Archives for category: Personal Finance

For some reason, the hot economic topic of the week is about the USD losing its relevance in the near future. I’ve lost count of the number of local Finfluencers on YouTube that made videos about the topic in the same week. I’m not quite sure what the trigger for this is but I guess it may have something to do with the Saudis talking about switching to accepting RMB as payments for oil.

The funny thing is most of these local guys on YouTube don’t know much about international economics and basically parrot whatever they’ve read from Bloomberg or the WSJ. I’ve heard their commentary and I’ve not heard one of them mention current account surpluses/deficits, capital controls, or the amount of trade done in USD. This is International Econ 101 which pretty much determines the likely future path of a country’s FX rate.

Remember, it’s already hard enough for geopolitical analysts, macro-, and international economists to get this right. So if you hear some Singaporean YouTuber whose usual spiel is to recommend credit cards or their armchair analysis on Tesla start talking about whether the RMB will replace the Dollar, please don’t hit “Like and Subscribe”.

Photo by Mikes Photos on

30 under 30-year sentences: why so many of Forbes’ young heroes face jail
(The Guardian)

The short answer is because they are young, dumb, and full of c*m.

The longer answer is that we now live in a world hyper-fixated on quick fixes and instant success. Think of all the people flaunting their success on Instagram or Tik-Tok. Even if it took them a couple of years, it’s all condensed into a 15-second reel because no one has time to even sit through a clip that’s a minute long.

And that’s going on the premise that a successful business or product can be built in a year or two. To my knowledge, that’s a lousy premise.

Oh, and it’s also telling that the list is from Forbes. That goes to show what sort of media outlet they are – one that focuses on fads and headline-grabbing personalities rather than actual business.

Weekend reading: Making a K Drama out of the FIRE movement

Adding this purely for the commentary on the link between a certain K-drama and the FIRE movement. I resonate with this because if investing doesn’t lead to freedom to do whatever you want, then what the hell are you doing it for?

Sadly Giving Up On Retirement And Going Back To Work
(Financial Samurai)

Not quite what the headlines suggest.

Photo by Murilo Botelho on

Following my previous posts on retirement (here and here), I’ve been thinking about how to measure how far along one is on the Financial Independence ladder. Measuring your financial fitness is also useful to gauge which areas you need to improve on. While I’m sure that this is as much an art as it is a science, it’s helpful to be able to quantify some of these measures or have some sort of benchmark to compare against.

Many others have already attempted to answer this question and I have drawn inspiration from the works of many other people who have tried to answer this question. If there are any errors in my interpretation of their work, I apologise in advance.

Some ways to measure your financial fitness

Kyith from Investment Moats has this post on what he calls the “11 stages of wealth”. It’s a linear way of measuring one’s financial fitness and I think the nice thing about this is that it’s easier for most people to think in linear terms. I’m not sure I completely agree with this way of representing things because it’s not so clear that some levels come before others. For example, level 6 states that “wealth is 10 years worth of current annual expenses” while level 7 is “wealth’s annual cash flow is greater than annual basic survival expenses”.

I’m not sure why level 7 is after level 6 and to me, one seems like a stock measure while the other is a flow measure. For non-finance people, you may think of this as one metric measuring how much water is there in a storage tank while the other measures how much water flows out of the water tank. The two measures are related but they mean very different things. For example, you could have a lot of water in the tank but if the outflow is greater than any inflows, then it’s likely you’ll run out of water sooner or later.

The point I’m trying to make is not that one metric is better than the other but rather that both metrics measure different things and I’m not certain that one must come before the other.

Seedly has a set of 8 personal finance metrics which I like. They range from measuring solvency to the proportion of non-housing assets to net worth. I’ve adapted some of these and added levels against which you can measure your progress. This is very raw but I think it’s something worth exploring and refining.

More importantly, I hope it’ll be useful in helping people figure out how far along they are in terms of financial independence or it could also be used as a measure of financial fitness (i.e. which areas of your personal finances are you stronger or weaker in)

Measuring financial fitness

Here are some metrics I think are useful and the various levels to assess one’s fitness.

LevelsSavings rate
(with CPF)
Savings rate
(w/o CPF)
Debt servicing ratioDebt to equity
Months of emergency cashNet worthLiquid assets
(% of net worth)
Income from assets
(% of current expenses)
1< mandated CPF contribution rates< 0%Unable to repay periodic payments>100Nil<0NilNil
2= mandated CPF contribution rates= 0Able to only make min. repayments to rollover debt=100< 300-150-30
3< mandated CPF contribution rates + 10%1-10Able to repay debt repayments<=60< 6>=$100K16-30>30
4< mandated CPF contribution rates + 20%20-30Monthly income > 5x monthly debt repayments<=40< 10>=$1M31-45>50
5< mandated CPF contribution rates + 30%>30Monthly income > 10x monthly debt repayments<=20> 12>=$5M>45>100
Source: Author’s own

Let me describe each measure, how it’s calculated, and why it matters.

Savings rate (with CPF) – this measures the total amount saved either through CPF or net monthly pay. While many people in Singapore use their CPF OA to pay for their monthly mortgage, this metric gives a more comprehensive picture of a person’s true savings rate since it is not true that ALL Singaporeans will use their CPF OA money for housing.

