Market timing versus buying at prices you won't sell at.

Reader says...
Hi AK,

I emailed you a few years ago about starting to invest and you advised me to build up on my knowledge and to build a war chest. 

Now, I have opened an CDP account and feel that I am ready to start on an investment journey. 







I would like to seek your opinion. 

The mantra is simple, buy low sell high. 

But do you think that the timing is right for me to buy stocks? 

Or should I wait for a better time and buy in the future?

AK says...

Alamak. I think I am one of the worst market timers in the world.

Ask what is your motivation for investing and see whether the investments fit your motivation.

Then, ask what you think they should be worth and whether the price Mr. Market is asking from you is worth paying.






Buy at prices you won't sell at and sell at prices you won't buy at.

Gambatte!

Related post:
Have a plan, your own plan.

Buying investment grade gold in Singapore?

Reader says...

Hi AK, would like to check with you on gold products.




1) What are some of the products if we we would like to use CPF to purchase gold? Is it recommended to purchase using CPF?

2) For purchase of physical gold, are there any considerations when purchasing? Understand UOB gold should be quite cost efficient if you purchase minimum weight.

3) Why is gold bullion coin is more expensive than pamp gold bar

AK says...

Read:
Why investors for income buy gold?

1) I believe the opportunity cost for using our CPF savings to buy gold is rather high.

I will not give up the risk free returns to speculate on gold.




2) I buy gold bullions from UOB.

The Kilobar is probably the most value for money, weight for weight.

However, it isn't practicable for most of us and not very practical.

My choice is the 1 oz bullion.




3) Bullion coins of same weight from different mints can differ in prices but UOB sell them at the same price.

It doesn't matter coins or bars.

If we are buying as an insurance, it is sensible to simply go for best value.



Related post:
Singapore Precious Metals Exchange.

CPF OA to SA transfer or MS Top Up to SA?

Reader:
"I would like to make transfer from OA to SA so I did a check with CPF. Assuming that I reach the full retirement sum at age 55, they mentioned that I cannot withdraw cash top up to SA and its accrued interest but I am allowed to withdraw the OA to SA funds transfer and its accrued interest. I am confused however. My initial understanding is if my combined sum in OA and SA exceeds the full retirement sum, I am allowed to withdraw the access funds. If that is the case, whether it is cash top to SA or OA transfer to SA, should not make any difference. If you could clarify on this issue, I will be greatly grateful. Thank you."

AK:
"MS Top Up is a cash top up meant to help us with funding our retirement. It is an additional input and not part of the of the annual contribution limit (mandatory + volutary).The OA to SA transfer is money that is already in your CPF account.

"The OA money is from mandatory contributions and voluntary contributions (if any). These are made within the annual contribution limit and not in addition to the limit.The CPF is meant to help every member with retirement adequacy.

"Whether we choose to do OA to SA transfer or MS Top Up will depend on our circumstances. Whatever those circumstances might be, the MS (or the FRS) will go to our CPF-RA at age 55 and cannot be withdrawn (unless we choose the BRS by pledging a property) until age 65 at the earliest in the form of an annuity (i.e. CPF Life).

"Unless our CPF savings are made up entirely of cash through MS Top Ups to the SA, it is unlikely that we won't have a more meaningful lump sum withdrawal at age 55 if we should exceed the prevailing MS (FRS) significantly by then."

Related post:
1. Almost 55 and worried about CPF.
2. Did CPF Top Ups but denied lump sum payment.

Investing for income to help support a small family.

Hi AK,

I'm a 34 years old on a stable job earning enough to support a small family. I have a sum of around 50k to 70k set aside purely for investment for passive income.

Although the sum is not a lot but I'm looking at buying blue chips (im looking at singpost and starhub) and REIT (I'm looking at Aims and Cambridge industrial trust).

Its my 1st time investing and im a very lazy person and I don't want to be bothered about or worry about whether the stock will crash or not with minimal montoring.

