Friday, December 7, 2018

SIA Engineering - Is It Time To Buy This Company After 22% Decline This Year?

SIA Engineering has been an investor's favorite for many years because of their moats servicing the maintenance and repair lines for various different airlines, with their own SIA planes taking up the majority of the recurring business.

It does look like a defensive business because every capacity planes that are increasing each year would have to undergo maintenance one way or another.

Over the years, the operating environment gets tougher due to longer maintenance interval perhaps as the quality gets more resilient for the newer next generation aircraft and there are many more competition in this small niche space of the industry.

The JVs are giving them good growth over the years as the company continues to invest in this segment partnership, notably with Stratasys in the areas of manufacturing technology and Cebu/Airbus for their respective maintenance with the airlines.

This year alone, the share price has dropped from $3.20 to today's low of $2.47, that is a drop of over 22.8%.

If you are someone who held this stock from the start of the year, you'd probably be screwed all over by now.

But is there really no value to this? What would be a good price to enter for this company?

I run my model using the discounted cash flow methodology by forecasting the terminal growth over the next 5 years to 1.2%, with an initial -1% for the first 2 years, then 2% growth thereafter.

I added back the depreciation which is a non cashflow item as well as their investments in the JV & Associates which are quite significant.

Their investments in the various JV & Associates are quite an important element to their business model so it is probably fair to value them separately.

What we are saying here in the DCF exercise is that we will take them out and see how much is the true value of the SIA Eng business.

PER of between 18x to 22x is probably a fair way to value this company with a discount rate of 8%.

What we get is an intrinsic value of about $2.66, which is about 7% higher than today's price.

Do note that this implies some growth into the future so if there's further deterioration to the business, then the value would plunge much further.

For investor, there's probably not enough margin of safety yet in this one.

The company has just recently cut its interim dividend and the balance sheet is weakening.

There's also no sort of catalyst at the moment and there are much better dividend counters out there to buy at the moment.

Thanks for reading.

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Thursday, November 29, 2018

Is Investing In Growth Always A Good Thing?

When investors like us invest in the stock market, the goal is always trying to grow our wealth over time. 

Investors are generally thrilled by the prospect of growth in general, whether they are referring to their income, savings or even the companies that they invest in. 

We just love things going in the "up" and "grow" direction.

It is so tempting for investors to see their companies growing by double digit each year because i.) they expect the management to take the shareholder’s earnings and reinvest them to propel for further growth or ii.) Higher growth means higher dividends that the management can decide to payout or iii.) the share price would eventually re-adjust themselves to the same valuation. 

What do I mean by that?

For example, Colgate’s share price is $63 today. If Colgate’s valuation based on price to earnings ratio is currently at 20x and the company prospects a guidance growth of 10% per annum over the next 3 years, then the forward price to earnings ratio at the end of the 3 years is expected to be at 14x. Most of the time, the market will not allow such scenario to happen and upon the announcement of the news, the share price would adjust itself to the range up to $84 such that the valuation of the company goes back to 20x. 

Of course, such scenario is a very simplistic way of putting it in mathematical form. 

In reality, we all know that not everything will go according to plan in the next 3 years. 

Well, mostly in that sense.

From a downturn to the economy to the change in the fiscal or monetary policy of the macroeconomic factor or the company could have internal labour, production or acquisition issues that they did not anticipate for. There could be a scandal in the making or a new competitor coming in with better quality and cheaper products. The possibility of any event happening in the 3 years is seamless. 

The problem is the share price has usually priced the news in earlier before allowing what the company can really perform.

The market is often forward looking and that's when most investors get caught in their pants, i.e buying when the valuation is high.

Most investors notice the prospects of a "good" investment only either when their friends tell them or when they read about it on the newspaper. By the time they put their foot on the water, most if not all of the good news have been baked in and the investor is left to pick up the mess should anything goes wrong or if the company is not able to meet the ambitious guidance they project.

Unless you are a damn good timer in exiting the market, the investor who uses this strategy are most likely to end up poorer over time.

Growth investing also has the tendency to caution the day when finally that growth slows down.

You can't have a company that grows perpetually and exponentially higher growth each year. 

At some point, the company is going to register a slower growth and when that happens the market is going to take it quite badly, re-adjusting to the slower growth outlook for the valuation it entails.

I don't have a good strategy to go long on growth companies because I'm always skeptical about either what the management say or what the world might crap on me.

Being in the financial and accounting sector myself doing forecast for the past 10 years of my work experience, I've seen almost every single time the forecast has gone haywire, even if they are only for the next 3-6 months, let alone multi-running years.

It is also extremely difficult to spot on the very few companies in their early stage of growth and then ride on them because it entails a lot more expertise on the sectors you are eyeing for (almost like going for a private equity seed stage).

I'm interested to listen though to the strategy of those who've been investing in growth companies for some time with some measurable success and how they decide to enter and exit and what are their cautious approach to not being caught.

Let me know in the comments below.

Thanks for reading.

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Monday, November 26, 2018

Investing Action Bias Can Be Detrimental To Your Strategy

I was having a short holiday trip with my family to KL in the past week so I did not particularly overlook the market too much other than quickly checking for news at night when my children has fallen asleep.

