In a world filled with psychological biases, there is none more apparent than the “halo effect”. The “halo effect” is when someone is viewed as some Omni-prescient being due to his or her status.

This status may be due to positional goods (a.k.a Veblen goods) that signal one’s position or it could be due a status conferred by an authority. In the first case, a good example would be the conclusions people jump to based on the kind of car you drive; a person driving a Mercedes Benz or BMW is usually seen as someone with money. In the second, doctors or people who have some title (e.g. CFA, CPA, etc.) to their name as seen as authorities of some sort.

With the ‘halo effect’, the assumptions and presumptions are sometimes taken too far. For example, it would reasonable to assume that a doctor is knowledgeable about medicine and health but with the ‘halo effect’, sometimes people expect doctors to be knowledgeable about everything.  

Unfortunately, this halo effect is often present when it comes to getting wealthy. Many people assume that getting wealthy and being free from worry about finances is only something those with high-paying jobs or those who are really intelligent* can achieve.

See if you fall prey to the ‘halo effect by considering the following two people.

Person 1

Gas station attendant and later on in life, janitor.  His idea of a treat was his usual morning visit to his local coffee place. He always wore shabby looking clothing that even gave the impression that he was homeless.

Person 2

A-list actor. Earned millions from blockbuster movies screened in theatres around the world.

Who would win?

At first glance, the obvious answer seems to be Person 2. After all, if you earned millions in your lifetime, you’ve possibly earned more than most people even earn in their lifetimes. With that kind of a headstart, how can you possibly do worse than Person 1 who probably earns a wage than probably falls into the bottom 10% of any society?

Unfortunately, that’s true.

Person 1 accurately describes Ronald Read who left a US$8 million dollar fortune to charities and other institutions. And he isn’t an isolated example. Take the case of Margaret Dickson who left a US$1.42 million dollar fortune and Paul Navone who had a fortune large enough for him to donate US$2 million to charity. (full story here). In Singapore, there was a case of a retired primary school principal who left $1 million to her domestic helper (story here).

Neither of these people profiled had jobs that paid astronomical sums. In fact, Ronald Read, Magaret Dickson, and Paul Navone all had low-paying jobs while the Singaporean profile had a job that was considered upper-middle class but certainly nowhere near investment banking levels.

Whereas I got Person 2’s profile from something I read about Nicholas Cage (who had to declare bankruptcy) but that profile isn’t something out of the ordinary. I remember reading similar things about Johnny Depp and stories of lottery winners who subsequently lost it all also come to mind.

Sure-fire way to wealth

I read this the other day and I completely agree. You may not be the best investor out there who can consistently generate the highest returns year after year, but being disciplined about savings and being humble about potential returns will ensure that you get there.

The main reason why people in the Person 1 profile succeed despite the seemingly low odds is that they turbo-charge their returns with a high savings rate and let their returns compound. i.e. They put their head down, work hard, lead a simple life, and let time do the heavy lifting for them.

The main reason why people in the Person 2 profile do so badly despite the odds being in their favour is that they let lifestyle creep** take over and make terrible financial decisions. It’s the same with every company that earns too much cash and then blows it on silly projects that kill shareholders’ returns rather than add to them.

As the people in the first profile show, there is a way to wealth.

You just have to stick with the plan.


Before we go, I’m not saying that you shouldn’t study hard, or work hard to get a job that pays well. I’m saying that getting a high-paying job isn’t a necessary condition in order to get wealthy. Neither is a high intelligence.

Obviously, better-paid people who are disciplined savers and investors end up wealthy at a younger age and find it much easier to do so. Celebrities who are smart with their finances can parlay their sums into even greater sums (Oprah and Dolly Parton for good examples of this).

The point I wanted to make is that we need to strip the halo effect away and realise that most people could become wealthy if they wanted to. Being disciplined and smart about your finances matter more than high pay and intelligence.



*I used the word ‘intelligent’ and not ‘smart’ because ‘intelligence’ usually refers to one’s innate cognitive ability and is largely immutable whereas ‘smart’ usually refers to one’s learned experiences. Even if you disagree, that’s the way I mean it here.

**Lifestyle creep is something that many people can relate to especially in this era of social media. Seeing other people dine at fancy restaurants or take holidays to exotic locations stir emotions that have people convinced that they too, need to experience the same things in order to be happy. People then spend extra dollars earned on nicer but unnecessary things. It’s particularly common among younger people who see 100 dollar t-shirts or 1000 dollar shoes as a necessity in order to gain influence among peers. It’s stupid but I know the feeling well because hey, I was once young too.


I met a friend for lunch and he shared with me that he was thinking of retiring early. Not super early but earlier than official retirement age kind of early. Given that the official retirement in Singapore is 67, he was looking at something like 60. His wife also brought up the possibility of reducing the number of hours of work or stopping work altogether in order to spend more time with their young children.