May I have your opinion on whether the 4 stocks mentioned above serve my purpose of minimal monitoring?

Regards,
D

Hi D,

They are all good investments for income. Well, they have been so for me (except for Singpost which I do not have) ;)

Minimal monitoring but still must monitor. ;p

I am ready to buy more in the event of a stock market crash, all else being equal. :)

Best wishes,
AK

Passive income will be useful in helping D pay some bills regularly at home.

"That is what passive income is for at the most basic level, to help pay some of our bills." 
Source:   http://singaporeanstocksinvestor.blogspot.sg/2015/06/thank-you-for-investing-in-income-for.html

Related post:
AK anyhow picks 5 stocks for income investors.

What BREXIT means for my money?

Many are worried about BREXIT and what it could do to an already anemic global economy. Many are also worried about the high level of liquidity in the system becoming more elevated and how ineffective it is in addressing the global economic malaise.

• Reader:
  

  
  

  
  

  Notice that you have been accumulating stocks. Do you think that in the current climate the prices are distorted? The sentiment and the stock price seem to diverge. Also there is no optimism and extreme pessimism. But there are some heighten risk. Eg. Long term bonds seem to be over valued, EU seem weaker with the BREXIT and may trigger the rest of countries to exit euro, euro banks having high NPL, and current monetary policy seem ineffective.
  
• Are you only nibbling? Or buying in big quantities? Mind if you share how the allocation of cash in this climate i.e. Your warchest. Small, moderate or large amount of cash allocation?
• 
  
• 

  11:23am
  

  Assi AK
  

  
  

  
  

  There is ample liquidity in the system. With BREXIT, there will probably continue to be more liquidity. Money needs to go somewhere.

  
  

  Global economic growth is anemic and the fundamentals are not fantastic. However, money still needs to go somewhere.

  
  

  There are relatively inexpensive offers in Singapore's stock market. Despite the negative news, I believe that DBS is now a bargain and at the current price, OCBC is also looking interesting.

  Nibble or gobble? Still nibbling.
• 
  

What I am more concerned about is where my money should go for it to be treated better. 

Money needs to go somewhere and the next stock market rally here will most likely be a liquidity driven one.

Related post:
BREXIT and AK the investor.

Fixed rates, SIBOR, FHR18 or HDB housing loans?

Over the last year or so, I received quite a handful of emails and messages from readers on the subject of home loans. I think this blog post is probably overdue.

The banks can come up with fancy acronyms or names for their offers but there are basically two types of home loans: fixed rate or floating rate.

This is my take:

Fixed rates are for people who want to have a higher level of certainty and are quite happy with the lock in period. 

Floating rates are for people who wish to have the flexibility that comes from not having any lock in period.

I believe that which option we choose should depend on our circumstances, our beliefs and, hence, our strategy.

I choose a floating rate home loan pegged to the 1 month SIBOR (+ 1%) because I believe that I have the resources to pay down my home loan rapidly if interest rates should spike. 

For example, when interest rate on my home loan spiked to 5.1% many years ago, I chose to pay down the loan for my previous home. 

5.1%? Yes, I know this might look unbelievable to younger readers but ask the older folks and they should remember and, for some, it might have even been higher.

However, if I did not have the resources to pay down my home loan, I would have been stuck with the relatively high financing cost. 

I was not eligible to re-finance my home loan as the quantum was lesser than $200K by then. Banks weren't interested in refinancing relatively small loans.

This was a chat I had recently with a reader:

• Reader: Hi Ak, are you able to update on your home loan vs bank loan blog. Do you think is advisable to get dbs bank loan. 1st year fhr18 + 0.4%, 2nd year onwards, fhr18 + 1.2%. Lock in for 2 years. Cpf is still 2.6%.
• 
  
• 

  11:16am
  

  Assi AK

  Sounds like a good deal. The worry is the FHR18 and how high it could go but interest rates are likely to stay low for a while.

