Archives for category: Personal Finance

I can safely say that almost everyone reading this blog would like to reach financial independence and retire early if they could. In recent years, this has caused many people to jump on the Financial Independence Retire Early (FIRE) bandwagon. There are also plenty of people who have probably given up on retirement.

Recently, I saw a post on Investment Moats on the exact same topic. The question was one that most people probably have — Can I afford to retire on $X of net worth?

The problem with such questions is that everyone’s situation is pretty unique. Not all people are married, not all people have kids, not all people have to the same number of kids, and not all people want the same lifestyle. This is why financial advisors still have their place in this day and age because some judgement is needed to assess a person’s financial circumstances.

At the same time, I thought that if there’s a benchmark or a guidepost for people, that would be a goal that people can work towards. I saw a fantastic post on Reddit that used average household expenditures to determine financial independence.

So I thought, ok, why not use data from the Department of Statistics Singapore to determine the average expenditure per person and the net worth needed to generate that annual expenditure.

I found data that separates average household expenditure by residential property type and what I did was to take the average household expenditure, divide it by the average number of people in a household and multiply it by 12 to annualise it. Then I took that expenditure number and multiplied it by 33.3 and 25 respectively to show what net worth you need to achieve FI if you’re an average person.

Here are the numbers:

Avg. Monthly Expenditure (by household type)* FI AMOUNT (PER PAX) 3% FI AMOUNT (PER PAX) 4%
TOTAL** 4724  $         566,880  $         429,455
HDB 3831  $         459,720  $         348,273
CONDO 8000  $         960,000  $         727,273
LANDED 10409  $      1,249,080  $         946,273

The nice thing about this table is that it determines what net worth you need relative to the average kind of living standard you want. For example, if you want to live like a person in an average HDB household that spends $3,831 per month, you would need a net worth of between $348,273-459,720 if your withdrawal rate is 4% or 3% respectively.

Please be aware that the table above shows us the average net worth needed per person. If you are the sole breadwinner in your household of two, then you need to multiply those net worth numbers by two.

Of course, doing so makes it seem more challenging and you might question if you’ll ever be able to retire but keep in mind that the average household expenditure need NOT be your expenditure. You can always spend much less than the average person. Life is not a game about trying to see whether you can buy more things than the next person.

This simple exercise should help give you a target to work towards but take not that it’s not scientific in that the numbers are absolute. Rather, they should serve as a guide and adjustments should be made to cater to your own situation.



*The data is from the 2012/2013 Monthly Household Expenditure survey. To bring it up to today’s numbers, you would have to factor in the inflation rate for the last few years. Do not that inflation rates tend to be different for different income groups so use the right rate.

**The ‘TOTAL’ group includes households whose residences are not part of the other three categories. e.g. Non-residential shophouses etc.


I have to confess. I haven’t been catching up on my online reading this week. Been trying to get through “Money Changes Everything” by William Goetzmann. It’s a fascinating read as you realise how modern civilisation wouldn’t have been possible without finance. Another way of looking at it is that finance shaped modern civilisation and basically, a big part of the way we live today is because of finance.

Anyhow, here are some other things you could catch up on.


The Nine Essential Conditions to Commit Massive Fraud (The Reformed Broker)

Speaking of financial history, Joshua Brown gives a fantastic overview of how financial fraud is committed. Against the backdrop of the 1920s and using the profile of Ivar Krueger, Joshua runs through each step, illuminating it with examples from Kreuger’s life (which is detailed in a new book) and other more recent examples such as Enron, Madoff and Elizabeth Holmes.

If you read only one thing on this list, this should be it.


Bloomberg: The Good and the Bad of Retirement Saving (The Big Picture)

Joshua Brown’s colleague, Barry Ritholtz provides commentary on Vanguard’s annual review on retirement savings in America. It’s shocking to see how different the average and median amounts in defined contribution retirement plans are. Despite the positives in this year’s review, one major point he makes is that Americans are still not saving enough.

I suspect we might find the same (albeit to a lesser extent) here. CPF contribution rates are high but most Singaporeans spend a good chunk of it on housing. I’m not sure the minimum amounts in the Retirement Account (RA) provide for an average standard of living.


