Goh Eng Yeow's anguish over his paper losses etc.

AK is an accredited kay poh and is always looking around. 

If we train ourselves to be more observant and to be more aware of our environment, we might learn something or find something which might benefit us now or in the future (either by participating or avoiding). As investors, it could be a good idea to be a kay poh.

Today, I visited a mall that I have a stake in through my investment in a listed company. I saw a good crowd in the late morning and that made me happy. Did I hear SPH?

I bought myself a curry puff at an Old Chang Kee kiosk and I had to queue. A lady in front of me bought all the fried chicken wings available despite a recent price increase of 10c per wing. I had to wait quite a while for my turn but I was happy.

I went to a bank to place a fixed deposit and I saw that they had an air purifier. So, I chose the seat that was the closest to the machine while waiting to be served. A bit noisier but the air was probably better. 

Alamak, AK is so kiasu and kiasi. Yah lor. Regular readers know that I have two air purifiers at home and that they are on almost 24 hours a day. It is always good to be prepared. Prevention is better than cure, isn't it?

This leads me to another idea about how we should always be prepared, whether we are investors or not. I have a friend who was looking high and low for an air purifier when the haze was at its worst recently. 

Despite my advice a few years ago that he should get an air purifier for his home, my friend didn't get one. He said the haze wasn't that bad. This time round, his parents developed respiratory issues due to the haze.

As investors, we probably get the best deals when the market is not interested. When everyone is interested in buying a stock, it is hard to get a good deal. Well, when everyone was interested in getting an air purifier, it became harder to get our hands on one. Same, same but different.

So, since the haze is an annual event, why not be prepared for it? If only price movement in the stock market is just as predictable.

As investors, we want to be prepared too. We want to make sure we have a war chest ready and that we have a shopping list ready. We don't know if a crash is going to happen but if it should happen, we should know what to do and make fast decisions. 

We must be prepared to seize opportunities or be prepared to lose out on opportunities.

While waiting for my turn at the bank, I read an article by Goh Eng Yeow in the papers and I would like to highlight these few paragraphs:

As investors for income, if we have invested in good companies, even badly timed entries should eventually turn out well. 

The fluctuations in prices should not affect us much if we have been eating bread with ink slowly (see related post no. 3).

So, how's your Sunday? 

Told you AK is kaypoh. ;p

Related posts:
1. Protect ourselves from the haze.
2. Tea with Solace: Common sense investing.
3. How to have peace of mind as investors?
4. Feeling depressed about paper losses?

Without CI coverage, could we become a burden?

If we have a good H&S policy, why do we still have to get coverage against critical illnesses (CI)?

Well, if we should die quite quickly from these critical illnesses, then, that is the end of story for us.

What if we did not die and were left weakened? What if we were unable to work or if we should wish to seek alternative treatment? Could we become a burden to our family?

Having said this, depending on our circumstances, we might not need CI coverage for life. OK, some might still want it but that is something else.





Here is a recent conversation with a reader:

Reader:
My insurance agent told me he has max up his critical illness (CI) coverage in his whole life policy as he claimed we need money to cover sickness after 70 years old...

I told him hopefully I will be managing my finance so well that I should have at least 300K by then :) and shall I detect with sickness and I may just managed to stay for another 10 years.

Do you mind to develop a bit why you persuade your father to give up his whole life ? Don't you worry they may need the money if they are sick, especially during the golden year?

AK:
We buy insurance because we need to transfer risk. At 70, what kind of risk should my dad be transferring?

My dad has Medishield which will be upgraded to Medishield Life by end of the year, hopefully. So, he has H&S coverage and, really, that is all he needs.

In retirement, we should have developed some form of retirement funding so that we have regular income without having to work.

If we still needed CI coverage at 70 or older, I can only assume that it would be because we could not afford to stop working and still needed an earned income. That is depressing.






Buy what we need and not what the insurance agent wants us to buy.

Related posts:
1. Getting covered against critical illnesses.
2. Retiring before 60 is not a dream.
3. Consider terminating whole life insurance.

UOB, Prudential and what is financially manageable?

As investors, we recognise that we could make investment mistakes. So, it is important to size our positions appropriately so that if an investment turned out to be a mistake, it would not sink our entire portfolio.

It is partly about making losses financially manageable. So, what is financially manageable?

Well, a more prudent way of interpreting whether something is financially manageable is in terms of cash flow. I know we could also interpret whether something is financially manageable by how much we have in savings.

