tag:blogger.com,1999:blog-52505920998461233142024-03-16T09:09:16.503+08:00Wealth Buch -- Journey towards Financial FreedomStocks, Personal Finance, Personal Development,<br>
Wealth, Income, Trading, Investing, Business<br>JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.comBlogger405125tag:blogger.com,1999:blog-5250592099846123314.post-45820881623817175472019-09-03T17:35:00.000+08:002019-09-03T17:38:44.429+08:00Another theoretical exercise on Property Calculations -- is it good for financial gains now?In recent times, there are many ads on Facebook, on property forums, on developer residential condo launches, how one can profit from buying properties, or specifically, ECs, and have it as an asset in which you could cash in to retire. Specifically, sell and downgrade to a HDB and retrieve cash for retirement.<br />
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The question is, in terms of financials, is this really a much better move?<br />
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So I decided to do a theoretical exercise on how this really works out. As there are multiple variables involved for different people over different time period, I decided that since this is my blog, I shall take myself as an example, on my own scenario 7 years ago and how it may pan out. Specifically, back to HDB vs Esparina condo again. </div>
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To simplify matters, I will set some variables for my theoretical exercise. </div>
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Starting amount for property = $160k. That was approximately the amount we put into HDB from our CPF at that time, in addition to the renovation we did for the HDB back then. This excludes additional furniture and electrical appliances.</div>
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Target timeline: 30 years later. That's the typical bank loan time, plus I would have been 61 years old by then. I highly doubt I will like to go through the hassle of moving house around 70 years old, so I think 30 years timeline should be good. </div>
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Assumed average interest rate over 30 years: 2.5%</div>
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I am taking the CPF OA floor interest rate here as a comparison. </div>
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<a name='more'></a>There are also a few other assumptions that are needed to be taken into consideration.</div>
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Assume HDB price remain relatively stagnant, or even, depreciate over time. </div>
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For private property prices, I am unsure. But I shall take data from SRX website, on their price index from 1995 to 2019 for the OCR region (<a href="https://www.srx.com.sg/price-index">https://www.srx.com.sg/price-index</a>). There was approximately a 97% increase in price over 24 years on resale price. So for 30 years, we could assume a 125% price increase. </div>
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Lastly, the biggest assumption is that money not used to pay the property, is put into the bank. </div>
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I exclude other misc fees like carpark and town council fees as they are roughly similar to condo management fees. </div>
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Now the calculations start. </div>
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<b><u>HDB Calculations</u></b></div>
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For the HDB, it is simple and straightforward. It was $325k for me, plus renovation or around $25k. </div>
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The loan started at around $190k back then. </div>
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So over 30 years, the amount we fork out would be the following</div>
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Initial payment: $135k</div>
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Renovation (including air con): $25k</div>
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Stamp duty + misc: $5k</div>
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$190k loan + 30 years of interest @ 2.5% = $270k (using MoneySense mortgage calculator)</div>
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30 years of property tax: $500 * 30 = $15k (It is actually lesser than $500 currently).</div>
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Selling price doesn't really matter if staying in the HDB all the way, but let's assume that it becomes $450k by then. Currently, the market price is about $550k.</div>
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Upfront: $165k</div>
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Total forked out over 30 years about <b>$450k</b></div>
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<b><u>Condo Calculations</u></b></div>
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I find this a wee bit more tedious because we need to consider buying and selling the condo, to buy back a HDB for retirement in order to have cash for retirement. </div>
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For Esparina, for a unit almost the same size as my current 5-rm HDB, it would have costed $880k.</div>
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Renovation costs not considered as it was generally in move-in condition. </div>
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Initial payment: $176k (20% downpayment)</div>
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Stamp duty + misc: $21k (back then)</div>
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$704k loan + 30 years of interest @ 2.5% = $1001k (using MoneySense mortgage calculator)</div>
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30 years of property tax: $1500 * 30 = $45k (I am doing an underestimate here, without consider potential increases in property prices).</div>
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Upfront: $197k</div>
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Total forked out over 30 years about <b>$1243k</b></div>
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(That is <b>additional $793k</b> forked out. We will have to take this into account later.)</div>
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We assume that by 30 years later, this condo can be sold for $880k * 2.25 = $1.98 mil, roughly $1800 psf in the year 2044 (125% price increase, which may or may not materialise.)</div>
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To draw down on the amount, one will have to sell the condo and buy a HDB.</div>
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So we assume that the sale goes through at $1.98 mil.</div>
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Upon selling</div>
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Agent's 2% commision: $39.6k</div>
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Amount received: $1.94 mil</div>
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Upon buying HDB in full without loan</div>
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(downgrading to cash out from the condo)</div>
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HDB Price: $450k</div>
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Stamp duty: $8.1k </div>
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Renovation: $10k (assuming just basic renovation and moving)</div>
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Cash left: <b>$1472k</b></div>
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Versus buying a HDB, the amount would be an <b>additional $679k</b> in cash to retire with after a lifestyle downgrade. </div>
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If we consider fixed deposits of 1.5% giving an additional of $213k to the initial $793k if we put in $26.4k annually, it would be an <b>additional $466k</b> cash.</div>
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<b><u>Conclusion Part 1</u></b></div>
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Honestly, without doing my mathematical calculations, I had thought that the bank interest rate would somewhat erode the amount that would have been gained, while stamp duty will erode it even further. Afterall, 125% is roughly 2.7% per annum compounded on the backdrop of a 2.5% bank interest rate. 2.7% per annum also makes sense as inflation rate for Singapore is around 2%~3%. </div>
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The bulk of the difference in amount comes from two amounts.</div>
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(1) $325k of the HDB yield 1.1% per annum over 30 years on a backdrop of interest rate of 2.5%, vs $325k out of $880k yielding at 2.7% p.a. </div>
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(2) Another $555k of the condo yielding 2.7% p.a. While the bank loan is at 2.5% such that there is only a gain of 0.2%, every time the loan is paid down, the yield for that amount turns into 2.7%.</div>
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Financial bloggers have been talking about yielding 5% or more generally. For the $793k (average of $26.4k per annum, or $2.2k per month) to achieve the same amount of gain, it would have to be a compounded 3.8% per annum over 30 years. In other words, I have to consistently beat 3.8% per annum compounded for 30 years just to match the gain that an EC like Esparina would potentially have. This is because of the difference of 1.6% p.a. for 30 years for the $325k. </div>
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But we have to consider that to yield 5% consistently over 30 years, the amount of effort to achieve that is more than the amount effort to just buy and stay in the condo for 30 years, before finally downgrading. Buy and stay is definitely much more passive, on top of being able to enjoy the condo facilities for 30 years. </div>
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<b><u>Tweaking some variables</u></b></div>
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The above scenario are based on some historical data, and are overly simplified and optimistic, at least for the condo part. </div>
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So I played with some number changes. </div>
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<u>Variable change 1: Condo value increases 2.0% p.a. instead, less than bank interest rate of 2.5%. </u></div>
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In this scenario, we can assume the HDB value does not change (it might go lower).</div>
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The condo buyer would be able to sell for $1.594 mil (around $1450 psf) and receive $1.56 mil after agent fee. </div>
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After downgrading to HDB, there is still a $1.092 mil left. </div>
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The same $793k would need ~2% p.a. to give the same amount. </div>
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Which means to say, if we do not expect the condo price to increase more than 2% p.a. after 30 years, then staying in the HDB and putting the cash into fixed deposits (currently 1.7% for CIMB), and maybe some into corporate bonds, etc, may yield better results. </div>
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This scenario is likely if we bought at a property price high, i.e. during the 1996 era of high property prices. </div>
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<u>Variable change 2: Bank interest rate rises a little past 2.5%, assume 3.5%. </u></div>
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This has a little more considerations. All else being equal, it would be the interest amount that will affect.</div>
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For the HDB,</div>
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$190k loan + 30 years of interest @ 3.5% = $307k (using MoneySense mortgage calculator)</div>
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Total forked out would have been $37k more.</div>
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However... HDBs have the advantage of HDB loan at 2.6% fixed, so if we go by this path, it would be only $4k more. It only make sense to go with a HDB loan in this scenario. </div>
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For the condo</div>
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$704k loan + 30 years of interest @ 3.5% = $1138k (using MoneySense mortgage calculator)</div>
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Total forked out would have been $137k more.</div>
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This would erode the $672k advantage to $539k.</div>
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Comparatively, fixed deposits of 1.5% will have give an additional of $213k to the initial $793k if we put in $26.4k annually.</div>
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<u>Variable change 3: Bank interest rate rises way past 2.5%, assume 5.0%. </u></div>
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For the HDB,</div>
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$190k loan + 30 years of interest @ 5.0% = $367k (using MoneySense mortgage calculator)</div>
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Total forked out would have been $97k more.</div>
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However... HDBs have the advantage of HDB loan at 2.6% fixed, so if we go by this path, it would be only $4k more. It only make sense to go with a HDB loan in this scenario. </div>
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For the condo</div>
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$704k loan + 30 years of interest @ 5.0% = $1361k (using MoneySense mortgage calculator)</div>
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Total forked out would have been $360k more.</div>
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This would erode the $672k advantage to $316k. Still better than fixed deposit. </div>
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<u>Variable change 4: Condo value increases 2.0% p.a., while bank interest rate is at 3.5%. </u></div>
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The condo buyer would be able to sell for $1.594 mil (around $1450 psf) and receive $1.56 mil after agent fee. </div>
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After downgrading to HDB, there is still a $1.092 mil left. Because of forking out $137k more, there will only be $955k left for the downgrader, $162k more than $793k. This is less than the fixed deposit gain (and assuming the fixed deposit rates doesn't rise).</div>
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<u>Variable change 5: Condo value increases 2.0% p.a., while bank interest rate is at 5.0%. </u></div>
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The condo buyer would be able to sell for $1.594 mil (around $1450 psf) and receive $1.56 mil after agent fee. </div>
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After downgrading to HDB, there is still a $1.092 mil left. Because of forking out $360k more, there will only be $732k left for the downgrader, less than $793k. </div>
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<b><u>Conclusion Part 2</u></b></div>
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The variables change give an additional perspective. </div>
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The scenario painted above gives an additional $466k cash because of two assumptions</div>
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(1) Condo resale prices rise at the same rate as before for the OCR region over past 24 years. </div>
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(2) Interest rates remain at 2.5% or lower. </div>
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Looking deeper into the data, both catalyst may not hold.</div>
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<u>Assumption (1)</u></div>
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The greatest rate of increase (160%) was between 2005 to 2012, a 7 year period. This was in line with the Singapore population growth spike from 2003 to 2008, and remained above 2% until 2012. With population growth comes higher demand for properties, so it makes sense. </div>
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However, since 2013, there was a very slight, or minimal growth rate till now, 2019, a 6 year period. With the release of more land in the Great Southern Waterfront, Paya Lebar Airbase, etc, I am unsure whether condo value will still rise at 2.7% p.a. for the next 30 years. </div>
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<u>Assumption</u><u> (2)</u></div>
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A quick google search currently shows the property interest rates between 2.48% to 2.78% across different banks (source: MoneySmart blog). My guess is, the low interest rates of the past may not come back for now. The low interest rates previously were due to the 2009 financial crisis, where there was a liquidity crunch. Interest rates were lowered to increase the liquidity (or make borrowings cheaper) to help the economy recover. </div>
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Will the interest rate be lowered again? That's anyone's guess, but I think the likelihood is low. Ultimately, banks want to earn more $$. Why charge an interest rate so low?</div>
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Because of the economical and political events in Singapore since 2005 till 2013, property prices were increasing fast while interest rates were low. Any comparisons with that time period will show a nice property yield gain, and get buyers very sold on it.</div>
