My salted fish had turned over

First of all, sorry for the long hiatus. This had been a crazy June holiday, so all my free time is sucked up into never ending work. I'm very glad that June holidays is over, to the dismay of all school teachers in Singapore, lol!


Recently, I noticed that one of my salted fish had turned over (咸鱼翻身). Yup, you heard me right - that's when a stock that you had bought long long ago, and had dismissed it and wrote it off because of some mistakes in judgement but nevertheless held on to it, and is now suddenly revived. This particular salted fish is very fragrant because it had been salted since April 2010. I had bought it at an all time high of 0.270 and subsequently averaged in at 0.240, giving me an average buy in price of 0.255.


Wow...why did I buy it then? It's based on some rumors that I had long forgotten. It didn't materialise, and thereafter the stock crashed and burned but I still had on to it after all these years. Reason? It's a good reminder for myself not to buy stocks with rumors. I'm glad I've not made the mistake then, so in a strange fashion, it's quite a good tuition fee paid.

The company had been paying dividends, so it helped to reduce the cost of bearing the stock. After collecting dividends every year, it amounted to around 11% of the capital sunk in, so it's not that bad. I initially thought of cutting losses, but since I do not require the capital locked up (it was a rather small amount), I just held on to it. More like a reminder to myself rather than an aversion to realise paper losses. I must say I'm quite relentless in cutting stocks.


So, what's the rumor that's propelling this unloved penny to a parabolic capitulation now? It had recently announced that it had made placements shares arrangement (at around 0.160+) with two big investors to dilute the total holdings to around 20%. If you ask me, that's a pretty huge investment in a 'okay' company. One of the two investor is none other than Sam Goi, better known as popiah king, who is quite an astute investor and businessman. I wonder why he got into this, and with such huge stakes in the company as well. Usually share placements are frowned upon since it leads to dilution of everything, including dividends. But the market had absorbed this seemingly bad news quite unexpectedly by capitulating upwards.


Yeah, but who cares...I get to exit and pass the buck to another better player lol

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The holy trinity of returns, risk and liquidity

There's been much talk about the CPF rates being very low. About 2.5 to 4% depending on which account you're talking about. It's kind of hard to get higher returns than that while maintaining the same risk as that of a fixed deposit. What risk am I talking about here? It's the risk of capital losses. And I'm not just regurgitating this - I've actual experience in maintaining a retirement fund for my parents, so I know what I'm talking about here.


My parents are not risk takers. The riskiest kind of investment product that had in the past (without losing money) are endowment funds from some insurance companies. You put in a lump sum at the start and wait for the term to mature, then you take out a sum greater than the lump sum you put in at the beginning while still giving you assurance that if anything goes wrong with you, you'll still get paid when it matures - that's basically how endowment plan works. This tranche of money that my parents had, they initially wanted to put in a fixed deposit offering maybe 1.2 to 1.3%. I thought I can do better than that, and offered to give them a higher return and also offer them capital guarantee too but they have to tell me a few months in advance if they need the money back. In other words, they are buying a bond from me, with me as the party guaranteeing that amount invested with flexible maturity date.

The magical point of all portfolio - to balance returns, risk and liquidity. Can't have it all.

The portfolio consists of preference shares from banks and some high grade bonds with strong corporate (and government backing, so they say). No equities at all because given my parent's requirements (they really just want their initial capital to be safe and liquid). How's the projected returns? It is expected to give around 3.6%, with capital losses incorporated (Most of the pref shares and bonds are bought above par from the secondary market at SGX, so when it's recalled back, I'll lose some capital). Can I push it above 3.6%? Yes, but something will have to go. The risk of capital losses increases with the portfolio yield. I can get some very high yield bond (e.g. from Olam) but if something happens, I'm the one bearing the losses because I'm the guarantor. Bo hua for me.


So yes, I totally get it that if CPF returns is 6 to 8% pa, then it can't be capital guaranteed. We have to balance portfolio returns, risk and also liquidity and you just can't have it all.


But not easy doesn't mean that CPF board should take the easy way out to beat inflation by raising the minimum sum. I think more options can be given to CPF holders to participate in the growth of their retirement funds. I would really be happy to see more growth in the bonds market offered to retail investors. If you're talking about normal bonds, you need at least a quarter of a million to participate - and how many people has that kind of money to spare? If SGX can break up the size of the offer into smaller chunks (in 1k lot, for example), it'll be a great move towards helping retail investors adjust their respective portfolio returns with the risk of capital loss.


More selfishly, I think it'll be good for people who don't have CPF (like me) to plan their retirement funds their own way.

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So far so good

I've been using YNAB, a software that allows me to track expenses and all my cashflow in different accounts with great precision and accuracy, since Aug 2013. Almost a year now. It works very good for me because there's so many times that I've missed out on something and I didn't know about it until the end of the month when I did my month-end accounting and found out that things don't add up. I'm very sure I would have missed these errors if I persisted in using my spreadsheet way of tracking expenses. I'll still highly recommend it to anyone who is serious about budgeting and tracking expenses. Don't buy it now though...wait for a great offer to come (at Steam, that online platform to get games), which is a matter of when and not if.

Thought I'll do a half year update how my savings percentage is like, given the new found accuracy. In the past, my spending is relatively low. I'm not truly independent yet and a lot of expenses are paid for by my parents. Though I gave them allowance to offset some of this, I'm quite sure it's not enough. Why? I don't have to pay for rental (for a room). I don't have to pay for my own breakfast and dinner. If there's a problem with some household items, I'm not the one paying. When the toiletries are almost finished, it'll magically refill and appear. In short, a lot of expenses are paid for by others. Hence, it's hardly a miracle to have my savings percentage (relative to income, of course) at 70 to 80%. Of course, I always know it's not going to be realistic going forward.

After a few financial bombs that nearly wiped out all my savings, I got myself married, bought a resale flat, paying for a pre-owned car and started paying for things I never had to pay for in the past. Nobody is paying for me now, as it should be. Everything in, my year to date savings percentage hovers at 47%. (If you're not self employed like me, don't compare - I don't contribute to cpf. So, if you include your CPF contribution as well as your employer's contribution, in addition to your own savings from your take home pay, you'll probably beat me or even out.) This statistic is not going to be useful until I finished year 2014 and tabulated everything, because there is just too much variability in my income stream and also my expenditure patterns. There's some big ticket items in the second half of year 2014 that occurs annually (like insurance premium, road tax etc) so it might lower down my savings percentage. On the other hand, my peak season occurring around Aug to Oct might boost my income too. 

Going forward, I'll try to keep my savings percentage at around 50%. It can be higher but not lower. I already shared my monthly expenses - everything in, it's about 3.5k per month. Hence, it's very clear to me that my income better be more than 7k to have that kind of savings percentage. In fact, during my peak months, it better be much more than 7k so that it can even out those drier months. Life's a bitch when your pay resets (though not necessarily to zero) every year and you have to work hard to reach the same pay as before, and work even harder if you want to earn more than the year before. No complains here - I chose this myself.

My savings target of 30 to 40k seems right on track. Savings percentage is a tad lower than projected, but still alright. Will have to see it again at the end of year 2014. So far so good.

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