Well, it is nice to have more assets (and cash is an asset) than liabilities but if we should be in a situation that requires us to draw upon our assets to fund commitments, then, we could find ourselves in trouble in future.

So, before we commit to anything financial, ask if our cash flow is adequate and not just whether we have enough savings to see us through especially if it is going to be a long term commitment that is quite demanding.

What led me to say all these?

A couple of readers sent me a link to this article:
Admin executive paid yearly insurance premiums higher than annual pay.

A 57 year old Mdm. Han bought a Prudential endowment policy from UOB a couple of years ago. She now discovers that the maturity benefit is not 100% guaranteed. She might get a sum that is actually lower than the total premiums she would have paid at maturity.

Pertinent question:
How did she get the impression that the maturity benefit is 100% guaranteed?

It also baffles me why she would commit to a $40,000 annual premium when her salary is about $30,000 a year. She might have been persuaded by the free air-fryer and steamer.

Pertinent question:
Was a thorough fact finding session conducted with Mdm. Han or was someone just in a hurry to sell a policy with a fat annual premium?


I don't have the answers to these questions, of course, but these questions aside, if Mdm. Han had asked the important question "Is this financially manageable?" and knew how to answer the question, she would have avoided such a situation.

Please note that I am not even talking about whether the insurance product is suitable for Mdm. Han. That is another topic altogether.

Related posts:
1. Misled into earning 6.3% interest in 4 years?
2. 6 point response to an expensive lesson.
3. A true story about life insurance and grapes.

Save money and time with a simple meal.

I am a big fan of the microwave oven. A big time saver, it can be used to prepare all sorts of food. I even use it as a steamer.

Today, the ingredients that went into my lunch were:

1. Cauliflower
2. Tofu
3. Extra virgin olive oil
4. Black pepper
5. Garlic salt

We could buy a big head of cauliflower for very little money. For a bit more than $2.00, there is probably enough for 4 servings here:

Tofu, unfortunately, is sold in boxes of 300 gm each and I only used half a box for lunch. I usually pan fry the rest to be eaten later in the day.

Wash the cauliflower and, then, put them in a microwave oven safe container with the tofu. The tofu provides the moisture required to steam the vegetable. Close the container and leave it in the microwave oven on high for 8 minutes or so.

Before.

After.
The cauliflower looks moist and the tofu shrunken.

Be careful in handling the food as it is steaming hot. Transfer onto a plate and add extra virgin olive oil, black pepper and garlic salt. 

There, we are done.

Oh, I had a banana and an apple too. I like to eat spotty bananas because they are less likely to give me gas.

Total cost of the dish? Less than $1, probably. 

The fruits probably cost just as much.

This is one ideal dish for people who are looking to cut down on carbohydrates and meat in their diet. 

For people who say that they would like to save money by cutting down on dining out but think that it is too time consuming to cook at home, this didn't take me much time at all.

Ah, in case you are wondering:

The rest of the tofu. Pan fried with just a bit of butter.

Bon appetit.

Related post:
Suddenly, financial freedom looks less remote.
"Regular readers know that my journey towards financial freedom is anchored upon a philosophy and that philosophy is apparent in my daily life."

ARA Asset Management: Re-initiating long position.

ARA Asset Management was a stock I fully divested more than 3 years ago. 

On hindsight, it was a mistake because deviating from a familiar practice, I did not keep a core position for income. I suppose I was a bit more active as a trader in the past.

I have been waiting for a chance to get back in and the recent plunge in its stock price has provided me with an opportunity to do so.

ARA's EPS for 2014 was 10.35c and DPS was 5c. So, they paid out about 48% of earnings as dividends. 

When looking at ARA's PE ratios in the last few years since 2012, we see a range of about 12x to 22x. Median PE ratio is, therefore, about 17x.

ARA's 1H 2015's EPS came in lower at 4.19c. Could 2H 2015 do better for FY 2015 to beat FY 2014's EPS in aggregate? Of course, your guess is as good as mine. 



If we should simply annualise 4.19c, we get a full year EPS of 8.38c. Multiply that by 17x and we get a price I might buy at which is about $1.42 a share.


At $1.32 a share, I am re-initiating a long position at a PE ratio of 15.75x which is a bit lower than the median of 17x identified earlier. 




