space Trust in August. It was a nibble because I thought it was a fair price but not undervalued. I rather like the numbers and the management seem to be competent. For those who have not read my blog post on the REIT and why I decided to buy some, please see related post no. 6.

I also have investments in the following S-REITs:

A. Keppel REIT
B. Frasers Commercial Trust
C. Lippo Malls Retail Trust
D. Cambridge Industrial Trust
E. Suntec REIT
F. Cache Logistics Trust

These are largely legacy positions or what are left after I reduced my investments in these REITs in a big way. My investment in Sabana REIT should rightly join their ranks.

With income from Sabana REIT significantly reduced this year and the fact that it was one of my largest investments in S-REITs, 2014 full year income from S-REITs has reduced drastically.

Total income received from S-REITs in 2014:
S$ 88,476.22

Although this gives me some $7,373.02 of income per month, this is a more than 25% reduction from what was received in 2013 last year. This is a significant reduction, no matter how we slice it.

Some might wonder what is AK the income investor to do? Well, I have been increasing my exposure to some other investments to make up for the shortfall in income. I might have to talk to myself in another blog post regarding these investments.

Related posts:
1. 2013 full year income from S-REITs.
2. Added Croesus Retail Trust and reduced Sabana REIT.
3. AIMS AMP Capital Industrial REIT: 7 for 40.
4. A simple way to a double digit yielding portfolio.
5. Saizen REIT: Rewarding patient investors.
6. Soilbuild REIT: A nibble.

Make money at all costs or do the right thing at all costs?

It has been almost 20 years since I lived rather high up in a building. Discovering a relatively good value for money deal for a high floor unit in a newly built high rise means I am once again closer to the clouds.

I took some photos of the skies this evening from my balcony as my mood turned contemplative. What do you think I saw in the skies?

When I looked at the skies, I am reminded of how small I am and how there are forces out there that make problems in our mundane lives more mundane.

To some of us, we might also feel that there are divine forces in the skies observing everything that we do. The heavens have eyes, as the Chinese saying goes.

It is good to be reminded that although money is important in modern day life, we should be careful to do the right things to make money.

君子爱财取之有道

Be righteous and make money in righteous ways.

I try to remember this always and that is also why there are certain events or programs I would not want to be a part of. Perhaps, ignorance is bliss but I rather be aware and do the right things. I can't live without air conditioning and hell is way too warm for me.

Related posts:
1. Questions we must ask and people I detest.
2. Nobody cares about our money more than we do.
3. Make more money, do good and pay less tax.

Wisdom, wit, some vegetables and a fish.

I was chatting with my mom and she talked about looking at the skies and laughing at the follies of man. I told her she is so poetic and reminded me of 文章. Younger readers might not get the joke.

Have a listen:





I think this was more than 20 years ago. I am feeling my age. Thanks, mom.

I also decided to give myself a lunch treat today and I think it is a lunch that most people would approve of:

Price: $3.50.

Who says AK's lunch is always under $3.00? Who? Who?

Related post:
Old fashion or growing older?

Marco Polo Marine: My comment in another blog.

I stumbled upon a blog on Marco Polo Marine and I was reading the comments section and felt compelled to make a comment to correct one of the readers. This was my comment:

For readers who are interested in the blog I am referring to, you might want to follow the link here to read the rather well written article: Valuestocks.sg: Marco Polo Marine - Still waiting.

For readers who just want to know what could have compelled me to make the above comment, this was the comment responsible for my response:

It seems that AK the blogger has been gravely misunderstood. It is either that or I have misunderstood what I should be doing as a blogger or whether I should be blogging at all.

Some time off from blogging to do some serious thinking is probably in order.

Related posts:
1. Portfolio review: Unexpectedly eventful.
2. Managing exposures in AK's portfolio.
3. The matter of letters and FY 2014.

Invest in hotel projects for income?

UPDATE: 
I was chatting online with another reader on this matter. Frankly, if I were after passive income by investing in hotel rooms, I would rather invest in a hospitality Trust and there are plenty of options here in Singapore alone.

For anyone who is considering buying hotel rooms as investments for passive income, ask how well do you understand this investment product?

"The rule of thumb is that a hotel room must earn $1 per night for every $1,000 it costs to buy the unit. That means if it costs $125,000, then the room has to rent for $125 per night, on average, and be occupied 60% to 70% of the time. Examine the hotels in the area, as well as the average vacancy rates, along with average room rates. Only then can you get a true picture of whether or not you’ll earn money on rental revenue." Romana King

"...vast majority of people don’t know the full facts. They are sold on a made up ‘projected’ cash flow and a glossy brochure. That is nowhere near the due diligence that should be done on a specialised investment strategy like this." Brett Alegre-Wood
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A reader wrote to me about investing in a hotel project in Phuket recently. This was my reply:

Hi R,

I have a friend who bought into a similar program offered by a hotel group in Phuket.

There are actually plenty of risks in such investments and you have to be one with rather deep pockets. I cannot remember the full discussion I had with my friend but here are a few points off the top of my head:

1. Concentration risk. It is one property.

2. Prospects. You have to question why the developer does not want to take a bank loan or a syndicate of loans to fund the project? If it is lucrative, they should do it. Or is it more lucrative selling rooms in the project to private investors?

3. Management risk. If the project does poorly and the management is not getting paid adequately because of this, could they simply walk out?

4. Is a guaranteed 5% return adequate compensation? I am inclined to think not.
(In fact, could it be a case of "taking back our own money"? Investor could be paying an inflated price for the hotel room to get the guaranteed yearly return for X number of years.)

If you wish to invest in Phuket properties, have you looked at condominiums and apartments? For the same amount of money, if I remember correctly, you could get a bigger property and in pretty good locations too.

Best wishes,
AK

THB 1.0M = S$40,000.

There are many investment opportunities out there. Some are legitimate while some are not. Those which are legitimate, we want to ensure that we would be adequately compensated for the risks that we are being asked to undertake.

For sure, I am not an expert when it comes to investing in properties and hotel projects in Phuket. I was just voicing my concerns.

Related post:
Returns of 15% per year invested.

"Many of the hotel room investment options are fractional ownership. Fractional ownership no matter what the marketers say is Timeshare reborn. You only own a fraction of the property exactly like a timeshare. We all know what happen with the timeshare market and if you do a quick Google search, it will show you how millions of pounds were lost by investors. For me this is a deal breaker if you are offered a fractional ownership investment don’t walk away, run!"
Source: 
http://rmpproperty.com/2013/03/why-we-wont-sell-hotel-room-investments/

"An investor who only wants to be known as Mr Wang bought two units at Ibis Lymm. He had heard about the investment from a friend who had purchased two rooms at Ibis Knutsford and then went on to buy a unit at Ibis Lymm as well. The $400,000 that Wang invested in the hotel rooms had been savings put aside for his retirement and his children’s university education. “And we need the money,” he sighs. “It’s been a burden.”

"Another investor, Mr Fu, who bought two rooms at Ibis Lymm, agrees. “A lot of us had sleepless nights,” he admits. “And so, we have been communicating with each other.” The amount invested, $400,000, may not sound like a lot, but it’s not a small sum either. “We have to answer to our families,” Fu says. “We thought we could get a brighter future, but it has turned out to be something opposite.”

"Mr Koh believes he was most likely the last investor from Singapore to participate in the Ibis Lymm scheme. The whole experience has made him more vigilant, and since then, he has begun to scrutinise property advertisements, especially those offering high guaranteed returns."
Source:
http://www.theedgeproperty.com.sg/