Wednesday, November 20, 2019

Invest before you investigate

Image result for what philosophy can teach you about

I was reading a book entitled What Philosophy can Teach You About Being a Better Leader by Reynolds, Houlder, Goddard and Lewis and was pleasantly surprised that it turned out to be an above average read for investors.

The authors asked to resolve this paradox concerning two uber-investors Peter Lynch and Warren Buffett:

  • Lynch believes in hard work, but Buffett believes strongly that inactivity is much more intelligent behavior.
  • Lynch was quite an opportunist but Buffett was famous for his self-restraint.
  • Lynch makes thousands of decisions a year, Buffett only a few.
Although I think Peter Lynch is bad influence to retail investors because he seems to trivialize stock picking and made it seem to easy in his books, I find myself drawn to his behavior. One thing I do is to invest first and investigate later. A stock that is favorable to analysts and gives a high dividend should be invested into first before time is spent poring through their financial metrics. Generally, if I have a high yielding counter and I get confirmation from a blogger I respect, I would x10 to my holdings. Aggressively getting into a stock at a good price is better than waiting for others to pontificate and get in slowly after the fact.

I don't think there is a contradiction to Lynch and Buffett's approach. I think the unifying principle that determines how much effort you need to analyse the stock is the Kelly Criterion. 

If you reduce the Kelly Criterion into it's mathematical components, it basically means three things :
  • Take a larger position in a security that gives higher returns.
  • Take a smaller position in a security where the risk free rate is higher.
  • Take a smaller position in a security where volatility is higher. 
This should not be limited to position size - this can be applied to intellectual effort as well. 

But the rules are different - maybe intellectual effort is inversely proportional to position size.

  • Spend more time investigating a stock if you suspect that it may give lower returns.
  • Spend less time investigating a stock where the risk free rate is lower.
  • Spend less time investigating a stock where the volatility is lower.

Why does Lynch seem so hyperactive compared to Buffett even though their performance was equally stellar? My hypothesis is that Buffett has cheap financing in the form of insurance float so he does not need to think too hard to win when it comes to investing. He may also invest in less volatile stocks. Lynch has always been categorized as growth investor. 

I'm not a Buffett or Lynch scholar unlike many other financial bloggers so maybe I am wrong but I think there is credence to the idea that the Kelly Criterion can drive the amount of intellectual effort you put into portfolios as well.

A dividends portfolio consisting of 10-12 stocks can be designed to have a volatility about 2/3rds of the STI ETF. If you have such a portfolio, the intellectual energy you need to analyse this portfolio is going to be very small - so small that you may want to invest first, extract the dividend income and investigate incoming news through the Business Times later. I take these things one step further and even go as far to say that rookie portfolios need to have these mathematical qualities. 

If you go with a a few growth stocks and go in with leverage, then you've got a serious problem. Your volatility is high so the amount of intellectual energy is going to be humongous. You have to pore through every financial statement and think hard before you make a decision.  

What do you guys think ? 

Once this idea reaches maturity, I may do a more comprehensive article on the Dr Wealth website so I want my personal blog to showcase my more zany ideas. 

Monday, November 18, 2019

MBA in a Nutshell #14 - Marketing : Marketing Mix - Place

We are still trying to progress through the 4 Ps of marketing. Today we are covering Place.

The first we thing w need to understand are distribution options. There are three levels of distribution options.

We commit to intensive distribution if we are aiming for maximum exposure. We do this by using any wholesaler or retail outlet that would let us stock our goods. Most consumer products fall into this category.

We can also use elective distribution if we sell the higher ticket items. The RPGs and boardgames I play are normally sold through special FLGS stores.

Finally, we use selective distribution to aim for limited exposure. Specialty goods that a highly differentiated or luxury items fall into this category. For decades, Shiroi Koibito white chocolate biscuits can only be found in Hokkaido but these days you can buy them at Donki.

Specifically, there are four general forms of distribution channels that a business would need to choose to reach their customer.

Direct Response Marketing is the method adopted by my program under Dr Wealth. We sometimes employ our databases to get folks to attend our previews which results in converted customers for training. It is the conversion rates that makes me lose sleep at night.

Retail Marketing is probably the most common form of marketing where goods are placed in stores. In such a case, placement of products play an important role. Retailers are moving toward house-brands that erode the profits of manufacturers.

MLM or Network Marketing is actually a legitimate form of marketing that is mentioned in textbooks. MBA books like to think that MLM is going to rise in Asia, even going as far to say that MLM is more culturally compatible with Asians because we still believe in selling to family and friends. In all my preview workshops, attendees consider MLM one of the worse ways to make money - way lower than Internet Marketing or Forex Trading.

Finally, when an MBA text mentions Cyber Marketing, you will know that this book is a little bit dated. Cyber marketing is the predominant form of marketing today and probably warrants a separate textbook on its own. I've always wondered whether a formal textbook exist that contains the same material as those dubious Internet Marketing seminars.  If you do know of a textbook, let me know. 


Saturday, November 16, 2019

Personal Update

The week has been less relaxing than I thought. I was supposed to conclude my training for Batch 9 and then spend the next few days doing noting much but I ended up doing some administrative matters regarding my dad's matters.

a) My dad's matters

Things are moving much faster than I was taught in law school. In Part B, we were taught that you do up a will because things get slow and complicated otherwise. I ended up going through the Letters of Administration route, and initially I thought things would be really slow, but everything concluded in two months, a credit to our super-efficient Family Courts !

Some of the issues I had to deal with are as follows :

  • Sometimes the Family Court may not understand your investments completely. You need to be patient and work with your law firm to answer their queries. I wrote an email explaining that non-renounceable rights are not traded so have no market value and even attached ESR REIT's circular to show them. The paralegal then forwarded it to the Courts via E-Litigation.
  • CDP needs the letter of administration be a certified true copy. Work with your law firm to certify everything before heading to CDP to complete your task. I should have known this myself but because I did not think about this, took a few extra cab rides. 
  • CDP share transfer from one account to another is $10.70 per counter. Budget this for probate matters if you have many stocks ! It may also take a month to happen !
If you really want to handle issues of probate well when it is your turn to pass on, my only advice is to make sure you have a child who is both legally and financially trained and trustworthy enough to play the role of trustee. My dad succeeded in doing this, but I have no idea how can I execute this myself.

Even now I cannot imagine what would happen if someone is not trained in these matters.

b) Training and Personal Finance matters

When I started on my gig, I really thought my career would peter out by now, but things are better than ever. One side-effect of  having a career taking off this year is that I now have to take very proactive steps to manage next year's income tax statement which means opening and maxing out my SRS account and contributing to my wife's CPF account before this year closes.

Tax-deductibles are no longer a running joke for me so I have to start executing what I have been teaching my students these past months.

Maybe I might even need to incorporate in 2020. 

c) Leisure and Hobbies

I could get into some light RPG gaming one a month but I'm not sure whether this is sustainable because I prefer to create a totally new investment program next year. Otherwise I managed to install an old game I bought last year called Banner Saga that is a turn based RPG tactics game. 

My job is slowly crowding out my hobbies and even binge watching Netflix is now a luxury I cannot afford. What occupies my time is the notion of thought leadership - my investment articles on Dr Wealth have a readership that far exceeds this small blog and we're in competition for eyeballs and that means I need the knowledge to not just produce more articles but to deconstruct the work of other bloggers who may disagree or critique my ideas. One out of four articles I contribute will be less user-friendly and will read like this.

