Just be a better saver and forget investing for some.

• 
  
  

  Reader: I am currently 28 years old earning annual income of around 240K. Not sure whether doing SA contribution of 7K per annum and SRS 15.3K per annum is a wise move for my current age? Main purpose is to get income tax relief as much as possible since I am in high bracket tax payer and this contribution might be able to save quite a lot on income tax
• 

  
  

  Assi AK: As long as you are paying a lot in income tax, it makes sense to do MS Top Up to SA and to contribute to SRS. You don't really need to invest. Just be a good saver.
  

• 
  
  

  Reader: But it is a long long way to go before i can see the money again for CPF at 55 yo and SRS at 62 yo. what if i die before that? Lol
• 

  
  

  Assi AK: The money goes to your loved ones. ;)
• 
  
  

  
  
  

  Reader: i dont get to enjoy the hard earned money then
• 

  
  

  Assi AK: You cannot have your cake and eat it too. You have to question what is more important to you.
• Reader: I plan to have financial freedom like u by investing for income
• 

  
  

  Assi AK:  Everyone is different. Dun be like me. ;p
• 
  
• 
  
  
• Reader:  I can save around 150K a year after deducting all the expenses including income tax. Slowly buying solid dividend stocks to hopefully get sizeable passive income like u
  
• 

  
  

  Assi AK: Sounds like a good plan.
  

• 
  
  

  Reader: I seriously think your strategy is good that's why i follow
• 

  
  

  Assi AK: If this is more important to you than getting income tax relief, well, you have your answer. :)
• Reader: I am super conservative and not risk taker as well
  
• 

  
  

  Assi AK: If you are investing, you are taking risk.
• Reader: Haha true
  
• 

  
  

  Assi AK: The only risk free way to building wealth is the CPF. ;)
• Reader: CPF top up is risk free but not sure worth the wait and lock up of cash
  
• 

  
  

  Assi AK: Well, you know my answer to that. You have to decide for yourself if you believe me. ;p

Related posts:
1. Want to create another stream of income?
2. Should a young person contribute to CPF or SRS account?
3. Should I top up CPF-SA, CPF-MA or SRS account?

Invested in a cash rich company with no future?

Reader says...

I attended an AGM recently. It was a China company. Basically, no one from the management attend. 

No Chairman, no CEO, no executive director. 

The only person there to conduct the meeting is a newly appointed independent director (2016). 

We were there to review financial period 2015, hence the director replied to most of the questions was that he was not with the company. 





The company secretary (representative from a secretarial services)  and auditor was present. Oops, by the way, the auditor has flagged in the annual report on going concern.

Can the meeting be held without anyone from the management to answer shareholders' queries? I tried to check the requirement online, but I can't find regarding who must attend. ACRA requirement only mentioned minimum number of members.

The accounts of the company raised a lot of questions on the flow of underlying cash. The company was cash rich (and still is till today). 





However, over the past 1-2 years, 85% debts has no chance to recover. The company even subsidized their partners (distributors) when they wind up the business. The reason provided by the auditor is to "maintain relationship".  

I wonder why a company would still want to keep relationship if the business partners did not even pay up in the first place. Besides that, the company "invested" 3 times of their 2014 profits in a strategic program. 

The AR stated paid 36 million to an academic professor for consulting work.

I checked with the independent director regarding several huge unjustified spending. 

He said that day to day operation is not covered within the scope of corporate governance.

I have sent an email and also called SGX personally. It seemed that everyone is pushing away. 


SGX asked me to contact share registrar, and shares registrar asked me to contact company secretary. 





I feel that SGX has done a bad job letting companies (mostly China companies) to public list in Singapore without due diligence. It does not speak of a first world standard. I wonder if shareholders of fraudulent companies can sue SGX for negligence. 

Imagine, how many retirees has invested their life saving to these mostly China companies.

Maybe I should check with MAS. A bad company, with no integrity listed in Singapore is no different from con man. 

MAS should set up stricter rules to protect the investment community.

Do you have any advise or info regarding above subject? 

Although I am vested in the company, and I know my action will lead to company suspension, but I would prefer to blow this up so that SGX can do a better job, exercise due diligence tracking companies in future. 

Of course, certain companies should not be listed in the first place. My only concern is that the other shareholders may be affected by my action.

Looking forward to your reply.

AK says...

There are so many red flags here and I think you know it too.

If we have invested in a company that is doing badly due to factors which are not within the control of the management but there is a chance of recovery, we can hope. 


If we have invested in a company that is doing badly due to a dishonest or incompetent management, then, I think there is no hope.





