How best to utilize the Singapore Savings Bond?

With the recent announcements of the Singapore Savings Bond (SSB) coming up in Sept, which is just 2 months away, there's a lot more thinking on my part regarding how best to utilise this new instrument to preserve and grow our wealth.


The advantages of this savings bond is widely reported in the newspaper. It's that you can cash in and liquidate the bond any time without price risk. For bonds, there is a maturity date and if you hold the bonds till maturity date, there is a guarantee on the capital invested. The price in between the purchase date (if you buy on par) and the maturity date can fluctuate widely, and possibly go down because of the near certainty of a interest rate increase in the short term, but you can sleep well on it. Because if you hold the bonds till maturity, you'll get back the par value of the bond. However, if you cash in early before the maturity date of the bond, you stand to lose (or gain) depending on the price that the bond is trading at that point in time. Well, the SSB don't have this advantage at all.


The other advantage is that the interest rate will pro-rate according to how long you hold. If you hold it for 1 yr, the interest rate of the investment sum will approach the 1 yr bond interest rate. If you hold it for 10 yrs, then you will get the interest rate equal to that of a 10 yr bond interest. Add to the fact that you don't have price risk when you cash out early, this serves as a quick and dirty way to hold your excess cash.


The last good thing about this is that it's guaranteed by the Singapore government. Ultimately, a bond is an IOU from the debtor to the lender, where the lender lends a sum of money to the debtor, with the debtor promising to pay the sum borrowed plus another interest to compensate the lender for lending. Hence, a bond is as guaranteed as the solvency of the debtor. If the debtor crash and burn, so too will your piece of IOU. In this case, the debtor for the SSB is the Singapore government. As good as gold, as they say.

Do bear in mind that you need about 1 month's time to liquidate the bonds. So, it's probably not good to leave ALL your extra cash inside. What happens if you have an emergency where you need a sum of money NOW? Got to think about that.


So how am I going to utilise this new instrument?


1. I'll first put in about 3-6 months worth of emergency cash in it as a first tranche. Since I'm paying my mortgage using cash, and I'm filling up my CPF with cash as an emergency hoard for paying my mortgage, and the CPF pays higher rates than the SSB, I'll likely put in an amount equivalent to 3 to 6 months of expenses WITHOUT including mortgage. I'll rather put my mortgage money in the CPF, thank you very much. Some people are funny, they are actually asking whether they can buy using CPF...


2. Next will be my war chest. Currently they are sitting in my POEMS money market fund, getting about 0.5% pa. If I put it in SSB for 1 yr, I'll get around 0.9% pa. For 2 yrs, it'll be about 1.2% pa and so on until 10 yrs, which is about 2.4% pa (and expected to rise too). Maybe I'll put in 2/3 of war chest inside here and will keep the rest as cash. The exact proportion I haven't worked it out yet..we'll see how it goes.


I'll put in my 3-6 months emergency cash in first, get to know how the system works, and see how to do it regarding my war chest. I'll be a great additional weapon to use, but I still wish we have more retail bonds lol

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What would change if you earn $25k per month?

I saw a newspaper article today here that talks about the difficulties of older aged PMETs who are struggling to find work after being laid off in the last financial crisis. In the article, there are several examples of people earning (to me) an extremely high income. There's one getting $25k a month and another earning $9k per month. On Sunday Times, there are a few woman earning $10k and $9k per month, and wanting their significant other to earn as much, if not more.


When did salaries get so high? Is it so easy to get $10k and above per month now? Are they are the top earners or are they the norm? Wouldn't you want to earn $25k per month too?


But the real question is this: if they are earning $25k per month in the past, why are they still struggling to find a job now? Wouldn't they already paid up their debts, saved up a huge amount and semi retired with that high income? I guess not, hence they are in this current situation they are facing. The basic of being wealthy is really just to spend less than what you earned. That is the base of pyramid - the foundation. Without that, other things like investment or insurance wouldn't be able to come in and build a higher pyramid.

If you start earning $25k per month, what would change? In order to earn that amount, likely you are going to have a different set of friends and contacts who are likely earning around that income too. You'll probably start eating in a higher end restaurant since they are all eating there. You'll also likely to drive a similarly branded car in order to fit in. I think if you're going to earn this amount of income, you'll likely increase your expenses proportionally too.


