STE says to see crises as opportunities and accumulate.

I am happy to publish another blog post by a fellow investor and one of ASSI's more prolific guest bloggers, STE:

“Creative Destruction”
and
The Business Cycle

“Millions saw the apple fall, but Newton was the one who asked why.” By Bernard Baruch .

 “The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions.” By Seth Klarman

We have seen market move and swing viciously since mid of last year due to event such as “Yuan devaluation “ , “Oil and Emerging Market crisis “ , “ China’s Debts and Shadow Banking issues”  and the recent one “ Brexit “.

All these event has created huge market volatility and because of investor’s psychology swing together with these market news … we have seen the index swing up and down wildly.

One need to always remember that “"Psychological create 90% market”as quoted by Andre Kostolany.

Whatever things involving “people “ … it tends to be “ chaotic and messy “ , for me .. stock market looks like this :

Nowadays, Stock Market became more intricated and complex due to fast moving news by click of second and much intergrated / connected world by IT revolution in recent years.

News move in Nano-second and always being “magnify “to attract viewers’ attention or increase subscribers …

     

Some of the event may have long term impact on the market but some are just “ noise “ which affect the stock price in short term … but even for those major event , remembered that market always move in cycle and “mean reverting “ eventually .

Joseph Schumpeter, an “Austrian Economics “ coined the phrase of  “ Creative Destruction “ and also written great books like “ Business Cycle “ / “ Capitalism ,Socialism and Democracy “.

According to him , “Creative Destruction is the essential fact about capitalism “ and he gave example like “ blacksmith  being wiped out by factory , the car superseded the horse and buggy, and corporation overthrew by proprietorship “..

And by Wikipedia , according to Schumpeter, the "gale of creative destruction" describes the "process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one". If  you are interested on “Austrian School of Economic thought” , you may refer to this link ..   ^{https://en.wikipedia.org/wiki/Austrian_School  and further reading on works from “Austrian Group of Economist like}  Ludwig von Mises  and Friedrich Hayek .

Same for other crisis , eventually , people will need to move on and market will not even remember those crisis e.g Oil crisis in 70s , Asian Financial crisis , Dot-com bubble and the latest GFC caused by Housing bubble .

Look at above chart on Dow Jones since 1884 ,, market gone through many cycles and even with 2 “world war “ and various bubble & panic .  GFC in 2008 may become insignificant if we look at this chart in long term …

BUT ,,, one may argue that as investor ,, we may not have such longer time to go through the market …well , that’s fair enough !! One may need to look at shorter time frame and react to our own investment cycle / need accordingly.

For me , as per previous blog post , I will only use one chart  and react to it accordingly to adjust my portfolio allocation from time to time. That’s the “ Linear Regression Chart on market and Mean Reverting concept “ , by doing this , I hope to avoid buying high when market is in “euphoria “ and taking advantage on situation when market is in panic and over-react.

As rules of thumb , we must also avoiding those “highly speculative and  hot stock “ in the market and be realistic to our “ expectation of return on investment ”.

Also , as I mentioned before on the “Fallacy of Indexing “ … when we talk about long term index return of 8-10% … it is base on average  of very long time frame … in shorter time frame ,, index could swing by +/- 20-30% easily .

There is also “ survivorship “ biases on the stock component in the index… for those stocks who have destroyed by business cycle and lack of innovation (e.h NOL/ Noble ) been taken out from Index and new one being added . I guess this is also part of the process of “Creative Destruction “. When the old one being destroyed and disappear in the Index , the new one being added and continue to create value for the Index. 

“ Crisis = Opportunities “

If we look at  Singapore’s context ,,, market has also gone through many cycles with up and down … if one could take advantage on one or two of these crisis ,, it could really shortern our time to achieve F.I.R.E.

< I have not added the latest event on BREXIT ,,, it may turn out much more serious or may not in the list at all … it is anybody’s guess . I think>

< Credit goes to one of the bloggers who have created this table , which I have forgotten from where I got this >

For the past 20 years , market have corrected more than 9 times which have resulted negative return of -20% to -62%. This is to show that how often and crisis prone our market is.