Maybe this is new multi-dimensional chess game I'm playing. 

d) What I am reading

I did not enjoy Narrative Economics by Robert Shiller, the epidemiological economic analysis is great but the book is just a historical rundown on the narratives that impacted financial markets in the past. A good book should teach people how to think about new events and not just rehash old ones. I would have been much happier had the book provide a framework on how to measure and track the infectiousness of ideas as they wreak havoc on your investment portfolio. 

The Man Who Solved the Market by Gregory Zuckerman is much better, tracing the lives of Jim Simons, one of the greatest quantitative investors of all time. I believe that a close reading may unlock the use of Markov Chains in determining which market cycle we are in which can be fantastic for investors like me. 

I have to admit that the idea of picking up a PhD in Quantitative Finance is appealing to me much more these days but I'm worried that my age would make me slower at exploring fresh new areas of mathematics. 

Wednesday, November 13, 2019

MBA in a Nutshell #13 - Marketing : Marketing Mix - Price

Wow ! It took ages to get out of the product segment.

The segment of Price only has enough material for one article. Here are all the possible approaches to price a product

Premium Pricing - Charging a high price relative to other brands. Hermes is a great example of a brand that does this. I wish I were here.

Fair Pricing - Price that is objectively regarded as being reasonable. NTUC Fairprice is definitely in this category. (OBVIOUSLY !)

Penetration Pricing - Charging a low price to generate volume. My program was here a year ago. I would argue that many unicorns like Grab employs this strategy.

Parity Pricing - Charging a price that matches that of competing brands. If you cannot differentiate your product, you will have no choice but to do this.

Cost-Plus Pricing - Charging a mark up based on costs incurred. You don't really want to get into a business that does this. I suspect the smaller law firms are slowly moving into this territory.

Idiosyncratic Pricing - Price based on what the value is to the individual customer. Another heaven I wish I could be in. The rules for selling in this domain is almost all consultative driven.

Leasing arrangements - Allow the customer to lease to push decision making into lower level management. Photocopiers employ this strategy very well.

Preemptive Pricing - Nasty stuff. You lower the price to damage a new entrant into the markets. I don't like doing this but over time, some folks may want to compete in my territory. As I do not spend my trainer fees on living expenses, I have enough dry powder to start a price war and even engage in painful IP litigation. As a somewhat paranoid, I have already assumed that this would happen and have a network of allies on standby. I guess the price for success is eternal vigilance.

Push versus pull pricing - Pricing at a compromise between buyer and seller. This is possibly what happens when a B2B arrangement occurs.

Threshold pricing - The reason why charging $99.99 will eliminate a lot of buyer resistance compared to pricing something at $100. This is so common I am not even sure whether it works anymore.

As much as I believe that I deserve Idiosyncratic and Premium Pricing, I don't think the market will allow my own product to be priced this way yet. I think the training industry has not really recovered from the crazy 2000s where these guys with fake credentials hawk derivatives strategies promising some kind of pipe dream to the hapless investor.

We currently price fairly for a 2-day workshop and lifetime access to a FB group. Price increases occur frequently, but I generally do not increase price unless I convince myself that value has increased.

Monday, November 11, 2019

Letter to Batch 9 of the Early Retirement Masterclass.

Dear Students of Batch 9,

It’s been a great honour and privilege to be able to conduct a 2-Day Early Retirement Workshop for you.

The highlight of this session is that we managed to successfully conduct a new version of the Emigration Exercise that used to be done for earlier batches. In this exercise, students get to roleplay an emigrating singleton and to investigate one destination that they would like to emigrate to by digging out the economic data of a target country. Once they reach their destination country, students will have to determine whether they can live on the dividends generated back home in Singapore. Students will also get to present one new stock that they would like to purchase once they open their trading accounts in their new home.  

We were unable to pick a favourite destination today after looking at the data because New Zealand (Wellington) and Thailand (Bangkok) garnered equal votes. The results of this fun and enlightening exercise will be shared in a future article on the Dr Wealth blog.

I have also learnt quite a bit from Batch 9.

The first thing I learnt is that I can reduce my expenses further when I pick the GrabHitch option carpooling feature when calling for a cab. I will make it a priority to try this out from Bukit Panjang this week.

During the qualitative analysis segment of equity counters, the discussion on OCBC was unusually lively.  Students shared useful insights on how OCBC is resonating with millennials with their first mover advantage on CDAC accounts and the tactical positioning of the Frank sub-brand. The class also unanimously agreed that OCBC apps and webpage were more user-friendly compared to the other local banks. As I am not an OCBC customer, I was pleasantly surprised that my previous impression of OCBC as a stodgy old bank no longer reflects the reality experienced by their customers today.

The biggest pay-off from teaching Batch 9 came was when I discovered that one really smart student is an actuary in real life so I jumped at the chance to ask her what kind of insurance does she buy for herself. Her answer – just term life and H&S, totally made my day. If you ever want insurance advice, you should mirror the moves made by the folks who actually create them for a living.

By this batch, the ERM has more or less settled down with our methodology of stocks selection and this batch of students has managed to choose six blue-chip stocks and six REITs to form the core component of the portfolio. I find this class even-handed and balanced in their approach of stock elimination, so I look forward to investing with my trainer fees before the end of this week.

As a response to feedback during this course, I will be taking steps to align the final portfolio closer to the asset allocation exercise done as part of early stages of the course. We are always improving our material after your feedback, so you can expect a supplementary write-up to be posted on the FB group within the next few days.

Christopher Ng Wai Chung

Wednesday, November 06, 2019

MBA in a Nutshell #12 - Marketing : Marketing Mix - Product - Boston Matrix

Image result for boston matrix

The Boston Consulting Matrix was my first exposure into the power of 2x2 matrices. Some genius found a way to build a map of where all your products stand vi-a-vis each other based on the twin axes of market share and growth rate.

This generates 4 possible quadrants :

a) Star - High Growth, High Market Share

These are the stars of the show who have a dominant position in a high growth industry. If your product is placed here, this is an enviable position to be. While my ERM class is growing fairly quickly in 2019, my market share has some room for improvement. At this stage, the only way I can resolve this issue is to clone myself.

b) Cash Cow - Low Growth, High Market Share

These are the bread and butter product lines that you need to have in your company. While the growth is no longer there, like dividend stocks, these product lines generate the cash flow used to sustain the rest of your company. The Stars of yesterday tend to become the cash cows of today.

c) Question Mark / Problem Child - High Growth, Low Market Share

Some industries can be high growth but you may not have a dominant position in this industry. Problem Child is named this way because it is not too clear how much more you want to invest in marketing these products. I suspect that effort will have to be made to differentiate this product further in order for marketing to succeed.

d) Dogs - Low Growth, Low Market Share

I would characterize a large number of my competitors as falling into this category. There are a lot of training vendors who cover value investing and each vendor has to compete over a shrinking pool of investors who are getting more sophisticated tools and information portals to invest in local markets. We're even seeing some major information vendors leave our market.

A significant part of running is getting rid of your Dogs so that resources can be deployed to turn your Problem Child into Stars.

After positioning all your products into a Boston matrix, a company owner can then decide whether to include/exclude a product, bundle one product with another, or raise the price.

For my own program, we have been refining materials, adding value and raising prices for a large part of 2019.

Sunday, November 03, 2019

Living the NERFed Murderhobo RPGer Life

Image result for murderhobo

The weekend post is a little late because I spent the greater part of Saturday and Sunday attending a course on Quantitative Investing by Dr. Wealth but as a paid customer. I'm not ready to blog about it because I want to do this some justice to the course, so instead I just want to do a philosophical piece about life.

I had a small epiphany about my life lately.

