A simple way to a double digit yielding portfolio.

Regular readers know that First REIT is one of my oldest investments in my portfolio of S-REITs. 

One of my earliest blog posts said how this was an investment for keeps. 

That was in March 2010. 

Time really flies. It has been almost 4 years.
See:
First REIT: This one is for keeps.






Over the last few years, I made use of opportunities to buy more units of First REIT's. 

These opportunities were in the form of a rights issue and market corrections.
See:
Bloodbath continues and AK71 went shopping!
and
First REIT: Rights issue.






I became an investor of First REIT's in 2007. The price was 75c a unit.

During the Global Financial Crisis (GFC), I bought more at 42c a unit.

When it had a rights issue at 50c a unit, I took up my allotment and even bought nil-paid rights from unit holders who didn't want to fork out 50c a piece for their rights units. 

Those cost me 66c a unit in total.






During a fierce correction in 2011 which people called a bloodbath, I bought more from 74.5 to 77c a unit. 

It was a decision which I used Technical Analysis to help me in, with the belief that there was nothing wrong with the fundamentals of the REIT.


Some may ask why would I buy at those prices which were higher than what I paid during the GFC or rights issue. 

Perhaps, an old blog post will throw light on this.
See:
First REIT: XR and fair value.







As income investors, we are, no doubt, interested in distribution yields. 

With Q4 DPU coming in at 1.97c, the annualised distribution yields on costs now work out to be 10.23% to 18.76% per annum.


Although the unit price of First REIT has retreated from a high seen sometime middle of last year, sharing the same fate of all S-REITs' after a mention of "tapering" by Mr. Ben Bernanke, a unit price of $1.06 today is still 1.37x to 2.52x my entry prices.

Is there any purpose in sharing these numbers with you? 

Well, if we ask what did I do to make these numbers an integral part of financial security for me today, we will have our answer.


Although some might feel that I am revealing a secret, what I am doing is just sharing a process. 





There is nothing sacred about this. It is just the way I think:

1. Know our motivations. Are we investing or trading?

2. If we are investing, are we investing for growth or income?

3. Will REITs help meet our objectives?





4. What are the fair values of the REITs in question?

5. Fair values are most probably subjective but without any idea of fair value, we will not know when to buy and avoid overpaying.





6. Know our investment well and stay updated. Know the strengths and weaknesses. Know the benefits and risks.

7. If we are investing for income, we could still trade around our long position while staying mostly invested. This could enhance returns.


See? Nothing magical. 

Anyone can do this.

Now, some have asked me if they should buy into First REIT at the current price. 

Questions like this are always difficult to answer, for obvious reasons.

Personally, I always like to buy cheaper. 

So, I like to buy a good REIT when there is a discount to NAV and when distribution yield is higher, all else remaining equal.





First REIT's NAV/unit is now 96.64c.


Of course, if people are investing for income, finding the yield acceptable and the fundamentals good, they could initiate a long position in the REIT, bearing in mind the risks involved. 

Don't just focus on what is good. 

Know also what could go wrong and if it is acceptable to us. 

It is only natural that people would have different levels of risk appetite.
See:
REITs: When to buy?







Do the right things and the rights things will have a higher chance of happening for us.


So, is there a simple way to a double digit yield? 

Yes. Not easy perhaps but simple.




Related posts:
1. First REIT: Revelation.
2. Are you ready to come out on top from a recession?
3. Motivations and methods in investing.
4. 3 points in stocks investing.
5. The mystical art of wealth accumulation.

Kopi with Song StoneCold: Getting value out of everything!

Song StoneCold says:
I decided to embark on my path to financial freedom about 5 years ago. So, what inspired me to get started?

I discovered that no matter how hard I worked I would still be a stinking rat in the rat race. Looking at some of my colleagues carrying balls and backstabbing each other just to get a promotion and increment of about $200 bucks truly disgusted me.

Then, I reached a ‘tipping point’ and decided enough was enough! I needed to get out of the rat race!