Policies, politics and paranoia: Singapore Democratic Party chairman Paul Tambyah goes On the Record (Channel NewsAsia)

I don’t usually like to post stuff on politics and I’m surprised that CNA even got someone from the SDP to present their views. Dr. Tambyah makes some very good points in his interview and I suppose if Dr. Chee was smart enough, he should let Dr. Tambyah take over completely. Dr. Tambyah’s image is much more appealing one than Dr. Chee’s. Having said that, being too much of a nice guy may not be useful in politics? I don’t know.


The focus has turned to the markets this week. Here are some things to catch up on.

gold link pocket watch

Compounding requires Absorbing Damage so You’re Never Forced to Quit (Investment Moats)

Kyith has a post that I think underscores that in order for compounding to work, it takes time. And throughout that period of time, things can (or should I say, will?) get pretty nasty sometimes.

For me, the interesting bit is that I never knew there was an ishares ETF that tracks the Singapore market. Kyith’s example about how buying this ETF at its inception* during the highs of the Asian Financial Bubble led to paltry returns over the next 21 years is also very illuminating.

In short, if you buy when markets are expensive, you will live to regret it.


New cooling measures: The show has just begun (Property Soul)

Vina at Property Soul has come out with her take on the new ABSD measures and what it means for the property market in Singapore. I’m pretty sure many of you may have already read this but FWIW, stay tuned to her site for more in the coming days.


Some Considerations For Investing Globally (A Wealth of Common Sense)

Ben Carlson has a great post on the case for investing globally. He’s written it from the perspective of an investor in the U.S. but of course, the same would apply for someone outside of the U.S.

What’s interesting for me is how the S&P 500 and MSCI EAFE (which represents investing in developed global markets) have taken turns to outperform one another.

While the simple case would be to invest equally in both and rebalance periodically, the more enterprising investor could invest in one, and then start switching to the other as valuations become relatively cheaper in the other.

Also, based on the table, might it be suggesting that in the next period, markets outside the U.S.? From a valuations standpoint, it certainly seems possible.


Mainland developers are ‘money mills’ that rely on spiralling asset prices (South China Morning Post)

Many people have been warning about credit bubbles in China for some years now. This opinion piece provides a look at the mechanism by which the credit bubble has developed. If this is true, then the stock markets in China may be on to something after all. And if it bursts, then expect HK and SG markets to be badly affected as well.


Wealth Is What You Don’t See (Fervent Finance)

Sustaining Wealth is Harder Than Getting Rich (A Wealth of Common Sense)

Finally, on the personal finance front, two different articles which highlight what should be obvious truths.

The first one makes the point that for most people, getting wealthy is a result of cultivating good habits with money — being frugal and thrifty are sufficient components to getting rich.

I personally know a few colleagues who have been mid-level civil servants for a good 30 years and right now, they would easily qualify for the top decile in terms of net worth. Yet, they watch every dollar. To them, the best meals are the ones in the hawker centre or coffee shops. They fly economy because it’s cheaper and they would never stay in a 5-star hotel unless it came at a good price. They are some of the most practical and humble people I know.

The irony is that some of the kids we teach think buying Yeezys or NMDs, which cost hundreds of dollars, and 80-dollar T-shirts show that they are rich. What they don’t realise is that the guy standing before them in the classroom could be worth millions, never have to work another day in his whole life but is wearing a $20 polo tee and sport shoes he copped at a sale.

The second one makes the points that getting rich and staying rich are two different things. You may have gotten rich through a lucky break such as riding the wave of an industry that’s experiencing unprecedented growth or an inheritance. But staying rich takes much more than that.

You can’t spend like a drunken sailor (which is essentially what Johnny Depp did) and expect to remain wealthy. This is why the Chinese have a saying that “Wealth doesn’t last three generations.”

In my life, I’ve seen how some of my extended family behave and everything is playing out according to the pattern above. In my family’s case, it may even be accelerated. The first generation built the wealth through sheer hard work and grit. The second generation has grown it (somewhat) but my generation, the third one, is pretty much spending it away.



Some weeks back, my younger brother wanted to learn about investing. I thought about it long and hard for quite a few weeks and eventually, I told him to go and buy this book – The Intelligent Investor by Benjamin Graham, the version with annotations by Jason Zweig.


Don’t call yourself an investor if you haven’t even read this

Who is Ben Graham?

Benjamin Graham is more famously known as Warren Buffett’s professor and former boss. Graham, together with Dodd, wrote the classic textbook, Security Analysis. Essentially, Graham is the godfather of Value Investing.