Unless you don't mind being a social outcast. It's not so easy as saying if I earn $25k and I keep my expenses constant, I'll save a lot more and so on. There's likely going to be a lot of social pressures, likely coming from your new found friends, colleagues and perhaps your family too. To say no to all these, you really have to align what you want with your money. Do not belittle the social pressure of fitting in with your peers.


So, what should change if you start earning $25k per month? A difficult question to answer. Given a choice, perhaps it'll be easier to earn much lesser and fit in with an environment of people who are also lower spenders. I'm not so sure I have the willpower and the social strength to still earn that much and yet remain a social outcast. It's really not that easy.

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Should everyone invest?

Before answering that, let's change it to another question: Should everyone have tuition?


No. Because not everyone needs it, though most will probably have to seek some sort of guidance every now and then. If you're highly disciplined, understands what is going on in school and has access to occasional help, then go ahead and do it independently! I also don't have access to tuition at all in my schooling days, but that's a zillion years ago and I know how tough it is like these days. So, in summary, it can be done. You can have no tuition provided you do these and that.


Going back to the original question on whether one should invest, I think the answer is no. To qualify that question properly, I'm talking about investment as in the stock market. I've heard stories in createweath8888's blog regarding people who do not want to touch the stock market at all. These people have very low maintenance and their personal inflation rate is so low, it wouldn't hurt if they didn't invest their money at all. Investment is, afterall, just one way in the great scheme of things. Some people who have excellent career paths can also save a huge amount of money, squirrel it somewhere and use it sparingly till the end.


Assuming you want financial freedom (and always bear in mind that not everyone is aiming to have that), and here are some other ways to reach it:


1. Work like crazy, save like crazy, live in a low cost environment so that you can spend less without working anymore. This range from migrating to another country to living with nature in a self sufficient community. There's a movement in other countries where people live way below their means, become self sufficient and generally living a life without the need to use much money at all.


2. Do your own business. Once you achieved a certain level of success, the business runs without you and you will have a stream of income coming in till your retirement. I would't say this is passive at all, but it's still a more reliable income than depending on someone for work. At least you can control some of the variables more than a mere employee can. Could be an good option, or worse, depending on whether you succeed or not, haha!


3. Marry a rich partner. Hey, it works, but not for me. More likely I'll make my partner rich LOL

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6 problems that prevent students from scoring

This article is first published in my tuition site here. I thought it'll be great to share this with the parents and students who sometimes read this site.

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In my years of tutoring, I found that there are 6 categories of problems that students faced. I’m going to list out all these potential problems and then we will see how we can reduce or eliminate them.

1. Not knowing the content well
2. Lack of exposure to different types of questions
3. Unable to finish exams in time due to lack of speed in finishing the questions
4. Poor exam skills
5. Stress related issues during exams
6. Carelessness


1) Not knowing the content well

This can be the easiest problem to solve, but can potentially be the hardest too. Lack of knowledge can be caused by a variety of problems that may occur during the transmission of the knowledge by the teacher to the student. It can range from a noisy classroom, teachers who don’t know the content well themselves, unmotivated students, lack of proper note taking etc. It’s not a major problem and most students want to do well in school, so the motivation is somewhat there already if the knowledge can be packaged and structured in such a way to make things easy for the students to grasp. But if the problem comes inherently from a lack of motivation, then this can be a tricky issue.  Students don’t always come into classes all prep up and motivated to learn. They may have a whole baggage of issues that needs to be unraveled in order for them to be ready to learn anything. A lot more counselling with both the parents and the student will be the usual practice in such circumstances.


2) Lack of exposure to different types of questions

The symptoms usually go like this: Student can do all the simpler questions during lessons and when doing homework, but when it comes to exams where the questions are trickier, they crumble and can’t do it at all. This shows a superficial understanding of the content such that when the question is not presented in a standard format, the students are unable to recognize them immediately. Lack of exposure can be reduced by exposing them to harder and more challenging questions. But the trick is not to let them tackle the hardest one immediately. An ascending progression towards more challenging questions of the same topic or theme can be prescribed to slowly ease the student towards tackling the ‘funnier’ sort of questions. Usually other school prelim papers will help a lot in exposing students to non-standard questions.