I started reading thousands of books and attended thousands of seminars. Ok, ok . Maybe just a few hundred books and a few hundred seminars. All these were on investing and financial planning.

To cut a long story short, every single financial planning book advocated living with a budget, recording every single transaction, being frugal and bla bla bla.

Well, some even tell you to forgo Starbucks coffee! Now, imagine the money you can save after the compounding effect! Gosh! 

(AK's comment: Gosh! Talking about me, are you?)

Nevertheless, I decided to give budgeting a try. I tracked every single transaction, everyday. I tried to save money here and there. I was frugal and I seldom bought any luxury items or had a good meal at restaurants. What was the result?

PAIN!

I realized that it was not what I really wanted.

I want to have a decent lifestyle even before I am financially free, not a lifestyle of frugality, not to live by the ‘suffer now and enjoy later’ mantra’. I want to occasionally enjoy my caramel frappacinno at Starbucks!

Something happened 3 years ago that reaffirmed my thinking. My late aunt passed away at the age of 40 leaving behind a large sum of money for my uncle. She had been frugal all her life to the extent of dividing a packet of chicken rice for lunch and dinner.

In short, she tried to save every single cent possible. She didn’t even buy coffee at the neighbourhood coffee shop, much less from Starbucks. Mind you, she was not poor at all. She was earning a decent monthly salary.

In the end, my uncle used all the money and spent it on another woman. My late aunt's pain became his gain. Sad story. Lesson learned for me.

1) No point being too frugal. We need to enjoy life once in a while and use our money wisely 

2) Suffer now and enjoy later may not happen. Life is unpredictable and at any time we may just say bye bye before we can enjoy life. What is the point of being the richest man in the graveyard?

I am not going to splurge on everything but I decided that to keep a balance is the way to go. I need to enjoy my life while building my wealth through investing. Having investments which generate cash flow will give me passive income while growth stocks will give me capital gain. I will enjoy my life NOW and not later.

After some trial and error, I found that to achieve this I just need two simple steps. 

1) Get value out of everything.

2) Just ask.

It is possible to have a decent lifestyle if you make some small efforts. Below are some of the examples of how I managed to have a decent lifestyle

1) I have many credit cards from different banks. Now if you are poor in financial discipline please don’t try this. This is only for people who pay off their bills every single month. There are many ways different credit cards can give you quality perks. 

For example, Citibank Dividend Card not only gives you cashback for everything you spend on, it even gives you FREE travel insurance when you book your flights using the card. It offers you 10 percent cash back for your Starbucks purchases too.

Then, Maybank's Family and Friends’ card offers you 5 percent cash back at Watson and Guardian. These are the places we will spend money at anyway. So, why not get a better deal. Find credit cards that suit your lifestyle and apply for them. Just make sure you pay them in full every month.

2) If you are a bookworm like me. You can borrow books from the public libraries instead of purchasing them. Recently, I discovered that we can borrow ebooks from the library too. It is hassle free and reading ebooks from my iPad feels so good. If you need to buy a physical book, try bookdepository.com. It offers free shipping worldwide. 

(AK's comment: If you do not mind pre-owned books, they are usually cheaper to buy. Betterworldbooks also ships globally for free and every book you buy helps to promote literacy for the poor.)

3) Once in a while, if you decide to buy a luxury item, just wait for a discount. Be patient!

More often than not, there would be a discount in any shop sometime in a year. I usually wait for the Great Singapore Sale to buy the expensive items that I want. Use your credit card during this period and it often offers more discounts and perks.

If you want to attend a concert or seminar, just Google. There will surely be people who are selling their tickets at a lower price because they cannot attend the event due to some reason. Compare prices in shops and Google to check online.

When you are travelling, you can buy items from the transit area of Changi Aiport. I bought my iPad Air there and saved on the GST of 7%. Many shops in Changi Airport in the areas open to everyone offer waivers on GST too. 

These steps will save you tons of dollars while you continue to enjoy your purchases.

4) Car related expenses. I have no loyalty when it comes to petroleum companies. Which company offers the best price will get my business. This could be through some credit card tie-ups or discount coupons, for examples. Sometimes, loyalty doesn’t pay. We need to get value out of everything.

