How to be a gold-digger ?

This article is a follow-up of the previous article which provided dating advice for financially independent men. It gives dating advice to women who are seeking financially independent men.

I met women who started seeking a better life even while in University in the 90s. I've known girls in the Science faculty in NUS 20 years ago who lingered outside the lecture theatre to wait for the male doctors to emerge from the lecture theatres. I also had a good friend who was a top mooter and NUS debater who once asked me for advice on how to deal with a stalker from a different faculty who liked attending law lectures with him. ( It is as if an engineering undergraduate would have advice for someone who has such a nice unique problem like this. Too bad he had no advice for me on how to attract stalkers while in University. )

Fast forward 20 years, I think the situation is very different today but not necessarily in favour for our daughters. There is a smaller dating pool of eligible men as many boys end up in jail, get addicted to porn or simply choose the path of PS4 asexuality. The remaining pool of men know their value, all thanks to apps like Tinder which gives them hook-ups on demand. ( It's no accident that Match which owns Tinder is working on an IPO soon. )

So what advice do I have for the potential gold-digger ?

Don't.

I spend 3 hours volunteering at Family Court every week and I witness the bitterness of divorce first hand as part of my JD program. It's not something I think any dad would want their daughters to go through. A man's financial status should form a baseline for a woman to make a choice but it should not be the highest criteria.

The market for men, especially financially independent men, is highly efficient. Apps like Tinder and businesses like Lunch Actually are actually secondary markets for marriages and sexual relationships. Men, being primarily visual, will first rank women by their outward appearance, and then choose someone of somewhat equal social status to follow the trend of assortative mating.

The burden now exists for women of the future, being the more deliberate and wiser gender to choose properly taking into account how they rank against their peers in terms of good looks.

For the most part of it, financially secure men are like blue chips. Steady dividend flows but expensive to buy. In extreme cases, a woman can at best own only a small fractional share of a financially powerful man and may have to settle for becoming a wife-in-common, sharing her husband with different his girlfriends without him running afoul of Woman's Charter if he received good advice.

I propose this rule of thumb for my daughter.

Find a good conscientious and agreeable man for a husband, failing which, its ok to stay single.

Couples can seek financial independence together by working hard and saving for the future. It's like finding a stock with tiny dividends but high potential for dividend growth in the future. I know one thing rich men understand, it is that their wives who dated them while they are younger are the only people who chose to struggle with them when they were poor. They will never find someone like that again for the rest of their lives.

Otherwise, single-hood is just fine. Just make sure that there's a lot of travel in that life plan.

There is nothing more bitter than seeing a middle-aged woman go to court to seek maintenance arrears from lazy and unmotivated men.

My turn comes up again next Monday.

Dating advice for financially independent men.

I do not need to really blog anymore. These days, a fellow blogger might just refer some readers here and all I have to do is to react to their article.

Investment Moats put up a really hilarious article today.

Before I start, a little bit about my dating history. I was NOT financially independent when I was dating, but I was a bona fide cheap date in my early thirties struggling and failing every month to live on my dividends. But me and my missus were happy. We ordered a $7 Nasi Briyani from Shami Banana Leaf restaurant and the portion was large enough to be shared. I was cheap but I was able to assure my wife that I have the ability to look after her.

So back to the story from Investment Moats.

So a girl dates a really simple guy, then dumps him because she felt that he could not give her financial security, only to be told later that he is a rich heir.

I actually think that the heir was doing it wrong. It's one thing to avoid gold-diggers but it's another thing entirely if a rich heir acts like a hipster. Women would generally not find hipsters particularly attractive. Even if they do, in the Singapore Context, the heir would not pass the father-in-law test. No way I will let my daughter date a hipster, if the hipster turns out to be financially independent, I would still have concerns and think that he is being perverse.

That being said, if you are a financially independent and a single male, consider the following advice :

a) Even Superman has a day job as Clark Kent.

Have a fricking job that attracts good, single ladies. But what's a good wife ? Someone conscientious, agreeable and non-neurotic.

If you can choose your vocation because you shit gold, do engineering or accounting. Jobs like these exude security and does not pay decently enough to attract gold diggers. It also passes the father in law test with flying colours.  

Let's face it - Society is not prepared for men without jobs. It signals laziness and redundancy.

A savvy financially independent man may need to sever the idea that being financially independent means not having a job at all. I know, I spent 30 minutes explaining my income sources to an ICA officer for my wife's citizenship application. Even the government does not know how to deal with dividend income. Exasperating because the officer kept asking me why SGX pays me money every year and why is it not taxed.

I expect a many financially independent men to be cut down in dating circles in Singapore because most folks don't understand that it's possible not to work for a living.

b) Hunt in places where great wives exist.

I found my partner in Japanese class. I figured out that the best place to find a girlfriend is not in SDU or some situation that includes hard liquor. A rich heir can, of course, network with his peers in social economic status, that way both him and his girlfriend can avoid gold diggers.

A rich heir can easily enroll in an academic program to go spouse hunting. I would only advice that he should avoid law school, because the women know their Women's Charter well ( and would insist on joint ownership of property and would find creative ways to imply a resulting trust if you get a girlfriend after marriage. )

c) Joining a religious organization can be helpful in this regard

Even an atheist like myself would have to admit that churches are great places to find a spouse. It's almost like cell groups are designed for young people to meet each other and create more devout children for bigger tithes in the future.

This rich heir can ply his guitar skills for his cell group and then find someone who is not a gold digger.

d) Don't worry so much about the technicalities of law or finance. Just go date someone !

I know I transferred my CPF-OA to CPF-SA before I met my girlfriend because I don't want Singapore woman compel me to take on too big a mortgage. If a rich heir needs a way to mark out his non-matrimonial assets, set up some trust, it's best to do it while single before finding someone that he can be with for life.

I read so many cases in property law and all these legal problems boil down to failures of communication and trust within the family which money cannot really resolve.

Find someone you can love and keep for life, raise kids who can stand on their own and would not have to kill each other for your money and you can avoid becoming a case authority for the next generation of law students.

Did I mention that you should avoid situations with alcohol just now ?

How to beat the STI index ?

A lot of other blogs talks about the virtues of the STI ETF index ( ES3 ).

For most beginners, buying the entire index makes sense. As ETFs generally have low management fees, holding the ETF for a long term yields solid dividends and you get to make a general bet on the Singapore economy. 

But what if you are an intermediate investor and want better performance on the STI index?

One way is to understand that the STI index is a capitalization-weighted index. This means that the position of an individual stock when you buy the index is proportional to its market capitalization which is its (stock price x number of stocks). Anyone who buys the index is in essence always buying a larger proportion of stocks which has done well previously as its market capitalization has gone up before. 

One possible winning strategy is to buy individual STI stocks in equal proportions. You undertake a slightly higher risk for better returns because you refuse to overload on  a stock which has already been bidded up by the markets. 

The evidence can be found in the performance of two indices : The SPY index is the S&P 500 index which is capitalization weighted. The equivalent equal-weighted index, with code RSP based on statistics in Yahoo Finance, currently outperforms the SPY index by an annual rate of 0.18% over 5 years but over 1% over 3 years. This out-performance can be large if you hold your portfolio over several decades.

The problem with creating an equal-weighted STI portfolio in the past was that 1 lot was 1000 shares. These days, with 1 lot being reduced to 100 shares, your largest stock position would be 100 shares of Jardine C&C which would cost you about $3,149. With 30 stocks in the STI, you might be able to create a crude equal-weighted STI portfolio with just $100,000.

Considering that you also avoid paying a 0.3% management fee of the STI ETF, this strategy may be worth a try if you already have $100,000 in that STI ETF counter.

NB : Do watch your brokerage fees which would amount to 0.75% so make sure you can hold at least 3 years for your savings in management fees can offset the brokerage payments. 

NB : Unfortunately, I did not have the time to test whether there is outperformance on a Bloomberg terminal for local stocks. Readers who backtest please share your results on this blog.

Law versus Chaos in Personal Finance.

I just completed 90% of two research papers and started by mid-term holidays ( Lectures resume next Tuesday ) and have only a few minutes to create this update.

