Learning To Be Wealthy And Not Rich

I discovered this book by chance while waiting for a flight at Changi Airport. It caught my eye due to its author, Morgan Housel, whom I read some of his online articles and found them succinct. The book title was the other reason I chose it as I wanted to understand how big an influence that something as intangible as psychology has on a person dealing with money concepts.

Each chapter is quite short, 5 to 10 pages on average, perfect for quick burst of reading whenever I was free. But this took me six months to complete! I went through the book twice. The first round took four months because I was distracted and only touched it sporadically. Yet the topics were attractive enough to go for a second round so that I could really delve in the details. Don't be mistaken, it's not hard science and nothing formulaic.

The topics generally cover areas such as thinking in terms of risks, how a wealthy person behaves, encouragement to save and investing luck. Beneath all these lies the main issue; the individual's approach. While the market economy is a jumble with forces pulling in various directions, the key is to be clear on your own investment journey. The main thing I learnt is to strive for a life on my own terms, having money is just a tool to make it happen. Don't get disheartened when things go a little offside as it should be when events and policies are always unpredictable. This reminded me of the recently announced changes to the CPF SA which has big implications on many people. I took a deep breadth and decided it's time to move on. No point dwelling and better to spend the effort on recalibrating my portfolio.

Tip: Tenuta San Guido Alberto 2014, gum and raisin, chewy tobacco with uplifting nose

Sharing HDB Notes To My Boss

**Before you read further, I want to qualify that the below is purely a work of creative thinking.

Since the Prime Minister decided to talk about the topics of HDB and CPF, I thought it would be fun to chip in some ideas. Let me put myself into the shoes of Perm Sec MND and dream a little.

To start off, I'm outlining some basis and assumptions that guide this post's direction. 

a) A HDB flat is meant for stay, be affordable and not for investment. The current situation requires ways to address flat affordability, uneven wealth distribution, inclusivity for poor and elderly and help for young generation to start a family. As shall be shown, my measures are meant to reduce BTO price and curb resale values, essentially rebooting the system with new rules.

b) CPF is for retirement. As a safety net, the CPF must not be allowed to fluctuate too much from its contributed amounts. Its goal is to be a long term accumulation tool and ensure a stable payout at the appropriate time.

Now, the dream begins. Even if some figures below may be farfetched, it's because I didn't do in depth calculations. So this is a broad outline and my personal (maybe somewhat controversial) take.

1) The BTO scheme will be revamped and prioritized for Newcomer (defined as first time married couples and/or singles above 29 years old). Such applicants must choose a flat if their queue number permits, otherwise they lose the status of a Newcomer for three years. Any leftover BTO flats will then be opened to others on a ballot basis with families having at least one Singaporean child given five times additional chances. The MOP is 20 years but has an option that allows the owner to sell the flat after 10 years. If this happens, the transaction value is subjected to 20% tax, decreasing 1% each year from the 11th year onwards, on top of point 2 below.

2) A new tax scheme, Seller's Windfall, will be introduced for resale flats. The first S$400k of the transacted flat value shall be exempted and amounts above that are placed in tiered categories and imposed a taxable percentage, up to 60%.

3) The BTO salary ceiling will be revised to S$12000, housing loan payment via CPF shall be capped at S$1000 per person per month, therefore the remainder is by cash. The lending value of a house loan is capped at 70% of the valuation or sale price.

4) For private housing, each couple or single (above 29 years old) can own 1 HDB and 1 private apartment. Landed owners (defined as non strata titled land) will not be allowed to purchase a HDB flat. If a landed owner sells away his house, he becomes eligible to do so immediately. Any violation of holding both a landed property and HDB concurrently for more than 6 months will be heavily penalized. A year long exercise will be launched to check all residents' stated NRIC address against actual living address. ABSD for second apartment purchase (exclude HDB in calculation) and above starts from 30%.

5) Existing grants will be removed or reduced and focused mainly on the lower income tier and couples below 35.

6) The EC and PLH scheme will be discontinued.

