The year 2016 in terms of books read

It's becoming clear as we move towards the end of 2016 that my target of reading 52 books this year is not going to happen. Not going to give any excuses for not being able to do so, it is just as it is. As usual, I'm going to list down all the books that I've read, then I'm going to recommend a few good ones that forms a deep impression after reading.

Here's the list of all 38 40 (updated 28th Dec 2016) books that I've read this year:

Alibaba: The house that Jack Ma built - Duncan Clark
The new sell and sell short - Alexander Elder
Living with a SEAL - Jesse Itzler
When breath becomes air - Paul Kalanithi
Continuum concept - Jean Liedloff
Asian Godfathers - Joe Studwell
Pregnancy: for the first time moms - Darrell Spice
Hard truths to keep Singapore going - Lee Kuan Yew
Extreme ownership - Jocko Willink & Leif Babin
Choose yourself - James Altucher
Gorilla mindset - Mike Cernovich
Beautiful souls - Eyal Press
Start-up nation - Dan Senor/Saul Singer
Concierge confidential - Michael Fazio
What money can't buy - Michael Sandel
It's only money - Cara MacMillan
Real Food / Fake Food - Larry Olmsted
Be financially free - Morten Strange
Flashpoints - George Friedman
The monk who sold his Ferrari - Robin Sharma
Left behind 01 - Tim Lahaye, Jerry Jenkins
Dietland - Sarai Walker
The money culture - Michael Lewis
Absolute beginner's guide to pregnancy - John Adams, Marta Justak
The Happiness Equation - Neil Pasricha
The Infinite Sea - Rick Yancey
Forever Free - Joe Halderman
The art of Procrastination - John Perry
Forever Peace -Joe Halderman
The Forever War - Joe Halderman
Fahrenheit 451 - Ray Bradbury
Bartleby The Scrivener - Herman Melville
Man's search for meaning - Viktor Frankl
Do androids dream of electric sheep? - Philip K. Dick
Portfolios of the poor - Daryl Collins et al
Gang leader for a day - Sudhir Venkatesh
The ultimate success secret - Daniel S. Kennedy
The education of millionaires - Michael Ellsberg
Way of the peaceful warrior - Dan Millman
Money: Master the game - Tony Robbins

I can probably squeeze one book book or two before the year is up, but that is pretty much it. Not in any order of preference, here's the shortlist of 6 books that I think are crucial in my personal development:

Portfolios of the poor - Daryl Collins et al

Man's search for meaning - Viktor Frankl

Flashpoints - George Friedman

Beautiful Souls - Eyal Press

Start-up nation - Dan Senor/Saul Singer

Extreme ownership - Jocko Willink/Leif Babin

When breath becomes air - Paul Kalanithi

1. Portfolios of the poor is so good that I can't help but post some sort of reflections while I'm still half way through the book. You can read about my post here. It talks about the financial statements (balance sheet and cash flow) of those who are living wit 2 USD per month or below. No other books I've read talks about the portfolio of the poor and their apparently bad choices in life like this book. I think while it's important to read the majority of the books out there that talks about the portfolio of the rich, it's also important to examine the other side. After all, both cases are extremes and likely we fall in between these two.

2. This book is on so many people's recommended list that you just have to read it to see why. He is a logo-therapist who survived the Holocaust and found that people who suffered needed meaning to understand why they are suffering. Everyone can take suffering, as long as it serves a greater purpose, but nobody wants to take meaningless suffering. It is a very engaging book and is a page turner for me. Beware, because once you started on this, you  might just want to quickly get to a quieter corner to devour this book in its entirety as soon as possible.

3. This is a sequel of the book "The next decade" also by the same author, and I thoroughly enjoyed it. This continues from where he left off and focuses more on the EU region and where the conflict areas, known as flashpoints, are in the region. I read this around the Brexit saga and it allows me to understand the different scenarios that might be played out. This is a very interesting book if you're interested in the global political scene that is happening right in front of our very eyes. What will happen to Russia, and to the different countries that made up the EU? How is Turkey going to navigate the scene, being sandwiched between Europe and the middle east?

4. This is a brilliant book recommended by Sillyinvestor. It is collection of stories that portrays real people displaying extraordinary courage by rising above all others to do what they think is right. The author infuses each story with some comments on how difficult it is to go beyond the social rules of the group and act what is right. There is a story of an immigration officer who allowed fleeing Jews into Switzerland, a guy who did the right thing in the conflict between the Croats and Serbs, an israeli soldier who refused to follow orders and a whistle blower in corporate America. It's a very light reading but with a very heavy lesson behind all the stories - when it comes to your turn, would you sacrifice personal gains to do what is morally right?

5. What's wrong with Singapore's education system? How come we don't have a start up culture here, compared to other countries? Israel is one of the most war torn nation surrounded by hostile countries who loved nothing but to see the downfall of their nation, but it still produces a lot of companies that brings so much innovation plus patents that drives technological advances globally. This book explores some of the things that went right for Israel. There's a lot of references to Singapore as a comparison to Israel, so the locals here might find it very relevant. I think any parents or teachers with a stake in educating our next generation will find this book extremely relevant and thought provoking. 

6. Two SEAL officers come together to give business consultation to companies by applying what they've learnt in their combat training and experience. I thought it'll be pretty cheesy, but it's surprising relevant. Every chapter they will illustrate some exciting combat situation and how they navigated through all the screw up and potential dangers and emerged victorious. And after that, they will apply this story to one case in their consulting work, followed by a summary of the lesson. One concept of extreme ownership is what I'm trying to practice after reading it. It's about how everything and anything that didn't go according to your plan is your fault. If my student is not motivated, it's my fault. If my student didn't do well, it's my fault. If my student wanted to leave the tuition, it's my fault. It might be a little harsh, but it empowers me and gives me the ability to change my environment, rather than to give that power away. One of the best self help book I've read this year in 2016. Don't take my word for it, go and read and see for yourself.

7. After reading Viktor Frankl's book on Man's search for meaning, this book seems like accompanying book. While Viktor's book is more philosophical and theoretical, Paul's book is much more practical and it feels that the author is showing us how to lead a life full of meaning even though he is suffering. I think there is a great deal of lessons we can learn from him. This book can be read easily and is a page turner, so be prepared to sleep late at night once you've started on this book. Be warned. You might even cry a little at the end of it all.

In 2017, I'm going to have a major change in my status. I'm going to be a father! I wonder if that will derail my target of 52 books a year. Probably so, but we shall see. As it is, I still intend to read, but I wonder if this is just fantasy on my part haha :)

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Two new systems to change my life

I usually spent the last few days towards the end of the year to do some serious reflection on the practices and the system that I used for the entire year, to see if I can improve it or fine tune it further. I will share two systems that I had recently been implementing that I think will streamline my thought process for further reflection at the end of the year. The first has to do with trading, and the second is more to do with my line of work.


Trading system

Problem: 

In the past before I started using Investingnote in 2016, I have a huge issue with remembering the homework that I do with the charts. The problem is that the charting software I'm using only allows me to save x number of charts. And to add to the problem, it sometimes hangs and all the saved data is gone, including my watchlist. That is extremely frustrating. Due to the lack of a proper system to jot down my thoughts when I'm doing my homework, it becomes highly discretionary. There are situations where I had forgotten some charts that I'm eyeing at, and so missed the opportunity to act on it. The more important thing that is problematic is that I lack a feedback system to tell me if what I'm observed weeks or months earlier will play out as I predicted. This resulted in a very chaotic learning system. This problem is compounded by the fact that POEMS do not have the good till date order system. All orders will be cancelled by the end of the day. It makes planning a trade nearly impossible for me.

Solution:

Since using Investingnote, I started developing a system where I can track the homework that I do. I have four watchlist:

1. General watchlist
2. Bullish divergence
3. Bearish divergence
4. Close monitoring

The first watchlist (General watchlist) is a collection of companies that I've heard about and is interesting to me at that point in time. Usually this consists of roughly about 2 pages worth of various companies from different industries. If I hear or read about anything interesting, this is the watchlist that the company first get stored under.