Graham biggest contribution was to popularise the idea that buying stocks should be a function of what you get relative to what you pay for. What you pay for is the price but what you get is a share of the profits and assets of the business. In essence, Graham popularised the use of the P/E (price-to-earnings) ratio and, together with Dodd, suggested normalising earnings before comparing with price, which is basically what Shiller’s Cyclically Adjusted Price to Earnings (CAPE) ratio is.

Anyway, I told my brother to buy the book for two reasons and this post is essentially for him.


Reason 1: It’s the right way to think about Investing

I don’t mean to offend anyone from what I’ve seen, too many people approach business and investing the wrong way. They learn wrong ideas and end up doing stupid things until they either realise it too late or never at all.

Many people think that investing is all about buying low and selling high and they fail to understand what it really means to buy a stock. From ‘The Intelligent Investor’, there are three important lessons to learn.

#1: Price is what you pay, Value is what you get

Buying a stock means buying a share of the business which is why stocks are also known as ‘equities’ which basically translates into ownership. The essence of Graham, which is at the core of what Buffett and other Value Investors believe, is that an owner of the business cares about the assets of the business and what earnings or cashflows those assets can bring the owner.

Now, the majority of “investors” in Singapore only care about price. They know how much they bought a share of Singtel for. And they know how much they can sell one share of Singtel in the market right now. Why? Because the price is the simplest piece of information to find.

Better investors can cite the earnings, cashflows or dividends that the business can bring in each year. But imagine you’re a business owner. Will those metrics be enough? You’d probably want to know other things: How your competitors are doing? What do customers think of the product? What are the largest components of the cost of production?

The first important lesson from Graham is that being a stockholder means being an owner of the business. If you only buy the stock based on its price and the hope that the price will go higher than the price that you paid for it, that’s speculation. And Graham made it quite clear in the book that therein lies the difference between investing and speculation.

The trick is knowing which activity you’re engaging in.

#2: Price and Value can, and will diverge

The second important idea from Graham is that the stock market is driven by emotion, short-termism, and irrational behaviour. He personified the market as a fellow called Mr. Market who quotes you prices on the stocks each business day.

As Buffett understood, the advantage investors have is that an investor can afford to ignore Mr. Market and take advantage of his over-pessimism or over-optimism. On days where Mr. Market believes that the world is going to end, he ends up quoting prices that are so low that it’s benefit to buy. On days where he thinks markets will keep going up forever, he’ll quote prices that are so high that the business will never be able to provide a decent rate of return for investors*.

#3: Price and Value will converge (eventually)

Of course, for Value Investing to work out, prices and value must converge. In other words, buying at prices that are low relative to value lead to good returns because the market will eventually recognise that the company is worth much more than the current price and therefore bid prices back up to what the company is actually worth.

The problem with this is that this recognition can take time. For example, prices of financial stocks remained fairly depressed following the Global Financial Crisis of ’08-09 and it was only until last year (2017) that bank stocks finally started to gain some favour again.

This is why the great economist, John Maynard Keynes, who was a pretty successful investor as well, said that the markets can remain irrational longer than you can remain solvent. This is why many investors caution against the use of excess leverage. For the majority of retail investors, leverage is something to be VERY careful of. If you choose to proceed, do so with caution.

On the other hand, prices tend to come down fast. So if you’ve bought at a very high price relative to value, don’t expect to hang on to your gains for long. Once again, taking on leverage by shorting the market is also not for the faint-hearted. There are many Value Investors who short Growth and have paid a high price for it. When you short, being early is (almost) the same as being wrong.**

I wanted to do this in one post but it’s gone on for a little too long. In the second part, I’ll show you the parallel between buying “The Intelligent Investor” and investing.


*The classic example of knowing how ridiculous the market was when a dot-com CEO told his shareholders that given the company’s share price at the time, he would need to return them 10 years worth of revenues in order for them to just break even. I thought it was Cisco but I can’t seem to find a source for this. Cisco’s price to sales went as high as 37 though.

**For those interested in finance, go watch ‘The Big Short’. It’s accessible and the heroes in the show almost lost everything by being early.

Markets in this region have been tanking and the STI has fallen below the 200-day EMA to the point that it’s about to pull the 50-day EMA below the 200-day. While this isn’t a perfectly reliable indicator in itself, this could present a good buying opportunity if this trend continues for another 6-9 months.

