Retire with an investment grade bond and an annuity (UPDATED).

The CPF is a risk free and volatility free retirement funding tool that Singaporeans should learn to take advantage of.

However, depending on what we want it to do for us, the way we use it would be different.






Reader says...
Hi AK! Can I ask u for some advice.. or rather ask u to talk to urself! 

My wife and I r both self employed, and I want to boost our CPF SA account, but I'm not sure whether we should boost just one or both accounts.


My SA has Xk and i'm XX, she has Xk and XX, and I'm thinking if we both contribute to her account, its quicker to reach the minimum sum and exceed that, so we can draw out a lot in excess of the MS when she reaches 55.





Whereas if we contribute to both i have to work harder to reach the MS and we may just slightly exceed the MS when we reach 55 in our respective accounts, and can't withdraw as much.


I'm contributing 2k a month, and she 800 a month to our SA atm. If you are faced with this, what is the more sensible choice?






I sidestepped the question about whether it is better to contribute to only one account or work harder to contribute to both accounts. I think the reader has the answer somewhere in his head. 

It really is a matter to be decided by him and his wife. 





I don't want them to scold me for some reason when they hit 55.

However, I had this to say:


AK says...
I think you might also want to consider maxing out the annual contribution limit for the CPF. 

The limit this year is $31,450 (mandatory and voluntary contributions combined).

{CPF annual limit in 2018 is $37,740.}





The money voluntarily contributed gets apportioned into your OA, SA and MA. 



You could then do an OA to SA transfer as long as your SA has not hit the ceiling (which is the prevailing MS). 

Note that there is no income tax relief for OA to SA transfer unlike MS Top Up to the SA (for the first $7K per year).







CPF savings has a bond like feature which allows us a larger lump sum withdrawal (i.e. anything above the prevailing MS) at age 55 but it is also an annuity component (i.e. CPF Life) that pays us a monthly income for life in our golden years.

 

Note:
Whether we are able to withdraw Top Ups and the accrued interest would depend on the age at which the Top Ups are done.






"Top-up monies are set aside specifically for retirement needs and will be used to increase the recipient’s payout level and/or payout duration. 

"Hence it cannot be used for other purposes such as education, investment, insurance premium payments, housing, pledging and/or exemption.





"If you had received top-ups before age 55, the top-ups and accrued interest in your Special Account (SA) will be transferred to your Retirement Account (RA) when you turn 55.


"Any excess, above the Full Retirement Sum applicable to you, can be withdrawn when you apply for withdrawal at age 55."






Source: CPF FAQ.

Related posts:
1. How to upsize $100K to $225K in 20 years?
2. Another step towards retirement adequacy.
3. What happens to our CPF money at age 55?

Marco Polo Marine: Termination of rig construction contract.

It has been more than a year since I blogged about how I managed my exposure to Marco Polo Marine. 

I believe that it is a good example of how we could size our investments not only based on our motivations and whether the investments meet those motivations. It is also a good example of what we could do if the investments' ability to meet our motivations should change over time.

Marco Polo Marine had a very good track record even through the Global Financial Crisis a few years ago. I was also impressed by their foresight to move into the business of OSVs and not just stick to tugs and barges. Things were looking good and they started paying dividends. 

To me, as an investment, Marco Polo Marine provided a nice combination of growth and income.

Without a working crystal ball, I definitely did not see an order for a jack up rig coming. It was a huge commitment and this is probably putting it rather mildly. Of course, if things were to pan out nicely, Marco Polo Marine would probably do even better to have an asset like a modern jack up rig which would bring their business to the next level.

However, I decided that the deal introduced a certain amount of speculation. I also decided that it would be difficult for Marco Polo Marine to continue paying a meaningful dividend with a heightened borrowing level. So, based on the way I allocate my resources, it would require that I thin my exposure to Marco Polo Marine and I did.

Of course, for a while now, we know that things did not pan out nicely, with the price of crude oil having plunged quite suddenly and plunged badly too. 