At times, I felt a bit guilty for ignoring my portfolio a little while I have some fun on the same side of the world.

Then I quickly reminded myself for why should it be that way.

While it is true that I literally did '' nothing'' to the portfolio, I reminded myself of the strategies I employed for the portfolio which has been working well for years.

My strategy to stick with a defensive dividend portfolio has been a boon bore for most of the days. It goes up a little and down a little in some days but they gradually move up after some years of convinced positioning.

Of course, I also opened a short position for UMS before I went to KL based on a couple of fundamental reasoning I have in my previous article and then I just leave it there for the thesis to work it out.

And then mostly I just leave it aside and wait for the events to play out.

I get on with my other side of life that I have.

Today's article is about how much action does an investor needs to have in order to feel justified that he or she considers certain aspects as trying to achieve.

Of course, it is common sense to everyone to know that most of the actions might not turn into desired results but many did not realise the behavioral aspects of trying to get involved with the herds.

Consider the recent events of First Reit which stole the limelight news in the past week for being the highly most volatile Reits jumping double digit day in and out.

Naturally, with such volatile event, it will be the town topic to talk to for many. Some may be fleeing for exit, while others may see it as an opportunity. Until today, we have not really received a proper explanation for causing such a train wreck other than some credit downgrade for the related associates.

The best action in this case is perhaps then to sit and do nothing until you've clearly visualize in your head the justification you need to buy/sell.

But most just wants to get a piece of the action for sake of "doing something"

This week, the big story is circulating the news about a manufacturing company Hi-P over a privatisation offer.

With such news circulating, it doesn't matter if fundamentals earnings or outlook are going to be good or bad, the share price would fly on such rumor.

Again, naturally it'll be the talk of the town and you'd be silly not to participate in such hot news right?

Does that even reminded you of the once great crypto currency which has now been quiet down quite a bit these days.

The more seasoned investors probably already know about this and are sticking to their strategies. The more experienced traders are probably having the last laugh of the day.

The newbies are most likely the lambs that get the slaughter.

Maybe, it's better for them to avoid the forum crowd, for many of the lions there are lurking, without knowing the consequences they have for "participating" in an action bias.

Monday, November 19, 2018

Investing Is So Damn Tough You Are Right

To say that this has been a tough year for investment is an understatement.

Investing, as a general form of growing your wealth is so damn tough that for one not to be losing money is sometimes already seen as a form of success.

I can totally relate why many people avoided them like a plague because contrary to many popular beliefs, it can jolly well diminish your money.

Imagine yourself being invested in Asian Pay TV Trust at the start of the year, having intrigued by its stuttering share price and a high dividend payout.

You might have thought the dividends they pay out is unsustainable hence you made a decision to project them conservatively at the fcf you think they can give out.

When APTT announces their recent results, the management is even more conservative than you are and slashed their dividends like they did to slaughter a dying pig, causing its share price to fall by 50% in one day.

APTT might be a bad example because the more savvy investors could have been advocating investors to avoid them since their ipo days.

What about a stronger company like First Reit, which owns several hospitals in Indonesia and homes in Korea and has triple net lease master arrangements with a solid industry and sponsor background.

Imagine if you are someone who've just started out and would like to form a sustainable decent dividend paying reits and you come across First Reit as a company that has a great background history in terms of both operational and financial.

You got in at $1.20, thinking a 6.7% yield is decent enough for a hospital industry and then out of nowhere got whacked down by 20% in a week without having any clue or news to what was happening.

That is 3 years of dividend panadol that you need to wait before you even recoup back your capital.

Sounds like a ponzi scheme to many.

For those that turns to arguably one of the safest company in Singapore, Singtel did not fare any better.

Singtel earnings have been dragged down by weaker regional performance and their share price have been languishing low, back to where they are in the last 10 years.

You could argue that you receive a lot in terms of dividends over the past 10 years but that's mostly for consolation.

You know that is not good enough.

At the end of the day, you might just turn to the Singapore Savings Bond and decide to wait until the recession is here but I can tell you that by waiting your skills aren't polished enough to handle such situations when it comes.

You'd be just waiting and waiting and waiting.

Investing does not guarantee that you build up your wealth and I do not have an answer to one that can guarantee that you will.

The environment we face in the next 10 years should make it even harder to make money.

It is so damn tough you are right.

Thursday, November 15, 2018

Recent Action - UMS

This is a recent strategy which I am experimenting on my CFD account which I will be explaining more in detail when I have the time to blog the full implementation on it.

I recently opened a short position in UMS Holdings at the price of $0.66 for 50,000 shares.

This was somewhat a different strategy I have for my main portfolio which focuses on dividend income strategy and will remain the core of it for the most part of things.

UMS has been a very popular stock in the past 2 years due to their recent semi-conductor upcycle, which seen their stocks price goes as high as $1.30+ prior to the bonus offer 1 for 4 sometime during this same time last year.

Since then, their results this year have not been particularly good, with the trade war between the US and China impacting the demand production of their products and some delays in capacity production.