Of late, I have been drifting away from playing D&D and putting a lot of focus on my life as a trainer. A cursory explanation is that D&D does not pay but being a trainer does, but I think as a financially independent person there are reasons that go beyond money as I slowly move away from gaming.

I think my problems with playing RPGs is a reflection of what I've consistently encountered my whole life.

In D&D, players like myself are murder-hobos. We trend to play great-axe wielding barbarians or pole-arm swinging Sentinel Paladins.  Otherwise we will be spellslingers like Diviners or Sorceror-Warlocks who never sleep. We focus on killing monsters, taking their treasure, and solving the problem is a quick, ruthlessly efficient manner.

The problem with murder-hobos is that we are seldom the majority in a gaming table. There are a class of gamers that my friend terms Yolofomos. Yolofomos want to play Kristina the Elven Beastmaster Princess who can develop a telepathic link with her pet cougar, maybe even have sex with it. The worse Yolofomos are those anime-loving BBFAs who insist on playing some kind of bard or "colorful personality". Such Yolofomos still focus on role-playing and exploration but can be objectively quite bad at it.

The truth is that Murderhobos are quite fine with Yolofomos and can work around inefficiencies in party tactics. They enjoy role-playing and exploration too. But you see, if a Murderhobo becomes too efficient as killing machines, Yolofomos feel threatened because " you play like that, it's not fun for me anymore. "

Enter the DM. The DM will do his best to make the game fun for everyone.

In theory the DM will run the module objectively and then split the rewards evenly. But in practice, the DM tries to stroke the Yolofomos by giving them more powerful magic items or over-budget monster encounters to challenge the Murderhobos and fudge the game for Yolofomos.

So Murderhobos RPGer have a perennial problem. They are always playing D&D in Hard or Inferno mode while Yolofomos get to play it in Easy or Normal mode. I once took a sub-optimized monk and went through 4 levels without a key material component to cast my most powerful spell when a fellow party member was given a Necklace of Fireballs that only found use after he rage-quit the party and I managed to hold of it.


An investor will find this story very familiar.

Ed Thorpe, who found an innovative way to do card counting, was eventually marked by various casinos and barred from entering them. He eventually joined the biggest casino in the world, the Stock Exchange, and did very well as a hedge fund manager !

So fundamentally, what is a Murderhobo?

IMHO, Murderhobos are folks who incorporate mathematics and a cold economic logic into their basic lifestyles and personal philosophies. They have a Bayesian sort of outlook in life. For example, we know that given the way RPG modules are designed, there are probably secret doors in empty rooms, so we search for them. ( Then we get accused of metagaming )

Societies will always have mathematical loopholes whether they are a some kind of advantageous beta that works in a back-test or asset structures that are just too tax-advantaged to ignore, so we Murderhobos pile into these loopholes. Because I am empirical, and coldly logical about investment markets, if I find that a strategy works, it is only fair that with the right conviction I can supercharge it with leverage so that I can beat all the best talking heads in the blogosphere?  Right now, as it stands, even my unleveraged students have a decent XIRR and all my portfolios are positive.

But I think my D&D experience has taught me saltiness lurks around the corner. I've been playing in this kind of hostile environment for three decades.

I am seeing a lot more passive aggression directed with at my business partners or myself these days. Overall, I think it is a good sign that we're growing. I want to take this in good spirit. Although I will never mention this here as to who they are, I do know which blogs are my biggest critics, and I do tell my students to read them and reflect upon their writing. Investors do best when they have a contrary opinion.

But here's the deal with financial markets.

My business can fail and my career can be over in a minute.

But until my models fail and I start seeing some investment losses, the Singapore Government, the real DM in this game of investing, can't NERF me without Singapore losing it's status as a financial hub.

So if I find a +5 Sword in the form of regulatory boost to REIT gearing ratios, or decide to pound someone with my Juris Doctor feat, no DM will be there to save a Yolofomo.

 Anyway, if I get back to D&D publicly, I think I will be a DM moving forward and will probably find PCs in the financial circles.

We can run an all-Murderhobo party !

Tuesday, October 29, 2019

MBA in a Nutshell #11 - Marketing : Marketing Mix - Product - Product Lifecycle

Image result for product lifecycle

Like many living things, a product has a life cycle and evolves through multiple stages.

i) Introduction

At this stage, there is a lot of research and development. Sales and profits are low. A product at this stage his highly vulnerable and funds are needed to grow properly.

ii) Growth

At this stage, sales and profits are growing. A substantial amount of promotional effort is required to sustain this stage.

iii) Maturity

Sales and profits peak at this stage. Profits may diminish because competition is getting into this game.

iv) Saturation

Decreased profitability occurs here. Competitors are starting to get into the game.

v) Decline

Market share is slowly being eroded and cost cutting will occur at this stage.

vi) Abandonment

Production ends at this stage.

When you understand that everything has a beginning and an end, you begin to have less of an attachment to your product and more to the process of grandfathering a product through the various life cycles. Right now, I believe that my program, having only graduated 300+ students, is at a growth stage with maturity not too far away.

Of late, I noticed that mainstream media is starting to develop a bigger fascination with FIRE and FB groups are trying to establish some materials on to attain some limited version of financial independence. As of now, I believe that any attention given to the possibility for early retirement will strengthen my hand so I expect to put in more effort to ride on this interest from the general public.

Over time, I do expect more groups to want to muscle into financial education territory, as I am sitting on some capital and profits over the past year, I should have a few tricks up my sleeve to further differentiate my product from the rest of the pack.

Sunday, October 27, 2019

Thinking at the margins.

Image result for burger and lobster roll

One reason I would like Economics to be introduced to O level students despite only starting to study it serious at my Masters is its immense usefulness in daily life (as compared to that abomination English Literature). 

One really nifty concept in economics is marginal value, which is contrasted with average value. Marginal value is the value we give to one extra unit of an item. i.e. I'm going to eat lobster rolls with a friend next week and I bet we're both looking forward to it. This is a special event because neither of us eat lobster rolls on a regular basis. If my friend has already eaten three lobster rolls that morning, he probably would not be too excited to each his fourth lobster roll  with me that afternoon. 

Ergo, the marginal value of the fourth lobster roll is very small compared to the first. 

The crucial problem in education is the ability to translate a theoretical idea into everyday living. 

How can we think at the margins the same way economists are trained to do ?

Not all dividend dollars are equal. 

As we starting to get payouts from our investments, the dividends would not be worth very much. You might see a $50 payout in your bank account once every three months, hardly enough to pay for anything else. This can cause a lot of Millenials to give up on the dividends chase. 

The marginal value of a dividend payout happens when one quarter of dividends payments start to exceed three months of particular bill. Then you can at least say to yourself that in that payment category, the item will be free henceforth. If you spend $40 (or $120 per quarter) on a sim-only plan, the marginal value of the $121 dividends dollar that quarter will be very high because your data will be free moving forward.

The success of a dividends strategy, thus, relies on chaining your dopamine rush by being aware of your regular expenses. It's great to know the size of your smallest bill every month so that you will know the point that expense becomes free. In my opinion, a data plan is always the best place to start. 

For rookies, you might want to ask yourself at which stage of your portfolio development does your data plan becomes fully subsidized by dividends payouts ? 

I'm rapidly reaching a stage in my life whereby an added dollar of dividends in a quarter is not particularly valuable to me. My biggest expense every month is my mortgage and I have a leveraged account producing close to about 120% of my quarterly mortgage payments every three months.

At this stage, the magic of Economics 101 can be further applied when you have a steady flow of dividends coming into your bank account.