“ Linear Regression and Mean Reverting “

My investment strategy for coming years remain the same …where I will take advantage when stock index gone down to 2500 level +/- and start to accumulate war chest again when stock rebound from that level .  Please ensure to keep some cash buffer if index went down to 2200 ( which is equivalent to crisis level in 97/00/08 ).

As mentioned earlier , market will be much more  volatile due to “flooded liquility “ couple with psychology effect due to “market NEWs ( noise ??)  “ .

Let’s tighten our seat-belt and ready for this “bumpy ride “ !!!

< Dividend update >

"Do you know the only thing that give me pleasure ? It is to see my dividend coming in …" John D Rockefeller

YES! This is most important event for investors who have invested for “passive income “ ….regardless of market volatility ,,, dividend income continue to flow in …

Total dividend collected for  1^st Half 2016 = $102,426 .  (my methodology of calculation is different from AK as I did not include the privitazation return from Saizen as “dividend “ ,, instead , I would treat them as “ return of capital “).

** Total dividend increased substaintialy in 2 Qtr 2016 due to more investment in 1^st Qtr 2016 on some of the blue chips by taking advantage of the market turmoil during early 2016 . Also, partly contributed by better div from Accordia Golf Trust.

Lastly , allow me to re-quote below which I have quoted before : by Warren Buffet in 1999

Stock have always come out from crises “Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”

After year 2000 , stock market have experienced another 2 major crises i.e Dot-com Bubble in 2000 and GFC in 2008 … but yet .. Dow Jones stand at above 17,000  while watching at the episode of BREXIT crisis unfolding .

Happy Investing and stay focus on your Long term Investing strategy, hope & wish all could achieve F.I.R.E soon!!

Cheers!!

---------------------------------
AK:
"What does F.I.R.E. stand for? Make a guess. I did and got it right! I so clever. Ya, I know. AK is so shameless! Bad AK! Bad AK!"

Related post:
STE's investment strategy.

Compare apples with apples and learn something.

Many readers think that I don't take enough fruits and vegetables and I have been making an effort to increase my intake. 

I enjoy a particular brand of apples a lot, Envy. Crisp and sweet, it is probably more expensive than some apples but, hey, I am learning to be nicer to myself.

Envy apples sell out quickly and many times I find them sold out at the NTUC Fairprice in the HDB estate near my place. So, when I saw them on sale at a branch in a shopping mall this morning, I bought some.

This evening, after dinner in a warm and crowded kopitiam near my place, I popped into the NTUC Fairprice I usually patronise just to enjoy the air conditioning. Clever, right?

Then, I saw the apples. 

Ah, new stock has arrived, I thought to myself. Out of habit, I looked at the price and, then, I looked again.

Sure or not?

I was pretty sure I paid a higher price just this morning.

Anyway, I bought a pack, came home and checked. You know lah, we should compare apples with apples, right?

AK so witty? I also say.

See the difference?

OK, magnified for the optically challenged:

Alamak. How come like that?

Now, I know. 

Moral of the story:
"Don't buy fruits from NTUC Fairprice found in more atas locations."

A 10% difference is a big deal. 

Well, to me it is, anyway.

I know. It is hard for me to change my ways.

Comparing apples with apples, I learned something this evening.

Related post:
What a visit to NTUC Fairprice could teach us?

Sell 2 condomiums to buy 1 landed property?

Hi AK,

I chanced upon your blog recently while searching for landed property and found your blog very interesting.

I would like to have your opinion on my property search.

I am in my late 40s and owns 2 condos in the OCR with my wife.

One of the property is fully paid off and rented out. The other property where we live in, still have a loan of $800k for 20 years.

I am confidence of paying off the loan when I reach 55 because of the rental and we have a combine income of more than $20k per month.

We are considering selling off our 2 condos and purchasing a landed property. I did my sum and conclude that we still can have the similar loan of $800k if we purchase a landed home at $2.2 mil.

Now my Questions

1) Does it make economic sense to swap 2 condo for 1 landed if everything remain the same or similar? interest rate, loan tenure and amount etc.

2) Although with the landed, I will have no more rental income. But I will still be able to reduce the loan significant when I reach 55 with my CPF withdrawal.

3) Any pitfall that I need to consider seriously? Like is it realistic to have a $2.2mil landed?

