Archives for category: Personal Finance

If you have as many contacts on social media who are financial advisors as I do, you’ve probably seen the following information in one form or another over the last week or so.

Credits: Seedly

What happened?

So what happened was that Singlife which provides a high-interest savings account revised their interest rates downwards for the first $10K deposited in each account.* You can read the details here. And in response to that, all the financial advisors that I know on my social media started posting stuff like:

“Oh no! They’ve done it again!” or “Earning less interest? What should you do?”

Of course they all followed up that line with something like “Let me know if you want to know how to increase your wealth” or something like that.

Much ado about nothing?

Now, this isn’t a review of high-interest savings accounts but when I saw those posts on social media, I replied to one of them saying:

“Isn’t this revision just a difference of a maximum of $50 a year? If you’re worried about making $50 less in interest a year, you’re focusing on the wrong thing.”**

Funny enough, after I posted that on my own social media, I didn’t get any one of those financial advisors correcting me or pointing out something else to consider.

What I did get were a couple of messages from other non-financial people asking me about the second part of my message – which is, what then should they be focusing on?

Pretty much anything else works better

I thought that worrying about $50 a year is a complete waste of time. Almost anything you do to improve your financial health should be worth more than $50 a year.

You could:

  • Cut back on one latte a week – $260 ($5 per latte x 52 weeks)
  • Cut back on one meal at a restaurant each week – $780 ($15 per meal x 52 weeks)
  • Go work a little more (one day a week) – $2600 ($50 a day x 52 weeks)
  • Save more – $520 ($10 a week x 52 weeks)
  • Cut back on one Grab ride a week – $520 ($10 per trip x 52 weeks)

I think many people on my social media were expecting me to come up with some fancy advice like “you need to invest in equities” or “invest in the S&P 500 better returns”.

But look at the list above.

Anything on the list is something the average person should know how to do or be prepared to do in order to get a little ahead financially. I’m not sure how is this rocket science? And I’m not even sure why financial advisors need to recommend getting a financial product in order to make up this difference?

Ok, that’s it for this post. See you next time.

Notes:
*Actually, you’ll notice that they’re still paying the old rates just that it’s now conditional on you spending $500 a month on their card.

**The difference is 0.5% on the first $10K. Interest on amounts above $10K remains the same. $10,000 x 0.005 = $50.

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I think I say it for most people that we’re glad to say goodbye to the year 2020. And boy, what a year it has been. As a world, we’ve:

  • learnt to live with COVID-19 and safe distancing measures
  • become accustomed to Work-from-home
  • seen the financial markets become unhinged from the real economy
  • experienced quite a bit of turmoil, especially for those in the industries hit hardest by the decimation of the travel industry

My 2020

For me, 2020 hasn’t been all that bad.

I’ve heard of family and friends who have lost jobs due to the pandemic. Some have jobs but have seen diminished economic activity due to the effects of the battle against COVID-19. While the public service has its bonus measures tied to economic growth, the drop in bonuses has relatively little impact when you consider that we still have our jobs with no paycuts. Despite being in the private sector, my wife has also been fortunate that she’s been spared from any fallout due to the COVID-induced recession.

On the plus side, work-from-home has meant that we’ve spent more time together with our cats. We have also moved to a new place and I can’t imagine how handling the renovation and move would have been like had there been no work-from-home. Work-from-home basically introduced an element of flexibility into our schedules and that really helped with the move.

Another great thing that happened in 2020 was that we bought our new place at a great price and sold our previous place at a decent price too. I usually suck at trading but this came as close to a good trade as it gets. I have to admit, it has nothing to do with skill and we were purely lucky that we managed to fetch a decent price for our old place despite the ongoing economic recession. The price was even better than what a flat on a higher floor in the same block went for and had that seller not been desperate to sell, I suspect all our flats would have fetched a better price as the resale market started to heat up thanks to the delays in the construction of new flats.

