Friday, July 29, 2016

What NEL (North-East-Line) Breakdown This Morning Taught Me About Investing And Life?

This morning, during the peak hours of the train service, the jinx event happens again!

Yes, NEL (North-East-Line) breakdowns once again, from around 7.30 am, for about 30 minutes. After alighting from the LRT and witnessing the packed station with multiple snake line queues, I need to make a decision and make it fast!

So, what options do I have now....?

1. Proceed to join in the already crowded queues and waiting in the stuffy environment OR

2. Proceed to take the alternative transport via free bus services, which is nearby - but, equally long queues have been formed within the whole interchange OR 

3. Proceed to take the alternative transport via taxi - of course, there is no guarantee that I can get the taxi easily, so there is a risk here OR
4.  Proceed to take the alternative transport via  Uber - Personally, I've never tried Uber service before so, this option is the lest feasible OR    

5. Take the LRT back home and come out again when gotten the news that the train services has resumed OR

6. Call a friend - I had a few friends staying around the same area as me and probably they are on the way to work too, so probably can ask for a ride OR

7. Any other options that I've never thought of at that time....

Within seconds, I've decided on Option 5, with a slight variation! Instead of taking the LRT back home, I decided to take the LRT and ride along the loop. My rationale are :

1. The train station is too packed and stuffy, I need more fresh air and not prepared to join in the queue amidst the stuffy condition.

2. With such a queue, even if the train service is resumed, I foresee that I can only get into the second or third train, at best.

3. The whole loop of LRT line will take me around 10 to 15 mins and I am prepared to sit inside the LRT train and enjoy the air-conditioning as well as get entertained by Muttons In The Morning (Class 95 radio program).

I am pretty happy with my decision as soon after I completed the loop, the train service resumed within 5 minutes and I managed to get into the second train. All in all, I only late for work for about 30 minutes or so. I remember in one of the previous similar incident, I've chosen Option 3 (via taxi) and waited for 30 minutes for the taxi alone ;-)

So what have I learnt from this unfortunate event about life and investing?

1. We are constantly making decision in our life (or investing), knowingly or unknowingly.

2. Once you've made your decision, other options become irrelevant as you can't relive to make another decision. There are opportunity costs involved in making or not-making decision, but we should not be paralyzed by it.

3. Whatever decision you've made, it is deemed the optimal one at that point in time, you need to accept the consequences and move along. Most of the time, there is no right or wrong decision, just how optimal at that particular moment.

In life or investing, every step or decision counts! 

If it was you, what option would you make in that situation?


Friday, July 22, 2016

7 Financial Terms Many Singaporeans Get Wrong (Guest Post)

Finance has a language of its own. Most of that if dry is boring - right up to the point where it hits your wallet.

It makes sense for anyone, whether they are investors or not, to understand these common points of confusion:

  1. Nominal versus Effective Interest Rate

You often see two sets of interest rates on a banking product. The nominal interest rate, and the Effective Interest Rate (EIR). What’s the difference between the two?

Well the nominal interest rate is just the stated interest rate. It doesn’t take into consideration the effect of compounding. There is a significant difference between the two. For example:

Assume you have a form of loan that doesn’t compound (a vanilla bond is a good example). You are owed $5,000, after a period of 10 years. If the interest is 5 per cent per annum ($250 per year), you would get $7,500 at the end of 10 years.

But if the interest was compounding, you would get a very different result. You would no longer be getting just $250 per year. You would get $250 in interest in the first year, but in the subsequent year you would get $262.50 (five per cent of $5,250), and in the third year you would get $275.60 in interest (five per cent of $5,512), and so on. You’d have $8,144.47 at the end of 10 years - a difference of around $644.70.

This is why, when you take a loan, the bank is required to publish both the nominal interest rate, and the EIR next to it. You should take note that the EIR is the genuine rate you are paying.

2. Median versus Average

Unless you paid careful attention in school, you have probably forgotten or missed the difference between a median and an average. This slip-up can be used to mislead you.