Anyway, if you’ve had a tough week, here are some reads to make it better.


‘Stingy’ millionaire donates S$3.35 million from S$20 million fortune to charity after his death (TODAY)

I’ve written about people like Agnes Plumb and Ronald Read. Finally, there’s an example from our local shores. Mr. Low Kum Moh was a sub-accountant who was born into a family of fishmongers. The secret to his wealth? Frugality and investing in the stock market over a long time-frame. This is pretty much the same story as the other ones I’ve featured here. The point of it all is that great fortunes can be made by people that most would consider very normal. The trick is to find a strategy that works and keep plugging away at it.

Which brings us to the second read.


In Praise of Incrementalism (Rebroadcast) (Freakonomics)

Freakonomics was the book that convinced me that economics could be interesting and that probably saved my university life.

In this episode of their podcast, they make the point that lots of progress in this world are based on incremental progress. The problem with most of us is that we tend to view great events or inventions as if they happened miraculously.

In particular, I love this example that their guest, economist David Laibson points out:

LAIBSON: One has the impression that it’s impossible to save enough for retirement — and to a certain extent, it is impossible if you start at age 50. But if you start early in life, and every year, you contribute let’s say 10 percent of your income, and maybe there’s an employer match, so now we’re up to maybe 15 percent, and you invest that savings in a diversified mutual fund, stocks and bonds, and you have low fees, and you keep going at that year in and year out, and you don’t decumulate prematurely — it’s amazing how that process produces millions of dollars of retirement savings. So it’s kind of hard to imagine how you go from what seems like a little bit of money each year to being a millionaire but that’s exactly the way it works when you work out the math.

Instead, most people often aim for that lottery ticket like buying bitcoin. Most people who do this put very little at the beginning (like a lottery ticket) and when it starts to pay out in a substantial way, they then proceed to bet the farm thinking that what has happened will go on indefinitely.

Unfortunately, this is almost always precisely the time when things start to go bad. Think of someone who bought bitcoin at $500 or $1,000. After seeing the price of bitcoin go to $10,000, they feel like a genius and proceed to place even bigger bets. Well, the bet may have paid off temporarily but look at how it’s turned out.

Which brings us to…


Bitcoin Bloodbath Nears Dot-Com Levels as Many Tokens Go to Zero (Bloomberg)

I’ve been writing about the problems with Cryptos since late last year (see here, here and here). To be honest, I’m not as pessimistic about crypto now as I was last year. Of course, there’s nothing fundamental to base my thoughts on but buyers are surely not as euphoric about cryptos as they were late last year.

I suppose the article compares the crash in cryptos to the crash in the tech sector during the dot-com era as prices in both situations have nothing fundamental to support them but I would argue that bitcoin is in a worse situation because, in case of the dot-com stocks, you could at least see if things were getting better based on a turn-around in cashflows and profits.

For bitcoin and cryptos, you have to track whatever these cryptos are meant to replace and see if those things are getting replaced at all.

Anyway, here’s the million-dollar picture from the article above.



Have a great week ahead!

boy wearing green crew neck shirt jumping from black stone on seashore

Stock photo of many happy children. Should you really have so many children if you cannot afford it? [Photo by ajay bhargav GUDURU on]

Is having children a blessing?
Is having more children always better than having less?

What if you have so many children that you depend a lot on the state to help raise your children? Should only those who can afford it have as many children as they like while those who can’t afford it be restricted to a certain number?

Those are questions that I don’t think anyone can agree on because these choices are deeply personal and yet, they can impact society at large.

Many children on a low income

Recently, Channel NewsAsia (CNA) ran a profile of the Heng family that has a total of nine members — Dad, Mom, and 7 kids from as old as 16 to as young as 3. As the article highlighted, the Dad only brings home less than S$3,000 a month while their monthly expenses come up to around S$3,000.

Because of this, the Heng family has barely enough for monthly necessities. Luxuries come from the generosity of friends and their church while they also have to apply for welfare payments to help with some of the expenses. The biggest cost seems to be non-monetary as the kids don’t seem to have much personal space and both the Dad and Mom seem drained from having to manage such a huge family.

I think it’s safe to say that to most people, they have no idea why this family would choose to have so many kids in the first place. And the Heng family is precisely the argument many people make for why the government should not provide complete welfare for citizens.