However, I’m glad we sold when did because of the impending flood of resale flats hitting their Minimum Occupation Period (MOP) in 2021. If you haven’t read the news, there’s basically five times as many flats going to hit their MOP in 2021 as compared to the average year. Assuming the same proportion of people cash out of their BTO flat, that’s going to be five times the number of resale flats on the supply side compared to any given year.

The stock market has been kind to investors as well. Despite the swift and brutal drop in March, all major stock markets have more or less recovered and then some. I was expecting markets to fall for another six months or so but the fall in March was so brutal that I suppose it took all the wind out of the sails of the bear.

However, the bull has really come back with a vengeance. Young people who were too young to even remember the Global Financial Crisis have participated widely through apps like Robinhood that offer zero-commission and gamify the whole trading process*. And the thing about these kind of times is that when new blood enters the markets and start to make ridiculous returns without experiencing much pain, you know things are starting to get a little crazy.

Nevertheless, as I write this with 1.5 trading days left in the year, my portfolio looks fine. As long as you save and invest for the long-term, you should be fine. I’ve learned a big lesson in investing this year which is that it’s pretty much futile to time the market perfectly but having said that, it’s necessary to also have a sense of when markets are a little crazy and when they are at basement-bargain levels. In short, I think markets have been getting a little crazy of late.

Now, don’t get me wrong. 2020 hasn’t been all cheers. We lost a close family member on my wife’s side of family. The only consolation there was that the passing was peaceful and there wasn’t much suffering involved. Plus that family member has had a long and fulfilling life.

And that passing got me thinking. While we know the average life expectancy of someone in Singapore is in the low 80s, there’s also half a chance that someone in Singapore never makes it to that age. At the same time, there’s also half a chance that you’ll live past that age. In short, you gotta live each day thinking that it could be your last but at the same time, you can’t YOLO each day as odds are you’ll need resources for a long future.

Alright, I think this going to be a good place to end my post. 2020 was an eventful year. I hope 2021 will be kinder to the world and I hope it’s a year that will be good to you too.

Note:
*Notice I said trading and not investing.

Last ‘Best Reads’ of the year. And what a year it has been.

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Supercharging Your Financial Bullshit Detector
(Incognito Money Scribe)

Great post but the problem with advice that’s given in the post is that like all things in life, most people will fail to appreciate it.

Running Out of Time Before Running Out of Money
(Of Dollars and Data)

Something to think about. However, also remember that it’s not necessarily a bad thing to run out of time before you run out of money if you can plan for a way for that money to continue making a difference even after you’re gone.

Meet Bob, the World’s Worst Market Timer
(The Reformed Broker)

Great, great example on how time in the market can even overcome the worse possible entry timing in the market. However, it’ll be interesting to see what the results are in a market that went nowhere instead of a great big, bull market. In other words, how would this look like for someone invested in the Nikkei?

Animal Spirits: IPO Mania
(A Wealth of Common Sense)

A sign of the times? By the way, there was once when I tracked the number of IPOs on the SGX and there is a strong correlation between bull markets and the number of IPOs coming onto the market. I guess the point and narrative is obvious but don’t think that this can be used as a market timing signal.

At best, it means that much of the credit in the markets have been soaked up by these IPOs. As long as the demand for credit outweighs the supply of it, markets will continue to go up.

“A Social Experiment” – S’pore Influencers Clarify On Website Selling Their “Used Pillows”
(Vulcan Post)

From what I gather, “Social experiment” seems to be the term you use whenever you want to back out of the original intent you had. Anyway, I’m not sure which is worse – (a) the selling of used pillows to the kind of demographic it was targeted at, or (b) the selling of what are actually brand-new pillows when the customer was expecting a used one.

(a) is trashy but hey, you know, willing buyer, willing seller while (b) is clearly deception or false advertising.

In a previous post, I mentioned about our recent decision to move to a new home and my brief thoughts on some of the considerations that we had when buying the new place.

In this post, I hope to explore some other angles to buying a property in Singapore. Hopefully, this would help if you are looking to buy a property in Singapore.