Recently a really horrible piece of financial advice came out from Elite Daily which was immediately pounced upon by by my friend and uber blogger Budget Babe. I would like to add some context and nuance about personal finance in general.

We need to think about our adult lives as battle of Law against Chaos.

On the side of Law is our desire for security. To meet our goal of security we need to be conscientious. Saving our money and carefully managing our careers put us in the side of Law.

On the side of Chaos is our desire for variety. To meet out goal for variety, we need openness to new experiences. We are not robots. We need to spend a little money, develop interesting hobbies and make new friends to stay sane.

Financial bloggers are generally on the side of Law. Elite Daily is generally on the side to Chaos.

But as psychology students might know. Conscientiousness and Openness to new experiences are orthogonal to each other. We can save, work hard and have fun at the same time.

Maybe a way to proceed is not to see a disciplined life of savings and investments as one being quite drab and no fun at all. For me, the bulk of my books sales and dividend earnings do go into buying role-playing games.

Case in point, I have suffered enough to put out two research papers.

I am now meeting my family and then I should be out partying with my classmates later.

Catch you guys this weekend where I will be sharing an article on beating the STI index.

How to deal with the idea of 15% yielding "unicorn" yield stocks.

Investment moats struck blogger gold again with an article on keeping cash around for that 15% yielding stock. To me, this article borders on financial pornography, but it does so in two good ways : Firstly, Driz'zt did not insist that 15% yields exists, he merely suggests that a prudent investor hold some cash in reserve should that day arrive. Secondly, he referenced my blog, so I would need to put in some effort to build on his ideas.

The main idea of my article is that a 15% yielding stock which would pave the way for your financial independence is a mythical animal much like a Unicorn. Most of the time, these yields are not sustainable and you are likely to be burnt if you build up a solid $50,000 just to plonk it on a yield stock that would collapse within the following 2 years.

Here are some of my points :

a) Don't wait for that Unicorn to arrive, it might turn out to be a Nightmare 

Ok, this is D&D reference.

Driz'zt's idea is brilliant. You will need a cash reserve for reasons other than investments. But 15% yields is a rare event indeed. I was able to pick up some REITs at about 12% on average during the Great Recession which probably is the main reason why I am in Law School and not some harried Service Delivery Manager for a tech firm today. Some stocks which exceed 15% yield are like that for a reason - investors hate them because the yields are not sustainable. Investors remember various investment disasters like Omega Navigation, Macarthurcook Property Securities Fund, Babcock and Brown and FSL.

Investing into these disasters always starts with an intention to capture ridiculous yields. I have plenty of scars to show as I remain quite a yield pig myself even today.

b) Better to save your cash for a general bad economy rather than wait for a Unicorn to arrive.

One way to improve Investment Moat's central thesis to consider when the markets are bad and then capture a number of cheap stocks to ride the downturn.

But what is a bad economy ?

I have some concrete suggestions for the retail investor. You get a bad economy : When banks are yielding  6% or when telcos start yield 7%.

These are good signals to act even when there are no 15% stocks in your radar.

c) Buy many warhorse stocks, don't wait for unicorn stocks to appear.

A good warhorse can give an investor plenty of mileage and looks almost like a Unicorn. It just does not have a magical horn.

When times are bad, what is a warhorse stock ?

You can observe a solid yielding counter like Croesus which other bloggers have been talking about. It current yields about 9+%. In a really bad market, it might yield 11%. This is a solid warhorse stock if that scenario occurs.

A fallen angel counter like Sabana REITs which yields 11% would also be a rare and positive market event.

I would even say DBS at 6% is a steal. The trick is to take your capital and buy all these warhorses at an average yield of 8-10%.

d) Employ some fundamental indexation when you build your portfolio.

The beauty of 100 shares per lot is that individual investors can start to weigh a stock based on market fundamentals. One idea to slant your portfolio warhorses is to weigh each allocation based on dividend yields.

Example : Market crashes - Cambridge REIT yields 12%. DBS Yield 6%.  Your allocation to Cambridge should be twice that of DBS because it has a double it's yield.

This idea is consistent with the Kelly Criterion article I mentioned earlier. Bet more when there are more dividends but don't avoid low yielding blue chips in a downturn.

What is the result of adopting this article ? In a downturn, you get to lock in a more realistic yield of perhaps 8%. A $100,000 cash hoard would have a sustainable yield of $8,000. Enough to pay your electrical bills and lunch expenses.

Not exactly pornographic but would give you a reasonably happy ending.

Manage your CPF well but please do not rely on it !

I'm very busy this week as I have my mid-terms and a presentation to make next week in school.

Nevertheless I want to elaborate on this point I made in my radio interview which Driz'zt of Investment Moats has kindly referred some traffic to me is his very well-thought article on CPF.

We Singaporeans are a lucky lot because a large part of what our government do actually works. The same cannot be said if you happen to live in our neighbouring countries.

The mindset of not relying on CPF is not a judgment on our government's capabilities. I am a lot more positive than Driz'zt and Roy Ngerng and believe that a comfortable lump sum awaits me at age 55. I expect to get a nice lower 6-digit sum at 55, which translates to about $1,000 a month additional passive income after that. It's not enough to live on if I have yet to clear my mortgage loan, but it's a nice welcome addition to what I already have. So the primary effect of relying on ourselves allows us to achieve a more comfortable retirement when the CPF board suddenly decides to reward us when we reach 55 years old.

That being said here are some minor points to push the debate further.

a) I am a strong proponent of the CPF-SA transfer.

I see real estate being stagnant for the next decade with interest rates rising, so the option of using the CPF-SA to get a bigger home may not be such a good idea. I prefer small homes with a larger investment portfolio and performing the transfer earlier in your 20s will see more interest being credited over your lives. More interest from CPF-SA makes it earlier to cross the minimum sum hurdle so you get all of it back after you hit 55.

Sometimes not having options when it comes to money is not such a bad thing. I might be considered foolish or insane when I maxed out my CPF-SA in my twenties because I did not know who my wife will be in those days. I thought Gen-X Singapore women would want bigger houses and would deplete my CPF resources so I decided to keep it out of reach from my future wife before I even met her. I still managed to get my EC in the end and the government credits over $6k to my CPF-SA every year as a result of that action.

( I reserve the right to change my mind if the Government raises the amount we can invest in our CPF-SA. Ideally, I would like to invest 100% of my CPF-OA but not everyone would well if this opportunity arises. )

b) CPF Life is better than the alternatives from buying it from commissioned agents. 

A retiree's passive income is best supplemented by an annuity. The problem is that annuities are expensive and affect the rights of your remainder men.  CPF Life solves the problem for us because we can just rely on it to fend off mortality risk. From the point of view of a million dollar portfolio, the government is not retaining much of your assets and another guaranteed $1500 passive income from age 65 is not a bad idea.

The broad idea is to have a portfolio of securities to provide capital gains and dividends supplemented by a fixed annuity payment. You eat your annuity payments first and farm remaining dividends back to your portfolio to keep the engine moving. If my portfolio remains large relative to the sum retained by CPF, I can opt for bigger monthly payments with less money returned to my family when I die.

c) Max out your CPF-IS with high-yielding blue chip stocks.

Finally, if possible max out the CPF-IS scheme and do it before you buy your first property because the government will not force you to sell your holdings if it exceeds 35% of your CPF-OA.

I also manage my CPF-IS differently from the rest of my portfolio.

As I can't extract dividends from this portfolio, I choose big bluechip companies that I can afford to hold for a long time horizon which yields higher than the CPF-SA rate. This guarantees that for some market risk, I get to have bigger returns than the default 2.5% that the CPF Board gives me.

In conclusion, while we should not rely on the CPF for our retirement, managing the CPF well can give you a $1,000-$2,000 boost to your monthly passive income after age 65. While the CPF-SA is not as flexible as the CPF-OA, it comes with a gigantic boost in guaranteed returns so transferring the OA to SA in your mid-twenties is not a trivial strategy.

Peer to peer lending strategy using the Kelly Criterion.

There is very little literature on how to invest in peer-to-peer lending campaigns and I am pretty sure that very few financial bloggers who have a decent framework on peer-to-peer lending.