Savings rates (w/o CPF) – this measures the savings rate based on net monthly income. It indicates one’s willingness and/or ability to forgo current consumption and is a good indicator of how soon a person can reach financial independence. This is especially so since there is a cap on CPF contributions above a certain income. From the earlier piece on retirement, it appears that a savings rate of 10% is typical across the developed world, hence I’ve let 10% be the middle ground (i.e. Level 3).

Debt servicing ratio – this is a cashflow measure that determines whether one is on the road to financial ruin. After all, if one’s income is unable to (fully) service their debt, then interest on the debt will accumulate and you will either need to sell assets to raise cash or find other sources of credit to draw from.

Debt to equity – provides an indication of one’s ability to take on and service debt. In this case, equity for a person is equivalent to his/her net worth. It’s an indicator of their ability to pay off their debts. Any number above 100% means that a person is technically insolvent because the equity (assuming it’s sold instantaneously for its current value) is not even able to cover the amount of debt that one has.

Months of emergency cash – An indicator of how much cash a person has to tide through any loss of income. Depending on how conservative you want to be and assuming the typical case where income is more than expenses, you could measure this as months of expenses to cover (less conservative) or months of income to cover (more conservative).

Net worth – everyone’s favourite indicator. More often used in a dick-swinging contest but it gives a person an indication of how wealthy you are and how many goods or services you could theoretically purchase. Obviously, the higher the number, the better. I’ve used $5M as the entry point for the highest level because let’s face it, inflation has and will continue to make being a millionaire less of a deal than it used to be.

Liquid assets – an indicator of true wealth since liquid assets are also assets that are more likely to be liquidated close to their stated value at any point in time. Classification by their broad category can be misleading. For example, equities are generally thought to be liquid assets but some equities can be thinly traded and have large bid-ask spreads, making their net realisable value quite different from the current value. Markets that are liquid may also see their liquidity vanish in certain scenarios. Generally, the higher the better and it’s quite telling that as people get richer, they tend to hold a larger proportion of their net worth in financial assets (liquid) rather than real estate (less liquid).

Income from assets – An indicator of whether you still need that income from work. These include income from fixed-income instruments, dividends from equities, or rental income from real estate. Putting Dividend Irrelevance aside, many retirees and investors spend only their dividends and don’t draw down on the principal. You may argue that this is not optimal but if it works from a behavioural standpoint, then it is what it is. In general, the higher the better as this reduces the need for an income from work.

In short, the above metrics seek to measure a person’s ability to withstand financial hardship in the event of loss of income from work or to meet unexpected expenses. It also looks at whether a person has difficulty repaying debts or risks becoming bankrupt.

Where I stand on financial fitness

Savings rate
(with CPF)
Savings rate
(w/o CPF)
Debt servicing ratioDebt to equity
Months of emergency cashNet worthLiquid assets
(% of net worth)
Income from assets
(% of current expenses)

As you can see, I’m at level 4 on most measures which is to say that financially, I’m in a comfortable spot. While my debt servicing ratio is at level 3 (it’s probably closer to level 4), I wouldn’t worry too much because my debt-to-equity levels are really low (level 5).

The area that I really need to work on is increasing my income from assets (level 2). This is an indication that a good proportion of my assets are non-income producing (i.e. home equity, non-dividend paying stocks/businesses, or capital gains from past investments).

I’ll be tracking these metrics on a monthly basis to see how they evolve. I don’t expect to see much change from month to month but I guess it’s like monitoring things such as blood pressure to make sure that everything’s going well.

I’m sure there are many ways to improve these metrics. Maybe we could measure net worth excluding primary residence?[1] Are there other metrics to consider? Are the various levels appropriate?

Let me know what you think in the comments below!

[1] Although the counter-argument is that for someone who’s considering selling their house to live overseas or to rent out their house and rent overseas, including their primary residence in the calculation gives a more economically-accurate picture of their finances.

How quickly the mood has changed. The optimism that we saw in January has quickly become less positive no thanks to the strong labour market and inflation numbers. Markets are now pricing in a higher peak in the Fed Funds Rate although it seems that the market still expects rates to start coming down by next year.

Photo by Mikes Photos on


Sadly, I’m finding this out the hard work in my latest job. I endeavour to write more and hopefully, through that exercise, I’ll become a better writer in time.

Buying A Modest Home Has Been A Poor Wealth Building Advice For The Past 10 Years (15HWW)

The gist of this post is that Mr. 15HWW is experiencing FOMO.

Before I shared my thoughts, let me state upfront that my wife and I have also benefited from the run-up in property prices.

Selling our BTO flat to move into a resale HDB in a much better location has been a game-changer in terms of quality of life. We’ve managed to cut our travel time to and from work and for personal reasons, this estate works much better for us.

Selling our BTO flat also meant that a fair amount of the resale flat’s price was paid for by the buyer of our BTO flat. In a way, it’s just simply unlocking the value in home equity that would otherwise remain trapped in your home and you may be getting richer on paper as Mr. 15HWW found out but it won’t really translate into something tangible. The bonus is that the recent increase in HDB resale flat prices mean that our home equity has also increased by a six-figure amount.