Capitalism ensures that there are millions of products that are designed and engineered to have a high marginal value to you. I got the latest Kindle Paperwhite with 8Gb and free data after stacking a round of discounts on Shopback and 

I also tried to do more shopping at Cold Storage to try out a better brand of butter. The marginal value of better butter is a little overrated, sadly. 

Friday, October 25, 2019

Why engineers and tech professionals hate immigration and what can be done about this ?

Image result for richard posner radical markets

I will do a little bit of social-political blogging today.

A hot topic of the next elections is likely going to be about CECA because I suspect that Tan Cheng Bock will leverage on this issue as Heng Swee Keat is very possibly the architect of this agreement that grants free access to Indian tech professionals into our economy in return for granting Singapore banks full access to the Indian economy.

From the perspective of local engineer like myself, CECA is a game changer that kept my salary low and increased the competition and stress we have in local workplaces.  As I watched the movie Three Idiots lately, I was very impressed by India's almost divine reverence for their engineering talent. I asked myself how can our local  engineering degree holders who can get Bs or Cs for Physics / Maths A levels compete against a demigod-engineer from IIT?  The truth is they can't.

The quickest solution to the problem is to simply not be a plain engineer in Singapore.

The solution is to become an engineer-landlord.

Once I started investing, I can start to see how we can benefit directly from the flow of professionals into Singapore. As Singapore becomes more competitive, companies want to set up here, and Indian professionals also want to rent our spare homes and buy our goods. I daresay that my investment and rental gains, net-net, exceed my losses under the CECA arrangement. I even spent two happy years in Singapore Mercantile Exchange which was set up by an Indian billionaire.

But this leaves a serious problem in our society today.

Not everyone can become an engineer-landlord. There will be folks who are left behind and would want to punish whoever drafted the CECA with India.

So how can we solve the problem of allowing the man on the street to benefit directly from immigration so that we will not have a populist revolt ?

Radical Markets by Eric Posner is the first time I felt that there is some hope that a solution can be found. Here is how to adapt his ideas to Singapore :

First we have to identify a discriminated class in Singapore. To me, non-degree males are a discriminated class in Singapore. The GINI coefficient for males is much higher than females and non-degree males have a lower representation in Singapore Parliament than women or ethnic minorities.

( Only MP Charles Chong lack a degree )

I think the first solution is to align the needs of non-degree males with potential immigrants.

Suppose Beck Hock is a non-degree male working hard to raise a family in Yishun, very likely he will struggle to make his ends meet if Singapore goes full throttle into globalization.

What if we let Beng Hock sponsor Rancho, a Indian Engineer, to work for Google in Singapore ?

Beng Hock will have to interview Rancho to decide whether he will fit into Singapore society, buy insurance in case Rancho turns out to be unable to work, rent a room to him and vouch for him for a year so that Rancho can get a three year work permit.

Rancho has to pay Beng Hock a fee to work in Singapore and be his guide to local culture. From some economic surveys, Rancho will be willing to pay big money to Beng Hock for that privilege, sometimes as high as $9,000 to work here.  The process of setting a price can be an auction mechanism like COE.

A non-degree male can credibly sponsor one new immigrant every year boosting his salary by a decent $300-$500 a month, this can limit the effects of xenophobia drastically in our society. Also the vetting by heartlanders will account for things like cultural fit that cannot be reduced to a set of criteria by any government bureaucracy.

For sure, there will be problems if we implement this system in Singapore. But that's what our scholars are for.

If the government does not want immigration to smack them in next elections, finding way to allow ordinary Singaporeans to directly benefit from immigration is key to their political survival.

Monday, October 21, 2019

MBA in a Nutshell #10 - Marketing : Marketing Mix - Product - IP Protection

Beyond product design and differentiation IP protection is important to protect your product.

As I never really wanted to AVOID being stereotyped as an IP Lawyer (because a lot of engineers who become lawyers do end up in IP law), so I did not take the full complement of IP law modules so I can't really do a decent article on this topic.

The book distinguishes three forms of IP protection in its marketing chapter:

a) Trademark

Trademarks distinguishes your product and service from others. You can follow the steps to register a trademark here, otherwise you can seek a remedy under common law via the law of "passing off" to protect an unregistered trademark (The TM symbol).

Registering a trademark is useful to bar other players from using it and also allows you to gradually build better brand recognition. Our government also makes it a point to provide generous tax rebates to businesses trying to register their trademark.

Upon registration a trademark is valid for a decade.

b) Copyright

An author has automatic copyright over his work. For published works, the copyright lasts for 25 years in Singapore. If a third party infringes your work that puts you on a disadvantage, you can sue this third party but remember that ideas cannot be copyrighted, only expression of ideas in tangible form.

c) Patents

You can patent something if it is new, involves an inventive step, and it is capable of industrial application. Many different kinds of patents exist.

Generally speaking, a patent lasts 20 years and the process of getting one can be tedious and expensive. Worse, applying for a patent basically means sharing information on it to the world at large. However, during this 20 years, you can sue anyone who uses your invention without your permission.

Beyond the basic copyright that I am entitled too, I probably do not need better IP protection right now. Maybe in about a year's time, as I come up with newer product offerings, I will re-examine this matter.

Perhaps a graduate diploma in NUS on IP Law may be in the horizon.

Saturday, October 19, 2019

Real issues in retirement and how to deal with them.

Image result for the psychology of retirement

Most financial bloggers deal with only the financial aspects of retirement. Even my course, as it attempts to build a generation of early retirees to dot the commercial landscape in Singapore, requires a laser-like focus on personal finance so that a person can get out of the rat race which is going is still good in the workplace.

If you are an actual retiree, however, you will soon find that retirement is a game of multiple dimensions and you will to play all of these aspects of the life game well to enjoy a great life in your personal winter. The Psychology of Retirement by Rosenthal and Moore discusses all these issues in detail. 

Here's what missing from most articles on FIRE about Retirement :

a) You need to be healthy to retire well.

This can be so cliche but folks are surprised at how hard this is. Our Singaporean healthcare system has enabled citizens to live up to an average of 85 years but it has capped our Health Adjusted Life Expectancy to around 74 years. This means that 10 years of our lives are spent being ill before we pass away.

Making matters worse, when you read literature on nutrition and wellness, they are typically from the US and may be biased by commercial interests.  Even as I started on intermittent fasting, I am confused by so much conflicting advice - is coffee with butter cheating on your diet ? Governments do not have an incentive to cover this well so we're stuck with using our feelings to determine what keeps us healthy.

I've learnt that chiropractors can call themselves doctors in the US and spawn a new class of health advice that I prefer to verify with scientific evidence. Worse, in the US, scientific papers can also be sponsored by commercial interests.

Personally,  I think diabetics should avoid listening to anyone outside the formal medical fraternity unless it is endorsed by a specialist.

b) You need develop good social relationships to retire well

The scientific literature say that loneliness is a bigger killer than obesity for retirees so you need to find ways to improve social relationships post-work. The fact that many FIRE aspirants are introverts make things worse.

I am lucky that I have a family of my own. Imagine a large number of singles achieving FIRE and then realizing that they are mostly on their own during weekdays when their pals are at work. They can't even find others to holiday with them with all the money they have because so few succeed in FIRE in real life.

Even in the FIRE discussion I have on WhatsApp, the number of actual FIRERs are small and generally have yet to succeed in organizing an activity together.

I think we have to up our game because most of us are guys and guys generally only bond by taking part in common activities. As we get older, we lose touch because we become too old to participate in activities together.

c) You need to reinvent your personal identity to retire well

The worse way to retire is to do it involuntarily. Cold turkey does not buy time to figure out what role you need to play in society and this can be painful after the few weeks of honeymoon period.