Some background first

My friend is also a colleague. He’s a very dedicated and hard worker, wife and he are in their 30s, they have two young children and are basically, in terms of income, are what Singaporeans would call middle or upper-middle class. After all, when they got married, he was forced to buy a property from the resale market as their combined income already exceeded the cap that qualified people to buy a subsidised apartment from the government.

In my opinion, that’s a big handicap for him as far as retirement is concerned as he has a 20-30 year (the typical length of a mortgage in Singapore) mortgage to pay off on his property. If he plans to keep staying in Singapore, that’s money that he’ll have to pay off as he’s working towards gathering more assets that can replace the income he receives from work.

He also has two young children. That’s an additional financial burden for roughly the next 20 years of his life. The burden should ease somewhat as his children move into primary school as formal schooling in Singapore is heavily subsidised but as far as living expenses as concerned, that’s going to be another anchor tied to his feet. But given the circumstances, it’s no wonder we Singaporeans aren’t producing enough babies to replace ourselves.

The path to early retirement

He then shared that he came across a roadshow from our national pension system, the Central Providend Fund (CPF) and was seriously considering moving more funds into his Special Account (SA) as it earned a much higher interest rate (4% as of writing) as compared to the Ordinary Account (OA) which only pays 2.5% (once again, as of writing).* He also felt that CPF Life scheme, which is basically an annuity that pays you a certain amount each month for as long as you live, was promising. He also shared that he thought about moving abroad in later years as each dollar could be stretched much more in other countries.**

Unfortunately for my friend, his housing loan will probably mean that not much is going to accumulate in his CPF account. I suspect he’ll be lucky to have about $100,000 in his CPF accounts (OA plus SA) by the time his housing loan is paid off.

I don’t envy my friend’s position. He and his wife may belong to the upper-middle strata of society if we go by household income but the fact that he has a huge housing loan on a private property and two young children to take care of means that even something like retirement may be a concern for him.

My reply

So what I told my friend must have been a paradigm shift for him because I told him that I wasn’t going to wait until I was anywhere near 60 years old. I was going to stop work as soon as I hit my target net worth that would generate enough income to allow me to live a life near my current standard of living. By my estimates, this will take me another 5-10 years. I’m pretty sure I’m an outlier because very few people in Singapore are planning to retire in their 40s.

The sad thing about us having that conservation is that if we, middle to upper-middle class Singaporeans are having this conversation, then people who fall below the middle in terms of household income better hope that their bodies and mind never give way until the day they die because they’ll probably be working for the rest of their lives.

Personally, my plan hasn’t changed. If you can figure out how much you need each month, multiply it by 33 (if you’re conservative) or 25 (if you’re less conservative) and you’ll know how much you need in order to retire. If you want to be more precise, I’ve written about this before.

The other key to this is to be able to generate at least 3-4% return per year (not difficult) on your assets which will provide the income to replace the income from work. The other concern is inflation which means that the ideal rate of return is not 3-4% but more like 6-7% per year (still doable even without leverage).

An example

Just for illustration, let’s suppose that someone in Singapore needs $1,500 per month in order to survive. Assuming $250 a month for utilities, internet and phone bills, conservancy charges and transportation, that leaves our hypothetical Joe with about $40/day for entertainment and food. Food is pretty cheap if you don’t eat out at expensive restaurants every single day.

So given the above estimate, hypothetical Joe will need anywhere from $450,000 – $600,000 (depending on whether you use a 3 or 4% withdrawal rate) in order to generate the income needed for survival.

I guess a good rule of thumb would then be that if you have double the survival amount, you would be living decently and if you have double that, you would be able to live pretty luxuriously.

In short:

Standard of Living      Wealth Needed                 Income Generated (Monthly)

Survival                        $450,000 – $600,000          $1,500
Decent                           $900,000 – $1,200,000       $3,000
Luxury                          $1,800,000 – $2,400,000    $6,000

Next steps

I know that those sums above look ridiculously huge but if you plan to retire without worries, that would be the kind of sums I would aim to have to retire with a peace of mind.

Of course, if you can cut your expenditure down to much less (e.g. through growing and cooking your own food, spending much less on discretionary items such as cars and holidays, spending less on medication and healthcare by keeping yourself healthy), then I guess it’s possible to retire with much less. The other alternative would be to continue working in some form (i.e. reduced hours or reduced workloads) or to generate income from other some venture.*** But think about how much less of a burden it would be knowing that you’re not working in your job because you have to.



* I know the CPF pays an extra percentage point on the first $60,000 of the sum in your CPF but in the larger scheme of things, that’s negligible.

**This, I agree. Unfortunately, it also means quite a bit of lifestyle changes. No more 24-hour prata joints, McDonalds’ and Mustafa, if that’s your sort of thing. Or no more eating cheap and good food like Chicken Rice, Nasi Lemak and Mee Goreng unless you plan to move to Malaysia. But that presents other concerns, like safety.