It does not look like things are going to improve until global demand rises enough to address the current oversupply of crude oil. Although the Cabotage Law in Indonesia will expand to cover jack-up rigs as well in the new year, there is no guarantee that Marco Polo Marine would benefit from it in such an environment. 

I still have a position in Marco Polo Marine and I actually added to this position in recent months as the stock price declined but only to a level at which I feel comfortable with a more speculative position. 

Now, with the news that Marco Polo Marine has terminated the contract with PPL Shipyard for the construction of the jack-up rig, what do I think?

The reason given for the termination is PPL Shipyard's "failure to comply with certain of its material contractual obligations". I believe it had to do with some quality issues found with the rig that is still under construction.

Apart from terminating the contract, Marco Polo Marine is also going to try and take back the 10% deposit it paid for the rig. Will they be successful? I don't know.

I do know that without the rig in the picture, Marco Polo Marine's balance sheet would be stronger. Their profit would also be higher. Yes, despite what some might think, Marco Polo Marine is still a profitable company.

In an environment of prolonged low crude oil prices, the rig order cancellation is probably more of a good thing, realistically. Of course, with the speculative overhang removed, how is Mr. Market going to treat Marco Polo Marine's stock? 

Sell? Buy? Hold? You tell me.

Marco Polo Marine's NAV per share is 52.8c and their EPS (9M FY2015) is 3.42c. 

4Q FY2015's results should be out soon and if we were to assume zero earnings in that quarter, at 19c a share, we have a PE ratio of 5.56x.

With the rig order cancelled and if there are no severe ramifications because of this, I think that Marco Polo Marine should eventually shake off the more speculative air that surrounds it as an investment.

See announcement: here.

Related post:
Managing exposure in investment portfolio.

Investors use Stockflock Concierge to save time.

"One of the investors I chatted with complained that making money from stock market is not easy. We hear about big boys moving the market and making big bucks for themselves. But when it comes to ourselves, why does it feel like an impossible task?

"Because investing is a difficult business. Don’t let anyone tell you otherwise. Fund managers hire brilliant, well-paid analysts and pay thousands for Bloomberg terminals to help them invest better. All these resources are not available to most of us.

"Can you do well investing for yourself then? Absolutely. Here comes the good news.

"The internet has levelled the playing ground. Internet forced trading cost to plunge over the years and will continue to do so. Internet has made it possible for us to get good data and write-ups, many of us are just missing where and time to find the information you need to invest wisely.
 

"For the time starved, there are courses to teach investing and tools to help you invest. After all, 14 out of 30 STI stocks have returned over 8% annually for the past 10 years. That means if you picked your investments carefully, even blue chips stocks can provide a very good return.

"You don’t need to try exotic investments to grow your wealth. You just need to put in some effort and time, like what most investors do to do well in the market.  
 

"So what if you don’t have the time to keep track of so much information swimming around you?

 

"We all struggle with too much junk information. Wasting time deleting the unimportant and missing the crucial piece to making the one good investment.

"Stockflock is providing just the tool for busy investors by providing updates on the companies you are watching from different sources, including AK's blog, TheEdge, corporate announcements and many others.

"If you are having trouble keeping up with all the information floating about, you might want to consider what is being offered at Stockflock Concierge. We think you will find the personalized information pleasantly helpful for such a low cost. It’s cheaper than a cup of coffee!

Information you need to invest better

"For AK's readers, the start-up is offering a promotional rate of S$2/month for the first three months. So don’t forget to use the discount code “AK71”!" 
Try it here, the promotion is only for a week!

Wilson Ong

AK says:
For those of us who are a bit too busy to keep track of things, Stockflock  Concierge does offer a valuable service at a very reasonable price. For only $2 a month, there is certainly no harm in taking advantage of the offer for a trial period of 3 months. Gambatte!

Something AK wants to lose and not gain.

I was inspired after talking to a new found friend to try a new diet. So, I have not had any rice, bread, noodles or crackers since 8 November.