The second watchlist (Bullish divergence) belongs to a collection of companies that I think will have a potential to go up. Because I'm looking at daily, weekly and monthly timeframe, sometimes the signal might take a while before it happens, so this is a place where I will check on the chart every weekend. During market extremes (usually a fierce market selldown or euphoria), I might even check it every end of the day.

The third watchlist (Bearish divergence) belongs to a collection of companies that I think will have a potential to go down. This is simply the opposite direction of the second watchlist.

The last watchlist (close monitoring) is the one where immediate action needs to be taken in the next trading week (within 5 days). This is where I will check intraday (the charts from investingnote are live intraday!) and also end of each trading day. Queue orders will be submitted if I think a trading signal is satisfied.

Having a watchlist is not the end point. The key thing is that after every round of homework towards the end of each trading day or trading week, I'll shift them around the four watchlist. Sometimes counters in the general watchlist get shifted to the bullish divergence one, and after some time, they get 'upgraded' to the close monitoring for further action.

The advantages of this system is that:

a. I don't need to waste time looking at all the whole universe of counters to sieve out the ones that requires my immediate attention. Within each trading week, I'll zoom in straight to the 'close monitoring' watchlist and see if I need to do any actions.

b. I can learn if my system works through the follow up of signals because I have a system that allows me to track them over a period of time, upgrading or downgrading them when they occur. This allows me to finetune and improve my observation skills required in my technical charting skillset. I probably learn a lot this year than in the past 5 years!

c. I can tell if the market is turning by looking at the collection of companies in the bullish and bearish divergences watchlist. Currently there is nothing in my bearish divergence watchlist and most of the reits are in my bullish divergence watchlist with many of them upgrading to the close monitoring watchlist. There was a time almost all the reits are in the bearish divergence watchlist. You can see and feel the market movement better this way, including rotational sectorial plays.

d. Time savings. Since I don't waste time tracking things that are not immediate and urgent, every end of trading day homework takes less than 10 mins to do. End of trading week homework takes a bit longer since I have to browse through all the companies in all the watchlist, but that takes at most 30 mins. I feel much more efficient and because just like in an emergency room, this system acts like a trading triage that classifies different counters according to their immediacy and direction.


Why the heck didn't I think of this earlier? I think part of the 'excuse' that I had is that the technology to make this system work is not in place yet. I'm going to continue doing this and finetune it.


Student relationship management system

Problem:

I have quite a number of students in any one year, and I have a pen and paper notebook that I write on after every lesson, detailing the dates of the lesson and also the things that I did after each lesson. The point of doing this is to allow me to reflect after each lesson had finished and also to allow me to remember which point I am in the teaching of the syllabus. The problem here is that because my note book goes page by page in a weekly format, I can see each week which students I had for the week, and the lessons I had with them, but I have no way to see in a page what topics had been covered by me for any one particular student. To do that, I will have to browse through all the weeks before by flipping my notebook. This system had been working well for me for over a decade, but I felt that I could improve it further. I could add a section on the homework that I've given, plus the difficulties faced by the student doing that homework (this I had never captured before in my current system), and also what to do in the following section. I can't do this like a NIE teacher with a prescribed lesson plan because each student comes to me at different foundation and at different times, and I have to address all the issues that they face within a set period of time before they sit in for their exams. With 20+ students, that has always been problematic. I need a proper student relationship management system.

Solution:

The solution is really to digitize my notes. I've been using Evernote for that purpose. Under a notebook called 'Students', I write down a brief profile of the student, including the chapters that they had gone through at that point in time before taking my lessons. It will also include the list of chapters that I had covered with the student. After going through a lesson with a student, I'll write my usual handwritten note on my notebook. When I had the time towards the end of the day, I'll key into Evernote a detailed lesson reflection. This includes the date of the lesson, the type of questions the student had problems with, the exact things that is taught during that lesson, the worksheet given. Under the reflection, there will be a line where I will include the homework given. Under that line again, there will be another line where I will write down the things that I will do in the following lesson

The advantage of the system:

I tried to be rationale and list down a, b and c of all the advantages I can think of. I gave up. In truth, there's really only one reason.

I have an excellent memory, up to 2 to 3 weeks, for all my 20+ students that I had in a year. But as I'm getting older, my memory may fail me. I might forget what I've covered with my students, especially after a long break (say 3 weeks or more). I don't want that to happen. In the past, I'll just ask my students, but now I want to have a journal log of what I've done. This will allow me to track everything through all the lessons I had with the student.

On a more sentimental note, it's also to remember that I had gone through all these things with my students.

Just this week, a student came in with a black face. I knew something isn't right and I asked him about it. He just mentioned he had family issues (I guess it's a quarrel with the parents), so I reduced the stress level heaped onto that student. Start to talk a little more to get him into the mood of doing and I also forget about my usual nitpicking. I didn't write it down yet, but I suspect as I'm more familiar with this new system, I'll slowly add it in. Maybe an emotional state of the student. Maybe something interesting that happened in the lesson.

Last year I had another student. He is in NA stream, and I think he is the best learner I've ever seen. He just devours everything he can find in a topic that he is interested in. At that point in time, he is interested in making bullwhips and he searched the internet, watched countless youtube and made his own whip and practiced in it. He knew all the theories and science behind the cracking of a whip. All these will be lost if I didn't record them down.

Is there really an advantage to this system?

Yup. I use my time and life-energy to do the work that I do. The time that I spent with my students ought to be remembered like a treasured faded photograph with my family. I don't want to reduce my students to a grade, or a name. These are living breathing little humans that are learning how to navigate the world. And it's all too easy to forget that while we're trying to earn a living through our work. I don't want to lose that part of it and throw them away. This is what makes my work meaningful and it should stay that way. THAT is the advantage to this system.

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Sabana Reit 42 for 100 rights exercise

Sabana just announced a rights exercise. For every 100 shares that you have before XR, you're entitled to 42 rights shares priced at $0.258. Based on their track record, I don't think it'll be well received.

I once bought Sabana reit at 0.960 back in Nov 2010 and sold it at a 0.910. After dividends, thankfully I still make a very slight profit of 0.7%. I told my wife to get rid of it too. From then, the share price just went lower and lower until it hits 0.435 today. Imagine a 50% loss but with a yield of 8 to 9% pa! The dividend is not going to be enough to cover the loss in capital.

There's quite a few people asking around on what to do with their Sabana reits. I think we can safely classify into 2 types:

A. Those who had shares in this
B. Those who don't have any shares but wanting to get into it.

I can tell you frankly, rights issue is going to benefit people in group B more than group A most of the time.

Don't slip on this slippery banana skin

For people in group A:

1. You can decide on a fundamental basis whether you want to sink in more money into this or not. If you don't want to, you should sell it as soon as possible and close off the case. It'll be silly to subscribe to the rights and put more money, and after XR, the price likely will go down lower and wait for extended periods before going up again. If you're okay with this, then go ahead and subscribe to the rights entitled to you and apply for excess. This will lower down your average price and hopefully it'll come to light one day.

Do look at this post here. Most of the companies that issue right will recover back to the price before announcement of rights exercise between 1 month to 1.5 years. That's just based on statistics on a small sample size. So take it with a pinch of salt.


For people in group B:

1. You can buy nil paid rights during the trading period for the rights shares. But remember, you do have to go to the atm to subscribe (and pay) for them, otherwise they will expire worthless. There could be arbitrage opportunities when the difference between the nil paid rights and the mother share is not 0.258.

2. You can buy the mother shares before XR, get the entitled rights and then apply for a lot of excess rights. This way, you might get a lot more excess rights than the prescribed ratio of 42 for every 100 shares, so you might end up with a lower average price.

3. Buy after XR. Since you have 1 month to 1.5 yrs before the price recovers, you'll have plenty of time to pick and choose a right point to enter.



After the change in lot size from 1000 shares to 100 shares, things need not be so complicated anymore. I'll just go for strategy (3). I'll be looking at this to see if I can get just one more puff out of this used cigarette.

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Somebody staring at me

I wore a new t-shirt out today and noticed a few people, especially the guys, looking at me. I know because I saw their eyes trying to read what my t-shirt says. I took a selfie of myself and here's how I look:

Yeah, I know my face is something that comes out of a horror film. But really, I think it's my t-shirt that these people are looking at. I think my t-shirt is a good conversation starter. I'm wearing it for work and hoping one day my students, out of curiosity, would ask me what Financial Independence means. I'll be all prepared and ready to deliver my heart wrenching, inspirational speech about financial freedom with the soundtrack of Braveheart in the backdrop.