Of course, if ARA should deliver an EPS of 10c for FY 2015, $1.32 a share would look much cheaper then (with a PE ratio of 13.2x).

Dividend yield, assuming DPS of 5c remains unchanged, is almost 3.8% with a purchase price of $1.32 a share.

Another stock for income and growth? Good to accumulate at lower prices? Perhaps so.


Related post:
ARA: Divestment $1.30 and $1.32.

9M 2015 passive income from non-REITs.

Some wonder if Mr. Market could go into a depression? I don't know but I do know that many stocks became much more attractively priced in the last three months.

Consistent with my strategy to diversify my portfolio to reduce reliance on S-REITs for income, I added to my long positions in the following as their stock prices declined more significantly recently:

1. Accordia Golf Trust

2. Ascendas Hospitality Trust

3. ST Engineering

4. Starhub

5. SembCorp Industries

In the last three months, I also initiated long positions in the following as investments for income:

5. VICOM
"A 15x PE ratio would give us a fair value of $5.36 or so per share."

6. Religare Health Trust
"Trust has demonstrated its ability to improve its revenue organically quite strongly which makes up for the expiration of the sponsor's waiver to their share of the distributable income."

7. King Wan
"King Wan is in a net cash position and it also has an order book that would provide earnings visibility until 2018."

Finally, I accumulated the following stocks which have a bit of an income investing angle but the main reason is because I think they are worth much more and at lower prices, they became even more attractive:

8. Wilmar

9. OUE Limited

If you should be interested, you could search ASSI for more of my blog posts on these stocks and why I decided to add them to my portfolio when I did.

Of course, stocks could stay undervalued for a long time but regularly receiving some dividend in the meantime makes the waiting more palatable. I like to be paid while I wait.

If you suspect that I have dipped into my war chest in the last three months, you are right. 

Could we see another big decline in the stock market? We could and we should be ready. So, being cautious, I have not exhausted my war chest.

I have a couple of fixed deposits maturing next month in October and I will probably be keeping the money close at hand instead of putting it in another fixed deposit or two.

In Q3 2015, the following non-REITs paid dividends:

1. SATS

2. Old Chang Kee

3. APTT

4. SingTel

5. SCI

6. SMM

7. Wilmar

8. NeraTel

9. ST Engineering

10. QAF Ltd.

11. Starhub

12. HongLeong Finance

13. Croesus Retail Trust

For the first 9 months of 2015, total passive income received from non-REITs: S$ 57,747.59. 

This works out to be S$ 6,416.40 per month.

Have a shopping list and be ready to pounce if Mr. Market becomes depressed.

Related post:

6M 2015 passive income from non-REITs.

Croesus Retail Trust: 22 for 100 rights issue.

Some time ago, I mentioned that due to the relatively high gearing level, I expected further acquisitions made by Croesus Retail Trust to be funded through new equity or a blend of new equity and debt.

In their acquisition of another mall in Japan, Torius in Fukuoka, funds will be raised partially through a rights issue. 

Some details:

1. 114,222,677 Rights Units. 

2. Issue price of S$0.610 per Rights Unit.

3. 22 Rights Units for every 100 existing Units held.

I very much prefer a Rights issue to a share placement because the former allows all unit holders to participate. I also like Rights issues if the money is used to purchase good quality income producing assets which would lead to DPU accretion.

Based on the purchase price, the NPI yield of Torius is 7.8% while Croesus Retail Trust's portfolio's NPI yield is 5.3%. So, the purchase is NPI yield accretive. However, due to the enlarged float, post Rights issue, we would see only a slight increase in DPU.

By subscribing to the Rights, I am putting my trust in the management to extract more value from the property as they have hinted at AEIs and future positive rental reversions.

I will fully subscribe to my Rights entitlement at 61c per Rights Unit and I will also apply for excess Rights, as usual. If I am successful in getting some excess Rights, it would improve the distribution yield of my investment in the Trust.

During the one week or so when nil-paid Rights are being traded (9 Oct to 19 Oct), we could see some weakness in the Trust's unit price. That could be an opportunity to accumulate.

Also, if the nil-paid Rights are priced attractively, I could buy more. For example, if we think that, post acquisition and Rights issue, a fairly good unit price to pay for Croesus Retail Trust is 80c a unit, then, if the nil-paid Rights should trade at anything lower than 19c a piece, it could be a good deal (80c - 61c).

I certainly hope that this rights issue would present opportunities for me to add to my investment in Croesus Retail Trust at more attractive prices.

