Used Hock Lian Seng as an example in August 2016. (Technical Analysis, Valuation and War Chest.)

I used Hock Lian Seng as an example to chat with this reader in August 2016. 

I wonder if he bought any before my next blog on Hock Lian Seng in February 2017. Don't scold me hor, I am just curious.

Blog in February 2017: 
Hock Lian Seng returns 100% and more.



-----------
Reader:
may i ask which TA you are using? candlestick, moving average or ?

AK:
I try to keep it simple. Example:

http://singaporeanstocksinvestor.blogspot.sg/2014/12/hock-lian-seng-robust-order-book-at-3.html
Hock Lian Seng: Robust order book at a 3 year high.

I also try to spot divergences sometimes:

http://singaporeanstocksinvestor.blogspot.sg/2013/05/hock-lian-seng-buying-on-weakness.html
Hock Lian Seng: Buying on weakness.

Reader:
I read, sometime u can't time the market, so shld we enter at a price we still think it's undervalue or use ta to determine entry price?

AK:
We can never get the lowest price. If we did, we were lucky. 🙂

So, if FA tells us it is undervalued, we can nibble.

Keep the TA picture in mind if it tells us prices could go lower. Have a war chest ready, always.




Reader:
Am reading this, have the same dilemma on when to sell
http://singaporeanstocksinvestor.blogspot.sg/2015/05/should-i-sell-my-investment-to-lock-in.html?m=1
Should I sell my investment to lock in gains?
Currently my war chest is hovering 20% 😁

AK:
Gambatte!

Paid off $15K debt and pondering other money matters.

Hi AK!

Few days ago I happen to come across your blog while searching for some information regarding finance management. So i'm considered a new reader of yours. 

After reading them I find that you are someone that is quite knowledgeable in this area and I though maybe you could give me some advise on my situation based on the current knowledge and experience that you have.

So here's my current situation:

My take home income after deducting cpf is currently 3k per month. I have been working for exactly 3 years (since I started this first full time job on 1st aug 2013). I manage to clear off a 15k debt within these 3 years (5k per year). 

And in my second year I started to buy insurance. This is the problem number 1. I really spent too much on it I guess it's because I didn't have enough knowledge regarding finance options at the point of time that I bought them.

Insurance that I bought:

1) Ntuc income: it's an endownment plan which I bought it for savings purpose. Payment term is 5 years (about $2.5K per year); contract term 20 years. The guaranteed amount that I will get back after 20 years is $15k.

2) Ntuc income: another for savings. This is the one that I later regret buying but I had already paid the annual amount and terminating it would mean losing money. As I spent too much on it. Contract term is 20 years as well; payment term is 10 years (about $5.8K per year)... I have already paid about $8.3K.....

3) Prushield monthly is about $350 per annual for my current age.

4) Prulife (about $3.3K per year) for 15 years. I have paid for 1.5 years already. 

I am now very confused as I am not sure if it's a good idea to hold it out for so many years or should I consider suffering some short term losses and just give up on the one or two policy? 

If I were to give up on prulife and revosave I would lose about $13-14k in total which is an 'ouch' for me considering I just started working. HAHA but trying to be optimistic I just turned 27 years old June this year so I guess the good thing that I have here is time.

After all these I currently have $10k in my bank account as emergency fund. I have been using 360 account from ocbc and have been fulfilling the 3 criteria. I didn't start the SRS account but I read some of your post and I will be getting it soon but I don't think I will be able to transfer a lot of money into it to totally avoid income tax. Afterall my income tax is about $300 plus per year. Probably help to cut a little. As SRS will be locked up for a very long time till we are age 62 and I am only 27  that is really a long time to lock away our money. But I am not sure how much should I put into SRS as having cash on hand is also important.

The way I see myself now is that I made decisions in the past that didn't allow my money to work harder for me. However, regarding investment I really have zero knowledge and I am also someone that wants certainty more than taking high risk. Especially on something that I am not sure I will not go into it. 

So the second problem I have is do you have any advise for a newbie like me regarding investment. For example what are the skills that I need to have before deciding to go into investment and what are the risk etc. The thing about investment is that I have read about people losing alot of money imagine 100K or more and I am not sure if I will be able to take that blow in the future especially if I were to start a family. 

