Wednesday, July 03, 2024

Should you prioritise Financial Independence over starting a family?


I want to answer a reader's question that was posed to me lately. This person found someone very attractive, but she wants to prioritise early marriage and children. However, because this reader is close to FIRE, he is conflicted about choosing FIRE or jumping into the relationship. 

It is time to share my updated thoughts on this blog because I suspect my earlier articles may have had an undue influence on him. I am OK with changing my mind on this blog as I age. 

First, there are solid arguments for a single guy to choose FIRE over starting a family. This would be my choice in my 20s, having only started dating when I could live on investment income (because I can pay for every date with dividend payouts). For a guy, his bargaining power grows exponentially as his portfolio grows, and you be fixated on a kind of woman, but not a specific one, so go for someone only when your bargaining power goes up. Truth is, for most guys, the dating scene can be very cruel, with dates on Tinder trying to sell ILPs to you and most women going after that "6-foot-five investment banker with blue eyes." 

But as I got older, my mind started to change on this matter. 

Suppose you are a guy, and you've already been shopping around. You are already in your mid-30s with a solid career and educational qualifications. You find someone more attractive than your previous set of dates, and she is similar in professional credentials. 

I fail to see why her desire to start a family should stop you guys from going ahead; you're adamant about attaining FIRE. 

Some points of consideration :

a) Suppose there is a fear of divorce. The national statistics should not apply to readers of my blog. Suppose the rate of divorce is 30% in Singapore. Your probability of divorce should be much lower if both of you are not married at too young and have degree qualifications. Adjust your probabilities as you know more about your date. 

b) The idea that marriage and kids can slow down FIRE does not account for the government policies that are specifically designed to maintain a heteronormative society via the BTO/EC systems. While a single guy can probably FIRE much earlier, he will lose out on the capital gains from a leveraged residential property that only married couples can buy. So far, the increases in my EC valuation exceed how much I spend on my two kids. 

c) Folks don't understand that marriage and kids can build one of society's most potent economic units as you reap economies of scale. Statistics show a retired couple spends less than two singles living separately. 

The final point I want to make is that many readers may be fixated on the remaining single FIRE thought leaders, but I don't believe that they will have the last laugh.

Just because a person is wise with money does not make them wise regarding relationships. If someone has money and is unattached, it may even say something about their personality!

I don't believe that any of my happily single friends have a plan to counter loneliness, which can kill at a rate faster than heart disease, and it actually gets more complicated to form friendships as a guy after your 50s. I don't see Gen Z running up to me to get me to play D&D with them. 

At the end of the day, we can learn from the tragedies we read about in the press, the cases of Yang Yin  
and Mitchell Omg / Audrey Fang may be lurking in the corner, waiting to pounce on the elderly who are financially independent.

Who will spend your money in the end?

Saturday, June 29, 2024

Some advanced thoughts on Malaysia and KL


After returning from my trip to KL, it might be time to talk a bit deeper. I hope that these random thoughts can moderate some of the feelings of folks who are caught up in the fervour started on some Telegram groups about buying homes in JB or KL.

a) Conscious currency conversion between SGD and MYR

While in KL, I often divided the cost of any item I wished to buy by 3.5 to calculate the equivalent cost in SGD, and I would always conclude that the price was low. Malaysians in Singapore do the opposite. They apply a multiplier of 3.5 and always conclude that everything in Singapore is costly. 

I had an attitude adjustment from a Malaysian friend who works as a PMET in Singapore. He has to travel to and from every week to give his family a better life. He is the only person who provides a unique perspective on all this. He says that Singaporean food is very cheap compared to Singaporeans' salaries. 

Imagine what it's like to pay MYR $15 for economic rice as someone who works in Malaysia. 

b) By the numbers, KL would make an excellent retirement destination for Singaporeans

If you look at the situation from a pure numbers perspective, my ERM students researched and showed that an expat in KL can live on $20,000 SGD a year, including rent in a one-room apartment. This means that a 4% withdrawal rate and a $500,000 portfolio can provide a working retirement plan for a single person. 