First things first, I’m not a professional property investor, analyst, or researcher. There are tons of others out there with more experience and knowledge about the property market in Singapore.

What I do have is some knowledge and training in economics and finance. And well, buying a property is one of those decisions that economics and finance is well suited to tackle.

Why are you buying the property?

This is perhaps the most important question to ask yourself before buying the property.

Are you buying the property to stay in? Or are you buying the property as an investment? Or perhaps, both?

The reason why I think this question is so important is because many people often confuse what their objectives are. They start with buying a place thinking that it’ll be a great place to stay but after talking to some people who are in the industry, they then decide that they should buy the biggest property they can afford because it’ll be a great investment.

While the two objectives may not be mutually exclusive, I find that seldom do the two converge. Or at least if they do converge, it comes at some cost to the buyer.

Let’s take the first scenario – you are buying a property because you need a place to stay. In this case, the analysis is simple. Treat all the associated costs as a housing expense and simply find the one that minimises cost or maximises utility for each dollar of housing expense. Let’s see how this applies.

Given the choice between buying a condo or resale HDB, both on a 99-year leasehold, roughly of the same age, and that’s located in the same area, what would be your choice?

In this case, I would go for the HDB resale simply because for a unit with the same floor area, the cost per square foot is less than half that of the private condo. I find very little upside to having a walled community simply because a housing type is labelled “private”.

Maybe you get some sort of kick living in private property because of the gym or the pool (beware that these come with the associated higher maintenance cost) but the point is, when you take on the bigger mortgage, you’re aware of why you’re doing it.

You can take it one step further and figure out if it’s better to rent or to buy. I think it’s a very good exercise you could do and at the minimum, the basic considerations would be the rent vs. mortgage and maintenance costs as an owner. Once you work out the NPV of renting vs. buying, you can then factor in the fuzzy stuff like emotional attachment to a place as an owner.

If you assume that the property will act as both an expense and an investment, then automatically, you must factor in the rate of return that you expect to earn on the property as well as think of how you would (eventually) monetise the asset.

However, you must be aware that if your home is also your biggest investment, then you must also recognise that you are taking on a lot of concentrated risk.

For example, if for some reason you have to liquidate your investments, it will also mean having to move house and remember that property, as an asset class, isn’t very liquid.

Furthermore, if you cash out of your home in the future, you’ll need to realise that if property prices move up in tandem, then selling your place at a good price means buying another place at a higher price.

Besides the there are costs of moving to a new place. Downsizing or moving to a cheaper neighbourhood is another strategy but you must recognise that those options have their associated costs to them as well.

Besides that, remember that opportunity costs matter. Investing most of your wealth in property that typically returns the same rate as inflation also means that you give up earning returns in other asset classes such as stocks.

What can you afford?

So once you’ve decided why you’re buying a property, the next thing is to decide what your budget is.

The first thing to recognise is that not everyone who says they have your best interests at heart really has your best interests at heart. After all, consider the incentives of your real estate broker. They earn a commission (~ 2%) for each sale transaction that they represent their clients.

If you understand this, then you’ll understand why an agent might try to encourage you to buy a bigger property than you might want to or need to. And this is precisely why you hear stories property agents telling their clients to “upgrade” from one property to two or agents telling their clients to “upgrade” from HDB to private property.

If you ever find yourself seduced by some of these pitches, go and re-read the previous section. Know why you’re buying the property in the first place.

Also, don’t listen to the bankers. They’d love to lend you more, particularly against collateral that they can seize in the event you default on the loan. That’s the reason why there are government regulations on how much loan you can take. The banks won’t need protection. It’s naive buyers that do.

I’ve found that the best guide to how much house you can buy comes from Property Soul. She has a 3-3-5 rule that provides a good rule of thumb for how much expensive the property you are trying to purchase should be. Note that the rules of thumb are fairly conservative so if you stick to her rules, you’ll be safe.