Currently I don't intend to go into investment as I think I do not have the required knowledge and $$ and I don't like to go into something I am unfamilar of.  

My priority now is to save up. I wanted to take this time while saving up to gain more knowledge. But I felt really lost as investment look like a very big world to me so many things and I don't know where to start.

I guess I have the discipline to save up since I am able to pay off 15k and still have 10k in my bank after paying all the insurance, bills and daily expenses etc. With my 3K take home pay. I can still feel my heart ache when I type the word "insurance".

The last part would be on cpf:

I am 27 this year so I believe transferring OA account money into SA would be advantage to my situation. However i have some concerns. Because me and my partner is planning to get a bto flat hopefully by next year. We are planning to get a 3 room flat in a non-mature area so as to get more grant. Assuming the flat is 200k. 10% would be 20k which i think the grant should be able to cover. 

So now my question is should I keep the money in my OA and pay for the rest of the bto flat and get as little loan as possible to save on the loan interest or should I just aim to pay for the minimum 10% and try to get the maximum loan. We are planning to sell this flat away instead of for permanent stay. 

My current plan now is to transfer about 15k to my SA but my concern here is after that every month how much should I transfer from OA to SA in order to hit the minimum sum by the time I am 55 years old. Is there a way that can help us calculate because I really have no idea what is the minimum sum that I must have in my SA by the time I am 55 years old. And how to calculate how much i should put in every month in order to hit that amount. 

Cheers,

XY =D

Hi,

Welcome to ASSI! :)

1. You seem like a prudent person when it comes to debt. Stay that way.

2. You only need to buy Term Life for as long as you have dependents. It pays in case you die. You buy some Critical Illness coverage for in case you don't die and have to stop working due to these illnesses. You need H&S coverage and if you think class C or B2 wards are good enough for you, you only need Medishield Life. You don't need to spend a lot of money to get the insurance coverage you need. Whether you want to make changes to your insurance portfolio or not is your call, of course.

3. Having an emergency fund is prudent. Roughly, it should be enough to cover 6 months of expenses for those in their 20s. For those in their 30s, 12 months and for those in their 40s or older, 24 months. Nothing sacred about this. Just a comfortable guide for myself.

4. SRS is useful if we want to sock away more money for retirement. The income tax relief is a nice feature. We can also consider doing MS Top Up to our CPF-SA to enjoy 4% interest per annum. Will get income tax relief for the first $7K contributed per year too.

5. Read up and learn about investing. Then, decide if this is something we want to do and are comfortable doing. To be quite honest, many people are not cut out to be investors because they cannot stomach volatility. If you do decide to invest, never invest with money you might be saving for other purposes.

6. Doing OA to SA transfer in the first few years of my working life was an important move that helped to get my CPF savings to where it is today. Whether you should do it and at what pace if you do it would depend on what you plan to do with your OA money. Just remember what is the primary purpose of the CPF and also the opportunity costs involved in using your CPF money. I won't say more.

Gambatte!

Best wishes,
AK

Any other ideas for the 27 year old reader? 

All genuine comments are welcome. :)

Related posts:
1. 7 things a reader did after visiting ASSI.
2. Why buy term life insurance and how?
3. 7 pertinent question to help us build wealth.
4. Use CPF savings or cash to pay for our home?
5. SRS: A brief analysis.

Understand the function of each tool in personal finance.

People get confused sometimes what the CPF is supposed to do. We should be clear what each tool in personal finance is supposed to do for us. Don't be confused.

C

... May I know how much should I top up my SA cpf by cash if I want to avoid paying tax?

Assi AK

You could do MS Top Up to your SA. Tax relief will be given for the first $7K of top up per year.

C

Thanks. Tax relief meaning the entire tax payment is waived or only partially waived?

Assi AK

Well, if you taxable income is $20K and you do MS Top Up of $7K, your taxable income becomes $13K.

C

Alright thanks. Most ordinary folks will not be taxed so much so I think there is no point in topping up. I would also like to learn investment. Where can I start? I am risk averse though.

Assi AK

Risk free? CPF. ;)

Tax savings from CPF MS Top Up is just a sweetener. It should not be the primary motivation.

Learn how to invest? You can start by reading some books. Go to my blog's right side bar and look for the box with the heading "Food for thought".