Beyond the numbers, issues like political stability, changes to the MM2H scheme, and safety will still be a big impediment for many Singaporeans. Having close relatives nearby and being a good driver can greatly help your retirement journey. 

c) Buying Malaysian real estate is still a terrible idea

After my trip, despite all the news about more collaboration between our two governments, buying property is still a bad idea. Singapore's land scarcity is unique to us, and we can't transplant our ideas about owning land to Malaysia. 

KL has old towns like Cheras. KL also has townships which are has-beens like Subang Jaya and upcoming yuppie enclaves like Putrajaya. The fates of house valuation will be based on these shifting tides.

It's nowhere close compared to the millions of dollars of equity you made buying your EC during the PM Lee era. 

That being said, there is nothing wrong with renting a unit in Malaysia using dividend payouts or HDB rents from Singapore. 

d) Education and being stuck in the lower parts of the value chain is an issue

Bank Negara has been trying to hype the Ringgit for the rest of 2024. They might be right in the short term, but I can't see how the Ringgit can maintain its current value against the SGD over the next 10 years. The locals need to improve their English proficiency, and I can't even speak English to someone in an up-market European-themed eatery. Also, the convenience store clerk of a Japanese outlet would turn your business away, claiming no loose change.

PM Anwar surprisingly knows about this problem but has chosen to anger his nationalists by asking us for help with English teachers. After I visit KL, I can understand how urgent this request is. Of course, how we respond will be equally entertaining. 

I encourage intrepid Gen Z types to consider trying out some kind of digital nomad lifestyle centred around KL. Earing in SGD and spending in MYR is da bomb! 

It's still relatively easy to fit in culturally, and for the more enterprising guys, you'll never know whether you can find a spouse while you are there. 

Wednesday, June 26, 2024

My latest trip to KL.


Last week, I took a trip to KL to enjoy the last few days of the school holidays. The trip was funded by rental payouts from JB property, which I could not unload at a reasonable price, so the feeling of the powerful SGD was diminished as I was spending primarily the rental income earned in MYR. Nevertheless, we put ourselves up at a better place at Ampang for $150 SGD a night - a far cry from previous trips where I preferred low-cost accommodation at Petaling Street. 

In many ways, KL has not changed. The "software" that Singaporeans take for granted was simply not there, with staff in convenience stores refusing to provide change and waitstaff at high-end eateries like Paul's being unable to converse in basic English. However, you get what you pay for, and the experience is still cheap and pleasant as you no longer feel the budgetary restraints that fetter your spending powers in Singapore. But there are certainly many areas where KL wins hands down - the Grab Taxis are fast and cheap, and we are better off just meeting our relatives at many foodie destinations instead of expecting them to drive us there. 

KL will always be the place to go for me because it now has three fantastic bookstore branches. The Kinokunitya bookstore at KLCC boasts a better RPG collection than the Singapore branch. There is also a well-designed Tsutaya bookstore at Pavilion Bukit Jalil and a fantastic Taiwanese bookstore, Eslite, at Bukit Bintang. Singaporeans will likely have to fly to KL one day to visit the bookstore as our national libraries crowd out the local bookstores here. 

Other than books, the only thing I can really talk about is food. I'm fortunate to have spent two days with a secondary school pal who drove me to distant eateries and two days with relatives who brought me to a different set of restaurants.  

Before discussing my pleasant food experiences, I want to express my disappointment at the much lower standards of my usual Prawn Noodles at Bukit Bintang Lot 10 food court. The lady boss remained the same, but the prawns were overcooked with the "black veins" still intact. We paid a ridiculous sum of MYR 280 for the meal, and I can get cheaper and better Prawn noodles next to my home in Woodlands. That is my last visit to the outlet. 