Here's how my fantasy reply goes:

1. I'll ask what they think financial independence is all about.

2. I'll ask them for some reasons why people work.

3. I'll ask if they had ever done anything that they will gladly do for free because it's exactly how they would spend their leisure time on

4. I'll ask if they would want to be able to do things like that for the rest of their lives

5. I'll ask how they would feel if I can show them a way where they no longer have to work for a living, and have all the freedom and time to pursue what they want to do (cue for Braveheart music)

6. I'll sell them a series of video links at $99.99 each and be freaking rich

6. That's what Financial Independence is all about.

7. Students leave my place, all teary but inspired. Each step they take take sparkles with the fire of passion. Each breath they take fills their lungs with air and purpose. Each heartbeat sends positive energy and optimism that vibrates throughout their body. Sounds coming out of their mouth are like angels singing. Light entering their eyes are rainbows brightening their vision.


Nah, most likely my students will mouth out an invisible huh, and proceed to play with their handphone on their way out, with me screaming at their backs to remember to do their work for the next lesson. Or they wouldn't even ask because their curiosity about the world had been deadened by the burden of the school. I bet they wouldn't even ask where I got my t-shirt from.

It's okay, perhaps my readers will ask. Or perhaps one day when my students are ready, this blog will be here for them.

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Closing off a tranche of LP 'bonds'

I handled my parent's portfolio since end 2013, and I'm still handling them now. Recently, my parents wanted to withdraw out 40k. My parent's portfolio is handled in tranches, according to the timing where they gave a lump sum to me. Since the first tranche of money is 50k, and the portfolio also consisted of Capital mall asia bonds (CapmallA3.8%b220112) that is going to be redeemed back in Jan 2017 (here), I decided to cash out the entire portfolio and return it to them.


When I first started out, the options are pretty limited. I looked back at my older article here on the philosophy behind the allocation. The fixed deposit for foreign banks are giving 1.25% pa for 2 years, while the local banks are giving about 0.55% for the same period. Now, the rates for local fixed deposit for 2 yr is doubled, at 1% pa. For POEMS money market fund (MMF), it was 0.5% pa in end 2013. Now the MMF is giving a return of about 0.9% pa and still rising. You can see the macro environment changing over the last 3 years. There isn't even a singapore saving bonds back then. If it's available, I'll definitely consider putting some money in it since it satisfies the criteria of handling my parent's money, which is a guarantee on capital and also a higher than fixed deposit return.


And so I did the allocation of the 50k. The terms are laid out in this post here. I'll summarise the gist of the terms here too. It's like a bond, with a fixed yearly yield of 2% pa, no fixed duration or maturity period, and I will guarantee that their capital will stay intact when they want to cash it out. So the actual instruments I used to achieve this aims can be found in this post here. Mainly it's pref shares from banks and high quality retail bond. There is a change in the portfolio because the pref shares from OCBC bank (OCC 5.1% NCPS 100), was redeemed back in Dec 2015, which I've mentioned in this article here. The portfolio didn't lose money, but it affected the returns because of the unexpected earlier redemption.


I took the money and reinvested in Frasers centerpoint ltd bonds (FCL Trea 3.65% b220522), and that's all the transactions there is until today. Let's see the returns over the 3 year period where I handled the money.


Initial capital: $50,000
Date of inception: 27th Dec 2013

Total brokerage fees in buying/selling: $342.13
Percentage of brokerage to capital invested: 0.68% total or 0.225% pa
Total amount of dividends given out: $2,000
Cash retained in portfolio: $3,881.43

Current value of portfolio (all in): $53,402.43
Total portfolio returns (inclusive of paid dividends): $55,402.43
Date of closing: 12 Jan 2016 (that's when the capital from the redeemed cap mall bonds will be returned)

Absolute profit: $5,402.43
Percentage return: 10.80%
Time period of handling portfolio: 1112 days
Average returns per year: 3.55% pa

That's fantastic, in my own opinion. I beat the Singapore savings bond over the same period of 3 years. Even at their best of 2.78% per year over 10 years (Issued in Nov 2015), their 3 yr average return per year is 1.48%. Their Dec 2016 issue is worse. At 1.87% per year over 10 yrs, their 3 yr average return per year is 1.03%.

Shit, I should just take a cut of 0.7% pa of NAV, as 'management fees' over the last 3 yrs in which I managed my parent's money. I'll get about $1k, and the average returns per year will drop to 2.86 % pa. Still very decent lol!


Reflections:

It had been a very good learning experience for me to start and close off this tranche of investment money. I had to think deeply about the benchmark I want to set, and also the criteria in which my allocation philosophy is based on. In addition, I also have to think about how to set aside the amount I want to distribute out so that I can retain the cash to pay for things like commission and more importantly, to offset any possible losses from early redemption from my parents and also from the inherent capital loss from buying retail bonds at above par value. In between, there is also switching of the portfolio allocation because of redemption by the issuer. I'm glad I didn't lose any money on my parent's behalf!

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I knew I loved you before I met you

I knew I loved you before I met you, so goes the song by Savage Garden. When I first heard that song, I thought it's just some mythology that some romantics had dreamed of. I don't really believe in love at first sight. Until it happened to me (okay, technically there's no 'sight').

That little kick, that little tremor, especially at night. The black and white pictures we took every other month. The vast amount of conversation we had regarding what we're going to do, and how we plan to do this and that. The huge amount of research reading we did and the youtube videos we watched.

All these for someone whom I've never met. How can it be?

I believe more and more these days that if we gone through all the various cycles of life, then we will empathize and understand why people do certain things. I think that's one of the first insight as a parent, that there are two persons in the world who loved you even before you are born. My parents, no matter how bad I was as a kid, or how naughty I am, loved me before I was born. So is everybody.

That's an incredible insight.

I'm waiting with fear and tribulation for more such experiences.

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Where did all my savings go?

I started tallying the past records of all my savings recently. My aim is to find out where all my hard earned savings go to. Did I 'waste' a lot of my life energy, which is captured in the form of savings, into frivolous stuff? It's a pity that I only started tracking seriously in 2008. I started work around mid 2003, so those 5 years until 2007 are like my lost years


The breakdown over the years

2008: $53k
2009: $50k
2010: $50k
2011: $53k
2012: $29k
2013: $25k
2014: $68k
2015: $64k
2016: $67k ?

I haven't close 2016 yet as there's still some weeks left before the year is up, so that's just an estimated figure. To sum it up, I've accumulated about $460k worth of savings over 9 years, ignoring the lost years from 2003 to 2007 where there's no data available. It averages out to be about $51k savings every year. There are good years and there are bad years, and here is the record that I've made in the most recent 9 years.

I checked back on my past records in order to find out more about the lost years between 2003 and 2007. I should have about $100k to $120k accumulated over about 4.5 years, since I started work in mid 2003. That means I save about $25k per year during that period.

How did I double my savings rate?

On reflection, I think the best thing I did was to buy an freaking expensive whole life plan. I wasn't financially literate back then and I was like a sheep out for slaughter. If I remember, the plan will cost me about $3k every month to service, and that makes me wake up to the fact that I might be scammed. I sucked it up and took it upon myself to find out more about investments, and this lead to that, and eventually I entered the stock market to pay even more tuition fees. It's silly how I resented the fact that I have duped myself to buy such an expensive whole life plan, but years after that incident, it turned out to be one of the most important inflection point in my personal finance. It's the pain of having been scammed that made me push through the hard work to read up all the stuff needed to understand all about finance.

The second thing was that I started tracking my expenses down to the cent. In the past, I had used the old school method of keying expenses in a notebook in my mobile phone, then transfer the data over to my desktop spreadsheet. In 2012/13, I switched to YNAB and never looked back again. An initial experiment to just track my expenses fully for 1 month lead to a start of a habit that lasted for nearly 10 years now. The thing about tracking expenses to this level of detail, is that it leaves no room for mental accounting. It is what it is. I make it a point to reflect upon the data I've collected every end of the year (like what I'm doing right now), and that lead me to believe that there's only so much room to cut expenses, and so I started looking at a lot more ways to squeeze in more work to earn a higher income. This lead to a series of actions to slot in more work and up my game.