For example, say you are asked to join a marketing scheme, and to help sell cruises. When you ask how much you can earn, you are told the average amount is $3,950 per month. Does that mean the majority of the sellers earn that much?

Probably not. Consider this:

Say there are 100 sellers in the scheme. 90 of the sellers only make $500 a month. However, 10 of the sellers are tremendously successful, not least because they take a portion of the sales made by the other 90 people (this is how many Multi-Level Marketing schemes work. So now:

90 people earn $500 a month from the scheme. 10 people manage to earn $35,000 a month from the scheme. What is the average?

($500 x 90) + ($35,000 x 10) / 100 people = $3,950.

The average is indeed $3,950 per month. However, we know for a fact that 90 per cent of the sellers don’t earn anywhere close to this amount! They only earn $500 per month.

This is because the unusually high earnings from those at the top of the scheme (the ones earning $35,000 per month) greatly skew the results.

By using the median, we lay out all the numbers in a row, and knock off the numbers from both ends until we come to the middle. In the above example, we would lay off the earnings of all the sellers in the straight line, and eliminate one number from each end until we come to the number in the centre (which would be $500).

This is why reputable agencies like the Ministry of Manpower always report median income, when trying to give a sense of how much the typical Singaporean earns. An average income would be a highly misleading figure.

Bear this in mind when you are told the “average” amount someone can make from a product, or the “average” pay for a particular job.

3. Capital Protection Versus Guarantees Against Loss

Capital protection often sounds like a great form of safety. In fact, many advertisements like to boast that a financial product is safe precisely because of capital protection features.

In reality, capital protection is no guarantee against significant losses.

Capital protection means that only the initial amount you invest is protected. The rest of it is not guaranteed. Now, consider what happens if you invest a large portion of your life savings (say $100,000) in a structured deposit, which promises returns of five per cent per annum. You must commit the money for a period of 10 years. You are warned the risk is high, but you have capital protection.

After nine years, you receive a call that something has gone wrong. The structured deposit has been cancelled (the bank is “calling” the deposit). You will only be receiving your initial capital back.

Have you lost money? Quite definitely.

At the end of nine years, the amount of money the deposit has accumulated is around $155,133. By getting back only your initial capital, you have wasted nine years of growth, and lost over $55,000.

All that time, you could have had the money invested in a safer product. And remember that over nine years, the rate of inflation would have significantly lowered the real purchasing power of your initial $100,000.

Capital protection is of some use, but don’t be under the impression that you are perfectly defended against losses.

4. High Volatility

Many lay investors are scared off by the term volatility, or risk. It’s important to remember, however, that high volatility does not inherently mean something is bad.

High volatility means there are large price movements in either direction. A volatile asset can fall significantly in price, or it can rise significantly in price. Without volatility, profit is impossible (if all prices are permanently fixed, how could you ever find a discount, or run a business?)

Some degree of volatility is needed in order to grow your money. As such, many financial advisors will suggest mixing in a small amount of volatile assets. One such approach, called the barbell strategy, is to have 90 per cent of your assets in safe products (like fixed deposits), and 10 per cent in highly volatile products.

In this way, losses from the volatile products cannot significantly damage your wealth (they account for just 10 per cent). But in the off chance that they pay off, the high volatility means they could triple or quadruple returns, and the high profits will offset the slow growth of safer products.

To put it simply, do not assume that high volatility is all bad. The key is to balance your portfolio by getting the right mix.

5. The “Free” in Interest-Free

There are many misconceptions about how an interest free loan works, particularly with regard to credit cards.

If you use a balance transfer, the interest free option is not without cost. This is the balance transfer fee, which is a percentage of the amount transferred. So if you shift a $2,000 debt to another card, at a processing fee of 4.5 per cent, your total debt grows to $2,090.

At the end of the six month interest free period, you again make a balance transfer, incurring another 4.5 per cent. Now your debt is $2,184.

This is why you cannot evade paying your credit card forever, by repeatedly making balance transfers. It is still growing, even if you hop from one interest free period to the next.

