Thursday, January 29, 2015

My chin up journey

For the past weeks since the start of the year, you can see 2 persons in the east near to a pull up bar, around 10pm to as late as 11pm. One of them would go near to a bar first, mount it by jumping up and the other would as quickly as possible, grab the ankles and help to assist the person to go up. It'll be 2 sets of 6 assisted chin ups, if they are feeling strong and energetic, or 3 sets of 4 reps if they are not feeling up to it. Always, there'll be rest in between the sets.


Those two persons is me and my wife. For some reason that I'm still trying to figure out, we decided to train to do at least 1 chin up by CNY. Both of us are zero heroes, meaning we can't even do one chin ups. For me, I'm a serial zero hero. At the peak I could do 10+, and that was back in my prime during army days.


During end 2013, I managed to do 3 to 4, so that I could pass the more stringent IPPT before they revamped it all over again. Anyway, I have a lot of experience in going from zero chin ups to 1. The journey from 0 to 1 is immensely harder than from 1 to 2 and from 2 to 3. So a lot of effort had to be done to build up the back muscles and the arms. Esp the back muscles, which is kind of hard to train unless you go to the gym purposefully. For my wife, she never had the experience of doing 1 chin up before, so it's a brand new experience for her.


This is where I want to be


In the past, when I was going from 0 to 1, I was doing all sorts of things except going to the bar to attempt to pull myself up. I would be doing weights, then push ups and dips and those assisted pull up machines found in the gym. The settings of the chin up machine is set so that I can do 10, which means that it's not hard a setting. After training for some time, I would test myself by going to the bar and attempt to do one. A few grunts and a few kicks, I still can't do one. How disappointing, I thought. Didn't I train hard?


If you want to learn how to swim, you can buy the best swimming trunks, the best anti-fog goggles, a nice Speedo swimming cap and even a mp3 player that is water resistance so that you can listen to music while swimming. You can read all about how to do it from books, talk to swimming enthusiasts to ask them to give you some tips and watch youtube videos. But if your feet is not even dipping into the swimming pool, it's not going to help. To learn how to swim, you need to jump into the water. Might not be initially, but eventually you'll need to.


I guess the same lesson applies for my chin ups...if I want to do one chin up, I need to go to the bar and attempt to do it. All other things are peripheral. The most effective way to do it is to attempt to do it. Invariably, you'll encounter problems. Like, I can only do less than half a chin up. Since the back muscles are the ones that do the initial lifting, I concluded that my back muscles are weak. The only way to train is to do more assisted chin ups, until you can do half a chin up (this means that you can lift yourself up to the point where your elbows are about 90 degrees).


And that is where I am right now.


To go further, I need to build up my biceps. That's why I'm doing weights. Out of all books that I read, it's Antifragile by Nassim Nicholas Taleb that I learnt how to build more powerful muscles so that you can lift heavier weights. You just need to take the max weight that you can lift for about 5-6 times, instead of doing multiple times on lighter weights. When I mean 5-6 times, I really mean the last lift you can do is 6. You'll be struggling on the last rep and you possibly can't do anymore after that. The theory is that if you want to lift heavier weights (which is essentially what chin up is about), you need to practice lifter heavier weights. Doing lighter weights multiple times can only make you...lift lighter weights multiple times. So right now for me, it's 8.75 kg for 6 times, 3 sets, with rest in between.


It just takes less than 10 mins to waste my arms totally. On top of this, I'm still doing the die-die-do-12-chins-up-by-any-means exercise with my wife. I tried it yesterday night, and I can barely even do 1/4. It's like that, my muscles are totally wasted. To become stronger, you need to destroy and rebuild. That's how nature works. I just need to supply it with nutrients and water and the rest would take care of itself.


This is where I am now. From Freddy Thorn Illustration

LP the personal trainer? No lah. Knowing me, you know where I'm going to end this post with. Seldom do we see new things, but we consistently find new ways of doing old things. From my chin up journey, you can see a few important points:


1. If you want to do something, go do it. Don't do everything except the things you want to do. I know sometimes we need to psych ourselves to the task. Go do it then, but ultimately remember this, to do chin ups, you need to go to the pull up bar and do chin ups. Any other things are peripheral and at most plays a supporting role. Do the thing that you fear the most.


2. Push your limits to grow. Doing the same thing that you can already do multiple times is a different sort of training if your goal is to do even bigger things. Of course you'll suck at it initially, but that's the only way to push yourself out of your comfort zone.


