Portfolio of 8 Singapore Stocks - Aug 2015 [updated 31 Oct 2015]

On 14 Aug 2015, as the Singapore market trended down, I highlighted 8 Singapore companies to keep watch on. I figured that an opportunity would come soon if the downwards trend continued. Indeed, it came pretty suddenly on 24 Aug 2015 (see Playing with the bears of 2015).

While the STI never quite hit the official 20% bear territory, it was pretty close, reaching -19.9%? A 0.1% difference is perhaps just a technicality. Many stocks reached their low point that day.

I thought it might be interesting to see how a portfolio made up of these 8 stocks would fare over time. I assumed that a reasonable investor wouldn't have caught the lowest point to buy, but would have delayed a few days to watch how things unfolded before jumping in.

So, taking reference from the prices a few days later on 28 Aug 2015, here's how a $100,000 portfolio would look like for this portfolio of 8. No REITs nor business trusts. But the 8 are broadly diversified.

Stock	Number of Shares	28 Aug 2015	Dividend Yield	Price to Book ratio
OCBC	1,300	$9.280	4.03%	1.1
Keppel	1,700	$7.200	7.02%	1.15
M1	4,200	$2.920	6.43%	7.08
Boustead	14,600	$0.855	4.73%	1.46
Kingsmen	15,200	$0.820	4.43%	1.59
VICOM	2,100	$6.000	2.93%	3.82
HourGlass	17,000	$0.735	3.06%	1.23
GKGoh	14,900	$0.840	4.73%	0.73

In working out the above, I did not take into account transaction fees. The number of shares were based on approximately $12,500 for each stock, rounded to the minimum lot size of 100. With that, the whole portfolio would have cost $99,126. I guess if transaction costs had been factored in, it would have come close to $100,000 anyway.

Let's see how this fares over the next few years with a buy and hold strategy.

--
1 Sep 2015 ...

I forgot to indicate the dividend yield and their price-to-book (P/B) ratio of the stock previously. So I have updated into the above table, but these are based on the data on 1 Sep 2015.

These are all dividend yielding stocks, and mostly with P/B below 2.0. The exceptions were M1 and VICOM which had much higher P/B. These probably reflect the premium that M1 commands as a Telco and likewise VICOM in their vehicle inspection role.

I'm drawing inspiration from Teh Hooi Ling's article where she mentioned a finding from historical analysis that stocks with a healthy dividend yield over P/B ratio tended to perform better over time.
--

31 Oct 2015 ...

The data for M1 was amended due to earlier error. Changes are highlighted in yellow.

Playing with the Bears of 2015 - should I be excited or miserable?

Over the weekend, the headlines were screaming death and destruction. When the headlines of two national papers start carrying headlines like this, it's time to pay serious attention!

What's with the sudden excitement? It's not as if it suddenly happened. The STI has already been declining for months from the last high of 3500 earlier this year. So 3,000 is perhaps just a psychological number, which was otherwise of no significance?

At 3,200, we were already effectively experiencing a correction (-10%) and we had already gone past that. By 2,800, we would officially be in a bear market (-20%). In fact, some of the emerging markets had already reached bear territory in recent weeks.

On, 24 Aug 2015, the local market seems to have collapsed. The board was a sea of red. Mumbles of "Black Monday" was heard. The VIX was rapidly reaching the 30s while the STI had reached 2,843.

Was it a capitulation? Judging from the many posts that it was an opportunity to buy, I guess not yet. From this point, there can only be two possible trajectories: (a) the market continues further downhill and sparks a complete capitulation before making its recovery, or (b) we are already at the bottom and the market recovers from here.

With Scenario A, there will be more regrets of "Shit, I bought too early!" or worse, "I better sell before it's too late!"  With Scenario B, there will be regrets of "I missed the bottom!" Either way, it will be a wailing wall of regrets.

Undeniably, this will be a baptism of fire for new investors who have not experienced the events of 1997, 2000, 2002/3, 2008/9 and 2011. They will look back in time and wondered what the fuss was. History tends to look a lot less terrible than today's reality.

Watching a profit of $50,000 sink into the negatives within a matter of weeks or even days can be highly demoralising for somebody with a portfolio of $250,000.