6. Credit Card Instalment Plans

Many credit cards allow you to make instalment plans on big purchases, such as televisions or laptops. For example, you may see an offer from your card that says “Interest free 12 month instalment plan” for a $10,000 plasma screen TV.

You might conclude that, when you buy the TV, the first instalment of around $833 is charged to your credit card. That is not how it works.

When you buy the TV, the whole $10,000 is charged to your credit card right away. If it is interest free, you are simply not paying the interest rate on this specific purchase. But the entirety of the purchase has been charged to the card, and counts toward your credit ceiling - that’s why you might find your card repeatedly declined after such a large purchase.

Also, remember that there is a minimum repayment sum. If the minimum repayment is three per cent of the amount owed, buying that TV raises the minimum repayment to at least $300 per month. You still need to pay this or face late charges.

7. Tactical versus Strategic Asset Allocation

Asset allocation refers to the way a portfolio is balanced. If you have a financial advisor or wealth manager, this is often done for you. The allocation is often described to you in simplified terms (e.g. 10 per cent cash, 60 per cent shares, 30 per cent bonds).

Strategic asset allocation usually refers to a long term, buy-and-hold strategy. These principles require portfolios that are tweaked periodically, often every six months (but this can vary).

Sometimes however, you may hear the term tactical asset allocation. The technical sounding term is sometimes used to avoid alarming you, along with the term “actively managed”. Make no mistake, it refers - to a limited degree - to market timing. That is, the risky process of trying to guess market movements, in order to buy low and sell high.

Some salespeople know that concepts can be offputting to the risk averse, hence the use of the more obscure terminology. While it doesn’t immediately mean something bad or outrageously risky, be aware that tactical asset allocation reflects on active, more aggressive approaches.

This article was contributed by, Singapore’s leading personal finance comparison platform for credit cards and personal loans.

Tuesday, July 19, 2016

Pokemon Go - What Investors Can Learn From This Phenomenal Game

Pokemon Go
Are you a Pokemon fan? It doesn't really matter, but I am sure you've seen or heard about the latest mobile game craze, Pokemon Go! Currently available only in US, Australia and New Zealand. Fans from Asia got to wait a bit as the game was delayed its launch in the Asia. 

Pokemon Go has broken all sort of records in the US game app markets. It is free to download in iOS and Android phones and nicely blend in the real and virtual world for the fans (or players) to catch the pokemon creatures in "real life". It's kind of like fantasy comes true for the Pokemon fans. 

So, what has Pokemon Go got to do with investing? I think there are much we, retail investors can learn from this cultural phenomenon, here are my take :

1. Good thing takes time. Do you know long it takes for the creator, John Hanke to create this app? Not 1 year, not 5 years but 20 years. Yes, he started mapping the world of Pokemon since 1996, while he was still a student. Just like any investment, it takes time to bear the fruits, so be patience and have faith in your dream or investment, as long as you've done your home work. As the saying goes : time in the market is more important than timing the market. 

2. There is no need to re-invent the wheel. Do you know that the Augmented Reality game concept of Pokemon Go is not something new? Before Pokemon Go, there was Ingress, even though not as popular. Besides, the graphic and design of the pokemon looks average to me too. Just like in investing, there are enough strategy for the retail investors to adopt, there is no need to reinvent the wheel by coming up with brand new strategy. All roads lead to Rome, just find one or two that suit you.  

3. Luck is important! I believed no one, not even the creator, John Hanke has envisaged such a crazy success of his game. What can I say? I believed luck do play a part in everything. Just like in investing, you might have done your 101% research and homework in studying the stock(s), but at times, you still need a fair share of luck in turning it into an hit.     

Would you have a go on Pokemon Go when it is available here? For me, I am not a fan of games but will definitely give it a try just to have a first hand experience of this phenomenal craze. 