7) HDB is to embark on a 10 year building plan to achieve 30000 flats per year. During this period, the aims are to sooth supply constraints, encourage those with expiring leases to move and young couples to start a family early. Among the new BTO flats, these include a variety of one to four bedrooms (up to 1800sqft). Certain floors eg second to fifth levels in certain blocks are earmarked for retirees only. These are one or two bedrooms flats strictly on a rental basis. The household nucleus for this may include the retiree (with spouse) and son(s)/daughter(s). A retiree's grandchild is not included and therefore the parent(s) must move out. Once the retiree (including spouse) passes away, the flat is returned and prepared for the next occupant. 

8) State clearly any flat upon reaching 99 years will be returned at zero value. Only a small percentage of flats may be eligible for SERS and the probability decreases while point 7 is being implemented. HDB will commit to make an offer to acquire flats with leases less than 15 years (amount expected to be token value contributing partly as down payment for next flat). It is a one time event and requires 80% resident's support. If rejected, then the flat follows its due course.

9) CPF in OA can only be used for housing (per point 3). CPF in SA can only be used for government securities, fixed income instruments or fixed deposits.

10) The interest rate for the various CPF accounts will remain for now but starting from the next review and subsequently, it will be adjusted under the formula (6 month Sora - 0.5%), subject to a minimum of 2% in OA and 4% in SA/MA.

Tip: Chateau Ferrande Graves Rouge 2017, tobacco and woody, inviting bouquet, slim finish

Finance Investment Movement 36

The political space in Singapore had been in overdrive in the past few weeks with various scandals and investigations happening. This is not the staid environment that I'm accustomed to where our government operates with a robotic touch. While the rumour mill continued to swirl, my focus was elsewhere. I watched the National Day speech with keener interest. Even though it was a short one, the sneak preview given by the Prime Minister will generate even more excitement until the rally date on 20 August. That's because he had touched on two issues closest to every citizen's heart; HDB and CPF. It meant something was brewing and the status quo no longer worked. I had mentioned before (over here) about my observations and glad the government is going to address such sensitive topics. My guess is there will be some measures to help the poor and elderly (maybe singles as well), tweaking eligibility rules and enhancing retirement. There's just too many areas and possible solutions (A side note: I don't support higher grants). In my opinion, the housing issue must be tackled now as any misstep will lead to a disastrous outcome, affecting the entire society strata as a house is the most expensive asset/liability. In about two decades, when more HDB flats come close to reaching lease expiry, the anxiety will be felt if nothing is done to reset expectations. Obviously, the government will not want to crash the market but neither should it allow seemingly unabated price increase. Therefore, it must start shifting existing policies to allow time to sink in, hopefully transitioning within a decade. As per Singapore style, let's put in another decade as buffer. Because if things don't work out, 20 years from now, the generation of new home buyers, existing home owners and retirees of that time will look back and ask "what if" questions with regret. I believe given the long term vision of our wise leaders, they have a plan and hope to gift the incoming Prime Minister a nice platform to begin a new era. Otherwise, I see this as the biggest sabo of a lifetime.

There is something unusual in the bank deposit rates. As the US Fed raised interest rates, our local banks have gone in the opposite direction by offering lower mortgage and deposit interest. Corporate financing rates remained high at around 6.5%, which meant the banks earned about 3% in interest income for such transactions. Why is this possible? I reckoned that's to do with the status of Singapore as a safe financial hub. Given the uncertainties in other countries, global depositors have basically transferred excess cash into Singapore based banks, causing an indigestion, so much so that DBS could even lend money to MAS! To small retail customers, the banks could afford to be stingy such as the HSBC EGA bonus program being taken away or GXS reducing its interest rate to 2.68%. I think the banks will be even more selective, thus it's important to lock in quickly if a good deal presents itself. My investment since the last update was adding another $1000 into the Pimco GIS Income Fund. At the end of the month, I will subscribe to the SSB as it can be used to replace an older tranche that gave a lower coupon rate.