5) You can still watch movies at the cinema but do it during weekdays. It is much cheaper. You could get discounts with some credit cards. One credit card even offers you free popcorn.

6) Eat at your favourite restaurants during lunch instead of dinner. Lunch is generally cheaper. Again use credit cards to get better offers. Try to have only ice water. Drinks are the most marked up items in the menu. They are not worth it.

Next step is to just open your mouth and ask! You will be surprised how much money you can save by just asking for a discount, free samples, annual fee waivers from credit cards etc. There is no harm asking. If we don’t get it, just look for another shop and move on.

There are so many ways and these are just a few.

What I am trying to say is that it is possible to live a good life at discounted prices.

In the stock market, we look for under-valued stocks. Here, we look for under-valued items. One of my favourite quotes from Warren Buffet is this:

"Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down." - Warren Buffett.

Let us all enjoy a good life while we build our wealth at the same time.

Related posts:
1. 7 money habits of AK's.
2. Free shipping globally!
3. A modern day good life.
4. To be a happy peasant.
5. How rich is rich?
(... do not forget that being happy is more important than the pursuit of money. If we can be happy every day of our lives, we are truly rich.)

Tea with EY: CPF Life or ETF for retirement?

Annuity - It's Income Insurance!

Thanks for doing up a nice summary on Value Investing Summit (VIS) Day 1. I left during lunch and not attending Day 2. Decided that the takeaways are too marginal for me to spend my weekend there. But I must say, VIS is really useful for those who are rather passive or inexperienced in financial planning. :)

About the not buying annuity, I can't agree entirely. I used to hold the same perspective but when I got down to map out my retirement planning using CPF SA savings (please see attached), I had a different realisation.

From the computations on the last slide, you can see that $200,000 in the CPF SA transferred to RA at 55 years old could give us a monthly income of $1,325 to $1,479 till we konk off, regardless of rain or shine. How much is the FV of $200,000 at 65 years old? It's about $300,000. So that will be about 30% of the $1m which we need for retirement.

Click to enlarge

Personally, I believe in diversifying my retirement income. I don't know for sure if my mental faculty can be as sharp when I grow old and for how long I'm still able to manage my investments. If I have to depend on my family to invest for me, wouldn't it be additional burden for them?

I take buying an annuity as some form of insurance on income. I would have some peace of mind if I were to live up to 100 years old (choy! touch wood, touch wood!!). If I don't and I konk off at 85, there is still $100k left as bequest. If I were to go even earlier at 75, there would still be $200k left. This is if I choose the CPF Life Basic Plan.

To balance the need to leave behind a larger legacy, I'll invest the $700,000 in different income generating assets. If I can achieve an average of 5% returns, that will be $35,000 a year, or $2,916 a month. At 6% returns, that will be $42,000 a year, or $3,500 a month. Add that to my annuity plan, I will have $1,325+($2,916 or $3,500) = $4,241 or $4,825 a month.

My point is, we must be clear of our financial planning/retirement objective. Do we expect passive income generation with absolutely no effort? Then there is a trade off on capital preservation. If otherwise, it would mean some work or a lot of work, depending on the monthly retirement income we are after.

My strategy is to build up the CPF SA savings to buy my income insurance, i.e. the CPF Life Basic Plan. If we have $150,000 in CPF SA at around 40 years old, and continue to have contributions up to 60 years old, we would have $600,000 at 65 years old if we delay our withdrawal.

Click to enlarge.

Click to enlarge.

After buying the annuity, I would still have $300,000 available for other investments. If $1m is the target amount for retirement, technically, I should have accumulated $400,000 outside my CPF SA savings by 65 years old. Assuming I have no savings at all at 40 years old, I would need to save $9,600 each year or $800 per month, for the next 25 years, with a CAGR at 4%, to reach $400,000 at 65 years old.

The above calculation is based on the assumption of hitting the CPF contribution limit on $5,000 monthly income. 