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<u>My guess</u></div>
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I am guessing Variable Change 4 to be the most likely for the next 30 years. Another way this could be sold is the big numbers and the potential gain in absolute dollar terms. It does look very nice on numbers because the numbers are large.</div>
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However, based on percentages (an E Maths topic btw), the yield may not be that nice afterall. </div>
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So in summary, in terms of financial gain, I don't think one would be much better off financially in 30 years time by buying a condo now. That does not even include the stress of higher monthly repayments for some. </div>
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Of course, buying a property to stay does not always mean it must be for financial gain. The objective of this theoretical exercise is to do a personal self-check on whether buying a property for financial gain/retirement really works the way it was described. I think I have my answer.<br />
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What it also means for me, is that I can take my time slowly if I am looking to upgrade my property. No rush at all.</div>
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Then again, markets can remain irrational than we can remain solvent. So... who knows?</div>
JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com6tag:blogger.com,1999:blog-5250592099846123314.post-15258682339449436652019-08-29T17:20:00.002+08:002019-08-29T17:21:36.577+08:00Stagnant Networth / Portfolio... And my excuses for a married guy******<br />
As per some recent blog posts, these are for re-organising my thoughts for myself, for self-reflection and to hold myself accountable for events that has transpired in recent years.<br />
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Feel free to comment and point me out.<br />
Thanks uncle cw88 for reminding me to think of lessons learned.<br />
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Quite some years ago, I decided not to track all my expenses, and just spend as I want to. I have already lost count of the number of years, but for me, at least I made sure I spend only what I have and paid up all credit card bills every month (credit card for ease of purchase and discounts). Nothing on debt.<br />
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One of the main thing that was nagging me on my mind, was my rate of growth of my networth. In the early years, the growth rate was rather good, but as I checked my portfolio recently, I realised I had not had much portfolio growth.<br />
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Honestly, I was puzzled, confused, and little bit unhappy. I know I have been spending a lot more, made some big investment blunders, but I thought it would have been better. And the main reason why was because I did not put a figure to everything I have been doing.<br />
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So I decided to do a reflection exercise to track back on myself past few years. It was easy to track myself on some older posts as I had not been actively posting past few years.<br />
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As I looked back at some older posts, I realised that was a point in time in Nov 2016 where my portfolio actually touched $350k. I had reached $320k at age 32 (2015), and $350k at age 33 (2016).<br />
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As it stands, my portfolio is still at around $350k in the year 2019 with about $25k++ warchest, which means there was minimal to no growth. There are still funds here and there in different bank accounts which I am too lazy to really sum all up.<br />
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So from 2016 to 2019, I only grew on average by $8k+ a year, even though my dividends is ~$18k annually. What actually happened? Since I was not spending any effort in tracking where my money went past few years, I was actually a little at a loss. Within the 3 years, I should have had dividends of around $54k. And maybe extra savings from work. But where did they go to?<br />
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Having been too passive in those few years, I have to think back slowly in time, discover the reasons, and see where I can improve on myself.<br />
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Based on my self-reflection, there were 3 major reasons<br />
(1) Quitted full-time job in 2012<br />
(2) Increased expenses due to house and children<br />
(3) Poor decisions in the stock market<br />
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<b><u>(1) Quitted full-time job in 2012</u></b><br />
I quitted my full time engineering job in 2012 and had pumped in about $40k to takeover a tuition centre. I was doing both engineering and teaching tuition before that, working almost 80 hours a week. Income was great, and there was no time to spend $$, so savings rate was almost 90% or more. That set the base.<br />
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Come 2012, I reached a stage where I had to decide whether to reduce the amount of tuition and continue with my engineering job, or quit my job and do full time tuition. I was too tired to continue doing what I have been doing for the 3 years prior. I chose to quit my job.<br />
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Income immediately fell drastically. Not only had I no full-time job, tuition income fell too due to increased business expenses. Due to my number of students (more than 3 in a group), I am not able to teach at home by law. Apparently, URA and HDB do not allow advertisements, be it flyers on even online ads, for tuition services at own residential places. Some tutors flout this law, but that's them.<br />
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Profits are not that great yet, because we have also been reinvesting the bulk of them back to the centre to improve on site facilities for the students.<br />
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I also had quite some funds invested to keep the business going for a while before finally being able to slowly withdraw them out in recent months. That contributed to my warchest.<br />
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<b><u>(2) Increased expenses due to house and children</u></b><br />
In the past, before wedding, I stayed at my parents place. Expenses were near zero as electricity and water bills, internet bills, town council fees, household items like toilet papers etc, were paid by my parents. I did gave them a monthly amount which I still do now, although I was fortunate that they don't really need it.<br />
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Mid 2014 was the wedding, and expenses shot up for household. My arrangement with my wife is that I would try my best to pay for majority of the expenses to see if we could survive on a single income, while the majority of her salary would be saved for potential future uses, e.g. in the event we were to upgrade our home. Also, the exercise to survive on a single income is also in case she decided to stop working to take care of kids. It has worked well so far, such that she has a substantial enough savings in both cash and CPF.<br />
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In short, majority of expenses fall on me, and so I shall do a rough breakdown.<br />
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Because I also work at home, PUB bills come up to almost $300+ a month. In addition to all the other bills, estimated monthly amount is around ~$500 currently.<br />
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In addition, we got a family car. It was a shared expense between me and wife, so it was some ~$40k upfront that was put in. Along with this come season parking charges, car maintenance charges, parking charges, road tax, car insurance, petrol, car cleaning, etc. Excluding the one off upfront payment, this works out to about ~$5.4k annually on my shared part, or average of ~$452 monthly.<br />
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In 2017 came our first child, and 2019, our second. Expenses went up even further, with diapers and milk powder, baby wipes, diaper creams, etc etc. There were also one-off expenses due to confinement nanny, confinement food/medicinal herbs, hospital bills, gynae bills, etc. Monthly expenses include childcare, doctor fees, etc. All in all, for both children, excluding the one-off expenses I estimate a current monthly spending of ~$1.5k. Might most likely be an overestimate, but I guess not too much over. Childcare is already $500, milk is about $180 per month for the younger one, maybe cheaper for the elder one. Diapers probably around $50 a month, assuming 6 changes a day with average 30c per diaper. Paediatric fees are around $100++ each visit when sick.<br />
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My own spending on my own wants also increased. With tablets and new phones and useless stuff from taobao because it was cheap... Also, toys and books for my elder child is also classified under here... However, this does not affect too much. I estimate an ~$150 average monthly which may increase in the future.<br />
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Because of family, I have also taken an additional life insurance coverage ($2.2k a year) on top of my term insurance ($400 a year). Wife's salary covers hers for now. There is also the hospital and accident insurance I took up for both kids (~$1.3k a year I think, for each kid). So there is another $430 per month here.<br />
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Lastly, food is a major expense. Be it eating out, or buying to cook. Supplements, for myself, for my wife, for my kids. Groceries, etc. Water filter expenses. My expenses in this area is estimated to be about $800 monthly. Might be more, might be less, this is just an estimate.<br />
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In total, there were one-off expenses of ~$60k on my end, from 2017 to 2019, the bulk being the car and the hospital/gynae fees. The estimation of recurring expenses is about $3.8k monthly, or around $46k annually. I'm personally surprised by this quantum, but I don't think I will seek too hard to reduce it for now to maintain the current standard of living.<br />
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<b><u>(3) Poor decisions in the stock market</u></b><br />
A long time ago, I used to think this way:<br />
Dividends are passive. I just need to buy and forget.<br />
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In other words, buy at a correct and good price, forget about it and come back few years later.<br />
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That was a huge mistake. I might have gotten a counter at a good price at the point in time, but that only governs the downside... Losses are minimised... in my case, by dividends. I was lucky, really lucky, for SPH, Starhub, M1 and SMRT.<br />
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In a few short years, industries can change. Disruptions can happen. One needs to be keenly aware of the business environments and etc. What works well in the past, may not work well in the future.<br />
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And that was what I had missed for Starhub and SPH. I had my fair share of ups and downs, of the bumper dividends received, but I missed following business updates closely on the industries.<br />
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Indeed, investing, even for dividends, cannot be passive. I was overly passive, lazy, and also careless, in my approach to my portfolio management.<br />
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So back in 2016, my portfolio included Starhub and SPH at a value which is ~$20k in total higher than now. With both counters a combined $20k lower today, and a 100% write-down of Hyflux perps of $21k, and my portfolio still around the same, it means I must have pumped in almost $40k cash into my portfolio, with some profits from the sale of Singtel.<br />
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Most of my portfolio gains were made between 2009 to 2014, but none of those are being accounted for here as my base year for this self reflection is 2016 till now.<br />
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Noble group loss was not included in this because the capital loss was almost equal to the capital gain made from Saizen Reit. So the comparison between 2016 and 2019 would not have been much different.<br />
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<b><u>My Conclusions for myself</u></b><br />
As I write this post with all the calculations, I finally gain some clarity about my financial situation and how I have been "anyhow" allocating cash without much thinking.<br />
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So over the past 3 years, of the $54k dividends received, $40k have gone back into the portfolio which sort of buffered the loss from SPH and Starhub. $14k are in the warchest ready. Another additional $10k has been put in from savings.<br />
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The majority of my income are actually spent on (2), family. Previous years when I was single, I saved 80% to 90% of my income and spend on average $1k a month. At $46k annual spending for my family, that was an increased of $45k annually, times 3 years, compared to when I first started out. Granted, a small $2k went into life insurance (for 25 years) and would be part of a tiny portion of retirement amount.<br />
<br />
<br />
<b><u>Conclusions in general</u></b><br />
(1) Passive investing cannot be overly passive. It is never buy and forget.<br />
<br />
(2) The best time to build your portfolio based on hard work and savings, is right after graduation and before marriage, which is typically the onset of the 3 big financial bombs. That's where we have the most amount of time and energy to build our first pot of gold.<br />
<br />
Although it is always said that our highest earning power is when we are between age 40 to 60, I have not reached that age yet to be able to compare and reflect on it. So for now, at least up to mid thirties, my conclusion is likely to remain true.JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com6tag:blogger.com,1999:blog-5250592099846123314.post-62848410527046818042019-08-27T14:42:00.003+08:002019-08-27T14:45:23.092+08:00Marginal safety with dividend counters -- SPH and StarhubThis is a mathematical exercise I did with my holdings in Singapore Press Holdings.<br />
<br />
<br />
A short history of my relationship with SPH<br />
Around the 2008~2009 era, I bought in 6000 shares of SPH at an average of $3.65<br />
Mid of 2014, I bought in 2000 shares of SPH at $3.98 but booked in as $3.65 on my portfolio as I used "profits" from sales of other shares to offset the difference.<br />
<br />
So, I took it as 8000 shares of SPH at $3.65 average.<br />
<br />
With Starhub, it was quite simple. Majority were bought in 2009, with some in 2010. In summary, the average cost of Starhub was $1.90.<br />
<br />
2015 came, and all the way till this year, I have been busy with wedding, with family, with children, with business, etc, such that I have not spent much time to look at equities. That's up till recent months, where I took interest again.<br />
<br />
It was really eyes off market for majority of the time. I knew SPH was in a sunset industry. I knew. But I did not take any actions to sell.<br />
<br />
Starhub was being disrupted by MNVOs. I knew. But I did not take any actions too. On my old blog post, I was considering to sell at $4.70. But I did nothing. [That was $47k on hindsight.]<br />
<br />
I mean, it was "buy for the long term" right?<br />
And SPH declined to $1.98 while Starhub declined to $1.34.<br />
<br />
With that, I have actually discussed with friends before, on how the dividends from SPH and Starhub actually helped buffered the drop in price for me, and how "lucky" I was. But it was just a feel. There was no actual calculations until I did it today.<br />
<br />
<br />
<a name='more'></a><b><u>For SPH</u></b><br />
Checking on the historical dividends paid out,<br />
from start of 2010 till today, the dividends paid out was at least $2.005 for 6000 shares<br />
from mid 2014 till today, the dividends paid out was $0.855 for 2000 shares<br />
<br />
If dividends were used to offset the "cost" of the shares, it would have been $1.9325.<br />
At the current market price of $1.98, there is still a tiny profit of $0.0475.<br />
[Of course, when it falls below $1.93, it would be a loss instead.]<br />
The gain/loss is almost 0%.<br />
<br />
As of now, fixed deposits would have done much better than the amount of SPH. But at the very minimum, the capital had been withdrawn gradually via dividends (and moved into other counters and into business), and it would have been the same if I had left it in cash and not bought SPH.<br />
<br />
<b><u>For Starhub</u></b><br />
Checking on the historical dividends paid out,<br />
<div>
from start of 2010 till today, the dividends paid out was $1.815 for all 10000 shares</div>
<br />
If dividends were used to offset the "cost" of the shares, it would have been $0.085.<br />
So it is almost free now.<br />
Or another way to see it, if I sell at today's price, it is still at 66% gain (dividends + loss) over 9 years, about 7% a year.<br />
<br />
<br />
Not having the time to follow the market and just holding the counters passively<br />
Not having the conviction to sell when they were priced too high<br />
==> these have costed me quite a fair bit of profit.<br />
I tend to think too long upon selling.<br />