A better way is to work part-time, maintain your connections and self-worth while figuring your life out. Once again, I am very lucky because I bought 4 years of time to retool myself as a lawyer before this amazing opportunity came to let me transform into an investment trainer.

Even today, I struggle to explain what I do to an layman audience.

  • How can a guy retire at 39? 
  • If he does, how is it even possible to teach it to others? 

An explanation is so complicated, sometimes I just say that I'm unemployed because it's easier to understand and salespeople avoid me upon hearing that.

If you get retrenched in your middle age, what you will experience will be even worse than what I had to go through because of the loss of self-esteem and the lack of time for you to retool how you see yourself. The lack of a middle-gear for careers that allow part-time work is strangely absent from our workplace,

Perhaps while many of you are actively trying to achieve FIRE, remember that you need a plan to maintain your health, relationships and personal identity while you are attaining your journey towards financial independence.

Thursday, October 17, 2019

MBA in a Nutshell #9 - Marketing : Marketing Mix - Product - Differentiation

We're heading into the marketing mix taught to most MBAs which is the 4Ps of  Product, Price, Place and Promotion. Interestingly the author claims that in HK and Singapore, "people selling" and "physical evidence" would extend the marketing model into the 6Ps.

We will only be taking a short while to talk about product differentiation.

A great example of product differentiation in the book is Haagen-Daaz  that added more butterfat and pumped less air to build a new category called premium ice-cream. I was shocked to discover that Haagen Daaz actually came from New York, hardly the kind of place conjured by it's classy Swiss-like brand name.

Unfortunately for me, I entered an industry that isn't exactly a Blue Ocean zone. It is not difficult to find videos on various value investing or get rick quick courses on the Internet. Complicating matters are the really well-run Telegram groups that I am already part of that can provide real-time advice on reaching financial independence or REITs investing.

So this is what I did to differentiate my product from the rest in the industry :

  • My course is driven by a life objective rather than an investing style. A retail investor is learning a framework on how to retire early and not a specific form of investing. So unlike other trainers, this gives me the freedom to pivot based on changes in the financial markets. Strategies do fall out of favor every now and then, so I am not locked down to any investing approach.
  • I adopted a quantamental approach and then made it feasible for a retail investor to execute the investment strategy without too much analysis which tends to paralyze them under a different course provider. I know because I was the last batch of NUS Applied Finance masters, I spent years being paralyzed by the Equity Analysis framework taught by the CFA program.  This combination is unique and based on a blend of different academic papers published in journals. 
  • My course covers leverage in greater detail and provides an option to boost returns if you are willing to take on a non-zero chance of margin call. Only a minority of students go on to apply leverage but many students are intellectually curious enough to want to learn more of how that works.
  • Beyond the course, I built a walled-garden on FB consisting only of alumni of the program. This way we have a safe space for serious investors who are sick of getting "PM me pls" messages in the more open forums. This group also provides lifetime updates and support on the portfolios built by the latest batch of students.
  • I am also building a coalition of partners who are willing to offer special rates for students of the program in exchange to getting access to them. So far students are pleased with the software tools and salary based FAs I can introduce to them. Naturally, I have a network of lawyers to help them with stickier issues they may face as part of their lives.
  • Lastly, I am part of the product too. Not only have I gone through the process of attaining financial independence, I have over a decade of public speaking experience was spent one semester being bashed-up by seniors in the SMU International Moots Program. Most of the best investors I know are mainly introverts, may be socially awkward, and may not like being interrogated by a paying member of the class. This is a space I can play in. 
Beyond what the students get, my course is the only one where I actively take a leveraged bet on my student's investment choices using a significant part of my trainer fees. This ensures that I will work hard to improve my material over time because I face investment losses if my students make bad bets on the market. This is probably the hardest component to replicate because it almost means that any trainer willing to do this will have to forego a salary for a year after each course.

In summary, product differentiation is a marathon. 

Over time, I fully expect competitors to come into this space and I am ready to meet them in this field of battle-  so much so that I am willing to publish my play-book on this blog for them to review.

But rest assured, I am already working to develop my next innovation in the financial education space.

Next week I will talk about IP protection.

Monday, October 14, 2019

Personal Update

Right now, I'm blogging from Festive Hotel in Sentosa.

We decided that we needed a short break so my wife got us a 3D2N stay in Sentosa so that my mum can head to the Casino, my kids can get to Universal Studios, and I can get more work done in my hotel room. For the past few weeks, I am resolving my father's matters and have been shuttling to and fro my family lawyer's offices. When it comes to such matters, it's ok to be slow and steady but the most important thing is to be accurate so that the paperwork will be quick and painless.

a) Financial markets

Singapore miraculously avoided a technical recession in Q3 2019 !

Every workshop preview, I would conduct a poll on what my audience thinks about Q32019 but the polls consistently  vote a that technical recession will occur albeit with V shaped recovery thereafter. The only time I noticed an upturn was the last preview when the folks voting for a L shaped recovery suddenly disappeared. But this narrow escape has been hinted by government officials for some time so we're not seeing a vigorous response in SGX at the time of writing.

I believe that the longer direction for the economy is still down, as I was informed by a friend that MAS will be reducing the rate of the appreciation of the Singapore dollar. A sure sign of pessimism in the markets.

b)  Personal investments

Because I have been investing course proceeds regardless of market timing, my portfolio is experiencing a decent upsurge of late. This might even be sustained as Trump makes peace with China and focuses on impeachment proceedings.

I recently revised the process on how to open a brokerage and CDP account, as me and my mum just completed creating a joint account and made two buys just to test the GIRO and dividend payout capabilities.

( If you are curious I bought Netlink Trust and Keppel DC Reit. No back-testing required for this decision )

For my mum, everything has to be uncontroversial and a wee bit boring.

My next project is to start CFD investing in OTC bonds, which will be a very interesting endeavour that will keep readers excited for the next few months.

c) Books I am reading

Image result for hard at work singaporeans book teo you yenn

NUS academics have published a really good read called "Hard at work - Life in Singapore". This is a politically neutral (generally speaking)  piece that gets 60 ordinary Singaporeans to just talk about their lives. I strongly recommend that investors spend time learning about our fellow Singaporeans - I've been stuck living in an EC for years, living on my dividends and I think it is humbling to read about other fellow citizens like the barista who makes $6 an hour and funeral director who shares some interesting observations on his industry.

I don't totally support what the authors have done, turning the MOE Scholar and Police Officer section into an LBGT advocacy piece, but for right-winged capitalists, this book is important to recognize that our society needs multiple perspectives in order not to fall into the trap that the Hong Kongers have fallen into.

If I have to redistribute my wealth to maintain social harmony in Singapore, I want the tissue paper seller, supermarket worker, and barista to get a decent part of it.

d) No, I did not get punished by Blizzard for my support of Hong Kong

By some twist of fate, I was informed that a professional e-sports gamer called Blitzchung is also called Ng Wai Chung. This made me a subject of teasing by many of my friends even though I actually see myself as being more sympathetic to China. (A side-effect of being more pro-Singapore than pro-Hong Kong)

I don't understand what HK Youths are trying to achieve when they do things that affect daily commerce of their city state. It is their parents who suffer when there is no money to be made.

They can learn to be more like us and vote with our feet. Hopefully this will bring a nice boost to property prices here.

e) Final lifestyle hack I picked up in Sentosa

On hindsight, it was really dumb of us to pay $1600 for a two night staycation.