Conclusion

In short, this post isn’t meant to be a guide to buying property in Singapore. Instead, I hope that you get a sense of the financial considerations that one should take note of when buying a property.

Postscript: After I wrote this post, apparently the regulators have become aware of some of the more egregious practices that have been going on in the property market.

By the time this gets published, the US Presidential Elections are over! Yay, now can the world get back to some business?

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Are We Trading Our Happiness for Modern Comforts? (The Atlantic)

Prof. Arthur Brooks makes very good points that I’m sure is nothing new to people who have found contentment. At the same time, I think these points are lost on a (typically) younger generation of people who have yet to come to this realisation that things aren’t everything.

Can money buy happiness? Depends on how a person sees their social standing, wealth compared to others: Study (Today)

One more read for those into these happiness studies.

Economics & Politics as a Lens on Markets (The Big Picture)

Remember, markets are reactive and at the same time, are forward looking.

On the FIRE movement’s enemies… (Growing your tree of prosperity)

I like Christopher’s writings. This piece of his is no different. The most important line in the piece? “A conventional approach will yield conventional results”.

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Wait. Isn’t this supposed to be about investing? So why am I telling you about savings? At the very least, shouldn’t I be telling you about concepts like Time Value of Money (TVM) or Compound Interest? Well, all of those might be important but let me explain why I think savings, at least in the beginning, is the most important step of all.

Compounding will turbo-charge the returns you get on your capital. C the difference between simple interest and compound interest. A simple interest of 10% per annum (p.a.) on a sum of $1,000 brings your total to $2,000 after 10 years while the same $1,000 compounded at 10% p.a. for 10 years gets you $2,593.74. That’s almost 60% returns ($1,593 vs. $1,000) just by letting your returns compound.

So why is savings so important?

Zero compounded by anything is still zero

For starters, no matter how powerful compounding is, if there isn’t anything to compound, your returns are still zero.

That’s just it. You can’t escape the mathematics of the situation.

Naturally, the higher the savings rate also means that compounding has a much bigger number to compound on.

Without savings, it’s going to take a long, long time

In the beginning, you aren’t likely to have much capital to start with. Even if you can produce god-like returns in the realm of 20-30% p.a., the absolute sum is not going to be life-changing.

For example, let’s say you have a financial independence target of $1 million and you expect to compound $1,000 to your financial freedom. Assuming you can achieve the above-mentioned godlike returns of 25% p.a., it will still take you roughly 31 years to reach your target.

But what happens if you start saving an additional $1,000 a year? Then it only takes you about 24 years.

And remember, the above example assumes you are going to some sort of investment genius. I can assure you that more likely than not, you will be as average as I have been.

Let’s try to apply some more realistic numbers and see what that takes us. This example is going to be in the context of someone working in Singapore that has a Central Provident Fund (CPF) account. As of writing and I think (fingers crossed!) for the foreseeable future, the Special Account (SA) pays roughly 4% p.a.

If a Singaporean worker starts working at 25 years old can somehow contribute get $5,000 per year in their SA and it continues to compound at 4% p.a. until he/she reaches 55 years ago where CPF allows that lump-sum withdrawal, this person would have $280,424.69. Assuming that the 4% p.a. is a real rate of return, I think more than a few people would be quite happy with having $280K in their bank.

Savings forces us to live with less

Living with less means that it’s much easier to be financially independent.

Most people don’t realise this but there isn’t a magic number to financial independence. Financial independence depends a whole lot on whether you have enough income to meet your expenses.

A person with an income of $100,000 and expenses of $100,001 per year will never experience financial independence and in fact will be forced to dissave.

Naturally, achieving financial independence means being able to generate the income necessary to cover your expenses at will. There is no dependence on an employer for this income.

How does this relate to savings?

Well, if your savings rate was high, then your expenses would naturally be low. Let’s consider two people, both with an income of $100,000 p.a. Let’s say that A only saves $10,000 while B saves $90,000. The corollary must be that A spends $90,000 while B spend $10,000 per year. This means that each year, A would have saved 1/9 of a year of his expenses while B would save 9 years of expenses.