The argument goes something like this: if you provide citizens with enough for survival, they’ll take it for granted and make stupid choices like spending any surplus money they have on things like cigarettes, alcohol or other unnecessary things. Having hardworking taxpayers foot the bill for people like this is something that we should not support.

And the Heng family is not such a bad example, to begin with.

The Dad is working, albeit in a job that pays little. Presumably, this is commensurate with the skills he has so it’s not like he has a choice of being paid more. The Mom has to stop working because, otherwise, who’s going to take care of all the kids?

The Heng family is already a much more exemplary family that another family who was also receiving welfare, and yet had found the resources to pay for cigarettes and cable TV (see here).

How most people think about this

Reading profiles like these, I can understand why some people think this way. The average taxpayer probably thinks, “Hey, I’m working in a decent job. I get a salary and pay my taxes. On top of that, I make sure that I have enough to raise my kids and give my family a decent standard of living. Why should I be penalised by having my taxes pay for other people’s bad choices? If they chose to make bad choices, they should pay for it.”

How I think about this

Unfortunately, this is where I take a different stand. If it was the 20-year old me, I might have thought the same way as most people but right now, I tend to think of it this way:


The parents made some questionable choices but the children, if you believe children are the future, shouldn’t have to pay for those choices. This family is living on such a tight budget that I doubt they have any room for emergencies such as the Dad having to stop work due to injury or if one of the family members fall seriously ill and chalk up huge medical fees.

While those emergencies may be covered financially through welfare, we cannot deny that the emotional toll of such an emergency may impact the family. For example, if the Dad cannot work, then the Mom will have to take over the role of breadwinner and naturally, the older siblings will have to step up and take care of household matters. This will affect their studies and their shot at a decent future.

In short, Singapore’s form of targeted welfare may look good on paper but if we account for the needs of a complex system, it will not work. Vulnerable families such as the Heng family have fewer options when it comes to life. And with fewer options come worse decisions.

Poorer people have fewer options

Take for example this report on the exorbitant interest rates that poorer families pay for discretionary items. While it’s normal for most people to pay for items like a fridge or TV in full, poorer families don’t have this option and are forced to take up options such as hire-purchase schemes. While they may initially be able to afford these the purchase, a curveball that life throws them can easily cause the purchase to spiral into a nightmare.

Of course, this is not unique to Singapore. All over the world, poorer people have fewer options. For example, those who can’t afford college tuition take student loans to finance their college education. On paper, that sounds like a good thing — borrow money you don’t have, invest in an education so that you can get a higher paying job, pay off the loan and enjoy the returns from education.

In essence, education functions like how a business borrows to buy an asset and use the returns to the asset to pay off the loan. Unfortunately, not many people realise that not ALL businesses work out. Similarly, people with students loans can find themselves in trouble should they be unable to work and therefore be unable to repay the loans. The debt can snowball and your credit can get impaired such that it affects other areas of your life. This is especially true if the person took the loan to invest in an education that wouldn’t pay off anyway because demand for graduates in certain disciplines tends to be lower than others.

We need a broader safety net

I’m actually glad that in recent months, the conversation in Singapore has focused quite a bit on inequality in Singapore. Maybe it was Teo You Yenn’s book, or maybe it was because of the watershed general election in Malaysia that caused our own politicians to suddenly open up to the idea that inequality is a hot-button issue but no matter the cause, it’s good that people are starting to talk about it.

If we truly want to help the most disadvantaged in our community, we need to recognise that a safety net needs to be broader so that the ship doesn’t sink. Having targeted welfare is like providing patching holes in a ship’s hull. It’s more important to make sure the hull is strong rather than patch holes in the hull as and when they appear.

Of course, these are just my thoughts. Let me know what you think in the comments!

It’s that time of the week again!

Get yourself a cup of tea and get ready to get smarter before the week starts.


Social Security benefits buy 34 percent less than in 2000, study shows (CNBC)

The World Isn’t Prepared for Retirement (Bloomberg)

This week, I wrote a post which touched on financial literacy. The sad thing is that many people around the world have very little idea about things like inflation or compound interest.

Unfortunately, these are exactly the things that you need to think about once you no longer have a source of income. Many people also think that they will have a source of income until they reach the official retirement age but a downturn in the economy or changes to the industry can easily mean that a person loses his/her job during their prime working years.

