Short exam break.

It's exam time in SMU again and this time the mugging is much more intense than the first two semesters of law school so this blog will go offline for about 2-3 weeks.

Hopefully by then I would have some interesting ideas to share with everyone as right now my mind is occupied by my studies.

So I'll catch you in all in early December !!!

How to be a financial troll ?

Some financial bloggers met yesterday and we discussed how a financial blogger can theoretically turn troll and earn Ad sense revenue by engaging with pissed off readers.

I am trying to distill the discussion into something more concise for the benefit of other financial bloggers. While most are not trolls by my standards, a bit of trolling can make the blog livelier and expand the audience to include people who tune in just to find out what you are going to say next.

So here are some ideas :

a) Be young and 'inexperienced'

Some bloggers who might be creating a persona may wish to consider youth and inexperience as fairly effective flame-bait on the internet. I realised that some bloggers who sound reasonable get flamed for being young and inexperienced but it builds traffic for them anyway. I think this is a good strategy as it taps into the insecurity of Gen-X who is facing their 40s and job losses.

I think Jeraldine Phneah managed to strike gold lately with this strategy. Love her or hate her, I bet she has respectable traffic.

b) Be Female

I was talking to Budget Babe about the flame mails she gets from male fans and realises that she gets a large share of brick-bats simple because of her gender. I think her analysis of the economy is not better or worse than any one of us because no one has a firm grip on the future anyway.

Looking my demographics, financial blogger readership is typically 75% male and I can sort of imagine the effect Budget Babe has on the insecure 20-something male who has yet gotten any sexual access. The affront is very fundamental to a young male's sexual identity because Budget Babe is exactly what she is - a smart, self-assured female who can look after herself financially.

Anyway, I think she should just say what she thinks is a good investment and let the markets be the judge.

c) Eschew Frugality

If you are neither young nor female, one guaranteed approach to turn the entire financial blogosphere against you, get angry readers to scold you everyday but read all your articles is to publicly eschew frugality completely.

Robert Kiyosaki started this maneuver and wrote a best-seller by elevating this into an art-form. To Kiyosaki, saving money is so middle class - this is a very attractive message to the masses.  There will always be a majority who wants to know how to make it rich without being frugal and openly eschewing frugality gives a blogger magical powers and it makes wealth creation effortless.

The psychological power of eschewing frugality comes from 'sprezzatura' or studied carelessness which is documented heavily in Robert Greene's 48 Laws of Power.

[ If you think about it, Singapore university students are masters of this technique, pretending to drink and party while studying hard for the exams to shift the curve. ]

One way of reading a financial blogger or new entrant in Me and My Money when someone eschews frugality is to investigate the person's source of wealth :

a) Did the person come from a rich family ?
b) Did the person marry into money ?
c) Did the person have credentials which gave them above average earning power.
d) Common in Singapore : Person employed leverage on property markets in Singapore during the era of massive immigration.

The investigation can lead to interesting insights if done in the right spirit.

But unless you are really special, it helps your case to remain frugal regardless of circumstances.

When it rains, it pours !

Unlike the other financial bloggers who active talk about their investments, I do not usually share my portfolio positions on this blog.

The reason is that if I do so, I was concerned that some readers might latch onto the idea of dividends investing so fanatically that they might suffer serious losses or miss out on something more tried and tested being offered by, in my view, better informed financial bloggers out there like Investment Moats or the mighty AK71.

But I think sharing my investment bloopers is quite fine because it is educational and demonstrates to readers that high yield investors do experience the occasional failures. 8% dividends is great while the money goes into your pockets but moments like this would give the neurotics some cause for concern before they jump into this investment style.

So this week has been a really bad week for me :

a) Rickmers Maritime has suspended their dividends.

A detailed technical discussion on Rickmer's fundamentals are already highlighted in Investment Moats here. I shall not go into the details here but the shipping trust has suspended their dividends although it remains profitable.

Rickmers is a classic yield trap which I have a tendency to fall into in spite of all my experience. It was very seductive as it offered 15% a year in yields. I knew that owning this counter would burn me one day but I could not predict when that day would be, so I kept my exposure to about 2% of my portfolio and intended to bail out when dividend starts running out.