Tip: Vergelegen Chardonnay 2020, lemon and toasty, heavy acidity and dry

Finance Investment Movement 29

I guess it's becoming a habit. As advocated by many in CPF discussions, I topped up the MA by $2500 on the first day of the year. However, the annual tax deductible portion of $8000 is unlikely to be fulfilled since I have achieved FRS. The next few months will be an assault on my wallet as bills are due for property tax, insurance, income tax and Medishield. 

For the last few months, while many put their cash in Tbills, I was also on the lookout for value in global high yield funds. After pondering for so long, I made the move by investing $2000 in Allianz Income And Growth. What interested me were the US centric focus, mixture of bonds and stocks and 9% pa yield at current price. Yes, the risk is there and I'm well aware of the coming wave of volatility. My view is the upside is at least twice the downside, so it's a bet I'm willing to take.

This year, I plan to track dividend yields and took a template to do this. Still monitoring it and hope this gives greater clarity on the cashflow.

Tip: Mer Soleil 2019 Chardonnay, slick with oaky body, fresh herbs and decent finish

Finance Investment Movement 24

It's a proud moment to achieve my savings goal for the year and even slightly exceeded that. Although the distribution is uneven, given the time still available, I should be able to make up for the shortfall in other categories. In any case, I need to ramp up the preparation for Vacation expense as my family had decided to go on a year end cruise. We booked two ocean view rooms on the Royal Caribbean liner. I'm hoping to squeeze in an additional trip to Australia just with the wife for a short unwind.

I didn't expect the SSB average coupon rate to fall to 2.8% but it was slightly mitigated by the high 2.63% offered for the first year. Just when I thought I could build a ladder of six consecutive months of subscription, this has left me with the dilemma on whether to proceed. Perhaps I might still go for it but treat it like a short duration bond and redeem within one to two years.

Received the NS credit of $100 and while I thought for a moment on how to utilize it, I came across several articles that advocated cash withdrawal or CPF payment. I opted for the latter and transferred the amount to my wife's account since hers is still a long way from FRS.

Finally, after almost daily observation of the AUD fixed deposit rate, I saw the opportunity arrive and promptly locked in at 2.41% for 6 month tenor with DBS. I never knew these rates change so quickly as the impression had been that they follow the central bank rate of its home country. I expect overall interest rate environment to be on the uptrend till year end so it should be in time for a renewal at the higher rate.

Tip: Kitaya Junmai Ginjo Summer, dense fruit base, rich mouthfeel

Finance Investment Movement 21

The milestone of the first option trade I had ever done was achieved on 5 May. The strike price quoted was US$141 with a week long duration and a put was sold. This honor went to Apple as I'm a fan of its products and didn't mind holding its stock even if the put was activated. Otherwise, I stand to gain a net premium of about US$25. And one trade became two when a put option for Disney was made days later. This is for a strike at US$95 versus US$55 payout. In total, I collected about US$35 in premiums after a rather spooky stock market week and closed the Disney position early.

As the US market tanked last week, investors were left grappling whether to buy the dip or hold onto cash. With a rising interest rate trend, I had set aside a little spare cash. Since the cash was idling, it set me thinking on how to maximize its value. Besides equity purchase, some options that were considered include CPF Housing Refund, Singapore Savings Bond and short term endowment plan. This cash was meant to be liquid so I narrowed it to SSB and began searching for its latest offer. On the MAS website, it showed T bills were available too and the last yield was 1.56%. How could I have forgotten about this instrument! This could have been my go to option when the fixed deposit was redeemed in February. So I applied and am waiting for the result.

Another instrument that I'm monitoring is the unit trust, JPM Income Fund. It's invested primarily in US national debt and pays a monthly dividend that works out to 4% pa. This might be the right alternative bond portfolio for diversification purpose. Various platforms distribute this but there are different fees, so I'm still looking around.

Tip: Chateau Moulin Riche 2014, nice floral bouquet, slight spice, medium body and length

Finance Investment Movement 20

A quarter of the year has passed and it has been mostly about expending cash on recurring items such as insurance premiums, tax payment and CPF contribution.