I am going to attempt to come up with a blueprint on how to size your bets when you are being offered a campaign on any lending platform.

This approach is based on the Kelly formula which is employed by gamblers in casinos. It is an optimization strategy which maximises long term returns. Based on what I know about the current state of lending platforms, the Moolahsense platform has enough data to facilitate this form of bet sizing.

I would leave the mathematical proof of this approach to the experts.

[ For the purposes of this article, this article only applies to lending projects and does not apply to equity crowdfunding campaigns. As I have a fairly personal bias against property crowdfunding, I do not advise that this be applied to property projects at all but some folks ]

Let's say you have a campaign and have allocated $10,000 into peer to peer lending which forms your bank-roll.

Scenario 1 : Attractive Campaign

This sample company will pay-back a total of $1060 in one year. Suppose you check the company data and find that the calculated default probability is 2.5% over a year.

The Kelly criterion which recommends that you bet proportion x of your total bank roll where

x = ( Expected net gains ) / ( Gains on successful campaign )

Start with an assumption that your position is $1000.

You can earn at $60 on a successful campaign. When the company defaults, you expect to lose everything or all of $1,000.

Expected net gains
= Earnings x Probability of success
= [Earnings x Probability of Success - Loss x Probability of Failure]
=  $60 ( 100% - 2.5% ) - $1000 x (2.5% )
= $33.50

Gains on a successful campaign
= Best case scenario
= $60

x = ( Expected net gains ) / ( Gains on successful campaign )
   = $33.50 / $60 = 55.83%

In the above example, the recommendation would be to bet about $5,000 or $6,000 into this campaign as it is fairly attractive.

Scenario 2 : Campaigns to avoid

Let's consider a campaign which returns $1,090 in six months but the website says that there is more than a 16% chance of default within a year which you estimate should turn out to be about 20% a year.

Return is $90 on a successful campaign. You lose everything in the event of a default.

As it is a six month campaign, you should be using a default rate is (100%-20%) ^ (6 months / 12 months) or 10.56% or just about 10%.

Expected net gains
= Earnings x Probability of success
= [Earnings x Probability of Success - Loss x Probability of Failure]
= $90 x 90% - $1,000 x 10%
= -$19

Once you get a negative number, you should avoid this campaign and look for something else to do with your money.

Scenario 3 : Risky campaign where you can ask for more

If you can offer more for Scenario 2, what happens ?

Suppose you can choose to offer a high rate which returns $1,120 in six months.

Return is $120 and you lose everything in the event of a default.

As it is a six month campaign, you should still be using a default rate is 1- [(100%-20%) ^ (6 months / 12 months)] or 10.56% or just about 10%.

Expected net gains
= Earnings x Probability of success
= [Earnings x Probability of Success - Loss x Probability of Failure]
= $120 x 90% - 1000 x 10%
= $8

x = $8 / $90 = 8.88% which you can round up to 10%

For this campaign, you should bet a smaller amount - no more than 10% of your total bankroll.

You should therefore bet the minimum of $1,000 of your bankroll is $10,000.

This framework should be a superior but riskier approach to something which I am currently doing, which is to bet the minimum amount of $1,000 across as many campaigns which I can get my hands on.

If you wish to follow my strategy which maximises diversification, you should still employ the Kelly formula to find out which campaigns to avoid. At the very least, you should choose the minimum amount of return such that your expected net gains are a positive number.

I think this is cutting edge stuff, so comments from seasoned traders are welcome !

Notes from my last interview at Kiss 92 FM on retirement.

I think I was a lot more nervous in this round of the interviews because some of the questions veered away from what I was prepared for, apologies if there are more time fillers if you are a Toastmaster.

Nevertheless, it was a good session.

I want to clarify some points I made and highlight some questions I addressed when I was off-line with the deejays,

a) REITs are not everything.

The DJ's couched the questions from the position of a rent collector which was how the conversation veered towards a discussion on REITs. While REITs are a mainstay in my investment portfolio, I rely on four asset classes to build my passive income. ( Four clases are REITs, Business Trusts, High yielding equities, Peer to peer lending. )

I hope that this does not trigger a bull run on REITs as we have no idea how they would perform in a high interest rate environment.

b) What REITs to buy ?

Offline the DJs wanted to know which REIT to buy. I was trying to evade the question so as not be construed as advising someone financially. I answered that if a person buys all the REITs in a diversified REIT portfolio it is possible to achieve 7% yields right now so individual stock selection is not necessary in the current climate.

c) Question on CPF.

This question was entirely ad-hoc and I would not want to offend any authorities listening to the program but I stand by my advice that if you need to rely on your CPF, you are not ready for retirement. CPF life gives a great boost of about $700 - $1900 a month after you reach 65. I expect many Singaporeans would not be able to hold jobs between 55 and 65 so they will need personal savings to tide over that decade.

d) Books to read.

Well meaning friends ask me why I did not recommend my own books. The reason is that Growing Your Tree of Prosperity is almost sold out. Other than George Clason's Richest Man in Babylon, my book Sowing the Seeds of Prosperity is designed to get the local investor started.

Every serious investor needs to get to the point where he can understand The Intelligent Investor by Benjamin Graham.

e) With-holding cash from children to promote good money habits/

Maddy really threw me off-guard with a question on whether it is wise for parents to withhold money from kids and put it in an account for them to witness compounding growth in action. Maddy suggested 10%. I was doubtful because I was not sure whether kids would be deprived from this form of parenting and whether this strategy would backfire so I suggested that she be moderate with this program.

An answer to this question would be complicated and reduces to a question of how to instill conscientiousness and willpower in children. At least from the child development literature I know, there are no solid answers.

One thing I know : You want conscientious kids, make babies with a conscientious spouse.

( Three hours in family court every week also confirms this ugly truth )

It does not help that I was a spoilt only-child who can have almost every toy I wanted as a kid but grew up to be an adult who really needed nothing much other than to read, solve complex problems, play D&D and troll my law school classmates,

f) Opinion on SPH.

Maddy also triggered a very interesting discussion on SPH and asked me my opinion on high-yielding counters with declining businesses. My view is that a long term buy and hold investor of SPH is not so badly off as he would have collected substantial dividends and would now have some SPH Reits in his portfolio as well.

Dividends investing is quite anti-fragile. Time heals all investment mistakes.

g) Singapore Savers Bonds 

There was some small-talk on SSBs. I did not buy any but I am glad that the government has created a product which people are talking about in a positive way.

I am still pining for my inflation protected bonds.

Anyway my notes going into Kiss 92 is as follows :

When is a good age to retire?

This answer varies from individual to individual. A person who wishes to retire would need to accumulate enough assets such that it would be enough to last them the rest of their lives. This is a difficult problem because we do not know when we will die and have no idea what our spending patterns are like post-retirement.

Is 55 too late to start planning for a 'retirement life'?

Again it depends. It is easier to retire if you are single and have no dependents. A late planner may have sufficient income to start accumulating a portfolio which can be used to supplement the income from CPF life which kicks in at age 65. So it's entirely possible to start saving from 55 until 65, and then rely on investment income and income from CPF to retire from the workforce.What are some things we should consider when we plan to retire?

When should we start planning our retirement savings?

The best time to start planning is before graduation immediately after your last set of final exams. The savings accumulated in your 20s would subject to the most amount of compounding throughout your life. So learning about savings and investments are crucial before your first pay-check. Accumulating knowledge is also easier in your 20s. As for me, I studied finance at the professional level once I exhausted all the usual investment books so I went after the credentials which most private bankers have.

When should we start saving for retirement?

The easiest approach is to start from your first pay-check. At 7% gains, you will need to save $820  a month if you give yourself 30 years to become a millionaire. If you have twenty years left, you will need $1920. If you only have 10 years you will need $5780. So it gets progressively harder as you get older to save for retirement.

How much is enough to retire in Singapore?

Two factors determine how much is enough for retirement. The first is how well you can manage your investments post retirement. The second is how much you will need to spend post-retirement. For a single man who is a good investor who can find investments which can yield 8% a year and spends $2,000 a month, he can be financially independent with a portfolio size $300,000. However, it would be prudent to build a margin of safety around that figure of $100,000 and find a part-time job which gives personal satisfaction if you are in such a person's shoes.

