Tuesday, June 30, 2015

Ethical investing

Do you have a problem investing in companies that does things that you normally don't do in real life?

I give an example here. I am invested in HSBC - the world's local bank - for a pretty long time. That was way back in 2007 when I just started this blog. Back then, the financial crisis had not happened yet and in the span of almost 8 years, a lot had changed. The whole landscape of the global financial markets had been changed and now you heard not only of companies bankrupting but also countries!

Back in June, I saw news of HSBC laying off 50,000 people globally to cut their annual cost. If you're seeing this through the eyes of an investor, you should be happy. And indeed, the stock price went up briefly following the release of this news. We're talking about cutting annual cost by up to $5 billion annually, so of course this brings the company a better set of numbers and a healthier overall ratios.

But if you're the employees working there? Seen through the eyes of the employees, there's only one word to describe this feeling - 'sian'. This isn't the first bank doing such head count cuts. I believe a few global banks, including Standard chartered, also did the same to adjust to the global changes that is sweeping across the financial landscape.

So the question is, is it fair for the top honchos to decide on the direction of the company, reaping the possible rewards of their actions and yet the risk is taken by the grunts of the company? Even if the decision turns out to be a bad one and the top honchos have to resign, they do so with a huge bonus, a golden handshake and possible another good career for them in the next MNC. How would you feel about this? It's not just this laying off that pisses me off but it's also the numerous charges laid upon them on money laundering and also other shady business that investment banks do.

Does ethics matter to you when you're doing investing?

I thought about this question long ago when I first started dabbling into the market. Back then, my stance was that we don't always know what the company is doing but what we can do is to reap the profits or dividends and do what we think is right with that money. But slowly, I'm wondering if that's the right decision. These days, I don't mind paying more for a local startup cafe just to support their business and what that represents, instead of some heartless MNC with dubious morals.

Does investing in a vice business troubles you? Does it make you sleepless at night? I've since reduced my allocation in HSBC by half but still hold a portion of it in my portofolio.

Wednesday, June 24, 2015

Do you have more than 1 alarm in your mobile phone?

My student didn't turn up for lessons recently. It's a group session so the lessons went on as usual for the rest. A while later, he texted me, apologised and said that his alarm didn't ring and that's the first time in his life that it happened.

It happened for me as well. Usually about once a year, I'll have screw-ups in my gadgets. I usually set alarms in my phone to wake me up in the morning. Two, in fact, and they are all on snooze. In the past, I like to switch off my phone entirely. Some models allow the alarm function to wake up the phone and automatically switch the phone on by itself so that the alarm can ring (not all models though). So, what happened was that my phone didn't wake up and I couldn't wake for my morning lessons.

It really didn't matter how many alarms you set in one phone. If the alarm in that phone didn't ring for any reasons, it's highly likely that the rest of the alarms in the same phone wouldn't ring as well. So having more alarms in a single phone didn't eliminate the risk of the phone not waking you up. All it did is to reduce the risk of you switching off any alarms by snooze it off without you consciously waking up.

So the trick I came up with is to have another physical alarm, and in conjunction with the alarms in the phone. The event that the alarm going off in both devices are independent and hence I reduced my risk of not waking up on time. And for important events or very early lessons, I always set two alarms in two different devices.

That's just like diversification in different asset class, isn't it?

Monday, June 22, 2015

My thoughts on Pre/Post Financial Independence schedule

I read B's post on pre and post financial independence (FI) schedule here. In it, he put in his planned timetable for pre and post FI. He also encouraged everyone to try it and have a little fun imagining what it'll be like upon reaching FI.

I thought about it. I'm not reaching FI anytime soon, though I'm sure I'll certainly reach it one day. I'm a full time private tutor. People thought that this means I'll have a lot of freedom in my time, plus the fact that I'll have a few months of holidays during June and Dec period when students are generally having their holidays. The truth cannot be further from this. Weekends are burnt and holidays are spent preparing students to handle one major exams after another. The whole mantra is that if you're free, I'm not going to be free. If you've just finished work and going to a nice restaurant to eat, I'm the server who takes your order and serves you your steak. In other words, I work when others are not and vice versa.

My timetable for work is easy. I work 7 days a week, with 5 days of weekday being lighter and weekends being much heavier. 4 to 6 hours of work during weekdays and 6 to 10 hours of work during weekends is very much the norm, if you want to push up your income. These days, I don't work a full Sunday too, preferring to spend my time having a proper rest before I tackle a new week refreshed again. This only happened on my 10th year for tuition work. Due to the fluctuations in my work schedule, I guess I will work about 35 to 45 hours per week on average, with 40% of my workload on weekends. That's my pre-FI schedule for work.