The cut in the interim dividends from 1 cents to 0.5 cents based on their most recent results are probably the most clear signal as their businesses are slowing down and they’ve strayed away from their usual high cash balance in their book to preservation mode as they’ve started to spend some acquisitions this year, which we don’t know what kind of return it might bring back to the company.

In their recent results, sales were down by 26% for the quarter and net profits were down by as much as 41%, most exacerbated by the increasing manpower cost.

Margins for the core business remain largely intact.

Economic conditions remain largely challenging.

In the short term (and am taking a position only for the short term), this is a negative for me as most investors are looking to UMS as an income play more than anything else. 

With an interim being cut, partly due to the decline in business and also cash acquisitions, there are huge possibility that the full year dividends might be cut too as after the acquisitions, they have only $20m cash as compared to $60m a year before. This resulted in them going from a net cash to a slight net borrowing position.

Free cash flow for the 9 months is at $15m and I expect full year fcf to come in just under $20m.

I foresee full year dividends to be cut from 6 cents (which they need $32m) to 4 cents (which they need $21m), which gives them a dividend yield of about 6%. Not attractive enough for me as a long investor and I'd rather sit in the opposite fence of things. 

AMAT will report their 4th quarterly results tonight, which will impress but they have cautioned on the 2019 sales outlook, which will dampen the mood further if the cycle has finally peaked. This is perhaps also the reason why UMS is diversifying their businesses away from one customer through their recent 2 acquisitions.

For now, I am seeing some opportunity to make money by being on the opposite fence of things so let’s see if this strategy would play out on the down momentum.

Will be updating when I close the position.

P.S: If you are interested in opening an account for CFD, do refer to my banner link on my right hand side.

Wednesday, November 14, 2018

Dividend Income Updates - Q4 FY2018

I am writing this dividend update quarterly in an attempt to compile my quarterly dividend performance for the year. 

With a rising cost of living under the belt, in particular with the two kids in tow and hence require some bits of maintenance spend to keep hold, it can be particularly stressful to keep up with the expenses or cash outflow. 

Many times, we are dependent on our sole income which comes from our source of salary which we received monthly. While these may be the norms in the beginning, it is not healthy to be overly dependent on it over long periods of time as it may anytime snap behind your back. 

This is the reason why all of us need to think ways to grow our side income while we can so that we may unravel opportunities that can supplement our monthly income from salary. 

For many, these activities can range from being an Amazon affiliate seller to vlogging for a youtube channel to being a freelance writer. 

Some others in the investment space include investing in alternative assets, bonds or stocks that can give them dividend income on a regular basis. 

For myself, dividend investing has worked very well in the past few years due to the familiarity of the company and regularity of the payout, which I like it very much. 

It has helped me to curb my rising expenses when the need arises and further propel my portfolio growth through regular capital injection via dividends reinvested.

Still, with many get caught in the high yield trap as evident from the APTT incident this morning, it pays to be cautious of the payout that you are receiving.

Without further ado, here’s the Q4 FY18 dividend income details: 

CountersAmount (S$)Ex-DatePayable Date
Fraser Logistics Trust4,168.54 12-Nov19-Dec
Netlink Trust1,251.72 12-NovCFD
Far East Hospitality Trust1,050.00 5-Nov13-Dec
Starhill Reit1,150.00 5-Nov29-Nov
Total 7,620.26

After tabulating the dividends for all the companies, the 4th quarter dividend income came up to $7,620.26.

4th Quarter is arguably the weakest quarter of all, so we should see some better improvement in the next quarter.

With that, the annual dividend income has now summed up to $42,972 for the year, which so far is a record high for the portfolio. 

Together with the past dividends received, the portfolio has now accumulated $124,063 worth of dividends received and this number will keep on growing over the next few quarters and one day will become an integral part of my sustained income to live off. 

Thanks for reading.

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Tuesday, November 13, 2018

CFD Experiment - Dividends Credited and Cost of Financing

Following my experiment using CFD account to purchase shares which I blogged here a few months ago, I have finally received my first dividend payout credited to my account.

Although rather straightforward, but they operate somewhat a little differently from holding a normal ordinary shares account hence I wanted to document this for future users.

For those who've read my past articles, you would have known that I have opened up an account with Cityindex and have tried to experiment leveraging through a series of different level financing.

Being conservative since this is my first few encounters with leveraging instrument, I have only leveraged up to 1x which means for whatever position I have opened, I have half purchased it using cash and the other half using borrowing.

The cost of financing is estimated to be at about 3.2% per annum, though computed daily.

I currently hold open positions in Netlink Trust and CapitaretailChina Trust.

You can see that the cost of financing is computed daily, and I incur a financing cost of about $10 on a daily basis for these two relatively large positions.

Netlink trust also went ex-dividend on the 12th Nov and payment date for the ordinary holder will not happen until the 27th Nov.

However, for CFD account, your dividends are immediately credited to your account given that you are borrowing the shares and your borrowing cost is computed liable on a daily basis.

Given the usual nature that the share price will usually drop on the day of the xd, it usually nets off before the share price grows gradually up again.