<br />
Fortunately, similar to the case of SMRT previously, dividends have helped buffered a fair bit of the difference.<br />
<br />
<br />
The question then becomes.... should I sell now or not.<br />
For Starhub, I am not confident that they will pick up anytime soon. However, the shares are almost free, and any amount I sell is a profit.<br />
<br />
For SPH, I am quietly positive on their properties portfolio for now. But I am also unsure whether I should sell it because I do think it is at fair value at the moment.<br />
<br />
Thinking thinking thinking...JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com6tag:blogger.com,1999:blog-5250592099846123314.post-77111925875476631832019-07-29T12:16:00.002+08:002019-07-29T12:16:49.042+08:00My HDB property -- should I have gone for an EC back in the days of 2010? Years have passed since I collected the keys to my HDB. And having already reached the minimum occupation period along with two more additions to the family, and maybe considering one more, I was looking for a bigger property, specifically an executive condominium since I have a 5-rm HDB already of 110 sqm.<br />
<br />
And with the massive increase in private property prices, I can't help but wonder if it would have been a better move back then to squeeze all my savings out for Esparina condo vs my Fernvale flat.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="http://www.lumchang.com.sg/images/default-source/property/singapore/esparina-01.tmb-pro-li.png?sfvrsn=1" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://www.lumchang.com.sg/images/default-source/property/singapore/esparina-01.tmb-pro-li.png?sfvrsn=1" data-original-height="200" data-original-width="200" /></a> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiWKfSbcl8KivkYEK62lcZeUuEkryFw5y52L7tsu2C1Pz16G392uCFN16kR0W2hwrfK3f5d4-sZpL2G9bY5eG-2TPU-DEFZ2SwX0u-aDumKuIs_AA4N47Pc9QvvUDGcgRWoK_0U17jNTWk/s1600/Fernvale+Foliage.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiWKfSbcl8KivkYEK62lcZeUuEkryFw5y52L7tsu2C1Pz16G392uCFN16kR0W2hwrfK3f5d4-sZpL2G9bY5eG-2TPU-DEFZ2SwX0u-aDumKuIs_AA4N47Pc9QvvUDGcgRWoK_0U17jNTWk/s1600/Fernvale+Foliage.jpg" data-original-height="521" data-original-width="537" height="193" width="200" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
</div>
<br />
So I went to do some mathematical calculations as follows:<br />
<br />
<a name='more'></a><br />
Based on what I could afford back then,<br />
<br />
Esparina<br />
1000 sqft -- ~$750k or $750 psf<br />
Currently, average is around $1100 psf, so about $350k gain<br />
<br />
HDB<br />
I got it at $325k. Plus minor reno around $25k maximum, so $350k.<br />
Currently, average sale is around $560k<br />
So about $210k gain<br />
<br />
While the absolute gain is smaller, $210k vs $350k, the percentage gain is higher, 60.9% vs 46.7%<br />
<br />
If we then include the interest rate of $400k over the past 6 years, on an average of 2% a year, it would have been at least $50k more in interests, which would bring the $350k gain in Esparina down to $300k, or a 40% gain. However, I did not consider CPF grant from the government, which wasn't a lot back then.<br />
<br />
Many things would have been different as well. If I had gone along with the EC, I probably wouldn't be able to clear our car loan fast, wouldn't have dared to step outside of the MNC employment to venture on my own, nor would I have dared to put more cash into the market, which allows me to have a comfortable dividend income at the moment.<br />
<br />
Net net, I think the HDB was a slightly better financial move at that point in time, and it allows me to potentially consider an EC next, without needing to sell it first and wait for 30 months.<br /><br />
To me, with the crazy increase in EC prices, I think it would make even better financial sense now for young first timer couples to go for a HDB first while they sort out their finances.<br />
<br />
Meanwhile, because of the Piermont Grand EC launch, I also consolidated all our family assets to prep for an potential purchase. Although I did not go for the ballot eventually due to various considerations, it was a good exercise. Apparently, we would be able to afford a maximum of $1.6 mil property if both wife and I showhand all our stocks/bonds/savings/CPF with a $400k loan remaining. This puts our total assets of CPF OA + HDB + investments + cash at near $1.2 mil for the family.<br />
<br />
Of the various considerations not to purchase the property, the financial related ones are due to the following:<br />
<br />
1) If we get a bigger property, we would move from net inflow of cash from investments to net outflow of cash to investment, mainly property. While the asset base may rise in the future, cash flow is generally affected for the next 8 years at least.<br />
<br />
2) If we get a smaller property, it would be a downgrade. Condo facilities are generally pretty useless to me.<br />
<br />
That's all the rant for now.JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com8tag:blogger.com,1999:blog-5250592099846123314.post-64782980237753063442018-09-22T00:10:00.000+08:002018-09-22T00:10:02.326+08:00"An additional $560k gone..." -- Calculating the dollar losses to investments and businessWhen I first started this blog years ago, it was meant to chronicle my journey, to be accountable to myself for my financial decisions.<br />
<br />
Gradually, I have people telling me they learned from my blog. That kept me motivated, until I got busier and busier, and reduced the frequency of writing drastically, to the point I have almost not written much.<br />
<br />
And... I'm glad that I have posted more in the earlier days. It's like I'm reading on my past self, how much more disciplined and stingy and scroogy I was than now.<br />
<br />
So this blog post serves as chronicle for my future self to read and re-read again.<br />
<br />
Instead of a blog post with a positive tone, this would take on a more negative tone.<br />
<br />
<br />
<b><u>More stock losses (~$29k)</u></b><br />
I like to talk more about my losses in stocks, than gains. For me, it serves as a reminder of my stupidity, lapse of discipline, and how much more I have to think and learn. For others, it serves as a warning that the stock market is not here to feed you or give in to you, but a double edged sword that can slit your throat any moment.<br />
<br />
<u>Losing at Noble Group</u><br />
After my past estimation that the estimated capital gain was near $0, more losses were chalked up. First, Noble. That was an additional ~$8k in losses. I have to admit, it was more of a gamble to buy. I cannot remember the price I got it now, but I remember having a minor profit after buying.<br />
<br />Subsequently, the management decided on a 10-for-1 consolidation, before the share price drop to its pre-consolidation price. In one fell swoop, this caused the share price to drop 90%. Failed gamble. Entirely my fault. I thought I did my homework, but obviously I do not know enough.<br />
<br />
<a name='more'></a><br /><br />
<u>Losing at Hyflux Perps</u><br />
An additional $21k might be lost here. It is a perpetual security, and I had put in a large amount initially because I thought not all would be accepted. I was wrong. I was greedy.<br />
<br />
While there might be a remote probability of this being revived, I will probably choose to write it off for now.<br />
<br />
That's $29k lost over the past 2 years, which is probably what some would save over a period of half a year to a year. Fortunately, dividends over the past 2 years would have covered a majority of this, but it is akin to a lost 2 years in stocks investing.<br />
<br />
<u>At Starhub/SPH</u><br />
These two shares were once dividend darlings. At one point in time, I was over 100% in unrealised capital gains for Starhub, before dropping to a loss.<br /><br />Right now, the paper losses for these shares are pretty low. Dividend received over the past 7 ~ 10 years have probably covered all the paper losses and the majority of the buy-in price.<br />
<br />
<u>At Accordia Golf Trust</u><br />
This varies a fair bit. At about 10% below my buy in price, my dividends received would have covered the paper loss. Dividends as a form of exit strategy is still working for this counter, and the two counters earlier.<br />
<br />
While I was extremely busy trying to run the tuition centre, as well publishing my books, taking care of a kid, etc, I had not looked at the market or any of the companies quarterly/annual reports at all.<br />
<br />
More recent entries like OCBC, SembMarine and more SGX are doing ok. However, going forward, I will likely be not putting as much cash into the stock market as before, but keeping it in the bank to further boost liquidity over the next few years.<br />
<br />
<br />
<b><u>Tuition Centre (~$530k over 7 years)</u></b><br />
I had quitted my job and taken over a tuition centre previously in 2012. I have always wondered what happens if I stayed in my engineering job... or if I reduce overheads by teaching tuition in other centres or 1 to 1 at students home.<br />
<br />
In total, estimated overheads since 2012 to end 2018 amounted to ~$530k, of which half went to rental of premises. This was on top of the takeover fee. Would I have saved that amount had I gone around to teach? Or would I have earned less? I'm really unsure.<br />
<br />
With that figure, I can't help but wonder occasionally if I would have hit a million SGD in liquid assets had I went ahead with a zero overheads business at the current age of 35. Revenue due to my lessons solely have covered majority of costs, while I underpaid myself. Granted, there were other tutors which helped in the overheads.<br />
<br />
Of course, the nice way to put it is that<br />(1) These are all part and parcel of business expenses.<br />(2) This is an investment for the long run.<br />
(3) It is a learning journey.<br />
<br />
It's all a matter of perspective. Definitely, lots of priceless lessons were learned, some of which I would likely share over the next few blog posts. In fact, some of these lessons are applicable to the world of investing.<br />
<br />
<br />
<b><u>I'm still fortunate</u></b><br />
With all these seemingly negative financial moves, I'm really fortunate that overall, my networth has still a mild increase, even with much increased expenditures.<br />
<br />
And that excludes...<br />
Car loan fully paid.<br />
HDB loan half paid.<br />
Got a whole life insurance<br />
<br />
Counting my blessings, and ending the rant for now.JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com2tag:blogger.com,1999:blog-5250592099846123314.post-55335852814177433072017-01-29T22:30:00.000+08:002017-01-30T14:01:33.279+08:00My Realised Capital Gains After 8 years in the market Is Near Zero<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-family: "arial"; font-size: 14.6667px; white-space: pre-wrap;">Recently, I mentally tabulated a number of my stocks that I have sold, or suspended, or privatized… And the grand total of capital gains (dividends excluded) among all these realised gains is near zero… :(</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Granted, there were a number that were due to mistakes made as a newbie in the stock market. The stocks offhand that I recall:</span></div>
<b style="font-weight: normal;"></b><br />
<a name='more'></a><b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Gains:</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Saizen: ~$8k</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Silverlake: ~$6k</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Singtel: ~$2.2k</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Darco: ~$</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">China Hongxing: ~$2k</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Macquarie Infrastructure Trust: ~$2k</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">GLP: ~$3k</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Singpost: ~$2k</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Bread talk: ~$2k</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">DBS: ~$1k</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Capital mall Asia: ~$2.4k</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Total Gains: ~$32.6k</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Losses:</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Aztech: ~$10k (after privatizing at 42c, I have accepted the offer)</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Berlian Laju: ~$11k (100% write off)</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Cosco: ~$5k (100% write off)</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Hor Kew: ~$5k (100% write off)</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">China SKY: ~$1k</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Total Losses: ~$32k</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The other counters, either I can’t remember, or the amount is too little to be significant. </span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">It is interesting to note that the capital losses were due to stocks bought in the very early days. Cosco was my very first purchase. Subsequent purchases influenced by forums was Hor Kew, Berlian Laju and China Sky. Aztech was my personal mistake.</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">These are my “school fees”.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">These mistakes occur because I do not have an exit strategy. I implemented techniques halfway. I was not disciplined enough. Fortunately, my later purchases have sufficient gains to buffer and cover these losses.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">What's interesting for my portfolio management style is that the majority of the gains come from dividends (instead of capital gains). The remaining counters on my portfolio are positive in terms of capital gains, but they are stable enough to provide a dividend yield for the long term. In terms of dividends, I did not really calculate, but I believe to have yield about $90k in dividends over the past 6 years, despite slowing down in my wealth accumulation this year and the last 2 years.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">So now, my “exit strategy” while preserving capital, is to do an “exit” with dividends. </span></div>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Some examples:</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">1) Recently, SMRT was privatized, and while it was at a price lower than my purchase price, the dividends paid out over the time I owned it covered the difference, giving me another nett zero. </span></div>
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<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">2) For Starhub and Aims AMP I Reit, my yield is ~10%, and I should have receive my principal back in about 3 years time.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 14.666666666666666px; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This shall probably be my main strategy for portfolio management going forward, on top of being careful on purchasing shares at a bargain price. Keeping it simple. </span></div>
<br />JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com8tag:blogger.com,1999:blog-5250592099846123314.post-71404282874822745992017-01-29T11:13:00.004+08:002017-01-29T16:52:38.445+08:00Review of 2016 and on to 2017I haves meant to put this post out at the start of 2017, but was delayed by the birth of my princess and preparations for CNY.<br />
<br />
I have not really been reviewing my portfolio and stuff since 2014. Looking back, re-reviewing myself, and writing on the blog, actually holds me accountable for my own progress, as well as being a chronicle of my past decision making, be it good or bad.<br />
<br />
I wanted to restart this blog with a different focus, but haven’t had the time to do it. Procrastination had set in, along with a myriad of excuses (Which shouldn’t be there in the first place).<br />
<br />
First thing, I realised recently that this blog had been extremely useful for myself to track my past purchases, and the reasons for it. What I know today and what I know then is very different, and I cringed at some of the purchases I made in the past.<br />
<br />
Next, while I have grew very little in terms of portfolio value over the last 2 years, upon reflection, I realised my cash had gone significantly into<br />
1) Wedding preparations.<br />
2) Housing<br />
3) Shared portion of car loan and misc expenses<br />
4) Baby preparations<br />
5) Purchases of various wants (this amounted to quite a fair bit)<br />
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I have also put cash into<br />
1) Books (lots, but haven’t really read all)<br />
2) Businesses (talk about it later)<br />
3) Attending marketing/business courses (partly sponsored)<br />
<br />
In terms of wants, due to my over-spending, I think I have bought many of my wants already. This was primarily possible because of the China taobao :p<br />
The wants are however mainly in terms of electronics to boost productivity (such as the ipad bluetooth keyboard that I’m using to type this post), baby stuff and furniture.<br />
<br />
In books, I have bought a fair number of business related books, although I have not read everything yet. I must make sure I finish reading these books before end 2017.<br />
<br />
<b><u>Businesses</u></b><br />
I have $5k into a start up before calling it quits end 2016. I learned that startups are super risky to invest in because not only do they not have a proven business/revenue model, the people behind it may also only be good salesperson but not good business people. For this particular startup, I was sold by the CEO. I contributed many ideas that I believed would set it apart from the rest of the businesses, and came up with a sustainable revenue model (or so I think) which the rest of the shareholders were agreeable with.<br />