***It’s ironic how some people who stopped working early actually ended up making more money sharing their experience with early retirement as compared to their previous jobs.

I’m a fan of what the Motley Fool (MF) puts out but some of the things that they put out are, for obvious reasons, click-bait-ish or downright simplistic. In this article, it’s worse. It’s downright dangerous.

So in this article (link here), the MF writer looks at three stocks on the STI that are near their 52-week low. To be fair, that is a promising way to fish out stocks that may have been beaten down more than deserved.

Most of the article is a pure description of the latest corporate activities in the respective stock. This is fair but the point of the MF article isn’t to report the news but to make some analysis of the events. So, issue one, the article doesn’t make any sense of the recent developments and the subsequent impact on the stock’s financials.

Right near the bottom, the MF writer goes into the downright dangerous territory by recommending that SingTel is worth a look (and the other two aren’t) just because SingTel’s dividend yield is higher than the STI’s overall dividend yield.

This is dangerous because it doesn’t explore whether SingTel’s yield is sustainable. One, it could have been high because of special dividends the previous year. Two, the current yield may not be sustainable and shareholders may experience a cut in dividends which will eventually bring the yield down.

Now, I don’t know if any of the above will happen as I haven’t gone to take a look at SingTel’s financials but the fact that the MF article recommends SingTel based on its dividend yield and the stock being near its 52-week low is just a bad recommendation.

I wonder how many people will read the MF article and be able to point the same things that I just did. If you could, then good for you. You’re probably financially-savvy.

So, just the other day I heard some shocking news.

An acquaintance of ours passed away and it turned out that she had been suffering from depression and took her own life. We didn’t know her very well but it was a shock because, from the brief time we knew her, she was very bubbly and cheerful. I don’t know if she was already suffering from depression when we knew her but it was also unthinkable that someone that appeared so positive could be suffering in silence.

The other shock was that she was EXACTLY my age. Right down to the day she was born. Someone my age passing away is a rare event, especially in a country like Singapore where life expectancy is high. But it happens. And in this case, it happened to someone that felt like life was troublesome than death.

And it’s a real shame because she had a gift. She helped my wife and I capture the memories of our wedding, which is one of the happiest moments of our lives. No doubt, she helped many others in the same way too and could have continued to help many more people do the same.

Dancing with darkness is seductive. It’s like a dance with a good-looking stranger dressed in black at a ball. The problem with life is that you can’t and shouldn’t keep revisiting that moment in the past. Doing so keeps your mind, and subsequently, your entire being captured in the memory of that moment while the entire world passes you by.

If you know anyone who’s suffering from depression, please get them some help.

This is for anyone residing in Singapore:
Samaritans of Singapore contact details
24 hours hotline: 1800-221 4444
Email (replies within 48hrs):

Update: Being more mindful didn’t help me remember that I didn’t have a title for the post. So here it is.

So, I’ve been trying to be more mindful lately.

And something interesting happened just the other day.

I was sitting alone having lunch and enjoying some “me” time. Then along came a colleague from the administrative office and joined me. That was ok with me because I’m kind of OK with him; We’ve had lunch and kopi before.

Then along came another two more colleagues- one, I’ve never had much contact with. So I was kind of neutral. The second, I’ve always kind of felt a bit averse to because of some prior contact with her. To be more specific, I’ve always thought she was a bit bossy, caused inefficiencies and wanted the limelight without putting in the work. To be fair, I still think that way.

But I reminded myself to be mindful and be present. And not to judge.

And the surprising thing is that the four of us who are not regular lunch partners (in fact, the four of us never had lunch as a group ever) actually ended up having conversations that were surprisingly engaging. We discussed a wide range of topics that ranged from politics to social change. Even more importantly, we didn’t agree on everything but there was never any animosity or ill-will. It was just a nice exchange of views and opinions even if we didn’t all agree on something.

I don’t know if it’s being mindful that caused me to have a different view or attitude towards this but I usually dread having lunch with people I don’t know well or don’t particularly like.

But after this instance, in fact, I realised that the colleague I thought was all bad was really not all bad at all. I can’t explain why but even the previous feelings of dislike for this person has been reduced.

And I feel better for it.




This is going to be a departure from my usual posts on investing. It’s also going to be somewhat of a personal post. I do hope it’s a useful post though because this could potentially be more useful than any investing knowledge there is.

What is mindfulness?

Mindfulness, as I understand it, is the awareness of being present.

This means to focus on the present and not have your mind running wild about the past (like the fun you had yesterday at a party), the future (like what your life will be in 10 years time when you are happily married with 2 kids and a dog) or things that aren’t there (like whether that person you like just checked you out or the blank stares that you may get when doing a public lecture).

Why does it matter?

The thing about life is that there are many things that happen every day that are out of our control. These things can either make us extremely unhappy or annoyed when things don’t go our way or, they can make us extremely happy or joyous when things go our way.