To see how you stack up on the financial literacy scale, go and take the little test included in the Bloomberg article. It’s only three simple questions and frankly, I’m surprised that anyone can get it wrong.

The CNBC article highlights the problem with our CPF. CPF works wonders in terms of forced savings and compounding that sum into something much more. The problem is that once CPF starts paying out, inflation isn’t really factored in. It’s not really that different for most insurance products. Whole life plans and annuities often don’t adjust for increases in the cost of living.

Unfortunately, as the article and even the statistics in Singapore (Table A.1 in the document) show, inflation for medical costs tend to be higher than what the CPI shows us. And if you think about it, this is precisely what retirees and seniors should be concerned with.


Bull Markets & P/E Multiple Expansion (The Big Picture)

Ritholtz has a post commenting on research done by UBS. The research shows how bull markets tend to be a function of P/E multiple expansion. The takeaway is basically how bull markets are driven by (over?) optimism as investors re-rate stocks to deliver faster than expected growth.

In other words, bull markets tend to be driven by a narrative on investor confidence due to the economy doing well while bear markets get punctuated by cycles of optimism and pessimism.

Take the finding/theory with a pinch of salt though. After all, if these things were so predictable, then we’d all be rich.


Guide to Dividend Withholding Tax for Singapore Investors (Financial Horse)

Finally! Someone has come up with information on withholding tax on dividends and this clarifies things up so much. I suppose Financial Horse’s training as a lawyer helps because all the legal jargon and heaps of information just confuses me. The table that shows the tax rates for other countries helps so much as well. Useful information to know if you invest in overseas markets.


The Story Of Agnes Plumb: Dividend Millionaire (The Compound Investor)

Another unknown millionaire story. Same themes from all the others – money compounded over long periods, frugal lifestyle but the twist in this story is that she actually inherited the stock from her father and subsequently did nothing.

Nothing! She sat on her thumbs and just waited, and waited.

You may argue about the wisdom of not spending all that money but you cannot argue about the wisdom of how compounding is a powerful force. As my wife’s favourite bear said,

“Don’t underestimate the value of Doing Nothing, of just going along, listening to all the things you can’t hear, and not bothering.”

As for Plumb, she may not have spent a lot of the money on herself but she left a lot of it to charity and if you ask me, that’s a lot of good done for the world.



More money has been lost reaching for yield than at the point of a gun.” – Raymond DeVoe Jr.


So, I just watched this awesome documentary on Netflix called ‘The China Hustle‘ and it brings to mind some events that happened in our local stock markets some years back.

The China Hustle

The film is a documentary that follows how some investors in the U.S. got into the business of short-selling Chinese companies listed in the U.S. Basically, what they uncovered was that some Chinese companies listed on the U.S. stock exchanges were selling stories too good to be true.

The thing is that no investor can trust the financials for these companies because the numbers were all inflated in some way. What made things worse was that the investment banks, together with the auditors, bringing these companies to the market either didn’t or couldn’t do the due diligence on these firms but brought them to market anyway.

Stage two of the play saw the banks promote these stocks to clients and after having cashed out, the CEOs of the company in China, the banks who collected the fees for helping the companies list, and the brokers who sold investors the stock all made out nicely.

Stage three then saw the investors left holding on to stocks that were worth much less than they paid for them because the underlying business was then exposed as being worth many times less.

The film also interviews three investors who lost a lot of money from investing in those stocks and it’s quite painful to see retirees lose six-figure sums from what is essentially fraud.

I’m pretty sure the film also has its agenda and, therefore, takes that angle quite consistently so the thing to keep in mind is that not every Chinese company is going to turn out to be a fraud or that every banker out there is working against your best interest.

Getting educated about such things is one thing we can do to ensure that we don’t fall for schemes and scams that could ruin our lives.


S-Chips: The Singapore Version

Why did it bring to mind some things that happened in our local markets?

Well, first, the short-seller featured in the show who was purportedly the first one to expose a Chinese company is none other than Carson Block. Carson who? Block is the guy who runs Muddy Waters who basically wrote a damning piece on Olam way back in 2012. Of course, Olam turned out fine after Temasek took a stake in it and is definitely not in the same category as the Chinese companies featured in the show.