C

Thanks AK. Am I right to say that if if I hold the stocks long term e,g. More than 10 years, I will not be making losses?

Assi AK

I don't think anyone can guarantee that...

Related post:
Build a cornerstone in retirement funding.

A couple of blog posts on selling winning investments.

Reader:

"Hi AK,

just curious about your strategy on handling rises in a share price. E.g if you had bought StarHub/ sph/ accordia etc for income, at what level would you consider it worthwhile to sell? Thanks!"

Assi AK

You might want to read this: http://singaporeanstocksinvestor.blogspot.sg/2013/08/when-to-buy-hold-or-sell-part-1.html

When to BUY, HOLD or SELL? (Part 1) | A Singaporean Stocks Investor (ASSI)

Assi AK

and this: http://singaporeanstocksinvestor.blogspot.sg/2015/05/should-i-sell-my-investment-to-lock-in.html

Should I sell my investment to lock in gains? A perspective. | A Singaporean Stocks Investor (ASSI)

"If we are investing for income, if the investment is still doing the job we expect it to do, generating attractive income for us, then, there is really no reason to sell unless we feel that there is another investment out there that can do a better job." - AK

Cutting or holding Marco Polo Marine?

Dear AK

Good day to you!

MPM has been on serious "diarrhoea" mode for a long time.  Friends have advised that I should cut-loss and forget about this counter.

I would appreciate it if you could talk to yourself on MPM.

Thank you.

Regards

AK says:
"MPM has survived previous down cycles before. I am hopeful that they will survive this time too.

"The elder Lee now holds 62% of MPM's stocks. He wouldn't want MPM to go under.

"I am holding on to my investment, understanding that, for a while now and for a while more, this position is rather speculative."

Related post:
Marco Polo Marine: Termination of rig contract.

Which types of stocks and REITs to invest in?

Good morning AK,

How are you today?  Hope you are doing well =)

Firstly- THANK YOU for sharing the post on CPF interest accrual on funds used for housing! I was wondering why my accrued interest portion kept growing- almost S$6K per year! I am considering some voluntary refund on principal amount to reduce the funds owing to CPF.

I have a new query to get your views- do you plan specifically which categories of stocks and reits to invest in?

As you may recall- I am trying to re-balance my portfolio to release some stocks at the right time and buy some new ones- aim is to increase my income yield from 4% to slightly higher. Look forward to any thoughts that you have...

L

Hi L,

Glad to know you found the blog post useful. Yup. People are usually very surprised when they find out how much they are losing by using their CPF money to fund the purchase of their homes.

Doing voluntary refund since you can afford to will help you to build wealth in a meaningful and risk free manner.

I do not tell myself I must have so many % in stocks and so many % in REITs although I have been trying to build up my non-REIT portfolio due to future interest rates risk.

I invest when offers make sense to me.

When it comes to investing for income, in today's environment, if I can get 8% or higher from well run REITs and business trusts, that's not bad.

For stocks, if it is cash rich, a 3% yield based on a 50% payout or less is not bad but I would prefer 4% or higher.

Each of us will have to find out what is acceptable for us. :)

Best wishes,
AK
 

Related posts:

1. Have peace of mind as an investor.

2. AK anyhow picks 5 stocks for income investors.

3. Unemployed, almost 55 and worried about CPF.

Matthew Seah answers questions on SPDR STI ETF.

Dear AK,

I am SH, one of your many blog readers. I am currently 21 years old and i am planning to make my first investment through a STI ETF. (Still deciding between spdr and nikko). However i have quite a number of questions regarding SPDR STI ETF; especially after reading its annual report, which i hope you can help to clarify.

These are the questions:

Unitholders’ contributions/(withdrawals)

Creation of units:

2015: 31,366,855

2014: 59,145,817

Cancellation of units:

2015: (149,927,298)

2014: (6,664,213)

Change in net assets attributable to unitholders resulting from net creation and cancellation of units:

2015: (118,560,443)

2014: 52,481,604

Distributions NOTE4

2015: (12,106,500)

2014: (10,726,000)

Total (decrease)/increase in net assets attributable to unitholders:

2015: (109,105,696)
2014: 69,068,372

QN: I found the above information in the annual report but I couldn’t understand what it means. Can you explain?