That aside, here are three of the better places I ate in.

a) Village Park Nasi Lemak

Village Park Nasi Lemak was the best nasi lemak I had ever tasted, but it was priced at a ridiculous $12.50. Comparisons with Coconut Club in Singapore are pointless, as I heard that Coconut Club's Nasi Lemak was based on this original brand. Like Coconut Club, the best part was the succulent chicken, which was crispy on the outside and soft-and-juicy inside. 

b) Siu Siu Restaurant

The second epic place where I had a meal was a local institution called Siu Siu Restaurant, where the local zhi char was excellent. We were disappointed that they ran out of crabs, but we still enjoyed many meat dishes and fish. Clearly, it is advantageous to go where the locals eat, and the food was not only cheap but excellent.

c) Porto Romano Restaurant 

The last choice was purely accidental. As we lived in an old but relatively upmarket mall called the Intermark, we found a classy-looking Italian eatery that served reasonably priced food. We had a decent pasta meal, and on the last day we were in KL, I tried to blow the remaining budget on a Surf and Turf item, and the price/quality exceeded our expectations. 

All in all, it was a good trip. I originally intended this trip to be for book browsing, but having friends and relatives drive us to far-out places really enhanced the foodie experience for me. If I go to KL again, maybe at year-end, I want to refocus on museum visits and their handicraft centre, which I cannot do on this trip.

Wednesday, June 19, 2024

Insights into Acquisitional Wealth, Italian Espresso bars and Chuan Chuan.


I will fly off to KL tomorrow for a few days of cafe hopping and wandering at bookstores. The KL scene has become much more vibrant for bookstores as Singapore has been losing them to our well-run libraries. I foresee a future trip to Bangkok to visit game stores and KL to bookshops.

Today's article is about chain combo-ing some books to derive insights. I was fortunate to read these books in a row, and they enriched my personal experiences during my short break after conducting my 34th installation of the Early Retirement Masterclass.

Let's begin with Josh Tolley's Acquisitional Wealth, a novel personal finance book that folks should read. Initially, it reads a little like Robert Kiyosaki, but then it takes a detour into the world of small business M&As. Tolley believes that instead of the usual work, saving and investing in mutual funds, folks might be better off buying businesses from small business owners. There are many non-cyclical businesses like a car wash or a laundromat with owners seeking to retire, and you can buy them just like a value investor should. One major issue is that you often have to borrow money to purchase such businesses, and the acquisition process requires months and the services of a good accountant and lawyer.

I enjoyed this book so much that I started googling for business brokers in Singapore. After a while, I realized that our markets are so severely beaten down that we can find illiquid companies trading at 3-5 PE, so there might not be a need to buy a business. The book's biggest glaring weakness is that it does not say much about valuation, which can be remedied by reading textbooks by Aswath Damodaran. If you are considering expanding your mind beyond the usual investments, consider taking this book out for a spin.

I give my brain a break after a finance read because I'm getting mellower and becoming more interested in human matters. Books should trigger pleasant memories, stimulate ideas for travel, and teach you a thing or two about life. 

Chinese Espresso by Grazia Ting ticks all the boxes. It is an ethnographic study of Chinese immigrants from Wenzhou who are now owners of espresso bars in Italy. This book made me want to travel to Bologna, Italy, with my posse next, given that I had a fun trip to Istanbul after reading the history of the Byzantine Empire. The idea is to meet ethnic Chinese who speak fluent Italian and Mandarin and are forced by circumstances to buy coffee bars to survive in Italy.

For a book like this, it's good to be exposed to the racism faced by Chinese immigrants, but it is also a fascinating read about coffee. The author worked as free labour for these espresso bars and discussed how difficult it was to generate the foam with evenly sized bubbles for a cappuccino.

But what's really valuable for the finance-obsessed is how ethnic Chinese think about business operations. The Wenzhounese can dominate the coffee bar trade because they see their kids as free labour. The profit from an espresso bar operation does not account for labour costs as it is family-run, and profits are for the whole family, with the patriarch using his funds to buy up other espresso bars for their married children. The Wenzhounese, the most entrepreneurial of all the Chinese dialect groups, already operate on acquisitional wealth the way Josh Tolley would have wanted. 

This completes the circle of books I read these few weeks, one book on theoretical ideas on small business M&A and another, an intimate description of small businesses in Italy.