More importantly, Chinese companies listed in Singapore (called ‘S-chips’) have been a feature of our market for some years now and quite a few of them had their own accounting scandals brought to light after the Global Financial Crisis.*

There’s an anonymous account by someone who’s supposedly a former S-chip CEO that has been circulating on the internet since 2009 and it reads pretty much like the stories presented in ‘The China Hustle’. Go google and you’ll realise that it wasn’t just a problem confined to the U.S. or Singapore, the Australian and U.K. markets were similarly hit by such cases.

Of course, the China growth narrative has been played, some investors made money, and some lost big time.


People Never Learn

It’s crazy but if you’ve been investing the markets long enough, you’ll see certain patterns repeat over and over again.

One pattern is how speculators get FOMO and end up chasing the next growth story. In the early 2000s, it was tech, then housing. Then it was financials and China.

The last two years? It’s definitely been tech. People have been so open to putting money into technology (think crypto) that hasn’t any demonstratable proof of profitability. The venture capital space also seems to have no problems raising money and even in the publicly-traded space, which is usually where private investors find an exit for their holdings, investors have been quite happy to pay PE ratios of a few hundred for stocks like Amazon and Netflix.

When you see news like how Jeff Bezos is the richest person in the world and how Mark Zuckerberg is poised to overtake Warren Buffett in the richest people in the world standings, you know that’s where money has been flowing to.

I’m not saying that these businesses are not legitimate or that you’ll lose money investing in these companies. I’m also not saying that the stock prices of these companies are going to fall tomorrow.

What I’m saying is that when most people get too optimistic about something, that’s when I’d be careful about it.


*If you’re interested, Cynical Investor has a whole collection of posts on the troubles that S-chips have had in the past.




Photo by Pixabay on

In 2013, I wrote this piece ($100,000 before 30) that highlighted an article written in The Straits Times on how realistic it is for someone in Singapore to amass $100,000 before turning 30.

More than a few people in Singapore have already proven that $100,000 by 30 is more than possible (for example, see here). What I thought I’d explore is the possibility of that same person reaching $1,000,000 by 60.

Why 60? Because that’s slightly before the official retirement age in most countries. In fact, the official retirement age is probably going to be 67 or 70 for someone in my generation. However, most people feel that they don’t have enough money to retire on even after working for a lifetime.

I want to show that’s not true.

Of course, a million dollars will not be the same in 30 years as it is today but I think for many people, a million dollars is still a sum that seems unachievable even after a lifetime of work. We’ll also look at the scenario where purchasing power is retained.

Anyway, I want to look at the possibility of a 60-year-old obtaining $1,000,000 because  $1,000,000 for a 60-year-old is kind of the same mental block that $100,000 might be for a 30-year-old.

Starting assumptions

Using the numbers from the “$100,000 by 30” article, I’m assuming the following:

Starting sum at age 30: $122,919
Savings per year: $22,805
Years to compound: 30

The article assumed that the hypothetical person saves 50% of his/her income. For the sake of easy calculation and to be conservative, I’m going to assume that the amount of savings will not change. i.e. the hypothetical person continues to save only $22,805 per year from age 30-60.

Scenario 1: $1,000,000 by 60

Using a trusty financial calculator, I found that with the above assumptions, one only needs a rate of 1.24% p.a. to reach a million dollars by the age of 60.

1.24% per annum for the next 30 years.

Let that sink in. That is a seriously low bar to cross. As I write this, the 30-year Singapore government bond has a 2.88% yield. Assuming rates don’t change much, the latest issue of the Singapore Savings Bonds which everyone loves will also get you there if you keep your money in it for 10 years and repeat the process another two times.

Scenario 2: Retaining purchasing power

Of course, those worried about losing purchasing power to inflation will point out that $1,000,000 today is not the same as $1,000,000 thirty years later. Well, historically speaking, inflation has been roughly 2.5-3% per year. This means that our 1.24% p.a. needs to be something more like 3.74 – 4.24% p.a.

Scenario 3: Becoming an actual ‘millionaire’

In order to retain the purchasing power of a millionaire today, that rate of return needs to be higher. Assuming an inflation rate of 2.5% p.a., $1,000,000 today will be equivalent to about $2,097,567.58 in 30 years. In order to become the equivalent of a millionaire in 30 years time, our $100,000 by 30 person will need a rate of return of 5.12% p.a.

Keep Calm and Continue the Process

Of course, scenarios 2 and 3 are the goals we should be aiming for and that’s not going to be achieved with government bonds but neither is it an unrealistic rate of return. The $100,000 by 30 article assumed investing in a 60/40 stock/bond portfolio which should easily give us 5% p.a. It may not get you to scenario 3 but it won’t be far off.