The Retirement Savings calculator and the Compound Interest calculator can be found on CPF's website: http://mycpf.cpf.gov.sg/Members/Calculators/mbr-Calculators.htm

New calculators on CPF's website:
https://www.cpf.gov.sg/members/tools/calculators

Related post:
A cornerstone in retirement funding...

Why I don't feel proud to be Singaporean?

It is unfortunate but sometimes very smart people can become quite dumb in certain instances. 

Unfortunate but true.

Then again, we have to ask if it is a matter of fact or a matter of opinion. 

If it is the latter, then, maybe the smart person is not dumb. 

Maybe, he or she is just different.





Recently, there has been a lot of talk about a certain Miss Stephanie Koh who declared that she is not proud to be a Singaporean. 

She was eloquent in her complaint and according to a friend, Patrick, it seems that she just hates Singaporeans.

I am sharing Patrick's observation here in my blog:

What irks me is that people are interpreting it as some kind of political message. 

There is no political meaning. 

There is no pro or anti message.

She just dislikes Singaporeans. Period. 

What's there to support if all there is is hate?






Her points summarized by
https://www.facebook.com/notes/robin-rheaume/stephanie-koh-why-i-am-not-proud-to-be-singaporean/10151936357538920

It's no place for an artist (2:02)
Singaporeans are narrow minded (3:19)
Singaporeans are not creative (4:05)
Singaporeans are submissive (6:58)
Singaporeans are not happy (7:24)
Singaporeans are not nice (9:00)
Everyone just follows the rules (11:56)





Yikes! 

Sounds like a young lady full of angst and on a war path.

My take? 

Why doesn't she do anything about the situation. 

Don't just complain. 

Or is she complaining and waiting for someone to do something (which, by the way, sounds very Singaporean to me)?

Then, we have people who agree with her either in part or in whole. 

To people who don't agree with her, these people who do would appear stupid, of course.





When topics become very socially divisive and there are so many examples in the world of these, I can safely say that they are really a matter of opinion and not facts.

So, one could say that Miss Stephanie Koh is opinionated but who could say for sure whether she is right or wrong? 

Happy can liao lor. 

Oops, I forgot, she is not.

Maybe she should watch this: 

Be Happy!





AK is opinionated? 

So? 

You don't make me angry, ok? 

"I'll attack you, I'll scratch you and I'll kill you!"

Read this news article?
K-pop star hunt finalist: Why I don't feel proud to be Singaporean?

Buying a car? Chances are it will be European.

Click to enlarge.
Source: LTA.

I still remember a time when Toyota was consistently the number one brand in Singapore in terms of sales figures. Imagine it is number three now! It is also the sole Japanese make in the top 5 sellers in Singapore.

Is there really so much wealth in Singapore?

Or is most of it an illusion?

Mind boggling.

See full list at LTA: here.

Related post:
Car dealers unhappy with LTA.

Buy a property below valuation AND replacement cost!

Someone asked me why I don't consider buying new built Japanese apartments for investment since I feel that a reflation is underway in the country.

Why Saizen REIT?

The value of the residential properties owned by Saizen REIT is below their replacement cost.

Buying at a discount to valuation is great but buying at below replacement cost is even better! When I invest in Saizen REIT now, I am buying at a discount to valuation buildings which are valued below replacement cost! How crazy is that?

Want to compete with Saizen REIT and other incumbents by building new similar apartment blocks? Must be bonkers to do so.

So, supply is not growing and demand seems like it could grow with Abenomics gaining traction. Things could look better in the next few years for Saizen REIT.

Related post:
Saizen REIT: Insiders are accumulating.

Ad hoc Annual Report for ASSI.

A potential advertiser asked me for some blog stats and I got this from Stat Counter today:

Click to enlarge.

The green bar for 2013 is so tall that a couple of numbers could not make it into the chart.

I left out year 2009 which was the year I started my blog since it didn't have numbers for a full year.

If I was not asked for this, I would not have gone to Stat Counter to check the numbers.

I thought since I have the numbers, I might as well publish them and share with my readers. You guys are the other half of ASSI. You make the numbers.