I relate what I learn to my ordinary life. After conducting my course, I have two days when my wife and kids are with their in-laws in Malaysia, so I decided to hang out with a friend over the long weekend. He used to hang out in a Japanese pub that had closed down, so he wanted to just drink with the ex-staff, but all I wanna do is to sing.

So I followed him to a weird corner in Jurong East called Vision Exchange, an ethnic enclave of PRC immigrant workers with an entire row of Chinese eateries. 

We picked a quiet eating place, and prices were super competitive; 15 sticks of Chuan Chuan were sold for just $10. Compare that with our local equivalent of 10 satay sticks for $13 at Pasar Malam.

[ On a separate note, I spent $13.50 on Chuan Chuan, then I sang for 3 hours in a karaoke lounge with one drink for $6. My total damage that evening was less than $20. ]

With such a price point, it is no accident that Mala eateries have also begun to dominate the local F&B scene the same way the Wenzhounese have acquired the espresso bars in Italy. 

Immigrants are willing to struggle as locals cannot chiku (eat bitter); they are willing to exploit themselves to sell cheaper food to us. With a Mandarin-speaking majority, Singapore is much more attractive to the PRC than Italy. 

But, of course, there are plenty of parallels between local Singaporeans and Italians. When Italians see the PRC, they think that the Chinese are part of a mafia group. We tend to see them as money launderers.

If there is any lesson to learn from my reading adventures, personal finance readers owe a lot to sociologists, and we should read their books more. One classic is The Millionaire Next Door by Thomas Stanley, who inspired me to go all the way to hunt for cheap chuan chuan in the first place. 

Saturday, June 15, 2024

Letter to Batch 34 of the Early Retirement Masterclass


Dear Students of Batch 34,

It's been a great honour and privilege to conduct a 5-Day Early Retirement Workshop for you.

 As I cover this latest batch of students, interest rates are still high, and 2024 is expected to have just one interest cut around the year-end period after the US elections. The pessimists might say that the portfolio we build still faces some downside risks as REITs continue to underperform. Still, optimists would see this as a bargain opportunity with a longer stretch. After all, the projected yield of the portfolio built by this batch is high at 7.42%.

 Community observers who follow the construction of ERM portfolios should note that this class would have selected a large variety of local stocks, as dividends are pretty high across the board. However, I removed a few counters to make the portfolio more manageable and accommodate folks with a smaller amount of capital, so please refer to the rejected list of stocks for details.

 I am a realist. Students should see some capital losses if inflation remains high in the US, which is why I hedged with one banking counter. Otherwise, the portfolio will outperform if we get lucky and interest rates come down early in 2024.

Returning to the class, I wish to thank this batch of students for keeping me entertained and curious. The conversations in the classroom make the class come alive, and I’m grateful to be able to tap into your broad life experience today. I particularly enjoyed the conversations about Chinese society, what working in China feels like, and how the nature of involution has shaped Chinese society today. They gave me hope that the situation in Hong Kong has bottomed out.

Lastly, I hope Batch 34 will participate actively in the FB group. I look forward to seeing you at the following community seminar, which is slated for Q3 2024. 

All my focus is now on bringing LLMs into this program

Hope to see you then!

Christopher Ng Wai Chung

Thursday, June 13, 2024

About some Telegram finance groups I am in


Today, I will discuss the few personal finance-related chat groups I am in on Telegram. I thought it would be interesting to share a little bit about the groups I participate in so readers of this blog can join them. 

Before I begin, I want to talk about the elephant in the room in the 1M65 chat group I do not participate in. From what I gather from folks who visit that group, the culture of 1M65 is similar to the EDMW forums of yesteryear. There is a lot of posturing, and occasional fights can break out, getting trolls banned. Nevertheless, I greatly respect Mr. Loo Cheng Chuan, who made the group what it is today, even though I have no desire to participate.

We must thank Mr. Loo, as he keeps many weirdos and folks jonesing for stock tips at bay so they don't infect the other smaller communities.  

a) Dividend Investment (

The first group I want to talk about is the Dividend Investment group, which has over 3000+ members and is the place to go for news on Singapore dividend stocks. On the first observation, it is the average group you go to to get news on dividend stocks. 