At the same time, those who are feeling FOMO for missing out on the increase in property prices need to see things from a broader perspective. Most people who sold their BTO flat to buy another property would probably have taken a more expensive mortgage and have higher loan repayments. With the recent increase in home loan rates, these same buyers are probably feeling the heat so I wouldn’t be too envious of them.

From the story, it also seems that the Senior’s mortgage also keeps going up with every next property purchase. I’m not sure about others but that seems unpalatable to me. I wouldn’t like the idea of having to continually face higher monthly payments on my home loand as I age. This should be particularly true for those in their 40s who will probably see their earnings peak and encounter a higher chance of being let go in an economic downturn.

The last problem with looking at home equity as a form of wealth is that if you only have one property, your home equity is locked up in the property which is a roof over your head. To unlock that value, you have to buy and sell that property*. When you sell, you will have to move. Having moved house twice (once to my BTO, and now once more to my current place), I can safely say that I don’t enjoy the process.

Anyhow, if you see buying (and staying) in a home as part of your wealth-building process, then it is only right that you consider the growth of the total portfolio equty and not just the equity in your home. After all, monies not invested in property can and should be used to invest in other assets. If you see things that way, the gap between someone who benefited from a rise in property prices and those who haven’t shouldn’t be so huge.

*I know you can take a home equity loan if you have private property but that also comes with its associated costs and risk.

How Much is Enough to Retire Comfortably?
(A Wealth of Common Sense)

The post is commentary on a Bloomberg article which did a poll. Anyway, long story short, those polled said they need an average of $3m to retire. There are some minor differences in proportion of respondents across geographies but that’s the most common response.

$3m is real terms. If that number is truly real, then I think a good swath of the population will never be able to.

Ever since I wrote those two posts on retirement in Singapore, I’ve been seeing more opinions and views on retirement. It’s probably some psychological effect that I’m noticing more of these sort of articles but nevertheless, it’s more data to help form an opinion on this issue.

Photo by Pixabay on

After my previous post on this topic, I saw this video by Christopher Ng[1] where he calculates that the average Singaporean Household saves about 10% of their income (net of CPF). I thought I should run the numbers again using this savings rate and see how this changes the results.

The video also mentions how much expenses an elderly couple would expect to incur in retirement for a basic standard of living. This is based on an LKYSPP study that was done (link to Seedly feature) and it says that a single elderly person needs about $1.421 per month for a basic standard of living. However, we’re also interested in someone who wants to retire early and the seedly piece calculates the per household member figure for a basic standard of living at $1,600 per month.

The other sanity check I made was to see what nominal rates of returns a 2% inflation rate would give for the real rate of return assumptions I made previously. With a 2% inflation rate, the nominal rates of return for Equities, CPF-SA, and Cash is 7.6%, 4.6%, and 3.0% respectively. I’m quite satisfied with these nominal rates of return as they seem in line with what you could expect from each of these asset classes over the long run.

Using a 10% savings rate, the numbers are:

OptionsFinal Nest Egg (A)Final Nest Egg (B)Final Nest Egg (C)
Retire at 45$344,254.43$241,662.22$203,020.13
Retire at 55$657,563.21$369,846.34$280,756.48
Retire at 65$1,192,739.87$533,932.84$366,625.76
Note: this is a simple FV calculation given the assumptions laid out earlier.
PV = $100,000, N = 15/25/35, R = 5.5%/2.5%/1%, PMT = $4,500 x 12 x 10%

Comparing this to the numbers that assume a 20% savings rate:

OptionsFinal Nest Egg (A)Final Nest Egg (B)Final Nest Egg (C)
Retire at 45$465,261.21$338,494.62$289,943.37
Retire at 55$933,787.19$554,298.26$433,269.75
Retire at 65$1,734,097.23$830,545.16$591,591.25
Note: this is a simple FV calculation given the assumptions laid out earlier.
PV = $100,000, N = 15/25/35, R = 5.5%/2.5%/1%, PMT = $4,500 x 12 x 20%

My quick thoughts on the results of a 10% savings rate vs. a 20% savings rate are:

  1. The numbers with a 10% savings rate seem more realistic for the average Singaporean. Looking at the “(B) + retire at 65” combination, that seems like a pretty healthy sum especially if you factor in one’s CPF Life payouts.
  2. The 10% savings rate + (C) combination seems to provide unsatisfactory levels of real wealth. Using the 4% rule as a quick rule of thumb, the retire at 65 option only provides an additional $1,222 per month.[2] Combined with CPF Life payouts, that would provide someone with enough to live in Singapore but little buffer for anything else. It also assumes that this person doesn’t have a mortgage or rent to pay which may not be the case.

In short, if you choose to earn cash-like returns of 1% real returns p.a., you had better be saving much more than 10% of your income. If you earn CPF-like real returns of 2.5% p.a., saving 10% of your income is ok I guess.

On the other hand, the bad news for early retirees is that if you use the $1,600 per month figure from the LKYSPP study, our back-of-the-envelope calculation using the 4% rule says that you’ll need at least $480,000 in your nest egg (remember, you can’t depend on CPF Life if you’re retired early.) in order to generate that $1,600 per month.

You’ll see that even in our “Save 20% of your income + Invest in the markets” scenario, you won’t quite get to $480,000. Therefore, if you really want to retire early, you’re going to have to save much more than that and/or earn much higher rates of return. The danger in reaching for yield, of course, is that you blow your account up as many people invested in crypto found out last year.