3. To grow anew, you need to destroy. By going about your old ways yet hoping to see new results is insane and delusional. If you don't remove the old, it's hard to find new space to fit in the new.

Sunday, January 25, 2015

LP's asset portfolio

I'm inspired by Derek when he shared his asset portfolio here. Like him, I'm not going to include the asset value of my residential property, nor my CPF or insurance surrender value. No point including property, as it easily overshadow all the other assets, distorting the percentage. Besides, I don't really see my residential property as an asset. Personally I would include the surrender value of my insurance, or decided to keep it as consistently as possible to Derek's definitions.




Shares/bonds

This includes the marked to market value of the shares held since the beginning of Jan 2015. Includes all the SGX shares, US and HK portfolio

War chest

I'm almost 50% cash. Some of this are locked in fixed deposit, and none of my warchest comes from CPF. But my war chest is fluid. Every month, it'll increase by a few k and decrease by a few k when I enter a new position. All my monthly savings are actually going into my warchest. Looking at both Derek and my own's ratio of warchest to invested amount, it's kind of hard for the market to crash LOL

Emergency fund

I only have about 3 months emergency fund. This amount of money is mainly held in my SCB account, which is also jointly held by my wife, though only my part of the money is represented here. This account is used to pay for any joint expenses, like housing mortgage, household repair etc. This account serves as my bill paying account for all joint expenses. I'll always keep a fixed amount inside and we do periodically top up to ensure there's enough to pay 3 months worth of household expenses. I know my segregation of emergency funds and bill paying account is not clear, but this is because I had funds for all sorts of things and not a lot of things will catch me by surprise. Kids, don't follow me!

Impending bills

Just for the purpose of this representation, I pulled out my budget for all my big insurance bills that I have to pay for this year and put it under this category. I pay annually, so this is thes  single most biggest expense that I have to cater for. The rest are easily settled by either the cashflow from my pay or from the emergency fund/bill paying SCB account that I jointly shared with my wife.

Play fund

Play fund is not a physical account but an accounting account. I put aside a fixed budget every month, for frivolous things like gadgets, games, books etc. As long as it's not a necessity and not for work but for leisure, it'll fall into this account. If I have to travel overseas for holidays, it'll fall under this account too.


I don't have a daily expense account. There's a budget for food and restaurant, so these are properly accounted for and there's no need for a physical account to set aside money for it. Most if not all of it is funded by my pay that comes in weekly or bimonthly. In months where it's drier, I might have to tap into my emergency fund, but I seldom do that. So far, I've only done it once or twice in the driest year of my entire career. Actually my wife can also act as my emergency fund. When she's hitting a dry spot, I'll spend more money on food for her. Vice versa, when I'm having drier months, she'll treat me more often.


My blogging fund comes from my play account. But for some things that need to be paid for, I did a cash call from the cbox community in 2013. They kindly raised enough to make it last till 2019! You can read about my own kickstarter campaign here.


There you go!


Saturday, January 24, 2015

POSB did it again!

Not long after the 1.5%, 6 months (cap of 20k) exercise that I blogged about here, they came up with another bigger amount and longer tenure.


This current one is 1.88% pa for 12 months, with a minimum amount of $1k to a max of $1 million. In addition, there's also a $88 ang bao for the first 10,000 customers. The details are all found in their website here. The full terms and conditions is found here.




To qualify, you need:

1. Register by 28th Feb 2015 (inclusive of date) here.
2. Complete the top up by 28th Feb 2015 (min $1k, in multiples of 1k up to a max of 1 mil)
3. Maintain top up amount for 12 months.


As usual, they wanted fresh funds, so just do the necessary FAST credit transfer between banks. The cash gift will be deposited to the account registered by 31st Jan 2016. As for the first 10,000 customers who will receive additional $88, they will get their ang bao in their accounts by 31st March 2015.