Thanks in advance for any advice (professional or unprofessional) :-)

Best Regards

B

Hi B,

Welcome to my blog. :)

Financially, I believe that you are in a comfortable position now and buying that $2.2 million landed property doesn't seem like a demanding thing. It is affordable.

However, you did not mention how much you have in your emergency fund or what are your plans to help fund your retirement if you were to purchase the landed property.

Like you said, buying the landed property would mean giving up your rental income and it could also mean drawing upon your CPF money (which is really meant for retirement funding) to reduce the loan for the landed property at age 55.

I am just raising some pertinent questions and you don't have to tell me anything else if you don't feel comfortable to do so.

In closing, I just want to say that it is probably OK to up our consumption level if we have certainty we will avoid financial hardship later down the road.

Best wishes,
AK


Related posts:
1. Do I need a bigger home?
2. 2015 passive income all gone.

Solace says winter is coming and he is taking action.

Sharing a comment from Solace, an ASSI guest blogger. It has been a while since he wrote and this piece is a heartfelt one.

Solace says:

In trying to navigate through personal finance, I have learnt not to set conventional limitations on myself.

When I first started out, I thought I should only work from 8am – 5pm, Monday to Friday. No work for me on public holidays and on weekends.

Such thinking limits options to increase our income.

I know people who monetise their free time on weekend and public holidays to give tuition. Others work as relief taxi drivers on weekends.

I have 2 friends who are passionate about sports and music, respectively. Both hold full time jobs in the corporate world. One transforms himself into a swimming instructor during weekends and evenings while the other teaches music on his off days.

My industry and skillsets have allowed me to change from working regular hours to doing shift work. 

Now, I am required to work on some weekends and public holidays. Sometimes, I am also rotated to work night shifts. I would also volunteer for overtime as long as I can make it. All this translates into higher income as a result.

Human capital is limited, make hay while the sun shines.

Try our best to make more money while we are younger and healthier.

"Winter is Coming" is a motto in Games of Thrones.

The meaning behind these words is one of warning and constant vigilance. There are always dark periods (“Winter”) in our lives even if things are good now ("summer").

In our context, winter can come in the forms of economic recessions (leading to retrenchment, pay cut, pay freeze, for examples). Of course, sickness and old age are inevitable.

I do hope that I am well prepared when “Winter” eventually comes into my life.

AK hopes that all of us are well prepared.

Do the right things because our lives can be and should be better.

Related post:
A young father says money not enough.

A young father of two says money not enough.

Hi AK,

I am 37 this year. Married with 2 boys, 6 and 2 year old 

My wife not working and take care of our children 

Recently I have been feeling very fan , keep thinking money not enough to bring up our kids , I had a job which I don't really like , I am still here because I need to bring home an income to support this family.

I need advise from u. If now 1 got 100k in FD, how to make better use of it. Thanks AK

I LIKE YOUR BLOG

Hi D,

Welcome to my blog. :)

While keeping a look out for a better paying job which you might enjoy more, think about how to reduce expenses at home and increase income in other ways. Make sure that the ways you have identified to increase income involve doing things you enjoy or at least don't dislike. Of course, if you do this, what you have will be more savings. Having more savings always makes people feel better.







Ask if that $100K in FD is your emergency fund. At age 37, you should have an emergency fund that will cover regular expenses for 12 to 24 months. The excess, if any, you could invest for income. You might want to split the excess into half, investing half now for income and the rest for in case the stock market crashes. Which stocks to invest in? I will leave that to you. :)
-------




Don't be "fan" (frustrated), to use your word. You have something precious and that is your family. :)

A well known local investor, Dr. Michael Leong, said before that family is more important than anything else (including money). Don't forget that.

We only need so much money in life. The rest is for showing off.

Know how much money we need and work towards that. 

Do what you need to do for your family.

Don't compare with others.

Unless we are the richest person in the world, there is always someone richer.





Related posts:
1. Greater financial well being is not beyond us.
2. How much should we have in emergency fund?
3. Free "e-book": Do not depend on wage increases...

Have a $327K home loan and $200K in savings.

What to do?

Hi,

I have been following your blog for last two years and would like to have your opinion on whether to pay off my mortgage or to invest the money I have in my bank.