Lo and behold, I had to get out really quickly yesterday and managed to escape at a price of 17.4cts. It is currently trading about 15+cts.

As I was an investor in Macarthurcook properties securities fund, First Shipping Trust and Babcock and Brown, I knew that in such a situation, the best thing to do is to just run. As exposure is small, I normally could get out with small scratch wounds.

b) Neratel's nasty Q3 results.

I did not see this one coming at all so I was blind-sided by these results, the details can be found in AK71's blog here.

Neratel is an important part of my portfolio because I wanted REIT-like yields but I also wanted equity holdings to give me ample diversification away from real estate. Finding consistent yielding stocks above 8% is very hard and my strategy is to buy many such counters and hope that in any year I can get about 6.5% from companies which do well in that particular year.  Neratel also has nice NETS terminals being installed in many retail outlets. I always thought that this was a stock with very steady earnings which made many investors rich in the past.

Neratel had a nasty 6.25% fall today but I am hesitant to let it go. I am still in the process of hunting for a portfolio of high-yielding equity stocks, so I am still not willing to let go of a counter which still pays out a dividend this year.

How long Neratel would be in a funk is something none of us can answer although AK71's analysis seems quite comforting. I am reeling from quite an amount of pain as Neratel is about 5% of my portfolio.

Generally speaking equities need to be held with more patience than business trusts. Equities generate high returns because they are subject to the vagaries of economic cycles but their behaviour is very different from REITs ! The best way to cope with volatility is to buy many such stocks and keep your exposure low.

c) Things might get worse from here.

I think China's GDP growth is dipping below 7%  and the Fed will raise interest rates soon.

This will not be great for the markets but we did have quite a long era of growth in the stock markets.

I don't see myself dipping into my capital soon but the odds of emerging from Law School with a lower portfolio size from market movements is now a realistic possibility because after all, I paid $70k in school fees. If that happens, I have to suspend my retirement and really buckle down to get some real work done.

In the meantime, I will be farming my excess dividends back into the markets to increase my income moving forward.

Are you a One Punch Investor ?

If you are a fan of Japanese Anime, you might have watched a few episodes of One Punch Man.



In spite of the fact that Saitama can kill any Kaiju Monster with just one punch, this is an eminently human story of how a person can cope with ennui and boredom when he finally attains god-like powers. I can definitely relate to that, being somewhat having no income for the past 22 months but being  able to hold out as a SMU student.

As  a student, my expenses have become really small and most of my time is spent reading my cases and managing this blog that I really don't have the time to really get into expensive hobbies. Consequently, with the exception of wanting more time, I have little wants and so have a life which would be boring compared to my friends who are always sharing a pic on their travels on Facebook. I have not even listened to some music I bought from iTunes.

But I digress.

The notion of the One Punch Investor is an interesting one.

When I was growing up, my dad always told me a story of his friend who was not a professional and did not know anything about investing. All he knew was that SIA was a company with a great future, so he bought lots and lots of SIA with his salary and inheritance starting in the 1960s. He also ate his dividends and reinvested it into SIA.

According to my dad, when his friend retired in the 1990s, he had about 500,000 shares of SIA. Currently worth over $5 million dollars today.

Naturally, I did not confirm this with my dad's friend who regularly visited my home when I was a JC student. And in spite of the story, I took a lot of steps to diversify my dad's portfolio and took the opposite approach - I diversified aggressively and focused on yields from multiple sources.

Here is what I think about this notion of the One Punch Investor

a) Highly dangerous to invest in only one stock.

Investing in one stock also makes the investor lose out on the benefits of diversification.

I can accept that there are many One Punch Investors in Singapore. At least one prominent financial blogger is almost single-mindedly invested in Keppel Corp which I do respect.

If Wharton professor Jeremy Siegel could invest in one stock, I would be that the counter would be Philip Morris although I would doubt that Prof Siegel would own only one counter his entire life. But investing is a marathon and stocks fall in and out of favour. Sometimes, a conglomerate with a sustainable competitive advantage can be run by managers who destroy value. Phillip Morris is constantly worried about lawsuits.

It might be better to look for about 8 growth stocks if you wish to emulate the investing greats like Warren Buffett.

b) You might be a One Punch Investor without knowing it.