I saw an old secondary school classmate and he told me that he could get a $200 per night stay from Carousell because hardcore gamblers are selling their free hotel stays online. Just now, I went to Carousell and there might even be opportunities to buy staycations at Marina Bay Sands.

Maybe one day, I'll be blogging next to the Infinity Pool.

Let me know if you have utilized this life hack.

Saturday, October 12, 2019

Lessons from my Dad #1 : Never let anyone count your abacus ( 打算盘 )

Right now my biggest priority in my life is to resolve my father's probate matters so that me and mother can move on in our lives. Naturally, it is going to take me a while to unpack all the lessons my father has imparted to me from an investment perspective so over the next few weeks or even months, I will share whatever I can about my father's very large influence on me as an investor.

One of the lessons I learnt maybe even as a primary school kid is that my father hated folks who "beat his abacus". He used to say in Cantonese that you should never let someone 打你的算盘.

I was doing some research just now and it seems to be related to the idiom "to beat a small abacus" or 打小算盘 which has a totally different meaning which is to be very petty-minded about money.

To understand the context of my family growing up, I was influenced by largely by two polarizing forces. My mom's family was very poor and never found a proper way to manage money. My maternal grandmother engaged in an old practice called tontine - even today we suspected that she was some kind of tool used by her neighbors. An uncle recently commented that my mother's family lived on a perpetual system of deficit and lived largely on loans and only did OK because of the high inflation in Malaysia that actually made this a feasible way of life for the past 30-40 years - maternal family was living like US citizens ! My father was the opposite, his finances were like a black hole singularity, once money is made, it never goes out - he can earn money, but good luck convincing him to spend any part of it.

Like all couples, my parents fought about money because they have different financial values but nothing makes my dad's blood boil when some impecunious relatives and friends suggest to him what he does with his finances. Sometimes I imagine myself in my father's shoes, fiscally ultra-responsible, with better educated in-laws telling him what to do when he towers ahead of everybody else in net worth. It must have been really irritating for him so this was one of my earliest influences when it came to my own financial awakening years later.

The imprint on me was undeniable. I was very indignant growing up in an era when insurance agents retooled themselves into financial advisers and suddenly an entire industry wanted to beat my abacus. Naturally I went on to take on drastic steps to in-source financial expertise within my own family.

I was determined to ensure that no one beats my abacus.

Ironically, once I started getting really serious finance credentials on my resume, my father started to give me a fairly big influence over his investments. I rewired his portfolio to provide him dividends while he maintained his ability to day trade with an old school broker. As he got older, I established more control, reducing his trade frequencies so he could enjoy seeing his money trickle into his bank account. My father just wants to see dividends trickle into his bank account. He has no real material goals in life other than to clown with his grand-kids.

I guess you can never be too dogmatic about your principles about finance. My dad let no one beat his abacus, but eventually I became his only abacus, working with him to address complicated rights issues and cycling his money into better investment opportunities.

Thursday, October 10, 2019

MBA in a Nutshell #8 - Marketing : Product Positioning

Image result for product positioning

Product position can potentially be an offensive blog post, so I will not go all out to share my real thinking behind where I stand vis-a-vis my competitors. This is something between me an my business partners and can be work in progress as the competitive landscape in investment training changes.

To create a product positioning map, we will first need to build a 2 x 2 matrix. The axes are arbitrary but one common way to differentiate between different training providers is price.

I would not say that my program is expensive, but for the past two previews, customers are starting to remind me that I have a very close competitor who charges a mere fraction of what I charge. I do respect my competitor quite a bit, so I don't wish to talk about my competition since I am not a student of their program. I normally respond to clients by just saying that, in spite of my pricing, my course is getting a fair share of students and doing objectively rather well and let them infer the rest. So at least I know that, in the grander scheme of things, the perception is that my course is priced on the higher side.

There is considerably more leeway to determine what is the second axes to differentiate training programs. One possible axis is the "growth-dividend" axis - some training focus on growth stocks and capital gains while my course has a distinctive focus on dividend yields. Personally, I don't like this distinction because my course focuses on Early Retirement which means that my strategies can pivot away from dividends if a better retirement strategy comes along,

So perhaps I need a better axes to position the products available in the markets

Right now I am thinking of the "narrative-quantitative" as an axis that differentiates training programs in Singapore.

From what I do know, the value investing school has a strong narrative component where investors create a narrative around why a stock is a good investment. This may come from an intimate understanding of the history of a stock, the capabilities of management, and some idea of how they have a competitive advantage in the market place. You will know that a course is narrative when trainers invoke Warren Buffett's name a lot.

My course is actually quite averse to narratives. The name I invoke a lot is Clifford Asness - I've been invoking him long before The Economist made it cool to do so this week ! So I am a finance hipster, I was into Clifford Asness long before it was mainstream to do so.

My students do employ some qualitative criteria when investing but we emphasize the quantitative properties of a portfolio first and dip into the narrative second. Ideally, my students will process the news and raise an alarm when they see SPH in a screen and argue that SPH will be rejected because they are trying too hard in an area that they lack competence in. Another case is the repeated rejection of BHG REIT for the reason that analysts reports are strangely absent on the web for a REIT and it's focus on Chinese Retail. Whether they succeed in making a good judgment call is less important because the quantitative back-test results do most of the heavy lifting in my class.

Choosing a second axes is not enough. The final 2 x 2 matrix must be able to inform me whether I can get customers when I focus on one quadrant.

From the way I view the competitive landscape, the "narrative-low price" quadrant has decent customer demand so my competitors have been around much longer than I have been so this is a segment that I think folks can operate on. I think I can open up my own "quantitative-high price" quadrant and do fine for the medium term.

Gathering data on the availability of paying customers for each quadrant is currently not something I can do yet with total objectivity. Fortunately, Dr Wealth has an article pipeline that allows us to mine for ideas on what the investment community is most interested in.

Monday, October 07, 2019

Letter to Batch 8 of the Early Retirement Masterclass.

Dear Students of Batch 8,

It’s been a great honour and privilege to be able to conduct a 2-Day Early Retirement Workshop for you.

We’re seeing some really interesting twists and turns for this particular batch of students ever since I decided to make the course more democratic and gave students the chance to select the strategy to perform the screening on. The hallmark of a good DIY investor is autonomy – the ability to make your own decisions to invest in something regardless of what was taught.

In this batch, you were presented with two possible strategies for REIT investing – a “high dividend strategy” and a “strong sponsor strategy”. Students initially voted to select a strategy with good sponsors after reviewing the quantitative metrics but proceeded to reject 50% of REIT counters after one session of qualitative analysis (largely due to the fact that yields are so low). You then requested to review the high dividend strategy which was done and resulted in fewer rejected counters.

The net effect is that this batch has two REIT portfolios by the end of class. Combined with the blue-chip portfolio earlier, this class has created three portfolios in total and, upon further review, I have decided to invest my trainer fees into the blue-chip portfolio and dividend REIT portfolio.

I have also learnt a lot of new facts that I have to confirm with my usual circle of experts and blog readers. Primarily is the issue raised by a student – that if you go to higher class ward in a hospital such as Class A, you will not be allowed to downgrade your ward if you get re-hospitalised. I find this policy hard to believe given that our financial fortunes may change between hospitalisations and downgrading may sometimes need to be done because we have no choice. Nevertheless, it is good to raise controversial issues for discussion because this can help some readers of my blog.

Another really useful thing I learnt from a student concerns Islamic Finance which I have no real expertise in. The question is whether REITs violate some aspects of Islamic law and, if not, why does only Sabana REIT claim to be Shariah compliant but not the rest? I will be trying to find the answer to this question over the next few days.