The problem with depending on external circumstances or conditions means that we are at the mercy of others or luck when it comes to our own happiness. It also means that we end up chasing something in order to make us happy. Unfortunately, that may lead to unintended consequences. For example, when I was much younger, I used to drink quite a bit of whisky. It wasn’t so much for the taste but more for the feeling that alcohol puts one in. That feeling of temporary weightlessness where you can forget about any worries or troubles. Unfortunately, that meant having a hangover and feeling horrible for at least half a day the next day wasn’t so fun. Also, it means that I always depended on whisky in order to feel that way.

Now, just to be clear, the above isn’t just about the evils of drinking. Many people have a different poison. It could be shopping, eating, travelling, buying expensive toys, sexual pleasure. Some of those may be more “healthy” than others but the common thing is becoming more dependent on external conditions to influence our state of mind.

And if you think about it, it’s ironic that something external or outside of our self is the thing that influences our mood which is largely a state of mind. Why is it not our mind that influences our state of mind?

Therefore, I believe it must be possible for our minds to influence our perception of reality. In this sense, it gets a bit confusing. After all, it’s not like I can simply wish away things I don’t like or want by meditating. Meditating isn’t some mutant power that can help you win the lottery or control the stock market. Meditating isn’t going to be the cure for some terminal disease that modern medicine can’t.

On the other hand, mindfulness meditation has proven to have some health benefits. After all, our perception of things is a result of inputs from our senses to our brain. How our brain reacts to those inputs naturally affects how our body will respond to external events. For example, if we experience stress, our body releases a hormone called cortisol and studies have shown that elevated cortisol levels aren’t good for the body. Mindfulness meditation has been shown to help people deal with stress better and therefore reduce the effects of stress on our bodies.

My take on how it works is that mindfulness is all about being aware. Aware of what? Aware of the sensations and thoughts that arise in our mind and just letting them pass. Why do we have to let them pass? Because the more we hold on to those thoughts, the more we let them affect us. And this happened to me at work about 2 years ago.

One day, I received a phone call from the admin office. Over the phone, the admin manager told me that a student of mine (I was the student’s form class teacher) had been sent to the hospital just before the start of a class. He then asked me to call another office that had reported the incident for more details so that I could call up the student’s parents and let them know.

I got pretty angry because I felt that this guy was passing the buck to me. After all, if someone in the school gets sent to the hospital, which is a seemingly serious thing, why does it matter whether it’s the admin office or the class form teacher that calls the parent? Shouldn’t the parents be notified as soon as possible? After all, who knows how long it took before he even managed to get me.

Second, he obviously didn’t do his job well because I shouldn’t have to call up another office to speak to the person who helped call the ambulance to get the first-hand account of what happened. He could have got the account when he received the call the first time around. What if I made the call and the person was not in? That would further delay the relay of the message to the student’s next-of-kin.

Anyway, I ended up making all the calls (which probably made me more pissed off). But that incident stuck with me and for the next few days, I was busy justifying how unreasonable the whole situation had been to anyone who would hear me out. The worst thing about this is the opportunity cost involved. All the time that I spent griping about how unfair the whole incident was could have been time spent doing better things. And those aren’t minutes of my life that I’m going to get back.

My journey

First off, I’m by no means an expert nor anywhere near the level of people who have been doing this for years. In fact, I’ve only just begun to meditate for 10 minutes each day and I find that anything beyond 10 minutes, my mind really runs wild. In fact, I only started meditating more regularly because the missus went away for a few days last December which I also spent a good part clearing my leave. So I had to wake up early to feed the cat but I pretty much had nothing else planned the entire day.

Prior to this, I had heard about meditation and been casually reading up on the subject for the last 10 years or so of my life. I’ve never been a religious person despite growing up in a household that believes in the metaphysical. My father is a self-proclaimed Buddhist which my mother only found out on the day they registered their marriage. But the thing is that like many “Buddhists” in Singapore, he isn’t really a Buddhist. In fact, the rituals and belief system is a mish-mash of Taoism and Chinese folk religion. Basically, Buddhism as translated by the Chinese when it was brought to China many years ago.

Furthermore, I spent the greater part of my school years in a Christian Methodist school where weekly chapel sessions were compulsory. Needless to say, I never really believed in either because neither made sense to me. After all, I prayed for good grades but I still had to study. So, not a very good system as far as the demonstration of cause and effect was concerned.

In university, I took an excellent module called “Introduction to World Religions” where I finally learned that Buddhism, as understood by most other Buddhists, was not the Buddhism that I knew. What I knew was basically Chinese folk religion masquerading as Buddhism. Why it happened was probably for the same reasons Christians believe that Jesus Christ was born in the middle of winter in a barn. It’s basically the adaptation of an existing pagan festival to the Christian worldview in order for the religion to gain acceptance. Ditto for how the Buddha got assimilated into the same universe as all the other Chinese gods that appear in folklore.