My point is, for many people, being a millionaire seems like a pipe dream. It isn’t. Not in both nominal or real terms.

If you’re one of those that already hit $100,000 by 30, this post of mine is to provide some comfort to keep doing what you’ve been doing. What you’ve been doing is right, and you’ll be just fine. In fact, if you can bump up the savings rate or get higher returns, you can get there is fewer years.

Now, if you can’t even amass $100,000 before 30, then what are you waiting for?

If so, you won’t take kindly some of the points made in Exhibit A below.

I recently came across this article* aimed at complete beginners on investing and it’s just downright terrible. The sad part is that I’ve seen many people share this on social media like it’s good advice to take.

I hope you didn’t take too much of it seriously because there’s plenty that’s wrong with it and any financial blogger worth his/her salt should be able to point out what’s wrong with it.

Let’s take a look at what’s wrong with it.


Exhibit A – a community-sourced article which has gone viral


The whole article gives you four different options but doesn’t highlight the proper risks and rewards or evidence to back up its claims. In other words, it’s shit.

What Exhibit A gets right

Exhibit A starts off on the right note by asking people to invest monthly. It correctly states that for all investors, inflation is one of the things we need to beat and that by putting your money in a savings account, you won’t be able to beat inflation. In other words, people who save money in their bank account is going to see their savings buy them fewer things in the future.


What Exhibit A gets wrong or ignores

#1 DCA may not be the answer

While the article makes some attempt to tell us NOT to time the market, it’s recommended solution is to dollar-cost average (DCA) into the asset class. Where this goes wrong is that the market, on average, goes up more times than it goes down. What this means is that as your DCA into the market, you end up paying a higher price, on average, for the asset.

Now, being in cash runs the risk of losing out on returns from dividends, coupons or capital gains but DCA-ing into a higher price doesn’t strike me as particularly intelligent behaviour either. I don’t have the data so I don’t have a definite opinion on this but the risk of DCA should be pointed out instead of being hailed as an optimal solution to the problem.

#2 How do you define risk?

The article then classifies the different recommended “ways to invest” according to risk levels.

The problem is: what is ‘Risk’? Is it fluctuations in price levels? Or is it a permanent loss of capital?

Unless you define risk properly, the classification is unnecessarily arbitrary.

Investors with a long time horizon shouldn’t be worried about fluctuations in prices and be more concerned with the long-term returns from the various asset classes. In fact, studies have shown that over a sufficiently long period (such as 15-20 years), stocks have delivered only positive returns.

Of course, investors had to live with the volatility of prices going up and down but with a sufficiently long period, returns were both positive and higher than any other asset class. On the other hand, bonds returned less than inflation over the same period.

So which is riskier? Stocks or bonds?**

#3 Fees matter and funds underperform

The article also suggests that funds are riskier than the global ETF that the three robo-advisors invest in.

Why? Once again, no mention of that.

I’ll tell you why. The biggest reason is that actively-managed funds then to charge higher fees and end up failing to beat their benchmarks. Check out this statistic that from research that was published last year.

Over the last 15 years, 92.2% of large-cap funds lagged a simple S&P 500 index fund. The percentages of mid-cap and small-cap funds lagging their benchmarks were even higher: 95.4% and 93.2%, respectively.

Source: MarketWatch

Once again, no mention of this even though this was one of the recommended steps.


Exhibit A sucks

Yes, I understand that the article is for beginners but beyond telling them to save money and giving them the steps to start investing, the article doesn’t help much.

In fact, if I were to tell beginners something, it would be to understand compound interest, gets a sense of market history, and understand valuations. If you aren’t prepared to do all that, you won’t have an idea what to do when you see your portfolio fall by 30-40% or your losses (on paper) go into six-figures.

Exhibit A is that the kind of stuff that fulfils the adage of how knowing a little can do a lot of damage. Go do yourself a favour and actually read up on proper investing before you do anything.



*Not providing a link to Exhibit A because it’s rubbish that you’re better off not reading it. If you’re really interested, go google the headline.

**Astute readers will also point out that the question depends on whether you are an older person without a job and a need for income to meet daily expenses or a young person with a relatively stable income and expected extra years of life (and thus, investment horizon) of possibly 40-60 years.