Become a millionaire by 31

Are you 21?
Receiving your first salary?
Rs 18,000 per month?

Wish to become a rupee millionaire by 31?

Care to invest 20% of it?
Rs 3,600 per month through SIPs

According to the calculator you would make 10.03 lakhs!
Taking inflation into account (around 7.2%), it would be worth 5 lakhs as on today.

Now if you don't touch this corpus and let it continue, you would have ....

..a mind boggling Rs 11.3 crores by the time you are 61.
(However taking inflation into account (around 7.2%) , it would be worth Rs 1.5 crore as on today)

India's next big investment story

Who is going to script India's next big investment story?

The flamboyant Rocky:

The elusive Professor?:

The confident Porinju?:

Well it is going to be:

The common man (and family of course!)

Investments in equities and debentures has gone up by 72% Year on Year according to the RBI.

In absolute terms it has increased by more than 38,000 crores.

However one needs to wait and watch to see whether this is a temporary phenomenon driven by the buoyant performance of the stock markets or have the Indian households starting understanding the value of investing in equity.

Growing Your Money Is A Long Term Relationship

I still have a long way to go in investing journey but I am going to write what I have found out and planned for my family.

You know what I discovered? It is extremely simple to grow money. What you want is for your money to grow from $X value to $Y value. If you insert a timeline with it, you can even work out the annualised returns or percentage.

There is what made investing complicated:
You see a group of investors/traders advocate investing in individuals stocks, ETFs, permanent portfolio, crowd funding and more. There are even more interesting theories such as dogs of dow/sti, trading during cd/xd, value investing, dividends investing, DCA, Fundamental Analysis, Technical Analysis, blue chips, mid cap, small cap, and the list goes on to hundreds of strategies endorsed by various experts. You may also discovered a lot of different figures on the same investment, sometimes, even with the same timeline. These could be a result of different ways of computations and formulas. Conclusion? I suggest you to take a pinch of salts at what most financial experts/bloggers wrote (I am so dead-meat, just offended the whole community). Why?

Confusion
They just confused you with too many variables and strategies to use. Enough said. Understand more of your style and find one that suit you. Stick to it and review it while you are learning.

They were in the past
Because those have succeeded were in the past. Current ones, they are also in this journey, alongside us. No one know where the gold are hidden at (if there are). What works for them at that point of time, could be a different timing for you. Yesterday heroes could be gone tomorrow before you realised it.

Creative Presentation of Information
Most people write what you want to see and just a 1% "creative" presentation of information will make the world different. Often, you will see who and who trying to prove their theories by coming out with an x% of past x years returns. If you do your due diligence, you may discover that these data are "manipulated". If you change any of their timeline and with some variables, you may get a % lower than your fixed deposit or worse off, in negative value. Most importantly, verify it.

They can't be with you all the time
You simply can't execute every single action exactly like what your "idol" has done. Nobody should be more interested in your money than you.

We are not the technical/fundamental competent investors we thought we are
Chances are, most part time investors like us who have a full time job, a family to care for, and an exciting life to lead, we are unable to apply most of the theories to our advantages. For example, you strongly endorsed UOB is the stock to go for. You can have many reasons for your strong conviction. But, just how much do you really understand UOB now and how it going to be, say, 10-50 years later? There are so many perspectives you can look at. Even if you cover all the micro and macro factors, those factors were yesterday and some based on forecasting. You will still have industry risk that is beyond any individual company's control. UOB's businesses are maintained by thousands of employees and it evolves every day. It took decades after decades of hard and brilliant work to build to its current model. How are you going to understand them? If you are like me, who don't have a super brain, you most probably can understand less than 1% of it, and what is going to happen to the company future.

However, some of the theories are actually brilliant and they worked. It depends on when you buy and sell (If you even thought of selling). There are plenty of successful stories and capable investors to learn from. I am still learning my personal investing style. So, please also take what I am writing here with a pinch of salt too. Take this information as raw data, and decipher which work for you. Most importantly, do your money a favour, understand your investment.

Hey, Frugal Daddy, what is wrong with you? Year 2016 has just started and you are writing a whole long story about negativity of investing in stock market?