More importantly, I learn that Buddhism was actually more a philosophy than a religion and the whole idea behind Buddhism was to seek nirvana which is this state of enlightenment. Unfortunately, that’s where things get seriously complicated. Buddhism has evolved into so many different schools with so many different practices that one doesn’t really know where to start. Furthermore, translations of Buddha’s teachings enter this realm of utterly confusing and convoluted jargon coupled with a whole list of “don’ts” or riddles that didn’t make sense. Nothing helped much and my search for meaning continued. Subconsciously I knew what I was looking for because I wrote my honours year thesis on happiness and incorporating it in cost-benefit analysis. Happiness and economics. What a combination. Didn’t find it though.

I must say that before 2010, mindfulness and meditation were still pretty much confined to Buddhists and the self-help realm. Too many of them write in ways that are either confusing, pompous or full of things that offer grandiose claims (e.g. Deepak Chopra). For me, the big breakthrough came from Tan Chade Meng, Google’s Jolly Good Fellow who created a mindfulness meditation program for Googlers that seemed fairly successful. So I bought his book but I never developed a sustainable practice. His book, while describing mindfulness in very, very simple terms and prescribing very, very simple exercises to get started is good for beginners. But for me, I just couldn’t buy in completely because of the overly saccharine, “feel-good” tone of Tan’s writing. Add to that the lame jokes that get boring after a while and I never really bought into it.

What got me started again

2017 was a tough year of sorts. The worst part about it was not things that happened but things that happened that I could have controlled. In the face of a lot of things that happened, I pretty much turned to cracking open a can or two or saying, “never mind, let’s have a nice meal.” This led to my weight gain (which I’ve, thankfully, lost some) as well as this nagging feeling that there were things I could have done better.

And a few days ago, I discovered a book by Dan Harris called “10% Happier: How I Tamed the Voice in My Head, Reduced Stress Without Losing My Edge, and Found Self-Help That Actually Works–A True Story“. In it, he details his journey from skeptic to being a regular meditator. What got him started was a meltdown on national TV (he’s a newsman) that was triggered by stress as well the use of drugs. However, the best part of his journey is not the fact that he’s attained nirvana or any supernatural bullshit. The best part of the book is that it details how he struggled to convince himself to start meditating and the various struggles on his journey thus far. He showed that meditation isn’t going to be some cure-all. In fact, after getting started, there will be lapses in practice as well as lapses in behaviour. He reverted to some old habits pretty quickly and for a while, he questioned the gains that he had made because it all seemed to have gone away. You don’t have to get the book because his talk at Google (link here) provides a pretty good overview of what it’s about.

So, for what it’s worth

I’m not saying that religions are all hokey. My beef is more with the people that practice the religion. I’ve seen good people who are Christian, I’ve seen horrible people who are also Christian. I’ve seen good people who are Muslim and I’ve also seen horrible people who are Muslim. Ditto for Buddhists or even Atheists or Agnostics. Or any other religion beyond the major ones.

I’m also not becoming religious or spiritual and starting to pray to some idol. Rather, it’s becoming more aware. More aware of my thoughts, my feelings, my emotions and the impact that’s having on my life.

I can’t say that there’s been any meaningful change nor am I sure that I’ll be able to objectively say that there’s been a positive change in any area. However, I’ll know that it’s working if the people around me start to notice the change and tell others about it. That’ll be validation for me. In the meantime, yeah, I do feel that I don’t reflexively react to things all the time. There are lapses but then I usually recognise and acknowledge them. I don’t beat myself up about it as I focus on the present.

There are

So now, I’m pretty sure that for 2018, meditating regularly until it becomes a habit will be something that I’m doing.


It’s been a long time since I published this. A couple of data points missing so I had to fill the missing points.

Anyhow, not sure if the CAPE is so efficient any longer as we’ve been seeing pretty low 5-year CAGR returns for PE10’s less than 15x but it is what it is. CAPE is supposed to be more indicative of 10-year CAGR returns anyway so 5-year may be missing the point. Unfortunately, our markets don’t have enough data to provide any insight on 10-year returns.

So for what it’s worth, here goes:

STI Close (on 29 Dec 2017): 3402.92
PE10: 13.88x

2017 has been a hell of a ride.

I don’t have any documentary prove but basically, I was invested quite heavily (~80% of my portfolio) in equities when Trump got elected. After the immediate sell-down caused by Trump’s election, I started buying into the market as I thought that markets usually overreact to political events. The buying was confined to the STI ETF as I wanted to go heavy on the banks. Given that the banks have a heavy weighting in the STI (~40%), it’s a pretty good proxy.

The reason for buying banks is simple. The fed had just embarked on their major rate hike cycle. As the Fed raises rates, we should expect banks to earn more from existing loans.* Add to that the fact that the banking sector was the proximate cause of the Global Financial Crisis, it makes good sense that the banking stocks would have been beaten down the hardest and therefore, far from the highs of 2007.