Thank you.

Singapore is going to suffer an economic meltdown!

I saw at least half a dozen people posting THE article in Forbes on their Facebook walls and one reader was concerned enough to send the HTML link for the article to me. 

Which article am I talking about?





This: 
Why Singapore's Economy Is Heading For An Iceland-Style Meltdown.

Sensational headlines like this are bound to capture the attention and, perhaps, also the imagination of people.

According to the article, Singapore has a wealth bubble, a population bubble, a credit bubble, a property bubble, a construction bubble and our sovereign wealth funds are at risk. 

Put all these together and we have an epic horror movie that will put "Nightmare on Elm Street" to shame!





AK decided to try his hands at a sensational headline. 

Let's see. What about this?

AKAN DATANG:
"The Killer Bubbles of Singapore!"

Maybe, this will get the attention of the Monetary Authority of Singapore (MAS) too! Too? 

Yup, The MAS has issued a response to the article in Forbes.

This: Singapore is not facing a credit bubble.

First, the property market is now stabilising and new housing loans have also been declining.

Second, household balance sheets are on the whole strong and property asset values are significantly higher than the debts incurred.

Lastly, the MAS said Singapore's financial system is robust.






Read both articles and form you own conclusion. Is Singapore going to melt like Ice, I mean, Iceland? 

Or should the Forbes article be moved from the non-fiction to the fiction section of the bookshop?

Although I am a worrier by nature, I think this is something I will have to pass on worrying. 

The issues are way too big and what good is it going to do if I worry about them?





What is more important for us to do is to work with what we have and to ensure we are prepared. 

Up or down, we want to be OK and we should be OK if we do the right things.

Related posts:
1. How to be truly rich when the world collapses?
2. The secret to avoiding financial ruin.
3. Don't think and grow rich.
4. Be cautious even as we accept higher risk.
5. Young working Singaporeans, you are OK!
6. Millionaires emerge from bear markets richer.

Car dealers unhappy with Land Transport Authority.

I read a commentary in The Business Times yesterday and found it amusing for various reasons.

It was a piece on how car dealers are unhappy with the Land Transport Authority (LTA) for what have been perceived as piecemeal announcements.

Honestly, I think they are more unhappy with the fact that the business environment has become very difficult for them, forcing many smaller dealerships to close in recent times.

For those of us who drive, we know that road traffic conditions have worsened remarkably and this is partially due to a motor vehicle population that has burgeoned in recent years.

More people also "seemed" to be "prosperous" as their demand for cars pushed Certificate of Entitlement (COE) prices through the roof just a few months ago.

The operative word here is "seemed" and not "prosperous". Why?

When "cooling measures" were introduced last year, demand fell dramatically. It shows quite obviously that many people were only able to afford cars here in Singapore when they had access to much bigger loans and 100% LTV (loan to value) was also available.

One complaint a car dealer had was about the categorising of cars not just by engine capacity but also by engine output. This caused brands like BMW to be completely pushed out of Category A which is where mass market cars compete for COEs.

Is this a bad thing?

Well, bad for the rich or those who want to appear rich. For most of us average folks, I think it is a good thing. Actually, for the rich, it might not even have mattered.

Imagine a middle income family buying a 1.5 litre Japanese make mass market car competing for a COE with a millionaire who was buying an entry level BMW for his son's 18th birthday. Something feels wrong here. What is it? I wonder.

So, the categorisation criteria are better now. I am not saying that the system is now perfect, of course, but I feel that it is better. More equitable, won't you agree?

Related posts:
1. First time car buyer? Get a Mercedes Benz.
2. Cooling measures for cars: Buying pre-owned.
3. Cooling measures for cars spurned.
4. Cooling measures for cars.
5. If we are not rich, don't act rich.

Marco Polo Marine, Mermaid Maritime and Jaya Holdings.

Someone asked me recently why didn't I buy into Mermaid Maritime or Jaya Holdings which are in the same industry as Marco Polo Marine?

He suggested that I look stupid now that Marco Polo Marine's share price is still languishing while those of Mermaid Maritime and Jaya Holdings' have shot through the roof.