  
  
• 11:21am
  

  Reader:
  

  
  

  
  

  I read your blog about paying home loan within 10 year. Lower interest. Is there a ideal year that we should finish our loan

  
  

  Number of year. Or a formula we can used
• 

  11:23am
  

  Assi AK

  10 years was because the fixed rate would end by then.

  
  

  It was an offer by POSB.

  
  
• 11:23am
  

  Reader:
  

  
  

  
  

  That offer ended. So this is the current promotion. I hope it wouldn't go up more than 2.6 percent
• 

  11:25am
  

  Assi AK

  The first 2 years, you are probably safe but the FHR is floating. So, in the 2nd year, if it does not go to 1.4% or higher, you are safe. Further along the road, it would be harder to say.
• 11:26am
  

  Reader:
  

  
  

  
  

  So in the other words. Hdb will be a better opinion
• 

  11:31am
  

  Assi AK

  Nope. I didn't say that. ;p It depends on our strategy, our circumstances and our beliefs. If we have the resources or are actively preparing the resources to be able to pay down our home loan rapidly in the event interest rates spike up, then, bank loans with the lower interest rates now are viable options to consider. Why not? Remember that once we opt for bank loans, we cannot go back to a HDB home loan.

  
  

The offer made to the reader by DBS here is pretty interesting because it is a floating rate with a lock in period of 2 years. Floating rates don't usually have a lock in period. 

What's the catch?

If the FHR18 should spike in these 2 years, bad luck, although it seems unlikely that it would.

What is FHR18?

The FHR18 is basically the interest rate on an 18 months fixed deposit offered by DBS. This is currently at 0.6% per annum. 

So, in the above example, first year interest rate is effectively 1% and for the second year and beyond, effective interest rate is 1.8% as long as the FHR18 stays unchanged.

There are debates on whether using the SIBOR (1 month or 3 months) plus a spread is better or whether FHR18 plus a spread is better. Central to the debates is the matter of transparency with the FHR18 being the winner. 

However, to me, what is more important in the decision making process apart from getting a good deal is to consider our circumstances and what we are able to do in the event that interest rates should spike. 

I always say that we cannot predict but we can prepare. If we are prepared, all is good. Peace of mind is priceless.

Related post:
POSB HDB Loan: Peace of mind.

Take the good with the bad investing in Singapore's economy.

Dear AK, 

How are you, hope you're in good health.

I have 2 questions.
 

1) what do you think of investing in ETFs, eg. SPDR and the 

2) such ETFs' dividend yields compared to buying single stocks.

For retail investors who don't really have very much appetite for volatility and time to do a lot of research. Yet still hope to invest safely. Hope it's not a silly question.

Hope you have a nice day. 

Thanks and regards,

S

Hi S,

Putting money regularly in an STI ETF is good for someone who would like to participate in the growth of Singapore's economy but who has no time nor inclination to research into individual stocks.

There is less risk of a total capital loss but, still, be prepared for volatility as the ETF will track the ups and downs of Singapore's economy.

Best wishes,
AK


Related post:
Risk averse and putting money in STI ETF, REITs or stocks?

Funding your child's university education.

Hello AK,

I've been following your blog closely for up to 3 years now. Your philosophy to investing has helped to influence mine from investing purely for growth to one that invests for income as well. I would like to seek your insights on something that might be beneficial for young parents.

I have an 18 months old daughter and have been considering saving up for her university education. I would like to explore using a monthly savings plan in the STI ETF to achieve this. Using the financial data available, we can calculate the CAGR from its inception in 2009 to 2016 to be approximately 11 percent. But I know that this does not apply for a monthly savings plan. Any idea how I can do that?

Thanks and Best Regards,

R

Source: ASSI

Hi R,

11% is in retrospect. It is unlikely that STI ETF will deliver that kind of performance in future. It is likely to be much lower. Remember that Singapore recovered sharply from a deep recession in 2009.

This option should still do reasonably well and is probably less costly compared to getting an endowment plan from an insurance company.