One of those usual invoice came from Cordlife. It's for the preservation of stem blood cells of my firstborn and so far, 15 years of dedicated storage. But my wife and I decided to stop this on the grounds that we most likely wouldn't need to utilize in future, the sample quality might have deteriorated over time and there's no end to this payment if we chose to continue. While I appreciate the efforts of the service staff to retain the account, I rather move on and save the $267.50 annual fee, with a slight crossing of fingers that the decision turns out right.

This month marks a significant milestone whereby I have achieved Full Retirement Sum in the CPF through a combination of top up and OA to SA transfer. That also sadly means I won't be able to claim tax relief for SA top up next year onwards. In any case, doing this now just brings forward the achievement since job contributions would have done the same by year end. Now, let compounding work its magic!

Tip: 2nd Pez 2019, fresh fruits, slight chocolate with mixed berries. A little tight for now, wait

Finance Investment Movement 19

The financial market is in a turmoil. Just watching the price of commodities rise in a straight line makes me dizzy. I may not have caught the gravy train to riches but the time is not for weak holders to go on a shopping spree. It is by choice that I'm staying on the side and observe the great volatility generated by yet another black swan event, this time caused by Mr Putin.

Crypto probably tell the best story whereby itself is already a big unknown. I saw my portfolio go up at the beginning of the month, then decline rapidly to go below last month's ending. Its correlation with the stock market is incredible except that the individual tokens can fluctuate wilder than the average stock. On this basis, I rather look for more stable instruments yet they must have inflation beating capability. At the moment, the best and safest thing I can think of is CPF. Based on calculation, I stand a good chance to become a CPF millionaire by retirement provided contributions continue at current pace.

An interesting conversation occurred when my children told me about their fascination with crypto after hearing from their online friends and videos. So I created a live crypto trading account with $100 and allowed them flexibility to trade whatever they want. Hopefully, this will form a good starting point to aid in their financial planning journey.

Tip: Canyon Road Cabernet Sauvignon 2017, very grapey, juicy and big mouth feel

Suggestion to HDB

The HDB flat is the epitome of Singapore's success as a nation. It grew out of necessity after gaining independence and has not looked back with beautiful and functional flats spread across the island, some even winning awards! But within the nuances of policy lie a list of issues facing this generation. Among these, some 99 year leases are due soon, the wealth distribution effect is uneven, long queues are forming at BTO etc.

The mission of HDB is to provide affordable flats for the masses and that's been widely achieved. The crux of the matter here is what's meant by "affordable"? I think if the policymakers can resolve this, then subsequent issues will naturally have their solutions. At the moment, one of the condition for buying a new flat is the income threshold. That itself caps the limit on how much loan a couple can afford which in turn sets the upper ceiling of how much a flat should be priced. I would suggest tweaking the income eligibility by referencing the household median income as well. Lower the income threshold if need be. In that way, new flat prices would not be too expensive and remain accessible to majority of citizens. Regardless of asset value enhancing factors, new flats should use that as the benchmark. Another consideration would be to do away with showcase projects such as Pinnacle at Duxton to ensure no flat would become overly priced.

What about those people who are caught with higher income but yet unable to own a private property? My opinion is to scrap the Executive Condominium scheme and instead allow them to buy a HDB flat as priced above. The catch is, more stringent conditions would have to be imposed such as gains tax, cap on CPF usage and/or longer minimum occupancy period etc. Resale flat buyers should also be subjected to similar requirements.

Therefore, land with higher value should be allocated to the private sector that in turn will cater to the high income earners at prevailing market conditions. This create opportunities for real estate companies to find innovative ways to attract buyers while helping the government to pocket more due to higher land price. HDB can focus to build affordable flats within a certain price range that can address new entrant concerns while ensuring no one makes a profit disproportionately when it's sold. The aim is to allow a HDB flat to be purchased or recycled within a price range while allowing private housings to be based on market forces.

Tip: Balvenie 12 Doublewood, fine and smooth oak

Month of June 2021

Updated finance page.

https://drinkingspot.blogspot.com/p/finance-sharing.html

Half a year has gone by so it's good to review what has happened.