Read announcement: here.
See Press Release: here.
"Nil-paid" Rights trading period from 9 October 2015 to 19 October 2015. The closing date and time for subscription for Rights Units by Unitholders is 23 October 2015 at 5:00 p.m. (9.30 p.m. for Electronic Applications through ATMs of Participating Banks).

Related post:
Croesus Retail Trust: ONE'S MALL.

9M 2015 passive income from S-REITs.

The stock market has declined a fair bit in the last three months. For a while, there was some panic. Even now, there is probably a lingering sense of unease in the air.


We must know what to do when presented with a situation. Knowing what to do depends on our own set of circumstances and also motivations. 

Recently, a reader asked me if she should sell a stock which she said she bought at a much higher price some time ago. 

I asked her to consider if she would buy that stock now at the current price if she didn't buy it at a much higher price earlier.

We want to buy at a price we would not sell at and to sell at a price we would not buy at.

There isn't a universal right or wrong answer. At least I do not believe there is. We could each have an opinion on something's value or the lack of it.

Anyway, what have I done in the last three months?

In the last three months, in the S-REIT space, I added IREIT Global to my portfolio as its unit price declined. I like the properties the REIT holds but I thought its IPO price unattractive.

To own freehold office buildings in Germany, arguably the strongest economy in Europe, is an attractive idea. At the current unit price, an 8% distribution yield is achievable.

My initial investment in the REIT is not a big one. In fact, it is relatively small and probably gives me only a toehold.

IREIT Global's relatively high gearing level and the weak Euro are pertinent concerns. 

However, IREIT Global's loans are in Euros. So, they do have a natural currency hedge. This is unlike LMIR's situation. 

Having said this, I feel that the largest decline in the Euro against the S$ could well be behind us. The S$ has weakened considerably as well. 

My reasoning here is really similar to my earlier reasoning on how we shouldn't see much more weakness in the JPY against the S$ when considering whether to invest in Saizen REIT or Croesus Retail Trust.

I also added to my long position in Soilbuild REIT at the end of August, paying 75c per unit, having avoided adding to my position as the REIT's unit price rose to the mid 80s earlier.

I like the fact that the REIT benefits from the shifting of certain commercial activities from office buildings to business parks which form a relatively big percentage of its assets.

I believe that Soilbuild REIT and AIMS AMP Capital Industrial REIT are well managed industrial properties S-REITs. They will face challenges as the economy soften but they should be more resilient than office REITs which predominantly have office space in Singapore's CBD.

Next, I think it is probably timely to comment on a development which has been gaining momentum in the S-REIT space.

Many S-REITs have DRPs (or DRIPs), Distribution Re-investment Plan. Some readers asked me if I would take part in these plans. 

My answer is that I invest in S-REITs for income. So, I would usually take the cash distributions unless there is a chance to benefit from arbitrage which happened once before for AIMS AMP Capital Industrial REIT and some might remember that I blogged about it.

We must stay realistic. Remember that S-REITs' unit prices could come under pressure in the short term. What is short term? Maybe, the next one or two years.

Many S-REITs' unit prices have already declined somewhat in recent months. This is probably in response to interest rates which have risen because the S$ has weakened quite significantly against the US$.

When the US Fed finally moves to increase interest rate by, say, 0.25%, before the end of the year we might see a knee jerk reaction which could send S-REITs' unit prices lower as risk free rate rises.

Taking distributions in cash would give us more resources to take advantage of such a situation if it should come to pass.

I do not think that S-REITs' distribution yields would rise to the levels seen a few years ago during the Global Financial Crisis but the possibility that we could see yield expansion happening exists.

To be sure, there is really no need to be pessimistic. S-REITs remain relevant tools for income investors. They are not going to go kaput. We should try to stay pragmatic.

How much? Oh, sorry, I have been rambling.

Total income from S-REITs for first 9 months in 2015: S$73,139.35.

This works out to be S$8,126.59 per month.

Related post:

6M 2015 passive income from S-REITs.

A financial strategy for the elderly with spare cash.

I am sure many of us are good children and worry for our parents.

Dear AK,

I have been reading your blog for a while and I do agree with a reader that there are many pieces of gold to pick up regardless how we traverse your site.