How should we retire?

Cautiously. Getting a retirement income to supplement your expenses is not enough. I was bored for the first 6 months after I left the work force and before I got accepted into Law School. A retiree needs to be mentally engaged. The other consideration is that friends in the same age bracket are likely to be still at work and struggling with mortgages.

Socially, it's quite hard for society to accept a 39 year old male who has left the workforce. Many SIngaporeans do not think that it is possible and many thought I relied on my wife for her income before they found out that she's actually a housewife.

Based on surveys, retirees typically spend less on food and transport but more on medical expenses.

When can we retire?

Based on surveys, Singaporean prefer to retire at 55.

I prefer the listener to consider financial independence as a better goal than retirement. Financial independence occurs when your investment income : rentals, dividends, patent and royalty payments exceed your regular expenses. Then you carry on working until you get a comfortable safety margin beyond your regular expenses. Then you should consider retirement.

Do we only start saving for retirement when we have a stable income?

If you wait for a stable income, it would be too late. If you income is unstable, you would need to spend below the lowest estimate of your monthly salary and put your savings in your investment portfolio. If you are unable to save, you would struggle because life throws many curve-balls at you - someone can fall sick and you might have unplanned expenses. 

My next radio interview is tomorrow Wednesday, 16 Sep 2015 8am, at Kiss 92 FM.

Looks like I was able to secure another radio interview with Kiss 92 FM at 8am tomorrow.

The topic : "What is the best time to retire ? "

Keep reading this blog as I will post some of my research notes after the interview so that we can have a deeper discussion here.

Write your own manifesto ! Rekindle the Singapore Dream !

The concept of a manifesto has become more interesting in the upcoming elections.

For a party which is not likely to form a government, a manifesto is of little use to the electorate but serves a purpose similar to that of marketing collateral. You see that these parties would come up with the best manifestos that have the effect of transferring a bulk of the reserves into the pockets of Singaporean.

For a party that is very likely to form a government after the elections, a manifesto becomes almost contractually binding because the electorate would remind the party of the promises broken since the last elections, so naturally these manifestos will be laden with motherhood statements but would have few promises. You are expected to live a ruling party's manifesto, not read it.

But manifestos are particularly useful when someone writes it for himself. Writing a manifesto clarifies your thought processes on the nature of success and can teach you a thing or two about your personal life trajectory.

I urge everyone to attempt this and share it on their blog.

If I were to write a manifesto on how to reclaim the Singapore Dream, a draft might look like this.

Reclaiming the Singapore Dream : The Way of the Unnatural Aristocrat

To most Singaporeans, the Singapore Dream is dead.

Globalization killed it.

Data Science and automation will wipe out the dreams of almost all the blue collar workers and a large number of white collar workers within the next 20 years.

The default position is a pessimistic one.

If you are average, the Dream is dead.

No government policy can reverse this.

The way to reclaim the Singapore Dream is to become an Unnatural Aristocrat.

The natural aristocrat is so by virtue of character and talent. You are at best a natural aristocrat at a certain point and time.  Beyond a point in the axis of time, entropy destroys all talent and all meritocratic standards. Demands of industries change.

An unnatural aristocrat is a natural aristocrat who has talents and resources which transcend the progress of time.

How does one become an unnatural aristocrat ?

An unnatural aristocrat is both a rentier and a super-manager.

A super-manager has the skills which are tremendously valuable at a single point in time and are sought after by multinationals and companies. They either solve or coordinate people to solve uniquely difficult and complex problems which cannot be automated. They have mastered techniques which go beyond analytical skills and have a toolbox which can deployed to suit any contextual situation.

A rentier has a resources which last across time. He has may have no valuable skill but his ownership of capital and means of production allows him to sustain himself indefinitely. A rentier acquires an skill set for his own benefit - an intimate understanding of the resources at his disposal and how to squeeze every drop out of his own property. He is trained to structure his ownership of such resources using appropriate legal instruments to the betterment of his family, moving offshore if required.

The super-manager projects power, aggressively trades time for money but can be fragile and forms the Yang of the unnatural Aristocrat. The rentier is passive, obtains money with no time spent, is anti-fragile and forms the Yin element of the unnatural aristocrat. An unnatural aristocrat will find moments where the work is aggressive and his Yang dominates his life and find moments of retirement and introspection when his Yin is ascendant. Yang reinforces Yin when money is channel into investment assets, Yin reinforces Yang when retraining and new skills are obtained.

There is no such thing as work-life balance in one point of time but work-life balance can be achieved across time.

When Yang and Yin are in harmony, earned income flows into assets and assets reflect back passive income.

When passive income equals earned income.

Singapore Dream comes back to life.

Before you vote on Sep 11 : How to make your own minimum wage and unemployment insurance.

I was actually quite apathetic to this year's elections, that is until I came upon snippets of the Worker's Party manifesto on their proposal for minimum wages and unemployment insurance which warrants some gentle intervention from a finance blogger.

But first of all, I don't want this article to lobby for any political party.

Just because I think that WP's ideas on minimum wages and unemployment insurance are wrong does not mean that the reader is being asked to support the PAP. This is because WP will not be able to execute on their manifesto even if gain two more GRCs this year.

Readers are free to support WP as it would have the positive effect of debating their ideas more rigourously.

I also don't want to get too deeply into the politics of minimum wages and unemployment insurance. I am right-winged conservative and readers should know that I will be biased once we get into a political discussion. I'm always for personal responsibility over tax-payer intervention. Tax me less and I will ensure that my family will not be an unfair burden to society.

Instead, I want to show how you can make your own minimum wages and unemployment insurance.

a) Unemployment insurance.

The easier target is to consider unemployment insurance. Based on what little I understand of the manifesto, WP seems to claim that a 0.1% salary contribution from employer and employee can generate about 6 months of pay up to the median income which was $3770 in 2014 for all unemployed citizens. The maths just does not square with me because WP probably made some assumptions about the forward looking unemployment rate when they designed the scheme without considering whether the scheme would actually lead to more people becoming unemployed.

Until I see more evidence, I am inclined to believe that WP drank a lot of Kool Aid when they agreed to publish this idea.What baffles me is that there is a better solution out there : Just let an unemployed person draw from his own CPF-SA a limited amount for 6 months, then make him contribute back when he starts work. No CPF-SA contribution, no insurance.

If you decide to make your own unemployment insurance, simply save 6 month x $3770 or $22,620 after starting work. You can now buy risk-free Singapore Savers Bonds and be your own insurer.

Downside is that you need to be a disciplined saver for 1-2 years if you are a fresh graduate to create this safety net.

Upside is that just holding onto the safety net for a year without drawing upon it will net you $500/year at 2.63%.

b) Minimum wages.

Suppose you have already created your safety net, now you want a synthetic minimum wage.

WP's idea of minimum wages is 80% of $1,250 or $1,000 per month or $12,000 a year. You can roll your own by using a portfolio of stocks with dividend yields.

If your portfolio yields 6%, you need approximately $200,000 to have this portfolio pay your minimum wages. If your portfolio yields 8%, you will only need $150,000 to have this portfolio pay your minimum wages. If you buy only Singapore Saver Bonds, it would require $457,000 to generate these required returns.

( Other financial bloggers do have great suggestions on how you can adjust your lifestyle to save more money and obtain these yields by investing correctly. )

At this point, you will start to protest that I am being unfair.

A WP supporter will say : If a person cannot draw a minimum wage, short of winning Toto, how can he build a portfolio of assets to pay a minimum wage ?

That's my real point : A worker who is worth $500 a month but is allowed to draw $1000 a month is tantamount forcing the business to set aside  50% x $457,000 to sustain him - all for nothing.  That's the whole point about waste which has to be borne by entrepreneurs.

To pay a minimum wage of $1,000, businesses need to ensure that the worker adds at least $1,000 of value. Using risk free assets, it takes close to half a million dollars to generate an effortless minimum wage of $1,000 a month. A very cruel burden to the entrepreneur.