When I feel that there is no hope, I take whatever is left on the table and move on.

Best wishes,
AK

Related post:
Where did I go wrong?

Why worry about hitting the CPF MS (FRS) too soon?

Hi AK,

I've been following your blog for years and thanks for all the tips you've shared. 

I transferred a considerable sum of monies from OA to SA when I was 34 as I was inspired by your strategy of doing so. I've been trying to build up my RS and hope that my SA balance will reach my RS within the next few years.


I'm also considering to top up my SA with cash to take advantage of the tax relief. However, I realised the strategy of transferring more OA to SA again may interfere with my plans to get tax relief in subsequent years, as the faster my SA grows, the faster I'll reach RS and after I reach RS, I will not be able to top up my SA and earn tax relief. 

Is my understanding correct? If yes, would it be better if I slow down on the OA transfers so that I can take advantage of the tax relief in subsequent years, esp since I'd expect income to get higher (and hence more in need of tax relief)?

Hi YY,

If you would like to have tax benefit, yes, MS Top Up to SA is the way to go. Up to $7K a year of cash top up will enjoy tax benefit.

Once you have hit the MS (the FRS) in your CPF-SA, you will not be allowed to do anymore MS Top Up to SA.

Thus, slowing down or stopping OA to SA transfer might be a good idea if tax benefit from MS Top Up to SA is something that is important to you.

Best wishes,
AK


Related post:
Met CPF Minimum Sum but has one regret.

Following AK, Pokemon Go, Saizen REIT DPU 9.87c etc.

I decided quite a while back that I should restrict the amount of time I spend on blogging and its related activities. So, nothing more than 2 hours a day. I think that is a fairly generous amount of time to spend daily on a hobby.

I know people who are spending a lot more time on Pokémon Go now. That is not something I understand but we decide on how we would spend our time and must be comfortable with the consequences. The latter is something people think less about.

I am also spending more time with family, gardening, exercising, shopping, cooking, watching anime and k-drama. So, even in retirement, I am kept busy as there are many things which I am spending more time on.

Blogging is not a job and I hope it won't become a job because I might not enjoy it as much then.

Some might notice that I have more updates on my Facebook wall than in my blog these days. This is because Facebook is very convenient.

I know.

AK is terribly lazy.

Bad AK! Bad AK!

Whenever I do that, I also update the comments section of my blog here. So, for those who do not follow me on Facebook and would like to have more updates, following the comments section of my blog is something to consider.

Here is a recent email exchange with a reader on the subject:

Reader:

Hi AK
Saizen made an anoucement.  I read that we will be paid the residual sum
and Sime Derby
buying shares at about 3 cents.
I do not understand at all.
Like to understand how do you see this development and your plan of action.

Thanks for your help.
 

AK:
I am holding on to my investment to receive the payout. :)

The REIT will issue new shares to new investor and I get to stay on as an old investor.

 

Reader:
Hi AKThank You. Likely we have to pay for new the new shares. What
is the cost and the net gain for old investor.This is the area I am
not clear.Appreciate advise.
Regards

 

AK:
I shared this on my FB wall:

 R:
 "May I ask what is happening to Saizen? I've read the document
released today but still do not understand. wish you would talk to
yourself n explain in simple terms to us! Thanks!"

Assi AK:
 "We will be paid 9.87c a unit and still get to keep our investment in the REIT, it seems.
"The REIT will issue new units priced at 3.484c to new investors to  partially fund purchase of some Australian properties.
"Whether it is a good deal or not is hard to say at this moment but to  get paid and yet retain an investment that could possibly generate
income for me in future sounds good."

Reader:
Thanks AK.i do not go faceboik.Why do not you post it on your regular website.

 

AK:
I actually posted this in the comments section of my blog too.
You can follow the comments section of my blog for updates, if you like. I provide info on how to do this under "Following my blog" in the left side bar.
I don't always have the time or inclination to blog. So, the comments section or my Facebook wall are quick ways for me to do updates. :)

Related post:
Following comments in ASSI.

Why do rich people have more money?

I hardly keep in touch with friends from my school days. Actually, I hardly keep in touch with anyone apart from family and a handful of closer friends. 

I grow more reclusive as I age and, honestly, I rather like it this way.

So, when I received a call from a friend whom I have not heard from for more than 10 years, it was more than a surprise. I was momentarily stunned.

What do you say to someone whom you have not kept in touch with for so long other than the usual "How are you?"