Matthew Seah: "Each unit of STI ETF is a share of STI ETF. Units are created or cancelled due to the injection of fresh funds or the withdrawal of money from the fund respectively."

Qn: 1 What is net asset attributable to unit holder? Does it just mean net asset value?

Matthew Seah: "Net asset attributable to unit holder is the net asset value, after fees are deducted for selling all the stocks and derivatives (if any) that the fund owns to convert everything into cash."

2 What is collective investment scheme?

Matthew Seah: "A collective investment scheme is a scheme which pools moneys from many people for the sole purpose of investing the pooled funds.

"Mutual funds, unit trusts, endowments and ETFs are examples of collective investment scheme."

3 Quoted derivatives in the form of nil paid rights from Jardine C&C on 15/07/15. What does this mean? I heard that spdr etf uses derivatives to try and minimise tracking error. Is this a significant proportion? What are the risk of it?

Matthew Seah: "Jardine C&C has made a rights offer of 1 for 9 shares.

Click to enlarge.

"STI ETF owns 112,541 shares of Jardine C&C.

"That equates to 12,504 rights that you see on the annual report."

4 If they pay dividends from cash, it seems that they are paying out more than what they have. They only have S$5M+ of cash but paid out 12M+ for 2015?!

Matthew Seah: "It is wrong to say that they paid $12M when they had $5M in cash. What you see as cash is only a snap shot “at 30 June 2015”. What has been paid out is cash they had previously from dividends collected over the six months prior, less management fees.

"Likewise, suppose your bank account has $5,000. It would be erroneous to say the $12,000 you have already spent is more than what you originally had, which was $17,000."

5 Does portfolio turnover ratio have different meaning if the calculation is based on purchases instead of sales? Is lower ratio better?

Matthew Seah: "For a turnover to happen, $1 in stock A have to be sold to purchase $1 in stock B. The portfolio turnover ratio will be the same regardless of purchase or sales.

"A higher purchase happens when there is a net investment inflow, i.e. more investors buying STI ETF units. Alternatively, a higher sales happens when there is a net investment outflow when investors liquidate their holdings. However, these higher purchases/sales numbers are not turnover as no portfolio rebalancing occurs.

"A lower ratio is better."

6 There is a significant increase in portfolio turnover ratio from 31Dec 2014-2015. It jumped from 0.94% to 9.77%! Do you have any idea why it is so? Is it due to the replacement of 3 of sti constituents in 2015? It is considered a one-off kind of thing right?

Matthew Seah: "It is indeed caused primarily by the replacements of STI constituents. It would be one-off when FTSE does not change the constituents on a regular basis. Generally, investors would consider such rebalancing to be one-off."

7 There is a significant increase in payables in 31 DEC 2015 compared to 30 JUN 2015. Is it due to the losses incurred due to the changing of constituents in STI?

Matthew Seah: "Payables in the ETF comes in 2 forms:

"‘Accruals for expenses’ and ‘Amount due to the Manager’. It just meant the fund owes money to to the Manager and third parties. These have nothing to do with losses incurred."

8 Is there a chance/under what circumstances the sti etf will close down?

Matthew Seah: "STI ETF is unlikely to close down."

9. If you are the one considering to buy the sti etf, other than the tracking error, expense ratio, portfolio turnover ratio, p/e, what else would you look at when analysing this etf? Would you read into the past years’ annual report?

Matthew Seah: "Nothing else, really. You should read past annual reports to compare all the parameters you have mentioned to ensure that the Manager has kept tracking error, expense ratio and turnover ratios low, or lower (better) over the years."

10. Where can I get past few years of annual report? I can only find annual report for 2015 and the semi-annual report for 31DEC 2015 on the official website
Matthew Seah:"You can contact them at http://www.spdrs.com.sg/contact/index.html"

Read another blog post on ETFs by Matthew Seah: HERE.

He did CPF top ups but is denied lump sum payment.

Reader:

Hi AK, I'm one of your readers.

With respect to the Retirement Sum Top Up Scheme, I checked with CPF and they mentioned that all funds made under this scheme cannot be withdrawn in lump sum. That is to say that all funds under this scheme and the associated interest earned will be ring-fenced into the RA upon reaching 55.