This isn't even a political argument for the upcoming elections - This argument does not even make the PAP look good because Progressive Wages run into the same issues I have raised ! PAP needs to convince conservatives why are the businesses in select sectors providing welfare to workers while other sectors do not need to do so.

I think readers of modest professional means should make it a resolution to create a portfolio to generate a $12,000 minimum wage using whatever instruments which they are familiar with to improve their personal fiscal resilience. While the numbers are modest and can be achieved within a decade worth of work, the true value of this exercise is in allowing someone to appreciate just how much capital it takes to sustain even one minimum wage worker.

Another words, do it for yourself, then judge others based on your own personal experience.

After you determine whether it is fair to impose this financial burden on the business man, tax payer, or the individual, then you would be able to vote your preferred party without regret or remorse.

How to seek financial knowledge ?

Budget Babe was the first blogger to respond to the POSB advertisement which exhorts Millennials to surrender their financial futures to financial adviser.

You can find the posting here.

I'm going to post the next logical step which would take the reader towards building a basic foundation in personal finance.

Here are the bare basics before you even start on reading a financial book :

a) You run your life like a business.

A good way of framing your financial life is that you are running a business regardless of what kind of vocation you are in. Your salary is a result of you selling your time to an employer. The food, transport and luxury watches you buy for yourself are expenses. Everything that costs money is an expense : this includes your internet connection bills and management fees of unit trusts. The only thing of true value is what remains after your deduct your expenses every month.

This constitute your savings and investments.

b) Choosing your investment is like choosing an employer.

The second fundamental is that you need to choose a good investment the same way you choose  a good employer. You exchange your time for money so you should take steps to maximize this exchange rate. Always gun for jobs which give you the highest remuneration for your time. Upgrade your knowledge once you hit a plateau in your hourly income.

Similarly, it does not make sense to invest in something that subject you to high expenses and pay your less per unit time. ILPs. unit trusts and hedge funds are generally speaking high costs because not only do you need to pay your financial advisor, you have to pay your investment manager as well. Exchange traded funds and individual stocks are generally low cost if you can minimize brokerage by making bigger buys but they are not marketed aggressively so a lot of DIY effort is required.

c) Compounding makes you rich. 

The third fundamental is that compounding, and not trading, that makes you rich. Money grows exponentially at a compounded interest rate. When someone takes a risk at 8% over 25 years, he will be much richer than someone who takes no risk at 4%, he just needs to stomach more volatility.

To be able to stomach risk, you need a longer horizon which means that you need to start young and compound your assets at a higher rate in your twenties. If you surrender your financial fate to an advisor at a young age, your assets, which could have compounded for the next 40 years, are converted into his commissions, allowing him to reach financial independence and attend more MDRT conferences.

d) Read to build your knowledge.

Once you have these basics in place, in my opinion, your first step is not to jump on the Warren Buffett bandwagon. You should also avoid works which focus too much on motivation and too little on technique. ( Robert Kiyosaki and Harv Eker comes into mind )

A book which balances some motivation and gives you the basics to get started is George Clason's Richest Man in Babylon.

Many of us financial bloggers have products on sale which arms you in the basics on how to get started.

My own product here is Sowing Your Seeds of Prosperity. BigFatPurse has an excellent book on building a Singapore Permanent Portfolio can be found here.

But do not stop there : The holy grail of personal investing is to eventually be able to understand and apply principles in The Intelligent Investor. Mastering this book allows you to take charge of your own portfolio and financial life.

As money is a very interesting topic which I find pretty easy to get obsessed about, I also encourage every beginner to consider taking the CFA exams.

This exam has a ridiculously low pass rate but studying for it can result in a better looking resume - exactly what a young 24 year old would do instead of surrendering his financial future to a so-called advisor.

But generally most readers who are familiar to this program will consider this suggestion overkill.

If you are fresh graduate in your 20s, you are not too old to learn something new. The opportunity cost of picking up skills in personal finance is much lower as your are single and have few commitments.

Don't surrender your fate to a financial advisor.

Become a financial advisor for yourself.

What about Engineers ?

If you want a study for a degree which is likely to see you in a bank doing Operations, you should study engineering. However, if you want to study for a degree which would land you into a job managing a hipster cafe or baking cupcakes, a Law degree is your surest bet.

If I can start my life all over again, I would still take Engineering as my first degree, the only change is that I will aggressively study software engineering, ignore electronics/hardware and try to slant my electives towards Data Analytics.

However, I would still not become an engineer. At least not an engineer in a traditional sense who looks at blueprints and direct maintenance for MRT trains. I will instead use my mathematical and programming skills towards solving problems which would make me more money. I see successful engineers programming GPUs to arbitrage financial markets.

The lack of engineers in Singapore have been on the radar lately and some folks have commented on the lack attention paid to this issue in this coming elections. This is a problem in Singapore because we will lose our competitiveness in key industries if we cannot graduate professionals who can understand and solve technical problems. The MRT breakdowns is a symptom of of this issue. Create a society which does not respect technical proficiency and underpays engineers, and you will be rewarded be frequent breakdowns and failing infrastructure.

That being said, I still think that we can incentivise more people to take up engineering in spite of low income prospects for the engineering profession. The trick is to address the hard truth that the most hardcore engineers are pragmatic people and these are guys who will choose money over passion if they cannot have both in their working lives.

Passionate people study media and the arts, pragmatic people study engineering.

Pragmatic people want to get paid - paid in a way which can command the respect of others.

Our preference is to be significantly overpaid - like lawyers and medical specialists, not like the cogs of the economic machine.

Here are some possibilities to explore to get more folks into engineering :

a) Encourage engineers to work abroad.

While this sounds counter-productive, engineers who to the US generally can get high salaries relative to even local degrees like Law or even Medicine. This requires some tinkering with the syllabus to get software elites to be able to operate as full stack engineers ( which might already be happening with the NUS Orbital programs ).

The advantage of this approach is that the problem of money disappears immediately and some engineers do come back to create jobs and startups. Engineers might face a local industry with poor prospects but with the proper skills they can come back to raise a family but continue to remotely work for US start-ups or build a start-up of their own.

Losing a few years to Silicon Valley is a small price to pay if some of these guys do return with the idea of building up the startup ecosystem.

We need to expand NUS Overseas College or maybe have a parallel program in the Engineering faculty. VCs might sponsor this program using equity tied to the salary of graduands ( This is part of  a new proposal by Marco Rubio on study loans in the US. )

b) Promote engineering as a superior first degree.

When I was an undergrad in NUS, my HR professor did something which I felt was wrong.

She was about to invite an ex-HP director who retooled himself as a GIC investment manager to speak to us but changed her mind because she said that she felt that she was doing a wrong thing because fewer people would become engineers once they met this guy.

Today I am still shocked at how much the authorities want engineers to sacrifice our own personal interests for the Singapore economy. I have not seen accountants, doctors or lawyers being asked to do this.

Another counter intuitive approach which can  be backed by salary information is that Engineering makes a pretty nifty bridging degree. Because life outcomes and salaries are sub-par, engineers can take on alternative professional roles. Accounting is rapidly becoming a Masters level course when SMU launched the MPA qualification, engineers can get a good raise when retool and join a big 4 company over an engineering paycheck.

A lot of folks in the finance industry get stuck at level II in their CFA preparations where multiple rounds of failed attempts are the norm. My experience with cracking the CFA is that engineers don't find level II particularly hard even though it has a reputation as killer exam. This is because we are already very quantitative and we are pretty good at statistics in the first place.

If you look carefully at the NUS engineering syllabus, every engineer studies a bit of everything. My financial accounting and statistics module helped me in CFA I. My law module taken 15 years ago made swallowing some concepts like contra-proferentum much easier. I would say that my degree is almost half of an MBA.