I have cut down on stuff with lots of added sugar which, of course, includes sugary drinks. I now drink water or green tea only.

If I want something sweet, I take some roasted almonds, dark chocolate (70% to 85%) or fruits. 


I have increased my intake of animal protein and greens. I have even started to take butter and certainly hope it is the right thing to do.

Cowhead belongs to QAF Ltd. Buttercup belongs to Auric Pacific.
Be careful. I found out today that Buttercup is actually not butter!
http://foodtherapybyaz.com/2014/05/27/i-cant-believe-its-not-butter/
Luckily, I chose to get Cowhead. I like supporting my companies.
AK is definitely a butter virgin.

Although being inspired is important, what really made me want to try this new diet was a visit to the clinic.


I was told that I was 7 kgs overweight. OMG! 

OK, to be honest, I knew that I was probably somewhat overweight because my pants felt tighter around the waist than before but 7kgs? 

That's a lot of excess weight!

Anyway, my new found friend told me that, to lose weight, exercise is 20% while diet is 80% of the formula. That was a revelation. I have always thought that exercise is more important than diet.

So, what have I been eating this week?

Here are some photos of the meals I had:

All prepared at home (except for the dark chocolate, of course).

It has been only a week. I don't know if I have lost weight but I guess I will know in another couple of weeks. 

Stiff upper lip and soldier on. What?


On a separate note, I am thinking of taking a short break from blogging and anything related to my blog which would include time spent on Facebook.

So, if you do not hear from me for a whole week or a few days in the near future, don't be alarmed. Just taking a break.

Trading around core positions for extra money.

Some might remember me talking about how I was trading stocks a bit more in the past. I also talked about how it is possible to trade around our core investments for income here and there.

If we are good at it, we could make some extra money from trading and yet retain a portion of our investments for regular income.



I don't trade stocks as much these days because it entails more work. It isn't just about buying stocks and holding them for dividends. We have to look at charts and decide when to sell and, of course, hope that prices might come down again so that we could buy.

However, sometimes, I just feel like doing a bit of trading and one example in the last two weeks was ST Engineering. I partially divested at $3.35 a share at the end of October with the intention to buy again if its stock price should decline meaningfully.

I decided to sell at $3.35 because that was where the mildly declining 200d MA was approximating back then. 

As ST Engineering's stock price declined over a few days, I resisted the urge to buy as connecting the lowest and second lowest price points gave me a trend line which suggests that there is probably going to be stronger support at $2.98 thereabouts which happens to be where the 123.6% Fibo retracement line is also located.

My BUY order at $2.98 today was filled.

Of course, it does not mean that the stock price will not go lower from here. 

Technical analysis simply shows us where the supports are. It doesn't say if the supports will hold. Now, if the support should break, we might see $2.88 tested next. I could buy more then.

Now, what if the stock price did not decline but went higher instead? 

Trading around a core position means that we still have a core investment retained for income generation.

So, some might remember that the mistake I made with ARA a few years ago was not retaining a core position whereas I sold only half of my investment in Old Chang Kee and retained half for income, for example.

So, when employing such a strategy, it is important to buy into stocks which we would be quite happy to hold because of the regular income we will receive. If the opportunity for a trade should present itself, sell a portion of our investment and retain a core position.

If prices go up, we are happy. If prices go down, we are happy too.

I don't think anyone would be unhappy with such a situation or am I mistaken?

Related posts:
1. Have my curry puff and eat it too!
2. ARA: Re-initiating a long position.
3. ST Engineering: Mystical art.

Accordia Golf Trust: A DPU of 2.32c and still a buy?

I was wondering how badly Accordia Golf Trust's revenue could have been affected by the inclement weather in Japan in recent months. That was really what was holding me back from increasing my exposure to the business trust significantly even as its unit price hovered near its historic low.

In its latest results, it was revealed that performance in 2Q was disappointing. This translated into a DPU of only 0.74c for 2Q. For the 1H, total income available for distribution translated into a DPU of 2.59c.