I won't be participating in this one. I don't think I'll have enough liquidity to do this. I still have 20k stuck in the previous exercise by POSB until July. Good for those who are holding emergency cash. This is really a good deal and possibly the highest fixed deposit rate offered by any banks here. Awaiting other competitors to top this :)

Thursday, January 22, 2015

My spending threshold

I always believe we should grow bigger than our problems. It's the way to make a big problem smaller, simply because you've grown bigger in size. I've written about these topics at length here:

1. Of dragons and men
2. The relative size of your problems
3. Outgrow your problems
4. Growing bigger than your problems


In the past, I used to fret about $10 meals. I only had very little pocket money and that's all the budget I had which also includes transport, stationeries and other expenses. That happens all the way up to university where I had to plan my meals properly. If I had too many restaurant meals (even those around $10 to $15), I'll have to scrimp and save the rest of the pocket money to last the entire month. So, during that time, my threshold was $10.


As I work and earn my own keep, that gradually increased to about $25. I fondly remembered the times when I was dating, and I had to spend money on movies, restaurants and cafes...It's not so easy for me. The average spending would amount to maybe $30 per outing, more if you have to pay for the other party. That's a lot of money for me, considering I only have $120 to 150 per month (if I remembered correctly) during my university days. So, during that time, my threshold was $30.




You find that at different periods of your life, this threshold where you have to think hard about spending will increase. From fretting about $10 for a meal alone, to $30 for a day's outing, to $60 for a all-boys drinking session, to $150+ for a good smartphone, to $16k downpayment for a car, to $40k COV and on and on. I think after spending thousands for my wedding and renovation, I don't really worry over things below $100 any more. It's like once you've completed Expert level in a game, playing Beginner level is just a walk in the park.


I think in the past, I was very concerned about the absolute price of things because my budget simply doesn't allow that to happen. Gradually, I realised that shopping for things that are value-for-money is more worth while in the long run. That took a longer time than I feel is right. I used to buy cheaper razor blades, cheaper shoes, clothes but they are really of lower quality. It turns out that I have to spend more time and effort buying newer cheaper and lower quality stuff. That changed when I bought my first pair of good Clarke shoes.


Compared to the usual Bata type (less than $30), Clarke shoes are easily $100 to $150 over. I remembered I took a long time debating over it, trying to work out the sums. My threshold back then was still around $100. Eventually I got won over and that changed the perspective that I see things. Things that I want and will use for a long time, I don't mind spending a lot of money on them. Things that I don't want, even if you give it to me for free, I also won't want it. It's simply eliminating wastage.


That eventually spilled over to food as well. In the past, I would gladly spend less on food so that I can conserve my budget. I would never order fruits...a platter of it cost more than what I spend on a proper meal - a meal that consists mainly of carbo but is filling. Drinks? No way, I would never order them since ordering one soft drink can be half the cost of my meal. I'm glad those days are over. The health effects of such actions cannot be belittled. But that was in the past when money was tighter than it was now. I'm glad I lived through it though I hope I'll never go back to those 'dark days' again. And who I am now is shaped by the experience that I had in the past, so no regrets over those. I'll probably do the same thing again if I can go back time.


Back to the topic of growing yourself to make your problems smaller. My stance is this...you can only save so much, and there's only so much cost to cut. Once you've done what you can to cut your expenses without feeling unbalanced, the only way to grow is to increase your earnings. Once you start finding ways to increase your income, you find that you're not just surviving. You're living a proper and balanced life. Maybe even thriving. What's balanced is subjective, but I think if you feel shortchanged by your own circumstances, that's not balanced anymore. I'm not a hermit and I need to spend money, and so I do. I shouldn't have to feel guilty over this.


In the midst of saving up and planning for the future, remember to live a little right now. While it's important to hedge for a long life, it's equally important to hedge against an unexpectedly short life. Financial freedom is a mindset where money is no longer a concern. A situation where you have too much money and you're still concerned with money is as bad as a situation where you have too little money and you're equally concerned over it.


Okay lah, maybe the former is a little better.


Saturday, January 17, 2015

MRT reserved seats

Tan plugged in his earphones, trying hard to ignore the stares of other passengers. He tried to close his eyes, pretending to sleep, so as to shield himself from the knives those eyes are throwing at him. In front of him, a pregnant lady stands close to him. He heard someone muttering, but it's drowned out by the music blasting from the earphones. Tan is, afterall, sitting on the reserved seat of the MRT train. It is Tuesday 8:32 am. To be inside an MRT at this time and day is not exactly an enviable position to be in.

Tan pretended to sleep but he failed miserably. Just before his consciousness quietly slipped away to blissful sleep, his last thoughts lingered on the gambling debt that he's trying to resolve. Tan had to work in a fast food chain after school on weekdays and take up tuition assignment over the weekends. He wondered how long he can do this before his body withers away. But no, such thoughts do his family no good at all.