Where did all my savings go to?

Adding up all my savings in my 13 years of work, it'll amount to $580k of my life energy. Not a small amount! It was quite a shock to see the figures like that. I'll show you roughly my breakdown below. The disclaimer is that it's really a rough figure, and while I tried my best to trace out what data I can especially during those years without proper record, it's highly possible that I could have missed out a few details. My aim is just to see where my hard earned savings went to.

1. About 41% goes to my portfolio, warchest and emergency cash

2. About 14% goes to cpf

3. Another 18% goes to renovation and furnishing of my flat

4. Home related expenses like downpayment and option takes up 9%

5. 6% is lost away plus bad debts (don't ask me that)

6. Down payment of cars takes about 4% (monthly expenses and installments is under expenses)

7. Another 4% is for partial capital payment for HDB to reduce the loan quantum

8. The last 4% is just a big fat unknown.

I add up all those categories as best as I can, and it more or less tallies with the $580k, so it's fully accounted for. The 4% big fat unknown could be things like headphones, guitars, games, computers, handphones and other stuff that I now classify under 'play fund'. These are the assets that I didn't include in my networth calculation because realistically, nobody will really buy them. It should also include money spent on vacation, also one of those things you use your savings on, but never really reflected in the asset part of networth calculation.

Is that okay? I guess so. I realize I don't have a lot of bad habits financially, so a bulk of my savings is invested in assets. Housing is one big part where I might have gone a little overboard, but it's also a place where I spent a lot of my time in.


What's the difference between expenses and allocating your savings?

Savings = Income - Expenses. We save so that we can use the money in the future, for fulfillment of both short and long term goals. Some people might save up for that nice bag they wanted to get for themselves, others might be saving up for that dream car. You can also save for retirement, so that you have a sum of money to draw down years down the road. Something one off. Expenses are usually more immediate and is chronic, so things like food, bills, even insurance premiums, pocket money for parents, all these are classified under expenses for me. You can even see expenses as spending from your cash flow while allocating your savings is more like spending from your balance sheet. I'm not an accountant, but I think the concept is similar to capitalised cost. I stand to be corrected.

I generally use my savings to advance my goals in life. If I'm a company, savings are like my retained earnings. You distribute some as dividends to reward yourself, but not excessively, so that you can continue to do the same good work you've been doing. Some of it you use it to buy other assets so that it can generate future earnings. If you don't know where your retained earnings go to, then you're not utilizing it the best it should be. I will use my savings to purchase financial assets so that it can continue to generate income for me to prepare for the eventuality where my human assets can no longer generate income for me.

That's my goal and I use my savings to advance it. And that's how I intend to do so until the goal is reached.

Could I have done things differently?

My wife saw me typing this and asked me what I could have done differently. I don't usually think things like that, but I gave a few ways:

1. I would have gotten married as soon as possible and get a flat as soon as I can

The rationale is that housing prices kept going up and it disadvantaged conservative people like me. If I got into a property without ensuring a certain amount of savings first, I could have been debt free by now. My flat could have been cheaper by 100k to 200k if I had bought it a few year earlier. But we also see cases where couples getting married when both are not ready or their mindset is not aligned, so they break up before they even get the keys to their flat. I don't think I would advice anyone to just get married and get a property asap - it's plain irresponsible. My wife added that we might end up in divorce if we married any earlier, because she is not the same person back then and I'm not the same person right now.

2. Start gearing up when I start work in 2003 to reduce/remove that lost years

I took 4.5 yrs to save 100k. Thereafter, it only took me about 2 years on average to reach the same amount. Why? I was putting so much limiting beliefs on myself that I have to break it one by one. That first 100k is the hardest amount I've ever saved because I've to learn how to have that mindset through trial and error. At the end of the research needed to write this post, I am thinking how great it was if I had shortened that journey. Imagine I could have saved another 150k to 200k if I had started tracking my expenses way way earlier! This is hindsight analysis and is just pure fantasy, I know, but one couldn't help but wonder. I alone knew that certain mindset is honed by battle, and even if there is a mentor to guide me on how to gear up my work, I might have a million excuses to avoid taking action. The teacher might be there, but the student is not ready to receive, so that's that.


In summary

I'm not here to preach about savings. I already know that if the reader is not ready, he won't even be here to read this. Or it wouldn't have that eureka moment where all things clicked inside you. I'm really doing it for myself, as a chronicle of what I had done and/or what I should have done. I have my own family with a kid coming soon, and I'm doing pretty decently in a job that I really like, have a roof over my hand, have a lao pok (old and used) car to drive around, and also building up my portfolio to generate dividend income for me. There's a tremendous sense of satisfaction and achievement in seeing the long term plans fall into place through careful planning, hard work and meticulous use of my savings.

I suspect that sense of gratitude and happiness is something I can never achieve by using that savings to buy any material things. This is who I am, and this is what I'm going to be. Working hard to save up, one year at a time.

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Financial competition

Lim, Tan and Lee sat around the marble table of the kopi-thiam. They are classmates that had not met each other for the past 30 years, so naturally they had plenty to share. The conversation flowed along, interrupted only by the periodic crunch of the kaya butter toasts and the sipping of kopi-o in the quaint porcelain cups, until it came to the topic about their children.

Tan started it first when he said that his son is very capable. He is earning $100k per year at age 25 as a banker. Lim said that was nothing to boast about. His daughter is already saving $100k per year at age 22 as a property agent.

Both of them turned their heads towards Lee, fully expecting him to top their stories. Lee looked back at them, and gently put down his cup of kopi-o back to its saucer. The porcelain tinkled like a bell, as if reminding the audience to keep quiet while the curtains are rolled back and the show is about to start.

Lee did not disappoint. He said that his son gave him a million dollars just after reaching 21 yrs old.

Wow, the two of them exclaimed, unable momentarily to process all the sound that they had just heard. Tan, who started all this, naturally asked how Lee's son manage to earn so much money at such a young age?

Lee's faced was sombre.

He said that his son bought an insurance and jumped off the building.

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Networth updates in 2016

Usually I'll do a networth update around end of the year, so with few blinks of an eye, we're here again after 1 yr. This year is a fantastic year for me, but I'll talk more about that when I reflect on the year 2016 and how grateful I am for the ups and also the downs. The last time I did my networth was back in 7th Dec, 2015, here.


There are so many ways to calculate networth, but I've always done my this way. It's assets minus liabilities. So, the assets part include:

1. Cash in my wallet
2. All the money in my various bank accounts
3. Cash holdings under mattress and milo tins at home
4. Money in my paypal account
5. All the money in the 3 accounts in my CPF
6. Money market fund account
7. Marked to market investment portfolios
8. Surrender cash value of whole life insurance plans

I do not include the value of my 5 room flat that I'm currently staying in, and also the value of the family car that I own.


Under liabilities:

1. Credit card bills
2. My portion of the HDB mortgage loan (total remaining loan amount divided by 2)

This year I finished the car loan of my previous car and paid up in full for my next car, so I do not have any existing car loans, unlike last year.

So, here are the tabulations:

2014: Assets: $226k, Liabilities: $220k, Networth: $6k
2015: Assets: $295k, Liabilities: $207k, Networth: $87k
2016: Assets: $351k, Liabilities: $188k, Networth: $163k

Compared to 2015, I increased by assets by about 56k. The increase in assets mainly comes from work. A tiny percentage comes from dividends and market returns of my portfolio. This is pretty in line with what I had planned, which is to add a minimum of 50k to my assets every year.

I had also decreased by liabilities by 19k. The bigger drop in liabilities is likely due to my car loan, which I had entirely paid up for. If only this is for my flat!

With that, my networth increased by 76k, which is slightly bigger than expected. This figure doesn't mean much for me, so it's just a number that tells me I'm on the right track. It had been a long while since my networth was nearly 0 in 2014!