Personally, I was hoping for a 1H DPU of 2.9c or even 2.95c which would have been possible if DPU for 2Q came in at 1.1c. Investing in golf courses for income, I guess the weather is something I must learn to take into consideration.

Accordia Golf Trust also decided to hold back 10% of the income available for distribution which means that DPU is only 2.32c for the period from 1 April to 30 September. 

So, what is the distribution yield?

I believe that it would be a mistake to annualise the DPU of 2.32c because it would be assuming that the weather would continue to be horrible in Japan for the next six months. 

However, if we like to think of it as a worst case scenario, yes, why not? 4.64c. This, of course, assumes that the management continues to distribute only 90% of distributable income.

At 62c a unit, we are looking at a distribution yield of 7.48%. This, I believe is pretty decent and higher than the 7% distribution yield dangled at Accordia Golf Trust's IPO which was, of course, at 97c a unit (which I thought was pretty much rubbish).

So, the question which I foresee many asking is whether Accordia Golf Trust is still a good investment for income? Well, I think it still is.

I do not believe that Accordia Golf Trust could turn in results which are much worse for the next six months but, of course, one can never be too sure when it comes to the weather. Anyway, chances are that things would improve unless Accordia Golf Trust has really bad luck. It is a matter of probability, really.

Accordia Golf Trust's current gearing level is 28.8% and its stock is trading at a 30% discount to NAV. 

About three quarters of the land the golf courses are sitting on are owned by the business trust. The rest of the land are leased from individuals, corporations or the government.

It is apparent to me that Accordia Golf Trust has ample debt headroom. As the business trust has a pipeline of assets to acquire from its sponsor, with the interest rate in Japan so low, I think it is a matter of time before the business trust makes its acquisitions. Fully debt funded, such acquisitions are likely to be DPU accretive.

If Mr. Market should feel depressed about Accordia Golf Trust's results, I certainly hope that he would show his displeasure in the usual manner which would allow me to accumulate at lower prices.

Related post:
Accordia Golf Trust: A distribution yield of 12.16%?

Is it too late to plan for retirement at age 57?

This is in reply to a reader's comment: here.

Hi hosea,

Welcome to my blog. :)

I am not allowed to give advice to individuals and I don't. ;)

However, if I were 57, I must recognise that I cannot be too adventurous with my money. I need to be more conservative.

Being more conservative, the returns might be lower but there is less chance of a massive or total loss of capital which a senior can ill afford. 




I want to consider investment grade bonds which includes Singapore Savings Bonds and also possibly maxing out my CPF-RA to benefit from a risk free 4% to 6% per annum return. This will provide a guaranteed monthly income in future.

Of course, I would have to make sure that my lifestyle is adjusted according to how much I expect to have coming in at retirement. 

It is not just how much we have coming in that is important. It is also how much is the outflow.

Now, at 57, if I think there is going to be a mismatch in what I need and what I would have coming in, then, postponing retirement to a later age beyond 62, which is only 5 years away from now, might have to be considered. This will also allow my CPF savings to continue growing.




What about investments? 

Well, I could consider blue chips which are less volatile and which have a good dividend paying history. 

I might want to consider ST Engineering, SATS and VICOM, for examples. 

I might have a few REITs which are more conservatively geared in my portfolio but I wouldn't want them to be a major part of my portfolio because I might not have the resources to take part in rights issues if they should happen.




If I have a HDB flat, there are many ways to monetise my flat. I could sell some of the remaining lease to HDB or I could rent out a spare room or two. I could choose to downsize too.

Finally, I remember that I have some savings in my SRS account which I can start drawing from at age 62 over a 10 years period. As long as I must pay income tax, I want to consider continuing to make contributions to my SRS account to pay less in tax.

I don't think it is too late to plan for retirement at age 57 but we have to be realistic with the options which are available. 

Related posts:
1. NDR 2014: Retirement adequacy.
2. Tea with Matthew Seah: Lifelong income with SRS.
3. CPF Life Payout estimator.

Make an altruistic investment in Singapore's future.

