Saturday, January 25

Wuhan Flu

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I’m at at a Chinese New Year gathering now and the atmosphere here is still as lively as compared to last year. No one is talking about the Wuhan flu and I suppose it is not auspcious to mention this.

Once news broke last week that human to human transmission is possible, I ordered N95 masks immediately for the adults and for my kid as well and luckily it arrived the next day and as you may know, N95 masks are in short supply now although government has reassured that there is sufficient stock. The online shop that I bought from no longer has stock for masks.

Investment wise aside, I was surprised that my double bagger Riverstone opened with a price increase of 7%+ due to the perceived increased demand of gloves during a flu epidemic. Defensive stocks certainly perform well last week.

My view on this is that I believe that this flu epidemic will reach SARS kind of proportion. Since the transmission mode is human to human and the incubation period is long which means people could already be infected and be infectious without showing any symptoms, the growth rate of this flu will increase exponentially

Using SARS as comparison, I’m looking to buy stocks which will sink temporarily due to this situation and I do have a watchlist in place to scoop these stocks up. I believe retail will perform poorly since if the situation worsen, people will avoid going out and crowds will dwindle. I can also presume property will perform poorly as well since people will avoid going to showrooms or going for viewings.

Friday, January 17

Strategy in a low interest rate environment

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I still remember a couple of years ago that I was having my usual breakfast with my colleagues from my 2nd previous company. Back then, we have been in the workforce for a couple of years and was in the early life stage cycle of collecting keys to our flats, renovation or getting married.

"Aiyah, confirm the interest rate will rise. Now interest rate is so low at 1+%. Sooner or later, it will revert to historical means"

 As so it turns out, the interest rate did rise but only for a short while up to 2%+ before retreating back to the current levels, not anywhere near the 3% to 7% seen historically.

And as I mused in my previous post, I see it most ironic that folks who are prudent in their investments suffered the most as the interest rate has been really low resulting in savings account and bond yields being low and folks who took on risks are well-rewarded in being over-leveraging given that there has been no crash for the past 10 years and still counting.When interest rates are low, it is easy to juice up on your investment, be it stocks, crytocurrency, properties etc.

It is my long term and enduring view that a low interest rate environment spur irrational risk taking -> too much money chasing too little yield for too much risk. Within the system, the risk is being transferred and being exchanged somewhere in the system and it will implode one day.

I found a good read in Howard Mark's memo which my current strategy is based on. You can read the memo here

Here, I extract one of the pointers from his memo;

In a world like the one described above, perhaps the most reliable solution lies in buying things with durable cash flows. Bonds, loans, stocks, properties and companies with the likelihood of producing steady (or hopefully growing) earnings or distributions that reflect a substantial yield on cost all seem like reasonable responses in times of negative yields. In my view, durability and dependability are highly desirable (rather than hail-Mary attempts at a moonshot).

 Currently, i am keeping a sizable amount of war chest that is yielding above inflation to take advantage of any possible market downturns or any crashes. At the same time, I am tweaking my portfolio to slowly add to positions of companies and REITs with consistent and reliable cash flow and is able to thrive in a low interest rate environment and this should result in good dividends on my receiving end.

Wednesday, January 1

Predictions are futile and changes are inevitable

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I took a break of more than 3 years from blogging. Now that I'm back, I was looking at some of the predictions that I've made and the majority of it turns out not to be too accurate ^^

  1. Market did not crash for the past 3 years in terms of equity or property. It stayed cool but there was no winter.
  2. I was recommending the STI ETF but in terms of capital gains, it was pretty flat for the past 3 years. Meanwhile, the US market continue to rocket. The dividend yield is still pretty respectable at around 3.6% based on recent trading price
  3. Interest rate continues to remain low which means prudent folks suffer because they stayed prudent while risk taking folks prosper in this environment of no crash and low interest rate.
For the past 3 years, I was also faced with some significant changes that had some financial impact.
  1. I sold my 4 room BTO HDB flat in the North East area for a decent profit after the minimum occupation period (MOP) of 5 years and moved to a 5 room resale HDB in the central area. On hindsight, it was not really a good move as I had to suffer quite significant cash outflow for the renovation since it is an older flat but I free up sufficient equity now in my CPF above the Full Retirement Sum (FRS) with excess to spare. On the other hand, my housing bank loan is actually less than 2% which is an oxymoron given that HDB loan is still at 2.6%. 
  2. After surviving a retrenchment in my previous job as written in my last post, I found a new job with a pay increase. However, this new job lasted me for 2 years as I had a hunch that I would be retrenched in the next restructuring exercise which turns out to be true. As such, I left my previous job for the next job with a significant increase in pay. Looking back, my base pay has actually increased by more than 350% as compared to my starting pay 10 years ago. For most of us, our career still bring home more dough than the yield from our portfolio and career development is of paramount importance. Having a versatile and in-demand skillset is very important as my skillset has enabled me to work in 4 different industries to date.
  3. I became a Dad. Being a dad brings a lot of meaning to me in terms of my life experience, way beyond what I imagined before when my wife and I were DINK. Financially, it represent cash outflow all the way from birthing, nanny, diapers, childcare, hospitalization etc., not that it's a bad thing by itself but my planning at the start was insufficient to say and the journey is still a long way to go for another 2 decades at the minimum.
  4. I actually bought a car even though I loathe to own a car due to the cash outflow, given how expensive cars are in Singapore. I guess cars were made for babies since bringing a baby on public transport is challenging, especially when you need to change diapers a few times a day, not to mention staring eyes from strangers when the little boss cries and pooping incidents on the travel.
Meanwhile, I am still adding stocks regularly to my portfolio based on the principles that I have been blogging ever since I started this blog and I'm quite pleased to say that the portfolio size is of a 6 digit size, yielding close to 4.5% which has been sufficient to defray many of my significant expenses although still some distance away from financial freedom. 