I have a mortgage loan of S$327,000 of 12 yrs tenor at current interest of 1.625% per annum.  Following year about 1.9% to 2% per annum.  Currently, I have about S$200K idle in my bank and do not know whether to pay off the mortgage or invest it in bonds, etc.  I was advised to invest in UOB United SGD Bond, but I'm not sure about it.

Appreciate your professional opinion on the matter.  Thank you.

Best Regards,

M

Hi M,

Alamak. I am not a professional. So, if you want a professional opinion, I have nothing to offer you. -.-"

This is my unprofessional opinion:

You managed to lock in interest rates of less than 2% on your home loan for the next 2 years and you wonder if you should invest your money for higher returns which really isn't difficult. However, if your investment horizon is only for 2 years (because you managed to lock in low interest rate for the next 2 years), then, better not. Investing is best done if we are using money we won't need for anything else (and we wouldn't have to liquidate our investments at a time not of our own choosing to meet those needs).

As for buying into a bond fund, er, I won't touch a bond fund even with a 5 feet pole. ;p

Best wishes,
AK

Related posts:

1. Get income from investments to pay interest.
2. Nobody cares more about our money. (Bond funds).

BREXIT and 1H 2016 income from non-REITs.

Were there any major development in the non-REIT space for me in 2Q 2016? 

Selling most of my investment in NeraTel probably qualifies. I sold about 90% of my investment in NeraTel. 

Being a relatively substantial part of my investment portfolio, the sale, as you might have guessed, bumped up the cash level in my portfolio by quite a bit.

A happy problem?

In the short term, with the divestment gains, it is probably a happy problem but if I do not put the money to more productive work, we would have to remove "happy" from the phrase. So, I put some of the money to work.

In the non-REIT space, in 1Q 2016, some readers might remember that I bought DBS, DBS and more DBS. Even now, DBS is trading at a discount to NAV and a relatively low PE ratio of about 8x. Paying out about a third of its earnings as dividends, the yield is almost 4%. 

Thanks to BREXIT, I was able to add to my investment in DBS as its share price declined, breaking a technical support. I would like to collect more on any further weakness.

In 2Q 2016, I also added to my investments in Starhub, VICOM, QAF Limited and Croesus Retail Trust on lower prices offered by Mr. Market.

Investing for income, I am interested in entities which have strong income generating abilities. Of course, they must pay meaningful dividends.


A handful of readers asked me for my thoughts on Croesus Retail Trust's proposal to be internally managed. It is quite interesting since it would be the first investment trust to be internally managed in Singapore if the deal is accepted by its unitholders.

All else remaining equal, internal management is a good thing for Croesus Retail Trust as it would mean that profits which would have gone to the external manager could be distributed to unitholders instead. The probability of conflict of interest between an internal manager and the unitholders will also be lower.

Of course, an external manager of any investment trust is a profitable enterprise, earning regular fees. No external manager in his right mind would give this up for a song. The price to internalise Croesus Retail Trust's manager is set at a princely sum of S$50 million.

For FY2015, the external manager recorded earnings of about S$500,000. Paying S$50 million to internalise the management would mean paying a PE ratio of 100x. Comparatively, ARA which manages a portfolio of REITs like Suntec REIT is trading at a PE ratio of about 15x. Go figure.

Although I like the idea of an internal manager for Croesus Retail Trust, I think paying S$50 million for this would be a price too high.

Post BREXIT, I also added to my investment in OUE Limited which I first blogged about in 2014 as a possible asset play. I basically paid 50c for what was worth $1.00. It was a smallish position as I was wary of the situation with Twin Peaks condominium. See my past analysis: here.

I decided to add to my investment because the situation with Twin Peaks has improved with many more units sold but the stock traded at an even bigger discount to NAV. While waiting for value to be unlocked, I will get some pocket money from the regular dividends OUE Limited declares.

Very much along the same line of thought, I decided to also increase my investment in Wing Tai Holdings. Although they have much more exposure to development properties compared to OUE, they have a stronger balance sheet. Mr. Market could be overly pessimistic. See my past analysis: here.