For an impending retiree, watching a retirement fund of $1,000,000 sink into $800,000 is like experiencing a firestorm that had just burned down a sizable part of the farm you're living on. It could well mean reducing a lifestyle of $3,333 a month to just $2,667 a month for the next few months or years, even as inflation creeps upwards!

What's been its effect on me? I've been dumping all my cash drawers and depositing them into my investment account. Buying and buying, day after day, as the market trended downwards. My only worry is running out of cash before it has reached the bottom of this pit. I should probably pace myself.

But two things I shouldn't touch: (a) the education funds for my kids, and (b) at least 6 months worth of expenses in cash as an emergency fund.

So what have you been doing?

How much does a household spend a month?

Cost of Living

The Department of Statistics publishes various sets of data that are available to the public to download from its data collection efforts. One of the interesting data set I came across is on Household Expenditure:

Source: 
http://www.tablebuilder.singstat.gov.sg/publicfacing/createSpecialTable.action?refId=3988&exportType=csv

Average Monthly Household Expenditure
HDB 1 & 2-room: $1,287
HDB 3-room: $2,478
HDB 4-room: $3,918
HDB 5-room: $5,283
Exec Flat & Condo: $8,000
Landed Property: $10,409

My own bottom-up estimates suggest that for my family of four residing in a condo, I would need $7,800 minimally to more or less maintain the current lifestyle. If I were at age 55 now, I would need $7,109. And at age 65, $5,977.

- I do not smoke, drink nor gamble. The occasional Toto don't count.
- I own a car and assumed that I would continue to maintain one till age 64.
- I assumed all housing loans have been paid down. No other debts.
- Overseas holidays are not included. I would need surplus to fund these luxuries.

The numbers seem to be fairly close to the overall statistics. I shall be collecting detailed data over the next 12 months to validate these figures.

Funding the Cost of Living

Based on my norms of 4% extraction from an investment portfolio, that means I would need the following to retire on (figures in bracket are if 5%):
Now - $2.34m ($1,87m)
Age 55 - $2.13m ($1.71m)
Age 65 - $1.79m ($1.43m)

In Teh Hooi Ling's "Show Me the Money - Book 1", chapter 19 on "Debunking the 'safe instruments for retirement' myth", she analysed various $1m portfolios over during timelines, and concluded that a 5% extraction to get $50,000 each year was largely viable. This was despite the ups and downs of the market.

Looks promising.

Aspial 5-year 5.25% Retail Bonds - Leveraging from the Market

Aspial started offering a 5-year 5.25% retail bonds to raise $75 million. It is nice to see more of such high yielding bonds appearing for the retail investors.

More:
Aspial to roll out 5-year 5.25% retail bonds (Straits Times)
Aspial issues a 5.25% bond with minimum $2000 (Investment Moats)
Aspial 5.25% retail bond thoughts (Got Money, Got Honey)

Aspial bond 2015 (Martin Lee)

Clearly, the bond is being offered with a higher coupon rate than compared to the upcoming Singapore Savings Bond (for the definitive collection of articles on SSB, check out GiraffeValue's 71 resources on Singapore Savings Bonds).

Some wondered why Aspial would be raising money from the market instead of borrowing from the banks. Checking against POEM's data on Aspial itself, we see some interesting data that can shed some insights:

Stock Data
Market Capitalization (SGD 'mil)	703.66
Common Shares Outstanding ('mil)	1,882.6200
52 Week High (SGD) (07/08/2014)	0.455
52 Week Low (SGD) (03/07/2015)	0.265
52 Week Return (%)	-15.940
Average Volume ('mil)	0.0148
Beta	0.56

Financial strength
Current Ratio	3.25
Quick Ratio	0.99
Long Term Debt to Equity (%)	247.97
Total Debt to Equity (%)	342.82
Interest Coverage Ratio (TTM)	1.28
Free Cash Flow to Firm (TTM) (SGD 'mln)	-34.97

Margin
Gross Margin (TTM) (%)	24.14
Operating Profit Margin (TTM) (%)	-1.39
Net Profit Margin (TTM) (%)	3.08

Dividend §
Annual Dividend per share (SGD)	0.0180
Dividend Yield (TTM) (%)	2.16
Dividend Yield (Annual) (%)	4.86
Payout Ratio (TTM) (%)	95.22
3-Year Growth Rate (%)	28.57