[ Blog readers do chip in if you can. ]

Otherwise, this batch of inquisitive students have raised possible areas of improvement for my course. One area that demands a new write-up is what happens after holding onto a portfolio for a year - do you sell the portfolio to buy the latest round of stocks selected by the latest batch of student, re-run the stock screen last year, or cherry pick stocks not found in your portfolio?

This issue will definitely be addressed by the end of this week in the form of article I will add to my course materials.

Christopher Ng Wai Chung

Tuesday, October 01, 2019

MBA in a Nutshell #7 - Marketing : Market Strategy

From the last article, I have only advanced one page of text. Marketing strategies are surprisingly simple consisting only of three basic strategies which I share below :

a) Concentrated strategy

When you apply a concentrated strategy, you have an intimate understanding of the customer and can produce a product that caters only to this target market.

As trainers, we can do more of this and yet not fall into the trap of competing for every soul out there in the market. Sadly we don't do this well enough in this industry yet.

One example outside my expertise is a financial program tailored to employees of a particular company. Succeeding in one sale made to HR translates to many students in a program. What is stopping me right now is what kind of sane company will pay to have someone teach their employees to retire before their 40s. It might make sense before a major retrenchment exercise though...

Another possibility is a course on couple finances that allows dating or married couple to participate in planning their finances together. Again, this unlocks the possibility of working with SDN and gaining a captive audience. 

Oh, how much I would love a captive audience from my stand-point at the moment !

b) Differentiated Strategy

A differentiated strategy breaks the customer down into multiple segments and then attempts to come up with a product to target each segment. This is more common in my field because my partner Dr Wealth has different programs catering to different kinds of investors.

This is a practical strategy because different product lines can target complementary segments that expand the revenue broadly.

Personally, I believe that a profitable line targetting Millenials and Gen Z exists in this space right now but I think no one has yet to figure out how to create a useful program that fits within the price point most Millenials are willing to pay for.

The conventional train of thought is that Millenials are too poor to pay for an investment program. My train of thought is that Millenials are too poor NOT to pay for  a good investment program. That is because they have the longest time to compound any investment that they can get into.

c) Undifferentiated Strategy

The undifferentiated strategy creates a product that is not targeted at any segment much like products like Coke or Tide detergent.

I think a lot of training programs fall into this category because of general ignorance of the program developer. These guys are typically finance and not marketing people.

While trainers know quite a bit about value investing, for example. I believe that it's a mistake to think that it works for all segments of society. If someone's investing methodology does not enable dividends, for example, then it is best not to target senior citizens who need dividends to pay their regular bills. In similar vein, a heavily quantitative program has no choice but to sacrifice poets and humanities majors who balk at the lack of a good story behind every investment move they make and a different program will cater to them much better.

You can actually assess an investment training program based on how careful the provider is at who the program is meant to target. An inexperienced provider will always claim that their investment know-how works for everyone who can live and breathe but someone with some experience will be able to safely tell you who is program best designed for.

I don't believe in a one-size-fits-all strategy. An investment methodology that works for everyone, in essence, works for no one.

Sunday, September 29, 2019

Building better Personal Finance online communities.

So here are some of the changes in the way I do my blog articles.

This blog, which has a small and dedicated readership will become more "meta", focusing on thoughts on my evolution as a trainer as well as snippets on my personal life. For the folks who want to read about my politically incorrect theories about dating, that's going to remain here.

For the more advanced investing articles, I will be posting on Dr Wealth.  The reason is that Dr Wealth has a much wider reach and have the SEO chops that brings more exposure for folks who wish to come for my workshop previews.

My free workshops are rapidly evolving into an actual free public lecture that anyone can attend without making a substantial financial commitment for my courses. I've reached a stage in financial independence where I can evolve to do more pro bono work and the feedback on my workshop content is actually fairly good at the moment. We've also had two successful runs without email blasting so I can safely say that I've stopped spamming your mailboxes for quite a while. While I can't write direct mailing off totally because it's still a good strategy for others, I'm doing everything commercially possible to avoid spamming members of the public.

Moving forward, I have a new challenge -  I'd like to think of ways to improve how finance communities are run.

All my students ( now close to 300 in size )  are placed in a closed FB group where they receive future course updates for no additional membership fee with the caveat that updates will last only up till the point I decide to stop being a trainer.

So I am now in the privileged position of administering a walled garden, much like the Apple iOS ecosystem compared to other personal finance forums which look more the like Android ecosystem. These are fairly serious investors and I got investing heavy-weights in the community. 

On my part, I'm using the community size to drive a hard bargain to see whether I can get better deals for my community. Right now, I got a better deal for Stocks Cafe and made some friends with non-commissioned FAs to help my students out. Recently, I just helped out a friend using my contacts who told me that he can't seem to convince an FA to sell him term life insurance. I have also cultivated a broker ally that can provide promotional rates for margin financing.

Right now I'm on the lookout for a trustworthy law firm (it has to be small and ferociously customer oriented) to direct my students if they need help with legal matters. In all these engagement, with the exception of Stocks Cafe where I do get paid, I do not seek a commission - I want to win the best deals for my community.

I just want my students to be winners in life.

Beyond developing superior bargaining power, I am also looking for a better way to run a finance community and the Philosophy of Science has something to say about that. It was Robert Merton who came up with the CUDOS framework that govern how scientific communities work.

I believe this can be translated into the management of an online Finance community :

a) Communal

This condition cannot be met in full but communal sharing of information can happen within a walled garden community and with paying customers, it does not make sense to share the best data with outsiders. Otherwise, I try to practice full transparency with portfolios created by all batches of students in private domain.

Some attempts to co-create material with some alumnis have materialised but died down in the past. I hope to do more of this in the future.

b) Universal

This is basically about non-discrimination. Beyond race and gender, I believe in the wisdom of crowds and it does not really matter what a person's education is.

If this person votes on asset allocation or market cycle, a class of 30 students and a trainer is light-years smarter than one trainer working it out on his own. To reinforce this aspect of community building, if I decide to sell a component of portfolio, i normally give the community a chance to vote for its replacement.

c) Disinterestedness

This is really hard to achieve in an online community and is the reason why public forums attract so much animosity when FAs provide a teaser to a person's query and then ask for a personal PM if the person wishes to carry on further. In this case, the FAs are not disinterested. They have potential money to make for every answer they give.

In a walled garden, it is a lot easier to be disinterested and give the best answer to benefit the entire community because folks already paid to get there.

d) Originality

We're slowly inching towards more originality, but we are not there yet. To achieve this milestone, my course has to win over and enroll the thought leaders in investing - that's a super difficult task.

I have a strategy to deal with this and it's inspired by Chan Brothers that my family is quite loyal to. Chan Brothers is not known as the cheapest travel agency. I think Chan Brother's longevity is that prices are high because they are not interested in the "fish market" crowd as told to me by my tour guide. They also provide better hotel rooms and want classier customers.

With higher prices, you are forced to create material to be worthy of the higher price point. The reward is not just more revenue but also higher quality of students that end up creating better portfolios for your trainer fees.

Ultimately if you want a better community, your course offering has to crack the barrier of serious investors who are confident of reading up on their own and making their decisions autonomously. The course has to seriously shorten the learning curve and bring auxiliary deals that justify the course fee.

In that I have an advantage, I was totally self taught using the CFA texts and never had a sifu in my life.

e) Skepticism

I think this is the most important trait that a Finance community need to cultivate. I'm glad the current membership has a few "grumpy" guys who will question every deal that is shared by a newbie. This is important that we don't make things personal and question everything that we read about.