I would like to seek your thoughts on doing financial planning for elderly. To be specific, my mother (70 years old) has recently struck a windfall. As she is not good with her money and I believe that within one or two years, that money would have been vaporized if she were to donate some to temple, give some to children, grandchildren , overly indulge herself and so on.

She has stopped working few months ago and her children have been giving her monthly allowances (regardless if she is working or not). Her CPF does not give her monthly payout as she does not qualify for the minimum sum (the amount is $60,000 during her time).

I would like to help her draft out something such that she can still receive monthly 'salary' from her windfall. By having monthly salary, it would gives her the feeling of being independent and have control on what she wants to spend on, instead of relying on her children. Having said that, her children will still continue to give her the monthly allowance.

This amount of money, besides being able to give her monthly payout, would at the same time be earning interest and to 'grow' more money as well. I am not sure if she should do a voluntary top up to her CPF account such that she can receive monthly payout, or she should keep it in fixed deposits of varying duration.

Would appreciate if you could help to throw some light.

Thank you

Best regards

LT

Hi LT,

Your mom is very lucky to have good children. :)

OK, know that I am not a qualified financial adviser or something. I can only talk to myself:

"For the elderly, they should be more concerned about not losing money instead of growing money. They should not be taking too much risk.

"If they are not investment savvy, they could consider contributing to their CPF account. The money will be split into the OA, SA and MA. Since they are 55 years or older, they can withdraw the money when they need (except for money in the MA). If they don't need the money, leaving it in the CPF means getting 2.5% to 4% in interest income.

"For the more elderly, those who are 65 and older, I think this is a good enough option and is something I have asked my parents to do.

"For the younger seniors, those who have just turned 55, they could consider Top Ups to their CPF-RA if they believe in an annuity that will pay them a monthly income for life from age 65."

I hope I have not confused myself. -.-"

Best wishes,
AK

Also read this:
Improving retirement adequacy for my dad.

Related post:
Make my money last longer? A senior's example.

Do you want to be a landlord? (Ideas from a Singaporean with a young family in his 30s.)

A conversation on buying properties for investment and some considerations.

Reader:

I have been following your blog for couple of years and thank you for sharing your journey. I will be really happy if I can achieve a quarter of your passive income when I retired (excluding cpf life).

I wish to bounce some ideals off you. Just wish to explore some ideas here while you are talking to yourself. J

I am in my late 30s with a very young family with kids, living in a 4 rooms hdb flat from BTO, north east, reaching mop soon, with 20 years of outstanding loan. 

I am aspired to own two properties, ideally 1 hdb flat and a private condo, with either one as a passive income machine/ appreciation for retirement but given all the current measures in place, it is quite impossible. I believe I have the following options:

Option 1: EC

I am considering an EC but if I were to go down this route, my aspiration will not be achievable due to (1) private property (EC after 5/10 years) must be disposed within 6 months after purchase of a resale flat (2) I will be in my mid/ late 40s when the EC reach mop of 5-10 years, theoretically at that age I would not want to stretch myself financially to get another condo. Having said that, I feel EC is a good investment.

Option 2: Staying Put

Alternatively, I can stay put, maybe clearing my hdb loan while waiting for opportunity to get a private condo but this may or may not happen. The prices is likely to go up once the government remove cooling measures unless we have a recession.

Option 3: Resale

Last option, upgrade into a bigger re-sale flat, perhaps in a matured town. Then again I will have to wait for another 5 years before allowing to get a private condo.

Would you be able to share with me what’s your thoughts are, the pros and cons, and what would you do if you were in my shoes? Would you just invest only in stocks and forget 2^nd property)? =P

AK:
Well, if you aspire to own a second property to have rental income, I would suggest that you take reference from the "Rule of 15" which I have blogged about before. You could go to my blog and do a search for this to read that blog post.

You want to consider also whether you are the land-lording type. Talk to friends who are landlords and hear what they have to say. For sure, it is not necessary for us to be landlords to achieve financial freedom.

For married Singaporeans who qualify, an EC is probably the best low risk method to make some capital gains. They are usually priced some 25% lower than condominiums in the same area. MOP of 10 years and an EC gains full condo status. Of course, you cannot keep your HDB flat in such a case but do you need to?

Of the three ideas you have, I think buying a newly launched EC would probably give you the biggest capital gain in time to come.

Reader:
Thank you very much for sparing some time to respond to my query.