<br />
Then the CEO lost focus and went ahead with projects that were totally unrelated to the original planned model. His confidence came from having presented, and awarded government fundings, and soon refused to bother about minority shareholders. His firm believe was that the government agencies can't be stupid enough to award him $$ if his model will not work. Apart from that, his financial management was horrifying. Government funds were spent on food which he declared as entertainment expenses as he need to talk to other businesses. The totally unrelated projects that he embarked on, all received little to zero revenue.<br />
<br />
Sad to say, it didn't work out. All the other shareholders gave up too. The lessons learned have been quite profound in my future approach to investing, especially in the stock market. It reminded me of the time I invested in Aztech. At that time, Aztech has a proven business model, but it is investing funds heavily into unrelated segments. This is almost the same as investing in a startup. I was advised by good people that Aztech was on the path of diworsification, and may not do well. I didn't understand back then, now I understand.<br />
<br />
Which means to say, for margin of safety in investing, a sustainable and proven business model must exist. It isn’t just the financial numbers, it isn’t just how well the CEO is selling his company and ideas, but the rather subjective judgment of the business model. A bad business model, would bring a company down to its knees.<br />
<br />
So instead of investing in another person’s startup, I started my own books publishing firm. The amount of work to even get a first book out was tremendous, and the returns… pitiful. However, it is the overall strategy that matters. Books have the impact of raising my personal profile, so I can get more students, on top of helping more students that decided to self study.<br />
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<b><u>2017 and onwards</u></b><br />
2017 onwards, I expect my expenses to go even higher, especially with the birth of my baby daughter. Enough lazing around, I must be even more prudent with the investments, take on more students, while developing the tuition centre as a business instead of being “just another tutor”.<br />
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The second edition of my first 2 books, and 2 more new books should be out by the mid of the year. The “Explain That!” Series of books which I sincerely hope will benefit many more students in their exams.<br />
<br />
This is also the year where I will be watching out for opportunities to change my portfolio. Current average monthly dividends stand at around $1.6k, but I am expecting this to drop as I sell certain counters to bring cash out. Will see how.<br />
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With a family member comes greater responsibilities, so must really work harder now. No more lazing.<br />
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JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com3tag:blogger.com,1999:blog-5250592099846123314.post-79756668666466027612016-11-15T11:11:00.002+08:002016-11-15T11:11:19.444+08:00Slacking from a 300k+ to 350k+ Portfolio<div class="separator" style="clear: both; text-align: center;">
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I realised that it has been a year since I wrote the blog post on my 300k + portfolio (and had it briefly mentioned in the Business Times -.-" )<br />
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Over the past year, I have been slacking. Real slacking. By slacking, I really mean I was not working as had as before when I first graduated. Then, I worked 70~80 hour weeks. Now? Probably 20+ hours<br />
<br />AND I have been spending lots.... some for good reason, some just for wants.<br />
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I am blessed to still have a portfolio that grew a little.<br />
<br />
So... I did a trackback to check on the cashflow....<br />
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Interestingly, it was a year where I didn't earn as much from the tuition business. Many factors at play here, including a transition period between an older partner in retirement to a newer partner. Hopefully 2017 will be a much better year.<br /><br />Also it was a year of massive spending.<br />
First, my wife and I will have a new addition to our family in Jan 2017 :) The expenditure on gynae consultations as well as pre-natal supplements adds up to lots. Money earned is to be spent on loved ones. For my own financial goals and targets, I just have to work even harder for it.<br />
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Next, this was Dec 2016, I signed up for a life plan for both myself and my wife. Not too big a deal, much less than the gynae consultations and etc in total, but still pretty ok.<br />
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Also, it was the year where I really spent too massively on online shopping. With SingPost Credit Card (Stan Chart) 7% discount, things get really cheap. The only caveat is a minimum $600 spending, which inadvertently made me spent more than what I should sometimes. I have actually reached a stage where I have nothing else to spend on... maybe my wants aren't that expensive afterall! Or... Taobao shopping is just cheap...<br />
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I also spent some $$ on publishing two books. I have yet to collect the receipts from the distributor, but I believe it should have broke even.<br />
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All in all, $$ coming in from active work was almost all spent, with some minimal savings.<br />
<br />
What helped my portfolio grow, was mainly dividends. Dividends from the different counters I own, and I reinvested the dividends into the market at different times.<br />
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For this year, I have bought the following:<br />OCBC at 7.73, Noble at an average of 0.23 for a "punt", and CMT just yesterday at 1.91.<br />
On top of that, I also subscribed for Hyflux Perps at IPO price.<br />
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The dividend strategy has been working out pretty well. As of now, average monthly cashflow from dividends and bonds are just shy of $1.6k monthly (only from my own portfolio). Still short of my next personal target of $2k.<br />
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To me, dividend returns form part of the defence and exit strategy of stocks. While slow, it provides returns over time. One example was SMRT. Although delisted at a price of lower than my purchase price, with the dividends received, I made almost no loss, apart from inflation costs of the money.<br />
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<br />
The strategy for next year:<br />
With a new addition to the family, cash expenditures are going to shoot up. While adjustments (both financial and others) have to be made, my main belief is that I have to adopt a slightly different approach to bringing in more income, much more so that merely cutting expenses.<br />
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To bring in more income, I would have to be much more disciplined and systematic in bringing in students that need help in their studies. I will also look into publishing more books.<br />
<br />Investing wise, I will likely continue with the dividends strategy (with the usual homework done before buying), and attempt to push it even nearer to $2k.<br />
<br />JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com4tag:blogger.com,1999:blog-5250592099846123314.post-515206627028403702015-11-17T17:47:00.000+08:002015-11-17T17:47:07.442+08:00Disciplined savings for cash sucking events in life, and not just create an emergency fundCash sucking events does not mean emergency funds, but emergency funds will help in allievating cash sucking events.<br />
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My definition of cash sucking events is pretty huge, and it's probably a wider definition as compared to just what emergency funds can do.<br />
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I list some examples of cash sucking events below<br />
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1) Marriage<br />
2) House<br />
3) Baby/Kids<br />
4) Medical Bills<br />
5) Parents' Medical Bills<br />
6) Business<br />
7) Car? Not a necessity but it increases convenience if you have old parents or baby kids who may need to be rushed to the hospital anytime.<br />
and more<br />
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I don't really like the idea and concept of just emergency funds, or maybe the more commonly accepted idea that it is for emergencies only. This is especially the case for younger people.<br />
<br />
And in my opinion, many emergencies could be covered somehow by adequate insurance. House damage? House insurance. Car accident? Motor insurance. Medical emergencies? Medical insurance. The list goes on. The rest of my thoughts does not apply if you do not have adequate insurance cover.<br />
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And as for emergency funds that are catered for loss of income due to unemployment, it will really depends on situation. How much debt do you carry? Any part time income source? How much investment income from dividends and bond coupons?<br />
<br />
Typically the younger you are, with less debt and burden and responsibilities, the lesser the amount of "emergency funds" you really need. In my mid twenties, I spend maybe a max of $900 a month, with average of around $700. 3 months emergency funds would be $2.1k, which is easily a month of salary after deducting expenses. In such a situation, does emergency funds really make much sense?<br />
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<br />
Instead, for the younger crowd, I would think that a systematic preparation for cash sucking events is more important.<br />
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Which means, a personal finance plan should entail preparing for cash sucking events, not just retirement or emergencies.<br />
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The question is... how?<br />
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<b><u>By Discplined Savings</u></b><br />
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I tested this over the last few years.<br />
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Basically, I have a separate bank account where I transfer $300 every month into it without fail. Month after month. The moment I received my income, I transfer $300 out into this bank account.<br />
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Pretty similar to a savings plan, but at bank pathetic interests.<br />
And sometimes, when I feel like I received bumper dividends, etc, I transfer about $500 or more. But nothing below $300.<br />
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This is probably what is commonly termed as "pay yourself first". And it is at an amount which most likely does not affect the quality of life. The younger you start, the better, as money responsibilities tend to increase as one grow older.<br />
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I thought nothing of it as this does not affect my lifestyle, but after some time, I realised that the particular bank account became over $10k. 3 years had passed in a jiffy without me really realising.<br />
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This cash, I could choose to use it in anyway I would deem fit. I could<br />
1) Buy stocks<br />
2) Use it as part of marriage expenses<br />
3) Renovation expenses<br />
4) Any other cash sucking event.<br />
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It's slow, but it's there. And the advantage over a savings plan? You could choose to contribute more, or take it out to use it anytime you want.<br />
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No matter what, $10k will definitely help in many of the cash sucking events.JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com1tag:blogger.com,1999:blog-5250592099846123314.post-12546025820793616852015-11-14T00:50:00.002+08:002015-11-14T00:50:45.794+08:00How I went from 0 to 100k to 300k+ savings by age 32Recently, there have been a number of the younger generations (mid twenties) asking how I managed to save... So I decided to write and share my experiences. <br />
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Recall that about 2 years ago, the national newspaper has mentioned how it is possible to save 100k by 30 years old. I remember there were quite a number of people who thought it was crazy and undoable, or maybe my memory failed me. Either way, there are a lot of people who achieved that before 30 years old.<br />
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Granted, my savings aren't exceptional. I do know a friend who has hit the two million mark when he was age 32 about two years ago. That.... is really exceptional, and I am unable to play at his level at the moment.<br />
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I don't want to write a grandmother story, so in summary, these were some of the events that I have been through before today. There were a lot of luck involved, but none involved striking the 4D or ToTo.<br />
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<u>1) Applied and successfully gotten a scholarship for university fees</u><br />
This helped lots. At least it gave me a headstart in 2008, just before the financial crisis. What's more helpful was that the money was not paid directly to the university but to me. I had the opportunity to invest into SPH (around $4 that time) at 6% dividend yield while paying down the school loan at 2.6% interest cuz my dad used CPF for it.<br />
<br />Over the few years that I paid down the school loan, I earned a difference in the interest.<br />
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<u>2) Part-time work: Tuition</u><br />
It was initially a part-time operation. I have never thought it would become a full-time operation, and now slowly turning it into a business instead of a one-man show, though people had asked me about it years ago. Tuition as a sideline income was the single greatest luckiest thing that has possibly happened. It gave me the much needed cash to then invest during the GFC.<br />
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<u>3) Investments</u><br />
I was lucky I made lots of mistakes when I had little money. Honestly, I don't think one should have too much savings before starting; mistakes made won't be that big if one doesn't take on debt for investing.<br />
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Also, after taking an interest into the world of investing, I practically crunched every book on it that I think is useful from the National Library. I also talked to a lot of people, and finally come to use the method I am using today. A very simplified, probably still mistake prone, method that worked for me for quite some time.<br />
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Finally, I have also been very lucky to be blessed with parents that are still very strong and healthy. I understand some of my friends have been supporting their parents and are unable to really save up.<br />
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<u>4) Subsequent resignation into full-time tuition</u><br />
When I decided to go full-time into tuition, I realised there are so many more things to learn. Working for someone else's dream is really way easier. It was a steep learning curve, much tougher than learning investing. Until today, I'm still learning. I invested quite a bit of my savings into this, but made sure that invested cash in portfolio was untouched.<br />
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<u>5) Marriage and housing financial bombs</u><br />
The big financial bombs... This took more cash than number 4. However, I have to managed the cashflow prudently so that it does not eat into the invested sum of cash.<br />
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<u>6) Setting up Examworld publishing</u><br />
This took another sum of my savings. Finally, the fruits are bearing, and my first book will be out in late Dec, I hope. The business model is almost firmed up as well. Again, invested cash was not touched.<br />
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1, 2, 3 gave me the initial capital outlay. 4, 5 and 6 were big cash suckers, but they were funded without much divestments at all.<br />
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Which brings us to a very simple rule to generating wealth...<br />
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"Invest your spare cash [prudently], and do not divest it for cash sucking events unless absolutely necessary"<br />
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It is so cliche, so simple, yet so effective.<br />
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Of course, then comes the problems of<br />
(a) How to invest your spare cash prudently, and<br />
(b) How to get the cash you need for the cash sucking events so that you do not need to use these events as reasons to divest your investments<br />
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Solve these two problems, and you will be on your way to financial success.</div>
JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com7tag:blogger.com,1999:blog-5250592099846123314.post-30939383555715582662015-11-12T22:36:00.002+08:002015-11-12T22:36:23.661+08:00Investment Philosophy -- How it has changed for meSince I first started on this journey years ago, my investment philosophy has changed quite a fair bit.<br />
