Sunday 28 October 2018

Cash is not King. Cashflow is.

When it comes to the topic of investing, I believe everyone out here wanted the same outcome - which is to allow our money to grow. In another words, by investing, we want our money to come out more than what we place into.

But sadly, the perfect world is never constructed in such a fashion and it is not always the case as there is many that actually came out with lesser money than injected.
Being a not-very-smart investor myself, I believe that aside the homework or due-diligence that is done, we need a fair share of luck to help us out as well.

By receiving dividends from my stock holding, it does provide me with a decent level of comfort, and at the same time, it does help me a little by reducing on my transaction fees as there is lesser buying and selling.

When a company pays us dividend, this actually creates an additional source of income for ourselves, which increases our cash flow. 

Similarly to a business, cash flow is a very important aspect in our financial state.

When we spend more than what we earn, our cash flow is negative. To finance the expenditure, we will have to tap on our retained earnings (savings) or take up loan to do so. However, if a negative cash flow is a norm, our savings will deplete or we will end up with a snowball of debt.

If we do not know how to manage our finances, regardless of how high our salary is, we will still end every month with a sad note, while we anxiously wait for our salary to be in.

If you're taking home $3,000 a month and spending $2,500 each month. We're still positive with $500 here. This will also translate to a spending rate of 83%

However, if you're spending $4,000. This is when you have a negative cash flow of $1,000!

Assuming, the salary now increases to $5,000. Taking the same rate of spending, we're actually looking at positive cash flow of $1,500!

The equation today is pretty clear cut.

To increase our cash flow, we can either:
1. Increase our income/Create additional stream of income
2. Decrease our expenses

Optimally, both 1 and 2 has to be done together to yield the best result. 

So why is cash flow exactly the King and not cash?

I'll draw a simple example to illustrate this.

Person A, retired with $200,000 in cash. Spending $1,000 every mth, with inflation at 3%. This person will not be able to make through the 14th year. Person A has a negative cash flow every month and has been using his savings to make it through.

Person B, retired with $200,000 in assets generating 5% dividends per year, inflation at 3%. This person will not be able to make through the 26th year. And yes, person B is having a negative cash flow as well! But with a source of income, the impact he'll face to die from hunger is delayed by 12 years!

Realize the differences?

So what if one has an inflow greater than outflow

Your guess is as good as mine. With a greater inflow than outflow, this person will be able to even accumulate more wealth as he is spending money! 

If this person continues to re-invest his excess cash into this retirement pot, he would probably be able to survive till the day Hades decided to look for him!

But again, at certain point of times, being filled with cash represents opportunity. But if the cash here is not being used meaningfully, it defeats the purpose and the cash here is just a stagnant pile of papers. 

By having a certain level of cash with us, this will provide us with some form of hedging. But if we are overly-hedged we have indirectly incurred more losses to our monies than we could do to "protect" it!

To make it clear, it is important for one to have cash to protect themselves. When they're lucky with cash, they will be presented more opportunities. 

However, if we do not make good use of it, it is still useless.

Whereas, it is essential for us to have a strong free cash flow.

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Friday 26 October 2018

Being Frugal or Being Cheapskate?

Everyone is born with a different spoon in their mouth. Some entered the world with a golden spoon right up while some are out with a plastic one. Nonetheless, I believe that majority of us today should be contented that regardless of spoon they're having, they actually have one.

Comparing to the slightly unfortunate ones in some other neighboring countries who probably not have any spoon to go with, we should be glad and count ourselves lucky.

Personally, I do not have the privilege when I enter the world 20 years ago to be fed with what we see in the image up there. Or rather, I should be. But the spoon happens to fell to another wing of the tree and I've come to earth with a disposable spoon in my mouth.

In fact, I believe that this is the best gift I'd ever receive from God. Who would ever know what these rich families could be engaged in just like the dramas we see out there?

I'm honored and blessed to come to this world and definitely more than happy to have my family with me. The experience of my childhood might not be perfect but I certainly know and am aware that I have a loving family to begin with till some time later. 

Soon later, my family enrolled themselves in a dangerous and sticky financial situation.

Having to live through such a childhood had brought awareness to me about perspectives and making financial decisions prudently while I'm growing up.

As a result, I became more conscious when it comes to taking monies out of my pocket and more commonly I'm perceived as a cheapskate to my friends.

Probably due to differences in each eye for how money is perceived, I'm a cheapskate for most of the time.

Having that said, I'm still a human and I do have my soft spots as well. I certainly believe that as a human we should not thrift ourselves too much to the point we are living just to build our bank account balances. 