I don't know how to calculate base on a monthly savings plan but it shouldn't matter. Over a very long term, it is about smoothening performance over time.

Best wishes,
AK

Parents should read this post too:
How to have enough to fund a university education?

Another fantastic buy! Don't say AK bo jio! (Buy potato chips or blue chips when marked down.)

UPDATE (7 SEP 17):
I simply love dark chocolate.

Made in Belgium.

It is super smooth and tastes soooo good.

Price: $1.00 per bar. 

Yup. This makes it taste even better!

Where to get this? 

Scroll to the end of this blog for the address.

Don't say AK bo jio. 




----------
Many know that I have a weakness for chocolates and ice cream. Without chocolates and ice cream, I think life is not worth living. To me, they are like an essential food group.

There is something else that I like but not to as big a degree. Potato chips. Specifically, Pringles potato chips.

Some might remember how I would eat Pringles potato chips with baked beans, eating them like horderves.

OK, if you must be very French about it, hors d'oeuvre). 

As I have been avoiding beans in my diet in recent months, I eat potato chips with fried eggs or tuna flakes these days. Yup horderves again.

When I went to Japan for vacations, I would buy their Pringles potato chips because they taste better than the ones we have here. The texture is smoother and the taste is less salty.

They are also available here in Isetan, Meidi-ya and some specialty shops but they are pretty pricey, as you can imagine.

Recently, however, I discovered that I could buy them really cheaply somewhere in Singapore and what did I do?

Price?

50 cents per can.  

Really?

Really!

Not joking?

Nope.

Where to buy this?

They are selling fast and I am wondering if I should buy more.

If you want to get some, better be fast hands, fast legs. OK, you better be faster than AK.

What? Where exactly in Bedok?

Er...

OK, I tell you (reluctantly):

Don't say AK bo jio. 




---------------------------------------------------
Update 4 Aug 16, 10.45AM.

Cepat!

Related posts:
1. How AK saved 32.7% + 9% in a supermarket?
2. Cheap cheap chocolates!

Motivations and methods in investing (Part 2).

Hi AK,

I am a 38years old male and have been following your blog since the start of the year.

Firstly, i must say i am truely inspired by your example and most importantly enlightened on the need for passive income for people like us in SG so armed with a little warchest of $50K i have picked up a number of stocks based on your advice on your blog.

Acromec - Entry price : 0.3
Capitaland - Entry price : 2.9
China Aviation oil - Entry price : 0.835
AIMS Amp - Entry price : 1.3
Sheng Siong - Entry price : 0.86
Venture - Entry price : 8.35
Singapore O & G : Entry price : 0.8

My problem is i do not have an exit plan. Based on current situation, should i take profit and sell  off some of the stocks? I do find a few of them overpriced at the moment like O & G.

Hope to hear your advice soon!

Thanks in advance!
 

Cheers
Y

Hi Y,

Alamak. I don't give advice. I am just talking to myself.

So, I say to myself:

"Always question what was your motivation for buying into a certain stock. If it is for income, then, price movements should not matter as long as the fundamentals are intact and it is bringing home the bacon. Of course, if you could find a better income stock than the one you have and if funds are limited, liquidating and moving your funds makes sense. Money should go to where it is treated best.

"If you are investing in something because you feel that it is undervalued and that its price should be higher, then, you probably have an idea of its intrinsic value. You could then sell if you find that your investments are now trading at prices above their intrinsic values."

Best wishes,
AK

Related post:
Motivations and methods in investing.

Progress and learnings in money and investment matters.

Hi AK,

1) I've automated my monthly fixed expenses to be paid out of my credit cards - actually just one credit card - where possible. I now just need to refer to my month-end statements when they come, and cross-check them with the respective companies' billing statements for discrepancies (usually stat boards are accurate to the tee lah hor). 

2) After much research and small A/B tests, I've also decided to use the same credit card for my other everyday spends as well. Hence maximized and optimized, at least for now while the T&C is still to my spending patterns' favour.

