Square 1

Haven't been blogging much, and i actually missed the Brexit drama, as I exited all my holdings prior to that.

I don't profess to have good foresight. I simply needed the money for the down-payment of my new home, so basically I have to sell off everything to come up with the cash requirements.

I got to say, it means i am starting all over again... no retirement portfolio, starting from scratch again. I consoled myself thinking that it's like giving up everything to be an entrepreneur, like Dividend Warrior selling off everything to open a tuition center, and rebuilding his portfolio from scratch.

At this time of uncertainty, why did i enter the property market? A lot of people are still very cautious, am i being foolish to be overweight on property?

(edit: and just nice one of my long time friend just posted about property http://investmentmoats.com/wealth-building-2/singapore-home-condo-landed-and-hdb-property-prices-grow-over-time/ and i quote "I came out of this exercise reinforced why wealth building through properties will always be a better option for many because of the low probability of people losing money.")

Prices have slightly cooled (though definitely nowhere near a crash have happened). It is a brand-new unit as it was unsold by the developer when it TOP 2 years back. To push sales this year, discount was given to buyers this year for them (or us) to bite. Effectively, I got it cheaper than those who purchased it earlier.

Also, I did not view it purely from an investment perspective as I am buying a home to live in. It really does check the boxes we are looking for for a home, being near good schools, quiet residential environment and being near MRT.

On the positive side, I am glad for this chance to clean up my portfolio as well. Going forward, i will be building up a pure ETF portfolio.

Starting from last month, I placed $300 into STI ETF (100 shares, with some leftover), and would be doing that every time I get my pay.
I did not choose to pay off the loan with the extra 300 as it would really not reduce it all that much, and building up some portfolio provides me with flexibility for liquidation next time.

In any case, it's back to square 1 from now on! After being debt free for some time, it's back to having a mountain of debt on my buttocks!

Up, up, up and away

Been a furry of news these 2 weeks:

Singapore car park rates up $0.10 to $0.20, season parking up $15 to $25

Malls, office buildings set to charge higher parking fees

Cab firms hit by higher operating licence fees

Electricity tariffs to rise by 4.3%

Found a picture that adequately describes this:

I guess the most direct impact would be those driving cars (3 of the news pertains to car park charges). However, there would definitely knock-on effect to businesses - transportation costs etc. Rising costs would eventually be passed on back to the end-consumers.

There's a limit to how much expenses we can save (short of being a hermit) - look to ways to increase income to cope with the rising costs.

(1) Increase salary (easier stated than done sometimes)

(2) Start a 2nd line of income (part-time tuition maybe?)

(3) Passive income (what I am trying to do) - dividends, rental etc

Investors are speculating on Brexit

Did you get the oxymoron on my title?

I was engaged in a conversation recently with a financial advisor, and was asked if I am making bets on Brexit. The advisor said that a lot of investors are speculating on Brexit, and hoping to make a quick win over it.
I was scratching my head. Investors speculate?
Benjamin Graham in his book, 'The Intelligent Investor' defines an investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative. Betting on Brexit does not promise safety of principal. It's like going to casino, betting big or small. Same logic.

The financial advisor goes on to say, all the investors talked to also make decisions the same way. After doing research, the decisions are also made on gut-feel.

By definition, investors invest, and speculators speculate. It is worrying when people start listening to speculators thinking that they are investors. How can it be? The decisions made are based on 'gut-feel' - to me it is like gambling. How can we say someone who makes decision based on gut-feel as an investor, or a speculator as an investor?

Calling a speculator an investor is misleading, and if we listen to speculators thinking they are investors, I think we will be in for a surprise.

Lend me money?

So recently I managed to get a free copy of my credit bureau report. (if you don't know, if you apply for a new credit card, or have your credit limit re-assessed by your bank, you have a 30 days window period to log in and retrieve a free copy of your report)

So what does mine says?

So I was rated AA, with a 0.15% probability for default and a score of 1953. I was thinking, why was I not rated the maximum score of 2000?

So I read on, looks like one of the factors is that frequent/recent enquiries (in addition to default or slow payment) will affect the credit score.

I was never late on payment (always on Giro) so I wonder if it's the case if I applied for too many credit cards. I admit, I have a lot of cards, mostly for freebies + various discounts at various establishments. So let's see

23 enquiries, and 17 accounts. I guess that must be why.

With a good credit bureau rating, would you be willing to lend me money? Remember, there is only a 0.15% of me not paying you back :)

In any case, the Bureau also helpfully added that 1 way to improve credit score is to reduce unnecessary new credit card application. If you don't need, then don't apply, although I DO still keep apply for shiny new cards.

Waiting for my next pay (muses while showering)

No, it's not my pay day yet, although in all honesty, I AM indeed waiting for it. My current company bought out my notice period with my previous company - and in such cases, I need to pay my previous company compensation first (of 1 month + of my salary), and wait for the next payroll cycle in my current company before I get reimbursed.