Siew Hua had always been a gambler. She had promised her fiancé that she would quit when they got married. She did keep to her promise. If her love for gambling is great, the love for her husband is greater. She eventually had two children - a boy first and then a girl - and all was well. Until the sudden death of Siew Hua's husband, that is. Then, everything came crumbling down. When her greatest love was forcefully taken from her, she went back to her second love. Tan is Siew Hua's son.

                                                             *******************
                                                           
Min told her family she's pregnant. She's only 20 and still studying. Thoughts of abortion sprang to her mind but it was her brother's insistence that she chose to keep it eventually. And so everyone in the family accepted the new circumstances, especially her brother.

Min had a checkup with the doctor at KK hospital on Tuesday, so she's taking the MRT with her brother. She's into the 4th month, so it's quite a visible bump. A kind gentleman in his 40s, sitting on the reserved seat gave up the seat to her, which she mouthed out the words "thank you" and smiled. After a few minutes, she saw her brother leaning heavily on the handrails, his head between his bent elbows. His knuckles are all white, as if he's holding the handrails for dear life. Occasionally, his legs will buckle, jolting him out of his sleepiness. Her heart softens.

"Kor kor, come. You sit. You're more tired than me"

Min guided her brother down to the seat and stood next to him. Her brother reluctantly but gratefully sank into the seat. He offered to take Min's haversack and put it gently on his lap, before proceeding to take out his earphones.

"Kor kor, still got time. The appointment is at 9 am. You sleep, I'll wake you up when we're near".

But he was already dozing off.

Friday, January 16, 2015

Start with the man in the mirror

I started ‘playing’ the market with no skills, dabbled in warrants simply because they are cheap and that I have limited amount of cash and patience. I've no idea how warrant works but that doesn't stop me from buying and selling them, often several times in a day to the tune of 15 to 20k per trade to scalp the minute changes. It’s a wonder that I didn't catastrophically burst my bank account. I've heard of people making a lot of sense talking about support and resistance and how the Bollinger squeeze makes a good long or how a RSI and macd-histogram shows that this and that is a good short. I also wanted to be knowledgeable and trade using technical analysis.


So I learn more about the technical side of the market. Charts, with support trend-line and horizontal supports and resistance are drawn.  I learned that the trend is your friend and 61.8% and 38.2% are the golden numbers in the Fibonacci retracement, also found in nature. I need to be careful of divergence when the MACD lines makes a lower low while the price heads up to a higher high. I read Jesse Livermore, Guppy, Martin Pring and all the other greats to learn their trades. But I lost more money. I thought reading these chart wizards makes me good. I understand the theory behind the books I read but I couldn't apply it profitably enough. Then I heard about the people who talks about the market being a weighing machine in the long run and a voting machine in the short run. We’re actually not buying counters but being a part owner in a great business. I also wanted to be knowledgeable and invest like a value investor and analysis a company fundamentally.


So I read up about financial accounting and know the how the cash flow affects the balance sheet and how the accrual accounting makes a profit looks nicer than it actually is. I learnt that we can find out how leveraged a company is by looking at the assets/equity ratio or see how times their current assets can cover their interest payments. I learnt that a PE of 10 means that you've bought 10 years worth of earnings in today’s price. I read that ROE is not a Japanese delicacy that I like to eat but is an important ratio to measure how good a company is at allocating their resources to make a profit. So is the ROA, enterprise value/EBITDA, Price to FCF and many more. Then I was caught in the s-chips like Longcheer and China milk. They have fantastic numbers, amazing value, rich in cash, low in debts and best of all – undervalued based on the whole matrix of ratios applied to them. As the prices of Longcheer dropped, I put in more and more, because if the price of the company is attractive before I bought, it’s going to be even better as the price drop further. I ended up cutting losses. Then I heard someone mentioned that it’s not the individual assets that are important, it’s the portfolio allocation that plays the most important part in your portfolio’s return. I also wanted to be knowledgeable and be a good manager of money.