It also gives me a good black-and-white copy of my expenditures, and I often use it as a form of accountability check on myself if I'm actually spending my monies wisely or am I regretting some spur-of-the-moment purchases. 

3) I've cultivated a habit of putting aside monies for savings towards my personal goals: opening savings accounts and filling them up to the minimum amount required is my new-found hobby (though it will die out soon as there are only so many that I can open). 

I'm just gamifying what seemed to be a mundane task i.e. saving money. May seem bo liao, I know. Maybe for your level, it's opening various priority/premier/privilege banking accounts? :P

4) Now each time after I receive my pay, I do a 30 min exercise of paying of my credit card bill (see point #1) and transferring amounts to my different saving accounts (see point #3), and soon after that, I'll know how much more excess cash I have for myself. 

5) Also automated (because GIRO) the amount that I set aside for long-term savings cum investment. It's just STI ETF for me for now, and I'm still working towards increasing and maximizing that monthly amount as my personal goal. Again, gamification of things. 

6) Outside of all these automations, I've also developed this habit of not paying items in full value, or at least their full face value. 

So I'm very auntie liao because I always keep a look out for discounts, coupons, credit card rebates for the items that I need to buy. For my wants, the decision-making process always get stuck in the deliberation stage, and more often than not, I forget about it. But if I don't, it probably something that I really, really wanted or am willing to reward myself for.

7) To occupy my time, I've also started to invest in stocks by paper trading with $15,000. 

Initially it was exciting: I took out my watchlist, screened them once more with my own self-approved parameters that I've learnt from different sources, and added a couple of counters to my portfolio.

It's not so exciting for me because I've reached a stage whereby I only have limited amount in my war chest to spend on, and gotta spend wisely. Assuming all the fundamentals are already self pre-approved, it's really more of waiting for the right entry points (negative P/B? lower end of the 52-weeks MA?) So what do I do? Wait for the next GSS (Great Stock Sale) lor. Told you I very auntie liao.

But one of the things I do learn on the side is why having a ready-to-deploy war chest becomes very important. 

I also learnt that looking at my portfolio everyday is not gonna help in anything. So long as I've bought the businesses for the right reasons, it doesn't really matter if the price moves up or down because I'm not trading and earning from margins anyway. 

Aside from capital gains, which will not be realized unless it's a time horizon of a few years, I'm just awaiting for dividend payouts which only happen on a bi-annually or quarterly basis. 

Right now I'm only sitting on 0.363% paper profits :D 

From this I also learnt why people always ask "if $x.xx is a good price to enter for counter A", and perhaps more importantly, why you always choose to be neutral about sharing such calls or actions. Because really, to each their own set of reasoning. 

8) Growing wealth is really like watching grass grow. Now I know why you started gardening. :D

Maybe this is why I always see the same aunties and uncles lim kopi at Toast Box, in an air-conditioned shopping mall near my place or doing line dancing in the CC. If all the pillars of your life are already sound and strong, and money no longer an worrisome issue, really what more is there to be done? Just smile and live life happily lor. :)

Sincerely,
F

Sunflower seedlings.

Hi F,

Your update made me smile.

1. You are doing a great job in saving money and tracking your expenses while trying to have fun doing it.

2. Priority/Privilege/Premier banking relationships are all attempts by banks to make more money from us. Seriously, give me OCBC 360, UOB ONE or BOC Smartsaver any time.

3. An STI ETF is a good way to start your journey as an investor.

4. Why pay full price for anything if we can pay less? I agree. A penny saved is a penny earned!

5. Paper trading to gain experience is a good idea. The stock market will always be there. No hurry.

Finally, welcome to "gardening" as a hobby. ;)

Best wishes,
AK

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AK shared a recent development on Facebook:

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1. Investing or gardening, be ready for war.
2. UOB ONE or OCBC 360?
3. Matthew Seah on Dollar Cost Averaging.