The last time we met, we chatted over a meal and he was doing pretty well. I remember joking that he would be able to retire very soon. To that, he said: 

"I can't retire soon. Rich people need to make more money because they have more things to spend on."

I was somewhat taken aback and asked him why he said that? What did he spend his money on?

He started counting the items using his fingers and I cannot remember all the items but I remember "a big house and two cars" being on the list. 

Then, I also noticed then that he was wearing a luxury watch. His clothing and shoes were also probably from some luxury brands but I wouldn't know, would I?

I also remember that I felt somewhat self conscious then with my outfit (not Boss but Bossini). 

Poor AK was psychologically scarred. 

I wasn't financially as comfortable back then and was trying hard to build my wealth like I was doing most of my life.

What this friend said back then reminded me of what another friend said to me before:

"It is not enough to be rich. You must appear rich."

Now, at the ripe old age of 45 and with what I have achieved, I can confidently tell these friends that they are wrong. They are so wrong.

Oh, you want to know why did my friend call me? 

Oops. I am growing forgetful in my old age?

Well, after some small talk, 

"Er... Could you loan me $50K?"

I was so stunned like vegetable. I kept quiet and he went on to explain.

Apparently, his business is not doing well and he exhausted what savings he had. There is no way for me to know if he was telling the truth or not and this is someone whom I have not been in contact with for more than 10 years.

So, what was my answer?

I offered him $2K, saying that I was not comfortable to lend him any amount larger than that. 

He hung up.

Rich people don't have to make more money because they have more things to spend on. 

Rich people have more money because they spend on less things and spend less on things.

I shan't say anything else but you might want to read the related posts below for my thoughts on "being rich" and "lending money".


Related posts:
1. If we are not rich, don't act rich.
2. Lending money? Ask questions.

15% to 20% yield per year but only for some.

Hi AK,

Been a regular reader of your blog. Simply inspiring to me.

I merely have one question to seek your advice. I have approximately $30,000 of current liabilities (namely credit lines and long term debts) or what some would call unhealthy debt. 

I also have approximately $13,000 of assets in stock holdings. If it was you, would you liquidate your 6% to 7% yield assets to pay for debts that cost 15%-20%?

From an economical reason, it makes sense to ensure that you forked out as little money as possible to pay the cost of debts. 

However, spiritually, I was wondering if I ought to keep my yield generating assets in order to "force" myself to work harder to upkeep the debt and buy more assets.

For now, my job does pay me enough to meet my debt cost and investment capital. 

Would you do the mathematically smart thing and pay down the debts asap or build up the asset at the same time?

Hi J,

Compared to a 6 or 7% yield, if you were to pay off your debt, it is equivalent to generating 15% or 20% in extra money per month. This is money in the pocket.

"Once you get into debt, it's hell to get out. Don't let credit card debt carry over. You can't get ahead paying 18 percent." 
- Charlie Munger

What about being forced to work harder and all that? 

Be pragmatic. There is more certainty in money saved now than money to be earned in future.

Gambatte! :)

Best wishes,
AK

Related post:
An unbeatable level of certainty in wealth building.

Second "Evening with AK and friends" in 2016.

Tickets for the first session of "Evening with AK and friends" in 2016 sold out in less than 2 days although my friends from The Fifth Person increased the number of seats available as I meant it to be the only session this year. (Told you AK is lazy.) Many readers were left out in the cold and requested for another session to be organised and I promised them to have another one. So, here are the details:

Date: 

16 September 2016 (Friday).

Time: 

7.00 pm to 9.45 pm.

Location:  

Lifelong Learning Institute, Event Hall 1-2.

This should be the last session for 2016 and unless there is going to be another InvestX Congress this year, I don't plan on making another public appearance for the rest of the year.

Get your tickets: here. Fastest fingers first!


UPDATE: 8.20PM, 16 Aug 2016.

Related post: Talking about "Evening with AK and friends".

$1m in CPF by age 65? What about $1.2m?

An article in the newspapers on one person's goal to have $1m in his CPF account by age 65 generated quite a bit of interest. 

I commented on my FB wall that not everyone has the financial ability to do what the person does but it shouldn't stop us from trying. 

Even if we should just do a fraction of what he does, I am sure we will be financially more secure in future.







After reading the article, I decided to estimate what I might have in my CPF account by age 65.

The estimate will ignore the effect of the extra 1% interest on first $60K of our CPF savings as well as the additional 1% interest on the first $30K once we reach 55 years of age. 

Of course, I am also ignoring the possibility that interest rates for our savings in the CPF could change in future.