Neither can such funds be used to meet the FRS /BRS requirement.

If a person wants to withdraw lump sum upon reaching 55, he would need to have at least the BRS sum solely from his Mandatory contributions, then the amount over this sum can be considered for withdrawal as lump sum. (Assuming property pledge)


AK:

That is not what I understand.

When we discussed this with Christopher Tan from Providend who is on the CPF Advisory Committee, we were told that any amount above the FRS is available for withdrawal (except for money from MS Top Ups and the interest earned).


Reader:

Right, so the point here is that the funds from the MS TopUps are not allowed to be considered as part of the BRS or FRS.

My dad wanted to do a withdrawal but they told him that he needed to clear the BRS threshold and funds under the MS top ups are not considered in this regard.


AK:

It doesn't make sense because we are not allowed to have more than the ERS in our CPF-RA. If the MS Top Ups to SA is ring fenced for the CPF-RA, we could end up having much more in our CPF-RA.

This is especially if the person does this regularly and hits the FRS early on in life and continues to contribute to his CPF whether mandatory or voluntary.

If a person does MS Top Up to the max of $161K by 30 years old, for example, he would have $440K by 55 years old (at 4% p.a.) without any further mandatory or voluntary contribution.

If he must set aside a FRS from mandatory contributions alone by age 55, plus this $440K, it would be far higher than the prevailing ERS allowed at that time, I am willing to bet.

They allow MS Top Up to the prevailing MS (FRS) and nothing more. This stays in the CPF-RA. This makes sense.

But in addition to this, FRS must be from mandatory contributions only? That does not make sense.


Reader:

Thanks. But based on the letter which I received from CPF, it seems that they don't allow such withdrawals. My dad made significant topups under MS topup scheme but because his mandatory contributions are not much, they do not allow him any withdrawals, on the basis that the BRS needs to be from mandatory contributions.

He has more than $175k in his RA now but most of it is from MS Topups Do u think it makes a difference if the person is above 55 when they started doing their MS topups ?


AK:

When did he start doing the MS Top Ups?


Reader:

He started topups after age 55.


AK:

Mystery solved :)

The $40+K would have gone into his CPF-RA when he turned 55.

Then, his MS Top Ups after age 55 would go into the CPF-RA too.

It is all locked up for CPF Life.

If he had $175K when he turned 55, then, he would have been eligible for a lump sum withdrawal and the MS goes into his CPF-RA.


Reader:

Ok. Then that probably explains it.
In any case, I'll write in to CPF to confirm this point.

Source: CPF Allocation Rates

What I did to monetise my free time and why?

Reader says...

I have been an avid reader of your blog and have also been to your meetup session last week.

Thank you for what you have doing and helping people in providing financial literacy.

I read that you used to work 3 jobs when you were starting out, for 7 days a week.

May i know what jobs were you doing at that time?

I have been working in a mid sized firm for a few years but my income is still not where i would like it to be and would like to take more jobs to supplement my income.

Spending wise i am disciplined but there's only so much i can save with a small income base.

Thank you.

Cheers,

-------------------------------------------------------

AK says...

Welcome to my blog. :)

I had a full time job but my evenings and weekends were free.

So, I found jobs that occupied me on some evenings and on weekends.

I was teaching students taking enrichment classes at night and I was also a private tutor on weekends.

These paid more on a per hour basis than my full time job. ;)





If we have free time, we can either think of monetising it or using it for enjoyment.

When we choose to monetise it, not only do we make more money but we also have less time to spend money.

It brings making money and saving money to another level. ;p

Gambatte! :)






----------------------
When we monetise our free time, to be quite pragmatic, it should be doing something that pays more on a per hour basis. 

Of course, this is not a hard and fast rule.

For some, they might do something they enjoy and yet be paid to do it in their free time even if it doesn't pay well. 






Being paid to do something we enjoy doing doesn't sound like a bad thing, does it?

Want to achieve financial freedom sooner than later? 

Monetising our free time will definitely help.

Then, what is the next step?






That is another topic and here is a hint as to why it is important:

The best insurance in life.












Related posts:
1. A young father of two says money not enough.
2. How my student went from zero to hero?
3. Is it wrong to be idealistic and live the good life?