While its fun to make fun of One Stock Investors. Many of us might be one without knowing it.

Some of us invest in Employee Stock Ownership programs which is practically investing in one stock. Worse, since you also work for the same company, you are also investing your entire human capital on that one company. May be wise to consider diversification if you fall into this category.

You will get a nasty double whammy if the stock tumbles and you get retrenched at the same time.

c) What would I do if I can only invest in one counter in SGX ?

If I have no choice but to invest in only one counter from SGX, only an ETF investing in global markets would make the cut. I would place all my eggs in the Lyxor World ETF that is currently being traded in SGX. This gives me the benefit of buying different exposure to stocks around the world.

Of course, if I had made such a choice I would have to pay for the ETF manager's expenses and expect a lower return from the index itself.

d) 100 sit ups, 100 push ups. 

Of course, the anime has some nuggets of wisdom. Whether you are a One Punch Investor or a highly diversified yield pig like me, we should never avoid the constant and never-ending improvement that all investors would need to subject themselves.

I do this by maintaining this blog, reading what my fellow bloggers have to say about investing and going through the Edge and the Economist every week - All that on top of my case load.

Of course, it would be very interesting if readers would share what stock they would buy if they were limited to one counter throughout their entire lives....

Almost 22 months since I left the workforce !

Time really flies...

Thought a quick update is in order.

a) Financial update

It's quite scary to think that I've not had a pay check from a company for 22 months. Even more interesting is that I've yet to draw on my investment portfolio capital since the last day I left the workforce.

Some sales did take place to reposition my stocks and some monies were returned when MIIF was taken off SGX. But all on all, I was able to farm part of my dividends back into the markets and a couple of P2P lending campaigns.

But overall, my portfolio was still down due to the slowdown in the Chinese economy, I expect my overall dividend flow in 2015 to be lower than 2014 but the year is not over yet and I normally assess my annual income in January when the summary statements arrive.

This month is particularly important because I finally paid up for Law school ( Yayyy! ). Accelerated payments by SMU was financially quite stressful for me and I had to hold back on investing in the stock markets when the bear market was making everything seem so attractive to dividend investors. Hopefully the November batch of dividends will see me playing more actively in the markets to boost my income further before I graduate.

2016 is going to be financially challenging year for all of us. I am likely to face dwindling dividends from lower rents but I  have to maintain a mortgage loan with higher loan payments. My CPF can probably last me another 4 years of mortgage payments, but there's no way of predicting what would happen in China over the next few years - one slip in my asset allocation, and I will have to get a job as lawyer in 2017 because I have to, not because I want to.

I find myself combing the China section on the Economist carefully for any investment insight, but so far it's anyone's guess as to what will happen next.

b) Studies update

For this semester, I had a lucky streak of being able to finish all my presentations early which meant more time for my exams. I was so happy last Friday after my last presentation that I spent 24 hours not touching my books and case readings.

More importantly, it feels good to be let out of my cage.

I concluded my pro-bono and community service requirements for my program and have more time in my hands to possibly read some non-law school writings.

This semester I am starting to really stretch the envelope of what it truly means to be JD student. I have started coming up with more innovative ways to render the legal knowledge taught in school. This means really leveraging on my 15 years as an IT guy in class.

This semester, I was able to hack a prototype on Google Forms to advise lawyers on Non-Exclusive Jurisdictional clauses without declaring a single variable.

The class is also warming up to the idea of employing computer flowcharts to elucidate certain areas of the law. The following is a computer flowchart I hacked for a Corporate Law presentation. I learnt flowcharting when I was a JC student doing Computer Science, it's getting a fair amount of attention in class these days because it is simple and useful.

Maybe the folks in Singapore Academy of Law will create some diagramming standards because expressing everything in prose is so 19th Century. ( For that to happen lawyers must believe that they can learn something from IT guys. )

c) Reading list and hobbies

To preserve my sanity I play a Dungeons & Dragons 5th Edition game every week. Every Saturday, I play a polearm wielding schizophrenic human paladin whose is a real beast in combat. At 3rd level, I took out an elite boss with a 42 damage smite attack.