The projection for 2017 is that my networth will increase by another 60-70k, so that will bring my networth to be higher than my liabilities. That means my assets will be twice that of my liabilities by next year. Since my liabilities consists mainly of my mortgage loan divided by 2, that means I can choose to cash out everything and pay off my HDB entirely if I chose to. But of course, I won't do that. It's still a thought though, haha

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ROE vs PB of regional banks

Just out of curiosity, I did a study on the ROE vs PB ratio for the different banks across the region. I fully understand that it's not a good apples to apples comparison because different banks have different regulations and capital requirements, and also different rules to recognise profits, bad debts and so on. But it's still good to see how the banks fare on these two metrics across the board.

All the figures are taken from the bestest platform to happen onto me this year: Investingnote. I don't just use them for the charts, but if you click on the tab 'Fundamentals', you can also get a quick and dirty ratios that are used commonly. They just don't have ROE, so I have to use a quicker and dirtier way to get my ROE by taking two ratios that they do have in the platform, namely Price to Book and Rolling PE. I just took the Rolling PE divided by the Price to book to get a rough ROE. For those companies that I can't find it from Investingnote, I used Yahoo finance to get the figures I want.

Don't trust me, I could have keyed in wrongly though.


Anyway, here's the scatter plot:

First look is that you can see a few clusters. Let me roughly group them for you:

The pink ones are the HK/China banks listed in HK. They are supposedly the best since they have the highest ROE with the lowest PB. But can their book value be trusted? We need to dig deeper into the figures. The best among them is ICBC and Agricultural development bank of China. ROE of 15+% with a PB of 0.7 to 0.8 is fantastic. Too good to be true? Again, I recommend readers to dig further and not to take these figures at face value.

The green cluster is our Singaporean local banks: OCBC, DBS and UOB. All of them have very similar ROE with OCBC taking the lead. DBS is the only one that is still priced below book (PB < 1) so technically they are still undervalued in terms of that.

The yellow cluster spread over a whole range of PB ratio, and these are the US financial firms. Of these, Wells Fargo and JP Morgan seems to be the best. US Bancorp seems too overvalued, even though they have the highest ROE.

The purple clusters are the banks from the EU side. Generally they are not doing too well, since they occupied the lower left corner of the scatter plot, characterised by low ROE and also low PB. It's interesting when there are investors who only look at PB ratio and determine that a low PB is always a good thing. Take a good look at the troubled banks. Almost all of them have low PB.

Why almost? You might also be wondering where is standard chartered bank? Here it is:

I excluded those banks with negative ROE (meaning they have negative earnings) so that we can see the scatter plot clearly. Barclays, Credit Suisse and Stanchart is right below the x-axis because they have negative earnings. The high PB ratio of Stanchart is strange. I didn't dig further but accepted the figures as it is. But those who are interested might want to do the dirty work of perusing their statements.

Seriously, I still think our local banks are worth buying, even after this recent run up. At the peak, they can reach a PB of 1.9 to 2.0. We're now around PB of 1.0 for the 3 local banks, so you can do your own calculations. Even at 1.5, there's still a lot of room.

STI 4000? Hahaha!

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Capitamalls asia bonds optional redemption

Another bond bites the dust.

Don't worry, this is not from the troubled oil and gas sector. It's the optional redemption of Capitamalls asia bonds, CapMallA3.8%b220112 announced from sgx here. I blogged about the bonds here and here.

The full maturity of the bond is actually on 12-Jan-2022 but there is an option for early redemption on 12-Jan-2017 and every year thereafter. Since there is a step up option for the bond  if it is not redeemed on 12-Jan-2017 to 4.5% instead of 3.8%, I guess there's every reason for them to redeem it back in full. The 3 months SIBOR now is 0.87%, about doubled since Jan 2015. I guess I was wrong to think they wouldn't redeem it. There's still another bond out there with 3.08% by Capital Mall Trust (not the same, but yeah) with no step up option and with maturity date in 2020.

How would this affect me?

It wouldn't affect my portfolio because I don't have any more of this bond. But it'll affect my parent's retirement portfolio, to the tune of $26k. Guess what, I'm going to take the redeemed amount and return it back to them. The last time OCBC pref shares redeemed back, I took the money and reinvested back into FCL bonds, but I'm not going to do so now. It would seem that in the very near future, it might be better to put the money in the safety and guarantee of a fixed deposit in the banks, rather than to take that extra bit of interest and risk the price volatility of the bond. Especially if I'm the one guaranteeing their capital.

Nope, going to return them the money. No more reinvestment of the money into bonds for them.

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Early Retirement Grid

I chanced upon an excellent blog that talks about FIRE (Financial independence Retire early) in 4 pillars. I will take some time to explore the site but I'm liking it already! It's here, called Four Pillar Freedom.

There's a post called early retirement grid with the following picture below

Picture taken from fourpillarfreedom blog post here

Basically it shows you how long you take to reach financial independence given your after tax annual income and annual spending. There's a few assumptions that comes with the table:


1) You're starting from nothing. It's good for those who had just been through the financial bombs of marriage and housing and renovation, because that's essentially what it is. After going through those 3 bombs, I have to start from scratch again and save up.

2) This is using a draw-down method of 4% of the portfolio annually. So you'll end up with almost nothing to pass on to the next generation.

3) It assumes you're investing the savings at 5% pa, and you no longer need to have any capital expenses in the near or distant future.


It might not be possible to hit all the assumptions. In fact, ignore that and let's see this philosophically. Firstly, you should be in the green zone. If you're in the red zone, that's quite dangerous because you're going to take a pretty long time of above 50 yrs to reach financial independence. Meaning you're going to work till you die. If you're in the yellow zone, you're too near the danger zone, and minimally you're going to need at least 25 yrs before reach your retirement. If you're in the green zone, you need less than about 14 yrs to reach your retirement.


Let's be truthful about this. It's good to have that option of being able to retire early upon reaching financial independence. You might not want it but it's still good to have that option. That's because when you're older, the choice might not be yours to take regarding your employment status. Someone will decide whether you can work for them, and when you still have bills to pay, that's going to be highly stressful. So, look up your annual after tax income and look up your annual spending and see what number you're at.


You probably know your after tax income, but you might not know your annual spending, especially if you've not been tracking diligently. It's alright, at least you know that now you have to have some semblance of tracking your spending. If you don't like to track every expenses down to the cents using some technology, that's fine. You can see how much you have from a dedicated spending account at the start of the month, and see how much there is at the end of it. It'll work fine. Either way, you need to know both your annual income and your annual spending.


From there, you know your FI number. The lower the number, the lesser the number of years that you still have to work, and the better it'll be. Did you notice that as you go down the column, your FI numbers drop too? Going to the right will also drop your FI number. Going down the column means you cut $5k off your annual spending, and going to the right means you increase your annual income by 5k. You'll notice for almost all the boxes, going down will decrease your FI number faster than going to the right. So do the easy thing first - cut down your expenses. Once you've cut down what you can, the only way to decrease your FI number is to raise your income level. I've talked about this at length in my blog posts here and here. That's why having a salary increment yet keeping your personal inflation checked in will be such a powerful force multiplier in your journey towards financial independence.


It makes you think twice about spending $5k on a Chanel bag right? That $5k you spent on the bag represents between 1 to 16 years of your life energy working before you can have early retirement! Think about it!

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My 50k savings goal back then and now

I was reading back my previous post on my 50k savings challenge here, and trying to see if there's any difference between then and now. I first started back in 2009, and it had been 7 yrs since. How time flies!

Comparing the difference between 2009 and 2016:


1) Shift in focus between 2009 and 2016

I had a plan on how much to save every month back in 2009 and it was further broken down into weekly goals for savings. That created a lot of stress because I have to watch my expenses like a hawk! While I appreciate the shocking jolt that made me rewire my thoughts and actions to align myself to this goal, I think I would not have done the same way again. This year, I just saved what I could after my expenses, and didn't really keep a tab on how things are going. The idea is that I've already streamlined my behavior after so many years, so things are almost on auto pilot mode now. I know if I hit a certain income level, I will have hit a certain savings level at the end of the year. And because of that certainty, my focus is not on cutting expenses, but more on getting that critical mass of students so that I can hit an income level that will guarantee my savings goal. There's only so much to cut in my expenses, but my income can be unlimited. Well, more or less.