In a future post, I’ll explore more on why $480,000 isn’t quite enough for early retirees in Singapore.

[1] Christopher Ng writes at Growing Your Tree of Prosperity. I follow his work and it is always well-researched and well-written. Even the snarky posts.

[2] You may quibble with the use of the 4% rule as I have (link here) but I would think that for our purpose here, we can afford to be roughly right.

Photo by Pixabay on

[Updated 7:51pm, 6 Feb 2022: There was a mistake in the calculations (classic spreadsheet error!) for scenarios (B) and (C) in the earlier version of this post. I have fixed the mistake. Many thanks to the reader who alerted me to it.]

I shared some brief thoughts on Kyith from Investment Moat’s post (Should You Retire at 30 Years Old with $1 Million or Retire at 40 Years Old with $10 Million (As a Singaporean)?) and that got me thinking about the likely choices an average Singaporean would face when thinking about working longer or retiring early.

If you read my earlier thoughts, I thought that the $1m vs. $10m tradeoff is something that hardly any working Singaporean would face. The next natural question was: What choices would an average Singaporean face?


To model the average Singaporean, I will assume the following:

  • Earns a median monthly income (excluding CPF contributions) of $4,500 (source)
  • Saves 20% of their income
  • Starting capital of $100,000
  • Starting age of 30 years old

I’m fairly confident the first assumption makes sense. That amount is the median income earned by an employed resident (i.e. Singaporean or Permanent Resident (PR)) and therefore is representative of the average Singaporean. Furthermore, I have assumed a starting age of 30 years old for this hypothetical Singaporean so no one can quibble that fresh graduates won’t be earning the median income.

I believe the $100,000 starting capital assumption is not a far-fetched one. It may be a stretch for some but given how the $100K by 30 stretch goal has become popular in recent years, I believe this is also doable.

The second assumption is a little more tricky. I thought of using the Personal Savings Rate (PSR) that is officially calculated by Singstat. Dollars and Sense has an article that calculated the long-term average as 30.7%. However, if you look at Singstat’s definition of the Personal Savings Rate, you’ll realise that it depends on Personal Disposable Income (PDI) which really is more of a macro variable tracking the income of the household sector rather than the actual savings rate of the average household.

The PDI includes Contributions from Employees (which probably includes CPF) and Operating Surplus from charity and religious organisations. The latter distorts the PDI upwards and definitely doesn’t reflect the income of households. More importantly, I couldn’t find out whether the Contributions from Employees include CPF contributions or not but I believe it does. That would change the analysis quite a bit as CPF monies are typically used for housing and not investment. This would mean that the PSR isn’t a good proxy for calculating the actual cash savings that could be used for investments.

To make things simple, I decided to use a savings rate of 20% and the median income (after CPF contributions). This then assumes that my average Singaporean saves 20% of their monthly income net of CPF contributions. Whether this is too high or too low is up for debate but I use 20% since the 20% savings rate is part of the popular 50-30-20 budgeting rule.

I’ll check around informally with my friends if this makes sense but for now, I will assume that it does.

I then calculated the ending portfolio value for three options (work until 45 vs. 55 vs. 65) under three different rate of return scenarios (1% p.a. vs. 2.5% p.a. vs. 5.5% p.a.). I’ll explain why I chose those rates of return.

Rates of Return

I looked at three rates of return scenarios – (A) 5.5% pa., (B) 2.5% p.a., and (C) 1% p.a

All three rates of return are real rates of return which means that I assume these are adjusted for inflation. For the sake of simple calculation, I also assume that wages increase at the same rate as inflation. This makes the calculation and interpretation easy as it means that any comparison between the numbers for retiring at 45 vs. 55 vs. 65 are ones that only concern purchasing power.

For example, this means that the decision to retire early at 45 with $100,000 vs, the decision to retire at 55 with $200,000 is really a question of whether one should give up $100,000 of purchasing power or work for another 10 years.

(A) 5.5% p.a.

I chose this rate of return to illustrate the CAGR of savings invested completely in a portfolio of diversified index funds. A 5.5% real rate of return with an assumed 2% p.a. rate of inflation gets us a 7.5% p.a. nominal rate of return for equities.

I think this is reasonable since the 10-year yield on US government bonds is about 3.5%. Add to that an equity risk premium of 4% and that brings us to exactly 7.5%.

(B) 2.5% p.a.

This rate is meant to reflect the rate of return one could get from the CPF SA/MA. As every Singaporean knows, the CPF Special Account (SA) and Medical Account (MA) pay 4% p.a. (slightly more since there is an extra 1% paid on the first $60K in Ordinary Account (OA) SA.) but I’ve just given this a real rate of return of 2.5% p.a. to reflect the slightly better than the cash rate.

(C) 1% p.a.

This is meant to represent the cash/short-term bills rate. I know cash has been earning next to nothing or even negative returns but this assumes that this form of savings/investment will earn its long-term rate of return. Basically, something to conserve/minimally increase purchasing power over time.