Otherwise I am reading some newer RPG products like the Sword Coast Adventurer's Guide and Primeval Thule.

For financial books, top on my list to read next are all of Teh Hooi Ling's Show me the Money Books and this highly recommended work called Asian Financial Statement Analysis by Tan Chin Hwee.

I've been really deprived when it comes to movies lately, I had to miss out on really good ones like The Martian but I was really grateful to be able to catch the Last Witch Hunter which stars Vin Diesel who is another D&D player.

Next week, I hope to catch James Bond : Spectre.

Thosainomics for fun and prosperity !

Somehow I know that you like my Thosai postings...



Last week was intense but I just completed all my group presentations. We're going to start slow but over the next few weeks I should be able to come up with more postings for investors. I might book a Bloomberg terminal again and I would share my results with you guys.

SMU has changed quite a this year which I suspect was probably due to a larger student intake. Because of the increase in student volume, it became a lot more challenging to find seats at the basement Koufu canteen.

Because of high rents, the price of food has become ridiculous expensive. In the Indian stall, I ordered two samosa and a piece of tandoori chicken and it cost me $6.90. ( As I am quite an old fart, when I was in primary four, the price of a Set Lunch which includes a steak at the restaurant The Ship at Shaw Centre costs $6.90. )

As a consequence of that, I have been eating quite a fair bit at uber-hipster cafe Kickstart where for about a dollar more, I get fairly high quality fusion food ( The kong pao pork belly is awesome ! ) .

But prices had become fairly ridiculous, as I would expect that not all SMU students are well to do.

So one morning I decided to stray further from campus early in the morning at 7am and went to Waterloo Street, and found an Indian stall which sold Thosai.

The result was a nice Onion Thosai with Vadai at $2.60 shown above. With my standard Kopi-O kosong, I was able to have breakfast for $3.60. Not bad by price standards in town.

So I call my set of insights from this simple lesson Thosainomics :

a) Experiment with your hunger

You need to experiment with your hunger. When I started out, I went for a plain Thosai which was not filling enough but two Thosais or a Thosai Masala made me sleepy after the meal.

The sweet spot is an Onion Thosai at  a median price point which would last me until 12pm lunch break.

b) Go Vegetarian

The price of local food has discontinuities.

The price of economic rice or zhi char goes up quite a bit when you move from standard meat to fish to prawns and to crabs. Similarly it goes down by a fair amount when you downgrade from meat to vegetables. Tofu and beans provide proteins at a fraction of the price of meat.

You can reach your budget easily if you train yourself to downgrade accordingly.

c) Go Indian

Not sure if readers agree, but Indian food is the cheapest among all the races.

While a roti kosong is about $1, it has to be made fresh and requires a lot of labour. Chinese economic rice is hardly economic these days but the effort is made prior to the sale and the work can be batched early in the morning.

In second place is Malay food as I can't eat Thosai everyday. I look for Bee Hoon Soto Ayam every morning as well but as it is not filling enough, normally supplement my meal with a Begedil.

I am avoiding Chinese food these days due to price. A bowl of Wan Ton Noodles is actually cheap compared to Economic Bee Hoon. Just try supplementing your economic bee hoon with a chicken wing and it stops being economic fairly quickly.

The only cheap option is the industrially manufactured Chee Cheong Fun from the drink stall.

But I say yucks to that !

Prosperity should be a technique, not a theology !

If you have been following the news and social media, you might come to the conclusion that the problems which arise in our society is that people tend to conflate technique with theology when it comes to material prosperity.

a) What is the theology of Prosperity ?

Prosperity as a theology is dangerous idea. It means that belief and faith becomes a sufficient condition to attain material prosperity in this world. It comes in many guises, not necessarily in the form of a religious group. Some authors like to sell the idea that by simply thinking and locking yourself mentally to the idea of abundance, you will achieve material wealth.

This is the a very misleading but sophisticated manifestation of wishful thinking.

It's not just faith that creates the idea that God will make you rich. We adopt faith in projecting the returns of unit trusts, that some of life insurance will make our children rich after we leave this world. That buying a Brazilian property would result in yields and passive income exceeding 15%.