We should also have a fair share of entertainment and enjoyment to keep our lives occupied. 

Shortly after, I got a taste of what my family went through myself in a miniature way as I got over-whelmed and complacent by what we can do with money.

So am I fortunate? I guess I certainly am.

This bad event had turned out to be another lesson that constantly reminds me to not ever fall into such a situation ever again and had educated me on the word - DISCIPLINE. 

Read: A letter to my 30-Year-Old Self - 10 Years Ago

We can be prudent but it's also essential for us to have discipline.

As a human, we are all brought up differently. We have different speed of learning and different perspective towards the issue. But however, I do believe that we are the only person that should be responsible for our well-being and wealth. 

It is never good to not take responsibility for your own positions when it comes to the financial aspect.

Before we even jump into any topic of investment, I strongly believe that managing your own finances is the most important lesson one could pick up.

When we earn, it's important for us to know about saving too. 

If we don't learn how to save up, we will not be having a choice or say when an unfortunate event arises.

Yes, you will then be in the mercy of your situation. 

So am I a cheapskate?

Part 2 coming soon.

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Friday 19 October 2018

Temasek T2023-S$ Bond

Temasek had recently launched a bond available for retail investor 2 days ago. The latest bond released by Temasek was the first ever that is opened for public to participate in. 

Here are the details below for an overview:

Interest Payment Date: 25 April / 25 October yearly.

For an easier explanation, I believe Temasek has done a nice job to include a short introduction and explanatory about the bond they're issuing to provide a the public with a general idea of the bond.

You may wish to take a look at the video below for more information

Investors must be reminded that the instrument they are looking at, today at is a bond. A bond is a fixed income instrument and by investing in bonds, we are essentially borrowing our monies out to the issuer, and in this case, Temasek Holdings. 

When we become money lender, we are paid coupons. In this case 2.7% annually, which will be paid twice across a year until maturity. Upon maturity, the principal amount will then be returned to the money lenders.

As bonds are a fixed income instrument, the interest rate for the bond is fixed throughout the 5 year. 

Meaning to say, should the interest rate in the economy rises more than what the bond could offer, your bond is essentially worth lesser as the same amount of money invested for this 2.7% can be invested for 4% interest. 

Making the other deal more attractive and to price it along, the unit price of your bond will fall. However, when the opposite happens, your bond will be worth much more. 

So yes, the general idea of bonds is there.

Taking yourself as a money lender today, the risk involving money lending will include the risk of your lender not repaying you. In this sense, we refer to the term as defaulting on payment. Hence, it is very important for the issuer to have credibility. 

Taking a look, Temasek Holdings hold a credit rating of AAA, rated by S&P and Moody. AAA represents the highest level of credit rating which has an exceptional degree of creditworthiness, perceived to have the smallest risk of default.  

As investors, we are most commonly paid for the risk we undertake in each investments. The higher return will command a greater level of risk involves and vice versa. For what we see today from Temasek, the risk of defaulting is minimal and having that said, we must expect a conservative return instead of crazy ones.

Comparing it to the SSB, we must also understand that there are differences between both product and this is the reason why we are paid slightly more in interest.

SSB despite being kept in our CDP accounts, they are not traded in the market whereas the T2023-S$ will be traded in the SGX market. Having that said, we will also be able to buy into the bonds from the open market after 26 October 2018. 

When traded on an open market, there will be a certain level of rationality by Mr Market and prices of the bond could be driven either ways by investors that buy and sell on the market. With that in mind, if we were to liquidate the bond somewhere in between the 1st-5th year and the price is down south, we will see ourselves selling them at a loss.

As this is a fixed income instrument, should the price of this bond fall below it's listed price of S$1, we will be looking at a higher interest received when we buy from the market afterwards. 

The bond application will close on 23/10/2018 12:00PM and will start trading on 26/10/2018 09:00AM on SGX market.

Successful applicant will be notified on 25/10/2018 and refunds of unsuccessful allocation will be paid of 24/10/2018 along with the announcements.

CPFIA-OA can also be utilized to participate in the bond issue of up to 35% and application of bonds can be done through iBanking, ATMS and Mobile banking app of POSB/DBS, OCBC and UOB.

As compared to some other products available, we must be reminded that this is a safer investment and will not be suitable for those who crave a greater returns. 

As it is traded in the open market and subjected to more risks, the T2023-S$ is also not a suitable place for us to park our emergency funds as our e-funds should not be subjected to losses when we liquidate it due to emergency. When we invest in T2023-S$ bond, it's best for us to hold through the 5 years period.