When I blogged about making a donation to NUS' university wide bursary program, a reader asked me, "What about NTU?"


As I make regular donations to NUS and I tell people about it when I have a chance, that was not the first time I was asked that question.


Well, honestly, I have more affinity towards NUS because I spent four years there. However, I do understand that there are needy students in NTU too.


So, in September, I decided to make a donation to NTU's bursary program to help needy Singaporean students there as well.

This is taken from NTU's website:


"The NTU, MOE, Donated and CDC/CCC University Bursary is open to Singaporean students."  Source: NTU.


Some readers might remember a rather disturbing episode that happened on my FB wall when I encouraged donations to NUS' university wide bursary program. 

By sharing the above statement from NTU, I have taken out the guesswork as to the beneficiaries of the program.

If we have the ability to be so, we should really consider being charitable and helping those in need.

Although there are exceptions, I do believe that most Singaporeans are charitable people.


There are many ways to make a donation to NTU. See options here.


There is also an option for making a donation online using a credit card: here.

AK made a $500.00 donation online.

Don't be shy to make a small donation as even $10 would go some distance to helping the needy.


In this instance, we would also be making an altruistic investment in Singapore's future.


Related post:
Making a donation to help needy students.

REITs: Leasehold properties revisited.

This is a brief reply to a comment from a reader on a topic which was rather hotly debated before: here.


Hi kh,

Investing in REITs, we have to understand something very basic and that is REITs distribute income. REITs don't distribute earnings. So, they do not account for depreciation or amortisation.

When we look at REITs, we mustn't look at them like how we would look at stocks where we look at earnings per share (which takes into account depreciation and amortisation).

When we buy properties, if they are not freehold, then, there is a lifespan. 

So, if we buy a HDB flat, theoretically, at the end of its 99 years lease, we have to to return it to HDB and the value of the flat becomes zero. So, on average, theoretically, it depreciates by slightly more than 1% per year.

To make investing in a property which has a 99 years lease sensible, theoretically, the yield should be 1% higher than a freehold property. This is to make it equally attractive. 

Whether that happens or not depends on many things and one of the things is that real estate, unlike other assets, are tied to locations.

I am using the word "theoretically" quite a bit in this blog post.

So, we are not wrong to ask wouldn't REITs with only leasehold properties end up with nothing one day if they keep paying out their income fully? Again, theoretically, yes.

However, real estate is unlike other forms of assets like machines, inventories or even cash. In an economy that does well, older properties could be worth much more too. Their values could, in fact, appreciate. 

REITs with leasehold properties could do quite well too by actively managing their portfolios. 

For example, a REIT could sell off older properties when the real estate market is strong and the values of their properties go up. Buy newer properties when the real estate market is weak and properties are cheaper. 

So, to me, the management's competence and motivation are more important considerations.

I think you understand the theory that if a REIT with only leasehold properties pays out 100% of its distributable income, it is not putting aside anything for depreciation. This is the way REITs work. 

REITs are allowed to hold back as much as 10% of their distributable income and I believe that it is a matter of time before S-REITs with mostly or exclusively leasehold properties do this to help address the issue of shorter remaining leases (i.e. depreciation).

In closing, I would say that whether to invest in REITs or not, there are many considerations. It would be a mistake, I believe, to be fixated with the issue of land leases.

Related post:
REITs: Leasehold properties.

NeraTel: Aggressive selling as 3Q disappoints.

Attention grabbing headline in the news for NeraTel:

"...earnings of $2 million for 3QFY2015, down 43.3% from earnings of $3.5 million in 3QFY2014."

This news led to some rather aggressive selling of the stock and I wondered if it was justifiable?

I made the observation before that NeraTel's revenue recognition can be lumpy because it is a project based business. It would be a mistake to place too much emphasis on any one quarter's results.

Could we see 4QFY2015 doing better which might give the full year results a boost? Of course, I don't know but looking at the first nine months' results, year on year, things don't look so bad.