Don't get me wrong, to cut the long story short, investing is an art. It is like a relationship, you need lifetime to maintain and to understand them while it continues to evolve along life stages. There are just some people not meant to be with you and someone out there could be just a perfect match. Same goes for investing. That is why there are people who choose to be single and lead their carefree life without relationship constrains, and some choose to marry with children or without. To each of their own and there isn't really a right and wrong here.

There are always some guiding principles that works most of the time. If you practice those principles, you will have a higher probability to grow your money. The key word here is probability.

Some of the guiding principles:

1) Understand your risk profile. This is extremely important because you will act differently when prices go up and down.

2) Understand your investment horizon. This will determine whether you should even invest in stocks and what stocks you should buy.

3) Understand how much you need. Seriously, if you have set aside a good safety margin and have more than "enough" money, why would you need to risk more for higher return.

4) Understand your option. This option is not the stock option I am referring to. It is referring to the options of growing our money. You can invest in properties, bonds and businesses. Trust me, If you have cash, you will not run out of options. You just need to make sure you don't get cheated of, and you don't procrastinate that your money never grow over time.

5) Don't expect to earn money from investment. Don't lose money is all you need. You must be thinking what kind of logic is this. Yes, you are dealing with probability. Be it investing in property, stocks or even cash, don't lose money is all you need with the probability. Any grow of money will be a bonus. And by law of economic and inflation, the money should grow if you don't make huge losses.

6) Since we can't be 100% sure in any of the stock even with 200% effort to understand them, we have to diversify. However, biggest positions risk lesser concentration with higher diversification, any may end up with lower returns than index etf. Which is not a bad thing if you enjoy reading about companies.

7) If you choose to buy individual stock, please still read up on the basics such as PE ratio, price to book, revenue, debts, lease strategy (Reits), inventory turnaround time (retails and commodities), profit margin, and any other valuations you think is relevant. Thinking of these already give me headaches...haha.

Most people are better off with earning from human capital (career) than expecting to earn from investment that can replace full time employment income (Including me, else I will have become a full time investor). Don't get me wrong, it is entirely possible to retire early. What I am trying to say is that if you are not even near your desired point, don't pin hope on earning ton of money from investment, thinking that it can allow you to stop work soon. Maybe less than 20% of people can live off comfortably without working just by income from investment. So, don't rush to it and make silly decisions. All you need is to understand your lifestyle, be more money efficient (cut expenditures and increase saving) and find a strategy not to lose money. Over time, you should be there.

So, what are my investment strategies? First thing first, I don't think setting a rigid strategy is a good beginning. Neither do I think having a flexible plan that I have no idea where I heading to, is a good plan. I think investment evolved over time because different opportunities present at different timing. You always need to have what you need to catch the opportunities when it comes.

There are time when properties are depressed. And, there are time when stock market are depressed. There will also be time when interest rate are so high that you don't need to look beyond bonds. There are always time that you just need some cash to feel safe or to use. Invest when you are confident, don't worry about missing the boat. Don't worry about not making enough money. Allocate assets accordingly that you feel you have a good balance to meet your life objectives. When playing with probabilities, you never know when you going to hit that 1% bad luck. Invest with money that you can lose. Just don't lose money, you will be fine. If you need to work longer, work longer (Although I hope to stop working full time as early as possible). Many people can't even find a job even if they want to. Be contended and stop comparing with others.

Here are my asset allocation strategies. Yes, I keep reviewing it:

Using STI ETF as reference	Cash	Stock (capped at)
≥ 5 years historical high	100%	0%
10% dip from highest	90%	10%
20% dip	80%	20%
30%	60%	40%
40%	40%	60%
50%	20%	80%
60%	10%	90%

My personal risk profile and preference is always to keep $200k in bonds with yield higher than 2.5%, before I considering investing the remaining. On top of that, I will keep an emergency fund of 1 year, which I aim to have more than 2% returns. For investment (Property or Equity), this is like a bonus portion to push up over return, which I aim not to lose money. I hope it can return 5-8% returns. Overall, I hope to achieve a portfolio of 5% or more annually. I may use different asset allocation strategies with different asset size and different life stages. For example, I may want to cap my equities investment at $480,000 or my property investment at $600,000. We shall see.

I thought if you are really cash rich, you may want to involve in a bit of different investments such as property and equity, and switching in between whenever each market presents an opportunity.