I have not found a sweet position to utilize my CFD better but am tinkering to think that holding long term using this strategy might not be the best strategy.

But this is an experiment, so I get to see both the nice and ugly side.

Currently, Netlink is in a green position while CRCT is in a loss position.

I might tinker shorting a position for the short term in the near future when I get the chance to do so.

That'll be my another experiment I wanted to try out.

P.S: Double the risk, double the reward, but it won't be nice for those who fell prey to it.

Thanks for reading.

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Friday, November 9, 2018

5 Key Highlights From Hobee Q3 FY18 Results

Ho Bee Land Limited is a property developer and investing company which has developments in various parts of Australia, China and United Kingdom. 

The company has recently announced their Q3 FY18 results which brings about some of the key highlights: 

1.) Rental Income has once again grown both year on year (up 28.3%) and quarter on quarter (up 26.1%) mainly due to the full quarterly contribution from Ropemaker Place (25 Ropemaker Street) which they acquired on 15 June 2018. 

Extrapolating this to full year, this means that rental income contributes more than $200m to the company’s recurring income base. This translates to an earnings per share of about 28 cents before deducting the corresponding expenses. 

Rental income continues to play a large role in Ho Bee business model going forward. 

2.) Residential Sales in Singapore has remained lacklustre following the new cooling measures introduced in the 2H18. 

The company has only managed to record $1.95m sales for the quarter with a 36% net profit margin on the sales. 

The management continue to be pessimistic in this demand sector. 

3.) Shares of Profits from Associates continued to perform strongly this year and momentum in this quarter due to its sales from the residential development projects in Shanghai and Zhuhai. 

This will not yet trickle down to cashflow impact until the associates declare dividends at the end of their financial year. 

In Tangshan however, the company recorded lower profits from the sales. 

Management has also sounded cautious outlook on the demand for China residential properties.

4.) Following the European fund loan of EUR 90m made in March earlier this year, the company has not made any further announcement on the use of this fund. This however, has appeared in the balance sheet section under the “Financial Asset”. 

Separately, the company has also completed a 200m pounds Green Loan with HSBC in Aug, which we should expect some further acquisitions by the company. 

Gearing (Total Borrowings / Total Assets) has now grown to 0.42x, an increase from last year of 0.29x. 

5.) Leadership changes by promoting Mr. Nick Chua as Deputy CEO as well as Mr. Ong Chong Hua as COO of the company. 

The company currently trades at a P/BV of 0.51 and a trailing dividend yield of 4% (using 8 cents ordinary + 2 cents special).

I'll update the spreadsheet once the full year results are out.

Still in my watchlist with their strong growth potential.

Thanks for reading.

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Thursday, November 8, 2018

My Thought Process On Discretionary Spending

First of all, apologies for the lack of posting as I just came back from my trip from Taiwan which my friends and I did our main objective of the trip which is to cycle. 

During our time there, we also witness a nice fireworks display and we also walked around a few of the night market. 

The topic that I wanted to write today however is about controlled spending, and this came up because my friends who were with me were asking why my spending was so low and how I manage my controlled spending, even though some of the stuff that we came across in Taiwan was really tempting at one point but I walked away from purchasing it. 

I thought I’d come up with a post on how I liberate my thought process when it comes to discretionary spending. 

First, by clearly segregating my spending as discretionary vs non-discretionary expenses in my budget, this gives me an immediate avenue to think straight between a need versus wants. 

Discretionary expenses are clearly “wants” and a nice to have and by it’s very nature you can walk out of it and nothing significant will happen to your life. 

For instance, your first and second purchase for your shoes are probably a need but beyond that it will probably go into the wants bucket. 

But these are items that are very tempting to buy, we can understand. 

A lot of money is paid to marketers to promote, market and brand their products to lure consumers to purchase them. With many various designs and brands competing against one another, this quickly becomes a buyer’s haven as they have limitless products to choose from. 

This brings us to the second point, which determines what should we be considering should we decide to buy them. 

The first and foremost is to to have a quick consult with the budget in our mind to see if we can still afford them this month. 

This will help ensure that we kept our spending tight within the intended budget we plan at the start and it doesn't viral rapidly elsewhere. 

If this criteria is not met, then I would walk away from it immediately without pondering further. 

If the criteria is met, I would then ask myself the utilization utility of the product I wanted to buy. 

If the product warrants a frequent use, then perhaps it gets closer to the need than wants and I can shift the category around. 

The idea of doing this is simply to ensure that it isn't an impulse buy that are based on first impression or look without using them much often. 

For frequent shoppers, this becomes a very important point because they generally like frequent changes or updates to the things they buy or wear, such as phones or shoes. 

I would also at times check if there was a cheaper version online for the same product that I'm eyeing because there might just be. 

Last but not least, I would then try to maximize my spend by using my Citicard Miles reward, which gives me 1.2 miles on per dollar spend. 

Some may think it's such a hassle to go through so many consideration before buying but once you are accustomed it comes naturally to you at a finger of a tip. 

We can still live a fruitful lifestyle, indulge in infrequent luxury at times and still manage to get our budget financials in shape. 

That's the best of all scenario.

Thanks for reading.