Sunday, May 8

Retrenchment & Financial Matters

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I was retrenched from my job around 3 months ago. It was not an easy experience for me as I went from a daily work routine to a sudden lifestyle of having nothing to do at all. It took a toll on me mentally I guess as our work and occupation forms part of our identity and losing our jobs is akin to having our identity being taken away partially.

Thankfully, I found a new job rather quickly in less than 3 months time and I had a few job offers, of which I settled on a job with a pay increase. I do count myself as really fortunate given the poor economic outlook and job market presently.

Given that losing our job means that the our monthly salary will cease and I believe that the main source of income for the majority of us comes from our salary, this will create financial stress during this time of unemployment. Retrenchment is without doubt, a harrowing experience and I have gained a few financial insights with regards to this experience.

1. Have some savings in the event of adverse risks such as retrenchment

6 months of savings is commonly advocated by financial advisers to cover for the risk of retrenchment. I had some sufficient savings which would be enough to last me for a year of expense. This is really important as knowing that I had sufficient savings, I was not hard-pressed to take on a job quickly even if the job does not pay well or does not interest me. Retrenchment is not uncommon these days given that economic cycles are getting shorter and it is important that you have savings to back you up.

2. Lower your housing consumption

A couple of years ago, I made the decision to opt for a 4 room HDB BTO flat in a non-mature estate, knowing that in the event which either my other half or I would like to stop working for a while, we can do so knowing that our monthly housing loan payment can be covered by just one of our individual CPF account. Fast forward to today, this seems like a prudent move given that at the point of my retrenchment, we had enough in our CPF accounts to cover for the monthly housing loan payment even if I were to stop working for a few years. That being said, I would like to stay in a mature estate due to the proximity to town and no lack of established amenities but I guess my pragmatism got the better of me.

3. Own your career development 

For the majority of us, our main source of income usually comes from our employment before we are financially free. As such, it is important to grow and to protect this source of income by taking charge of our career development. During this period of unemployment, I engaged the services of a career coach and what he advised really struck me. He told me that retrenchment is not uncommon these days and it is important to develop yourself and have transferable and multi-faceted skill-sets that can transcend industries so that it will be easier to look for a new job if the industry that you are in is not doing well. Before I was retrenched, I was already taking courses and certifications to expand my skill-sets to switch industries and this really helped me in my job search during my period of retrenchment as I was able to secure job offers in various different industries.

4. Have a war-chest ready that is separate from your savings

I believe I have been preaching for a long time on my blog that it is important to set aside a sum of funds to take advantage of any market opportunities during any economic downturn. Unfortunately, it is also during a economic downturn which we face the highest risk of losing our jobs. If we are not prepared in setting a sum of money to cover our expenses if we are retrenched and in the process of looking for jobs and set aside another sum of money to purchase assets such as stocks, it will be difficult for us to grow our net worth and take another step towards financial freedom. I guess this is how the rich gets richer since their income does not come from their employment and they are able to capitalize on market opportunities during economic downturns.

5. Materialism does not make our lives more fulfilling

This retrenchment really drives home the message in my mind that we do not need a lot in life to be contented and fulfilled. During the period of retrenchment, there was a natural instinct for me to cut back on our expenses and I took this time to re-look at my spending. In my opinion, having more material goods such as clothing, shoes, watches etc. will not make us our lives any more happier. These days, I make a conscious effort to reduce waste in my life such as using water which was used to wash rice to water the plants, repair my pants by sewing any tears, switching off lights when not in use and electrical appliances on standby modes, cook more often and try new recipes to make use of leftovers instead of throwing it away, make a conscious effort to see if I can avoid buying new items by re-using or modifying existing items which I have owned.

Overall, getting retrenched was not an easy experience but I have gained some interesting and valuable insights. In addition, this has also strengthened my resolve to be financially free as soon as possible as I may not be so fortunate to find a job so soon if I am retrenched again in the next economic downturn a couple of years down the road. Coincidentally, I received the biggest amount of dividends to date from my stocks portfolio on the month which I was retrenched and this has certainly add to my resolve. 
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Sunday, June 28

Using Fund Characteristics Of STI ETF As A Purchase Decision

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It has been 4 years since I wrote my last post. A lot of information is now available on easily online as compared to a few years ago when I first wrote about the STI ETF.

Some information is now available on the website of the SPDR Straits Times Index ETF.

I do get questions from time to time on when is a good time to purchase the STI ETF. You can click on this link to access the official website for the SPDR STI ETF.


On the website, you can refer to some information on this ETF under the fund characteristics section.



The price/earnings ratio or in short, the P/E ratio can be used a gauge to decide if the ETF is cheap enough for entry. The P/E ratio is taken from the selling price of the item divided by its earnings. In this case, since the STI ETF is tracking the Straits Times Index (STI), this can be taken to mean that it is the ratio of the total market price or capitalization of the companies that consists of the STI to the total earnings of these companies.

We are looking for a ratio as low as possible since this essentially means that the lower the P/E ratio, the lesser the number of years it takes for the earnings to pay back the purchase price.

If you do a search on STI P/E chart, you can easily glean information online such as the charts below.



At its current P/E ratio of 13.36, it looks like it is below the long term average although it is not as low as the global financial crisis during 2008 though I would probably term that as a rare event.
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