Valuation
Historical P/E Ratio	15.37
P/E Ratio (TTM)	43.53
P/BV (latest interim)	2.22
BVPS (latest interim) (SGD)	0.1669
EPS TTM (SGD)	0.0085

[Source: POEMS; as at 20 Aug 2015]

Aspial's debt-to-equity is more than 340%, with a short term debt of 95% due! This is way above my threshold of 40% that I use to screen for stocks to consider. It has apparently been exercising a very high level of leverage as it expands its business. These are numbers that would raise an eyebrow, or two. It possibly explains why Aspial has resorted to raising cash from the market to refinance borrowings, increase its working capital and to fund future business investments.

I am not buying nor own any shares in Aspial. But I'm going ahead to put in a small bid for this bond tranche.

Retiring on $2,000 a month [updated]

Retiring Siblings

Benny and Erica Tan are a brother and sister sibling pair. Benny had reached his statutory retirement age but was re-employed for a few more years.  Erica who is a tad younger, has however chosen to resign from her job and retired a year early. She got fed up working for an overly demanding boss. When she tendered her resignation, the boss begged her to stay. But she had already passed the point to turn back. She left with no regrets and is now picking up some ad-hoc work to fill her time.

They live in a 5-room HDB flat that have been fully paid for. The flat was transferred to them by their parents before they passed away. Not being graduates, they had basic jobs with decent but not 'obscene' pays.

Their lifestyle seems basic. While they do watch TV, they do not subscribe to cable. They do have an Internet subscription and each own a mobile phone with fairly basic plans. Both are singles with no spouse and kids to worry about. No car and certainly no motivation to do so as both do not even have a driving license!

It looks like they could survive on just $2,000 a month each. According to the Department of Statistics data on average household income and expenses, a 5-room HDB household averages $5,282.60 per month, while a 4-room HDB household averages $3,917.90 per month. I would judge that they are more akin to the 4-room HDB household although they live in a 5-room HDB.

Not having to spend a single cent on housing all their lives, their CPF contributions have been pretty much maximised and left untouched all these years.

Back to the Future

If they could rewind the clock and are instead at age 55 today, how would they make a decision on their CPF Life scheme?

[https://mycpf.cpf.gov.sg/Members/Schemes/schemes/retirement/cpf-life]

Under the revised CPF scheme , they could go for the Enhanced CPF Life with a CPF-RA of $241,500, giving a perpetual monthly pay out of $1,770 to $1,920 each from respective retirement age. Assuming the lower end at $1,770, they would each face a shortfall of only $230. How can they close this gap?  There seems to be a few possibilities ...

Monetise their Property

Rent Out

As they are living in a 5-room HDB flat, they have a room to spare. Being near to a Polytechnic and a Junior College, it's a location with possibilities. They could rent out a room. I wonder what's the market rate for a room rental in a HDB flat? Is $460 a month realistic? The risk lies in whether they can secure continuous rental.

[Renting out via AirBnB is an alternative. Unfortunately, it's illegal. For now.]

Sell Down

They could consider selling off their current 5-room HDB and downgrade to a smaller HDB, and then take the difference to invest for an income stream. So they could consider the newly announced 40-year lease 2-room flexi scheme (More: Joint Press Release by MND and HDB on 2-room flexi scheme, HBDWeb on 2-room flexi scheme).

For this to work, they would need to be able to extract out a cash value of $138,000 to be invested into income yielding products at 4% to get $460 a month. It seems possible. A check against this nifty tool at Simplyjesme on HDB resale prices shows an average resale price of over $600,000 for a 5-room.

The risk lies in whether the income yielding products are assured or come with downsides. But there seems to be more than enough margin of safety. If they sell their 5-room for $600,000 and buy the 40-year lease 2-room under the flexi scheme at $28,600 (for first timer applicants), that would leave them with $571,400. At 4%, that would generate an income stream of $22,856 a year, or $1,904 per month, well over the $460 gap that they needed to close. There's money to spare for overseas holidays, or to save for a rainy day.

Work Part-Time

Part-time Work

They could pick up some part-time work and earn some income. Assuming $8 per hour, they each need to put in only 29 hours a month to close the gap. That sounds like less than 4 full days of work a month! Seems doable. But are there employers willing to offer jobs designed for semi- retirees?