I also think there’s something to say about how people buy too much crap that they don’t need due to excessive advertising or how we end up spending on things that won’t mean much some years down the road and the environment is paying a price for that.

Less is more

If we were to apply the pareto principle of how 80% of all outcomes are determined 20% of actions, I would say being able to save and having a high savings rate is the 80/20 rule of personal finance.

I don’t think I’ve ever read or heard of anyone who has gone broke by saving too much. On the other hand, there are numerous examples of those who have made millions and lost it all and more because they simply couldn’t control their spending.

In short, save more, spend less.

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For those who’ve been following me for a while, you’ll know that I really think that most Financial Advisors in Singapore have never really moved on from being anything more than insurance salespeople.

This latest post over at Investment Moats show what’s wrong with the Financial Planning industry. While the data collected by Kyith is by no means comprehensive and only shows what has happened many years ago, I highly doubt that the Financial Planners in Singapore today operate very differently from the late 90s/early 00s and I’ll explain why.

Don’t get me wrong

Before I go and point out the issues I see, I want to state upfront that this is by no means targeting the people who have chosen this profession or in any way about any particular financial planner. I personally know a few and they range from very experienced ones to rookies in the field and by and large, they are not bad people.

I also think that insurance is a necessary expense to protect against low probability but high impact events. The problem with the Financial Planning industry is how the industry evolved from dealing primarily with insurance to one that moved into advising their clients on all areas of their finances.

Proof is in the pudding

Source: Investment Moats

If you look at the examples compiled by Investment Moats, you’ll see that most of the plans (which look like endowment plans) are basically plans where people pay a regular premium in return for an amount that gets returned at the of the life of the policy.

In short, it’s a forced savings account that only matures some years down the road.

A cursory look at the returns per year (XIRR) shows that investing in any one of those plans returns any where from 2-4+ % which is my opinion is pretty weak if you think about the fact that interest rates have been much higher in the past.

The worst part of all this is not that the plans delivered as they promised. In fact, if you go back to the 2000s, I’m pretty sure the plans were being marketed with non-guaranteed returns that were much higher, probably in the 5 – 6.5% p.a. range.

A test for all financial planners

I’ve spoken about how the agency problem is a big one for financial planners in Singapore. Furthermore, the barriers to entry into the industry is low and once they are in, the focus on most training is in terms of sales and not actual financial literacy.

If you look at the returns of the above savings plans, you should probably realise that savers could do better by putting their money in the CPF SA*. Using the same parameters given in the example in Kyith’s article, I came up with a figure of $34,569.07 if the yearly premium of $1,228.80 paid over 20 years was compounded at 5% per year.

Compare that with the $28,317.13 received by the policy holder in Kyith’s story.

Therefore, my test is this:

If presented with a plan by your financial planner, ask them how many of their plans have actually paid the non-guaranteed rate or more and to show you the data.

Given the low-interest rate environments, if any of the plans presented show you non-guaranteed returns close to 5% p.a., you should run and hide.

And if they show you returns of less than that, then why bother since CPF presently gives you that returns but without the additional corporate risk and fees?**

If you have a financial planner that is willing to say, “hey, you can get protection from me, but when it comes to savings, my products aren’t exactly going to be the best bang for your buck.”, then do let me know.

Notes:
*Less chance of default, almost equally long period where money gets socked away.

**I’m sure some of them will point out that the lower returns are due to the plans having some form of insurance as well. But if so, then why not just sell the insurance separately without the savings plan.

Covid-19 is all the rage here in Singapore right now. But obviously the markets have been pretty much treating this as a non-event. I have quite a few more links this week if you have to stay home because of the virus.

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Great to Gone (Humble Dollar)

Great story. You may or may not agree with the diagnosis but you can most certainly feel for this guy. How many people can count their ancestors a few generations before as one of the wealthiest people in their country?