What will I do once I reached FI? I love my work, but I don't like the intensity of it. If I can have a full day off on a weekday, I'll be happy as a bird already. In this line, it's too much to ask for to have a break on a weekday, because there's where most students will come. You know, after earning a certain amount of dollars, the only purpose of taking in more students is not to earn that incrementally less significant amount of tuition fees, but for the purpose of helping students. It's like you're a doctor and you're just closing your clinic before a patient who is seriously ill comes in. Are you going to reject him and say that your family is waiting for you for dinner? Come again tomorrow? I know I have the ability to help them, and I'll feel bad that I didn't because of selfish reasons like wanting to enjoy my life a little more. And hence I help them.

You just can't say no, especially when you know you have the ability to change another person's life. Come back again? There might not be another 'again' for that person.

Actually I have a plan in place for slowly weaning off work. Once I've reached an investible cash/investment of about 240k, and assuming I have a yield of about 5% off it, I'll be able to get $1k per month. I will give myself a 'reward' of having a weekday off. I haven't though much beyond that, like what happens if I can get $2k per month from investment. But the idea is to have a staggered exit from working based on the ability to exchange active income from passive income. I guess once I can cover all my expenses, my workload should drop to 0, but I doubt that kind of life will suit me very well.

I will definitely work as a tutor for as long as I can help others. Perhaps I won't charge as much. Perhaps I'll give a tuition scholarship to deserving students. Perhaps I'll volunteer at different organisation in what I do best. There are so many ways to give back to society and at the same time, enrich my own life experience. I think this can only serve as an addition incentive to be financial free - the idea of not trying to escape work but to actually do those work that you couldn't afford to do when you're still eking out a living.

That idea appeals to me very much. I guesstimate I'm about 1 to 2 yrs away from reaching that milestone of a quarter million. Can't wait to see what I'll evolve to become when that happens. Maybe my life will take on a life of its own!

Friday, June 19, 2015

The irony of being clean

My teeth are dirty, so I brushed my teeth.
My teeth are now cleaned but I dirtied my brush.

My brush is dirty, so I washed my brush,
My brush is now cleaned but I soiled my hands.

My hands are dirty, so I cleaned my hands
My hands are now cleaned but I tarnished my sink,

As I cleaned up one thing, I dirtied another
As I washed up one thing, I soiled another.

Did I clean my teeth since I dirtied my brush?
Did I clean my brush since I dirtied my hands?
Did I clean my hands since I dirtied my sink?
Maybe I'm better off by not cleaning my teeth.

Monday, June 15, 2015

Being frugal with your time

I was discussing some stuff with the finance gang, and we came up with the idea of being frugal. You know the usual stuff about being frugal with money, but there's also another less discussed but related topic - that of being frugal with one's time.

First of all, my definition of being frugal is to be efficient and not be wasteful. The action you do must be aligned with your values. So the distinction between stingy and frugal is that - whether what you do are aligned with you values. If you like being sociable, and like hosting parties and cook outs with people, then spending money along that direction is not wasteful. It's aligned with what you want to do. But if you can't tell sage from rosemary, and don't care less about food, spending money on such things will be a waste of resources. That's not being frugal. 

Knowing that, we can equally apply this to the concept of being frugal with one's time. Do you waste time on things that don't matter to you? Do you spend a lot of time on unproductive things while doing your work? Could you have reduced or eliminate time that is wasted, and channel it to something that you truly value? That's being frugal with time. 

Time is perhaps even a more limited and more valuable resource than money. You can use time to exchange for money, but it can seldom be done the other way. It's also possible to be frugal with money but not being frugal with time. For instance, you could be travelling a long distance to get something that is sold at net 50% discount to where you usually shop (even after accounting for travelling cost). But because the journey took 2 hours to and fro, you wasted 2 hours of your life travelling to save the money. For me, my per hourly rate is pretty easy to calculate. It might or might be be worthwhile to do it, depending on your per hourly rate.

That's why when I'm younger, I would go travel to far places to shop, just to save maybe $50 dollars or something on a pair of shoes. But when I'm getting older and my time is more precious, I no longer do that. I'm not saying paying the most expensive things will result in time savings. But usually good brands have a certain quality to it that a sub $10 item will not be able to match, especially if it's something that you value.

With that insight, I realised I'm not necessary frugal with money but I'm definitely frugal with my time. I don't like to waste a drop of time doing nonsense, and I don't like to waste other people's time too. That is probably the best reason to be financially free. You stop wasting your time doing non-productive work, earning money just to spend it on things that are not aligned with your values.