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Saturday, October 27, 2018

The Great Singapore Sale Stock Market Is Here Again

Every two to three years, we seemed to have a variety of the Great Singapore Sale in the stock market that are back and enticing investor's appetite to invest into the market.

With the STI index now down close to 20% from the recent peak, it appears to have given the cash investors another test to check their perseverance in whether they would succumb their hard cold cash into the market at this point. After all, what the cash investors are aiming are the huge once in a lifetime opportunities and not this sort of minor correction every two or three years.

That's what holding cash are for in the first place I assume.

Fortunately (or unfortunately), this is out of my bound as my allocation are mostly filled close to 100% of the time.

This is where folks are tinkering with ideas and excitement that I generally don't.

However, if you ask me, the best time to invest is where there are full of uncertainties surrounding the economy itself.

With the trade war unresolved, weak earnings guidance or the upcoming mid-term election, these are my "safe-haven" opportunities to invest. It is not when the market is doing all well that I started to put my money in.

With a long term horizon perpetually, it is difficult to see how investors would lose money if they invest in good quality companies. The only problem is if they buy it high enough with little margin of safety. Even so, time will reduce the average costs over time.

The best time to invest in any given market is now. 

You just need to keep adding on through your dividends quarterly when you receive them.

But there'll be lots of noises around when the market will bottom out from here.

It feels like a dejavu over again.

Thanks for reading.

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Friday, October 26, 2018

Why You Should Try Out Purchasing Your Stuff From IUIGA?

Following my last week's article on some of the savings strategies I used for buying groceries, I'll be sharing another of our favorite savings tips when it comes to buying some of our furnitures & fittings and lifestyle products.

About a year ago, my wife chanced upon a website called IUIGA, an online platform portal that sells many of the home essentials furnitures & fittings and lifestyle products that some of us may need depending on our lifestyle.

Back then, we wanted to hunt for a good travel neck pillow since we were heading to Taiwan a few months later and so we bought it online at IUIGA which came at a very affordable $16. As we do not travel on long haul flights very often (at least not yet), we were not willing to spend as much on such product.

However, when the product was delivered to our home, we were surprised by its quality. The pillow had a luxurious feel that to me is just as good or better than the ones you get at Muji or Travel Explorer that usually retails for more than $30.

Until today, we are still using it whenever we travel overseas and it has made our travels much more bearable on the plane.

While browsing the website, we also found another product that catches our eye and that is the bean bag which only retails at about $130. Compared to retailers outside, this was a steal given the amount of utilization we've used over the past year.

The quality of the bean bag cover was also good that it doesn't spoil even after we washed it a couple of times. The bean bag itself was also very comfortable when we sit on it.

We found it to be very comfortable especially when we are lying down watching our favorite television programme.

This retails outside for a lot higher
Apart from these things, they also sell other travel products which caught my attention such as the travel luggages, mother and baby products, kitchen essentials, beauty items and many more.

I've been wanting to buy this new hand carry luggage

As an investor myself, I've always been intrigued by how retailers try to price their product competitively in the market without compromising on quality.

Reading the IUIGA website gave me a clearer understanding of their business model as they obtain their products directly from Original Design Manufacturer (ODMs).

According to Wikipedia, an ODM is a company which designs and manufactures a product which is specified and eventually branded by another firm for sale. Such companies allow the brand firm to produce (either as supplement or solely) without having to engage in the organization or running of a factory.

These ODMs that IUIGA uses also manufacture for other renowed retailers like Samsonite, Muji and WMF to market their products at the mark-up they like.

Another thing I like about this online retailer is that they are very transparent about their pricing model, which states how much are their cost of goods and the margins they earn as compared to the other renowned retailers.

Given the prevalent competitive landscape of our retail players, I hope they will continue to thrive in this environment to provide consumers with great value for their purchases.

The next time you are looking for things to purchase or the upcoming Xmas present to exchange, you might want to try out IUIGA and sign up via my referral link here.

When you sign up, both of us will get a $10 (Min $100) off so it's a win win situation.

You might just like it as much as we do.

Thanks for reading.

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Tuesday, October 23, 2018

What Happens to F.I.R.E When A Recession Strikes?

In the eyes of the world, F.I.R.E means not actively working which means you don’t get any sorts of income and have to depend on living off your passive income in order to survive. 

Many people that I know who’ve achieved F.I.R.E are either invested in: 

  • High Credit Rating Bonds – This applies to those whose capital is huge 
  • High Yielding Corporate Bonds – Lower ratings bonds offering higher coupons 
  • Equities – A Combination of Securities, Stocks or Reits 
  • Property – Rental Income 
Most of these assets are susceptible to recession which can severely hurts the value of these assets in our portfolio. 

And this is why most people gave this excuse about not pursuing F.I.R.E by not embracing them gracefully because they have this large misconception that a recession can destroy all that we’ve built.

You can see this reasoning prevalent in many cases in the comments section of many FIRE articles. 

Here, I want to debunk this myth and misconception that many people have over pursuing for F.I.R.E in the midst of a weak economy. 

Adjust Spending Flexibly 

First, most F.I.R.E folks have mastered the grasp of basic survival of spending. 