I was pretty much right on this. What I got wrong (or failed to expect) was blue-chips such as the telcos and SPH getting beat down really hard. Keppel and Sembcorp had already been beaten down quite bad so, in fact, buying the STI ETF helped me gain some exposure there. However, news of a fourth telco, SPH’s continued downtrend in its core business and the impact of ride-sharing on Comfort Delgro caused the STI’s performance to be less than ideal. Overall, the STI still returned about 20% (including dividends) for the year. This isn’t something to sneeze at. Most people will be happy to get 10% per annum (p.a.). Of course, I wasn’t just in the STI ETF. Holdings of some other stocks amassed over the years also brought portfolio returns down.

Investment Returns (capital gains and dividends)

This year, the portfolio returned 8.18%. This is sad as the STI returned roughly 20% including dividends. The drag on my performance has been the huge cash holdings I had as well as the drop in blue-chip names like SPH and Keppel Corp. I was even a little too early in M1. Basically, nothing went right as far as timing was concerned.

Of course, returns were still positive for the year so I’ll take it as a win.

Total Growth

The better news is that the portfolio still managed to hit all-time highs despite the less than stellar performance. This is largely due to my highly aggressive rate of savings.



Getting wealthy exhibit 1: Savings vs. Investing alone

If I were to count on investing alone, me being no Warren Buffett would have only turned $1 into about $1.70 after seven years. However, by aggressively saving, the total amount “grew” from $1 to $3.50.

I know it sounds like I’m cheating. After all, it’s not like I’m some had some special skill as a farmer to grow more apples from the same tree. What I did was basically acting like a farmer who acquired more land and planted more seeds so that I have more fruit trees than ever before.

But think about it this way. Assuming that you need $30,000 to survive in Singapore and that a safe withdrawal rate is 3%, someone who wants to live off his/her portfolio will need a million dollars in the portfolio in order to generate $30,000 every year. The most important thing is getting a million dollars right? Who cares whether I get there through investment returns (i.e. capital and dividend gains) alone or through savings?

Savings is the thing that will turbo-charge your returns. You can read through why this works in an earlier post I wrote.


Gameplan going forward

Wasn’t my best year. As usual, I was a little too cautious when I should have been bold. Going forward, I need to tweak my portfolio so that I’ll be invested pretty much most of the time. Only at times of extremely high valuations will I move to cash. At times where the market isn’t cheap, I’ll just focus on holding my positions and let my cash build up through dividends as well as my usual practice of socking away about 25% of my take-home pay**.

Furthermore, my job is pretty much immune from market cycles and therefore, acts as a bond. Basically, I will be the least likely person out of a job and my earnings are highly unlikely to fluctuate from year to year unlike bankers or people in highly cyclical industries. (Read more on human capital in an earlier post)

Also, my time horizon is pretty much longer than most people. I am relatively young and personally, I don’t believe in investing for X number of years and then subsequently drawing all of it down to fund living arrangements for the rest of my human life. I view investing as accumulating and growing a pot indefinitely. Even long after I’m gone, this pot of gold should go on benefiting this world.

Given all of the above (high rate of accumulation of cash, bond-like job, and long-term horizon), I really ought to be more aggressive in pursuing higher returns.

Outlook 2018

Despite my gameplan, next year doesn’t seem to be the best year for that. Valuations are high in major markets. The various components of the STI that still look cheap (e.g. SPH, Comfort Delgro, Singtel, and Starhub) and offer close to or above 5% dividend yields are cheap for plausible reasons (i.e. competition from upstarts that threaten their monopoly).

Furthermore, the same doom and gloom-ers in late 2016 and early 2017***  aren’t that gloomy anymore. Economic growth in Singapore (which we know is, at best, a coincident indicator) came in strong. This suggests that we may be at the end of the upturn in the economic cycle. Will we continue to peak or will we see a drop? Who knows. All I know is that things aren’t as cheap as they were a year to a year and a half ago.

I think that it’s going to be harder to make money from the broader market going into 2018. This is probably a year for turning over rocks and if we’re lucky, we’ll get a drop of between 15-20% that will make things start looking cheap again.

Good Luck for 2018!


*Last I checked, most people are paying floating rates on their mortgages in Singapore.

**I would totally sock away more but, as it is, 23% goes into my CPF account. This basically means that my savings rate is about 42% of my total pay package. 42% is high but unfortunately, some of the money in the CPF account goes towards paying off my mortgage. CPF is Singapore’s National Savings/Pension Scheme.

***Who by the way called it completely wrong with respect to the economy and markets.

Recently I watched a lecture that Monish Prabai gave to Boston College (full video here) and while he talked about many other interesting things in the video, there’s one thing which stood out for me.

Rule of 72

The ‘Rule of 72’ is something I learnt quite early on. It’s a nice and easy approximation to figure out how long it takes to have an initial amount double.