I have re-read your post on Rule of 15, I did some quick calculations, for BTO flat, definitely it’s better to buy, however for EC, it shows it is better to rent but like you said, EC is priced at a discount compared to the condos in the same area as such there will be capital gain upon 10 years MOP. If Rule of 15 indicates EC shows not a good buy then private condo will be worse……

The reasons I wish to own 2 properties is due to 

(1) rental income 
(2) appreciation 
(3) my journey in equity has not been performing as anticipated. I have been reading some books (mainly on FA) and your blog of course but I feel my analysis and timing is always poor, 
(4) I could be wrong but I believe most people make $ from property then they use the capital gain to invest in equity during bad times to achieve financial freedom.

I have not cleared up all my HDB loan (although I can with my life saving) as I am waiting for opportunity in the equity market. But the cost of doing these is quite high even I have the CIMB account 0.8% vs 2.6%, 365 & multiplier account. Similarly, I am doing a $7,000 contribution to my SA yearly, but I have not transferred $ from OA to SA in view that I would get a condo when there is opportunity. No right no wrong here, but right now these are my choice (for now). =P

Our combined income may be hitting the new EC ceiling, what would be your view if EC is no longer an option? Apologies that I didn't mention this earlier. Feel free to comment Shi Fu!

Lastly, I have to thank you for sharing your journey all these while and I enjoy reading every one  of them. Keep it going 

AK:
The Rule of 15 is a good guide when we want to ask if a property is value for money. It is especially true when we are interested in buying one as an investment for (rental) income.

Now, if we are buying with an eye on capital gain, there is more of a speculative flavour. However, if there is a chance for arbitrage which is what newly launched ECs could provide, then, those who qualify might want to take a chance. ;)

I do agree that private condominiums in Singapore mostly do not offer value for money now. I believe that prices could continue to come under pressure for many more years. This is not to say that we cannot find good deals now.

You might remember another blog post I published titled "Affordability and value for money" or something like this. You might want to do a search in my blog for it.

It is true that we can make a lot of money from properties compared to equities but it is also about getting in at the right price. In this respect, it isn't very different from equities. :)
----------
Compared to investing in equities, an investment property is a much bigger one time commitment which would probably involve a relatively large amount of leverage. So, don't rush into a deal. Think carefully.

It is not only about affordability. It should also be about value for money.
Related posts:
1. To rent or to buy: Rule of 15.
2. Affordability and value for money.

3. Disastrous property investments.

Aim to pay off home loan and hit the MS ASAP.

The title of the reader's email was "CPF Haywire". So, imagine my trepidation as I clicked on the email.

Hi AK!

I've been reading your blog here and there and my eyes go haywire... so many nuggets of gold! Kam Sia very much for your contribution to society.

I just bought my first HDB and OA start from scratch. I calculated I'd have about 10k in a year. 

In order to meet the MS when i turn 55 in 15yrs time (about $244k if at 3% yearly right?), would you suggest that every few years to transfer a bit (thinking about 10k) from OA to SA for the compounding effect to be greater and yet leave some in OA for financing the 30yr loan? 







I have about 4 years worth of monthly deductions from CPFIS (principal amount), and this is my backup plan to tap on in case I lose my job.

Like you I choose to be conservative with my CPF and not take any chances in the stock market (aside from the only investment I made before purchasing the flat on the advice of my insurance agent) so my aim is to finish my loan ASAP and be able to hit the MS for retirement payout. 

Would you suggest to make partial payments every few years to lessen the years of loan or to stretch it out to 30 years?

I'm aware about tax reliefs or incentives doing VC, MS top-up, contribute to SRS but am not considering these because I have limited cash on hand.

I have 6 months emergency fund and every month I save some (for holidays, etc) and invest some for dividends (Spore ETF, REITS). Its not much because I started late in life (wish can turn back time to tell my bochap younger years to buck up!) and I'm hoping that I can still 'fix things' to ensure I have an okay retirement. 

Do you have any advice on what else can I do to improve my financial situation?

Many thanks,

OhwhatcanIdo

AK replies:
Hi,

Welcome to my blog. :)

I hope you did not buy an ILP from your insurance agent. There is no way to guarantee that you will get back the same amount you put in if you need the money.

I say this because you are looking at it as a backup plan in case you lose your job.








Money in an investment should not be looked upon as money in your emergency fund.

Of course, I will have some other stuff to say about ILPs but you can do a search for these blog posts in my blog.

