Friday, May 19, 2017

Personal thoughts after last night's talk on Stress-free investing

Ok, I've finally recovered from last night's talk. Let's talk about what happened last night from my perspective.

Last night, Lionel gave passionate speech about automating one's investments using ETFs and Alvin Chow spoke about implementing the permanent portfolio.

As for me, I was barely sticking to the original intent of the company directors when they set out the topic for the event. I really wanted every single talk I give to feature unique material that cannot be found in financial blogs and popular books on personal finance so I tried to craft a talk which attempts to link a person's financial capabilities to psychological well-being, fortunately there was a study made in the UK which allowed me to conclude that raising one's financial capabilities will also improve a person's psychological health.

The second component of my talk was about insurance. I reminded the audience that risk is almost synonymous with stress and can be active managed by either tolerating, avoiding or transferring it to someone else. Then I shared my minimalist framework on how I manage my personal insurance.

The third component is about dividends investing.

What was really amusing during the talk for me was Alvin asking the audience whether they thought my approach to investing was stressful and about 80% of the audience raised their hands.

I don't really have a defence if someone thinks that my approach to money management is complicated. If you are a regular reader of my blog, my approach to Life is complicated. The important thing, however, is that the audience acknowledges that dividends investing is the reason why I can be financially independent today. I have been feeding my family without a day job for almost 4 years while paying a full home mortgage and my net worth has even gone up since the day I entered law school.

The only thing I might add is that life sometimes demands that a certain amount of attention need to be paid to managing money. This is a cerebral exercise and can be very stressful.  If you do this earlier, it can give you a much more comfortable life in your 40s. If you choose an alternative which is less stressful during your 20s, you might have to pay more attention to money when you get older. The problem is that for Gen X, by the time they really start to think about managing their money, their main income stream becomes threatened by economic disruption. It gets even worse when you are sandwiched between two generations and have to support your parents and kids at the same time.

One final point.

I think we did not address a good question last night.

The question is whether are there are simple ratios that can be used for bond valuation that resemble the P/E and P/B ratios. The short answer is no.

This is a complex technical question which we could not answer last night.

To get an idea of how this is done at the professional level. You may click on this link here.

Bonds are valued relative to each other by looking at different spread values relative to a fixed benchmark.

I would be surprised if any financial blogger were to employ one of these approaches to determine whether a particular bond is over or under-valued.


  1. Hi Christopher,

    Appreciate if you could share with me more details on how you managed to feel your family w/o day job. Please refer to the below on my enquiry illustration:

    1) Is it true that your expense (in retirement) is less than the expense (while in emoloyment.

    2) How do one know whether he/she ia ready for full-time retirement (resign from full-time employment)?

    3) In your opinion, does a single person (single for life) take a short time than a couple with the assumption of both scenarios which indicate that the parties aim to save and invest for retirement at the start of the career.

    4) Do you include CPF savings as part of retirement cash stash?

    5) Any other tips which you could advise on achieving early retirement.

    I hope that you do not mind answering the above enquiries.

    Very much grateful for your valuable inputs.


  2. 1. Not true. The idea of expenses dropping after retirement draws data from actual retirees. If you retire early, you are on your own and may have more time to spend money.

    2. When your dividend income exceeds expenses by around 30-40%.

    3. Single person has greater autonomy so can achieve this faster.

    4. Don't include CPF.

    5. This is not a tip, but early retirees tend to be quite bookish. Reading is a cheap hobby and early retirement becomes increasingly harder if the person cannot live the life of the mind.

  3. Hi Christopher,

    Thanks for your valuable advice. This is very handy for my journey to FI.


  4. I think it's because bonds have been mostly institutional assets in SG that's why people don't have good idea how to value them. In US where it's possible to buy a single bond (just like a single stock), the market has matured enough for most bond investors to know things like yield spreads, duration, bond classes, & comparing of ratings by Moodys / S&P / Fitch. Of course even in US, many people are simply just interested in which bonds pay the highest yields, just like which is the highest dividend yielding stock, haha.

    I remember 12-13 yrs back reading that when junk bond yields reach 4.5% spreads or less over 10Y Treasuries, then look out!! I think it was William Bernstein. But look at the zero-yield environment over the past 8 years --- junk bonds are at 4% or less yield spreads and still going strong. Haha. The rush for yield has distorted pretty much everything. In S'pore it's property prices, heheh.

    Regarding expenses being lower in retirement, personally I don't think it's true, if you want to maintain same quality of life. I suspect many studies may be biased if they don't analyse the size of retirement assets or amount of retirement income. Many retirees are *forced* to spend less because of lower pension/retirement income compared to their working income; or simply to ensure stretching their retirement pot as long as possible.

  5. Thanks for reminding me, Spur, that, absent complicated spread techniques, most investors will go back to using yield to maturity to value their bonds.