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Back then, I was a greenhorn. I didn't know a lot of stuff. Especially for the first few purchases, it was based on hearsay. Hearsay from forums, from friends, from family. Honestly I didn't know better, and good $$ was lost. That was... in a way... "lesson fees".<br />
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Then, in my late twenties, I increase my focus on investing in sustainable businesses. The main focus was on monopolies, oligopolies, as well as "sustainable" REITs. I added inverted commas to the word sustainable before REITs because I may still be wrong in the long run. However, my model has served me well enough for the past few years.<br />
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Now, in my early thirties, having "sustained damages" from two of the three bombs, marriage and housing, my investment philosophy has changed a little more. Instead of just investing in sustainable businesses, I'm adopting a "Rise-And-Die-With-Singapore" investment mindset. Just what is this mindset about?<br />
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<a name='more'></a>Basically, the mindset is about investing in businesses that are directly or indirectly related to Singapore. And if Singapore as a whole survives and do well, the businesses do well. If Singapore fails, the businesses may also fail together. In other words, rise and die together with Singapore.<br />
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But... It does not mean we should be investing in bad businesses.<br />
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I do not know how to fully explain this philosophy in words, so I will probably use some simple examples.<br />
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<u>Investing in SGX</u><br />
Apart from the usual way of analysing companies, one reason why I invest in SGX is simply because... for now, if SGX fails, the entire Singapore stock exchange fails. If SGX fails, no one can buy or sell any shares. No matter how much your share price has risen, not being able to cash it out at all would mean your shares are now worth an effective $0.<br />
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Granted, there might be other platforms in the future, or the government may do something for shares to be traded still, but investors confidence will likely be shaken hard.<br />
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So... SGX cannot afford to fail... And if it cannot afford to fail, it must succeed. And that's one reason I invest in SGX apart from it being a monopoly and other reasons.<br />
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*One other reason, in the event of market crashes where people dump stocks, SGX still earns from the trades.*<br />
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<u>Investing in telecoms</u><br />
If Singapore's population grows, our telecoms get more customers. Over the years, mobile phones and home broadbands have changed from being luxury items to being necessities. And most recently, mobile internet. Because the penetration rate for such items have been very high, I view it as the businesses will rise and die together with the affluence and growth of Singapore.<br />
<br />
I doubt there will be hyper growth for the telecoms, but certainly, they will most like rise and die with Singapore.<br />
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The same probably applies for local banks, local property developers (not all), local office and industrial reits, as well as businesses in the defence sector (i.e. ST Engineering mainly)<br />
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<u>Am I putting too many eggs into one basket?</u><br />
i.e. the basket of Singapore?<br />
How about overseas stock purchases?<br />
<br />
Currently, overseas stock purchases for small frys like me have to be done through local brokerages who charge a custodian fee. They own the shares on behalf of us. Now... if the local brokerage goes kaput... bankrupt... because Singapore dies... I believe there's problem with "owning" or cashing out the overseas shares.<br />
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The question of investing then becomes simpler if all the eggs are in Singapore... Will Singapore survive in the foreseeable future? I think so. AND it will be easy to see when Singapore can't.<br />
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Maybe my philosophy is over-simplified, and unrealistic... But why make investing unnecessarily more complicated?JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com2tag:blogger.com,1999:blog-5250592099846123314.post-12628893194809129672015-11-08T00:33:00.002+08:002015-11-08T00:33:51.767+08:00Restarting this blog with a slightly different focusI have not been blogging actively for about 3 years plus I think. That was when I was at my late twenties and approaching the thirties.<br />
<br />
Since then, some of the people who known me have asked me to continue blogging my financial journey. I have not done it due to a variety of excuses and reasons, including the reason that there are now many excellent financial blogs on the individual stocks.<br />
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Now, being in my early thirties, been just married, with a HDB, I think it will be interesting to chronicle the financial struggles, and growth of a newly married couple, both at 32 years old as of today.<br />
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The aim of this journey is to grow our retirement nest, yet not scrooging on the little comforts in life like I have been doing for the early part of my financial journey. As my wife always says, money is meant to be spent and enjoyed. It doesn't mean excessive spending, but it doesn't mean excessive scrooging either.<br />
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Over the past 3 years, I have learned, understood, and realised a variety of things that I will be sharing slowly. </div>
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<b><u>I have slacked...</u></b></div>
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I will admit, I have slacked LOTS. I have not been aiming to grow aggressively in business. I have not been really monitoring my own personal expenses. I have not been monitoring the household income/savings vs expenses. </div>
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Portfolio growth has been slow over past few years due to expenses on wedding (~$40k spend on photos and rings, don't ask :x), housing, and misc comfort stuff.</div>
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<br /></div>
<div>
Personally, my portfolio is about $310k at the moment. My wife's portfolio is about the same amount, so our combined invested assets (exclude CPF and HDB and $$ sunk into business) stand at about $600+k. This comes from frugal spending earlier in life, unearthly working hours and some luck in the game of investing. However, due to mistakes in the past, not all of it are in good quality assets, although most are. That will be something I aim to fix slowly over the next few years. With some luck, I hope to hit past combined S$1 million without being way too aggressive over next few years. </div>
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<br /></div>
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I did not really track our average monthly dividends, but offhand, I think our combined average monthly dividends is about $2.5k (I think this probably exceeds our monthly expenses for now... I think)</div>
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<br /></div>
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In short, I think I need to do more tracking. But it's hard as my wife is pretty unclear about the technicalities of investing, and her bank account is pretty "mixed up" with her parents'... the finer details I think I will keep to myself.</div>
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<b><u>Priorities changed...</u></b></div>
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Being in the early 30s, and being newly married, priorities have changed. The priorities are mostly geared towards catering for my family, in case we have kids, as well as retirement planning. </div>
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I plan to restart aggressive wealth accumulation again (I hope). The following are probably a brief of my plans in the near future...</div>
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<u>1) Growth of tuition business</u></div>
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I need to find a consistent way to bring in students for not just me, but my other tutors. </div>
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I have been reading up lots, and attended courses, to learn more about this. Need to implement and not slack. </div>
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<u>2) Growing Examworld</u></div>
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Finally.... the first book is almost ready to be published by end Dec. It took me too long... My weakness is that I strived too hard for perfection, because I want to give my best to potential users of my book. And on the way, I discovered that there are just so many things needed to be done just to get a book out... Will share more about this in the future.</div>
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<u>3) Increase CPF savings</u></div>
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I'm a supporter of CPF. Where else can we find 4% compounded almost risk free? Plus the additional 1% for the first $60k... having OA wiped flat for HDB reduced my CPF to below $60k. </div>
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<div>
Since start of 2015, I have been contributing 37% of my income into CPF every month (I pay the employer portion of the CPF too).</div>
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<div>
<u>4) Increase investable assets</u></div>
<div>
I want to increase my total investable assets over the next few years. Need to work very very hard for this because many things may happen over the next few years. If my wife leaves the work force, we will be left with one less income source. </div>
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<div>
<u>5) Paying down the HDB</u></div>
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Currently, I pay for housing expenses while my wife pays for the HDB loans since my income is more unstable. With my CPF OA having more cash since contributing monthly to it start 2015, I will probably be looking to do a partial repayment using OA, and might be converting into a POSB home loan later on. </div>
<div>
<br /></div>
<div>
<u>6) Getting a life insurance</u></div>
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I'm looking to get a simple life insurance to insure against diseases in older age. I will post more about this, and probably invite my agent to post his thoughts on financials and insurance as well.</div>
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<div>
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<div>
Lots to look forward to, ending 2015 and starting 2016. I really need to stop slacking as much as I did, start putting in more time and effort into all these plans.</div>
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JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com8tag:blogger.com,1999:blog-5250592099846123314.post-83499972351582023092015-05-21T10:53:00.001+08:002015-05-21T10:58:32.619+08:00Simple Update on STIRecently I sold 2/3 of my holdings of SGX at a price of 8.72.<br />
<br />
My simple and quick analysis on the chart of STI still looks valid.<br />
I did a zoom in of the past few months to see if the conclusion coincides.<br />
<br />
Based on the assumption that the current wave is a motive wave (Elliott Wave Theory), it seems that my target for a correction around 3rd quarter of 2015 will still stand.<br /><br />The horizontal line is about 3650. It comes from a interim top just before the top of 2007.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEicwl_X2ySt8glMHOLAdcZwRf4VLmNUEKzbAHbI9o7SbZESXs87YpYryS9G7TQkfOpJhOvLX9CkW5RpDKhuO6mdFqFntV1m75XgwGKvey4Fy1xdPleX3T9FLH4Vl09m6ALhmm5FAryUU-Ay/s1600/STI+Chart+May+2015.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="151" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEicwl_X2ySt8glMHOLAdcZwRf4VLmNUEKzbAHbI9o7SbZESXs87YpYryS9G7TQkfOpJhOvLX9CkW5RpDKhuO6mdFqFntV1m75XgwGKvey4Fy1xdPleX3T9FLH4Vl09m6ALhmm5FAryUU-Ay/s400/STI+Chart+May+2015.jpg" width="400" /></a></div>
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The first wave is about 210 in height. If the 5th wave is about the same as the first wave, which it normally is, then we should get about 3636, pretty near to the 3650 target.<br />
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I will still play cautious for now.<br />
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<br />JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com0tag:blogger.com,1999:blog-5250592099846123314.post-79533727492860702152014-11-17T15:57:00.003+08:002014-11-17T16:06:56.465+08:00Simple Chart Fortune Telling For STI (Nov 2014)Haven't been doing fortune telling for STI for some time. This is a simple charting of STI, diagram taken from Yahoo Finance and edited.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjfMGXRVtmfENz2Udh1qcWZ07AXIjxg0CrAUSspbTmr9HHMMPBUARpOFCXyGsb7q0vfVxI3guIOjA3AeIe3cPdF_rCgul2hzE9oSaHKxc2zJE8OskHnYlASCap9T9dCxPQ9I3iwRfasN6zK/s1600/STI+Nov+2014.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjfMGXRVtmfENz2Udh1qcWZ07AXIjxg0CrAUSspbTmr9HHMMPBUARpOFCXyGsb7q0vfVxI3guIOjA3AeIe3cPdF_rCgul2hzE9oSaHKxc2zJE8OskHnYlASCap9T9dCxPQ9I3iwRfasN6zK/s1600/STI+Nov+2014.jpg" height="163" width="580" /></a></div>
<br />
Taking the 2007 peaks as reference, it seems like that will be a peak in 3rd quarter 2015 or 4th quarter 2017.<br />
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Adopting a long term view, I think 2017 would be a nice date to fit a 10 year cycle for markets to reach the peak. <br />
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Even if so, it meant a maximum upside gain of 15% over 3 years, or 5% a year. Risks probably not that worth taking anymore.<br />
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Personally continue adopting wait and see approach while learning how to deploy and move cash to build business systems.JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com0tag:blogger.com,1999:blog-5250592099846123314.post-31131206265805851042014-09-08T00:47:00.000+08:002014-09-08T00:48:52.958+08:00Retirement -- Think of building business systems This post is inspired by a friend's blog post, which you can find at
http://bullythebear.blogspot.sg/2014/09/retirement-thoughts.html#.VAyDrFahgds
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<br />
I guess it is easy for us to calculate.
Let's say we manage to save $4k a month for the next 30 years, that would net us $1.44 mil.
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Sounds good.
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But that's 30 years later.
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Then we read about news like Zopim being acquired for $37mil SGD, leaving their founders as multi-millionaires while below 30 years old.
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What's the difference?
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I have come to realise that starting our own businesses is among the best way to propel our wealth. But... the caveat is that lots of hard work is needed, much more than being just self-employed. Worst is, the hard work may not even pay off in the end. Of course, such probabilities could be improved with more knowledge and learning. And that is what I have been doing/studying the past 2 months.
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The greatest realisation came after I chanced upon this quote which I like to share:
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"Organize around business functions, not people. Build systems within each business function. Let systems run the business and people run the systems. People come and go but the systems remain constant" -- Michael Gerber
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I have come to realise that the current tuition centre I have been trying to grow and run, has been built mostly about people. Granted, my initial capital was low, and this is something that might be "necessary". But of late, I realised, some of the anchor tutors were getting tired, I myself am getting tired as well, teaching so many students. Worst, we are all pretty irreplaceable at the moment, being super effective as well as popular with students. There is no way I could take a break without the business breaking down. Even for the coming reservist, I have to arrange make up classes with students whose classes clashed with the reservist.
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The best way to reach out to help more students, I have come to understand, is to have a systematic way of approaching the tuition business as a whole. By systematic ways, it means, like what Michael Gerber said, having systems for the different business functions.
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In other words, build around functions, and have systems run these functions.
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I used to keep thinking, I want to hire people, to ask people to join in to help, etc, in this tuition business. At that time, I seriously have no idea what I wanted people to do if they come in. I was unsure what is needed to be done to grow the business further. And it is likely I am facing what most small business owners were facing in their business. In other words, I was working real hard IN the business, and while I know I need to work ON the business, I have no idea how.