In my personal world of engineering, finance and increasing law - faith is almost worthless. You can make an iron-clad will and your crafty children may find ways around it, challenging your mental capacity if it suits their case. Laws need to changed to protect husbands who get incapacitated during their marriages, worse, some feminists on social are attacking the idea quite aggressively.

And faith in easy answers is getting stronger. Easy answers sell better than complex ones.

Most of us don't want complicated answers because it gets into our way of living the lives we enjoy.

b) What is the technique of Prosperity ?

Not everyone is ready to pay the price to learn a new technique. It requires time, energy and most who understand the technique would not part with that knowledge so readily.

Techniques are hard truths which an investor needs to confront. Many of these are economic or mathematical in nature and requires decades of study.

The risk-free rate is 2.7% about exemplified by returns of the Singapore Savers Bonds. Buy anything with lower yields and you might end up looking like an idiot. Anything which offers higher yields will contain hidden risks such as shifts in markets or the default in the provider.

Buying many different assets generally would not make your richer but can keep your performance closer to the average, but it certainly prevents you from looking like an idiot when the market starts to turns against you.

c) Separate your spiritual and material desires.

You may share your spiritual desires with God, but you are better off trying to meet your material needs via Science/Social Science. It's not the easiest path in the modern world, but it's worth putting effort into studying marketing and scams just to find out how to react when "well-meaning" people present their ideas to you.

20 years ago, I fought a pitched battle against evangelists in NUS on the bulletin board systems, and I held the record of being sent to the NUS Office of Student Affairs thrice in during my undergraduate days.

Today, I celebrate being alive, financially independent and finally getting vindicated.

Keep the Faith Against Faith, because Reason will win over the long term.

Keep the fires burning !

Flame on !

Cost of having a child is way overblown !

A few prominent bloggers like Budget Babe have started talking about the costs of having a child. Quite intimidating for married couples planning to have kids and singles is the infographic of the price-tag of $1,000,000 to have a child.

I think this number is blown out of proportion, even if empirically true, the $1,000,000 payment does not happen up front but over the the life of the child but it creates an illusion that $1,000,000 is a pre-requisite to being a parent.

I am pretty sure that our birthrate would be zero in such a case.

Let's mathematically perform a very crude  net present value analysis on the cost of having a child :

Based on the infographic :

Maternity ward expenses : $7,000 - $24,000 [ But can take from Medisave ]
Age 0 - 6 : $1,200 - $1,700 per month - Average of $1,500
Age 6 - 12 : $100 - $3,500 per month - Average $1,600
Age 12 - 18 : $500 - $1,300 per month - Average $900

I've projected up to age 18 because beyond this age, the child get a loan to get a degree.

( A problem occurs when he can't get into a local degree program, then it's up to the parents to determine whether it makes sense to put their kids into Australia. I think by then ASPIRE would have been refined to make this unnecessary and an Australian qualification by then may actually send bad signals to HR anyway.  )

If you observe this analysis, the most expenditure occurs at ages 6-12 which is $1,600.

If you go by my 8% portfolio yield idea, an investor who invests at a yield of 8% would need only $240,000 invested in the markets to completely cover the costs of having a average child from ages 6-12. That is interesting because the yields from this portfolio covers all child expenses on its own without requiring the parents to dig into their earned income, freeing them to save more money or pay for their mortgage.

I think this information is a lot more valuable for couple who want to do some family planning before having kids. Suppose you are a married couple and both husband and wife are working. If you can commit to saving $40,000 a year together, 6 years of savings can fully support one child and maintain your previous life as a dual income couple with no loss of quality of life. Based on my previous blog postings, another $300,000 may even allow mum to stay at home and be a full time mom.

Of course, real couple will never be so deliberate when it comes to family planning but prudent individuals should have some savings before getting married. No point blowing everything on an event you wouldn't even care about 20 years down the road.

This number is also useful for getting the right perspective when planning wedding expenses. Best approach is to keep everything low key and ensure that the couple can keep $240,000 after the wedding is over if they want to have kids immediately, otherwise they can always hold their horses until the finance is right.

Of course, by following the advice from this blog you would always be erring on the conservative side, but having kids which are free and paid by dividends is something every parent should give it a try every now and then. ( Just don't start naming your kids Croesus or Sabana because of that. )

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.