In 2Q 2016, I received income from:

1. APTT
2. ST Engineering
3. SPH 
4. PREH
5. QAF Limited
6. Wilmar
7. ARA
8. Hock Lian Seng
9. SCI
10. SMM
11. OUE Ltd
12. Hong Leong Finance
13. DBS
14. NeraTel
15. Accordia Golf Trust
16. Croesus Retail Trust
17. Starhub
18. Ascendas H-Trust


I hope I have not missed out anyone.

Total income received from non-REITs in 1H 2016:

S$ 58,545.01

That is about S$ 9,757.00 a month.

I will continue to nibble at stocks and if a correction in the magnitude of 10% or more should happen, I am prepared to buy much more.


Related posts:
1Q 2016 income from non-REITs.

Why VIVA Industrial Trust not in AK's shopping list?

AK gets asked about VIVA Industrial Trust from time to time and why AK never blog about the REIT? Alamak. It happened again today. 

I decided to share this exchange I had with a reader and without saying too much, I hope it is clear enough:

Hi, AK

I have been your reader since 2013 when my trekking friends recommended you to me. You have been talking to yourself about REITs and i faithfully followed it. Thanks to your generous sharing,  I have benefited too. 

I have 87 lots during IPO and am thinking of switching them to other REITS.I searched for Viva Industrial Trust (T8B) in your blog, but i could not get any information about it at all.  If you are free, don't mind sharing some thought about Viva Industrial Trust (T8B). Or  Viva Industrial Trust (T8B) never in your shopping list at all.

Thank you very much for your time and please keep talking to yourself.

Thank you and wish you have a nice week ahead!!

Regards,

A

Hi A,

I looked at Viva before and I was going to publish a blog post on it in 2014 but decided not to. In essence, I wasn't interested in the REIT because:

1. I was not sure that UE Bizhub's valuation was realistic.

2. I didn't like that its Chai Chee property had 17 years left to its lease. Now, 15 years left.

3. I was wary of the massive financial engineering to boost dividend yield which would otherwise have been 25% lower.

I just didn't feel good about the REIT. I still don't.

Best wishes,AK


Other examples of financial engineering:
1. K-REIT: 17 for 20 rights issue.

2. OUE C-REIT.

A blog post on leasehold properties:
OUE H-Trust: Considerations and comparisons.

BREXIT and 1H 2016 income from S-REITs.

My income from S-REITs in 1Q 2016 received an enormous boost from Saizen REIT's distribution which was partially a return of capital. I said I had mixed feelings about the matter and, actually, it has created another issue for me. 

Cash as a part of my portfolio is now quite large.

Is this a problem?

Of course, keeping some excess money in savings accounts and fixed deposits is always a good idea. These are our war chests. 





However, too much cash (earning too little) and we won't be able to keep up with inflation which is one reason why we invest for income. We want to beat inflation or, at least, keep up with it. We don't want to see our wealth eroding.

To be quite honest, I am in no hurry to re-invest all the distribution received from Saizen REIT in 1Q 2016. 

Approximately, I received 8 years worth of "dividends" (in the guise of capital gain) at one go. So, I have quite a bit of time to wait for good investment opportunities. 

In the meantime, some of my cash is in OCBC 360 and UOB ONE, with most of my cash getting 0.8% to 1.9% in interest income from savings accounts and fixed deposits which are virtually risk free.

However, being mortal (and fallible), I couldn't help but nibble a bit at some S-REITs in 2Q 2016.





1. Cambridge Industrial Trust. I have been holding to a much reduced position in this REIT for many years and in 2Q 2016 decided to make a small addition to my position at 52.5c a unit. 

To be quite honest, I feel that AIMS AMP Capital Industrial REIT is probably a more attractive investment. The two REITs have comparable yields but AIMS AMP Capital Industrial REIT has a stronger balance sheet and a business strategy that leaves less to the imagination. 

However, I decided to go with Cambridge Industrial Trust this time because my investment in AIMS AMP Capital Industrial REIT is already quite big.







2. I-REIT Global. I only became an investor after some time from the IPO which I thought wasn't attractively priced enough and I added to my investment in the REIT last August at 65.5c a unit. 

I decided to nibble at 71c a unit in 2Q 2016 because even at that price, the distribution yield is still pretty attractive. I also like the REIT for its portfolio of German freehold office properties and their high quality tenants.