[[ My JD program has 3 engineers and at least so far, we are holding on our own quite well in spite of not being in our home ground and fighting the Humanities folks. ]]

[[  MBAs will be bullshit qualification in a few years once engineers start doing the Coursera specialization in their own spare time while CFA prepping. Do an MBA if you wanna network and choose a school which adopt a case approach, otherwise you should save your money. ]]

The trick of promoting engineering as a base degree which leads to bigger things is that even though some engineers do become lawyers, doctors and accountants,  You will have lawyers, accountants and doctors who understand technology intimately. But more importantly, there is a likelihood that engineers will remain engineers ! ( I spent a week helping out in family courts and I don't like the negativity associated with seeing couples in conflict, I rather code ! )

[[ As a side-note, I have committed to picking up some Python maybe when General Assembly touches down in Singapore because I believe that the legal industry is ripe for disruption and many processes can be converted into software as a service solutions. I am currently struggling with issues like legal Formalities and thinking about how technologies like Bitcoin could play into the next generation of corporate transactions. Imagine a contracts registry like our Land registry, backed by an assurance fund to assist our SMEs ! Very few lawyers think like that ! ]]

Anyway, I was one of those  IT guys who decided to stay in IT.  After I completed my masters in Finance, I voluntarily stayed in IT because my salary has been increasing quite steadily and I already figured out how to generate another source of income, Sometimes staying put may be the wiser course of action ( preferably made with the assistance of spreadsheets ! ).

The fear of engineers leaving the industry after getting another degree is overrated.

c) Patents as source of passive income.

I learnt this only in Law School because I met a classmate who is a top-flight engineer who has an income stream from his patents.

This idea warrants deeper thought. Passive income from patents is a powerful arsenal in one's portfolio because it is not highly correlated with financial markets. If I could have found a way to unlock my intellectual property from my University days, even a simple monthly cash flow of $500 a month requires a base portfolio size of $75,000 in the markets. ( Top blogger BudgetBabe saves $20,000 a year and she's infamous because of that ! )

Local universities may want actual modules on new product development with a pragmatic focus on IP monetization. If you think about it, this will generate refreshed interest in engineering.

Monetisation should be a core module. Heck, it should have been called a Bachelor in Monetisation.

Imagine a cash flow even before you start work which stacks on top of your salary.

No way a law or medical degree can top that ?

In summary, I think the tide can be turned with the right policies and incentives in place.

Folks who do engineering want a good life. A good life requires money,power and respect. Treating engineers and software developers like digital coolies takes away both money and respect from their lives. These societies will be rewarded with infrastructure failures if this goes unchecked.

Allowing some of the top engineers to become the top earners of society will attract more people to study engineering. Many of these folks may not end up being top earners, but they would at least have the opportunity to do some engineering work and have a middle class lifestyle.

What to do in this market downturn ?

Yesterday, everyone seemed to be having a reaction when the STI started on a free-fall which led it being 4% down.

Some of the folks had a "I told you so" episode, brazenly declaring that they have won because the market bear is upon us which is stupid because a savvy investor knows that bull markets don't last forever.

A least one person I know even went as far to declare that the Chinese Yuan would depreciate 10% and that this downturn was just the beginning. I checked into Yahoo finance, a 10% depreciation would mean that the USDRMB would be at the at the 6.82 territory. We are nowhere near that territory as of the moment so I would believe the markets only when I see it.

I attribute the feeling of triumph to the fact that the person probably has little skin the markets.  Even a broken clock is right twice a day.

Some of the other folks are openly panicking, some were sitting on paper losses and they were thinking about the opportunity costs of these losses. I lost about $40k+ over one trading session on Black Monday. That's half my school fees for my entire JD course. Even so, I don't have much to complain about : Buffett and gang probably lost even more. The beauty of investing is not that you have money to make, but that everyone has the opportunity to make losses. Losses means that sometimes, fear will strike the market and the result is a moment of truth when true wealth can be generated by buying bargains and holding them for generations to come.

This article is written for some of calmer folks asked me whether it was time to get back into the markets.

I think these folks are on the right track : Times like these are the best times to get into the markets and start investing.

As to what the market would do next is something which is beyond me. I would advise the reader not to believe anyone who claims to be an expert. For matters involving China the only true experts are those who study the CCP. The periodical of choice is not The Edge or The Business Times. You are best off reading the Economist for hints (I've already combed the most recent copy and got none the wiser).

Here's a strategy which I think is a reasonable one based on the ignorance of all parties including myself :

a) Split your war-chest into many parts.

Since no one knows what will happen next. It would be unwise to invest all you money in one go. The wise would consider the possibility that they are very likely to catch a falling knife if they invest tomorrow. So the prudent thing to do is to buy something with 5% of your war-chest if you make the decision to enter tomorrow.

b) Know the typical duration of recessions.

Several facts would be useful to understand how long a downturn would last. The Great Recession of 2009 lasted 18 months. Other recessions lasted about 8-16 months prior to Great Recession. The duration of economic cycles tends to be getting shorter so it is reasonable to assume that whatever we are experiencing would not last longer than one and a half years.

c) Time your market plays

Once you decide to make a move, starting thinking about what frequency would you inject into the markets. For example, you can split your war-chest into 6 parts and invest tomorrow and then every 3 months thereafter. Somebody else may split the war-chest into 18 parts and invest once a month.

This is the only way to avoid being cut by a falling knife.

d) Invest based on good market fundamentals

I can't recommend which stocks to get into at the moment because if I could, I should be managing a hedge fund and not writing a financial blog.

You may refer to other financial bloggers who are much savvier investors. What I do know is that this strategy is better for fundamental investors.

You need to decide on a theme for your investments. You may determine that you want a strategy to buy blue chips, deep value stocks, or growth stocks. A beginner should buy the STI index if they do not know which stocks to buy.

As for me, I will be bargain hunting high yield counters which give at least 8%.

In summary, at least for dividends investors, this is a great time to buy stocks. I will not be surprised that in the short term, we will experience a nastier downturn but we can collect cash from our investments until the markets recover.

As I have fees to pay in October, I am committing this round of dividends to completing all payments to SMU, thereafter, I will be farming about $2,000- $3,000 into the markets until I start my training contract in 2017.

Technology disruption, marriage and the New Age bachelor.

I think new technology developments warrant a fresh look into marriage and bachelorhood in Singapore.

It started during the summer holidays when I was asked by my professor what is the most important app which was developed over the past 12 months. My answer was Tinder. I was unable to really come up with a strong argument for the app because I was not a user of the app and had to rely on articles from other folks who could not stop raving about it.

My only argument was that Gen-X guys in general struggled hard to get hitched 10 years ago - I had to learn multiple foreign languages and endure a few rounds of mathcmaking before I met my wife at Japanese school. It was tiring and demoralizing, Nothing beats the disappointing of heading for a matchmaking session then finally seeing the other party (Yes ! I am a  visual creature !).

The Millenials have it so easy these days because all they had to do was to swipe to the right.

It wasn't until  an article in Vanity Fair which spoke about the massive changes in dating behavior which confirmed my suspicion : Tinder is a revolutionary app which fundamentally alters the way we mate - Companionship as a Service ( CaaS ) or worse, Sexual Gratification as a Service ( SGaaS )

This has serious consequences for all societies.

A very articulate friend of my cousin's offered a much better argument today. In the past, dating was a complex ritual. You had to smile. She had to smile back. Then you need to have courage to ask. Then, she has to assess whether you are an axe murderer before agreeing to hang out together.

To supplement his points, I would add that the old school dating dance was slow and bureaucratic - If you end up meeting a Gen-X female battleaxe who "wants to take turns being the alpha", then maybe you need to crawl back to the pub and start again.

From the lens of the suffering of Gen X, Tinder is revolutionary. The matching was done almost real time. In the world of Tinder, there is no rejection.

I watched my lady cousins install the application just now and, within minutes, they were giggling at various male profiles and talking about how "cannot make it" they are. I can imagine women using Tinder just to make fun of guys but occasionally swiping right when they see a good looking hunk, but the guys will keep swiping just to try their luck on anything which is remotely attractive to them.

More importantly, I think it does not take a genius to figure out that Tinder plus the launch of female libidinal drug Addyi would have a serious impact on marriage and society today.

Imagine this new world where successful bachelors can get ready sexual access by simply swiping right on app. Female libidinal drugs ensure that someone would always be at the right mood. Asset securitization and finance decouples wealth from owning large pieces of land, allowing an single with $300,000 financial independence and absolute freedom to travel the world or play games forever on their PS4.