Monetise a Hobby

Benny in particular is an avid photographer. He could pick up some part-time work as a wedding photographer. But there could be some difficulties in getting sufficiently regular assignments to secure a steady income.

Conclusion

Inflationary considerations aside, there seems to be a few avenues to close the gap. Although, each does come with some level of uncertainty that could derail the plan. Are there other alternatives?

Building the Kids Education Funds with Unit Trust

For my children's Education Funds for tertiary education, I have been injecting monthly contributions and their annual Ang Pows (Chinese New Year red packets) into their respective portfolios using Unit Trusts. Both portfolios are similar. So I shall use one of them for illustration.

Broadly, the portfolio is evenly diversified across (a) Asian small-caps, (b) Global Emerging Markets (GEM), (c) Asia Pacific, (d) Europe, (e) US, (f) Singapore, (g) Short-term bond, and (h) Cash.

This has been going on for about 10 years. Guess how have the various Unit Trusts performed over the years? The specific funds are as shown below, with annualised returns over 1, 2, 3, 5 and 10-year horizon.

Fund Name	1 YR	2 YR	3 YR	5 YR	10 YR
Aberdeen Asian Smaller Cos	-5.74%	-0.23%	6.34%	6.26%	-
Aberdeen Global Emerging Markets	-5.73%	0.37%	1.34%	2.36%	6.50%
Aberdeen Pacific Equity	-3.45%	1.05%	4.41%	4.61%	6.55%
Cash Fund	0.37%	0.24%	0.19%	0.18%	-
Deutsche Singapore Eqty Fd	-6.60%	-1.57%	2.58%	3.46%	5.79%
Infinity European Stock Index	9.74%	9.15%	14.46%	7.85%	1.98%
Infinity US 500 Stock Index	20.63%	17.14%	19.19%	15.26%	4.26%
Nikko AM Shenton ShortTerm Bond(S$)	1.78%	2.11%	2.27%	2.50%	2.39%

[Source: Fundsupermart.com]

Taking a 1-year view, US and Europe are the top performers at 20.63% and 9.74%. Singapore, Asian small-caps and GEM are the worst performing and are in fact in the red.

Stretching out to a 10-year horizon, Asia Pacific and GEM are actually the top performing at above 6% each. Whereas, Europe and Bonds were the weakest. Even then, they still turned in returns of 1.98% to 2.39%. As the Asian Small-Cap and Cash Fund have less than 10 years of history, their 10-year annualised returns are not available.

What can we observe from the above? While by no means definitive, it does illustrate some points that are often talked about:

1. Markets will have their ups and downs. Diversification across markets make sense as they tend to perform differently from each other, except where there is a massive global crisis. No single fund is going to be the best performer forever. There is no magic bullet.

2. Equities will usually outperform Bonds in the long run but will be more volatile. From above, we see that Bonds and Cash Funds (money market funds) remained positive throughout, but do not vary much over time. Higher risk, higher returns (you can go into the red). Lower risk, lower returns.

3. Over a 10-year horizon, it is unlikely to make losses. Despite the events of the Global Financial Crisis (2008), European crisis (2011) and the recent China meltdown (2014), equities still turned in respectable 1.98% to 6.55% over the 10-year horizon. Unlikely does not mean never though! Time in the market matters.

4. Investing (but know what you are doing!), even with the expenses involved for Unit Trusts, will do better than leaving money in the bank. The banks have been offering less than 2% interest for the last decade (risk free of course, especially the first $50,000).

It is now only a few years away from needing the money for the kids' tertiary education. Time to apply the brakes and exercise caution. There is no longer room for "time in the market". In the years ahead, I will be shifting more of the equities into cash funds, towards a 20:80 ratio. There is no need to adopt a high-risk, high-return profile anymore. To be precise, can't afford to.

Related:
Kids education revisited - back to the future
Endowment plans for child education
Misadventure of the education savings funds

8 SGX Companies to Keep Watch On

In my recent interview by Giraffe, I mentioned several stocks that I felt may be worth keeping a close watch on due to various challenges that they are facing. So I thought I may elaborate a bit further on these.