For equity, I will be scooping around on individual STI components and STI ETF. I am also considering to do a bit of international portfolio such as S&P 500 or World index ETF. The reason why I do ETF and individual STI components, is to have higher dividends as STI ETF only have about 3% payout. This will enhance the cashflow and in my opinion, the returns too.

These are my investment findings. Not losing money may earn me enough money to retire early in another 4 years and 11 months more. I may even have a bonus profit of say 5-8% average returns in the next few decades, only if I am "lucky". Remember, no one should be more interested in your money than you.

I can't even be sure how long I can live to. So? Live your life now. Stop over thinking on stock market and neglect your real life and your loved ones. Money is an enabler, not your master. Unless reading up companies is your passion or you use it to stimulate your brain juice.

May you be the master of your money.

Investing In a Bear Market

You will seldom see me writing about investment on equity (stock market). First, I am not an expert. Second, my key to financial independence is not dependent on stock market. However, I do admit it is a good instrument to accelerate your financial goals, if you did it "correctly", or rather, "timely".

We definitely can't time the market. This is why people still buy stocks at STI 3500 level. I believe when STI reached 5000 level, there are still buyers. We need to understand a few simple logics. First, STI is a general sentiment on how Singapore stocks are doing. Second, It is forward looking sensing and don't represent any current stage of our country economy. Most probably, it is speculation based on yesterday news. We "speculate" based on our best knowledge. Since we can't time the market, how do we know we have bought companies that will go up, and not down? For income investors, how will we know whether the dividends are sustainable?

If you have done your thorough homework and invest knowing the valuation is cheap and the price is nothing but just a discount, then it is at most a better "speculation" knowing your chances of earning money in the long run will be more certain. A good company need to be discovered by the general public to unleash the price potential (if you are looking to sell them) as stock market price are generally driven by sentiments. There are always mismatch in the true worth of the company and the market price sentiments, and the difference is what we get in the long run. Hope you get the upside, and not the downside. If you bought the right company at a good price and it is not discovered by the public, then you most probably will enjoy the potential of good earnings, which will translate into returns like dividends or sudden jump in share prices (after decades of not being discovered and finally, it does). As for dividends, you have to understand the company has the right to reinvest the earnings to grow the business, for all I know. It may not land in your pocket.

Having said that, the bear market is simply a trigger of negative sentiments among the stock market. Knowing your asset allocations are utmost important to a successful investment. Knowing that you have set aside some emergency fund for your livelihood is important because jobs are at stake during bad economy. Then, you can invest the "excess" cash you have. Of course, if your risk appetite is huge, then go ahead and invest your life saving away. Especially if you are youthful and no financial commitment. At your own risk. I wouldn't encourage this.

If this time is no different with any other bears, remember, it is a cycle. We could be seeing the start of the fall or we have reached the bottom. For all you know, what have you catch so far? How long more the journey?

Always remember, don't over invest in a counter if you are uncertain. For example, averaging down a stock that has went down so much and you happened to own it, must have a limit. Ideally, it should not be more than 10% of your portfolio. Of course, if you are doing STI ETF investing, then the 10% can't apply as you are buying a fund that invest in 30 top market capitalisation stocks. Personally, I have a bit of Keppel Corporation and it is dropping every day. I know I am not going to average down unless it meet all the requirements like portfolio allocation, more certainty of oil industry and no better stocks to buy. What if it return to $8 or $10? Good for me. If it don't, I did myself a favour of not overcommit. This is the beauty of cherry picking to beat the STI ETF, if you can avoid the downsides and focus on the upsides.

My strategy? Eat slowly, and when it is time to be greedy, eat faster. When is the time? Always remember, there are two pricing. 1st price is the general market pricing that caused most stocks to follow in a uniform direction. 2nd price is the overly beaten price of a good company. Look for a company that is good and you know it is oversold. Watch your portfolio allocations.

Hope we emerge richer 5 years later after this post. What is the price you have to pay?

Bonds send ominous signs no matter where in the world

Ask any bond trader in Tokyo, London or New York what their view on the global economy is, and you’re likely to get a similar, decidedly downbeat answer.

That’s not just because fixed-income types are a dour bunch at the best of times. A quick scan across government debt markets suggests that investors are pricing in the likelihood that growth and inflation around the world will remain tepid for years to come.