I personally witnessed this in my own life as the small business that my grandfather started has gone from start-up to stagnant to dead under the hands of the second generation.

Dollarisation would not save Argentina (Financial Times)

Great read for those into macroeconomic and monetary policy. It’s a subject very few appreciate and even fewer understand well. Unfortunately, it’s something that also affects many lives.

The Biggest Wealth Levers (A Wealth of Common Sense)

A great breakdown of what leads to wealth creation for individuals and households. The Millionaire Next Door is a classic and goes into too much detail (like the brand of cars and watches that most millionaires own) which can cause a loss of relevance in today’s context but the principles you can learn from there are timeless.

The Biggest Risk in Crypto Today (A Wealth of Common Sense)

Good points overall. And just like every financial scam out there, it preys on asymmetric information between those who understand finance and those who don’t.

However, finance isn’t rocket science. More people should be able to figure it out.

Why my purchase choices have the kiss of death (Tim Harford)

Really entertaining and funny read. I particularly like the phrase “harbinger of doom”. I must confess that I might be one of these people as well.

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This is one of those end of year posts so I guess it’ll be retrospective and yet forward-looking at the same time. However, being the end of a decade, I thought it’ll be interesting to look at some of the changes that has happened in my life in order to give myself an idea of what to expect in the next decade.

Career

At the beginning of this decade, I was a couple years out of school and working for the civil service. The job paid decent but was the scope of work was way out of my interest zone. Needless to say, I was there for another 2 or so years before I left for a teaching job in the public service.

Teaching foundation level economics has been fun but of course, the lack of depth impedes an understanding of real-world issues. Also, in this current day and age, economics has been applied in areas outside of the traditional business setting but being in the business school, the economics we teach doesn’t stray far from your traditional Econ 101.

In short, teaching economics at the school where I am right now is kind of limited in depth and breadth. Plus, it seems to be a business school phenomenon that economics isn’t all that important. Instead, the flavour of the times seem to be anything tech-related.

Fortunately for me, my interests and skills lie not just in economics but also in finance and in the next decade, the plan is to move further and further away from economics and more into the finance space.

Which area of finance? It should be in corporate finance and business valuation.

Health

It’s funny that I’m down with flu as I write this but my health hasn’t really changed much over the last decade. If anything, it has gotten slightly better.

I put on a fair bit of weight after working and in December 2017, I reached peaks that I had never reached before. That was the trigger for me to be more aware of my diet.

The thing is, I love beer.

So I searched and searched, and eventually I learnt that there was something called intermittent fasting. Long story short, I followed some version of it where I skipped breakfast except for a cup of coffee with evaporated milk, no sugar. And then I ate lunch at around 11:30am or so, followed by dinner at around 7:00pm.

I not sure I even did it right because some people say that you can’t have anything that has even a little bit of sugar in it (which the milk has) but anyway I lost about ten kilos and my weight has been at a comfortable level since.

I’m also sure it’s because I had light lunches on some days of the week but otherwise, I didn’t restrict my diet to any food groups. It was all about making sure you don’t overdo things.

The not-so-good part is that I haven’t managed to exercise regularly. Every time I’ve started to hit the gym again, the momentum somehow gets disrupted and the next thing I know, a week or two goes by and all my gym gains have gone down the drain.

I really need to start making a gym routine part of my week because I can literally feel my body getting weaker once I go without exercise for just a week or so.

Currently I try to do my gym sessions during lunch but I realised that’s not exactly a great idea because my timetable changes every semester which would be a deal-breaker for establishing a routine.

We’ll see how things go from here.

Life

Well, life is the big one, isn’t it?

At the start of the decade, I had a girlfriend. Now, I have a wife and three cats. Scratch that. Make it seven. How we got to seven is a funny story but we’ll get to that later.

So my wife and I have been married for almost 8 years now but it’s more than 10 years since we’ve met and gotten together. We’re not the perfect couple but we’re perfect for each other.