Summary: Shifted focus from cutting expenses to increasing income


2) You can get used to shit

I was complaining back then about working 10 hours in a day and having lessons at 7am and ending at 1130pm latest. It was quite entertaining reading about such things because it must have been quite a shock to me back then to work so hard. Back then, I also have my Sunday off, so it wasn't as bad. Compared to 2016, I think the work load in 2009 is considered a breeze! This year I had 14 hours workday, starting at 7am and ending at 11pm with 1 hr break in total for lunch and dinner. 9 hours on a weekday is quite normal and during peak seasons, 12 hours workday is the norm. I was quite stressed up over work back in 2009 and was generally feeling burnt out and unhappy. But this year in 2016, I was just laughing and enjoying my work (mostly), even though I was working a lot harder and longer. Like a hedonistic treadmill but in reverse, you can get used to shit, and when you do, it's no longer shitty.

Summary: I can take shit and enjoy it too. It's just takes a reframing of the shitty situation.

3) Impossibility made possible

Back then, I don't think I can save 50k. It takes a few years of doing it and stressing over it before my mindset is changed. I think it took about 3-4 yrs before my internal dialogue changed from "I think it's crazy" to "I might be able to do it" to "I think I can do it" to "I did it again". I can't stress how important it is to be able to leap from the impossible to the possible, because it gives a shot of confidence in my ability to go through the entire process of goal setting, planning, execution and review. I could never imagine that now, saving 50k is a norm and not a challenge anymore. That's just crazy.

Summary: Plan something crazy and go do it. The growth to achieve that crazy thing you're aiming for will be the catalyst for many other crazy things you could possibly aim for. If you don't challenge yourself and expand your limits, you'll NEVER grow.

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Choose yourself!

I am reading this book by James Altucher titled Choose Yourself. I'm still in the midst of it but am loving the message that the book is trying to convey. In this kind of economy, there's not much loyalty for any particular company. Everyone of us has to treat ourselves as a company and behave like we are one!

Here's some tips on choosing yourself from my own experience:


1. Have a personal brand and personality that people know you for

I think the general impression I get from people is that I'm very well read, disciplined and reliable. Try thinking of any one and rattle off 3 characteristics about that person. It doesn't matter whether it's true or not, but the perception is what matters. If you're perceived to be an asshole, then you will be treated like one. Jobs come and go, but your personal branding and personality stays. When times are bad, your personal branding might be the only thing that can differentiate between you and another stranger in the interviewer's perception. It takes a while to build up a personal brand and reputation, so remember that all it takes is 10s to destroy it. If you don't want to keep up the appearance, then be authentic and real. It'll be easier in the long run!


2. Marketing yourself - everyone must know what you're doing for a living

This is related to point 1. Everyone that I know must know that I'm a tutor, if not I've failed to market myself. It is said that the lobangs come from people outside your inner circle - the acquaintances in your 3rd, 4th, 5th and above degree of separation, so start telling people what you do for a living. If nobody knows what you're doing, then how can they offer help?

I'm not the hard marketing type also, so you likely won't see me dropping name cards in social events. I don't even have a name card lol! There's another side to marketing - you can market yourself all you like, but you better be good in what you are doing. If not, you'll be like the exploding samsung handphones. A good product is meaningless without good marketing while a bad product needs no marketing.


3. Upgrade and invest in yourself

This is not to satisfy some certifications or professional training time. We're talking about real useful skills here. If you choose yourself, then don't let others dictate what is good to learn. Choosing yourself requires responsibility and that involves having a goal in mind and looking for skill sets gap to fill. It can be a formal course like taking a proper training course offline or online, or just reading. Remember we're not upgrading to show others that we have the certification. We're upgrading ourselves because we want to be better, so you don't have to take up official qualifications. Reading is a form of upgrading of skill set too, especially if you read widely. I'm not picky - even reading comics is a form of upgrade. Hey, it takes imagination to jump from frame to frame! But do yourself a favour, don't just read comics. Read a proper book too :)


4. Exercise, meditate and take care of yourself

Resting and taking good care of your mental and spiritual health enables you to walk a further distance than others. Life is a marathon, not a sprint, so make yourself better so that you can provide better quality of service to others. Take care of yourself so that you can take care of others. Treat yourself well because you're a machine that needs occasional oiling and maintenance too!


5. Learn to say no

I'm still learning this. Learning to say no means you value your own time. You don't waste time on nonsense people or events that you do not enjoy. If you value your own time, you can be sure others won't value yours too. Choose yourself and make yourself happy. That way, you can be sure others are happy and don't have to listen to your complains too :)

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Review of financial goals

I wrote about my offensive and defensive strategies two years ago here, but never really got a chance to review it to see if it's still relevant. Let's do it now.

In that post, I talked about the dilemma of using cash to shave off interest at 2.6% by doing a partial capital repayment, or using it to invest in the market by getting a return of more than 2.6%. It's not an easy solution and I opted to do both to avoid the two extreme end game scenario of being asset rich but cash poor OR paying excessive interest for my housing loan and being in debt for a good 30 yrs. So, I came up with 3 plans:


1. HDB capital repayment plan

This is to top up 12k every year, shared between me and my wife, so that my 30 yrs loan will be shortened by about half. So far, I've been consistently topping up 12k towards the end of every year towards the completion of goal. From last calculation, I would have finished the loan in another 12 years. I talked to my wife about the interesting scenario where my son will be stressing over his PSLE while we will be celebrating and popping champagne for a completed milestone of finishing our HDB loans, LOL! Finishing our home loan will be one of the greatest accomplishment and I look forward to giving HDB my last check to wrap up the whole affair.


2. Build up of capital for 1k/mth dividend plan

This plan is to build up a base of 240k capital, and when invested at >5% pa, will generate 1k/month. In that post, the expected duration is about 2-3 yrs and I think I'm still on track towards that goal. Next year will be the 3rd year and I don't see why I can't fulfill this project on time. Well, at least for the capital build up phase. I intend to slowly deploy even if I have the capital, so there's no rush to get the 1k/month. Realistically, I can channel $20-40k per year to this project, depending on how much I can save, and that depends on how much income I can earn, which is a variable. Every year, my income will drop drastically as the graduating students leave so I will have to work hard to push it up to last year's income as fast as possible in order to save more. I was initially worried about my income for 2017, but I felt a lot more secured when currently I have about 75% of my income confirmed for 2017. I should be able to start 2017 running. This 1k/month dividend income will come in at a very good time as I will have to reduce my work load to prepare for more family time. It couldn't have come at a better time, so I'm glad I started this way ahead.


3. Emergency fund of funds

This project is to do voluntary contribution to my 3 cpf accounts in order to build up a full year of mortgage payment, to the tune of 24k. I did a tweak for this project. Instead of topping up 6 to 12k as mentioned in the article, I will top up 10 to 15k as voluntary contribution annually. Firstly, this will reduce the amount of tax I have to pay. Secondly, 56.77% of the contribution amount will be channeled to my OA, so that will be about 5 to 8k every year. I will then do a partial capital repayment of 6k using CPF (instead of cash).


So, the workflow goes like this:

Doing this achieves 5 things in one shot:

1) Reducing personal income taxes because voluntary contribution (VC) will have tax reliefs

2) Topping up MA to pay up for compulsory medisave contribution, as part of the VC (24.33%) will be channeled to MA, so there will be less cash outlay to top up just for the compulsory MA portion

3) Topping up OA to build an emergency fund of funds to have 1 yr of mortgage as reserve, so I know I can last 1 year without income and the mortgage for the house can still be paid for

4) Partial capital repayment to reduce housing debts so that the housing debt will be reduced and it helps to save on the interest for the remaining loan amount

5) More cash available since (1) to (4) comes from the same tranche of money by doing VC, so this enables my investment porfolio to build up faster. Ideally, I should have more money outside CPF than inside, to hedge against the policy risk and constraints of using CPF solely as a retirement tool.


It took me some years to realise this workflow and I should have done it much sooner, but that's the point of this post. If there's some self employed out there who is in a similar situation, you can short cut a few years of trial and error modify/adapt the workflow to suit your circumstances.


To be frank, having a child is not part of the plan when I wrote the post back in 2014. I think it'll be interesting to see how these goals will change when I review it a few years later after having a kid running around the house. I would expect more modifications to come for sure.