I shall talk to myself now:






1. I just bought a HDB flat. I want to make sure that I have enough in my OA to service 12 months of mortgage. If I am 40 or older, 24 months would be prudent because it could be more difficult to find a job. The rest of the money I have in my OA, I can transfer to my SA.







2. I bought some investments with my OA money. The money invested could have serviced 48 months of mortgage payment. I should look at possibly liquidating the investment if there is a gain or if it breaks even as my motivation was never to invest with my CPF-OA money. Then, I would have more money to transfer to my SA.







3. If the interest rate on my housing loan is less than 2.5%, it makes sense not to pay down the loan with CPF-OA money as the CPF-OA pays 2.5% in interest. I might want to consider the POSB HDB Home Loan.







4. I might want to contribute to SRS and use the money to invest for income. I will save on income tax and still be able to invest. Have my cake and eat it? Sure.

This talking to myself illness is getting worse by the day. Cham.

Best wishes,
AK






Related posts:
1. POSB HDB Loan.
2. How much to have in emergency fund?
3. OA to SA transfer before buying a flat?
4. SRS: A brief analysis.

A chat on inflation and cost of living (UPDATED JULY 2018).

This was a chat I had with a reader who is also a very concerned parent.

T
do we see a 3% increase in basic necessities costs? 

Perhaps 1-1.5% is more reasonable?


AK
core inflation. That would be 2 to 3% per annum. 

Recently, we have been experiencing deflationary pressure but even so, food prices saw inflation of 2.2% or so, year on year. 

Oil prices being so low now contribute to deflationary pressure but I don't this this will last more than a year or two. 

I hope that the Singapore dollar stays relatively strong and that we don't see inflation at 5% again just like a couple of years or so ago.




T
(Referring to the CPF) 3% incremental retirement sum will amount to 445k retirement sum 34 years later.... 

Oh wow... It will wipe out a lot of middle income ppl's Sa! 

Seen from the perspective of a 21 yr old male who just entered the workforce at 21 yrs now in 2015

AK
Inflation is a monster but we rather have that than deflation. wink emoticon 

 things will get more challenging in the years ahead. 

I remember a bowl of Lor Mee was 50c when I was in Primary One. 

Fast forward almost 40 years, it is $3 a bowl today. 

I think the price has gone up by more than 3% per annum. 

It is not an easy job to keep cost of living down. I don't want to be the government.







T
Cost of living will definitely go up over a period of 30-40 years.... 

Think the bigger challenge would be ensuring wages keep up.... 

During that time of 50cent lor mee, wages were probably around the 300-500 mark I guess



AK
I too young to know what wages were like. 

I think everyone must be financially prudent. 

What we have control over, we must make the best of things.





T
I worry abt the daughter's future.... 

I can instill financial knowledge into her from an early age but I'm afraid cost of living goes up too fast

AK
We probably have less control over our wages or prices. 

However, we have control over what we spend on and how much we save.




T
Yup... That I totally agree.... 

If cost of living goes up much faster then wages, it does not really make sense for the future generation to live like a hermit just to plan for retirement... 

What kind of life would that be?

AK
It really depends on our expectations and if we are willing to manage them, I feel.




T
I already lead a life sorta like a hermit just so I can afford my daughter's future academic needs and my own retirement needs.... 

I think I'm not at your level yet but I'm spending less then 600 per month on my own food, transport and personal needs so I think I'm on the right track.

Anyway I just wanna let u know I learnt quite a lot just from your posts.... 

Once I have my emergency fund set and a war chest ready, I'll start investing.....

Maybe the details of which stock which REIT, gearing and debt etc I still don't understand... 

But I learnt a lot from the concepts behind it. The concept of delayed gratification. Saving 100% of your income etc.

We are approaching a time in history now that simply earning a salary and saving will not be enough for even a simple retirement. Investment knowledge is important.








AK's closing comments:
I hope that Singapore doesn't become another Hong Kong or Taiwan where young graduates cannot afford to buy an apartment. 

I hope that Singapore doesn't become another Japan which suffered not one but two lost decades.

I am sure many Singaporeans have the same worries. 

(Source:
https://www.straitstimes.com/asia/east-asia/taiwan-youth-struggle-to-find-well-paying-jobs)
.............




.............
We do what is in our power to make sure that we are able to weather the storms which could come our way. 

We should not think that we would always see fair weather.

When we are prepared, we would have less to worry about.





Related post:
Don't think and grow rich.