In practical terms, it would mean I am out of 2 months of salary until this month end. So I do need to give myself a pat on my back that I managed to set aside emergency cash (as part of my resolution to get my finances back on track earlier) to sustain me for 2 months.

This also means I would get a bumper amount at the end of this month, definitely something to look forward to.

What about you? Do you look forward to pay day every month?

Any thoughts on how long you can sustain if you are without pay for 2 months?

New job, new beginning

So I started with another company at the start of the month. Given the uncertainty surrounding my previous company, I decided to take the plunge and hunt around for a more secure job for my career. I did not wait for a severance package, because I think I would not be asked to go anytime soon, and I wasn't there for very long in the first place - hence my package (if any) won't be that large.

In any case, it gave me a good story to hop out, and I took the opportunity for an increment in base pay (I think it would take a few years in my ex-company for my pay to rise to my current now - I guess that's why they say if employees stay in the same company for too long, their pay would be below market value).

In all, it was pretty good, and I do hope I can stay sometime in my current company. I do not like unfamiliar environments, getting to know new people and trying to establish myself all over again.

A few things that struck me:
1. It's not good to be a job hopper, and there are certainly risks involved in changing jobs. On the flip side, there are opportunities involved. Always have a good story/rationale for what you do, and why a job switched is needed..
I was always told at my ex-company which was undergoing down-sizing to focus on what you can control. (I think they meant to focus on your work - but I took it to mean focus on getting another job which is within my control!) I rather be employed at my own terms, than be asked to leave at another's term!

2. I got my current job through my network (of course, I did go through interviews), so this highlights the importance of networking. Never burn bridges - you do not know when you will need to leverage on connections.

3. Have an adequate back-up cash reserves. I saw a few colleagues being let go over the past couple of months. Not too sure about their financial reserves - but I know some have a young family, some with mortgage commitments. It's important to have a buffer in case the severance package is not sufficient to tide over till the next job comes around.

So, with this new job and company, I hope to be here for good with them. :)

Prestige Life Rewards

I was introduced to this new and wonderful product by a Great Eastern Agent. Don't invest in property, invest in Prestige Life Rewards (PLR) by Great Eastern. This works like property investment, only better!

Wow - is it true?



Because this agent is a friend, I am open to hearing more, and I was promised an analysis between property investment and PLR. As I have a HDB, the comparison will be between the 2.

As I receive the analysis, I opened it up, and was immediately sold by the great benefits of this product. Let me share it with you.

Actually I was being sarcastic. These kind of "analysis" actually pisses me off more than anything.

The analysis is quite biased and did not present a balanced view of both products. There is only the supposedly good points of the product and the cons of property investment – to me, this is more a sales pitch than any fair analysis

For example, and just to name a few:

(1) There was mention of an upcoming oversupply of HDB flats. This failed to mention the governments intent of increasing population in Singapore.

(2) Failure to mention that we are in a rising interest rate environment, which would adversely affect the product (given the element of premium financing).

(3) ABSD was mentioned that is incurred in purchasing a property – a noticeable omission was the mention the equivalent distribution cost associated with purchasing the PLR?
This to me gives a very indication of where the 'advisor's' interest lies - whether in providing an unbiased comparison of 2 products, or only interested in talking up 1 particular tied product. I think the answer is very obvious.

Fortunately, I also received the Benefits Illustration. This is a product that has an element of premium financing. That is, I put in an initial $800,000 (based on my property value) for a total premium paid to Great Eastern of $2,392,912

So I compared the cash bonus (or passive income goes the sales pitch) vs the net rental

It is obvious to me that rental income from the HDB yields overall better passive income. And I need to remind myself that the passive income from PLR has the added advantage of leveraging, and the indicative rate is the higher end rate with 2% borrowing cost constant. How true is that? I will leave you to judge.

For transparency, I am using a monthly rental of $2,500 - given a 5 room HDB in Bukit Merah, rental increasing at 2% p.a, y.o.y. In URA's website, we can see that the rental at 2007 is approximate $2,000 vs $3,000 in 2016. Instead of the 4% increase, I used a more conservative rate of 2%.

The surrender value of the HDB (sale in this case), vs the PLR is quite different though as there is an element of leverage. If all goes well at the end of 40 years (at 4.75% rate by Great Eastern), the surrender value is $2,615,066. Would my HDB be worth the same 40 years later? Probably not. However, this is not an apple to apple comparison, given the leverage involved.

What would be more comparable is if I sold my HDB and purchased 2 properties with leverage. In that case, I am sure the pay-off changes again.

Is it a good product? Did I bite?

No - qualitatively, I doubt that the motivation of the 'advisor' is for my well-being. Quantitatively, PLR takes a higher risk profile as an asset and still fail to beat the passive income element.

I did not thank the agent for introducing this product as I felt like I wasted time analysing on an inferior product. Thinking back - perhaps I should thank the agent, because it gave me a topic to write upon.

It really drives home the point of how no one cares for your money more than yourself.