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Buy High Sell Low, not Buy low Sell High

We often hear this nails-scratching-on-blackboard phrase "Buy low Sell high" until our eyes roll and our skin crawling with goosebumps. There's truth in it, except that like all aphorism, it's not as simple as it is. Let's deconstruct that phrase.


Buy low sell high consists of two parts. Firstly, you have to buy at a low and then you have to sell at a high. But unfortunately, the aphorism didn't really say what we're buying at a low. It's implicitly taken to mean buying at a low price and selling at a high price, but I think it's not right. Sometimes buying at $2 might not be better than buying at $2.50, especially when taking into account the risk of dropping even lower. It's better to bottom fish when the mud had settled and the waters become clearer; the chances of fishing a stone that breaks your line is lower. But clarity comes at a higher price, so if we have to follow another aphorism "Do not lose money", then it will make better sense to buy at a higher price rather than hope than the stock will make a V shape recovery by buying at a lower price.


The more correct 'thing' we're buying should be value. Hence it's more correct to say Buy High (in value) and Sell Low (in value), rather than the more risky proposition of Buy Low (in price) and Sell High (in price). Value means different thing to different people. If you're a trader observing a counter moving uptrend, buying at high value means the price touching the lower boundary of the envelope and then selling at the upper boundary of the envelope. If you're an investor, buying at a high value could mean buying when the price went below the intrinsic value of the company and selling when it's above. But do take note that regardless of what type of market participant you are, the price is never the thing we're focusing on. It's always about what the price means with reference to something else.


Since the aphorism consists of two parts, can we also reverse the order? Sell high (in price) and buy low (in price)? Effectively that's what shorting means. You sell off something and then buy back again at a lower price to make your profits. Again, this runs into trouble because basing your decision on price alone is hoping that the high price alone will catalyze the precipitous fall thereafter. No, it should be Sell Low (in value) and Buy High (in value).


By itself, this is quite an un-actionable advice. Without telling people how to determine value, it's impossible to follow this advice, hence it's not actionable. But to tell people how to determine the value, regardless of the 'value' in question here being a trading value or investing value, it will take more than 4 words. Maybe not even 4 books have the breadth and length to begin discussing it fully.


And that's the real reason why I love aphorism. If you know it, you'll appreciate the beauty and simplicity of all the mountains of knowledge condensed into a short sentence with a nice sound bite. If not, you'll understand it after you've made a mistake following it. Either way, you're going to take home something.

If you're interested in aphorisms, may I recommend a very good one by Nassim Nicholas Taleb titled "The Bed of Procrustes". It's a very easy read, but as with every such aphorism, you'll have tons of things to think about. I think of this book as an aperitif; something to whet your appetite with promises of more things to think about. Also works great if you're a blogger and need materials to write about HAHA

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Money beliefs and habits

When students come to me for help, the solution is not as simple as telling them to study. They are obviously not doing well, and the reason for them for not studying can come from a variety of reasons. It could be low self esteem, seeking attention from parents or peers, trying to fit in with his close group of friends and so on. Unless the root cause of the problem is dealt with, any methods of improving the grades is just symptomatic treatment and will seldom work for long, if it works at all. Hence, being a tutor is sort of like a doctor because you see the symptoms of bad results, and you try your best to decipher the symptoms and finding out the root causes.


It's the same for financial advice. If someone is not doing well in his personal finance, it's never as simple as save more and spend less. The symptoms show that the person is not good in his finances, but the root cause springs from his money beliefs. So unless the money beliefs are changed, any symptomatic treatment like budgeting, or separating wants from needs, or just spending less is not going to help much.


That is why Kyith's article here is such a fantastic write up. It's hard enough for people to talk openly about money, and it will be even harder for people to tell you their money beliefs enough for you to know what's wrong. Hence, to change a person's mindset about personal finance is going to be such a up hill journey. I guess the first part is at least to remove the barrier about money being a taboo subject. Once we share our own journey, it might open up the hearts of readers to talk about their own situation and how they handle their money problems, and things will fall into place from there. As a personal finance blogger, I think I have a part to play in this. I will share my journey, and how I navigate the various pitfalls and challenges of life, and hopefully readers will share theirs and we will grow as a community.

If you're interested in such money beliefs, you can try reading Secrets of the millionaire mind by T. Harv Eker. He will scold you and beat you up in his book (and I heard in his seminars too), but the job will get done. You will learn about money beliefs and how it's all linked to our money memory and most importantly, how to delink it and change within yourself. If you're sick, you eat medications to feel better. If you're sick financially, you should start by reading books to change your mindset and hopefully it'll translate to the right actions for the right change.

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My retirement comes annually

As my work winds down for the seasonal lull, I suddenly have a lot more free time. To the point that I don't know what to do with my time. I'm very used to working 6 to 8 hours of class time on weekdays (not inclusive of preparatory/marking time), so suddenly having only 2 hrs of work or even none takes a little getting used to. Again.


Every year end, I'll face the same situation of getting 'retrenched'. Every year end, I'll get my little experience of having retired and/or having reached financial freedom. It's the same feeling, that I've did what I had done and now I can finally have my life again. It's also invariably mixed in with the fear and worry that my money might run out, and that next year perhaps my earnings might not be better than this year or the last.


But not yet. For the next 2 to 4 weeks, I'll be having my honeymoon period. It's the period where the stress and worry haven't hit me yet and that all I can think of is the free extra time that I will have. I had dim sum lunch with my wife at 2pm and that stretched on with some shopping and tea to about 430 pm. After that, I read and took a nap until 7pm before I went out to have dinner together. At least for the next couple of months, I don't have to worry about rushing. In fact, I can stop looking at the time and let it pass while I enjoy these quiet moments. Try it. It's a different feeling when you have an agenda for the day versus one where you just get to do what you like when you feel like it. It's the same difference between a free and easy holiday versus a scheduled travel agency kind of holiday. It's the honeymoon period, of course.


I've worked pretty hard for this year - in fact, the hardest I've ever worked in my life! I've saved up with more than enough buffer for the winter months and I don't have to worry so much. But I still do. I guess even when I've reached financial freedom and truly have the option not to work, chances are that I'll still work a little. I don't have the climbing down mountain mentality yet, so perhaps this will change as I grow older. We'll see.


Next year is going to be a life changing year. Let's see how I'm going to navigate through this.

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The danger of holding too much cash

Today I made a mistake. I was queuing for a counter for about 2 weeks at 1.47. But when the stock started showing surges in its bid and sell volume, I started interpreting it as a sign that the counter will move. Against all reasons, I abandoned my queue and bought at the then sell price of 1.50.


It's only 0.03 cts, yes, and I didn't buy a lot (4,000 shares only), but it was still a mistake. The mistake was not sticking to my plan, which was to queue at 1.47 until it expires or it hits. On reflection, I think there's a few reasons why I did that:


1. I did not do my homework scans on Sunday, which I usually do because I was sick. If I had stuck to my routine, I would have realised that maybe today's funny volume movements are not that funny.

2. I had too much cash lying around. Nearly 50% and was climbing until I bought two counters in the last 2 weeks or so. The danger of having too much money lying around is that you tend to fire more eagerly, sometimes seeing what you mind tells you to see.

I want to take the chance to talk about the 2nd point. This is a relatively new problem for me. I never had the opportunity to handle such a record investment portfolio and a bonanza of cash waiting to be deployed, hence this problem might be more and more frequent ahead. We will all reach there one day. It's best to recognise it and stem it as soon as necessary, which is the real reason for this post. It's to remind the future me to wake up and stop doing adjustments when I should be doing nothing.


If we're doing things right, our portfolio will get bigger and bigger in size. Our money management and our psychology when handling money must also change gear from handling small amount to handling big amount. If your portfolio is 20k, you have a different set of worry from handling a portfolio of 200k. With a bigger portfolio, you also can't do the same thing that you did when you're having a smaller set. You can lose a few 20k, painful yes, but not catastrophically so. Nobody can casually say they can lose 200k portfolio, well, unless you are handling 2 million perhaps.


Some of the things I think we should be careful when handling bigger portfolio size is:

1. Diversification - I'm can't do a concentrated portfolio of 8 stocks. I'm not good enough to know if something will trip up in the companies I invested, so it's better for me to spread the risk to more companies. If one fails, it will not rot and bring down the entire ship. This is very important.