In Europe, bonds yielding less than zero have ballooned to $1.9 trillion, with the average yield on an index of euro-area sovereign notes due within five years turning negative for the first time. Worldwide, the bond market’s outlook for inflation is now close to levels last seen during the global recession. And even in the U.S., the bright spot in the global economy, 10- year Treasury yields are pinned near 2 percent-- well below what most on Wall Street expected by now.

“Where are the animal spirits to turn us around?” said Charles Diebel, the London-based head of rates at Aviva Investors, which oversees about $377 billion. What you see in the bond market is “a lack of confidence in the future.”

Diebel says his firm favors sovereign bonds issued by countries that are loosening monetary policy and betting against debt from nations that produce commodities.

Deflation Risk

With the risk of deflation lingering in Europe, China slashing interest rates to combat flagging growth and a raft of indicators fueling concern the U.S. economy is losing steam, it’s not hard to understand why many investors are pessimistic. And the persistent demand for the safety of government bonds also raises thorny questions about whether the Federal Reserve should be raising interest rates when central banks in Europe, Asia and many emerging markets are struggling to revive their own economies.

Appetite for safe assets is so strong in Europe that about 30 percent of the $6.3 trillion of sovereign bonds in the euro area have negative yields, index data compiled by Bloomberg show. That means buyers who hold to maturity are willing to accept small losses in return for the promise that most of their money will be returned.

In the past week alone, yields on about $500 billion of the bonds fell below zero, pushing the average yield for the region’s bonds due within five years to minus 0.025 percent, the lowest on record, data compiled by Bloomberg show.

More QE?

A big part of the push has to do with stubbornly persistent concerns over the state of affairs in Europe. For the 19 nations that share the euro, consumer prices were flat in October after falling 0.1 percent in September. In Germany, the region’s biggest economy, exports in August tumbled by the most since the 2009 recession, while factory orders and industrial production unexpectedly declined.

Among bond investors, that’s bolstered the view the European Central Bank will need to step up its quantitative easing to stimulate demand.

“Even after successive rounds of QE there is no sign of inflation anywhere out there,” said David Tan, the London-based global head of rates at JPMorgan Asset Management, which oversees more than $1.7 trillion. “We still face massive growth headwinds” and that will support demand for even low-yielding bonds.

Worries that lackluster growth will linger aren’t limited to Europe. Bond traders have pushed down 10-year yields in China to 3 percent for the first time since 2009 as the central bank cut rates six times in less than a year to spur what’s poised to be the weakest growth in a quarter century.

New Normal

In the U.S., yields on benchmark Treasuries were 2.13 percent in Asian trading on Monday, less than where they were at the start of the year and well below the 3 percent threshold that forecasters in a Bloomberg survey in January called for by year-end.

Bond investors have snapped up U.S. government debt as reports from new home sales to consumer prices have disappointed. Americans themselves have also pared pared back inflation expectations over the next 5 to 10 years to an all- time low, according to a University of Michigan survey released last week.

The economy is “looking relatively subpar,” said Thomas Tucci, the head of Treasury trading at CIBC World Markets Corp. in New York. “Japan, China, Europe are not growing at the levels they used to. You have to ask, where is the engine?”

Last month, the International Monetary Fund cut its global growth forecasts for 2015 and 2016 as weak commodity prices drive a slowdown in emerging markets. The IMF now forecasts growth of 3.1 percent this year. In the half decade before the financial crisis, annual growth was at least 4 percent a year.

The world’s richest nations also remain threatened by deflationary pressures, according to the Washington-based organization.

Japanese Lessons

Bond traders agree. In the developed world, they see inflation averaging 1.01 percent in future years, based on index data compiled by Bank of America Corp. Rarely has that measure fallen lower since the last recession ended.

Against that backdrop, a growing chorus of voices say the Fed may be moving too soon, especially after policy makers signaled they would consider tightening at their next meeting in December. Based on futures trading, the likelihood of the Fed raising rates by year-end is 50 percent. The central bank has held borrowing costs near zero since 2008.

Among those advising patience are Mizuho Asset Management’s Yusuke Ito, who says the Fed risks repeating the Bank of Japan’s mistakes by trying to head off inflation when it doesn’t exist. Policy makers there, who have struggled with deflationary pressures for two decades, raised interest rates in 2006 and 2007, only to reverse course in 2008.