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The key word is how.
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I struggled with the "how" for 2 years. Of course I'm still trying to learn more now, but I have come to understand about functions and systems. I feel pretty lucky to have learned programming during my NUS days, because such understanding is really similar to functions in programming. I will probably leave the content on how to identify and build around functions and systems at a later date when I have experimented more.
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But back to the topic of this blog post, the question is to retire, it is not just about how we are able to start a small business, but how we are able to build business supported by functions, systems, and people. A small business, or being self employed, is still limited in three ways
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<br />
1) It depends very heavily on the founder, who is not able to rest without the business collapsing.
2) It is not sellable, because again, it depends too heavily on the founder.
3) It is unable to grow, because the founder has only 24 hours a day. There's a cap, a limit, to the size of the business.
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But hey, is that what we want for retirement? I doubt so.
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The benefits of business systems:
1) Saving time
Putting systems in place enable others to operate part of your business.
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2) Saving money
Better systems means more efficient staff, perhaps fewer staff, and the small business owner get to spend more time doing the things that earn money and less time doing things that don't?
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3) Supporting your business growth
There's no point getting more customers or more business from existing customers if your business can't handle the extra work - a good system is needed to ensure continued great service.
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4) Sellable
With systems in place that are proven to work, it is possible to franchise or sell the business to another and know that it will still work.
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The key to retirement for a small business owner is to be able to get others to run the business efficiently while being away, or sell the business away. Isn't it?JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com14tag:blogger.com,1999:blog-5250592099846123314.post-57700115086310197162014-08-08T12:03:00.001+08:002014-08-08T12:04:41.819+08:00The busy past few months... and some lessons I learnedPast few months were crazy. First up was the HDB renovation. For a 5-room flat, I managed to finish the complete the renovation within a budget of $40k inclusive of furnishings. Guess I was pretty lucky to chance upon IKEA's sale and save a few hundred dollars on furniture. A 55" TV, LED lighting, built-in wardrobe, big dining table. My $40k isn't used up yet I guess, didn't really count, but there are still some portions of the house which need building, but it's pretty much done. :) And typing this blog post as I sit in my study room, of which furnishings come entirely from IKEA.<br />
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Next was my wedding in the early part of June. Photoshoots, actual day videos and bridal packages set me back nearly $27k. Ouch. But overall, it was pretty manageable in terms of finances. This excludes all the misc, i.e. lunch buffet at church, wedding banquet, etc. But if I include everything in, $60k was probably the costs. Still less than the $100k incurred by the couple on newspaper who went into debt just to get married.<br />
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While the government is encouraging couples to marry younger, I realised that at 30, with our combined finances, house renovations and wedding was pretty comfortable on the financial side. No stress and no need for any sacrifice for things we wanted. Certainly no need for any debt. The next big expenditure would probably be kids.<br />
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Next up for the month of July, I conducted olympiad trainings for 4 different schools. That was pretty crazy for the month because this is on top of my usual tuition workload. I also involved myself in a startup on indoor positioning systems. Basically, in the near future, you might probably see the fruits of our labour involving you somehow in some parts of your daily life :)<br />
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Finally, I have been studying more about businesses past few months, watching shows like Millionaire Intern on BBC Knowledge. What I see is that many businesses struggle because there was minimal sales. Even though their products or services may be very very good, as long as the sales are dismal, the business will not grow or may eventually go obsolete. The goal of marketing is to generate leads, and eventually conversion of leads to purchasers. <br />
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And in show Millionaire Intern, it seems that everything boils down to knowing marketing well. Personally, I have been studying more on copywriting, as well as experimenting different forms of marketing, on FB, Google, etc. I now have an idea of why some of the previous experiments failed, and probably will be adding my fix to it. Many many things learned, which boils down to even more application.
Till then...JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com1tag:blogger.com,1999:blog-5250592099846123314.post-32735185200237962552014-02-13T21:12:00.002+08:002014-02-13T21:56:14.570+08:00Investing Lessons to be gleamed from Eratat -- Avoiding a potential value trap*This is a blog post written with hindsight, but I'm pretty sure it would have been dissed off and thrown aside had it been written earlier.*<br />
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Recently, just before Chinese New Year holidays, Eratat requested for a trading halt and subsequently suspension. It was a company I have been suspicious about since March 2011. Much of my analysis (with some calculations probably off) can be found here.<br />
<a href="http://wealthbuch.blogspot.sg/search/label/China%20Eratat">China Eratat</a><br />
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Note that this isn't an exercise or pure blog post done specially to ride on a S-chip suspension bandwagon, but to consolidate the lessons and what has been posted before since 2011.<br />
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The question is, is it possible to detect such fraud before it happens? Apparently, there were lots of clues to this, and this was posted in a few forums. Apart from that, from my recent read ups of marketing materials, I realise there are more things to investing in a business from a fundamental analysis viewpoint that is not often discussed about.<br />
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I might well be wrong, and everything turns out fine eventually. But I highly doubt so.<br />
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Let us first recap the pretty obvious red flags that were brought up over the course of time in different forums.<br />
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1) High percentage of receivables as part of assets.<br />
2) The receivables would have been even higher had some of it not be written off as sales incentive and renovation subsidies.<br />
3) Despite high cash levels, Eratat had "no choice" but to borrow at an effective interest rate of 32%.<br />
4) As Greenrookie has pointed out in NextInsight forum, Eratat's subsidiary did not appear in the tax reports of top 100 corporate tax payers, which means it paid less than 3 mil RMB in taxes. The maths does not work out.<br />
5) The director sold all his shares at a "deep discount" in Aug 2013 due to personal reasons that were never revealed. Now we know his "personal reasons".<br />
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I have also pointed out earlier that the NAV after netting off receivables looks constant after 2 years of being listed.<br />
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The suspension now points Eratat to being a value trap. The numbers does look well on the surface, but seriously, any of the above red flags should have sent investors fleeing it.<br />
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Is it possible to avoid the value trap? Probably so.<br />
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It is said by fundamental analysis proponents that investing in a stock is akin to investing in a business. I concur with that. The problem with some investors is, they are buying the feeling of being an investor, and not buying as an investor.<br />
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Seriously... Does buying a counter, looking at some ratios and numbers, and attending the AGMs, asking some "smart" questions, really mean that it is investing?<br />
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I say no.<br />
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If fundamental analysis was purely due to just numbers, then all accountants should have cracked the investing game and match the world's greatest investors!<br />
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I don't claim to be good, but my recent realisation is that fundamental analysis is much deeper than merely looking at numbers, at ratios, and attending AGMs.<br />
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Fundamental analysis includes looking at the business and marketing strategies of the business. In the business world, this includes looking at competition as well the branding and marketing efforts by the company.<br />
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A book I will recommend as a reading material is The 22 Immutable Laws of Marketing by Al Ries and Jack Trout.<br />
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With reference to the content in the book, Eratat would have committed "crimes" of marketing that would have doomed a small company like them to failure. While I am not an expert in marketing, the following are my observations:<br />
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1) Moving from shoes to clothes using the same brand. In marketing, this is called line extension. People probably known them as manufacturers of shoes, and extending the product lines when the company is still too small is an event that typically kills small companies. Reebok, Nike and Adidas were very famous in shoes before they extended their product lines further. The same went for other industries like GE.<br />
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Aztech was one company I invested in. Originally I thought extending their brands to other products was good, and I invested in it. On hindsight, it wasn't. Aztech extended their brand into LED lighting, related to electronics. This was ok. But they extended their brand further into Shipping, Materials and even Food. That pretty much killed most of their profits and the share price tanked.<br />
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In similar style, Breadtalk extended their product offerings via different brands, i.e. Food Republic, Ding Tai Fung, Toast Box. Imagine if they called it Breadtalk Food Court, Breadtalk Restaurant, Breadtalk Coffee House. Yucks.<br />
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2) Repositioning from casual wear to upmarket wear. Seriously... After a positioning attempt from shoes to casual wear, they tried to reposition into upmarket apparel. The repositioning efforts of Mountain Dew took 7 years (described in the recommended book). Many more examples in the books would have gone to show that Eratat's marketing efforts are probably in the wrong direction.<br />
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Eratat would probably have done better if they used a different brand for casual wear and another brand for upmarket wear. Not brand everything under Eratat. <br />
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I mean, imagine a cai png store telling you it is upmarket and selling you at $15 for a plate instead of $4 at a normal cai png food court store. Compare this to being served food in a 5 star hotel.<br />
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3) Customers Perception. Eratat is made in China, comes from China, but registered as a brand in UK. If anything, the recommended book mentioned that it is impossible to change human mind perceptions once it is there. Eratat Lifestyle was once known as China Eratat. The "China" tag is always on them. Who would know best? Of course their customers in China; they don't sell outside of China.<br />
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Do you think it will work if Ya Kun tries to reposition itself as European or American upmarket coffee? That perception holds for Starbucks or Coffee Bean, but trying to reposition Ya Kun into the same area is an almost impossible event once human perception is formed.<br />
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And Eratat claims it is positioning itself as upmarket apparel with Italian design (from previously a China Eratat).<br />
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Moral of the story: Fundamental analysis should never be just numbers or ratio. The market demand, the competitors, the business and marketing strategies, should all be taken into consideration as well. Which means for new investors, it would do well to study business and marketing books too! After all, the world's greatest investor is a businessman.JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com9tag:blogger.com,1999:blog-5250592099846123314.post-73588936616454840172014-01-14T10:46:00.002+08:002014-01-14T10:49:19.399+08:00Business Lessons picked up (Part 3)I think I am addicted to writing this, so shall add a part 3<br />
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<b><u>It's never easy</u></b><br />
No one ever says starting a business or running one is easy.<br />
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Which is why when I felt like giving up, I don't. I look for alternatives and look for better systems to achieve the targets and goals.<br />
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If needed, I will pay for external help. If there's anything I learned, there's no necessity to do everything myself. Hire help. Outsource. As long as the costs are managed, spending to increase productivity is the way to go.<br />
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Which brings me to the next point....<br />
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<b><u>Learn to delegate</u></b><br />
Delegation is something that is easier said than done.<br />
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In the past, when I was still working as an engineer, I had to delegate some stuff to the engineering assistants to carry out. My first time doing it was a mess; the assistants were totally lost on what to do. Basically, I gave the final result I wanted, and not the steps to doing it.<br />
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So, I learned to list everything in steps, before sending my instructions on what to do.<br />
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I also once asked my sister to help me convert my handwritten physics notes into MS Word format.<br />
The result was horrendous. Graphics weren't done well, nor was there proper formatting and font usage. I had to redo almost 90% of the stuff.<br />
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On hindsight, it was my fault. I learned over time that I should have done the following:<br />
1) Provide a template<br />
2) Include examples<br />
3) Do up a metrics of performance<br />
4) Detail out what needs to be done<br />
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Delegation is best done if the steps and systems are well laid out. Not many people know what you want, because most do not possess the unique skill of mind-reading.<br />
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<a name='more'></a><b><u>Wave-Particle Duality</u></b><br />
This a concept from Quantum Physics. In simple terms, it states that every thing can have both particle of wave properties, i.e. light consists of particles called photons, and electrons can exhibit wave-like properties.<br />