My CPF accounts at the end of 2015:

OA: $418K
SA: $200K
MA: $50K

Assuming that I stop contributing to my CPF account from 2016, I should have at age 65:

OA: $652K
SA/RA: $438K
MA: $109K

Total by age 65: 

$1.2m




Although I will no longer have mandatory contributions to my CPF, I intend to max out the CPF annual contribution cap for members by doing voluntary contributions annually, in the process maintaining a meaningful percentage of investment grade sovereign bonds in my investment portfolio. 

So, I would probably end up with more than $1.2m in my CPF accounts by age 65, all else remaining equal.





I am making good use of the CPF to form a cornerstone in my retirement funding strategy. 

This safety net gives me peace of mind.

If AK can do it, so can you!




Related posts:
1. Use CPF savings or cash to pay?
2. How to upsize $100K to $225K?
3. A cornerstone in retirement funding.
Read newspaper article: here.

Retiree regrets selling his flat to help son buy a condo.

Dear AK,

By chance, I got to know some people who are investors and they told me about you. I enjoy reading your blog but I decided to write to you when I read the blog post, How to have children and a comfortable retirement?





I am a 65 year old retiree. I was a school teacher for all my life until I retired. I am a widower and I have a son who is working in the sales line.

I had a HDB 3 room flat but I sold it a few years ago to help my son buy his matrimonial home, a condominium when he said the flat was too small for us to stay together as a family. I now live with my son and his wife.






Apart from what I have in my CPF, I don't have much savings. I don't get any money from my son as he is struggling financially and his wife who is from China is not well educated and cannot speak English well. She says she is not able to find a job but I think it is because she doesn't want to wait at tables or wash dishes.

The times when I talked to my son about selling his car or convincing his wife to find a job were unpleasant. I now avoid talking about money matters with him and I feel his wife is very cold towards me. It does not feel like home. I spend my days outside and only come home to sleep.






I sold my flat and gave the money to my son because I didn't want to stay alone but I regret my decision to sell my flat and to stay with him and his wife.

I want to share a message with all parents that although we should love our children and try to give them the best but, like you said, we should be pragmatic and not deprive ourselves of a comfortable retirement.

I wish someone had told me this earlier but I am not sure if I would have listened.

Sincerely,
Uncle R




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

There are quite a few things I can say in response to Uncle R's situation but I shan't rub salt into his wound. Sometimes, we just need a listening ear.

I hope Uncle R will focus on activities that make his golden years meaningful and happy. I hope he will let go of regret and disappointment.

For what it is worth, I suggested that Uncle R read this blog post:
A simple concept to better mental health.





Related post:
I am not suggesting depriving children of necessities. I am suggesting not depriving ourselves of a comfortable retirement! 
- AK in How to have children and a comfortable retirement?

Matthew answers questions on STI ETF (Part 2).

Thank You and Matthew Seah for the help! Appreciate it  I still have a few more questions to ask regarding STI ETFs which would require Matthew's or your help.  

SPDR STI: 

1) Matthew mentioned that "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. " Based on this, am i right to say that net income would be a better gauge to determine whether the fund is paying dividends more than it can afford?

2) There is a significant increase in liabilities in 2013 due to purchases awaiting settlements. What purchases did they make? And how did they manage to pay off such a large amount by 2014? 

3) There is a change in source of credit rating in 2015. And the rating as a result improved from B*- to AA-. Did they change the rating source in order to improve their credit rating? Is this a source of concern?

Nikko AM STI:

1) Why is there suddenly an amount due to shareholder in 2015 under payable? 

2) The tracking error provided by nikko am is on a 3year annualised basis while for spdr, it is based on rolling 1year tracking error. Is it fair to compare this 2 tracking error directly? Is it sufficient to just look at the current tracking error in the fact sheet or should i look for past years tracking error of both ETFs? Where can i find past years tracking error of both ETFs? It wasn't in the annual report.

General: 

1) Would my returns be better if i chose to start DCA under a RSP plan when the index is cheaper as compared to when the index is higher?

Thank you and looking forward to your reply! 

From Matthew Seah:

SPDR STI 1) yes
2) The only liabilities the fund has is payables. Payables come mainly in the form of cash due to the brokerage at T+3. Since STI ETF is a cash ETF, they would have sufficient cash before purchasing the STI components.
3) you can review the credit ratings at http://investors.statestreet.com/CustomPage/Index?KeyGenPage=302726

Nikko AM STI ETF
1) Distribution payable is the cumulative dividends, less fees collected to be distributed to shareholders on a semi annual basis.
Are special dividends from any STI components? Is there a change in dividend yield when there is a switch of a STI component?
2) I am not sure where to find tracking error. But you can calculate by yourself.using excel and historical data for STI, SPDR and Nikko AM ETFs. The tracking error is generally very low and is not much of a concern.