So I learnt about the efficient market theory and how it’s useless to time the market. Nobody beats the market in the long run, so there’s no point trying to beat the market. Higher risk gives higher returns so if I have different classes of assets at different risk levels and therefore, different returns, it’s possible to find the efficient frontier whereby I have the most diversified asset allocation with the greatest returns for the lowest possible risk. I know about the Greeks, which are really not people from Greece but letters to represent different things. Specifically the beta, which represents how volatile a security is relative to the market in general. Then, there are the delta, vega, theta, gamma and all the fun stuff in options, which are also found in warrants. I didn't know that I dabbled in financial alchemy when I first started! Then I read more about bonds, because it’s a good alternative to the more volatile stocks and are supposedly inversely related to stocks. But bonds are a debt instrument, and when a company issues a bond, they are essentially borrowing money from the investors. Thankfully I know that little bit about accounting in my ‘fundamental analysis phase’. That helped tremendously when I also ventured into preference shares, which have features of both bonds and shares.  Hey, suddenly a lot of things gets tied in from all the loose ends and things seem less muddy now.


I stopped wanting to go for the next hottest quick fix to investments. I stopped wanting to be knowledgeable. I stopped trying for the next cure before I even figured out why the previous method doesn't work. I stopped escaping and finding the next scapegoat to blame for not making a killing in the market. I stopped looking at the stars and the Bradley’s turn dates to decide when the next major top and bottoms are. I stopped looking for the next guru to follow and for them to instruct me what to do.


Instead, I looked deeper in myself and looked hard at the man in the mirror. I have met the enemy, and the enemy is me.

Tuesday, January 13, 2015

How to beat OCBC 360's return

To the above blog title, I should add, 'in a relatively safe manner'. Risk and returns are directly related, so if you want to beat OCBC 360's 3.05% pa returns, you can always invest in the stock market with the potential risk of having capital losses. Here, I'm going to try beating the 3.05% returns, as well as equal it in terms of the risk of losing your capital. Possible? Read on.


We all know what's so great about OCBC 360 account.  If you hit certain milestone conditions, you get stepped up interest ranging from 0.05% to 1.05%, 2.05% and finally a max of 3.05%. There's some disadvantages to this though:

1. For those who can't change their salary code, you will have to forsake the 1% interest for crediting your salary every month

2. For those who can't pay more than $400 on credit card, you will forsake another 1% interest. I'm sure everyone can hit the $400, but it's how much trouble you want to do to change your status quo.

3. This is up to a max of $50k only.


So, what do I propose?



There's a listed retail bond traded over at sgx with the counter name CapMallA3.8%b220112. Details of the bond are as follows:


1. Coupon issuance dates: Twice a year, Jan and July
2. Underlying: Capitalmall asia
3. Maturity date:  First optional redemption 12-Jan-2017 and every year thereafter till 12-Jan-2022 (7 year from now),
4. Face yield: 3.8% every year (1.9% every half year) before 12-Jan-17, thereafter 4.50%
5. Number of payout till maturity: 13
6. Price traded now: $1.028 vs par value of $1.000
7. Based on the year of redemption, the non-compounded returns are indicated in the table:


(Thanks to SRSI for the gentle reminder of the possibility of early redemption! I forgot about it!)

So to beat the OCBC 360 rate, we have to bet that the bond is not redeemed at least till 2020, which is 5 years from now. If that happens, we get a annualised non-compounded return of 3.28% if we bought it at today's price of $1.028. If the bond is not redeemed earlier, they will have to mature on Jan 2022, which is 7 year from now. That will get you an annualised return of 3.63% pa.

A few risks needs to be highlighted now:

1. What's the chance of them redeeming the bond?

Capitalmalls asia had the bond set up in Jan 2012. For lack of a better gauge for borrowing costs for companies from banks, I used 3 mths SIBOR to see the risk premium of them borrowing money from investors at 3.8% (which is the face value of the bond). The 3 mths SIBOR back then was 0.39%. So to entice investors to invest, they are giving a premium of 3.41% (3.8-0.39) pa.

There is a step up component of this particular bond. If they did not redeem on 12-Jan-2017 and every year thereafter (until 2022), they will have to pay a higher interest of 4.50% instead of 3.80%, which is an increase of 0.7%. Assuming everything else stays the same, if Capitalmalls asia still has a risk premium of 3.41%, the 3mths SIBOR have to be 1.09% (4.5-3.41) by 2017.

If 3-mth SIBOR is higher than 1.09% by 2017, then the borrowing cost for Capitaland from banks will also rise, making them less likely to redeem back the bond since they have a low cost of borrowing through the bonds. The last time 3 mth SIBOR is 1% or more is back in 2009 before the financial crisis. The current rate now is 0.46% and is very likely to hit 1% in 1 or 2 years time, with the US Fed Reserve set to raise the rates by Q2 or Q3 2015.