3) Unable to finish questions in time

Knowing something and able to do a question given unlimited time is quite different from being able to finish it efficiently within the time constraint. In exams, there is always a time limit and students who can do the questions but unable to finish it in time will be severely penalized. This is actually a good problem to be in because it shows that the student can do the questions, but just not fast enough. Not a lot of students will fall under this category. In this case, the remedy is to drill the student.  Constant practice will streamline thought process and develop the necessary muscle memory to do different types of question efficiently within the time constraints. Every question will be a timed practice. Like an athlete preparing for a sprint, timed practice will stress students sufficiently and force them to always keep a watchful lookout to finish the question in time. Such speed drills are different from accuracy drills. The general principle is to expose oneself to different sort of questions so that one can do at least 80 to 90% of the whole exam paper regardless of the time taken. Thereafter, speed drills will force the student to confirm to the time constraints of the exams. Usually speed and accuracy are inversely related, so by doing it faster, accuracy will be lost and there will be more careless mistakes. The student will then learn the right balance of speed and an acceptable loss of accuracy to maximize their marks.


4) Poor exam skills

This is an important component but seldom taught to students. Best practices include knowing how much to write given the marks allocated, definition of keywords in the question so that one is answering the question adequately, techniques in doing MCQ papers, checking of answers, knowing when to cut loss and move on, choosing option questions to maximize marks, time management in handling different sections of the paper etc. A good student with minimal exam skills will be unable to maximize the marks scored.


5) Stress related issues during exams

There is a small percentage of students who behave like a different sort of person when the word ‘exam’ or ‘test’ is mentioned. This group of students can handle everything competently during non-examination time but when it comes to crunch time, they will have a nervous breakdown. The symptoms are: Very good results during non-major exams but just passing or failing when it comes to the major ones, with the heightened possibility of having stress related psychosomatic illnesses like severe headaches, fever and general unwell. This is a very difficult problem to solve and the success rates of the remedy vary widely with individual students. The remedy is to let the student have as many stress practices as possible. Usually this will involve timing them during their practice sessions and giving them lesser time than normal to complete them. Hopefully, and that is all we can do, that they will get used to the elevated stress level and learn to treat major exams as mere practice. Even with many hours of tuition, we cannot really get to the root of this problem easily.


6) Carelessness

This is a spectrum of effects ranging from very careful (less than 5% marks lost) to normal (about 10% marks lost) to the extremely careless (20 to 30% marks lost). This is not easy to root out. Carelessness can be masked as a defense against not knowing how to do. Usually the self is more comforted by the fact that it's a random and unavoidable careless mistake rather than under preparation of the exams and general lack of content etc. Genuine carelessness comes when the students settle on the very first answer that comes to their mind (or had worked out) without the expectation that their answers may be wrong. Even with checking, they can miss out the careless mistakes that are hidden in plain sight because they are not really looking out for errors, since they believed the answers they had given are correct in the first place. Therefore, reducing carelessness is a matter of following a set of procedures that iterates in a loop until the correct answer is found:

(1) Read the question
(2) Find the answer
(3) Check to see if the solution answers the question
(4) Repeat (1) to (3), until (3) is satisfied

Most students will do (1) and stop at (2), without going through the all-important step (3) to reflect and examine the solution to see if it really makes sense. The balance, really, is to do all these steps within the time constraints while maintaining accuracy and speed.

These are not isolated problems and most are actually dependent on each other. If you manage to solve one, you’ll likely reduce other problems as well.


Some students will no doubt ask why they have to learn trigonometry or integration when they have no need of such knowledge in real life situations. The skills needed to perform well in exams are part of this hidden curriculum that is not taught formally. After all, once you had left school and returned all the academic knowledge back to your teachers, what’s left in you are all these skills of success, of determination, of building a proper system of feedback and reflection that will guide you in through the tougher, the crazier and higher staked game of life.

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Half year review

Tracking is different from managing goals. If you track your goals but didn't do any reflection, then the feedback system is lost and you might not really use the data that you've tracked wisely. You can even say that tracking is a tool to mine data for reflection, so that you can have a better outcome at the end of the day.


Time flies, and the more I age, the faster it flies. Days zoomed by, followed by weeks and then months. Before I can unwrap my Chinese new year's ang bao, which is still placed at the same location where I've left it months ago, half a year had already flew past. It's good to sit back and see what I've done in the past 6 months.