OptionsFinal Nest Egg (A)Final Nest Egg (B)Final Nest Egg (C)
Retire at 45$465,261.21$338,494.62$289,943.37
Retire at 55$933,787.19$554,298.26$433,269.75
Retire at 65$1,734,097.23$830,545.16$591,591.25
Note: this is a simple FV calculation given the assumptions laid out earlier.
PV = $100,000, N = 15/25/35, R = 5.5%/2.5%/1%, PMT = $4,500 x 12 x 20%

My takeaway from the table is:

(1) If you earn a low rate of return on your savings (B and C), an extra 10 years of work hardly does anything for your wealth. Someone who works an additional 10 years is only 17.7%-34.3% (in scenarios C and B respectively) better off in terms of real wealth.

(1) If you earn a low rate of return on your savings (B and C), an extra 10 or 20 years of work makes you anywhere from 0.5-2.5 times better off in purchasing power. I imagine this could be the difference between remaining in the middle class vs. moving into the upper-middle class.

(2) If you earn a higher rate of return (e.g. (A)), that equation changes drastically because you are looking at anywhere between 2-3.7 times more in terms of purchasing power. That is a huge tradeoff but still nowhere near the ten times difference in ten years that was assumed in Kyith’s post.

(3) In (A), the early retirement scenario (first row) gets the average Singaporean a decent nest egg of almost half a million Singapore dollars. This also excludes the amount in his/her CPF account which will either be in cash or in the form of property. By the standards of almost anyone else in the world, this is a lot of money.

Based on the calculations above, it appears that in all scenarios, the average Singaporean could be very well off in retirement. Retiring with $591,000-$830,000 at 65 years of age is quite good by global standards so why is it that many Singaporeans still worry about not being able to retire?

Is it because many Singaporeans don’t save anything beyond the forced contributions to CPF? After all, contributions to CPF make up roughly 20% of their income so to expect the average Singaporean to save another 20% of the remainder seems like a tall order. And if many Singaporeans use their CPF monies (mostly) for housing and that amount grows at the same rate as in Scenario B, then it could mean that many Singaporeans reach the level of wealth in the table above but the problem is that wealth remains locked in their homes.

To conclude

I’m pretty sure that many people will quibble with the assumptions or numbers that I’ve used. For example, some people earning the median monthly income may say that it’s impossible to save 20% of their income. That could very well be true if you are the sole breadwinner for a family of three or four.

On the other hand, I’m sure that there will be some in the Singapore Finlit space who think that the numbers presented are too low since there seem to be finfluencers in Singapore who are aiming for a million dollars by age 35 or 40. These guys probably have incredibly high savings rates (way higher than the 20% used here) and/or have experienced rates of return much higher that the 5.5% p.a. real rate that I’ve used here.

At the end of the day, retiring early or not is a very personal decision. What I’ve shown here is that given more realistic assumptions of the various real rates of return, the cost-benefit analysis comes down to more of whether you should claim your time back or spend it to be able to buy more stuff in the future.

What I hope my post gives is a more realistic expectation of the kind of wealth the average Singaporean should be able to accumulate. This will also provide a better idea of the trade-off involved between retiring early or working for a little longer.

Also, I’m curious. Are my calculations for the levels of real wealth achievable by the average Singaporean realistic? Let me know if the comments below.

Markets have started the year strong. Will this continue? Only time will tell.

Photo by Mikes Photos on

Inflation Comes Down Despite the Fed
(The Big Picture)

Barry Ritholtz breaks down why he thinks inflation is coming down even without the Fed’s intervention.

The Art and Science of Spending Money
(Collaborative Fund)

Morgan Housel’s writing is incredibly good and once again, he nails it with this piece. There are so many gems within the piece but in particular, I love the quote from Montesquieu:

“If you only wished to be happy, this could be easily accomplished; but we wish to be happier than other people, and this is always difficult, for we believe others to be happier than they are.”


It’s surprising to know that this is still an issue that exists today. After all, this was the key insight that drove Bogle to start Vanguard. I hope to get my hands on Ed Moisson’s book and see how many more surprises I find.

Meet the moonlight clan: Young Taiwanese who spend all they earn
(The Straits Times)

When real wages have barely increased and the price of an essential like housing goes up so much, can you really blame people for living in the present rather than planning for the future?

I didn’t realise that the TFR in Taiwan is lower than even in South Korea but I suppose that’s the other outcome of countries with high cost of living.

Photo by Engin Akyurt on

It’s that time once more to look back on what has passed and to look ahead at what’s to come. 2022 has been a year of huge change not just for markets but for me on a personal level. I hope this post doesn’t turn into an incessant ramble. If it does, I apologise in advance.

Goodbye Bull, Hello Bear

The first obvious thing that happened this year is that markets turned from being great for all the bulls to the first real bear for many Gen Z investors. The S&P 500 peaked in December 2021 at around 4800 and has been on a downtrend ever since. For Gen Zs who were mainly invested (or should I say speculating?) in pseudo-tech (please don’t be in the camp that thinks, Tesla, Peleton, or Doordash are tech stocks), meme stocks, crypto, or TSLA, the pain is particularly acute. The Nasdaq composite peaked in November 2021 and is roughly down about 30% since then. Growth-at-all-cost stocks are down even more. Using ARKK as a proxy, these sorts of names peaked in early 2021 and are now down roughly 70% or so.