Well, like I always say, I don't have a working crystal ball, only a working bowling ball and I am not even a very good bowler. Sometimes, my bowling ball ends up in the gutter. OK, ok, frequently, my bowling ball ends up in the gutter. So embarrassing.

Anyway, if you had bought shares of Mermaid Maritime or Jaya Holdings' and made a bundle, congratulations. Celebrate! Always good to make money.

I have said that fundamentals look strong for the offshore and marine industry, supporting buoyant demand in the oil and gas industry. Prospects look good for the next couple of years at least.

I haven't studied Mermaid Maritime or Jaya Holdings in detail but with Mermaid Maritime now trading at about 23x earnings and Jaya Holding's stock price at a 5 year high, Mr. Market has to be very optimistic indeed.

For example, he must be expecting the earnings of the former to at least double in the next 12 months in order for a 23x PER to be reasonable now. Is this possible? I suppose anything is possible. What is the probability? Anyone?

There could be explosive growth in business in the future for both Mermaid Maritime and Jaya Holdings but I cannot tell if it is going to happen. So, I rather prefer to buy cheaply.

If I am able to buy a company's stock at a PER of 8x in the same industry which has earnings growth visibility over the next 18 to 24 months, isn't that a better deal? Well, I think so.

Now, which stock could this be?

Let me ask my bowling ball.

Related posts:
1. Marco Polo Marine: Exciting times ahead.
2. When to BUY, HOLD or SELL?

OUE C-REIT.

OUE Limited is spinning off OUE Bayfront in Singapore and Lippo Plaza in Shanghai into a REIT. Seems like OUE Limited is actively recycling capital and trying to catch whatever remaining interest investors might have in a REIT IPO. Just barely half a year ago, they listed OUE Hospitality Trust and I blogged about that here.

OUE C-REIT is the name of the latest offer. It will be priced at 80c a unit and will offer a distribution yield of 6.8% or a DPU of about 5.44c.

I believe that this IPO is a plus for OUE Limited shareholders just like the listing of SPH REIT was good for SPH shareholders. However, I don't think OUE C-REIT is attractive as an investment for the same reason that I thought SPH REIT was not attractive compared to SPH as an investment. You might be interested in that blog post. Read it: here.

I like the fact that OUE Limited has given a commitment to support the REIT by offering assets at a discount to valuation in future. This is something that the Lippo Group has done for LMIR and First REIT as well. After all, it is the same family that is in control of OUE Limited. Yes, OUE Limited is a 55% owned subsidiary of the Lippo Group.

I also like the fact that OUE Limited will retain a 45 to 50% stake in OUE C-REIT which will see their interests more aligned with those of minority unit holders in the REIT since any action taken which might hurt minority unit holders will hurt the sponsor, OUE Limited, most.

Having said this, we have to remember that the sponsor would have reaped most of the benefits from the IPO and the higher distribution yield is a result of income support given by the sponsor. If there were no such support, the distribution yield is actually 5.56%, almost 20% lower.

Over the next couple of years, if the REIT manager is able to fill up all the vacant space in the two initial properties and achieve positive rental reversions in re-leasing, the REIT could deliver a yield of 6.8% without any support.

However, with interest rates set to increase, we could see a heavier debt burden come 2017 when most of the REIT's debt mature. This could wipe out any hope of maintaining the relatively attractive distribution yield now unless unit price of the REIT declined.

The REIT could grow DPU through accretive purchases from its sponsor, of course, but with gearing ratio relatively high at 41% or so now, it would probably have to resort to equity fund raising either in the form of a rights issue or private placements. Unit holders should be prepared for this.

All investments are good at the right price and to invest in OUE C-REIT for income, I would only be interested if it should offer a much higher distribution yield, given the considerations above.

Related posts:
1. A strategy to grow wealth and augment income.
2. 2013 full year income from S-REITs.

Home of Luz Shinsaibashi, a mall owned by Croesus Retail Trust.