We can get upset at each other but we’ve never shouted at each other. We mostly just give each other the cold shoulder for a while before we realise that it’s not worth it and then we apologise and make up.

Most of the time, we just enjoy the simple things in life and each other’s company. Things like reading good books, eating good food (in moderate quantities) and relaxing.

In that way, we’re kind of like cats.

So, two years ago my wife (it’s always my wife who has the better ideas) asked if we could adopt a cat. She’s always liked cats but never owned one.

Since we don’t have kids, I figured it wouldn’t be a bad idea to have a cat to come home to and from what I read, cats are definitely lower in maintenance compared to dogs (or kids). I had dogs growing up so I kind of an idea about what kind of care you need for dogs.

And that’s how we got our first cat, Teddy. He wasn’t the cat we were going to adopt but then the rescuer suggested that as first-time cat owners, we adopt him because he was friendly and easy-going.

That turned out to be totally true because Teddy is the most low-maintenance cat I’ve ever met because you pretty much just have to feed him and make sure he has a clean litter box, and he’ll be a happy camper.

Then some time this year, the same rescuer asked if we could take in a kitten that was part of a litter rescued from Pulau Bukom, an island off Singapore, which is part of the oil refining industry in Singapore.

So cat number two, Pepper, came into lives and she has been a little ball of terror because she came with a parasite issue which caused diarrhea, refuses to leave Teddy alone hen all he wants to do it chill, and is super noisy when it comes to feeding time. But we still love her anyway.

Then a few months after we got Pepper…

One day as we were walking home, we noticed a cat hiding away at the bicycle rack, at the block of flats next to ours. We’d never seen her before and there are community cats in the area so it’s unlikely that another stray would have ventured into this area since cats are pretty much territorial. Plus, she was too friendly to humans which made us suspect that she was abandoned.

And so cat number three, Mudpie, came into our lives.

What we didn’t realise was that cat number three, was pregnant with four kittens. By the time we found out, she was two weeks away from delivering and so we now have seven cats at home.

They turned out to be such fluff balls

I think the next decade will easily see a mean reversion in terms of cats.

Wealth

Ah yes, and finally, all about the money.

I’ve been tracking this number ever since I started investing but my records for the early years haven’t been well-kept. The good thing is that I now have at least a decade worth of records so I can see exactly how much my wealth has grown.

The short answer is: a lot.

At the start of the decade, my portfolio was under $50,000. Today, it’s roughly eight times that. By the way, I only count monies that I can easily convert to cash. This means that I don’t include my CPF accounts nor the property that we stay in.

You could include those but that would mean giving up your residency status in Singapore. If that’s an option for you, then by all means, include those numbers. Otherwise, if you’re a Singapore citizen or PR, you have to ignore those numbers as those don’t mean much until you reach the age where you can cash out.

I’ve digressed so back to the increase in my wealth. Is that record impressive? Not really.

Because it could have been a lot more if not for two things: one, I was and still am, under-invested, and two, I was invested in the wrong places.

Let me explain.

I’ve had a huge allocation to cash in the last two to three years. This is despite the fact that as an investor, I’ve two things going in my favour. One, I’m relatively young and two, I’m still gainfully employed and likely to be in the foreseeable future (iron rice bowl, see above).

Therefore, I should have bumped up my allocation to equities, REITs or anything with a higher expected return than cash as I’ll be able to ride out any bumps along the way.

The second reason is that I was invested in the wrong places. Honestly, I started out the decade thinking that if I could read the financial statements, I would be a lot better than most investors. That is true but only to the extent that one is familiar, or willing to be familiar, with how the economic landscape that any company is in was going to change.

For example, there’s a company that I (like many other Singaporeans) am invested in where the shift towards online media has absolutely damaged the company’s main income generator. And this damage to their old business model means that the damage is irreparable despite their best attempts to diversify into other areas such as malls, nursing homes, and student housing.