OCBC. They have certain exposure to China and is hoping to grow its market there. With China experiencing some slow down, it will be affected. But my view is that a slow down does not mean that China will come to a halt. Business will continue to ebb and grow. It is a huge emerging market that is hard to ignore. And they will need capital (loans) to support business operations. Cash is king.

Keppel. A significant part of Keppel's business is in the marine sector which is facing challenges from the declining price of oil. Much of the oil around the world are moved by maritime shipping. There has been few new orders, although it does have a sizeable order book to carry it forward. If the situation persists, painful layoffs may well be necessary. Such layoffs could result in some loss of capabilities for the future. Since Choo Chiau Beng stepped down as its CEO, the new management team has had much to deal with.

M1. M1 is largely dependent on the domestic market telco market, unlike Singtel which has an international market for diversification. With a 4th entrant coming into the local telco scene, it would face cannibalisation from the competition. But the question is, will the 4th player survive? M1 has also been the first off the block to introduce new service schemes (innovation?) to try to take the market in the meantime.

Boustead. A part of its business comes from the oil and gas, as well as property development. Both of which are facing difficulties. The oil and gas challenge is similar to Keppel's problem. With a slowdown in population growth, the need for housing in land-limited Singapore is going to slow down. There is also a lot of competition from the many companies in Singapore. They are experiencing forex downside given the extensive business operations in Malaysia (rapidly depreciating M$) and Australia (A$ is almost the same as S$ now).

Kingsmen. If there is slow down in regional economies, resulting in less business shop upgrades and MICE events, then they are likely to experience difficulties in growing their revenue. But they seem to have a strong reputation. Good branding. The emergence of more and more theme parks in the region, as well as upgrades at existing ones, are continued business opportunities for Kingsmen.

VICOM. There are some on the shrinkage of car population with many cars due to replace those at the end of 10 years. As car owners replace with new cars, they will not need to go to VICOM that soon. Maybe there will be near term shrinkage in revenue. But VICOM is dominant and car inspections are legally required. All VICOM need to do is to just raise its charges?

HourGlass. Luxury goods would most certainly benefit from a large newly rich Chinese market, hungry for symbolism. But the stamp down on corruption in China has made many self-conscious, and an economic slow down would likely create further reason for pause and caution. The company is also in the midst of transition from its founders to the next generation.

GKGoh. It's businesses operations in Europe and Australia would probably be affected by the foreign exchange rates when translated into the S$ currency. Its Boardroom subsidiary (itself a SGX stock) seems to dominate in providing services to many SGX companies, providing a stable revenue stream.

But all the above are likely things that will blow over as things reach equilibrium with time (reversion to mean?). Demand for the goods and services will still be there to provide growth. Ultimately, the businesses will thrive, so long as they are not experiencing the "Kodak moment" and continue to be led by responsible management teams that do not engage in any shenanigan.

A ship full of bears

This week in particular has been an "excitable" week, with the market in a sea of red for a couple of days. Looks like a ship full of bears. But I'm a contrarian. The market goes down, I'm excited. So I'm buying. Gradually. Because I can't be sure the market wouldn't go down even further.

Disclaimer: Do conduct your own research and make your own decisions. I do not possess any all-seeing eye that claims to predict the future. So I am not a clairvoyant. Above is just a personal view of things.

4 Tasty Food at Old Airport Road Hawker Centre

There's something to be said about these traditional hawker food. It's so unlike the typical fare that we now get at all those franchised food courts. At the Old Airport Road Hawker Centre, good hawker food thrives.

Be warned: I said good, I never say it is healthy!

Considering how long the queue was, this store must surely be good! Like all faithful Singaporeans, I joined the queue of course. Got queue, must be good?

And I was not disappointed. It is VERY GOOD! Lots of stuff ("liao") in the bowl of Lor Mee. Tasty. And mine were the smaller bowls. I noticed most people went for the upsized version.

Not too far away is another store that sells deep fried crispy stuff. It seems pretty quiet with no queue. The hawker goes about his business quietly. I thought it wasn't good since there was no queue. But I noticed after a while that he was actually getting a lot of customers. It's just that his food gets served pretty fast, most of it takeaways.

So I ordered something to try - deep fried prawn-whatever-you-call-it. Oooh, it was "yums!" Couldn't help but to buy more to bring home.