10 March 2017:
Reader:
I am at Osaka, is this the trust that is listed in Singapore?



----------------------------
I just published a blog post on Dōtonbori in Osaka.

This is, of course, the place where we find Luz Shinsaibashi, a mall owned by Croesus Retail Trust.

If you are interested to see more photos of Dōtonbori, come to my travel blog: here.

Related post:
Croesus Retail Trust: Motivations and risks.

The TOP blog post of all time in ASSI!

One might think that the blog post which has received the most number of pageviews in ASSI has to do with personal finance or investment. It stands to reason, doesn't it? So, which blog post is it?

Since many people like step by step instructions, could "7 steps to passive income from the stock market" be the top blog post?

Or perhaps it is one of the blog posts on my full year income from S-REITs since they usually generate many comments and well wishes from readers.

Intuitively, we know that people are drawn to reading scandals and tragedies. People seem to have a morbid fascination with other people's misfortune. So, maybe my blog posts on China Minzhong's scuffle with a short seller made it to the top.

Well, I suppose the list could go on.

The results?

Click to enlarge.

Startling. Beaten by a stuffed toy.

Related post:
Singing Bone Hello Kitty.

Achieving financial freedom is a family affair.

"Don't worry about money. Concentrate on your studies. Leave money matters to us."

This is something well meaning parents might tell their children but this is an example of how a good intention might actually be taking a step backward.

More enlightened parents will encourage their children to save money, highlighting the virtues of saving. 

This is probably the most basic level. 

Parents who don't even do this are doing a poor job of parenting. 

I won't mince my words here.





Financially savvy parents might, then, take their children's savings and invest in income generating assets. 

This will help to build a stronger financial foundation for their children. 

If the parents do a very good job, the children could have an easier time in adulthood.





Financially savvy and more enlightened parents will teach their children the ways to make money work for them as early as possible. 

This is a case of teaching someone how to fish and not just giving a basket full of fish to him. 

Parents who fall into this category are probably very rare. 

Well, at least I have not met any yet.

I blogged about how I got my primary school going niece interested in investing before. 

She understands not only why she should be saving money but also how she could use her savings to generate passive income now. 

It is not enough to save money, she has to make the money work for her.

Some might tell me that children should enjoy their childhoods and I am being too realistic. 

Well, I never did believe in Santa Claus as a boy. 





Seeing how my dad's business almost went bankrupt and the problems it caused for the family when I was in primary school forced me to grow up rather quickly. 

No Santa Clause came during Christmas to drop us any goodies.

We could have financial problems one day if we do not do the right things today. Be realistic.

Financial problems will not magically disappear. Be realistic.





What is the best thing to do?

Be prepared and get everyone in the family involved, yes, including the children.

I see some parents coddle their children to the extent of spoiling them. 

I am sure examples of such parents are pretty common in Singapore. 

I see them all the time.

The economy has been chugging along in Singapore and unemployment rate has been low and many people are drunk on cheap money. 

Conspicuous consumption has risen.





If you buy things you don't need, you will soon sell things you need.
- Warren Buffett.

If you are reading this blog post, I gather that you are interested in achieving financial freedom. 

If you have children or when you have children, please take the next step.

Your children will thank you in future.




Related posts:
1. Teaching young children financial literacy.
2. At what age to start investing in stocks?
3. Rich Dad, Poor Dad: 2 are better than 1.
4. Little Book That Beats The Market.
5. Warren Buffett: Illustrated.

Financial security: 5 points you ignore at your own risk.

I wrote something in response to an article which was shared by a guest blogger. The essence of my response were these 5 points:

1. Have an emergency fund and beef up our Medisave Account.

2. Have a good H&S plan with a rider to cover deductibles.

3. Live well below our means.

4. Know the difference between needs and wants.

5. Create a passive income stream.

Want to know what kind of article would draw such a response from me? This:
"I have a 6 figure salary but I am in financial trouble."

If we are able to tick off each of the 5 points I have listed, chances are that situations like this are totally avoidable, barring catastrophic events.

Don't think that we are invincible. Don't be extravagant. Don't be a wage slave. Don't put ourselves at risk of financial trouble.