I take it that therefore it's unlikely for them to redeem back the bond in 2017. But it's a very simplistic way to see this, I realised. Capitalmalls asia might, for example, not require the debts at all and choose to redeem it.


2. The quality and safety of the bond is as good as the underlying

Capitalsmall Asia is under the big umbrella of Capitaland. To me, a bond by Capitaland family is as good as gold, and as safe as fixed deposit, maybe just a little riskier. The returns stated are non-compounded. To raise it further, you can invest the money received for a higher returns. And technically, I should use XIRR since the cashflow are pretty consistent and even, but I didn't. You can try it out if you wish.



Oh, the caveat...you must hold on to the bond until the underlying redeems it at par value. If you do that, you can forget about looking at the market price of the traded bond. If you wish to sell it earlier before it is redeemed, then you have to take what the market gives you. From what I observed so far over 1 yr, the price is pretty stable, whatever the market is doing. Even if the market price drops below your buy price, it's not a concern IF you are holding the bond till maturity.


There you go.

Thursday, January 08, 2015

The story of Old Cody



Near a mountain, far far inland
lived a happy, but a lonely man.
He is not rich; doesn't own a car,
shiny rubies, nor smoke a cigar.
What is his name? If you care to ask.
He’s Old Cody – farming is his task.


Monday six morn, he asked rich Richard,
if he is free, to view his orchard.
Shaking his head, poor Richard replies,
"I am not free, to see the sunrise,
so Old Cody, I bid you goodbye".
Old Cody shrugged, at least he did try.


On Tuesday twelve, he asked proud Peter,
"Come see my vine, where grapes are sweeter!"
Shaking his head, rude Peter exclaimed,
"Oh that won't do, or I'll be ashamed
if I'm seen with, a mere Old Cody!"
Scratching his head, "Why be so snobby?"


On Friday five, silly Sally came
Her petite frame, but with eyes of flame.
"Pretty orchard, with beautiful grapes,
Can I come see?", she stood mouth agape.
Standing there still, shook Old Cody's head
Hands on his hips, this is what he said:


"Oh that won't do, or I'll be ashamed
if I'm seen with, a girl of your name.
I am not free, to see the sunrise,
in the orchard," he cries and he lies.
With that he slams, the giant oak door.
Behind he shouts, "Oh come here no more!"


As he walked off, Old Cody's heart froze
"How I had erred, I've made a new low!
Judging Sally, before I knew her,
is exactly, how I was withered!"
Without more words, he sprang to the door.
There lie Sally, staring at the floor.


"Oh I'm sorry! What a fool I am!
Dismissing you, to hell I be damn!
Holding her hands, they walked to his fields,
to the golden, cheerful daffodils.
Or is it Rose, Jasmine or Aster?
Hmm, don't matter; form's not a factor.

Friday, January 02, 2015

(Some of) My 2014 expenditures

Finally after using YNAB for 1.5 yrs, I have a full set of expenditure data from Jan 2014 to Dec 2014. This is a software that enables me to track my spending to a great degree of accuracy. No faulty mental accounting nor mistakes here, so it's as good as it gets.


These are some of my expenditures:

1. Food/restaurants : $424 per month, or $14 per day ($4 per day for restaurant, $10 per day for foodcourt/hawker/coffee shops)
2. Utilities bill: $50 per month for my share, so it's about $100 household (subsidies included)
3. Clothes/shoes: $30 per month
4. Gifts/ang bao for others: $126 per month
5. Mobile phone: $42 per month
6. Household internet: $45 per month
7. Personal insurance (whole, term, disability, mortgage, h&s rider) :$470 per month
8. Car related expenses (monthly installment, fuel, road tax, maintenance all in): $345 per month


I realised that my own spending is very little by comparison. All the things that I do for entertainment throughout the year (exclude food), which includes shopping for clothes, shoes, movies, books, gadgets, works out to be $53 per month. Maybe it's a bit unfair, because usually my wife buys the stuff I want and I do the same for hers. So I should include gifts/ang bao, totaling about $180/mth. That's more like it.