The numbers are not pretty, for sure, but they don't look as bad as the headlines in the news which is about 3QFY15.

Quite obviously, revenue is down and expenses are up. 

A very competitive environment is old news, of course. In such an environment, remarkably, more or less, NeraTel has been able to maintain their gross profit margin. This is encouraging.

The question is whether am I going to stay invested?

I first invested in NeraTel at 40.5c a share and later added to my long position significantly in the middle of 2013 at prices from 60c to 63c a share. Given my rather large investment, the question of whether to stay invested or to partially divest is not one to be taken lightly.

As I invest primarily for income, I am mainly concerned whether NeraTel is still able to pay a meaningful dividend. I am also concerned if the balance sheet is still strong, naturally.

NeraTel is still a profitable business although it is not doing as well as before. 

To be honest, I would be pleasantly surprised if NeraTel is able to report a full year EPS of 4c which would mean having to report an EPS of 1.51c in 4Q2015, equivalent to 60% of earnings achieved in the first 9 months of 2015.

However, it would be equally surprising to me if NeraTel is unable to achieve at least a full year EPS of 3c which would suggest 4Q2015 coming in worse than 3Q2015.

Barring a bombshell of a 4Q, assuming that NeraTel should pay out most of its earnings as dividends, I believe a 3c dividend per share (DPS) is reasonable.

NeraTel's balance sheet is still strong. Operating cash flow has also remained positive.

I see challenging conditions for NeraTel but I do not see NeraTel going the way of the Dodo in the near future.

So, I will stay invested but, at this juncture, I won't add to my investment although I believe that NeraTel should be comfortable paying an annual dividend of 3c a share. 

I want to remember that given the stiff competition that NeraTel faces, earnings could continue to come under pressure.

If a DPS of 3c is a more realistic expectation based on a 100% payout of earnings, then, I would need a higher dividend yield for me to add to my investment.

Related posts:
1. NeraTel: 1QFY15.
2. NeraTel: 2QFY15.

Saizen REIT: A lesson on the right prices and luck.

A reader, Felix Leong, left me a comment on how Saizen REIT's shareholders are just lucky to get a good offer.

As I was replying to his comment, I decided that there is a lesson in this and that I should blog my response instead.

Felix Leong's comment:

Hi Felix,

Indeed, luck has a role to play in this and we should not think that this development at Saizen REIT has nothing to do with luck.

Whenever anyone tells me that he doesn't believe in luck, I would wish him luck.

When people buy any REIT that is trading at a discount to NAV, I would ask them why?

If they are hoping for the value to be unlocked, then, I would wish them luck. They would need it.

Why?

It might or might not happen.

When we buy into a REIT, to me, the main motivation should be for income.

This is a reason why although some are waving flags around for Sabana REIT now, shouting that it represents good value for money because of the huge discount to NAV, I am not convinced. 

I am not saying I am right and they are wrong. I am just saying that I am not convinced that they are right. I have shared my thoughts in a couple of blog posts on why I feel this way too.

I do feel sorry for those who got into Saizen REIT at its IPO so many years ago at $1 a share. We should all take it as a good learning experience and hopefully become wiser investors.

I rarely get anything at IPOs and when Saizen REIT had its IPO, I told friends and family that it wasn't worth the asking price. It just wasn't attractive. That was during my pre-blogging days, of course.

An important thing I try to remind myself all the time (although sometimes I forget) is that all investments are good at the right price.

So, I make an effort to keep an open mind about opportunities. Those stocks which are unloved and neglected could turn out to quite rewarding.

As investors, it is important to know what we want from an investment and if it is able to bring home the bacon.

If what we want an investment to deliver depends on luck, then, it is more speculation than investment.

When I got into Saizen REIT when I did, I was looking at an estimated distribution yield of almost 10%. Of course, there were many other considerations which, to me, made it a great investment for income at the price Mr. Market was offering.

The investment was a good fit for my motivation.

Saizen REIT has been a good investment for me and now Lady Luck has decided to smile on me.