Oh! In case you are still really really have no clue of Pokemon Go, do yourself a favor by checking out the following video:


Thursday, July 14, 2016

My Missing Week - In Memento Style

Sorry folks, I have been missing in action (blogging) for exactly one whole week. I am back now and hope that I don't need to wait for another 7 days for the next post ;-)

I like to treat this as a recap on what I have intended to blog for the past one week but didn't got the time to until now. 

To make it slightly more interesting and different from my usual style, I am writing this post in a "Memento" Style. If you are a movie buff like me, I am sure you've watched the movie, Memento (2001), directed by Christopher Nolan (yes, the one that brought us the blockbusters like The Dark Knight Trilogy, Inception etc...subsequently). It is a very intriguing crime story told in reverse order i.e. start with the end and end with the beginning. 

If you have not watched it, it is highly recommended! 

Anyway, back to the original purpose of this post, here is My Missing Week (in Memento Style) :

What a disaster for SGX, if you've not already known, SGX trading platform was down for the whole of today since 11.38 AM. Whether it will be up for trading tomorrow is still questionable but I believed this is the longest halt (due to technical glitch) in the history. Besides, I am pretty sure that some head(s) got to rolls too...

As per my earlier post regarding my manual DCA (Dollar Cost Averaging) counter, Singtel, I am supposed to lock in another 200 to 300 shares during this period. However, it didn't happens as the price keep moving upwards and almost hit the 52-weeks high at one stage. I do aware that such "flexibility" should not be applied if I were to follow DCA strictly but I am just trying out the variation of it and see how it goes. 

As the price of Singtel is still at the higher end now, I am contemplating to source for another alternative counter for me to rotate my DCA fund allocation. With multiple counter(s), I believed I can allocate the DCA funds more appropriately. Searching in progress....

There is no luck this time round! 

I failed at my second IPO attempt (Advancer Global) and missed the chance to be part of the successful IPO (up almost 100% on the first day of trading). Well, try harder next time.

SGX is having a stable and peaceful trading session, mostly greens...What a beautiful day... that was sorely missed TODAY...!


Thursday, July 7, 2016

Advancer Global - Trying my luck on the second IPO

For the past few weeks/days, one of the hottest topic in the local market I believed is about the upcoming IPO - Advancer Global Ltd. Offering at SGD0.22 a piece and tt will start trading on 11th Jul 2016, Monday (9 AM). 

After successfully gotten my minion maiden IPO shares of Frasers Logistics & Industrial Trust (FLT) a couple of weeks ago and further inspired by the blog posts by my friends (B from A Path To Forever Financial Freedom and Derek from The Finance), I decided to try my hand again on this upcoming IPO. 

As usual, since I am an "ikan bilis" retail investor, just trying my luck with 10,000 shares. Why 10,000 shares? As per the research by Derek, "10 to 49" and "100 to 499" have the highest percentage of shares allocation. ;-)

Oh by the way, according to our Mr IPO, Advancer Global Ltd entitled to 3 chilli rating, which is above average rating. 

Let's see how far my luck can bring me this time round ;-)


Saturday, July 2, 2016

What Are The Correct Habits Of Retail Investors?

Recently, I am reading a book called "The Coaching Habit - Say Less, Ask More & Change The Way You Lead Forever", by Michael Bungay Stanier. It's quite a good read and giving me a different angle of coaching. 

I am almost done with the book and learnt a couple of critical questions to ask when we are performing the role of coaching (whether in work or personal life). This also set me thinking : what should be the correct habits of Retail Investors? What if I changed the title to :

"The Retail Investors Habits - XX Less, YY More & Change The Way You Invest Forever

What would be the XX and YY?

Of course, I don't have the perfect answers for this, even if I have, different retail investors might view it differently. Having said that, I don't mind giving my personal thought, here will be my humble answers and why :

"The Retail Investors Habits - TRADE Less, INVEST More & Change The Way You Invest Forever
By Trading I meant "timing the market" by following market movement (I know a couple of my TA friends will not buy it) and Investing I meant "time in the market" by invest for longer term (FA friends will agree more with me on this). 

What about you? What is your BLUE and RED pills? 


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