Ah, that's more holistic than looking at just money, isn't it?

Friday, June 12, 2015

Not a great tech year for me

This year isn't a great tech year for me.

First of all, my old trusty desktop broke down on me and I couldn't get it to start at all. I ended up spending about $800 upgrading the entire things. Thankfully my graphic card did work out in the end, and I probably deferred about another $200 to $300.

Then, I dropped my handphone and the screen cracked into pieces. I'm usually very careful, and the height that I dropped from isn't even high, but shit happens and I ended up having to buy another replacement. Actually I was using it all along, but then I got cut on my fingers and my wife insisted that I get a new one. Quite true, why face a broken 'mirror' everyday and be unlucky? LOL

Then this week, my trusty old thumbdrive broke down on me. I couldn't get it to work on my desktop pc, and from experience, I know that it'll get spoilt pretty soon. There's no important data inside (thankfully), and I can get it out using another computer anyway. I also have to get it sorted out and bought another one.

I could imagine in the distant past, I'll get all riled up, especially when my phone breaks down. But I was strangely calm about it this time. Is it because I saw broken red dust? I was surprised that this kind of issues didn't hit me as bad as it did in the past. Maybe that's a sign of maturity in itself.

There's always good things even in the bad, and as I reflect upon them, these are my thoughts:

1. Though my old PC cannot be restarted, I eventually get a new one without any loss in data. That, I would have to be thankful for. I was extremely pleased after spending the money on my upgraded PC because now things are so much smoother and faster. Sometimes, things would have to break down to make room for the new.

2. I've to get a new phone and since my contract is coming to an end soon, I signed up for a new plan. It came in a time where I was trying to reduce the junk and clutter in my life, so I refused to buy a fancy (and expensive) branded phone and instead went for mi 4i. It's great, cost me $49 (with the plan) and am very pleased with it. I also 'downgraded' my data plan to 1.3 Gb/month and hope to stick within that limit. I think it's important not to keep upgrading the data usage. What's in it for me? Less facebook, less surfing and absolutely no watching of video streaming when I'm not in an area with wifi. That would keep me focused on what's important in my life. I guess if it takes a broken handphone to remind me of this, so be it.

3. I'm also very grateful that I had set aside a 'play fund' for such purpose. I already knew my desktop pc is coming to an end about 2 year ago. And I planned for it, stashing some savings into it so that the spending wouldn't come as a surprise to me. It's a good idea to stash aside these kind of money and these are not even part of my emergency cash. As mentioned before, the more you know about your life, the less emergencies you have and you can actually allocate your money more efficiently these way.

PS: Wouldn't be blogging so much in the month of June. The change in schedule due to the holiday makes me extremely lethargic and sleepy. I blog often in the morning and I'm so drained at night that I don't feel like doing anything except to relax. I'm such a night person...

Wednesday, May 27, 2015

If you don't work for it, you'll pay for it

If there's a important lesson in life that we must learn, then one of them must be this: If you want to get what you didn't work for, you'll end up losing more than what you hope for.

This important advice applies equally throughout different domains. I give a few examples:

1. If you want to get high returns without working hard for it by studying or researching deep into it, you'll get scammed. You see newspaper report of people getting scammed by land banking, ponzi schemes, MLM and so on. Of course, you can argue that there are people who had made it big this way. However, it's seldom by dumb luck that they end up being the winners. They know what they are doing. Do you?

I remembered when I started investing/trading. Initially I wanted to earn enough to buy myself a guitar, which is around maybe a thousand? In the end, I lost about half the value of a car! Why? I didn't know what I was doing.

2. Those who want to lose weight, there's only two things you can do - eat less or exercise more, or some proportion of both each. You can't do the same and lose weight consistently. Any methods that allow you to eat the same amount and do the same level of exercise cannot be sustainable, and might actually be harmful to your health. Again, if you didn't work for what you want, you'll get 'scammed'. In this case, you might be spending a lot of money on pills or diet regime that costs thousands, and still end up not achieving much in weight loss.

3. If you see everyone jumping into property because it's so lucrative, you have to be careful not to apply their success to yourself without also applying their hardwork too. We all want great returns without doing much work - that crazy idea of PASSIVE income. Puiz...totally corrupted the meaning of passive income.

It pains me to see people getting scammed. We're at that period in the market where everyone has a lot of money but nobody knows what to do with it. Be careful. Be very careful.

Monday, May 25, 2015

Just do it

I remembered the times when I grew up in a world without internet, youtube and (gasp!) google. If I want to find out about things, we have to listen to parents or teachers, whom we presume to know more about the world that we did. Either that, or we have to visit the library to search for the books and encyclopedias that are found there. They still are, just that these days with google, we tend to search online which is a very fast and efficient way instead of combing the entire encyclopedia starting from 'A' to 'Z' and hope to find a small entry with the information you need.