I just hope that she would continue smiling until the sale is completed.

Yes, we still need luck on our side as it is not over until it is over.


Related posts:

1. Saizen REIT: Deeply undervalued but is it a buy for you?

2. Sabana REIT: What is the right price to pay?

Saizen REIT: Can we make some money from arbitrage?

Saizen REIT is suddenly getting a lot of attention. This is certainly a far cry from the time when I first blogged about it in 2009.

Now, with a price of $1.10 a unit, many are wondering if they could benefit from arbitrage.

Buy at $1.10, get one round of income distribution and get to receive $1.17 sometime middle of next year.

In a comment I made last evening in my last blog post on Saizen REIT, I said that we might not get $1.17 a unit next year because the buyer will only pay 95% of the consideration with the balance 5% to be retained in an escrow account.

Basically, if the buyer should identify some engineering work required for the assets being acquired, they have the right to draw upon the money in the escrow account for remedial work. They will have 28 days to do this.

We can only hope that there isn't that much engineering work required and that most of the money in the escrow account would be released to Saizen REIT in due course.

There was also a worry about exchange rate and how a weaker JPY in the next few months could affect payment to shareholders in S$.

This is no longer a concern because the very prudent management at Saizen REIT have entered into a currency hedging arrangement.

So, for those who would like to buy into Saizen REIT to enjoy some arbitrage benefit, what should we do?

Anything below $1.11 would be safer. Buying at prices higher than that would be making a wager on the buyer not drawing too much upon the funds in the escrow account.

Finally, take heed the warning provided by Mr. Chang Sean Pey that there is no assurance or certainty that the transaction will be completed. So, trade with caution.


See: Hedging arrangements.

Related post:
Saizen REIT: Firm offer by Lone Star.

The "secret" to AK's success as an investor.

I was talking to a friend over a cup of tea recently and we agreed that most people naturally do not have the temperament to be good investors.

Most of us are not born into a family of good investors. Those who are will have an advantage, for sure. For the vast majority of people, AK included, we might start the journey later in life and we might have to try a bit harder but unless severely disadvantaged, financial freedom is definitely not beyond us.

Having the right philosophy in life is essential as our philosophy will guide all our thoughts and actions. I have achieved what I have today financially largely because of my philosophy in life. Remember the story about the grasshopper and the ant? (See my blog post on being a happy peasant.)

Regular readers would know that I believe in saving money, the more the merrier, of course.




Something I blog about pretty often is the CPF and how we should try to take full advantage of it as Singaporeans. 

I said that if we bulk up our CPF-SA as soon as we could, we would be helping the CPF to help us build a more meaningful retirement fund more quickly. Compounding at 4% per annum over a long period of time without risk would be more magical if there is a larger base to start with.

Imagine compounding $10,000 over 20 years at 4% per annum versus compounding $100,000 over 20 years at 4% per annum. How much we get at the end of 20 years would depend on how much we put in right at the start, everything else remaining equal.

Quite easy to see that, isn't it?




Many of us are probably familiar with the idea that our CPF savings is not going to be enough for us to retire on and that we should save more money. 

Of course, a more sophisticated idea is that we should have investments that will help to fund our retirement and this argument is a very attractive one too.

At this point, let me tell you a story.

One of the stories which I enjoy sharing is how I bought my very first lot of ST Engineering's stock at $1.55 a share donkey years ago. I was attracted to how they were paying 100% of their earnings as dividends to shareholders. 

Back then, when I told some friends what I did and I had more friends donkey years ago, some went:

"Wah! So expensive! That is $1,550 a pop and then there is brokerage fee! You so rich!"

Well, something like that. 

Brokerage fee was more expensive in those days and, yes, one lot was 1,000 shares until not so long ago.

Of course, for us young people who just graduated and drew a salary of about $3,000 a month, $1,550 was a lot of money. Yes, I was a young person once upon a time.

A reader's little niece drew this.

What was even more amazing to many, including my mom, was how I bought more of ST Engineering's stock as its price rose. I remember buying at $1.70, $1.80, $1.90 etc. Well, not at those exact prices but you get the idea. 