F.I.R.E folks are not ordinary people that you see on the shopping street. 

They have been trained mentally for long periods of their gestation survival moment throughout the course of their journey to reaching financial independence. 

These are people who can spend very little on their physical appearance, surviving a few months without Netflix, and probably a couple of years without buying new clothes. They can spend little on indulgences such as traveling or fine dining for peace with only books in their hands can give them enough comforts for long periods of time. 

What I am trying to say here is they have been mentally trained so well on their discretionary expenses that during a weak economy where earnings most likely drop, they are able to adjust their lifestyle as such and nothing drastic will happen. 

This is one of the strongest mentality of the F.I.R.E community. 

Assets Revert Back To Their Fair Value Over Time 

During recession, the most scary thing to experience is to visibly see your networth goes down by half the amount of its original value. 

Imagine working your socks off for 20 years and saving a hard stash of $30k every year until you’ve accumulated $1m, and then the moment of truth came which brings down your networth back to $500k. It is almost inevitably that in everyone’s mind they will start thinking the repercussion effect of a recession. 

Some may think that they have to return to the workforce to work for longer period in order to re-accumulate back that $500k that they “lost” during recession while some may start to play mentally in their mind how scary recession is that they can wipe out 16 years ($500k/$30k) of savings in a single year. 

Many people have this thinking that having the most warchest or cash during recession is the key to survive, but they are not. 

The key to survive a recession is to have the strongest mental. 

While it is true that a recession can cause an asset to drop drastically in their market value, for most of the case, they will rebound back once the cycle is over, assuming it is a strong quality asset. 

All you have to do is to stay mentally strong, continue to pick up good companies during this turbulent times and you’d come out not only unscathed but might even benefit in this recession period. 

A recession cannot destroy a folk with a F.I.R.E ambition. 

Only one with a weak mental will self-destruct during times when everybody is fleeing. 

Stress Test For Worst Moment 

A recession is also a good stress test for those with F.I.R.E ambition because it throws you so many bad scenarios from all angles and test your perseverance and determination. 

Imagine you are one of those being laid off without a job during recession, it is indirectly testing your financial strength to see if you have enough emergency funds as a back up to survive during these periods where you don’t receive any income. 

If you are folks in the F.I.R.E community and own a diversified portfolio of stocks in your fund, your company might also most likely cut dividend during these times to stash some cash as opportunities and hence you might be impacted by the lesser amount of dividend received. Again, this is a stress test to see if you, as a F.I.R.E community, have baked in sufficient margin of safety when you decide to achieve F.I.R.E before the recession. 


If you can survive the recession without impacting much of your cashflow scenario, then you are definitely in a good stead towards achieving permanent F.I.R.E. You are probably one of those in the FAT F.I.R.E scenarios where you have baked in a lot more room for margins error. 

For those who are like me and are barely on the Lean F.I.R.E status, I think it also serves a good purpose in stressing how much of what we can absorb and take in during these times and if not, we can work harder to give ourselves a more comfortable figure before deciding to F.I.R.E. 

The idea here is also that F.I.R.E is not a static moment. 

Things can always change, ideas can always evolve and goalpost can always move. 

We just need to be flexible with our adjustment and do not be afraid nor give excuse about the underlying external events which are unrelated to us.

Thanks for reading.

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Sunday, October 14, 2018

What People Misunderstood About My Combo Savings Strategy

When my recent article got published on Yahoo Money Matters (Link Here if you are interested), there were many attacks remarks on the comments section and also on the social media and hardwarezone forum in particular to the way I save on things.

They think that by being able to get to where I am today, I must have scrimped on things so badly in order to amass such a high percentage of savings even though I am the sole breadwinner of the family and our family have two young children.

At least 50% of the crowd thinks the maths doesn't add up, or they must think I live a misery life that I am missing out on most of the "fun" things in life.

The other 50% of the crowd thinks I must have a high income equivalent to a scholar working for the government.

Everywhere on the comments was an assault.

Almost none was complimentary or at least try to believe that it is true.

That is where I know that we here in the financial blogosphere are the minority outlier who believes things can happen for a reason.

There are many people who I felt had misunderstood when I say that we have to be aware on the things that we buy in order to accumulate more savings at our end.

Savers folks like us do not scrimp on non-discretionary items that we have to spend on.

We spend by being smart about buying them and looking for every value that we can buy.

For instance, I have two young kids at home who obviously need the most important things in their lives right now - Diapers and Milk Powders.

That doesn't mean we do away without them by depriving them of these things but rather we try to source for these items that have the same quality yet cheaper alternative.

In my earlier years for instance, I would buy them over at our neighbourhood country whenever we visited JB on the weekends when we had our short trip travel. With a strong SGD equivalent when  converted to Ringgit, the price that we pay for these items would have halved the amount that we pay in Singapore for the same imported items.

We did the same whenever we had the chance for our frequent travel to Bangkok.

Over the past few months where we did not travel anywhere, we would purchase them through Redmart, an online grocery shopping portal which takes the inconvenience out of the way for us for bulky items like rice, oil, tissue roll paper, diapers, etc.