I also realised that I need to set up a household fund. I spent $430 on house related stuff, like replacing my letterbox lock, aircon maintenance, little repairs here and there. I already budget that in for year 2015. Should have less surprises there for this year. I also set up a car repair fund after I realised that I spent $540 in 2014 for car related repairs and maintenance. I guess after about 2-3 yrs worth of hard data, it'll be harder to surprise me for unexpected expenditures.


The year 2014 is a fantastic work year for me. It's the highest income I've ever earned in 10 years and to put it in context, 2013 was the worst I had in 10 yrs. Maybe it sort of even out. I saved about 63% of my income, which is something I don't expect to repeat year after year. This is partly because of the increased income rather than the decrease of any expenditures. My expenditures are fairly constant, especially after I settled the first two bombs of my life (wedding and housing/renovation).





For self reference, I begin Jan 2015 with a net worth of $229,285 (not inclusive of housing loans and current valuation of house but net of other debts). My half of the portion of housing debt is $217,123, so my net worth is $12,162. It'll be a fantastic year if I can end 2015 with a net worth of $72,000, which is essentially a savings of $60k, or $5k per month.


Let's go.

Tuesday, December 30, 2014

LP minibonds 20k

I was setting up the stage for LP mini bond for my parents' friend for 20k, so naturally I've to do some homework. I started by looking up the yields for the different bonds and preference shares listed at SGX.


Do take note that the yields I calculate is based on my own way stated here. It basically included all the coupon/dividends payment until the first date of maturity, subtracted from the guaranteed capital loss from buying the bonds/pref shares above par.


Retail bonds

1. Genting SP5.125% Perp - 7.8 yrs to maturity (YTM) - 4.47% pa
2. Olam6.75%b180129 US$ - 3.1 YTM - 5.70% pa (USD)
3. LTA n4.17%160510 10k - 1.4 YTM - 1.59% pa
4. CapmallA3.8%b220112 - 7.0 YTM - 3.09% pa
5. SIA 2.15%b150930 - 0.8 YTM - 2.19%pa

Pref shares

1. OCC5.1% NCPS 100 - 3.7 YTM - 3.76% pa
2, CityDev NCCPS - perp
3. DBS Bk 4.7% NCPS 100 - 5.9 YTM - 3.67% pa
4. Hyflux 6% CPS 10 - 3.3 YTM - 4.98% pa
5. OCBC Bk4.2% NCPS - perp
6. OCC 3.93% NCPS 10 - 0.2% YTM - 8.97% pa


I noticed a few things:

1. The price of most pref shares either dropped or stayed the same. The drop is understandable, because the numbers of payments before maturity decreases, hence the price will have to drop so that the yield remained good enough to entice people to buy. But I noticed that the price drops lesser decrease in future payments, meaning that the yield actually drops a little.

In other words, I'll have a better deal buying earlier than later, despite the drop in market price of these bonds/pref shares.


2. OCC 3.93% is selling at par value right now. It'll mature on 20th Mar 2015 (optional), so there's still one more payment left. They pay twice every year, on Mar and Sept so one more payment means 1.965% returns with zero capital loss (since you're buying on par). Only commissions. Since 20th Mar is an optional redemption date, they can choose not to redeem, and therefore pay a 1.85% + 3mSOR quarterly starting on 20th Mar, Jun, Sep and Dec. The 3m SOR is about 0.42% now, expected to rise further, so minimally after 20th Mar (if they choose not to redeem), you can expect to get at least 2.27% pa, split into 4 times a year.

To sum up, it's 1.965% this year. If they redeem, they redeem at par, so net net just lose commission for buying. If they didn't redeem back, at least 2.27% pa every quarter from 20th Mar. But it might be some time before they will redeem back, so the market price might keep dropping, which is still fine as long as you don't sell it. Your capital is just locked up.


Good deal? I leave it to you.


In the end, I decided on 2 holdings for the 20k portfolio. Too little to diversify.

1. Capmalla3.8% b220112 (47.0 % of portfolio)
2. DBS Bk 4.7% NCPS 100 (52.9 % of portfolio)

The earliest maturity date is 5.9 yrs, and the guaranteed capital loss because of buying above par will be $900. My plan for this minibond is as usual, pay 2% pa and build up the cash reserves for that guaranteed loss. Thereafter, pay a higher % pa but always reserve some cash in case the person wants to redeem back and the market price is lower than par. This is no longer a capital guaranteed bond, but I'll still treat it as such. The only difference is that now, I didn't say it's capital guaranteed, haha


A big difference it'll make ;)