“Growth is not strong enough to generate inflation,” said Ito, a Tokyo-based senior money manager at Mizuho, which oversees $41 billion. If the Fed lifts rates, “it’s going to stall growth.”

-- Bloomberg

Minimum Acceptable Returns

If you have been reading financial books or articles from the United States, it will suggest that return lower than 5% is mediocre. We all want high return for our funds, but how? In US, I guess it is much easier. You can easily buy S&P500 and get about 10% average annualised returns for past decades. However, many of us are skeptical whether STI ETF can do the same. Reason being is that US ETF has much lower management fee and the performance is better. Like it or not, US is the economy powerhouse, a place where everyone at least have some respect on. In Singapore, we can't say for sure in the long term.

I am an advocate for "Not losing is winning half of the battle". There are so many strategies and temptation to do cherry picking in stocks, buy high and sell low, or buy mid and sell mid. When you see fellow investors buy and sell, especially in good years, you will be wondering should you be doing the same.

My philosophy is simple. I am racing against myself. As long as my money grow at an acceptable rate, I will be contended. I don't need to compete with others. I would want a >5% return, but to be "sure win", the strategy is actually to deploy some high interest instruments such as bonds, fixed deposits. I will settle down for any interest >2.5%.

Here, you will be wondering, how 2.5% can help in building up a sound retirement fund. Agreed that it is tougher than if you can earn 10% return, but if you are frugal and effective in your finance, it is actually quite doable. You may be surprised it is our saving/prudence that helped most people accumulate their first pot of gold, not some lottery in stock market. Again, I have to highlight that frugal is not cheap (click here).

When opportunity arises to get better returns (spotted undervalued quality stocks/property/bonds), this is when I will increase my base interest rate to limitless. From historical data, I should be able to average out between 5-8% return. Not impressive, but there is a cushion of "sure win" minimum of 2.5% return. I don't believe market is a 1 way street that keep going up, there will be plenty of buying opportunities. If you are worried about missing the boat and opportunity cost, employ Dollar-Cost Averaging strategy (click here) and permanent portfolio (click here).

What are your views and your minimum acceptable returns?

Investment Reflection: Asset Allocation

With recent corrections, I have been actively looking at stock market. I have sharpened my finance skill to read financial data. In order to make sound investment, I have also made an effort to understand more of the various businesses and their future outlooks. I would say I have become a more technical and proficient investor during the process. At the same time, I know much better what the world is happening.



This is not all. I still have plenty to learn. However, I feel this is not healthy, given my already fully occupied schedule. I find myself "multi-tasking" to unleash my financial potential to the maximum. I do it before and after my family sleeping hours, while travelling to/fro work and pockets of time when I am alone. For example, while in toilet (don't think you want to know so much details). So, I decided it is time to "discipline" myself.

I am only active in stock market when it is tanked. I don't have problem when the stock market is doing extremely well. Moving forward, I decided to only spend 1 hour daily to read news and looking at stock market during market turmoil. I will do it early morning, during lunch break from work and while travelling home.

Asset Allocation
Given the recent correction at about 20% from the peak, I am supposed to be 40% invested in equity. You can read my asset allocation here. Currently, I am 20% invested and I am only looking to be 30% invested the most now. Yes, you are right, I did not follow my plan exactly. This is because my asset allocation is a rough estimate. This is also why I asked you not to follow any "star" blogger (of course not talking about me) closely on your investment decision. Situations changed quickly, faster than any star blogger can manage to update their new post. Most probably, they will not update 100% of their trades. Not to mention, you may not be able to follow every minute on what the star blogger says, even if they are able to share by minute.

I would like to update my asset allocation a little:

Using STI ETF as reference	Cash	Stock (capped at)
≥ 5 years historical high	90%	10%
10% dip from highest	85%	15%
15% dip from highest	80%	20%
20% dip	70%	30%
30%	50%	50%
40%	30%	70%
50%	20%	80%
60%	10%	90%

My watch list: STI ETF ($2.8), CapitaLand Commercial Trust ($1.295 & $1.17), AIMS AMP Capital Industrial REIT ($1.22), Keppel Corporation ($6.5 & $5.85), Starhub ($3), local banks. May add 1 or 2 more to the list soon. You may notice some prices seem too low for now, but it is just my asset allocation strategy. Please don't take reference from mine as I have other financial instruments to invest. This is more for my personal tracking.