To add spice to the convenience deal, we also sprung up a few combo savings strategy which resulted in very decent savings at the end of the day.

1.) The first is through logging in to Shopback, a great e-commerce online shopping platform that partners with so many merchants that you literally have to use them.

p.s: if you are a first time user, you can sign up using the link here and immediately redeem yourself a $5 reward start.

$230.89 - That is the amount of cash rebates I get in recent months through my routine mandatory item purchases
2.) Once I logged into my Shopback, I will activate the rebate to get into Redmart and does my routine shopping option. 

I usually choose bulky items such as rice (they have a great japanese rice at affordable price which I highly recommend), oil and diapers which I am too lazy to carry outside since we are car-less people.

Redmart often has a promo-tie with Citibank credit card which you are entitled to around 8.8% off your spend ($12 off with minimum $135 spend). Again, I buy mostly items that can last a few months ahead so I just store and add them up accordingly.

CITIUP12 - My favorite code
3.) In addition to the above, by being smart about using the right credit card and in the above case Citibank card, I'll get an additional 8% cashback that goes back into my citicard (see tie-up link above).

4.) Last but not least, Redmart also has a partnership tie-up with Live-Up where it gives you further perks benefits by just signing up an account with them. They currently have a free 60 days trial with a free 2 months Netflix if you sign up an account with them, after which you'd be charged $28.80/year.

But just look at the savings I have over the past month with them, it's easily over $50 and I have redeemed my initial charges with them.

My Combo Savings Strategy

My final purchase would look something like this:

I purchased something that's worth around $135 (you will get around the same amount if you purchase them at your usual grocery stores) and get the below combo savings deducted:

$135 x [1% (through Shopback for existing Redmart customer) + 8.8% (Citi promo tie-up on almost every Cyber-Tuesday) + 8% (additional Citi cashback reward) + 5% (Live-up) = $30.78

This translates to a savings of about 22.8% for almost every time I purchased via Redmart over the past few months.

My Combo Savings Strategy
Final Thoughts

At the end of the day, savings is about being smart about buying things.

The first being able whether to segregate between discretionary vs non-discretionary items.

And the second to the extent of being able to extract the most value out of the things that you buy.

That's how I get my relatively high savings rate even until today, we save what we need to save and not what most people misunderstood by being stingy on things.

I hope that gives some clarification about things.

Thanks for reading.

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Friday, October 5, 2018

What Would You Do For 10% Raise In Salary?

I stumbled upon this article (Link Here) which they gathered about 1,200 Americans people to survey what would these people give up in order to get a 10% immediate raise in their salary. 

The question is of course, hypothetical in nature and by no means reflects an opinion which we might personally have it ourselves but I thought it’s still an interesting exercise to ponder about just for fun. 

To add some spice to this, I’ve picked up a few questions which I thought was interesting to have, and I have added my own opinions on the questions. 

You can let me know your own thoughts in the comments below. 

Working Related

1.) 55.9% would work an extra 10 hours per week for life 

B: To be frank, an extra 10 hours per week isn’t exactly a lot because it translates into about 2 hours per day which technically means you are working for about 10 hours in total. This is probably the reason why most would go for it given that they are probably already doing that. For me, I wouldn’t vote for this because I am literally buying an extra time with money, which I am already deprived of for most of the day. Working an extra time means lesser time to do other activities that we love and this is not in line with the financial independence concept that I pursue. Of course, if you are already doing the work that you love, then this just adds a spice dimension to it and I don’t see why not. 

2.) 50.4% would work one day every weekend for the next year 

B: This is not much different from the question above given that you are essentially buying time for money with the only exception that you only have to do it for a year and that’s it (compared to the above where you have to work for life). Literally speaking, the majority of these people who have voted yes for this could have find a weekend job and work for it. It doesn’t make sense for them to wait for the reality to kick in. Personally for my case, I wouldn’t vote for this as well because weekends are my treasure days where the family could be together doing common activities. 

3.) 15.27% would give up all of their paid vacation days for the next five years 

B: Generally speaking, we have about 14-18 paid leave in a calendar year so from a mathematical point of view, the monetary benefits seem to favour the give up. Plus, this is only for the next 5 years so essentially you can resume back your paid leave after that. Again, personally for me, I wouldn’t go for it because I usually utilized my paid leave for quite a few activities that I am working on and they are priceless to me. 

Social Related

4.) 53.55% would give up all social media accounts (facebook, Instagram, twitter) for the next five years 

B: Wow, this is a hard one for me! I know that social media accounts are generally tabloids that are filled with the latest gossips in town or newsfeed of your friends happening but to be without them for the next five years is still too much to accommodate for me. No as well on this one. P.S: It’ll be interesting though to see how others might vote on this one. 

5.) 88.61% would give up watching Game of Thrones for life 

B: I'm game for this one. I am not a big fan of GOT personally and would readily give up for an extra 10% increase in my pay. Give it to me right now! 

6.) 43.86% would give up exercise for the next five years 

B: I need my exercise after sitting in the office for almost half of the day, especially on a weekend. No for me. 