1. Savings

I've increased by savings goal to 60k this year and I'm about 2/3 done. This is a great year for me in terms of work and I'm working like crazy because of the workload carried over from last year. But as mentioned before, even though I worked very hard, it's not as stressful compared to the times when I first tried the 50k savings challenge. I think primarily, the difference lies in the mindset. Back then, I was cutting back on a lot of things to achieve it. It wasn't sustainable and it sure didn't make me happy. This time round, I didn't even consciously do it because my expenses are so SOP (standard operating procedure) that I don't have to think much about it. That's why they say saving the first 100k is the most difficult but it'll get easier as you build your 'savings muscles' by practicing it all the time.


Reflection: Good pacing of goal. I like it that I achieved much more without trying hard. All the right practice must be in place already. And as always, I'm very grateful for all the recommendations of students and all the LP's parent and student word-of-mouth advertisers for helping me all through the years. I'll never know when my work will dry up, so it's good to make hay while the rain shines.


2. Books

I don't think I've read so many books in half a year before in my life. I'm currently on book 30. I'm interested in exactly how much time I'm spending on reading, so I downloaded this desktop/mobile app called Toggl. I know this app is not used for this purpose, but whatever..

The blue column represents the number of hours reading. I only started using the app in May, so there's no data before that. June was horrible in terms of energy lack and general fatigue, because I adjusted my schedule from afternoon to late night and go from morning to late afternoon. It totally drained my energy level because I think I'm really a night person.


I'm usually only book 30 near to the end of the year, so I'm about 2-3 months early. I should be able to go past my goal of 52 books a year very very comfortably with perhaps a good lead. I usually start reading a lot more once my work winds down towards Oct and Nov.


Reflection: I was reading so many books that even my wife starts to read a lot now. Talk about good healthy contagious habits! Financial books some more! It would have killed her years ago, so I'm secretly happy about it, haha! It's very good for us to read the same books, because we'll bounce ideas off each other and discuss about the book's major themes and examples. I think it's important for couples to share the same cultural background, so that there's a lot more common points to bond together. That's why people do sports together, or movies, or just general dating.


3. Parent's investment funds

I'm now managing a total of 220k of my parent's retirement fund. The amount is crazily huge, even bigger than my own funds. I'm grateful that they trust me with their hard earned money and I'm doing what I can to make sure their trust in me is well justified! Most of the money is in bonds/pref shares. With the new fraser centrepoint limited (FCL) bonds ipo-ed a few months ago, I subscribed a lot more than what I wanted and passed a bulk of them to my parents. Just a few days ago, my parent's fixed deposit amount is released from holding, so they wanted to inject more capital in. I just transferred the FCL bonds that I hold and pass it to them.


So far, so good, even with all the turmoil in the market. I'm giving them about 2 to 2.5% pa, which is set to rise year by year to about 3-4% until they choose to withdraw out the funds. Then I'll give them a bonus based on whatever cash is left after subtracting from the guaranteed capital loss of buying bonds/pref shares above par value.


Reflection: 220k...it's a huge sum if I sit and think about it. What happens if the amount is lost? That's why I only put it in traded bonds and spread it over a few counters like banks and government linked companies. I wonder which is better? A) Getting those bad ass 250k a pop institutional bonds but getting only 1 lot, or B) spreading it over above par bonds/pref shares that are already trading in the secondary market on sgx.


Well, I choose the latter. I hope more good quality bonds are out there, then I'll switch some of the above par bonds with the new issues and rejuvenate the portfolio.

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HSI free falling -1450 pts

HSI did a good show today. Following the rise and fall of Shanghai closely, especially the latter, HSI went into free fall and dropped a staggering 1450 points, which represents a total of 5.84%. It's a figure that we don't see often and I thought it'll be good to save a screenshot of today's market close for future reference. So here we go:

What good is the knowledge of such things?


I think firstly, it gives you a sense of how bad market can go. If you keep working on CAGR, you'll find that the line is always linearly going upwards. Every year add x% to your previous year, without fail. But we all know that's not going to be true. The market will swing up and swing down violently and often we will be tempted to do things we otherwise might not do. You know, we always wish for a company that we're aiming at for a long time to drop a lot. But when that happens, you might have issues with survival than to talk about wealth building.


Secondly, it gives a sense of perspective. If you've been through a market swing of -50% and can still eat and laugh like nothing happened, then I know your true risk profile. No point talking about all the theory and risk management isolated from emotions. Everyone who had been in the market long enough will have to go through this acid test one day.


Will the market slip further on oil and greece? Maybe this time it's China (since when is it not China?) or perhaps EU woes? Who knows...but I do know what I'll do when that happens.

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