2. Finding a place to store that excess cash that is around. I admit I can't invest 100% at all times, so I will always have some cash lying around. I will always have to find some good place to park that cash and when all my current facilities to max the returns for the cash is used up, I'll have to find new ways to do so. I need to set up a system. I think if the cash is not rotting too much, the problem of wanting to invest eagerly may be reduced or eliminated.

3. How to average in your positions. Now with bigger backing, we can enter in 2 or 3 shots. There's a lot of science on how we can enter with 3 rounds. We can double down, enter at fixed time, enter at fixed interval, enter at subsequent support level and so on. This is vastly different when starting small since we only have 1 good shot if we don't want to over allocate our resources into one single company. The same goes for selling too. We don't have to sell all in one shot. We can sell out in 2 or 3 rounds. I need to experiment and come up with a good system to deal with these, so it's less discretionary also.


Anyway, I've a feeling I'll be blogging more and more about other stuff in the future. However, making silly mistakes is one area that I will never blog less about. If I want to be successful, I should have more and more new mistakes, less repeated ones and more reflections following that haha!

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Phillips money market fund (MMF)

It's been a while since I've talked about Phillips money market fund (MMF). A quick search revealed three articles:

1. POEMS money market fund (MMF) (2008)
2. Phillips money market fund (2009)
3. Phillips MMF (2010)

I know, from first look, they are all the same or similar sounding titles. No creativity on my part in choosing a title, haha!


For those who do not know, money market fund is a collection of short term bonds, deposits and savings. They don't give out interest like what stocks or even banks do. It's more like a unit trust where there's a NAV posted every day. If you buy say at 1.002 and after a month the NAV rises up to 1.012, then you have a return of 0.998% ( [1.012-1.002]/1.002 x 100%). The NAV keeps going up as the deposits and savings are capital protection upon maturity and even during the worst financial crisis, the NAV is steadily increasing.


Here's the returns I've tracked in the past:
2007: 2.01% pa
2008: 1.33% pa
2009: 1.04% pa

I didn't really track after that because it keeps dropping down as the interest rate environment is dropping also. But this yr and the last, the returns had been increasing again.

2015 Aug to 2016 Aug: 0.908% pa


If I take the more recent months, the returns will be even higher (but still less than 1% pa). It's time to take a look at this again to put your spare cash or emergency cash in. The process of taking in and putting in money is very fast, about 1 day usually (depending on time) and 2 business days latest.


What's the catch you ask?

It's not guaranteed by the bank deposit insurance, unlike fixed deposit (up to $50k per bank per pax, regardless of accounts in the bank). So, if Phillips MMF is to close down, then the money might not be able to recover. Well, in that case, don't put your whole networth in lah, just put in a suitable amount. You can use this is pay for your equities purchase using POEMS too, and that's what I do. The good thing about this is that it doesn't require you to jump through many hoops like minimum credit card spending etc. It's very good for people like me who don't have a fixed salary so I can't use those ocbc 360 accounts that people are raving about.

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It's 3 am I must be lonely

Restitutive, Retributive and Reformative.

These 3 words keep rolling around in my mind as I woke up in the middle of the night to think about this. It must be around 3am, because that's the time my aircon timer is set and I usually wake up due to the difference in temperature. I must have read it somewhere, but I'm not sure why this suddenly cropped up.

Restitution means to restore or repair something to its original state. Retributive effectively means an eye for an eye. Reformative means to correct or adjust for re-integration into society.

Your kid hits another kid in the playground. As a parent, what do you do?

Restitutively, you should pay a small sum of money to the other parent to restore the 'state' of the kid to its original one. Retributively, you should let the other kid hit your kid back. An eye for an eye. Reformatively, you should get your kid to apologise first (no violence no matter who is wronged), find out why they are fighting, and seek to correct the behaviour of using violence to vent out one's frustration or anger and instead seek other avenues to address the wrong.

As you can see, it's hardest to reform and easiest to seek retribution. There's always 3 ways to approach matters, and it's a good reminder to me as well. The right tool for the right situation.

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CPFIS-OA investors shouldn't invest? Really?

There's always a big hoo ha about CPF investors being unable to hit the 2.5% interest rate of ordinary account CPF. The statistics mentioned in this recent news is that over the last 10 years, more than 80% of those who invested their money in CPF would be better off leaving their money in the CPF OA. It's also stated that 45% of the investors made losses in the scheme.

I don't buy this. I dug further and saw this link for actual report of CPFIS-OA investors in the year ending 30th Sept 2015. For easier reference, I screenshot it below:

The first picture shows that really, for the year ending Sept 2015, 38% of CPFIS-OA investors lost money with returns of less than 0%. 46% of members earned a return of 0 to 2.5%, which means a total of 84% of investors might be better off not touching them and earning the 2.5% OA rate. And so it appears that the newspaper article is correct.

 But let's look at the small footer, where all the important details are hidden

In pointer 2, it says that the data do not include unrealised profits and losses. This is not mentioned in the news article!

Imagine I have 3 positions:

1. Company A, bought 30 shares at $1, still holding on at $1.30
2. Company B, bought 40 shares at $1, but cut loss at $0.80
3. Company C, bought 30 shares at $1, sold at profit at $1.20

Out of the 3 positions, only 2 and 3 is realised and position 1 is still 'running'.

Total amount invested = 30*$1 + 40*$1 + 30*$1 = $100
Realized profit/loss = (40*-0.2 + 30*0.2) = -$2 (loss)
Realized profit/loss percentage = (-2)/100 x 100% = -2.0%

Oh no, so I'm one of the members with losses since my realized profits/loss invested is -2%

But if I'm counting my total profits/losses for that duration, I should include BOTH realized and unrealized profits marked to market, so

Total realized + unrealized profits = -2 + 30*0.3 = $7
Total realized/unrealized percentage = $7/100 x 100% = 7.0%

That's a far cry from my realized losses of 2%. Isn't it?

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How we react to other's success story

Someone mentioned his success story. You immediately start to think of what are the circumstances that makes him different from you. Maybe he comes from a rich background. Maybe he don't have NS so he starts working earlier by 2 years. Maybe his parents help him pay the downpayment of his property and his car. Maybe he is single so he don't have to pay as much as a married couple with child. I'm sure you have thought of this, and so do I.

The issue about such thinking is that you start to form a hundred and one reason why you cannot emulate the success story. You start thinking that he is different from you and since you don't have the advantages that he had, you cannot have the success that he is having too. I find such thinking highly toxic and even as I'm still struggling to get over such jealous thinking, sometimes it'll start to creep onto you insidiously. 

I think it's part and parcel of being a human. We have our ego and a damaged ego is very hard to swallow. But it's important to turn such discomfort into a strength and motivation to succeed. You already have a role model who had been there and done that, so your learning curve is going to be reduced. If anything, you have a stronger chance of reaching the same success level in a much shorter time. I believe, self delusional or otherwise, that the purpose of sharing success story is more motivational than boasting. We just need to keep an open mind to learn and not close it off and say he is different from me, and I don't have this or that, hence I can't do it. It's important to accept the discomfort arising from the discrepancies and start closing the gap right now.

It seems like my whole life is trying to prove others are wrong:

1. When I'm in JC, there's this teacher who keeps telling me I should drop Further maths. I didn't and I succeeded in getting an A.

2. When I'm in university, my friends and family told me I can't get 1st class. I didn't believe it and I took extra modules to chalk up the score necessary to get it.

3. When I'm working, friends and family told me I can't work as a self employed private tutor. I won't be able to survive. But I did and I continue to do so.

4. When I'm saving 50k a yr after I woke up from my 'financial slumber', there are folks who told me when I get married and start having to pay for my own property, I won't be able to make it. Well, I'm married and I save even more now. 

Iron-teeth. I get highly motivated to reach my goals in order to prove a point. That's who I am. The quality of my motivation changes from being the angry, vengeful, the in-your-face kind of motivation when I'm younger, to a quiet strength where action speaks louder than words when I'm older. Both are pillars of strength when trying to traverse through the obstacles and road blocks in my path, but the second one is one that springs from self confidence. Not angry anymore, just self assured. I think age tends to do that to you. 

You no longer have to prove your 'worth' to anybody.

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