If BREXIT should spark a contagion, I would become a lot more cautious in adding to my investment in the REIT as its income is in Euros although having real estate in Germany, arguably Europe's strongest economy, I feel that there is some degree of stability.







3. Soilbuild REIT. I decided to add to my investment in the REIT which has seen a large decline in unit price due to issues with one of their tenants, Technics Offshore Engineering, which did not pay their rent.

The REIT has since been paid the firm's bank guarantee of $11.85 million by UOB. This is equivalent to 18 months of rental and it will give the REIT time to search for a new tenant.

In arriving at a price which I am more comfortable to buy at, I noted that the rent payable by Technics is almost $8 million a year which is about 10% of the REIT's revenue of $80 million a year. 

Assuming the REIT is unable to find another tenant after 18 months, without taking into consideration other costs, DPU would decline by 10% accordingly. So, happy with the distribution yield at 73c a unit back in December 2015, with the latest development, I decided that I would only add to my investment at 66c or so a unit.







Together, these nibbles used up less than 10% of the distribution I received from Saizen REIT in 1Q 2016. I think it is important to put them in perspective. They are really only nibbles.

S-REITs are leveraged income instruments. So, it won't be wrong to say that I remain wary as to how rising interest rates in the future could impact distributable income negatively, all else remaining equal.

There isn't anything retail investors like me can do but to be more conservative when it comes to debt and investments which depend largely on debt to bring home the bacon especially if growth is not particularly promising.






However, thanks to BREXIT, interest rates are likely to remain low in the near future and the most disadvantaged in the financial world are probably still the savers. In the search for higher yields, S-REITs are natural beneficiaries.

So, how much bacon did I receive from my investments in S-REITs in 1H 2016?

S$ 397,294.28








S-REITs remain relevant instruments for the income investor and I will continue to keep an eye on them, buying more of the ones I like if Mr. Market should go into a depression.

Related post:
1Q 2016 income from S-REITs.

BREXIT and AK the investor.

I just spent the better part of an hour replying to emails from readers and the topic which cropped up the most often was, not surprisingly, BREXIT. Here are a couple of conversations:

Reader: What do you think of the Brexit? Can you talk to yourself on the impact to your portfolio?


AK says: BREXIT will affect me as an investor if:

1. I have income generating assets in the UK.


2. I am invested in companies which export goods and services to the UK.


3. I have exposure to debt denominated in the Sterling Pound.

I think it is none of the above for me.

However, I am worried about the possibility of contagion. The UK is not a member of the Euro (i.e. the currency) but if European countries which use the Euro decide to do their own versions of Brexit, it would affect my investment in IREIT Global. How? I cannot say yet.

Best wishes,
AK

Reader: Given that Brexit is confirmed . The GSS of stock market is likely to happen . Can talk to yourself what spore stocks you are eyeballing?


AK says: Almost everything I have ever blogged about as investments for income, actually. ;p

Best wishes,
AK

Have our shopping list ready, stay calm and buy when our target prices are hit.

Remember, it is almost impossible to get the best deal. If someone else manages to buy at a lower price after we have bought, it might not mean that we got a bad deal. That person got a better deal.

Related post:
Mr. Lee Kuan Yew on Eurozone crisis.

Sell 5 room flat and buy 2 condo units for better cash flow.

Recently, I shared on FB a conversation I had with a friend regarding a talk he went for:

Friend:
"I went for a talk on property investment recently.


"The person wants us to sign up for his course and he will teach us how to sell our HDB flat and invest in private properties for better returns. 

"What do you think?"

AK:
"He will make money from the course. 

"He will make money when you sell your flat. 

"He will make money when you buy the private property. 

"I guarantee that he will make money. 

"Can he guarantee that you will make money?"

Seeing that, a reader who went for the course shared her experience and thoughts with me:



Y:

Refer to this post. I went for the course. Paid abt 3k. Learn all the concept. N it's workable. 

Just we mostly will not take any action to sell Hdb n go buy two privates. 

Because most of us will scare. Any step goes wrong then just gone case.

But they after the course also will provide service to help u achieve your dream la. Eg. Help u sell n buy n also get loan n tenant etc. 

Total 8k help u turn from one HDB to two privates. 