Even if they are successful, trading a much higher-margin business where they had a virtual monopoly for one that is much more competitive and capital-intensive means that the whole business is unlikely to provide the kind of returns to investors as it once did.

Therefore, the market correctly priced in lower multiples and slower future growth which explains the situation that the company finds itself in. In case you haven’t figured it out, the company I’m referring to is SPH.

There are a number of other such mistakes that I’ve made in the past decade and honestly, I find it too much work for the extra returns that a broadly-diversified portfolio might return. Needless to say, I’ve had my successes but those aren’t anything to brag about either.

The main reason for the increase in my portfolio is simply the insane savings rate that I have. By my back-of-the-envelope calculations, more than half of that increase was due to savings. Another 20% or so due to returns from dividends and the rest from capital gains.

In short, while you are young, you can have shitty investing skills and still see a dramatic increase in your net worth if you save like hell.*

I still obsess about my net worth but ideally, I’d like to arrive at the day where I honestly don’t care about money any longer because what I have is more than enough for my wife and I to live how we want to.**

In the next decade and more, I have to stick to a better investing plan. I’m already fairly disciplined about savings because it’s pretty much on auto-pilot and I don’t spend very much compared to others.

The main focus now will be to stick to an investment plan that allocates a higher return to equities and be disciplined about the re-balancing process while keeping costs low. This will be the way to go as I have many decades of investing ahead of me.

Goodbye 2019 and 2010s

You’ll notice that I haven’t talked much about what’s going on in the world and frankly, none of it has mattered much to me.

We have politics becoming a joke in the U.S., strongmen steadily gaining power in Russia and China and in Singapore, we have our own Orwellian-esque POFMA.

The climate has also gone bonkers with records temperatures being reached and yet, people rode the wave to sell metal straws while the fear-mongering grows over solutions that smart people like Bill Gates are suggesting.

In the business world, startups that blow through cash (think Uber, Grab, the disaster now known as WeWork, or almost any other unicorn for that matter) gets seemingly unlimited amounts of funding for business models that pretend to be a tech spin to an older business model.

Even in my world, the mantra seems to be “tech” and “entrepreneurship” but the powers that be fail to realise that as a business school, it’s unlikely for us to teach “tech” well. And frankly, “entrepreneurship” isn’t something to be taught so I’m not sure how we’re going to justify charging the school fees for that one.

“Hey, splash some cash for us to teach your kids the rules that they have to break.”

That’s probably the most honest marketing you’ll get from a business school trying to teach entrepreneurship.

Despite what’s happened, the 2010s have been kind to me. I’m extremely blessed to be living in a place free from strife, have loved ones that care about me, and seven cats.***

Notes:
* Of course this has diminishing returns as your net worth grows. It’s unlikely that your salary will grow in line with your portfolio and therefore the same savings rate will gradually add less and less to your net worth as the years go by.

**Skeptics will say that the day will never come but based on my current lifestyle, I’m pretty sure I’ll get there sooner rather than later.

***Of course, we’re not going to keep all seven.

So what’s new?

Well, what’s new is that this study by robo-advisor Syfe (with press coverage from both The Straits Times and TODAY) brings up two points that other surveys haven’t really brought up.

One, that younger folks aged 25-34 are headed for a comfortable retirement provided they continue their level of savings and low debt rates. And two, that those who owned a home were less prepared for retirement than those who rent.

You can read the full report here but I would also take the report with a pinch of salt. After all, Syfe is in the business of getting more people to invest with them so it’s fully in their interest to ask you to save and invest more.

Another point is that I took the survey on their site (link here) and if this is what the report is based on, then I don’t think the numbers are very accurate because some parts of the survey are badly designed.’

For example, the survey asks if you contribute to CPF but later in the survey, also asks if how much you save without specifying if the amount of savings includes your savings in your CPF account.

Also, the part on home-ownership doesn’t account for how much mortgage you have left or how much is the mortgage being serviced.

All things considered, I think the survey might be a little flawed so don’t take it too seriously.