When I was stuck in playing those notoriously difficult old school RPG (like wizardry, wasteland, might and magic etc, NOT league of legends!) because of some insanely concocted puzzles, I'll come back to it later. Sometimes, you have to restart from a certain save points, fight all the equally insane battles to come to that stage again and then you get stuck again! But I'll remember the puzzles and vow to solve them one day. Often times, I feel that I'm still too immature or lack certain bits of knowledge to solve the puzzles, so after a few years and the itch comes back and so I'll re-play the games again and try to solve the puzzles to complete the game. If I still fail, I can go to sim lim to buy those Questbooks that give hints and tips written like this: Go to Lnqcnq to cdrsqnx the nmd qhmf (see if you can crack the code). I mean, no wonder I'm good at alphabets. They give you hints and guides, never directly, and even if so you have to work hard at it, so that the solution is yours to derive and not theirs to give.

That's important. You don't ever want to deprive someone of the joy of working hard at something, fail, and try again until they succeeded. You don't want to deprive someone of being addicted to success and the hard work that comes before it.

And so when I read this wonderful piece of art, with built in gif so that it actually freaking animates, I was mind blown. It talks about how we live in such an amazing age where the traditional way of doing things had been removed. Obstacles that used to stop someone from expressing themselves has been removed, at least partially. There's really absolutely no reason for someone with the will power and the sheer tenacity not to try and do something about the things that they are passionate about.

Perhaps the only obstacle left is yourself. Your nagging self doubts. Your lack of actions despite the lofty dreams that you constantly talk about. You.

We have met the enemy and he is us.

Thursday, May 21, 2015

Frasers Centrepoint Limited bonds allocation table (part 4)

Bonds allocation for FCL is out. The allocation table is shown below for future reference:

A few observations:

1. Everyone will get something because the balloting ratio is 1:1

2. A lot applied between 41 to 50 lots, including yours truly.

3. The allotment favours those who bid 25 lots and below. If you bid anything less than or equal to 25 lots, you get exactly what you want. Does it mean that it's not as hot, as say CMT bonds?

Friday, May 15, 2015

Fraser Centrepoint Limited 3.65% pa bond (part 3)

Someone asked me what the returns are like when FCL do an early redemption. The bond is widely published as having a maturity period of 7 yrs, but we have to be mindful of the possibility of early redemption. I wrote more about the details here.

They have an interesting way of paying back the investor if they do an early redemption. The earliest optional redemption is on the 4th year, which is 22nd May 2019. They will redeem back at a price higher than the par value of $1. I've not seen such feature before in the bonds that I've studied. I think it's only fair to compensate the investors by giving them a higher par value for the interest payments that will be forfeited if FCL decided to redeem back the bonds early.

I did out a table to show the returns if they decided to do early redemption of the bonds. There are two factors here at work. Firstly, if instead of redeeming the bonds on the 7th year, they choose to redeem back on the 5th year, you will lose out on 2 years worth of interest payment. Secondly, because they choose to redeem back at a price higher than par, you will get a capital gain if you've bought the bond at a par value of $1. Which of the two factors will dominate?

I did out a table below to see the different returns on an annual basis.

You'll notice that it's actually quite a good deal if they choose to redeem back the bonds early. The missed interest payments is much lesser than the effect of boosting the redemption price of the bonds, netting you a return of 4.106% pa. Obviously as the date of redemption approaches the 7th year, the returns get lesser and lesser until it reaches 3.65% pa on the 7th year.

Is the chances of them redeeming early high? I'll say it's not. Interest rates should go up in 7 yrs time. Unless they do not need the money for working capital or have found a cheaper source of financing, I think they will want to drag out the debt to its full term of 7 years. Anyway, for a good bond, you'll want them to continue paying you forever!

What's the implication of this? I think even though the possibility of them redeeming the bonds is low, it still serves as a value point where the price of the bond will hover around. On May, 4th year of the bond, the price of the bond should be lower than 1.01825 and on Nov, it should be less than 1.014600. It doesn't make sense that the market price of the bond is higher than the possible redemption price at that point in time. But 4 years is a long time...who knows what will happen then? I'll still suggest that whoever wants this bond must be willing to wait out for the full term of 7 years, if not, you shouldn't be in this.

The last post I'll do for this FCL bond series is probably on the results of the balloting.

Here's the rest of the post:

1. FCL bond (part 1)
2. FCL bond (part 2)