My family and I are going for a vacation to Taiwan for 9 days. I will not be able to reply any message or look at the stock market (I hope). See you!

Will Recent Correction turns into a Bear Market?

According to Euro Pacific Capital CEO Peter Schiff, rising interest rates is the main driver behind the selloff.

"People want to blame it on China, but it's not about China. The U.S. market was falling before the Chinese slight devaluation," Schiff said.



"There has been a lot of technical damage done, and if the Fed isn't going to come out and come clean about the fact that it's not raising rates, I think this correction will turn into a bear market," he added.

There is no strong catalyst for the bear to appear. In my opinions, these could be the trigger points :

1) Oil countries/companies start to run into bankruptcy due to persistent low oil prices

2) Fed going ahead with interest rate rise and the percentage of rising given a shock to the world

3) China's stock investors panic selling causing the stock market to crush

4) something sudden happened unfortunately (example, war, virus)

Do you think current correction will turns into a bear market? Why?

Owning a Business via Stocks

With the stock market showing weaknesses, it is wiser for me to prepare my data quickly. It doesn't really matter whether there is opportunity to buy now, but what matters is to get ready and strike any time opportunity arises.

I always aim to write in simple language. However, I have to consistently use these technical jargon for future stock analysis.

Fundamental Analysis: This is when you imagine yourself becoming a business owner of the company. As a business owner, you will want to know :

1) How does the company made money. I will look for the sustainability of the business (long term story on their business model). It must convince me that it has great demands, not easily replaced and possess ability to set its pricing against market competitors. I will also take reference on the major co-owners of the business.

2) Whether the company is selling at a reasonable price in comparison of its earning (P/E ratio, return on equity, diluted earning per share, earning yield) or via asset owned (net asset value)

3) The cash flow (Discount cashflow, free cashflow)

4) The profit and cost of running the business (Average Weighted Cost of Capital)

5) Total market value (market capitalisation)

6) How the company provide the business owners with rewards and cashflow (dividends)

7) Debt status (gearing ratio)

I pulled these data from :

a) SGX website from stockfact
b) Yahoo Finance

Other ratio, which is always good to know, are not so critical to me. As you can see, there are many ratios to look at for a single variable, such as earning. It is to look at "same variable" using different perspectives. What I have listed are comprehend enough, at least for my common sense and as a part time investor.

Technical Analysis : I would pull a longest chart for the company (>5-10 years). Identify historical peaks and valleys. Second, I will look at the resistance levels or support levels to "guess" where is the common long term buying and selling points. Third, i will pull a short term chart (1 year) to "better guess" the current buying and selling points.

This is hardwork but necessary if you wanted to invest knowing what you are investing.

I will usually buy on dip. You can read my post of asset allocation strategy.

There is no 100% guarantee to prevent losses in doing a business. Minimally, I should know what I are getting into.

I am investing for my future, what about you?

Frugal Daddy

Asset Allocation Strategy

For simplicity, I will only look at Cash and Stock rebalancing, neglecting my bond/bond-like instruments.

Using STI ETF as reference	Cash	Stock (capped at)
≥ 5 years historical high	90%	10%
10% dip from highest	80%	20%
15% dip from highest	75%	25%
20% dip	60%	40%
30%	50%	50%
40%	30%	70%
50%	20%	80%
>50%	10%	90%

This will not be 100% possible due to market fluctuation and opportunities to buy, hold and sell stocks. However, this served as an ultimatum to be balanced.

Question: Which company to invest during the dip?

I will be looking at companies that dipped more than STI ETF as it could reflect a possibility of overselling by pessimistic market sentiments. Another good purchase opportunity will be new entrant with growth potential. Last but not least, companies with undervalued stocks are good buy too. All in all, the asset re-balancing should not exceed the equity cash value capping.

Question: How do I ensure the dip is due to market sentiments, and not deteriorating companies’ fundamentals?

Companies that dipped along with STI ETF may also signify other major problems. I will be ensuring that I do my due diligence to buy only companies with good fundamentals.