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This idea is inspired by this book called The Art of Quantum Planning. However, I have already begun to apply this idea after 2 years of constant thought. Might have saved quite a fair bit of time had I read this book earlier. So I thought I would share it here.<br />
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Applying to business, at times, it means that certain stuff or strategies do not need to be either/or thing. It could be both/and thing.<br />
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Applying to SPH newspaper business. With the internet booming, SPH has moved to digital newspaper as well. Instead of fighting as EITHER digital OR printed newspaper, they embark on the strategy of BOTH digital AND printed newspaper. It is a business strategy, and certainly self taught investors should learn a thing or two about business strategies. As a side complaint, I do see many critics of different listed businesses who know nuts about business tactics and strategies :x<br />
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I'm currently working to apply this to tuition, to merge online learning and actual classroom teaching into a single offer for students. More will be discussed after I have gotten the basic infrastructure up.<br />
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<b><u>Leverage</u></b><br />
Leverage has been a dirty word to some, and typically for some people, the first thing that comes to mind is leverage of money.<br />
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No, for businesses, there are many ways where leverage can come from. Not just money, but technology and time as well.<br />
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I once talked about Leverage here:<a href="http://wealthbuch.blogspot.com/2010/02/power-of-leverage.html">The Power of Leverage</a>
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A single human has only 24 hours a day, but if I can get 2 hours of help a day from 10 people, that's extra 20 hours a day.<br />
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Another example is technology. I could probably reach out to help more students via an online forum then from just teaching group tuition. Leveraging on print means I could publish my books, and leverage on different bookstores to sell my books to reach out to even more students.<br />
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A website (blog) is a form of leverage as well, in my opinion. I don't need to be actively at the website to engage people; it's always there when people need it (unless the server is down).<br />
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So now, the question is, how could I better make use of leverage to improve myself and my business? :)<br />
Constant thinking required.<br />
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Ending here.<br />
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<br />JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com2tag:blogger.com,1999:blog-5250592099846123314.post-49984931126476946732014-01-02T11:19:00.000+08:002014-01-02T11:19:06.992+08:00More business lessons I picked up over 2013, first handAs I plod on, I realised there are few more business lessons I have learned and personally experienced. Thought I should be writing on them to help consolidate my thoughts as well as share on the public domain, although these are pretty cliche.<br />
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<b><u>A team of different skills is needed</u></b></div>
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While most of the time, there are many things I can do alone, I realised the time and effort that are spent may not be worth it. The the speed of execution is important.<br />
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In additional, I recognize that I lack a number of skills to make a business succeed.</div>
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This is where a team comes in. Not a team of people, but a team of skills. Lots of people I see form teams just for the sake of forming teams. Or from what they learned from schools, formed teams because the teacher says so and so will make a team.<br />
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I remember the time I was in NUS, where we had to do this project called EE2001 at the second year. Right from the first year as a uni student, I was already opening my eyes and judging fellow students as potential team mates for this project. Needless to say, I chose the best I know, and they know too I will contribute the best I can. Eventually our project clinched A. Sounds great! Until I know another team that clinched A+. That team was not as good as us individually I believe, but as a team they worked great! Each of them has different skillsets that were crucial to the success of the project, and together, they did it better than us!<br />
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<b>The true meaning of teamwork lies in forming a team where people with different skillsets can come to work in synergy.</b></div>
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A great team helps to bring a project forward. While deep pockets can pay for teams, small pockets like mine could also go into partnerships with people who have these skills to bring things forward. But the ultimate goal is the same, to bring projects one step further ahead.</div>
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<b><u>Think and live and breathe the business</u></b></div>
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A business cannot be handled as a "by the way" thing, even though it may be a sideline. No one ever starts a business by chance. No one wakes up one day and says "Hey I have a business!". No one.</div>
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By thinking about the business, living and breathing it, I mean to say that one must think as a business owner, to constant think and improve and innovate to first match, then reach above competition.</div>
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==> Sometimes, I really wonder about small retail investors who claimed that they buy the business are hence a business owner, when they aren't even involved in the process of thinking, improving and innovating for it.</div>
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There is no point having a business that is the exact duplicate of the one next door. What makes a bubble tea shop better than the other one down the road? What makes this tuition centre better than the other one just beside? </div>
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In essence, one must be always thinking on how to improve the business, make it better, and more helpful, more value, to customers. This distinguishes the business in the long run.</div>
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Initially, the constant thinking portion may be tough, but persist in thinking and over time, human brains will adapt, and eventually be constantly thinking about the business. Right now as I'm typing out, I'm still thinking how to bring my projects forward and make my tuition more effective and be able to reach out and help more students. It has been conditioned this way for over a year, and it is now second nature.</div>
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Instead of investing in a business with a economic moat, why not create a business and create your own economic moat? </div>
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<a name='more'></a><br /></div>
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<b><u>Dare to experiment</u></b></div>
<div>
The school system in Singapore is such that failures are not tolerated, and are in fact punished. It is nature that effective punishments will tend to change behaviour and characteristics, which is why it has been around for centuries. And because many become afraid of failures, many probably do not dare to experiment.</div>
<div>
<br /></div>
<div>
But in the world of business, experimentation may need to failures. But without experimentation, how could a business grow? How is it possible to innovate and come up above the rest? Failures serve as a feedback mechanism that a particular method doesn't work, and it just means that another method should be experimented!</div>
<div>
<br /></div>
<div>
I still remember in my workplace previously, whenever I want to experiment in another way to do certain stuff which I believe will be more efficient and just as effective, I was chisled by my supervisor. His words were: "just do according to the documents and don't be too creative; it might affect your future in this company." </div>
<div>
<br /></div>
<div>
To be fair, the company was an established MNC, and many systems were in place to ensure things get done. What my supervisor told me was not wrong. Put it in another way, it means, just follow the system and don't create a new one. </div>
<div>
<br /></div>
<div>
But my brain was really bored by following systems. I wanted to improve it, to update it, to come out with new stuff. I see the 40 year olds in the company (no offence) being stuck in the company for years, doing the same and almost repetitive tasks of following the systems every year for more than 10 years! </div>
<div>
<br /></div>
<div>
I want to experiment, but just like during school days, I was told not to!</div>
<div>
<br /></div>
<div>
What's better to just come out and experiment and create systems myself?</div>
<div>
<br /></div>
<div>
<br /></div>
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<br /></div>
<div>
Ok I shall this post here, and come up with another post on the other aspects I have learned and understood soon.</div>
JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com3tag:blogger.com,1999:blog-5250592099846123314.post-27868502712041947112013-12-27T10:13:00.000+08:002014-01-02T11:19:17.790+08:00Review of Year 2013 & Some business lessonsIn a few days time, it will be the last day of 2013, and it marks the first full year since I went self-employed. It has been a long way since I graduated from NUS in the mid of 2008.<br />
<br />
I still remember the time where I just started work; I was full of optimism. I also gave tuition as a sideline then. In the "safe haven" of employment, it was so comfortable and the future looks bright. The company would try it best for us, or so it appeared.<br />
<br />
But some events woke me up.<br />
<u>First event: Retrenchments</u><br />
I see this company taking a loan from the government so that it could stay afloat and keep the jobs intact. A few months later, retrenchment came, and 10% have to be retrenched. Yet within a few months, hirings resume, for the positions that were retrenched. Jobs are never safe.<br />
<br />
<u>Second event: What I saw on my manager's desk</u><br />
I remember there was once in the office, I saw a stack of printed powerpoint slides that titled: "How to motivate your employees without monetary means". There was a pay freeze at that juncture, and I was still at the pay of a fresh grad after working for 2 years. While I know this MNC isn't doing well in the crisis, and is logical from the business side, this event still left a deep impression on me.<br />
<br />
Thus the tough decision to step out in 2012, and attempt to make a living by myself. The first few months were tough, my discipline was sorely lacking, and I was running around like a headless chicken. Fortunately for me, I have an experienced partner in the business, who manages the admin stuff well.<br />
<br />
Which brings me to the first lesson I learned: <b>Having an experienced partner or mentor helps greatly in the initial stages of doing business.</b><br />
<br />
That is common knowledge, but I truly appreciate the wisdom in it. I could see the mistakes that I would have made, in terms of finance, HR (choosing tutors) and branding. I wondered if I would have learned these if I had just "do-it-myself". Fortunately for me, my previous dabbling in FAs of companies left me with some basic skills to manage and understand some aspects of SME finance.<br />
<br />
<a name='more'></a>There were many times during the course of the year that we went "shucks, should have done it earlier". This was a result of poor planning. This is what the second lesson I learned:<br />
<br />
<b>Plan and strategize your moves early; and you jolly well execute it with speed and precision.</b><br />
<br />
What happened? First, in 2013, my flyers were printed late when it should have been ready by end February 2013. There were so many unforeseen delays that lead it to be finally ready in early April 2013. Also, with poor planning, I had put in a promotion date that ends in April 2013, which essentially render it useless in just a few weeks!<br />
<br />
<b>While planning is important, execution is even more important.</b><br />
<br />
What's with all the great plans if nothing was executed eventually? :x<br />
At least I learned my lesson, the flyers for 2014 are now done :)<br />
<br />
I'm earning less than what I earned while I was in full time employment. I guess most businesses do at the initial stages. Which mean to say your <b>passion is of utmost importance for staying in the business. </b>For me, my passion and goal is to help as many students as possible with my knowledge. Tuition is only part of the equation. I programmed quick revision apps for students of Singapore, free, when it would have cost at least $2k or more per app if it were outsourced. I'm exploring e-learning through videos next. :)<br />
<br />
<br />
I'm exploring collaboration, systemizing procedures for future expansion as well as potential expansion into a synergistic business (publishing).<br />
<br />
=========================================<br />
<br />
<b><u>Expenses Management</u></b><br />
In year 2013, I stopped tracking my expenses, to reduce the workload on me, and to also see if my bank account would suffer if I stopped the tracking. Ok, the main reason is probably I can't bear to see the huge expenses for my wedding preparations :x But I'm happy to say that at the end of 2013, I'm still surviving well, and my personal accounts still look sufficiently healthy, although I did earn less than when I was under full-time employment. That will soon change I hope :)<br />
<br />
Wedding preparations will probably form the bulk of my expenses this year and next, along with HDB renovation. I have already downsized my portfolio by about 10% (slightly < 30k), to prep for these as well as a probable foray into publishing. Of course, I still have a small emergency cash fund which could be used to purchase stocks if value appears. Or I make use of some of the funds reserved for wedding and renovation, but I doubt that the stock market will drop significantly enough in price to be sufficiently attractive for me in 2014.<br />
<br />
But seriously, just thinking of the expenses that will come in the next few years... makes me wonder how I could grow my portfolio further. Wedding expenses and housing renovation in 2014, and maybe baby expenses for 2015 and beyond. I must work harder and work smarter.<br />
<br />
<b><u>Goal 2013</u></b><br />
Goal 2013, my target few years ago, was not met. But there was definitely progress. The main purpose of setting goals, is to help set a clear direction and path for one to progress. Meeting the goal is a bonus. This practice of setting goals has guided me well over past 10 years.<br />
<br />
I will probably write up a goal 2015 soon.JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com4tag:blogger.com,1999:blog-5250592099846123314.post-68171466737735856322013-11-08T08:48:00.000+08:002013-11-08T11:07:46.794+08:00Investing in Eratat?I realised that recently, there are more people my age group into investing. This wasn't the case back in 2008 and 2009 when I first graduated. An interesting event.<br />
<br />
Over the years, I realised investing in equities does not merely mean digging through the financial reports. It also mean doing the necessary homework on competition, as well as potential business growth.<br />
<br />
In addition to all the pure FA data, I looked too at charts for confirmation at times.<br />
<br />
In investing, objectivity is of utmost importance. Of course, this is easier said than done, and I do not profess to be able to do that 100% of the time. And this is made worse when we own shares in the company too; typically there is a tendency to be more optimistic about the shares we own, because we bought it, and we don't want to be wrong in our judgment! Who want to buy shares to lose money?<br />
<br />