At the beginning of the year, I was skeptical where this Covid situation and vaccination program were going. It turned out we are no closer to solving this global illness even though many developed countries had gone on to vaccinate large parts of their population. Singapore may be doing better but it remains only useful in the local context and travel will not return by year end, I think. My son asked when would it possible for him to see snow, I just replied hopefully soon with a mental footnote that it meant 2022 or later.

Looking at the impact of lockdown on retail businesses, it was a sobering reminder that older folks likely suffered the most as they were digitally lagging, unable to tap on online marketing, delivery and payment resources. Technology has taken on huge importance in business operations and it cuts across all industries, layered with environmental considerations on top. Like it or not, either you embrace this or risk being left behind. Personally, I had been doing more online shopping this year than all of previous years combined, that included new experience in live auction and sale types of purchases eg buying fresh fish!

As I look at my investment and saving goals, it's a rather disappointing picture. I'm only 20% into savings achievement, have less cash on hand and not being invested as much as I would like. The bright spots are continued CPF increments, tried new trading platform and generally good hold up in asset value. I am still trying to digest so many conflicting views regarding market directions and crypto legitimacy, hence shall not make any definitive adjustment to my portfolio.

Tip: Saint Clair Vicar's Choice Sauvignon Blanc 2019, tasty apple and lemon zest

Month of November 2020

Updated finance page.

https://drinkingspot.blogspot.com/p/finance-sharing.html

I'm very happy to say that I managed to achieve my goal of contribution via CPF this year. It leaves me one more month to siphon away some more bits into other savings measures or something useful.

On the health front, I did a proper bike ride of 47km along Changi Coastal Walk, on the pretext of testing out foldie bicycles provided by a friend. This month, I also took part in the Bloomberg 1 mile challenge with my team and clocked 8:06min which was slower than expected. I was also introduced to a new game, Pickleball, that works like tennis but in badminton court size with smaller bats. Very fun and moderately intense sport, I would highly recommend for anyone to try. Despite these efforts, my weight remained the same, an anticlimax to my hopes. Nevertheless, I am looking for a fitness watch to track my vital signs and it probably would act as my conscious self reminder.

There was a new sashimi fish that I got acquainted with. Its name is Hakkaku. Shaped like a flying fish with long fins, a scaly body and seahorse looking face, it looks hideous but I was surprised by the firm texture and oily taste. I suspect this helped to enhance the sake flavors by enhancing the sweetness and enjoyability. It's a winter fish found in Nagasaki area.

Tip: Sakuragao Junmai Daiginjo Nanbu No Shizuku

CPF Top Up Nov 2020

It's a great feeling to achieve a goal, particularly if one spends months on it. Although a small goal, at least this hurdle has been crossed with my final CPF top up this year by $2000 and qualified for maximum personal CPF tax relief.

With the low interest rate environment, there are not many alternative investments that can provide guaranteed yield of 4%. Bonds, bank deposits and money market products are close to 1% while equities and commodities have topped my expectations at more than 20%. That depends much on level of risk taking, timing and selection. My portfolio still shows several red lines despite such euphoria which I continue to believe as irrational. The most outlier would be cryptocurrencies where the jury is still out on their viability in real world mechanisms.

Nevertheless, the CPF is a comfort cushion and I feel rather gutted not to realize this earlier in my work life. It was Covid that gave me time to read other inspirational journeys and plan for my own. A little late to the game and lots to catch up.

Tip: Horlicks, an old favorite in my primary years

CPF Top Up Oct 2020

There was a news article published few days ago that mentioned the plight of a man who invested his CPF money and lost 95% of it, leaving him pittance for retirement.

It's a sobering and real experience that I can imagine happening to those with less financial know-how. I especially agree with the article's statement that if one needs to use CPF for investment and not spare cash, then it means he's not prepared to weather the risks. I neither condone nor encourage the use of CPF for investment. But one has to look at the circumstances of the day and make a call on whether it's worth to punt your risk free interest rate of 4% (in Special Account). All CPF investments typically come with fees and opportunity costs with an expectation of beating the paid out rate.