This new bachelorhood : PS4 + Dividend stocks + Tinder + Addyi will be a grave threat to the institution of marriage. The best guys now have a lot of incentive to take themselves out of the marriage market. Single men will get not just more variety and but also more action than (faithful) married men !

Who will  get married then ? Policy makers will contend with a lower replacement rate, maybe reaching numbers like 0.8.

I foresee several drastic policies which can possibly ameliorate this situation which we should start debating about right now :

a) The first idea is that the government  consider drastically strengthening the finance of families which consist of a couple and at least 2 children. One possibility is to allow them to purchase another flat from HDB for the purposes of renting out to foreigners.

b) The second idea from a letter to the Economist is to supplement annuity payments like CPF Life of the elderly with the income taxes generated by their working children. This is a truly fair system which rewards elderly parents for the hard work done turning their children into productive citizens.

Some advice for the younger readers :

a) If you are female, Tinder does not help you find men who are willing to commit to a long term relationship. You need to know what you want out of life and maybe decide to skip out on Tinder entirely.

b) If you are male : What the hell are you waiting for ? You can always shut it off when you ever decide to settle down.

Should you panic with the STI below 3000 ?

A lot of folks are talking about the crash of the STI index and started contacting me out of the blue about what I plan to do so I thought I'd write a short post on this.

First off, local markets are down. At this point of time, most investors would have a suffered massive losses. I lost the school fees of my entire JD degree over the past week. This means that I would have been better off had I sold my entire stake before going into Law School and just ate my cash holdings.

But am I worried ? Not at all.

Here are the reasons :

a) Dividend holders are by nature already defensive investors.

Will I lose more money over the next few month ?. Highly likely.

But if I sell, I lose access to my quarterly cash flow from my holdings. I don't like to eat my capital so I will stick to eating my dividends for now. While REITs and Business Trusts are taking a slightly bigger beating than the rest of the market, the overall beta of my portfolio is historically low so I expect to lose less than someone who holds the STI ETF.

b) The China situation may be over-hyped.

The biggest bugbear is China. Greece is inconsequential.

If you read the Economist, The  purpose China's devaluation is to become a reserve currency of the IMF. China risks the ire of the US and Europe if devaluation was made to make their exports more competitive and this would just invite retaliation. I think the technocrats in the CCP would be smart enough to restrain themselves.

c) US will raise interest rates before year end.

The next bugbear are interest rates. While rates are likely to be up, we are looking at one rate change in 2015 so far. This has been priced into the markets ages ago.

I fail to see why investors are worried.

c) Markets really look good at the moment.

Yes, as markets are turning south, I'm not seeing a significant change in the dividends I collect. If anything, yields are spiking as we speak and I am looking at a big payout before end-September. My only disappointment is that I am not working right now as I would have been able to add quite a significant stake at 8.5-13% yields into my portfolio to make my cash flow much bigger in the future,

So instead, I 've chosen to ignore the markets and focus on my lawyer training. Startig next week, I will become a facilitator at the Family Courts to assist folks in getting a divorce. After October when my final fee installment has been paid, I might be able to push 2-4k of my dividends into the market every month so I hope that these bargains would still be around then.

But  what I learnt in the 2008/2009 crisis is this : You don't succeed in becoming rich by investing during good times. You get rich when you are in the markets when times are bad. The only way to do that is to keep each positions small, diversify and refuse to use leverage.

Our markets have been expensive as of late, I remember a year ago, people will look shocked when they hear that I only buy stock which yield at least 8%. I get challenged a lot about my understanding of the markets when people hear 8%.

I was using the SMU Bloomberg Terminals and am glad to say that a decent portfolio of sustainable yields of 6% - 10% is now possible right now. I tested these portfolios over 10 year and they return 15+% with a semi-variance of around 12%.

( I even replicated the filters in the HK market and got almost similar results. )

These are fantastic numbers by my book.

Recording of my my interview on Kiss 92.

As a League of Extraordinary Financial Bloggers, the community have really come pretty far and we are now getting some informal support for each other to promote our own independent form of financial planning for the masses who cannot bring themselves to trust commissioned agents.

This gig would not have been possible if not for cheerful.egg's  Lionel's introduction. Lionel is also the man of the week and has appeared in last weekend's Me and My Money.

Richard Ng of Invest Openly has managed to create a recording on my interview on Kiss 92 FM.

Clearly this is not the work of one individual and there is a very supportive community behind this event.

Try this link if the media player below does not work.

Raffles is not a Bumiputra institution !

Only three courses have ever rejected me in my life.

The first institution which I applied to which dinged me was Massachusetts Institute of Technology. But who am I kidding to think that I even stood a chance. I thought a rejection letter from MIT was actually quite cool. At least they bothered to send me one.

The second program to reject me was NUS' Diploma Program in Arbitration by their faculty of Law when I attempted to sneak myself into its first intake because I thought that an IT guy who can arbitrate outsourcing disputes might put me in blue ocean territory. Turns out that the first intake for arbitrators is actually red ocean territory. After the rejection letter came, I figured out that getting into a second or subsequent intake would not be worth my time. Pioneer or bust.

The most painful rejection I ever experienced, which many Singaporeans can relate to, was a rejection by RI. I was aged 12. I got 255 for my PSLE and my neighbour who got 259 claimed that a donation allowed them to get in (this was 1986). I cried for days because my parents, who hardly understood the education system, knew only RI as one good school - every other school is a shit school.

So you can imagine that I may have a chip on my shoulder with regards to elite education in Singapore.

But as it turns out I don't.

My friends from RI has never made me feel excluded and are hardly elitist. I've always been assessed by the strength and quality of my ideas. And they make great intellectual conversation which I struggle to find anywhere else. So as I get to know more people, I actually want my RI friends to stay the same.

So the latest flavour of the day is Russell Tan Wah Jian who wrote a hilarious essay to defend the status quo of elite education. It was so entertaining that the New Nation, a troll website, was able to reproduce it without modification.

While I think that crowds are rightfully mad as Russell seems to think that Raffles has a monopoly over the future leadership in Singapore. But when I think about TT Durai, Kong Hee and Rev Ming Yi and I understand why Russell Tan deserves a cock punch from the rest of the Internet.

But the idea of keeping an institution an elite one based on academic intelligence is something which would be good for Singapore in the future. Having many smart people at one location would be a great place for educators to experiment with new and potentially game-changing ideas and benefit government schools later. The downside of risk taking in teaching is that smart folks can recover from bad initiatives. RI kids don't stay in RI forever, eventually, some come to NUS and face us Goblins champions in the battle of ideas and they don't necessary win all the time.

So I would actually want to reinforce Russell's main argument but in a much more palatable way.

I think that the root cause of the issue concerns the, Chan Poh Meng, the current principal who labelled his institution a 'middle class' institution. Mr Chan has promoted the idea that the rich can afford tuition and give their children a huge advantage during the PSLEs. As a consequence of that RI has become the stomping ground of the well heeled.

That is an unfair characterisation of students in elite institutions.

Rich kids may actually be smart kids.

Social scientists are studying a social phenomenon called assortative mating has occured in most advanced societies. When scholars marry other scholars, their children would generally have higher intelligence than average kids like me. Do this over a generation, and it is actually possible to show in studies that many smart kids may actually come from rich families. This is a common social phenomenon faced by all advanced societies. Take tuition out of the equation, and these kids would still excel, poorer kids may flounder.

The question then remains is what to do with rich but smart kids.

If we emphasise equality in our society, then there is the fear that affirmative action would take place to allow kids from poorer backgrounds to get into an elite school with lower grades.

This is a horrible idea. You are in effect, handicapping kids for being rich.

I don't think that is the way to go.

Raffles will become similar to Bumiputra institutions in Malaysia. Similar to graduates of Malaysian Universities, employers will know that some students are of the affirmative action variety and would moderate their decision making on hiring accordingly. The Raffles brand identity would be irrevocably destroyed.

( And the boys at Barker road will be laughing all the way to Goldman Sachs from their Maseratis. )

Russell Tan is, therefore, not completely wrong.

We should never sacrifice equity on the altar of equality. That is a foundation of the meritocracy that we are in.