It is not even about becoming a millionaire, it is about becoming financially secure and we don't have to be a millionaire to have financial security.

"I have pledged — to you, the rating agencies and myself – to always run Berkshire with more ample cash. We never want to count on the kindness of strangers in order to meet tomorrow’s obligations. When forced to choose, I will not trade even a night’s sleep for the chance of extra profits." 
- Warren Buffett.

On that note, have a great weekend!

Related posts:
1. Get free medical insurance in Singapore.
2. A meaningful emergency fund is important.
3. Think you cannot reduce your spending?
4. Don't see money, won't spend money.
5. Wage slaves should be fearful.

What I do before I buy or sell a stock.

People sometimes ask me what kind of software do I use to keep track of investments or to decide what and when to buy and sell. They are always amused by the blank stare I give them.

AK71 is very old school which is a nice way of saying I am outdated when it comes to technology. No kidding.

OK, want an example of how I work? Here is a recent one:

This is the most recent of my scribbles regarding Yongnam.

Yes, I scribble on bits of paper (and hope I don't lose them which I rarely do, anyway).

Some of you might recognise what has been scribbled on the piece of paper. Technical analysis (TA). I usually do this when I have decided to buy or sell based on fundamentals and, yes, I scribble fundamental analyses (FA) I have done on pieces of paper too.

Some of my scribbles get organised and make it to my blog as fully fleshed out articles but many never do. Well, in my pre-blogging days, most of the scribbles would eventually end up in the bin. So, the current situation is probably a big improvement.

I also cut out articles from newspapers and periodicals, using a highlighter or pen to draw attention to what I think is useful information. Example? See: Art of wealth accumulation.

Oh, if you are wondering if I bought more shares of Yongnam's, yes, I did at 24.5c a piece yesterday. That is at a discount to their NAV/unit of 26c or so.

After divesting most of my initial investment in Yongnam in 2013, yesterday's purchase of the company's stock was my third since end October 2013. If Mr. Market continues to offer a good price, I would probably buy more.

Own the kind of assets Yongnam has at a discount? Own a business that will benefit from the projected doubling of  MRT lines in Singapore by 2030? Sounds good to me.

Whenever I scrambled to invest, often, I lost money. Whenever I scribbled to invest, often, I made money. What is the moral of the story? I wonder.

Related posts:
1. Strategy to grow wealth and augment income.
2. When to BUY, HOLD or SELL?
3. Recommended books for FA and TA.
4. 3 points in stocks investing.
5. 7 steps to passive income from stocks.

Voluntary contributions to CPF.

I am starting the year with moves to improve financial security for me and my dad.

I am making a voluntary contribution to my CPF account again this year. The idea is to max out the annual limit of $30,600 and let the magic of compound interest contribute to my retirement funds. Yes, the government will be helping me in my efforts. Although this will not be tax deductible, it will help to provide me with a peace of mind.






I have also decided to do quarterly voluntary contributions to my dad's Medisave Account from now on. As he has pre-existing medical conditions, he was unable to upgrade his Medishield plan. Thus, his share of medical bills are heftier.

My dad's Medisave Account is also depleted due to the many times my paternal grandmother was hospitalised in recent years. So, helping him to build up his Medisave Account seems like a good idea.

My dad is still working and paying income tax. So, with regular voluntary contributions to his Medisave Account from me, he will pay less income tax too. Yes, it is tax-deductible for the recipient only.

Voluntary contribution form.
Click to enlarge.

His Medisave Account will also be beefed up with some help from a 4% annual interest income. Yes, getting some help from the government again.

My dad's example really shows how important it is to have a good H&S plan in place. So, if you and your parents are relatively healthy and do not have a good H&S plan in place, you really should do something about it.

On that note, HAPPY NEW YEAR!

Related posts:
1. How to get free medical insurance?
2. CPF or SGS?
3. Pay less income tax.
4. Enhanced Incomeshield for my mom.
5. Millionaire or not, plan for retirement.

Visit CPF's website: here.