Question: Do I have to sell whenever market sentiments get better?

Once purchased, I will have no intention to sell any of them unless their fundamentals worsen or they are overvalued.

Question: By not selling, how do you re-balance your asset allocation?

For example, if I am 80% invested when market dipped at 50%, thereafter, the market rise to historical high within 5 years. My portfolio will then become lopsided to maybe, 90% equity and 10% cash.

Since I have exceeded the equity capping due to market appreciation, the stocks I have purchased are at much lower prices. This means I can afford to hold for long terms and enjoy more capital appreciation and dividends pay out. As a guide, stock market tends to go higher in the longer run, and we will not be able to know when this will happen. From this point, I will not add on new stock and pay more attention to hold and sell opportunities. The ultimate objective is to maximise returns and have a reasonable safety net. 

Quote from Charlie Munger - The number one idea is to view a stock as an ownership of the business and to judge the staying quality of the business in terms of it’s competitive advantage. Look for more value in terms of discounted future cashflow than you are paying for. Move only when you have an advantage. It’s very basic. You have to understand the odds and have the discipline to bet only when the odds are in your favour. We just keep our heads down and handle the headwinds and tailwinds as best we can, and take the result after a period of years.

Question: How about rights issue if I have reached equity capping?

Ideally, I should be leaving 5% buffer for such scenarios.

Question: As I am building my stock portfolio from scratch again, if the market don’t dip, does that mean I will never buy?

As I have en-cashed all my profits earlier, I don’t own much stocks now. However, I believe stock market is cyclical. If the market keep on going up, you just need to be patience. It can be 5 years or 10 years and I could have missed a lot of boats. So be it. Just take this opportunity to prepare my data and accumulate my warchest. Once the opportunities are here, I will make sure I use my precious cash and data to great use. It is easier to pluck low hanging fruits. Having say that, buy opportunities are always available. For example, new entrant with growth potential or undervalued stocks.

Quote from Charlie Munger - If you took our top fifteen decisions out, we’d have a pretty average record. It wasn’t hyperactivity, but a hell of a lot of patience. You stuck to your principles and when opportunities came along, you pounced on them with vigor.

Conclusion

This is my first step towards a more active investment portfolio. I will not rush into the stock market without an investment strategy. I rather missed the boat than risking losing my capital without convincing calculated risk. This is me. I have no qualm about holding excessive cash if need to. I will always resort to higher yield cash instruments like OCBC 360, Fixed Deposit or 5 years bonds. Upcoming, there will be Singapore Saving Bonds. Having said that, I still target 6% average yearly returns. All I need is a good entry point into higher yield opportunities. I believe when opportunities arise, I will have the courage to act. Quote from Charlie Munger : Extreme patience combined with extreme decisiveness.

Next step, it will be working on stock analysis to decide on buy, hold and sell.

My last famous quote from Charlie Munger : It takes character to sit there with all that cash and do nothing. I didn’t get to where I am by going after mediocre opportunities.

Frugal Daddy

Not Losing Money is Battle Half-Won

I have never lose money in stock market. Maybe because my transactions are small and only a handful. However, I tend to believe as long as we are cautious yet courageous at the right time, we are on the right track to the winning formula.



You can imagine winning in the opposite direction. By eliminating the losing portion, what is the direction you can go? Stay stagnant or profit, of course.

If you take this topic to another level, we will need to account average 3% inflation to stay stagnant. This means, If you start with $100, you will need to have $103 to break even for the next year. This compounded year after year. So, not doing anything to avoid losses is also not an option to most of us.

Ok, you must be thinking this is common sense. Sometime, we have to agree that common sense is not common, especially in many people. Everyone is unique. So how to prevent losing money in investments? I think to some extent, this boils down to our research and the profiles of companies that we have to target. For example, if it is a well profitable companies for decades, with government support, monopolise market, high demands, cheap supply, the price is below value and not at historical high, you are not that far off. If you are not convinced with the investment, don't take uncalculated risk. This is not a competition against anyone else, what matter is you end more than you start with.

Remember, profit by not losing.