Chan Poh Meng's concern should be reframed as follows :

a) A good school like RI should not accept a student who can, simply by being rich, hire scores of tutors to help them get into the school of their choice.
b) A student should be accepted for being smart, regardless of how rich he can be.
c) However, a smart student should not be denied a seat by virtue of being rich.

So I offer one possible solution :

PSLE is like hacked software. Tutors have found all sorts of ways to game it and can teach it for a fee. It is high time that all the top secondary schools create their own entrance examinations.

These examinations should be administered after the PSLE and be drawn from some PSLE material and some material from current affairs.

Students who score a high but reasonable PSLE score like 260 can attend a bootcamp and then take the entrance exam to determine whether he can get a seat in a top secondary school. He has one try for one school of his choice.

Different top schools administer different entrance exams with a different emphasis. Students cannot prepare for these exams.

Hwa Chong can administer a Chinese Physics paper. An RI entrance exam may expect the kids to take a bootcamp in basic chemistry in one year, and have them create a fantasy language from scratch in another year, extract logical fallacies from a blog article in a third year or write an app in a fourth year.

Exams are designed such that they are one-shot and cannot be replicated or taught by the tuition industry.

All exams test the student in applying knowledge to practical issues.

At the end of the day, there are conservatives like myself who are concerned about recent left-winged initiatives by the government.

Chan Poh Meng is just a phenomenon of the emerging political left from the PAP which has, of late, trying to enact policies which tinker with our concept of meritocracy in a way which may risk Singapore's competitiveness.

What is your money personality ?

Of late, some blogs have written some articles on a Money Personalities.

I thought I wanted to throw my hat into the ring and highlight some interesting findings from psychological research. When social scientists conduct surveys, statistical models are used to cluster answers together so that we will have a better idea of what kind of money personalities exist. The downside is that you will not have very comprehensive personality frameworks like the MBTI or DISC models.

This is based on  a paper called The Love of Money, Satisfaction and the Protestant Work Ethic : Money Profiles Among University Professors in the USA and Spain by Roberto Luna-Arocas and Thomas Tang. Even though this survey was done on academics, I think it defines 4 money archetypes quite well and I expect future studies to result in similar findings.

The four personalities, in the words of the original paper,  are :

a) Achieving Money Worshipper

Most financial bloggers fall into this category and it is less negative than it actually sounds.

Achieving Money Worshippers generally consider money as a a good thing. They are motivated by money and see it as a sign of success. At work, they value equity over equality and believe in merit-based pay. They also budget their money carefully.

Achieving Money Worshippers have generally quite high life satisfaction, feel a strong sense of control over their destinies and have a good work ethic.  They tend to be older and at the peak of their earning potential.

b) Careless Money Admirer

The careless money admirer is an achieving money worshipper who does not have the ability to budget their money. This leads to a dire outcome. Careless money admirer's have a love-hate relationship with money and see money as moderately evil but have no qualms stretching the boundaries of ethical behaviour at work. They also tend to be younger.

Careless Money Admirer's love money but are ultimately controlled by their lack of it. They are very prone to corruption and have the lowest life satisfaction.

c) Apathetic Money Manager

A number of readers may want to aspire to be an Apathetic money manager. Apathetic money see money as a good thing and budget themselves, but generally do not see money as a sign of success and are not motivated by earning money at all. At work Apathetic Money Managers still lean towards merit-base pay.

Apathetic Money Managers have the highest life satisfaction among the four categories and have a deep sense of control over their lives.

d) Money Repellent Individual

I doubt that a Money Repellent Individual would be reading this blog. These individuals consider money evil, are not motivated to earn it and do not see it as a form of success. At work, they are typically freelancers and are attracted to jobs which have a fixed and equal pay for everyone.

In a competitive society like Singapore, MRIs may be despised as underachieving losers. The lack of interest in money results in a life of stress and MRIs have a low satisfaction as a result of this.

The study on these four personality clusters sheds some light on the notion of life satisfaction and personal happiness.

Regardless of what your current personality or view on money is, you may become more satisfied with your lives when you :

• Make peace with money and start seeing it as a tool, and not as something inherently evil. Christians need to be reminded that the actual phrase from the Bible is "For the love of money is a root of all kinds of evil." Timothy 8:10.
• You need to budget your spending. Being in control gives you more life satisfaction and you need not live in fear of what your credit card statement will say at the end of the month. 

Wongamania - A new offering on my retail page.

Careful observers would have noticed that there is a new product on my retail page.

Wongamania

It's not easy to design and market a game. I tried this myself and I still have a role-playing game on sale on Amazon. Achieving a large print-run can cost tens of thousands of dollars even with the support from government agencies. Being in the gaming community, I know a friends who tried with different degrees of personal success.

Wongamania, a brainchild of Xeo Lye whose blog can be found here,  is an investment game where the aim is to achieve financial independence by accumulating enough money to buy a series of trust funds, all this while you have to fend off attempts by other players to play cards to prevent this from happening.

This game is entertaining and informative, but more importantly, it is an effort from a Singaporean who tried to launch a game into the markets.

What I did notice about the game is that the artwork is also particularly evocative to little kids. I have many games placed on my shelves but my daughter would always pull out this game because the art work appeals to little children.

( Why does my daughter not pull out Squad Leader or Car Wars instead ? A gaming dad might ask. )

Wongamania is definitely a good way to teach kids about the importance of planning for their financial futures and balances the priorities of entertainment and education well.

A fair and balanced review which highlights the strengths and weaknesses of the game along with an explanation of game mechanics can be found here by famous games reviewer Tom Vasel. While the review has both positive and negative elements, I consider it quite a milestone for a Singaporean game to be reviewed by Dice Tower.

Interview at Kiss 92 FM - Talk on Pocket Money.

All,

My interview with Kiss 92 FM was quite a blast this morning.

I was asked to talk about pocket money and parenting.

Some readers may be directed to this blog from the Kiss 92 FM Facebook page so I am sharing my research notes for those who want to get more information on what was shared today.

The only question I was not directly prepared for is whether parents should "bribe" their kids to do well in exams. My answer is that external rewards like exam bribes drive out the intrinsic motivation to be curious about the world around us so it not be the best way to motivate a child.

1.     How much money is enough for primary school kids?

I took a study by Birdseye/Walls in the UK in 2000, performed currency conversion into SGD and adjusted for 4% inflation.

Age	GBP	SGD	Inflation adjustment
5-7	3.12	$6.71	$12.08
8-10	4.04	$8.69	$15.64
11-13	6.27	$13.48	$24.28
14-16	12.10	$26.02	$46.85

So the general advice is to give around $2 for kids in primary 1 and steadily increase this to about $5 at primary 6. 

2.     Is it better to give kids a monthly or daily allowance? Why?

A study conducted in 1991 (Abramovich) tested children on how familiar they are with the prices of common goods. Students who had an allowance scored higher in this experiment. This shows  a monthly allowance facilitates monetary competence and is thus preferred as kids learn to plan ahead and save if they want something special like a PS4 console.

3.     Should we give our kids a little less or a little more for their allowance? Will this help them to learn about savings better?

The advice from financial literature is always to give less money and more quality time.

However, money plays a big role in economic socialisation and kids as young as primary 2 understand that money comes from hard work. So  parents should give more to cultivate savings as early as primary school. Opening a shared bank account can be done around that time.

Interestingly kids in Hong Kong understood how a bank makes profits at 10 which is two years earlier than kids from New Zealand.

4.     Should we still be giving money to our kids who are already in Polytechnic?

Based on some infographics on the web, a polytechnic student spends 25 hours on lectures, tutorials and labs a week. This is 5 hours a day on average. Assuming that the student needs about half that time to revise at home, that would be about 7-8 hours a day making part time work not too feasible.

Parents should ideally maintain some financial support with around $250 to $350 a month.

( JC students spend a lot more time studying, so its best that they concentrate on their exams so more support is needed but for a shorter time of 2 years. )

Short stint with Kiss 92 FM tomorrow at 8am.

Tomorrow at 8am, I should be on Kiss 92 FM.

I will be sharing my opinions on pocket money and children.

After the session tomorrow, I will be sharing my research and materials on this blog.