7.) 73.42% would give up all alcoholic beverages for the next five years 

B: I think I can do with this one, though five years without alcohol does seem a bit odd weird taste in my mouth. My mouth will get itchy but it is something I can do without. 

Others Related

8.) 34.98% would give up the right to vote in all elections for life 

B: This is getting more to the political side. This is a bit of a hard one as well but I’d favour a yes on this one for the sake of that 10%! Do it before I change my mind! 

9.) 12.2% would break up with their partner or significant other 

B: I seriously don’t understand this. Why would anyone be willing to break up with their significant other for only a mere 10% increase in your pay? Surely your other significant half is worth more than 10% of your entire salary! Wake up please! 

Final Thoughts

Even though this is just a fun exercise, we can deduce what are the factors that are important to us in life. 

Most of the easy yes or no comes from the fact that we are already not valuing that, for example in my case above I have not watched a single episode of the GOT but what if someone who are a big fan of GOT would reply? It’s always harder when you have to weigh the sacrifice that you are already doing for something that you need. 

It’s also interesting to see if we change the question to maybe a higher amount, say for instance a million dollars instead of a mere 10% increase, would any of your answer have changed then.

Thanks for reading.

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Saturday, September 29, 2018

$750K - Third Milestone Target Reached!!!

As part of a larger picture to keep track of my financial independence journey, I had planted a few checkpoint to stop and check if I needed to amend any of my strategy and also to give myself a pat on the back for the small achievement each time a milestone is completed.

This is the third installment of a four-series milestone and it is so important that I think it deserves a post on its own.

Rewind Back The History

For those who are reading or following the blog for the first time, you may learn from reading the past articles appended in the archives that this blog is a chronicle journey of an ordinary person who is looking to achieve financial independence at the age of 35 and I have given myself a 10 year timeline to do that from when I started working at the age of 23 (but only "woke up" after 1-2 years of working).

When I first started working, I was not immediately enlightened by this whole idea of financial independence. Having my salary at the end of the month means getting wasted on all sort of gadgets and the latest trends in town that my bank account would quickly diminish from 4 digits to a 2 digits by the end of the month. I was so eagerly waiting for the next paycheck to arrive but I thought at that time this was a common practice among the colleagues who were practically almost doing the same. I wasn't really sure if I should be deviating from that practice.

One day, I was somewhat enlightened by my ridiculous spending and saving pattern, with little to no investment that I started this blog to start afresh of keeping tabs on my spending, saving and investment. The "Cashflow" Quadrant by Robert Kiyosaki was my first inspiration book while there are many bloggers I was inspired that had also contributed well to where I am today.

Over time, I managed to do rather well in all the three aspects of climbing the corporate ladder, maintaining a ridiculously high savings return and getting a very decent return on my investment.

In April 2014, I managed to reach my first milestone target of $250k which I am extremely proud of. It took me 6 years since the start of working to achieve this result. You can view my thoughts on achieving that back then here.

Since then, I had my first parenting where my first son was born and I also upgraded myself to studying a part-time MBA so I thought expenses were going to balloon up and it would derail my journey to the next milestone.

Thankfully, while expenses have creeped up, the bull market also means that I was getting decent return on my investment and hence I was able to continue to push the networth up further and it took me about 3 years to reach the next milestone.

In March 2017, I managed to reach my second milestone target of $500k. You can view my thoughts on achieving this second milestone back then here.

I knew things were going to get even harder, given that our second child was born during the year and that means expenses have to doubled.

$750k Milestone Reached

Fast forward to this week, I am glad that my equity portfolio had managed to hit the third milestone of $750k worth based on its latest market value.

From the last milestone to today, it has taken me about 1 year and 7 months to reach the third milestone.

The recent M1 (top 2 position) takeover saga means the portfolio has bumped up by about $40k during the pre and post takeover news, and gave a nice boost to hit the third milestone.

This was an anomaly one-off which I was not expecting it would come that soon after the failed takeover bid 2 years ago. I guess I was darn lucky with it.

There was also collateral positive impact for my other position in Singtel (top 4 position) because of this news.

Together with some of the equity portfolio for my wife and 2 children, the portfolio has now hit north of $800k and has an FI Ratio of about 0.82x.

P.S: I will be combining the portfolio for the household since I no longer publish them every month here and it is easier to do reconciliation.

What's Next? The Final Milestone

The next milestone is probably the biggest one as it embarks the last piece of puzzle towards the path to the financial independence.

I don't think I am naive enough to think that this will be a smooth ride from here on.

Already with expenses running up and the bull market seemed like it is on its last leg, the portfolio could well take a hit down before it resumes the trend up. For sure, it will be a bumpy ride from here and I am keeping a cautious stance on the outlook and strength of the portfolio.

If the market is kind enough and give me the same returns as they have done in all previous years, I might try to achieve the last important milestone 2 years from today, which will coincides with my 35th birthday.

The strategy will not be anything different. It is to focus on the savings first and then decent investment return. I have probably peaked my human capital and will not be able to contribute to the increment much further from here.

Let's see if that will materialize.

I am crossing my finger and still hoping the answer to that is a yes.

Thanks for reading.

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