72 = Rate of Return per year x Number of Years

With that equation, all you have to do to figure out how many years it takes to double your money is to take 72 divided by the Rate of Return. For example, with a rate of return equal to 8%, it takes 9 years to double your money. Obviously, you could also figure out the rate of return required per year in order to have an initial sum double within a certain number of years. For example, if you want to double the initial sum in 10 years, you need a 7.2% return per year (72 divided by 10 years) for the next 10 years.

What I learnt from the video

In his lecture, Monish talked about ten ‘doubles’ which is 2^10 (2 to the power of 10). That’s equal to 1024.* That got me thinking. Going with that, for $1,000 to become $1,000,000, you need that $1,000 to double 10 times.

And putting the ‘rule of 72’ and this together, if you know your rate of return, you can easily calculate how many years you’ll need. Or conversely, if you know what kind of timeframe, you want to achieve this in, you can calculate the rate of return per annum necessary to achieve this target.


Initial Sum x 2^n = Final Sum

n = No. of doublings.

Quick example:
Let’s say n = 10.
Using the rule of 72, if we can get 8% return per annum, that’ll take 9 years for the initial sum to double once. So if we require 10 doublings to reach the final sum, the total time taken will be 9 x 10 = 90 years.

What it all means

The math above means that there are essentially two variables that impact the road to a financial target- rate of return per year and the initial sum

(a) Varying the initial sum

For someone passively invested in the market, per annum returns can be approximated (for easy math) to be 8% per year (assuming all dividends reinvested). This means that being passively invested will require just under 10 doublings or, take you roughly 90 years to become a millionaire.**

Starting with a much larger sum of $10,000 requires only 6.6 doublings or roughly, 60 years. That’s pretty good if you’re planning to leave something substantial for your grandchildren. Start with a $100,000 and that only takes 3.3 doublings or roughly, 30 years. Thing is, starting at 30, you still have to stick with it until you’re almost at the official retirement age.

The other flaw with the above scenarios is that most people don’t get to start with $100,000. Some may start with $10,000 if they’re lucky but most people would probably start with $1,000.

So there has to be a better way right?

(b) Increasing the rate of return per annum

This is the obvious variable to focus on.

Unfortunately, there’s no easy solution to this. In my opinion, there are three ways one could go about doing this.

One, find higher rates of returns. This could be in form of asset classes that do better than market returns although it’s not entirely certain one without the right skills and temperament will do better than the market over time. Or it could be in the form of a highly speculative asset like bitcoin where the price has gone from about USD 1,000 to USD 15,000 (or more, at one point) in one year. Unfortunately, that’s only 15 times or just under 4 doublings. So if you start with $1,000, you only have $15,000. Another 6 more to go. Problem is speculative assets like this are once in a blue moon. That is if you even got invested early enough.

Two, increase your leverage. It’s no secret that being levered increases your rate of return.*** Whether they know it or not, that’s one of the real reason why Singaporeans are obsessed with property. The returns seem paltry on paper but given that no one pays for property in full, the returns are pretty decent.**** Unfortunately, not many people have the gumption for increased leverage, especially in equities. As Lord Keynes remarked, “The market can stay irrational longer than you can stay solvent.”

Another form of leverage is through leveraging the efforts of other people’s labour and capital. This basically refers to setting up a business so that other people’s labour and capital become your returns. I think this depends on person to person. Not everyone is suited to take on the many varied tasks that a business requires.

Three, you can boost your rate of return on the initial sum through a higher savings rate or by adding more money to the pile. I know this sounds like cheating but hear me out. The goal is to get a certain amount of money (e.g. $1,000,000). Adding more money is like adding more seeds to the ground, it increases your chance of getting more crop. The magic of compounding will add a rate of return to ever-increasing sums and that helps you hit the target quicker. It’s just math.

Personally, I’ve only used methods one and three. With number three, there’s no way to lose. I guess the only “loss” would be the utility given up from things I could have bought but hey, I don’t feel it. With number one, I’ve had my fair share of successes and misses. Overall, I’m probably doing slightly better than the market but honestly, not by much.

Real-world results  (sample size n = 1)

I realise that many people may wonder how all this works in the real world. I’m glad to say that the above has worked pretty well for me. In the last 10 years, my portfolio has doubled just under 6 times. Let that sink in. $1,000 would have become $64,000 with that sort of returns.

If you think that I had some magic wand or some incredible investing insight, you’re wrong. Most of it happened because I had a high savings rate. A high savings rate contributes a lot to your portfolio in the beginning as your initial sum is so small that it’s probably a fraction of your annual income once you start working.

That really juices the returns per year in the initial stages. For example, starting with $1,000, saving 20% of the average fresh graduate starting salary of $36,000 per year ($3,000 per month) gives you $7,200 which is a 7.2 times increase in the size of your portfolio. That’s basically three doublings taken care of in one year through savings alone.