The T2023-S$ Temasek Bond should be regarded as a safer investment as opposed to the SSB, which we can view it more to a fixed deposit.

As usual, I believe it's very important for us as an investor, to know ourselves. Which equipment we use will depend on what objective we need and the purpose for doing so.

- Temasek Bond T2023-$ (Product Highlights)
- Temasek Bond T2023-$ (Offering Circular)
- Temasek Bond T2023-$ (Pricing Supplement)

More details can also be found on Temasek's official website on T2023-S$ Bond

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Monday 1 October 2018

Portfolio - September 2018

Current Portfolio (30/09/2018)
No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
Wilmar Intl
Starhill Global REIT
Far East Orchard
Singapore Saving Bonds

Total SGD:


The month of September is a greenish one for most of the business I own as opposed to the previous months. But when this update is published, this also tells me that we're left with only 25% of the year to go before a brand new year comes by again. 
And in no time soon, I will have a fair share of my hair going down the waste bucket. 

Taking a quick look back my target I've established for myself a year ago. It seems that I'm pretty way off the target I've set, which is actually very disappointing. 

Guess, for this year, I'm not that prudent as I thought I would be but yet another lesson learned. 

Read: 19-Year-Old Investor - Part 2

Zooming into the Year 2018 - I've set a target for myself to inject a cumulative total of S$15,500 into my portfolio with an expected value of S$16,642.50 together with a passive income of $66.04 based on a 5% dividend calculation. 

It is way-way off. 

But on the other hand, I've started to understand that Mr. Market will tend to swing around and a target, in general, would be good but we will not able to control Mr. Market's emotion. All we can do is to be mentally prepared and go for the thesis that you bought into. 

I believe, patience will be rewarded

I've learned to pamper myself a little more as time comes closer to my enlistment as I felt that I've certain things that I'd like to get it done prior to resuming my goals in 2 years time. 

I guess I shall console myself a little that things are still flowing in the way it is supposed to, although roadblocks could be seen standing ahead of me.


Back to the portfolio. The month of September has been an interesting one and I've taken the opportunity to cash into the October edition of SSB. With this purchase, I will be looking forward to receiving cash from my CDP account monthly starting from next year. This will be in favor of the DBS Multiplier account which I'm looking to open soon. 

Guess who is here to say Hi again?

Hello SingTel! 

And that is right. In the month of September, when Mr Market decided to punish SingTel a little, I managed to add 400 shares of SingTel at 3.09 into my portfolio. Officially pushing SingTel to become the heavyweight champion among my entire portfolio, surpassing the weightage of cash positions in my portfolio. 

Do I regret the choice? 

The bigger recent accumulation of SingTel shares has pushed my cost price down significantly. Factoring the dividend in, I'm actually green with SingTel today!

With the dividend of 17.5 cents to be maintained for the next 2 financial year before reverting to a 75-80% payout ratio from it's net profit, I believe that we do have some consonlation prize here. For the next 2 years, should SingTel weather through the storm, it is more likely that we will be looking a bigger paycheck coming from them.

I actually do look forward to a more significant investment with SingTel.

Overall Portfolio Performance (as of 30/09/18):
Total (Capital Injection) in 2017 = S$ 6,566.79
Total (Capital Injection) in 2018 = S$ 4,837.30
Total Capital Injection 2017 & 2018 = S$ 11,404.09

Realized P/L = 13.89% or S$ 1,583.43 (Based on total injection)
Unrealized P/L = -2.15% or -S$ 234.49 (Based on total cost for each counter)
Cum. Dividends + Interest = S$ 465.41
Realized + Unrealized P/L + Dividends = $ 1,815.35 (15.92% base on cost)

Current Portfolio Value: S$13,186.50 (+16.11% m.o.m due to capital injection, dividends and portfolio performance)

CAGR = 9.33% (Based on start date at 14/02/17) - Days Count: 593
XIRR = 12.99% (This high % you see here is due to the wild card from Crypto in 2017 and relatively short duration)

Do take note that both XIRR and CAGR % is on a relatively high side due to the short duration that I'm in the market. As a reminder, a simple bear market should be sufficient to wipe out all the positivity you see up there.

As the time goes on, the % will be significantly reduced and adjusted based on time.

Current Cash Position (based on Opportunity Funds + SSB) = 30.33%
Dividends/Interests received in September: $12.37
Total dividends received in 2018: $370.11
Average dividends/month: $30.84

You will also be able to look for me on some other platforms:
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