Science advances by falsification of ideas and replacing it with a better hypothesis. A good community has to be like this. Ideally, a revelation has to have the power to make me want to make a U Turn and change my slides. For example, The latest Keppel DC and MINT rights issue raised their traded price ! I had to revise my lecture slides after that because I previously taught that rights issues are often punished by the financial markets.

So, over time, what is my wish a a trainer ?

Perversely, I want my offering to be less about my course and the knowledge that can be gained from it even though I am working on my materials everyday. I want my final product to be the student itself. People buy the course because it speaks to their personal values and they want a network of folks who think like themselves.

Signing up should say something about their own personal identities.

Because of commercial realities, I am a long way from this goal, but at least it's something I can work towards as some means of personal actualisation.

Friday, September 27, 2019

Dealing with Maid Problems...

One the same day we buried my dad at sea, my mum and myself went over to the police station to make a police report. This is first time in my life that I had to do so and it was an interesting experience.

We fired our maid after she racked up $800 in phone bills using my father's phone while he was on his deathbed. The following month Singtel sent us a bigger bombshell - a $2,000 bill for the calls made to Myanmar as well as paid apps installed on my father's phone !

My first objective was to see whether this can somehow be positioned as theft on my maid's part, my second objective is to create a paper trail to seek an exemption from these fees by appealing to Singtel.

I was not successful at the police station to convince them that our maid stole from us. The IO felt that I might have a better case if the phone was locked and the maid hacked the phone. This, I somewhat agree, but it's good to have a printed copy of the police report. The police sergeant said that I have recourse at the Magistrate's Court in a civil suit, but I don't think it makes sense trying to sue a Myanmar maid.

Next, I went to Singtel, gave them a copy of my dad's death certificate, police report and, in essence, begged them to waive the fees while transferring the home line to my bank account. My concern was that the deduction will be by GIRO and given that I'm fresh from burying my dad, there is nothing I can do if Singtel decides to deduct the phone bill anyway. In this attempt, Singtel was compassionate enough to agree to waive the $2,000. I suspect this happens fairly often in Singapore.

I have decided not to make my final move which is to lodge a complain to MOM about my maid agency. They knew that the maid used my phone and racked up $800 of bills for our family and yet they foisted my maid to another employer days later. I thought MOM should be warned of this kind of behavior even though there is some chance that no action will be taken.

As the $2000 has been waived, I have decided to devote my time and effort on my father's estate and move on with my life.

Feel free to share your opinion as to whether I did right and what you would have done in my place. I am willing to entertain any legal suggestion on how to get my maid out of Singapore for good - I don't think any employer deserves to have her on payroll.

I am writing this so that other folks who have domestic helpers looking after senior citizens will get at least one data point on what to do.

The largest damage done to us is that my mum is now so terrified of domestic helpers and we will have challenges when eventually she will need someone to look after her later in life.

Wednesday, September 25, 2019

How should FAs sell their insurance products ?

Image result for flip the script

First of all, calm the fuck down.

[ Note that this post was removed from the Seedly discussion group because of my use of the four lettered word. Moderators wrote to me to explain their stance. There is no hard feelings but this reflects how much FAs fear articles like this on the web. They rather censor me than debate earnestly on this topic. Do spread it around because the context behind my use of 'fuck' is not meant as a cuss word. ]

I'm not here to bash Financial Advisors today.

I am teaching myself how to sell better and thought the best way would be to get to the level that I can teach someone so that I can become an ace salesman myself. Also, Dr Wealth sales staff are fans of my blog and I want to give them a little bit of training of my own.

I think there is nothing better than to demonstrate to FAs how to sell better to level up my own skills as a sales person. As it turns out, the old formula of introducing the product, acting exceedingly fake and optimistic about it, trying to close and then working super hard to deal with objections, is a thing of the past. As consumers, we know that you will employ these Jedi mind tricks on us and this explains why the internet is full of negative press about financial advisors.

Instead int he book Flip the Script by Oren Klaff, a much better model is proposed.

I think if an FA were to follow this script, they can do much better.

[ Note that I am not qualified as an Financial Advisor and the dialogue serves to demonstrate a sample sale and should not be taken as investment or insurance advice * Wink * * Wink * ]

Oren calls this the Buyer's Formula :

a) Introduce the buyer's formula

The trick is not to sell any product, but to sell a buyer's formula. Unfortunately, this formula has to come from a position of sincerity and earnestness. I will demonstrate my Buyer's formula for term life : "Look, a lot of students I have overpay for insurance. The quickest way around this is to find a mix of products that produces the lowest commissions for insurance sales personnel. This means hunting for a range of products that they will NOT SELL to you."

Now I got your attention, I'm not a just another fly-by-night FA.

b) Outline obvious ways to fail.

" Look at ILPs being peddled by FAs. They are obvious commissions generators. I know someone who is aged 60 and he tells me that he pays so much for his mortality credits for his ILP, his investments no longer increase in value after he pays his premiums. Also his ISP's with a Class Ward A has just gone up in premiums again. And critical illness is just a lottery ticket that pays when you get cancer.  That's no fun if you are at the age where you can't work anymore ! "

This is not only believable. This can be true. More interestingly you are an FA who seems not to be interested in pushing expensive products to the buyer. Intriguing.

c) Highlight Counterintuitive ways to fail.

"I'm all for buy-term-and-invest-the-rest and I can process your term insurance purchase right now if you wish, but the problem with term life is that it may not cover the case where you have some accident or mental illness and can't perform your task. I have disability income insurance and I bet no other FA has ever tried to sell to you before."

You highlight the small flaws for strategies that investors employ like BTIR but support it along so that I can find a genuinely good product to complement it - Disability Income insurance.

d) List Obvious Actions

" The trick would be to buy insurance without an investing component but figure out how to invest for a better future. Investors need a different kind of insurance plan : a cheap accident policy, a minimalist hospitalisation and surgical plan of up to B1 ward, and this disability income insurance. You can do all this with your term life for less than $300 per month if you already have AVIVA Group Term Life. You can focus the rest of your income on dividends stocks."

e) Less Obvious Hacks.

" Oh yes, you're probably smart enough to create a REIT portfolio on your own. At 6% yields, this insurance is free if you have a $60,000 REIT portfolio. A good investor should never pay for insurance from his earned income ! "

Genius ! Who thinks of shit like that ?

f) Hand over Autonomy

" Look, you are already a dividends investor, I can't really tell you what you should buy but I've done this hundreds of times with other clients and they are really happy with this combination of insurance products. "

Modern buyers don't like to be told about how to run their financial lives by Financial Advisors. This pisses me off. If you hand over autonomy to me, I am actually more plaint to future requests.

g) Redirect to keep buyer in bound.

" Yes, the combination may not pay out too well if you get cancer because there is no Critical Illness insurance, but that's what your investment portfolio is designed to do. Your investment portfolio will cover contingencies not covered by insurance such as getting retrenched, kids going to university,  or that stupid cousin wants money to open a coffee stall. "

Just let the customer object and get their satisfaction. You don't have to deal with every objection aggressively.

I'd like FAs to seriously consider using this gentler sales approach to earn their money, it requires a more intimate understanding of the customer and an honest assessment of products you can sell to make the world a better place. Maybe over the long term, you may earn lower commissions per sale but you can make it up with stronger volume coming from better referrals.

Another way of looking at this is that competing FA reading this will try out my script and actually starts getting sales from it - can you risk ignoring this different approach used by your competition ?