Obviously, the same savings rate does little to move the needle as your portfolio gets bigger and that’s where you need the markets to do the heavy lifting. Right now, my savings can still move the needle by a few percentage points a year so saving still works for now. At some point*****, I’m probably going to have to find returns either through better investing or leverage. That’s no two ways about it.

Many others have started on this path and have shown similar success. Just take Mr. 15HWW or Kyith over at Investment Moats for example. They have 6-figure portfolios but don’t for a moment think that that’s due to investment returns alone. My guess is that a fair percentage came from a high savings rate. There are too many newbies out there promising to teach you something about investing when the simplest thing they should be starting with is how to save lots of money.


*Or as Monish says, for easy math, round it down to a thousand.

**You should see the problem with this. For one, 90 years is more than an average person’s lifetime even for a developed country like Singapore. Second, I’m not sure it’ll mean much to be a millionaire, in nominal terms, 90 years from today.

***Kyith from Investment Moats has a great article on this.

****side note: I had an interesting exchange with my boss where he said that many people in Asia invest in property because that’s how lots of tycoons in Asia (e.g. Ng Teng Fong’s family, Li Ka Shing etc.) made their money. I then pointed out the irony that these guys all developed and SOLD property to retail investors. Basically, mom-and-pop property investors hoping to be the next Li Ka Shing is on the other end of the deal from him.

*****Probably when the same level of savings moves the needle by less than 1%.

I chanced upon this clip the other day while listening to Ben Carlson’s and Michael Batnick’s excellent podcast. If you haven’t been in the markets for more than 10-15 years, you should watch it. If you have, you should watch it anyway.

The clip is about 30mins long and is a good look at what the psychology in the markets are like during a boom. These were times when most new investors (in their 20s) were barely born or those who have limted investing experience (like myself) were still in the early days of our schooling life.

Amazingly, there were quite a few people interviewed who called it fervour and so many of the new participants in the stock market were people who had never touched the markets before (there was a cop, owners of a carpet business) and these people were doing incredibly stupid things (day-trading, buying stocks without even knowing the name of the company or what it does, buying on rumours etc.). Problem is, they made money doing these stupid things. And as anybody will tell you. If you get rewarded doing stupid things, you keep doing more of it.

The problem, as pointed out in the episode (#9, in case you’re curious) is that all the people who called it were basically early. I don’t know the exact date that the show was broadcast or when the people were interviewed for the show but let’s assume that the show was broadcast in mid-1997, that would still have made all the experts in the show who were calling it a bubble early by about 2.5 years.

The amazing thing, as I watched the clip, is how many parallels I could see with 1997 and markets in 2007 and markets today. While the S&P 500 and Dow has been climbing new heights many times over this year, I don’t think there’s a bubble in equities. Stocks aren’t cheap but how many people who have never touched the stock market in their life are coming to the party? Not many. Many people are still scarred by the Global Financial Crisis of ’08/09.

So where is the bubble? The obvious answer for me is in the startup scene and the cryptocurrencies.

The startup scene

Startups or Venture Capital is a brutal game where the odds of finding a success story is probably 1 in 20 or worse. Yet, SoftBank’s Masayoshi Son managed to raise a $100b Venture Capital fund.

Even the ones that ‘succeed’ are still burning through investors’ monies at an incredible rate. Take Uber for example. As recent as Aug 2017, Uber was estimated to be burning through cash at a rate of $2b a year. If Uber’s business model is anything like Grab’s, I’m not sure how they are going to ever make money. Grab’s model is basically predicated on subsidising both the consumer and drivers in order to grab (pun intended) market share.

So, if all these ride-sharing/hailing companies aren’t making money right now? What happens when investors get sick of throwing good money after bad? For one, those companies have to start monetising their customers. Maybe they raise money through selling ads on their cars? Or they raise prices of the rides and reduce the incentives given to drivers? The question is how much profit will they have even after doing all that? Will that be enough to give a significant rate of return to investors?


I cannot even tell you how ridiculous this one is. The bubble in crypto is painfully obvious for anyone who has studied markets.

  • Buyers who don’t even know what they’re buying? Check.
  • Unregulated asset class? Check.
  • Totally unrelated businesses trying to ride the crypto wave? Check.
  • Institutional investors coming late to the party? Check.

It’s painful to see how some people who are only about 20 years old think that they are going to become multi-millionaires in just a few weeks when they’ve never had more than a few thousand dollars just a few months ago. I guess this is what older investors mean when they say that there are no old and brave men on Wall Street. The markets are where brave men die young and cautious people live longer.

What to do about all this?

The best thing to do about all this is to stick with the strategy that you already have. As an investor, it’s not easy to find bargains in the market as it was a year ago when things were murkier and when almost everyone thought that things were going to get worse.

I don’t know if the bubbles pointed out above will pop soon or they will go on for some more. All I know is that I’m staying away from those places.