Recently I had some spare time since tuition winds down during the end of year, I took another look in a company I once studied a little again to see if it has improved in any sense, and why certain forumers are still very bullish about it. The company is Eratat.<br />
<br />
<a name='more'></a><br />
Over a number of forum exchanges, it is in my opinion in worse shape than 2011 when I first mentioned about it. Of course, different people, especially those with vested interests, still disagree strongly with me. I might be wrong in my opinions, but I'm not vested, and ultimately it is their money. :x So I decided to cease all future forum exchanges on this counter, and this will also be my final post on this counter until its fortunes has reversed substantially. "Never offer an advice or opinion to someone who won't take it or appreciate it." ==> I subscribed to this philosophy nowadays. I may not be Christian, but this certainly applies:<br />
"Do not give what is holy to dogs, and do not throw pearls before swine, lest they trample them under their feet, and turn and tear you to pieces." (Matthew 7:6)"<br />
<br />
The summary of the exchanges brought up some new data which I think would be nice to make a post here as a record for future study.<br />
<br />
Critical Facts as summarized by someone<br />
1)<span class="Apple-tab-span" style="white-space: pre;"> </span>A director sold all of his stake at 13.8 cents, before the share price plummeted down.<br />
2)<span class="Apple-tab-span" style="white-space: pre;"> </span>Eratat issued bond/warrant at 32% per annum even though they have lots of cash and net margins are substantially lower than 32%<br />
3)<span class="Apple-tab-span" style="white-space: pre;"> </span>I mentioned about growing receivables before. Apparently someone compiled the data as well and showed that while revenue was growing at 34%, trade receivables was growing at 52.7%.<br />
==> I would like to add that a chunk of the receivables were already written off and packaged to investors as renovation subisidies and sales incentives.<br />
<br />
On the issue of bonds from SHK<br />
"The company placed Rmb134m of 12.5% bonds with 82.5m warrants to SWAT Securitisation Fund, a SPV of Sun Hung Kai Financial. SWAT, in turn, offered a Rmb106.8m senior tranche of ABS to investors and a Rmb27.2m junior tranche to Sun Hung Kai Financial."<br />
<br />
The effective $$ that went out to Eratat was about RMB 100.5m from SHK pocket.<br />
<br />
By retaining a mere RMB 27.2m, SHK bears minimal risks as all risks have been offered out as ABS (Asset Backed Securities) to other investors. Smart.<br />
<br />
<br />
The amount of net assets look really beautiful but is really made up mostly of receivables.<br />
I would like to quote from the words of a fund manager's newsletter:<br />
<blockquote class="tr_bq">
“One thing about accounting, you know the liabilities are always 100% good. It’s the assets you have to worry about.” - Charlie Munger<br />
<br />
Coming to the second part of Mr Munger’s quote, assets are often worth less than their carrying value. One obvious example is trade receivables. Trade receivables are counted as assets, on the basis that they will soon turn into cash, but they can also harbour unrecognized bad debt. Shareholders often find out the hard way that receivables seldom convert into cash at their full value.</blockquote>
<br />
Lastly, chart pattern. I saw someone mentioned that the chart looks bullish. I am not sure why, but clearly it doesn't look bullish to me. It has broke down a number of significant supports in my opinion.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh_4xpUYQtvDlI0jcXP03icNbQexJY38hQYz210uRerSm6kNxxRkRshEiWdXaNXA28tQ_X8AYvAwA5XNrNVcciZ2bbaRzdE9jWI3AtOPdff7vN0p1BlVVKzIcn-6Zjji3Zxp62oyV5qz6RW/s1600/Eratat.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="185" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh_4xpUYQtvDlI0jcXP03icNbQexJY38hQYz210uRerSm6kNxxRkRshEiWdXaNXA28tQ_X8AYvAwA5XNrNVcciZ2bbaRzdE9jWI3AtOPdff7vN0p1BlVVKzIcn-6Zjji3Zxp62oyV5qz6RW/s400/Eratat.jpg" width="400" /></a></div>
<br />
<br />
Of course, after all the <strike>ranting</strike> compiling, I still hope the share price will recover for those souls who bought big into this company.JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com2tag:blogger.com,1999:blog-5250592099846123314.post-55341952289348619862013-08-22T15:31:00.000+08:002013-08-22T15:31:04.394+08:00Money Bombs! and my "risky" management of my financesThis post is a little inspired by a post by a new blogger I saw recently.<br />
The post is at http://www.my15hourworkweek.com/2013/08/19/money-bomb-1-the-wedding/<br />
and his blog is http://www.my15hourworkweek.com<br />
<br />
<br />
The year 2013 has been quite fulfilling so far. Really learned lots, saw lots, thought lots and understood lots... But from now till mid of next year, I will probably be spending lots, more so than my income :p<br />
<br />
Yep, wedding bells and bridal packages... Not that I am complaining :)<br />
Also, my HDB BTO will probably be ready next year too... Renovation costs coming!<br />
<br />
Just a short calculations of how much I need...<br />
1) Photoshoots - $7k => my wife-to-be wants one local and one overseas one (add another $1k)<br />
2) Banquet - $30k => I think ang bao will help cover some, although I don't think it will be 100%<br />
These wedding banquets just get more expensive each year, with costs rising faster than income.<br />
3) Renovation costs - $50k perhaps? Not so sure....<br />
4) Rings and misc items... - $15k => I probably over allocate some<br />
<br />
<br />
<a name='more'></a><br />Traditionally, I guess one would set aside cash for all these events and not touched it for any other uses... I'm probably pretty risky in the way I handle my finances :p<br />
<br />
Of course I need to have available savings for all these. What I have done so far...<br />
<b><u>Tuition Business</u></b><br />
Pumped in some cash to aid in the cash flow, but I should be able to withdraw it end of year. Interest free of course :}<br />
<br />
<b><u>SPH REIT</u></b><br />
I applied for 51 lots through the ATM. Got none :(<br />
<br />
I highly expect most of the funds to come back to my "chest" of savings for wedding. Little did I know that some higher being decided for me I should not get any :x<br />
<br />
===========================================================<br />
<u>Side note: Silverlake</u><br />
Offloaded all at a price of 0.755 a few days ago. Lucky me.<br />
There are many better deals out there now. One of which I'm eying, SPH.<br />
<div>
===========================================================</div>
<br />
In a way, I find that personal finances should also be managed like a small business... In simple terms, keep costs low, keep cash flow positive, ensure debts are as low as possible, or better still, have a ready cash hoard for acquisitions or investments. This sets the principle of how my finances are managed. I ensure I have no credit card debts, cash hoard for all the expenses above, as well as try to maintain a cash inflow. All along, I thought this was common sense, until I know a friend recently who had been paying his credit card debts for the past few years. Luckily for him, he finally woke up in time and stopped paying the minimum sum, and his debts are now almost cleared.<br />
<br />
<br />
In terms of cash flow, a stable job is very useful. Meaning... in Sg context, govt sector... an iron rice bowl if one does not make any major mistake. I remember I posted before about how my previous company was retrenching people in 2009... A job in a mildly profitable MNC doesn't look so stable after that. MNC rice bowls are determined by factors we cannot control at all, i.e. the industry, any potential restructuring (the nice word they use for investors) to "increase efficiency" and "reduce costs".<br />
<br />
Well, I guess I might have been proven right, as the company is now laying off 2% of its workforce citing efficiency as the reason. As far as I know (or guessed), the workload on the remaining engineers has increased, due to merger, new products, as well as less colleagues. Efficiency in a way means working longer hours for the same pay to the upper management. Costs are controlled by telling consistently telling you that you aren't good enough to be promoted, but exceptions are sometimes granted if you have been working 14 hours daily on a 9 hours a day job.<br />
<br />
<br />
<b><u>Being unemployed</u></b><br />
I love using this term at the moment. I am unemployed.<br />
What brought me to write this segment was that I chanced upon an old blog post of mine:<br />
<a href="http://wealthbuch.blogspot.sg/2010/11/musings-loyal-employees-life.html">http://wealthbuch.blogspot.sg/2010/11/musings-loyal-employees-life.html</a><br />
<br />
This blog has been a chronicle of my journey so far, and it was actually great entertainment to read what I did over the past few years.<br />
<br />
As of now, I have survived without a job for more than a year. And surprisingly still doing ok, and probably with more potential to grow in the near future. While I have more time to myself now, the main downside is that my total income has dropped by half... :(<br />
<br />
Fortunately, the dividend players I have over the years are showing their mettle by buffering this drop in income :)<br />
<br />Certainly, the amount of time I have now is priceless, and it has enabled me to come up with more ideas that I will be implementing over the next few months. Things that will be in synergy with tuition, and enable me to help even more students than before, including those that aren't my students. Such is my commitment to help the students of Singapore.<br />
<br />
<br />
<b><u>Going ahead...</u></b><br />
I guess I will still be "risky" with my finances. The funds that are originally kept for wedding will still be cycled towards some equities and business as well. Certainly, I'm running on tight margins for my necessary expenses. But I believe I will still survive that... for now... :D<br />
<br />
<br />JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com6tag:blogger.com,1999:blog-5250592099846123314.post-15784920537892332642013-07-15T02:13:00.001+08:002013-07-15T02:13:36.034+08:00Sold remaining GLPI sold GLP, preparing funds for either SPH or SPH REIT.<br />
<br />
But the more I read and think, it seems SPH may be a better deal than SPH REIT after all.<br />
<br />
<br />
However, I do expect SPH REIT to rise a little upon IPO, so....... strategize strategize strategize.....JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com2tag:blogger.com,1999:blog-5250592099846123314.post-61273024842333030402013-06-13T17:07:00.001+08:002013-06-13T17:07:24.937+08:00STI Elliot Wave Analysis June 2013Was free and took a quick look at STI.<br />
<br />
I realised the waves are so crystal clear... Well, I may be reading it wrongly.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8qPo4MqSe1Xs5ZtuIZ-HmJ-z-T0YNzSzXaytS_9aSZVTj-zAMRSmeKwodFCAY36dMbG7942px4CUbsNZrQRxejDl0KlgGLvYdljXwa2W2d3bfrdO1QvmtWHyjgP_paBVggN6jFuJ_qv6O/s1600/STI-June+2013.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="205" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8qPo4MqSe1Xs5ZtuIZ-HmJ-z-T0YNzSzXaytS_9aSZVTj-zAMRSmeKwodFCAY36dMbG7942px4CUbsNZrQRxejDl0KlgGLvYdljXwa2W2d3bfrdO1QvmtWHyjgP_paBVggN6jFuJ_qv6O/s400/STI-June+2013.jpg" width="400" /></a></div>
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What this count means:<br />
This is a correction, and STI will still go further up. (1) is 384 points long. If I expect (4) to end at around 3200 or below, and (5) to be almost as big as (1), then 3800 plus is achievable!<br />
<br />
Discount that maths, my guess is that the end of the more major 3rd wave will end at the 2007 peak, which is around 3800. <br />
<br />
The crystal ball would probably go on to tell me that a correction is then around the corner, and for a 4, it probably would be quite draggy :( <br />
<br />
Further that, the 5. This wave 5 would be tricky, and how far it would goes really depends, since wave 1 is so short. The cardinal rule of EW theory is that wave 3 cannot be the shortest wave, and it is already satisfied in this count. But STI 4000 should be a good guess?<br />
<br />
Of course, all these will be wrong if the current STI breaks below 3036, where wave 4 crosses 1, another cardinal rule of EW theory that cannot be broken.<br />
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<br />JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com1tag:blogger.com,1999:blog-5250592099846123314.post-32316854483774334732013-05-17T02:56:00.003+08:002013-05-17T02:56:45.148+08:00Some interesting details about EratatEratat is a counter listed on SGX. Previously, I have expressed concerns over its business model and its obscene amount of trade receivables.<br />
<br />
Subsequently, Eratat reduced its trade receivables, not by collecting back the cash, but by providing something called a renovation subsidy. Which sounds nice, but still means ultimately, the cash didn't get to them.<br />
<br />
It has been quite a while since I studied their statements. There were some people who were pointing to the SIAS research as the "authority", and expressed their confidence in this counter because SIAS said so, especially after I have expressed concerns over it. Certain things that are red herrings in my opinion are then brushed away. :(<br />
<br />
I dug out the past reports of SIAS research on Eratat. Each and every one of the reports mentioned Increased Exposure, even though the estimated Intrinsic Value calculated by the analyst went to S$0.27.<br />
<br />
Interestingly, the highest price the counter has ever went to was S$0.28.<br />
<br />
<br />
Checking the history reports by SIAS (no offence meant to any organisation),<br />
<br />
<br />
23rd Sep 2010 Intrinsic Value S$0.320 Title: New Business Shows Great Promise<br />
06th Oct 2010 Intrinsic Value S$0.320 Title: Running a Tight Ship<br />
04th Nov 2010 Intrinsic Value S$0.450 Title: An Exciting Set of Results - 108% Growth<br />
01st Mar 2011 Intrinsic Value S$0.480 Title: Time for value to be recognized.<br />
05th Apr 2011 Intrinsic Value S$0.480 Title: Do you want to miss this ride?<br />
07th Apr 2011 Intrinsic Value S$0.420 Title: Fast and Furious<br />
11th May 2011 Intrinsic Value S$0.430 Title: Yet Another Exciting Set of Results<br />
05th Aug 2011 Intrinsic Value S$0.325 Title: Strong Growth Revisited<br />
06th Sep 2011 Intrinsic Value S$0.325 Title: China’s Gateway to European Fashion<br />
08th Nov 2011 Intrinsic Value S$0.325 Title: Climbing the Brand Value Ladder<br />
23rd Feb 2012 Intrinsic Value S$0.325 Title: Accumulate on Overreaction to Results<br />
12th Apr 2012 Intrinsic Value S$0.325 Title: Treading New Ground in Trade Show<br />
14th Aug 2012 Intrinsic Value S$0.240 Title: Focus Shifting to Distribution Expansion<br />
05th Nov 2012 Intrinsic Value S$0.240 Title: 3Q Results Showed Improvement Over 1H<br />
26th Feb 2013 Intrinsic Value S$0.270 Title: 4Q Results Back to Par<br />
02th May 2013 Intrinsic Value S$0.270 Title: Higher Volume, Higher Prices for Apparel<br />
13th May 2013 Intrinsic Value S$0.270 Title: Preparing for the Next Lap of Growth<br />
<br />
In all reports, the analyst maintained increase exposure. And in all the reports, the intrinsic value is higher than the share price.<br />
<br />
Clearly, it can be seen that unless an investor bought in at the ultimate low, he/she will most likely be facing a big paper loss following the research reports. Well... The "investor" may make a profit another few years down the road. The question is then, how many years does that few years mean?<br />
<br />
<br />
Research reports protect themselves by<br />
"As of the date of this report, the analyst and his immediate family may own or have positions in any securities mentioned herein or any securities related thereto and may from time to time add or dispose of or may be materially interested in any such securities.<br />
...<br />
...<br />
The use of this material does not absolve you of your responsibility for your own investment decisions. We accept no liability for any direct or indirect loss arising from the use of this research material. We, our associates, directors and/or employees may have an interest in the securities and/or companies mentioned herein."<br />
<br />
<br />
The analyst and organisation are protected by their disclaimers, but your money isn't.<br />
Neither does any of my blog posts constitute any solicitation of an offer to buy or sell any securities. ")<br />
<br />
<br />
Moral of the story: Do your own thorough homework.<br />
<br />
<br />
JWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.com3