This is what I said about ARK Invest in March 2021 and I guess 2022 is when I take my victory lap

So rates have started rising and “markets” are spooked. I say “markets” because honestly it’s mainly in the high flying names of last year (e.g. TSLA, the ARK ETFs etc.) that have been hit. But honestly, even if those names get hit for a total drawdown of 50%, it’s going to be hard to say if it’s cheap to buy.

Best Things I’ve Read All Week (7 March 2021)

The main cause of mayhem in the markets was the series of Fed rate hikes that started in late 2021. Since then, the Fed Funds Rate has been hiked to around 4.5% (upper bound) and the Fed’s own expectation is that they will stop hiking when the rate reaches about 5%. It wasn’t so much about how much the Fed hiked rates but also how quickly they did so. At the same time, the Fed has also begun reducing its balance sheet which is adding to another source of tightening in the monetary system.

Where the Fed hikes rate to is now a foregone conclusion. The question on everyone’s minds is how long will they stay there?

The obvious impact on markets is the sort of thing you learn in a finance 101 class. As the risk-free rate increases, so does the discount rate on future cashflows for all sorts of investments and projects. This reduces the present value of future cash flows and has a greater impact on cashflows that are more distant in the future.

This basically explains why the broader markets have fallen anywhere from 20-30%. As to whether markets will fall some more or stage a sustained rebound from here, it really all depends on whether the economy achieves that so-called soft landing that Fed is hoping for. Therefore, 2023 will be all about how bad the economy gets – will growth and employment slow down drastically, or will many companies crash, burn, and therefore cause mass layoffs to become a feature that extends beyond the tech sector?

Crypto is tested

This will also go down as the year when Crypto, as an asset class, has its Global Financial Crisis moment.

From the failure of Luna and Terra, Three Arrows Capital to Celsius and of course, FTX. This will be the year that investors in crypto realise that no matter how much they hide behind the technology, the problems that they face in crypto as an asset class are pretty much the same problems that have existed in finance forever.

Alongside the failures of those companies, their high-profile founders Do Kwon, Zhu Su, Alex Mashinsky, and SBF have not basically been outed as either frauds or really bad businesspeople. The funny thing is, in finance, fraud is a feature of every hot new thing, not a bug.

Personally, I don’t think crypto is going away but this year has made it much harder for crypto as a mainstay asset class for mainstream investors. However, if you’re still bullish on crypto, you also have to recognise that after this year, you will live with more regulation or less liquidity. Neither of which makes for the sort of rocketship-like gains unless you can time the bottom.

Revenge of Inflation

For the first time in a generation, inflation is once again a thing.

First, a mea culpa. In October 2021, I commented on a Today piece that was done on inflation.

“I’m not sure much of the inflation we’re seeing today is because of an increase in the money supply. Furthermore, isn’t the velocity of money being a bigger factor for inflation the more commonly accepted theory these days? Increases in money supply leading to inflation seem to be a very 70s thing.”

Best Things I’ve Read All Week (31 Oct ’21)

As we now know, inflation came back in a big way. However, this wasn’t completely due to loose monetary policy but also in part due to the fiscal handouts to alleviate the damage caused by Covid and the war in Ukraine. The good news is that inflation seems to have peaked but the bad news is that many market watchers seem to think that it won’t come down to the Fed’s target of 2% that soon (for example, see Howard Marks’ latest memo “Sea Change“). This seems to be the likely conclusion given the tensions between the US and China that have led to onshoring or friend-shoring of supply chains and the other ongoing geopolitical tensions around the globe.

The good news for retail investors is that something always can be done. One, yields on cash or near-cash instruments have increased dramatically. In Singapore, this caused T-bills to be a thing, and bank are now offering interest rates on savings accounts that are higher than even the CPF SA. This is a sharp reversal of the pattern seen over the past decade or more where the CPF SA’s yield of up to 5% was seen as an acceptable bargain for keeping your money locked up until you reach the age where you’re allowed to then withdraw the monies from your CPF.

The question on everyone’s mind now is: how long will this last? I don’t profess to know but the consensus seems to be along the lines outlined above.

Working in finance

This year, I left the organisation and job that I had been doing for the past 10 and a half years. It wasn’t an easy decision given how comfortable I was in the role and I’m nearing the age where you don’t really start learning new tricks. Most people my age would have gained some level of mastery in their professional life and would be close to or entering the peak earnings phase of their careers. In my case, I was due to take over from my boss so in fact, career progression is something that was on the cards.

If that’s the case, then why leave?

The reason is that I couldn’t see myself doing my boss’s role or my current role for the rest of my life. I had also become jaded with certain aspects of the job and I guess that given my age, if I didn’t try to move now, then it would be never.

At the same time, I didn’t want to leave my job just because there was some dissatisfaction with it. The work environment and the colleagues whom I worked with were (mostly) good. So it was by some stroke of good fortune that I was offered a role that involved investments.

I’m two months into the job and frankly, I’m not sure how good I’ll be at this. What I can say is that I’m grateful for the opportunity to experience and learn what an investment professional does on a day-to-day basis.


This year has been an exceptionally brutal one for portfolios. While the drop in equity and bond prices hasn’t been particularly bad, the problem is that both major asset classes fell by double digits. This means that what is traditionally considered a diversified portfolio (e.g. a 60/40 stock, bond portfolio) has taken a hit when investors typically expect bonds to buffer against falls in stock prices. In short, bonds didn’t deliver the protection it’s supposed to have against a fall in equities.

