Another 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.

The question is, in terms of financials, is this really a much better move?

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. 

To simplify matters, I will set some variables for my theoretical exercise. 

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.

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. 

Assumed average interest rate over 30 years: 2.5%

I am taking the CPF OA floor interest rate here as a comparison. 

Stagnant Networth / Portfolio... And my excuses for a married guy

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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.

Feel free to comment and point me out.
Thanks uncle cw88 for reminding me to think of lessons learned.
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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.

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.

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.

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.

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).

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.

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?

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.

Based on my self-reflection, there were 3 major reasons
(1) Quitted full-time job in 2012
(2) Increased expenses due to house and children
(3) Poor decisions in the stock market

Marginal safety with dividend counters -- SPH and Starhub

This is a mathematical exercise I did with my holdings in Singapore Press Holdings.


A short history of my relationship with SPH
Around the 2008~2009 era, I bought in 6000 shares of SPH at an average of $3.65
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.

So, I took it as 8000 shares of SPH at $3.65 average.

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.

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.

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.

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.]

I mean, it was "buy for the long term" right?
And SPH declined to $1.98 while Starhub declined to $1.34.

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.

My 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.

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.

  

So I went to do some mathematical calculations as follows:

"An additional $560k gone..." -- Calculating the dollar losses to investments and business

When I first started this blog years ago, it was meant to chronicle my journey, to be accountable to myself for my financial decisions.

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.

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.

So this blog post serves as chronicle for my future self to read and re-read again.

Instead of a blog post with a positive tone, this would take on a more negative tone.


More stock losses (~$29k)
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.

Losing at Noble Group
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.

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.

My Realised Capital Gains After 8 years in the market Is Near Zero

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… :(

Granted, there were a number that were due to mistakes made as a newbie in the stock market. The stocks offhand that I recall:

Review of 2016 and on to 2017

I 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.

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.

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).

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.

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
1) Wedding preparations.
2) Housing
3) Shared portion of car loan and misc expenses
4) Baby preparations
5) Purchases of various wants (this amounted to quite a fair bit)

Slacking from a 300k+ to 350k+ Portfolio

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 -.-" )

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

AND I have been spending lots.... some for good reason, some just for wants.

I am blessed to still have a portfolio that grew a little.

So... I did a trackback to check on the cashflow....

Disciplined savings for cash sucking events in life, and not just create an emergency fund

Cash sucking events does not mean emergency funds, but emergency funds will help in allievating cash sucking events.

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.

I list some examples of cash sucking events below

1) Marriage
2) House
3) Baby/Kids
4) Medical Bills
5) Parents' Medical Bills
6) Business
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.
and more

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.

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.

How I went from 0 to 100k to 300k+ savings by age 32

Recently, 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.

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.

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.

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.

Investment Philosophy -- How it has changed for me

Since I first started on this journey years ago, my investment philosophy has changed quite a fair bit.

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".

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.

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?

Restarting this blog with a slightly different focus

I 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.

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.

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.

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.

Simple Update on STI

Recently I sold 2/3 of my holdings of SGX at a price of 8.72.

My simple and quick analysis on the chart of STI still looks valid.
I did a zoom in of the past few months to see if the conclusion coincides.

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.

The horizontal line is about 3650. It comes from a interim top just before the top of 2007.

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.

I will still play cautious for now.

Simple 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.

Taking the 2007 peaks as reference, it seems like that will be a peak in 3rd quarter 2015 or 4th quarter 2017.

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.

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.

Personally continue adopting wait and see approach while learning how to deploy and move cash to build business systems.

Retirement -- 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

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.

Sounds good.

But that's 30 years later.


Then we read about news like Zopim being acquired for $37mil SGD, leaving their founders as multi-millionaires while below 30 years old.

What's the difference?

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.

The greatest realisation came after I chanced upon this quote which I like to share:

"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

The busy past few months... and some lessons I learned

Past 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.

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.

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.


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 :)

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.

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...

Investing 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.*

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.
China Eratat

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.

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.

I might well be wrong, and everything turns out fine eventually. But I highly doubt so.

Let us first recap the pretty obvious red flags that were brought up over the course of time in different forums.

1) High percentage of receivables as part of assets.
2) The receivables would have been even higher had some of it not be written off as sales incentive and renovation subsidies.
3) Despite high cash levels, Eratat had "no choice" but to borrow at an effective interest rate of 32%.
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.
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".

I have also pointed out earlier that the NAV after netting off receivables looks constant after 2 years of being listed.

Business Lessons picked up (Part 3)

I think I am addicted to writing this, so shall add a part 3

It's never easy
No one ever says starting a business or running one is easy.

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.

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.

Which brings me to the next point....

Learn to delegate
Delegation is something that is easier said than done.

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.

So, I learned to list everything in steps, before sending my instructions on what to do.

I also once asked my sister to help me convert my handwritten physics notes into MS Word format.
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.

On hindsight, it was my fault. I learned over time that I should have done the following:
1) Provide a template
2) Include examples
3) Do up a metrics of performance
4) Detail out what needs to be done

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.

More business lessons I picked up over 2013, first hand

As 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.

A team of different skills is needed

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.

In additional, I recognize that I lack a number of skills to make a business succeed.

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.

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!

The true meaning of teamwork lies in forming a team where people with different skillsets can come to work in synergy.

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.

Think and live and breathe the business

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.

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.

==> 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.

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? 

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.

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.

Instead of investing in a business with a economic moat, why not create a business and create your own economic moat? 

Review of Year 2013 & Some business lessons

In 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.

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.

But some events woke me up.
First event: Retrenchments
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.

Second event: What I saw on my manager's desk
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.

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.

Which brings me to the first lesson I learned: Having an experienced partner or mentor helps greatly in the initial stages of doing business.

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.