General
1)http://singaporeanstocksinvestor.blogspot.sg/2013/08/tea-with-matthew-seah-dollar-cost.html
read the comments as well for the Nikko AM STI ETF simulator
one ETF starts before the great financial crisis, the other starts near the bottom



Related post:
Matthew answers questions on SPDR STI ETF.

Position sizing and emotional well being.

AK 

Marco Polo ... hit new Low.

Sighz. I have too much oil and gas in my portfolio. 

AK said:
"If it is causing you distress, you are probably overexposed..."

hi AK,

i didn know marco polo has so high debt . do u think marco polo will go into bankcrupt?

serious, i need your advice. if you have sold it, just let me know.

i really want to keep my remaning capital.

has losing a lot from peak 37 cent. 

Thank you!

AK said:
"I am still holding my position in MPM.
I don't know if MPM will go bankrupt.
The possibility exists, of course."

All readers who feel the same way, please read related posts below.

Related posts:

1. MPM: My comment in another blog.

2. Cutting or holding Marco Polo Marine?

3. How to have peace of mind as an investor?

Should I buy a higher price or lower price stock?

Thanks, AK.

I was considering between singtel and singpost but decided to go for singpost cause I can buy more lots.

 

Singtel price is 3x of singpost. I was comparing buying 10 lots each. Hence singpost appeals to me more.

 

Any comments?

 

Regards,
D

Hi D,

Price is what you pay and value is what you get.

A 10c stock could be costlier than a $1 stock. ;)

I blogged about why QAF was cheaper at a higher price before, for example.

Use related posts below as food for thought.

Best wishes,
AK

Related posts:
1. $1.14 a share cheaper than 94c a share?
2. 1H 2016 income from non-REITs. (Added QAF again.)

UPDATED: "I have no career aspirations, only financial aspirations." (Scolded by wife for thinking about financial freedom.)

Reader says:

I am 31 this year. Been working for 7 years and married for 2. 

I have been feeling unhappy at work and discovering your blog a few weeks ago gave me hope. 

I want to get out of the rat race.




My wife is a career woman and we usually have very little time to spend together. 

I am feeling unhappy about this too.

I love my wife and I would like to be able to spend more time together and achieving financial freedom like you would be ideal.

So, a few nights ago, I told my wife about you and how we should do what you did. 




She said that I should try my best to build a successful career and stop thinking about not having to work. 

She said a few other things which I found hurtful.

I should not be surprised by the response. 

She is doing well in her job and I think she is more successful than I am. 

Still, being scolded hurts...

(AK left out most of the reader's email as it got very personal.)





AK says:
I know it is not easy but try not to dwell too much on your current situation or you might end up visiting IMH.

I understand what you are going through and, if it is any consolation, it wasn't easy for me too. 

Some people were derisive and talked down to me over the years.




Scrooge. Stupid. Delusional. 

These were some words that were thrown my way before.

More recently this year in early March, I shared on my FB wall that someone called me a "quack". 

I am sharing the screen capture of that FB post here:

Source:
http://www.sammyboy.com/showthread.php?225976-Reits-good%26%2365311%3B

.



JohnTan said above:

"This investment guru (i.e. AK) sounds like a quack. Is that why he goes around wearing a mask all the time? Or he's Batman?

"If this guy is as talented as you claim, he shouldn't only be earning $5-7k per month for the past twenty years. 

"He should have been promoted to some high-flying director or started his own business by now. I hope you did not lose your shirt following his advice."





AK says:
Alamak. How like that?

See how the message is that a person is only considered successful if he is a high flyer in his career or if he starts his own business?

Like it or not, such ideas are quite pervasive in our society.





There is nothing wrong with career minded people who want a successful career. 

There is nothing wrong with having an entrepreneurial spirit. 

Honestly, we need such people.

However, I don't think there is anything wrong with people who would like nothing better than to achieve financial freedom and to stop working either. 





We are all made differently.

"I wanted the independence. 
I desperately wanted it."
- Charlie Munger.


What about AK? Me? 

I borrowed a phrase from EY:

"I have no career aspirations, only financial aspirations."






You have a responsibility to yourself to be happy.


To be happy, live your dream and not someone else's.

"Not even my wife's?"

Oh, no. AK is not going there! ;p





Related post:
To retire by age 45, start with a plan.