Fortunately for me, I’ve been accumulating cash all through the year. The other fortunate thing is that I never participated in the mania in US markets so while my existing positions accumulated over the years took a slight hit from an increase in discount rates, this was relatively small compared to the buffer provided by a sizable cash position and large holdings in the STI.

In a year where the S&P 500 is down almost 20% and the STI is down 4.61% (before dividends), my portfolio[1] is only down 2.84% (without dividends) and 1.27% (with dividends). All in all, I would say it’s roughly in line with the total returns of the STI. More importantly, the numbers presented are investing returns which is just an indicator of my (lack of) skill in investing.

A layperson would probably care more about the size of the portfolio and this would include all monies added to the pot. I made a tremendous effort to accumulate more cash in the portfolio and I don’t know how I did it but this year will go down on record as the year where I managed to add around 30% of my take-home pay to the portfolio. This helped to increase the total size of the portfolio by 7.39%.

Which would you rather have? A -1.27% returns on investment or a +7.39% increase in your portfolio size because you deferred some present consumption?

This marks my 15th year in the markets. I guess with this current cycle, you could say I’ve lived through 3 major bears now (’08-09, ’20, ’22-?).

I can’t say if the next decade will be like the last one or if will it become a secular bear that goes sideways for a while but I know that my portfolio has increased from a tiny 5-figure portfolio to a more than respectable 6-figure one.

And this isn’t because I’m some investing genius. In fact, if I was more aggressively invested, it would be a 7-figure portfolio by now. The secret is that I simply saved money, added to the portfolio, and didn’t trade in and out of positions. Based on pure investment returns, my portfolio has grown 1.93x over the last 11 years while the actual portfolio size (including cash added) has grown 5.89x. Roughly speaking, investment returns were 6.16% p.a. while total portfolio size returns were 17.49% p.a.

My experience just shows that if you’re a young investor with little capital, the best thing you can do for yourself is to continue saving, investing, and letting the gains compound. For example, adding $10,000 per year to a $100,000 portfolio increases its size by 10% while adding the same amount to a million-dollar portfolio only increases it by 1%. When your portfolio is smaller, it’s far easier to negate bad returns simply by adding more cash.

As demonstrated, adding cash does little to move the needle on a bigger-sized portfolio but I will argue that for the vast majority of people, this won’t apply. After all, how many people reading this (both in Singapore and abroad) already have millions of dollars in their portfolios?

If you want gains, just do consistent work.

[1] My portfolio only includes stocks and cash that are in my investment accounts. I don’t include cash reserved for everyday spending, monies in my CPF account, or home equity.


Finally, my personal life has been great. Despite catching covid sometime during Jul/Aug, my wife and I have been relatively healthy. I’m really thankful for my wife. We lead a relatively simple life compared to many of our peers – we watch way too many K-dramas, take walks along the park near our place, spoil our cats, and the most difficult decisions we have tend to revolve around where we should go to dinner.

Compared to many folks, we have been very fortunate.

We’ve also welcomed a long-tailed black friend that we saved from my parents’ place. And after we picked him up, we started seeing many signs that he was meant to come into our lives. Maybe it’s just confirmation bias or maybe it’s fate. Who knows?

Finally, looking forward

Following a brutal 2022 that has removed a lot of the excesses in financial markets, I am getting optimistic that investing steadily and consistently over the next 3-5 years in a broadly diversified portfolio will pay off in the longer run.

This year, I’m hoping to write more on financial literacy. I think it’s a topic that, despite the government’s best intentions[2], helps people lead better lives. Too many people fall into one of two categories. They either (a) fall prey to scams, frauds, or just bad financial advice or (b) become too afraid and conservative that the value of their savings erodes over time due to inflation.

Both categories of people are pitiful but at least for those who fall in (a), you could put it down to greed. For those who fall into category (b), it’s sad because it sounds like they are doing everything right – working and saving, only to end up finding it difficult to retire or they can only do so with some form of work, or end up feeling insecure about their finances without a job.

The good news is that this isn’t rocket science and so I hope to share what I know and combine that with a real-time case study of my own path to retirement.

I wish you all the best for 2023.

[2] I say this for a fact because at my previous job, some direction came at the top level for our students to complete some compulsory modules on financial literacy. I can’t say how successful these have been because I still witnessed many of my former students fall prey to the scams, frauds, and mania that surrounded Crypto, meme stocks, and NFTs. This just shows how difficult it is for you to learn something in class and then be aware enough of how it applies in the real world when the world is going crazy about something.

It’s Christmas! Happy holidays.

Photo by Mikes Photos on

China’s Covid Reopening Won’t Be Enough to Save Oil Markets

Bloomberg opinion piece on why China’s reopening isn’t necessarily a boon for oil despite what some people might think. The reasons stated are:

  1. Large part of China’s oil consumption goes into industrial raw materials
  2. China’s weak oil demand in 2022 is in large part due to problems in its property market
  3. Chinese oil consumption is more closely related to plastics consumption which is linked to global trade.

Commentary: Inflation is a silent killer of retirement planning. Here’s what you can do (CNA)

Inflation has been one of the big stories this year. I used to teach this stuff and one of the things we used to say in class is that CPI measures the consumption basket for an average household but not every household is an average one.