Just a few store away is this store selling pancakes with different kinds of fillings. The pancake skin is thin, and the filling tasty. This is also VERY GOOD. The guy running this store knows how to do business too. Wish all retailers had his kind of customer service attitude. Good service and good food.

Last but not least, I had a go at this soya beancurd store. Heard it is also famous. It isn't bad. Maybe I ordered the wrong item though, 'cause I didn't get the taste that I was looking for (i.e. compared to the beancurd store near Selegie that I used to patronise).

As you can tell, I had quite a lot that morning. Those who live at the eastern end of Singapore really have it made. Envy.

Have to live a good life. What's wealth and health, if we can't enjoy our food too? Not to mention that it is comparatively inexpensive compared to a high end restaurant. Munch munch! Gluttony.

Giraffe's Cafe - An Expose on LizardoRealm

GiraffeValue recently published on his blog a collection of 55 SG Financial Blogs. Seems my blog made it onto his list.

He subsequently got in touch to further conduct a virtual interview. "Lim kopi" as one might say. Here it is, republished.




[Republished, with permission]

Lizardo - Giraffe's Coffee

My guest for today is Lizardo from http://lizardorealm.blogspot.sg, he has been blogging for about 5 years on topic such as ETF, Unit Trust and stocks. I like the most is where he looks at them in a portfolio perspective rather than an individual investment.

Let’s see what he has for us.

GV:
Hey Lizardo maybe you can start by giving us a brief introduction about yourself? I.e your major, profession, age and other things you would like to add.

Lizardo:
I am a working professional with a few graduate and postgraduate degrees(Computer Science). I’ve been working for 24 years and nearing the big “50”. I started investing with some seriousness only 10 years ago, and started buying individual stocks in the midst of the Global Financial Crisis. Lucky timing!

I’ve been running some what-if analysis and certain models would suggest I could choose to semi-retire next year. But we’ll see. As a single income family, there are many risks to consider.

GV:
I see that you have a World Cup Team(stock portfolio) consist of SG dividend stocks and overseas stocks, and you have also invested in ETF, and unit trust. Could you tell us what is your portfolio consist of, and the breakdown of its asset allocation?

Lizardo:
My Singapore and US teams of stocks are indicative of what I’m invested into. Broadly, my asset allocation is a spread of:

[a] 45% Singapore stocks
[b] 11.5% in US stocks
[c] 11.5% each in European, Asia-Pacific (ex-Japan) and Global Emerging Markets using ETFs/UnitTrust
[d] 4% in Japan ETF/UnitTrust and [e] the balance in cash, preference shares and bonds.

I have a high risk appetite as I view my CPF as the bond component of my portfolio. The Unit Trusts are primarily invested using SRS and CPF-OA funds.

I maintain a few separate portfolios for my two kids’ education funds, and for my wife. Collectively, the total valuation for my family has exceeded $1 million. The gradual accumulation over the years has given me a lot of confidence that investing is definitely the way to go to build a retirement fund.

Keeping cash in the bank and fixed deposits is definitely not the way to go.

GV:
let say that there is a reader who is out there who only has 6hrs per week to spare for stock investing. He wants to build a portfolio that can generate dividend for him, holding period 3-5 years. What are the 10 stocks that you would introduce to him right now, and how would you build the portfolio i.e no. of stock, stocks criteria, DCA or lump sum purchase and etc?

Lizardo:
With a holding period of 3-5 years, I suspect it will require more attention and time. I’m a long term investor myself and I tend towards holding stocks ‘forever’. For this, 6 hrs a week sounds about right for me, possibly less. A lot more time would be spent reading up and gaining appreciation about investing initially.

I would recommend that the investor consider his/her risk appetite and purpose for such an investment. It is only with that understanding that he/she can make the right choices that he/she can sleep peacefully come rain or shine. Instead of jumping into individual stocks, I would recommend someone who is just starting out to try a diversified portfolio across market regions using either Unit Trust or ETF for a start. And then to go into buying individual stocks when the portfolio has reached some critical size – perhaps when more than $100K.

For a suggestion on the 10 stocks, he/she could consider my team of 11 players for some ideas. As a value investor, I recommend however to keep those on watch and buy only when the price is right – esp. a reasonable margin of safety. Buying when the P/E is above 20 is unlikely to be ever a good idea.