I was buying almost every month and I have reaped the benefits of being a shareholder over many years. The very first 1,000 shares I bought are probably free of charge twice over or so by now.

So, similar to my narrative on the CPF and my strategy, it is about saving as much money as possible early in life and putting the money to work as early as possible in life, investing in good dividend payers. 

We don't have to be a genius to do this but the will to save more money right from the start must be strong.








Not too long ago, a fellow blogger whom I respect said that he admires my money habits. He commented that I am probably successful more because of my money habits than my investment acumen. I cannot remember his exact words but his comment is in my blog's comments section somewhere. 

I will be the first to say that I am not a very good investor but I can grow my wealth relatively quickly. This is not because I make a lot of money. It is because I do save a lot of money relatively quickly.

Be much better savers as early as possible in life. 




If we do this, it will allow us to become wealthier faster as it gives us more capital to invest with earlier in life and we will have more time to reap the rewards of being invested (i.e. becoming wealthier). 

If we are able to save much more money than our peers, even if we are not fantastic investors, just by investing prudently for income, all else being equal, we are most likely going to enjoy a much better outcome financially compared to our peers.

Related posts:
1. To be a happy peasant.
2. How did AK create a 6 digits passive income?
3. Greater financial well being is not beyond us.
4. The Millionaire Next Door.
5. Buying a $500,000 watch after 3 years of work.

AIMS AMP Capital Industrial REIT: 2Q2016 DPU 2.8c

One of the few friends I have complained that I don't do quarterly reports on REITs anymore. I told him don't be lazy. Go see the presentations and financial statements published by the REITs. 

Don't rely on what bloggers write. Sometimes, we blog practically useless stuff and we are wrong many times too. Yes, even very eminent bloggers are not infallible. Don't think got bloggers means he no need to work as an investor, I told him.

So, why am I doing this? 

Well, a reader just asked me whether AIMS AMP Capital Industrial REIT is good to buy. I think must be a new reader because readers who have been following my blog know that I don't answer such questions with a 'yes' or 'no'.

Anyway, the reader read some disturbing headlines in the papers regarding AIMS AMP Capital Industrial REIT and wondered if it was a good investment. I gave him a link to the financial statement and said he should find out for himself. Don't rely on newspaper headlines.

AIMS AMP Capital Industrial REIT remains my biggest investment in the S-REIT universe. The REIT continues to do what I expect it to do which is to generate meaningful income for me in a sustainable manner. The fact that they are doing this while staying prudent in their finances makes me happy.

As shareholders, I have said before that we should be more concerned with performance on a per share basis. The fact that net property income (NPI) increases is meaningless if distribution per unit (DPU) should decrease and we have seen this happening with a couple of other REITs recently especially if they continue to distribute 100% of their distributable income.

AIMS AMP Capital Industrial REIT improved on their quarterly DPU and 2.8c per unit will be distributed on 23 December 2015. 

7.82% distirbution yield based on $1.42 unit price.

They did this while reducing gearing level to 30.9%. NAV per unit is $1.52.

Their interest cover ratio is at 4.8x which is healthy and they don't have any debt due till August 2016. Financially, the REIT is very sound.

AIMS AMP Capital Industrial REIT faces the same problem that all industrial landlords in Singapore do. There is more supply and, so, more competition for tenants but the REIT has been doing a very good job of getting new tenants and renewing leases at modestly higher rates. This is a sign of diligence and also competence.

There is no reason for me to reduce my investment in the REIT at this point in time as it continues to do the job I expect it to do and, in fact, if Mr. Market should go into a depression and decide to sell the REIT cheaply, all else remaining equal, I would probably buy more even though it is already my largest investment in S-REITs.

For now, I am looking forward to more passive income in December.

See presentation: here.
See financial statement: here.

Related posts:
1. AIMS AMP Capital Industrial REIT: Opinion.
2. 9M 2015 passive income from S-REITs.