In the current situation, I chose to let my full CPF run its course in a riskless environment and therefore added $3500 which further helps in my tax deduction next year.

Tip: Ginrei Gassan Secchu Junmai Ginjyo, stored in snow conditions for a year before release

CPF Top Up Sep 2020

The CPF rate will be kept at a base rate of 2.5%  till the end of 2021.

https://www.straitstimes.com/business/minimum-cpf-interest-rates-to-remain-unchanged

In a world hungry for financial returns, that is an extremely attractive deal. With bonus interest rates on the first $60000 and higher rates for Special and Medisave accounts, you don't have to think much if there's spare funds lying around somewhere. Therefore, this motivation allowed me to put $1000 into my Special account. There are not many months left to fill up the gap for maximum income tax relief.

Tip: Old Pulteney 15 years, salty and delicious honeysuckle

CPF Top Up Aug 2020

After paying the credit card bills of last month, there were some cash surplus so I decided to put $800 into the family's CPF accounts. This is something that I started this year to realize the power of compounding. Also, it's the wife's birthday so this serves as an invisible gift to her. Hopefully, by the time she can start withdrawal, the amount would be something decent. At the moment, I have no particular target to achieve. As an example from an actual CPF statement I saw, at age 65, a person with $102000 can expect to withdraw $662 for the rest of life. My opinion is this amount is too little for our lifestyle which means I have to save harder.

Tip: Iced Kopi

Month of July 2020

Updated finance page.

https://drinkingspot.blogspot.com/p/finance-sharing.html

The tug of war between stock market bulls and bears is looking like an epic is about to start. In a month, USD dropped almost 2%, Bitcoin rallied 18.5%, gold and silver rose while STI sunk 3.2%. Banks were told to reduce dividend payout amounts, some corporate results were really poor eg Keppel Corp and a dose of reality was offered by companies such as Capitaland on impending news. I'm going to adopt a long term view and hold on to my investments. If there are insensible price drops, I will add anything that can conceivably give back 4% or more, just to beat CPF interest rates. 

Now that the dining out scene is making a comeback, I finally got to try Kaiyo Sushi & Grill https://www.facebook.com/kaiyosushigrill/. It's located among a row of restaurants so competition must be tough. Having spotted it almost a year ago, I have always wanted to get in there until the wife's intervention. Turns out the food is good especially the grilled items (special mention that these appear so quickly on the table after you order!). If you are a fan of fish head and collar meat, then the choices here are more than enough and with good value too. I managed 3 visits in a month. However, news have appeared that the owner of the row of shop houses is looking to rebuild the piece of land. Hence, my joy at finding this little gem may be short-lived. 

Tip: Alma Mora Malbec, 2018. Full of berry plums and oakey taste stands out. Great with meats.

CPF Top Up Jun 2020

The mid year just begun and also indicate the final day of Circuit Breaker Singapore. Even though it's officially reopening the country towards normal operations, I feel indifferent. Most offices would be devoid of workers and even small gatherings are still not allowed. However, the next three weeks are crucial to test how well the system is implemented. I hope not to hear Covid cases start to increase.

I decided to mark this day by making a $500 contribution to my CPF Special Account. Besides, this will aid in my tax relief claim, attract early interest and forcibly lock away any spending thoughts.

So my updated CPF savings looks like this (Goal 2020).

Tip: Milo (3 spoons of powder, 1 spoon of condensed milk with hot water)

CPF Interest Rate till Sep 2020

The CPF is a very important instrument as part of my retirement plans. I truly believe it's one of the best policies that any government can provide for its citizens. Being forced to save a part of one's earnings is something not most are willing to do. So CPF steps in to fulfill the taskmaster role and you get additional contribution from your employer plus interest top ups.

CPF Interest Rates Jul to Sep 2020

My approach to using CPF as a retirement tool is not to spend it but add on wherever possible. Currently, I use it to pay part of my housing loan and nothing else.

Tip: Albert Bichot Chablis 2017. High acid minerality with medium body and short finish.