Cheers
Frugal Daddy

Smart Investor choose Real Estate property: A view from Nuvo City

I have an excellent guest blogger and this post was written by Euru Hojilla  from NUVO CITY. He is one of the best Real Property consultant and passionate when it comes to educating everyone in regards to investing your hard earned money in the world of real property. 

Being a young professional on this generation, having an investment is such a big thing. Nowadays, you won't be able to sustain a family or even start having a family if only depending on your monthly salary. Having a business, investment or a little side kick would be much helpful.

As a young professional, we need to be fully educated of all the options that is best for us. At this point in time, there's a lot to consider like stock market, a traditional business maybe for example a canteen, convenient store, coffee shop etc. Others even consider doing multilevel marketing, others do online marketing, some do selling at work or even at home but little that they know, they could do more bigger like investing in a real estate. Most people easily ignore this idea because they always assume that there's a need for a big capital so instead of learning more about the process, they just say no and let go of this wonderful opportunity.

Real estate investment is worth more than a million, even millions but that doesn't mean that you need to produce millions instantly. There are a lot of amazing offers real estate developers do. One of those are our chances of investing to our first property for NO DOWNPAYMENT payment schemes. Property Consultants will usually ask for your requirements regarding preferences of location, size of space, number of bedrooms, which floor or even orientation of views and most importantly, the budget. Property consultants will assess our capabilities and will surely tailor fit what's best for us. A good sales man will not push a product on his advantage but rather what's best for his/her client.

The next question is: WHY REAL ESTATE? WHY A CONDO?

First, real estate is at its boom and has been predicted by our socioeconomic professionals that it will continue grow bigger and bigger for the years to come. Why real estate, its because of its potential of having a multiple growth or appreciation of the value of your investment. And why condo, because most developers are now creating or building high rise towers in prime locations provided that they are given full equipments to enjoy and maintain a high value of life.

A condo is best to buy during its pre-selling. You will be able to get it or start paying for it in a cheaper or most affordable price. Then through the time, the value of your property is increasing and will keep on increasing. Quarterly, most developers release new prices of their developments and noticeably increased about 2-5%.

What condo offers are accessibility to schools, churches, hospitals, malls, business districts, main roads, restaurants, convenience stores and a peaceful environment.

What we usually pay is the location. The price of the property differs to its location. For example here in Libis, Quezon City. The usual price per sqm to nearby developments are at 120-130,000 per sqm while on this particular project, it only cost 102-110,000 per sqm but the quality of the materials, the finishings and all the deliverables are incomparable. Here, you will be able to save more and gain more. Not only that, you will be more than satisfied with your property and a confirmation of your wisest decision.

What to consider in investing to a condo?

Number one of course is the location, second is the reputation or the credibility of the developers and lastly and most importantly, is the benefit you'll get once you decided to buy a property on this development. A wise investment is choosing a property which not only offers residencies but with spaces for commercials, offices, businesses, malls and even hotels. In that, you are sure to yourself that the value of your property will greatly increase in 50% or even more.

Some young professionals and even the pro's do condo investment for rental purposes (either residential or office purpose) or for resale. Rental - unit owner will look for tenants to rent their spaces from 15-50,000 pesos. That depends on how you furnish and how big your unit is. Most tenants are from BPO offices or if not, families. Resale - for example, an investor was able to buy his unit at 2.3M pesos during pre-selling and after few years once the tower is fully turned over, the buyer will now find another investor to buy it on its current price like for example, the property bought from 2.3M is now at 3.8M. The buyer turned seller is able to earn a net of approximately 1.5M pesos and again will venture to another pre-selling properties.

What's good when you invest to condo is that, this is a property and a tangible form of ownership, an asset and its money generating. You just have to be keen in scouting to condo properties and find the best investment for you.

Step to do: Find a  property consultant, relay the requirements you're looking and provide him/her the opportunity to offer you the project appropriate to your needs and wants. Requirements are basically, 2 valid government issued id's, tin number, signed forms from the developer and a reservation fee which can be paid thru cash, cheque or thru credit card. Then next thing to do, get your payment schedule and never missed paying your monthly amortizations. If you maintain having a good payment history then you'll have a better chance to be approved for bank loans.

I think, I need not to say more because your fortune will always depend on your options. Just stop saying No's and start saying Yes for yourself.

For more info about Nuvo City and amazing deals. Follow Euru Hojilla in Facebook