Perhaps the top few that would be most interesting to me now would be OCBC, Keppel, M1, Boustead, Kingsmen, VICOM, HourGlass and GKGoh. Many of these have some interesting challenges that would suggest room for caution and doubt today. But it is precisely in circumstances like this that the best opportunities are created. It is the future that we seek, the past is only a history. In any case, every one of them is a dividend paying stock and hence provide some ‘insurance’ while we wait for their growth.

GV:
I see that you also blog quite a fair bit on your experience in unit trust. As you know, in our personal finance and investing blogosphere many have encouraged the use of ETF over unit trust, because of its lower cost and etc… What are some of the things that many have missed out, or things that you see and others don’t.

Lizardo:
I think the advice on ETF over Unit Trust is the right one. However, unlike Unit Trust where one can buy and sell anytime, it is less so in the case of ETF. For many ETF (the exceptions are the STI ETFs), I have found it difficult to buy, and would suspect the problem would be even worse when trying to sell, especially if there is a market situation developing. Also, given the charges, it makes sense to go ETF only if buying in larger quantity. Hence, for an early investor (as I was when I started almost 10 years ago), it was more convenient to go with Unit Trust.

The ETF markets in the US is a lot more liquid. But it comes with the penalty of the 30% withholding tax (especially on the dividends paid out), and there is potential issue over inheritance that I do not yet confess to fully comprehend due to US laws. Unnecessary complexities.

[Although there are theoretically market makers for the ETFs, I find that the bid-ask spread can be very wide. I don't get a sense that the liquidity is really there for me to buy/sell easily for the less popular ETFs.]

GV:
What are the most common mistakes you often see people make on investment?

Lizardo:

I think the mistakes are:
[a] not knowing what one is trying to invest for (what’s the time horizon?)
[b] attempting to make quick bucks by trading actively, jumping in and out
[d] attributing luck to skill,
[e] listening to others (noise) without doing an analysis
[f] looking for excitement from investing!

GV: Alright, now come to the last question. What are the tools or webs you use for investing and any financial web you frequently visit to source for information?

Lizardo:
– Key websites that I read are on my home page. Especially: NextInsight, ValueBuddies, Finance.sg, Business Times, Motley Fool Singapore.

– Key newspapers/magazines: The Edge, Business Times Weekend, Fortune.

– Key online resource/tool: POEMS, Fundsupermart, and my own Excel spreadsheets.

---

Something that I have never considered of when looking at Unit Trust,  on the response from Lizardo liquidity is one big issue.  Of course one can still go for US ETFs which are more liquid but the withholding tax makes it unattractive and not to mention about the legal complexity.

Of course for withholding tax issue say on S&P500 one can go for VUSD which does not have a withholding tax on dividend(as it will be taxed at 15% before the divided is paid out) as compared to the US version of S&P which has a hefty 30% withholding tax on dividend.

What is the inflation rate for Singapore? [reposted]

I was doing some analysis of my investment portfolio to assess how close I was to being financially independent, and started doing some "what-if" of the various planning parameters assumed. One of the important factor was the future "inflation rate".

I've always worked under the impression that 3% was a reasonable number to use, and I wondered how realistic that was? Tweaking the figures between 2% and 4% showed dramatically drastic impacts. It is clearly a very sensitive parameter - i.e. small changes would cause disproportionate outcomes.

I came across one article (http://www.tradingeconomics.com/singapore/inflation-cpi) which mentioned that the average was 2.75% (from 1962 to 2015).

Checking against the Department of Statistics data (http://www.singstat.gov.sg/statistics/browse-by-theme/prices), I obtained the following:

Table 1. Time Series on CPI (2014=100) and Inflation Rate (as at Feb 2015)
Year	Consumer Price Index (2014=100)	Annual Inflation rate
1980	50.6	8.5
1981	54.7	8.2
1982	56.9	3.9
1983	57.4	1.0
1984	58.9	2.6
1985	59.2	0.5
1986	58.4	-1.4
1987	58.7	0.5
1988	59.6	1.5
1989	61.0	2.3
1990	63.1	3.5
1991	65.2	3.4
1992	66.7	2.2
1993	68.2	2.3
1994	70.3	3.1
1995	71.5	1.7
1996	72.5	1.4
1997	74.0	2.0
1998	73.8	-0.3
1999	73.8	0.0
2000	74.8	1.3
2001	75.6	1.0
2002	75.3	-0.4
2003	75.6	0.5
2004	76.9	1.7
2005	77.3	0.5
2006	78.0	1.0
2007	79.7	2.1
2008	84.9	6.6
2009	85.4	0.6
2010	87.8	2.8
2011	92.5	5.2
2012	96.7	4.6
2013	99.0	2.4
2014	100.0	1.0

Based on the more recent 35 years of history, it seems to average only 2.22%.

Given this, I will revise to 2.5% as my planning norm, and to use 3% only to test the worst-case scenario. Using too high a figure may be unnecessarily inflating the extent needed from my investment portfolio, and inevitably postponing my FIRE. *hmm*

Can I retire now?

--
For an alternate view on this subject:
Bully the Bear's take on personal inflation

I recall having a bowl of Mee Pok Dry at $1.50 in 1980. Today, a typical bowl would cost $3 to $4. That correlates reasonably with the doubling from the above inflation data.

Of course, there are also other data points that could suggest otherwise - e.g. housing.

If you're looking for a less expensive bowl of Mee Pok Dry, it's still possible to do so at certain places. Here's one from a coffee shop in Teck Whye.

Pulau Ubin - An Island Escapade / 3D Coffee

It's the Golden Jubilee Weekend. Lots of places are free. I guess there will be maddening crowds everywhere. But perhaps that is part of the fun? Already, the office is starting to thin out. Some have taken the opportunity to travel over the long weekend.

One place you may want to consider without actually leaving the country is a short excursion to an island escapade. And no, I'm not talking about Sentosa Island. An inexpensive bumboat ride from Changi Point will bring one to Pulau Ubin, just a stone throw away. It's just $2.50 per person, one way. Ok, got to throw the stone very hard to get there. The only bummer was having to wait for a sizable group before the boatman would depart. It's a pretty random experience. But no regrets. we were greeted by this wonderful view upon landing at Pulau Ubin. Doesn't look like Singapore isn't it? But it is.

Kind of reminded me of Tanah Lot in Bali. Pretty tranquil and peaceful. It was a weekday when I went. So there was minimal crowd on the island.

There are some "taxi" services available at the pier and the drivers would be happy to bring you to Chek Jawa. Look for the vans.

My wife and I went trekking to the eastern side of the island. It's quite a long walk. But we were pretty happy for the exercise.

Coconut trees are in abundance, as were durian trees that were also in season. We hunted around, hoping for a lucky catch. But guess it wasn't our day.




The lotus pond was quite a sight. It's quite a common scene that can be found at some of the mainland parks these days. But this pond is BIG. I presume it's wild.







We reached Chek Jawa, and had a pleasant walk along the boardwalk. Fortunately, the weather was cloudy and wasn't too hot that day.

A couple of herons were sunbathing along the mud flats. An iguana was trying its luck for a birdy lunch. It wasn't successful though. Guess it went hungry.






Staring harder, we realised there were lots of strange looking crabs on the mud flats. They have only one big arm - tok-kong. One-arm robbers scurrying around. They are really tiny!

There seems to be only one public toilet available at this end of the island, and it's located at this house which doubles up as a museum.

The tap water is not for drinking though. So if you're looking to top up your water bottle, you're out of luck. There is a soft drink dispenser machine at the back of the house.

At this point, we struck jackpot as we came across something that we had hoped to see. Wild boar! There was a family of wild boar which came roaming around at the junction leading to this museum and the Chek Jawa mudflats.

They seemed pretty used to the presence of human. But to be on the safe side, we kept our distance.

So how about it? An overseas trip without leaving the country. Pack a meal from Changi Hawker Centre and enjoy a picnic on Pulau Ubin. Or go cycling if you prefer.

p/s: Along the row of shop houses at Changi Point, you may want to give this coffee place a go - Choc Full of Beans. It's located at the corner, near the bus interchange, facing the main road. The iced gourmet coffee comes beautified with these cute 3D foam characters. So cute, couldn't bear to drink. A good chill after a sweaty morning. Enjoy!

Happy SG50!