AK:
Refer to the questions I asked my friends. My opinion has not changed.

Y:
Just share my experience only.

If not prepare to pay the almost 10k. Better don't go for the course. 

If hardworking enough. All info can get from Internet

AK:
Basically, the students bear all the risks. ;p

Y:

Ya
Speaker make the most. N easily buy properties for themselves

AK:
 that guru makes BIG $$$.

Y:
Risk here is. Risk of our market turning down. So. Property might not able to rent out easily

AK:

Interest rates rising. Oversupply problem. Rental falling. 

I think there will be many who are going to be caught swimming naked when the tide goes out...

Y:

In fact our govt has done good job

For the protection part

All the taxes or rule is not set for fun de
This is to avoid ppl too greedy n anyhow buy

Ppl just cannot explore too much. Except those real rich millionaire

AK:
Yes, problem is that the "guru" will not discriminate between the millionaire students and the not so rich students...

Those borderline cases will be the ones who suffer the most as they don't have holding power or the ability to take a big knock.

In the pursuit of greater wealth, we should not throw caution to the winds.
---------------------------------

Honestly, if we are after cash flow, why not rent out the spare bedrooms in our 5 room flat?

What? 

Bedrooms occupied by children? 

Then, how are we going to have enough space in a shoebox apartment?

What? 

You have seen a family of 4 living in a shoebox apartment after they sold their HDB flat and bought 2 private shoebox apartments?

You know, I believe you because I also know a family who did that.

Seriously mental.





Finally, when people tell us that we can sell our HDB flat and own 2 private shoebox apartments, remember that unless they are fully paid for, we don't have ownership. 

We might have control of the apartments but we don't own them.

(Remember, nobody cares more about our money than we do and don't ask barbers if we need a haircut.)


Related posts:
1. Should I sell my HDB flat to fund condo buy?
2. Buy that second property and pay the ABSD?
3. Disastrous investments in the property market.

He met the CPF minimum sum but has one regret.

Regular readers know that AK transferred all his CPF-OA money into his CPF-SA in the first few years of his working life. That provided a bigger base and a longer time for compounding to work its magic. Of course, I have shared the numbers here in my blog too.

Now, this was part of a chat this evening with a reader who is buying a HDB flat:

Reader:
do you mean that letting HDB wipe out the OA money first? My flat will be ready in 2019. So in this 3 years, do you have any views on what should be done using the CPF OA money?eg. Transfer abit to SA account? I will take your comments as opinions. Do not WORRY!"

AK:
That was what I told a friend. He transferred a large portion of his OA money into his SA about 10 years ago before he bought his flat and now his SA has already hit the minimum sum. But this will work for someone with an emergency fund on hand that would also cover the mortgage payment initially as his OA builds up again after the flat purchase.


The chat gave my memory a jog. I cannot remember exactly how many years ago but it was probably more than 10 years ago when a friend discussed with me what to do with his CPF-OA money. He was still single then and not buying a flat yet.

During a meet up a few months ago, he told me that he already hit the CPF minimum sum and to a large extent, it was thanks to the hefty interest payments received for his CPF-SA savings. He basically transferred all his CPF-OA money into his CPF-SA after the discussion we had and did nothing to his CPF-SA since. 

So, apart from the mandatory contributions from employment, the money in my friend's CPF-SA really grew through compound interest!

Did my friend regret anything?

Well, it was something like this:

"I should have transferred more money from OA to SA in the following years. Then, I would have received even more interest and hit the MS even earlier."

Alamak. If AK had done that, he would have even more money in his CPF now too. Aiyah.

Of course, all our circumstances and motivations are different. We have to question if this route is something that is good for us too.

This would work for someone who is not thinking of buying a property soon or is able to buy a property without using money in his CPF-OA. 

In the latter case, to be safer, he should have emergency cash on hand which also allows for 12 to 24 months of mortgage repayments as his CPF-OA savings is rebuilding.

For a more complete picture, please read the related posts below.

Related posts:
1. CPF-OA to CPF-SA transfer before buying flat?

2. If I had done this, I would have hit MS too.

3. A lot of my CPF-SA money...
...the interest I received in my CPF-SA has been higher than my mandatory contributions to it for many years by now...