How has inflation affected you this year?

Demographics vs. the Stock Market
(A Wealth of Common Sense)

Good point made on demographics and how it may/will affect stock market returns in the future. The demographic problem will affect Singapore much more than the U.S.

The 2.7% Rule for Retirement Spending
(Ben Felix on YouTube)

Ben Felix gives a great overview of why the 4% rule should be put to bed. I’ve seen many Singaporean personal finance bloggers/YouTubers tout this rule without understanding the assumptions behind the study. Please check out his video for great insights into why you shouldn’t take Safe Withdrawal Rates too seriously either.

As expected, the Fed has raised interest rates by 50 basis points. The unfortunate thing for markets is that the Fed has indicated that the rate hikes may continue for a while longer.

Photo by Mikes Photos on

Central Banks around the world are fighting to get back down to 2 percent inflation. Why? Look to New Zealand (Grid)

Some years ago, a (now-former) colleague from another teaching department asked me why Central Bankers aim for a world with 2% inflation. Embarrassingly, I never thought of it and I couldn’t give a good answer.

Well, now I know.

The idea of formalizing a precise target came from New Zealand’s minister of finance Roger Douglas in the 1980s, who said in a TV interview that inflation should be between zero and 1 percent. While inflation had fallen, policymakers in New Zealand worried that the public would expect their inflation-fighting program to slacken.

“Douglas was very concerned in March 1988 that, with inflation moving into single figures … the public would expect the monetary authorities to ease up and settle for inflation in the 5 to 7 percent range,” Don Brash, former governor of the Reserve Bank of New Zealand, told Grid, and thus made the almost offhand declaration that his goal was essentially no inflation.

Implementing the target fell on Brash. In 1989, New Zealand’s parliament gave the Reserve Bank of New Zealand independence to operate as it saw fit but do so with the target the government decided upon. Early the following year, the government implemented an agreement with Brash to hit the zero to 2 percent target by the end of 1992. Brash recalled feeling surprised that the contract was with the governor personally and not the bank. But he soon got the message: While the government couldn’t fire the bank for failing to fulfill the agreement, it could fire him.

– Grid

Singaporeans Face Working Longer to Afford Retirement

This seems to be a common sentiment among the younger crowd, especially with housing prices on a tear. This is the tl;dr from the article:

Singaporeans’ long-term saving plans are being jeopardized by inflation hovering near the highest level in more than a decade, insufficient wage growth, accelerating housing costs and other financial burdens from living in a city recently listed as the world’s most expensive alongside New York. In addition, a reluctance by many to put money in riskier, higher-yielding investments means nest eggs are falling short.

– Bloomberg

JPMorgan: Challenging 2023 But A Market to Accumulate
(Investment Moats)

Kyith from Investment Moats provides an overview of JP Morgan’s view for markets next year.

Vietnam factory workers laid off as West cuts imports

Anecdotal but a sign that global consumption is slowing.

It is not a Bad Time to Retire
(Aleph blog)

I’ve been hearing similar arguments from various people in the industry that since yields are higher, it’s never been a better time to get returns with much less volatility by shifting from equities to bonds. Also, another point I’ve seen somewhere else before is that retiring in the depths of a recession is the best thing that you can possibly do to stress-test your retirement. After all, if you can retire with your portfolio battered and bruised, you can certainly retire when times are good.

Did I jinx the Santa rally? Although markets in China and HK are rallying hard with zero-Covid becoming more a thing of past with each passing day. The Fed meets one more time in 2022 – next wed, 14 Dec (US time). Will that help or hurt? Only time will tell.

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I Collect Cashflows
(The Reformed Broker)

A timely reminder in both good and bad times that in the long run, the market is a weighing machine. And what the machine weighs is really the cashflows that the investment throws off. I was looking at the performance of the STI over the last five years and as terrible as it has been (slightly negative on an annualised basis), you would have been up about 4% p.a. if you include all re-invested dividends.

Dollar trends and regimes
(Disciplined Systematic Global Macro Views)

Basically, if the dollar continues to get stronger for longer… something, somewhere in the global economy will break.

My Favorite Investment Writing of 2022
(Of Dollars and Data)

A few nice links in that list – notably the ones by Housel, Eiffert, and Dickson. Kyith from Investment Moats also shared about the one from Katie which basically is a less scary way of thinking about how much assets you need to generate a certain level of monthly spending. Could be useful from a Behavioural Investing standpoint.

OCBC Financial Wellness Index 2022

The full report of that survey every personal finance person in Singapore is talking about. Not much surprise here but these are the more interesting stats that stood out for me

  • 48% of respondents (up from 43%) said that they gambled more than they can afford to lose
  • 38% of those earning $10K or more per month (highest proportion across all income categories) have some form of unsecured debt (i.e. credit card, personal line of credit, education loan, renovation loan)
  • 40% of respondents say they have trouble paying off their housing loan on time
    note: The survey also notes that at the time of the survey, the benchmark rate was at least a full percentage point lower than the current rate
  • 34% of seniors (aged 55-65) say they speculate excessively (mostly in futures, structured products, and currency trading)

The above points are wild. Especially the one about speculating seniors.