The admin is very conscientious about dividends coming out from SGX and HKSE counters, and one of the pleasant things I like about it is that it showcases a down-to-earth lifestyle. Dividend investors love sharing food pics, not from expensive restaurants but cheap hawker centres. My guess is this group may have more Gen X and Boomers in it.   

The group is quite friendly and down-to-earth, but it goes into battle mode until someone comes into the group to criticise dividend investing. Then, they can be pretty fierce. I don't blame them; at the moment, dividend strategies are going through a bear moment, and most retail investors just want to talk about NVIDIA and buy based on momentum. So dividends investors are the LGBT+ folks of the investing world - folks getting their lifestyle and investment choices questioned all the time. Still, they are fundamentally very comfortable with who they are, why judge them on their investment picks? 

Dividend investors just want to be left alone to collect their passive income. They might be older and have a lower concentration of professionals, but they do not aim to be the most brilliant guy or the best investment manager in the room. A common trope when someone collects dividends is jokes claiming they live a "dangerous" lifestyle. This is the result of 1M65, which made the claim that dividend investing is dangerous.  

A few guys I like include Huatist, the resident bear who gets excited when stocks turn red. Paul is always free to dispense the occasional wisdom and what he has for breakfast. 

b) Singapore Financial Independence Community or SGFI (

I spend a lot more time in the SGFI group. It was started by Supreme Leader Investment Moats to discuss the more esoteric aspects of FIRE, such as the safe withdrawal rate, but it has evolved well beyond his control. 

If you want me to describe SgFI culture, it has become a safe space for high-IQ professionals with INTJ personalities. Occasionally, some folks show up to ask everyone whether their retirement plan is sustainable, but they stay to talk about travel, FI philosophy and lifestyle. The female participation is easily the best I've seen in any group, so be prepared for some weighty female issues to be discussed now and then. I think getting women to open up about their lives and finances is hard enough, and SgFI goes further to attract highly accomplished female professionals to join our discussions. I hang around because the otaku and geek discussions are cool, and INTJ folks are very knowledgeable about anime and RPGs. 

All this being said, SGFI is not an inclusive culture. 

Ideas have to be robustly defended. If you want to brag about trades in a non-contextual manner, you will be cut down to size quickly. The Dividends group clearly understands that SgFI is more PMET-bent, and newbies complain that some members are pedantic. (It might be a GEP thing.)

 I cherish the discussion of the trio of ladies XX, KitCat and Ash. I'm afraid that some incel might chase them away. 

One guy, Leon, is working on summarising the complicated discussions using AI. 

Supreme leader Kyith may occasionally show up if something displeases or annoys him. 

There are many other groups, but due to information overload, I only follow two. However, I don't do this for investment reasons. I'm more interested in lifestyle choices and philosophies. 

Sunday, June 09, 2024

How to think like SM Lee Hsien Loong


Whether you like him or not, PM Lee Hsien Loong presided over a successful reign that generated a massive amount of wealth for the country. After 2011, when the PAP lost Aljunied, he managed a quantifiable rebound in life satisfaction and happiness for all Singaporeans based on Gallup polls. As he settles into becoming Senior Minister, I can imagine journalists jockeying for positions to publish his memoirs or approach to leadership, which academics will study for decades to come.

But what if I told you that a book already exists about how SM Lee thinks?

Apparently, SM Lee was trained by a famous academic named Richard Zeckhauser from the Harvard Kennedy School. This nifty book by Dan Levy summarises Zeckhauser's thinking approach into a number of simple maxims that are practical and useful for lay readers. I think internalising these maxims would make it easier to discern SM Lee's leadership style once the book arrives in a few years. 

Here are a few points I have attempted to internalise to my work. 

a) When faced with a complicated problem, consider the extreme or simple cases.

Before attempting to figure out how to motivate people to pursue FIRE, we can look at the extreme case of how a successful situation can look like. Twenty years ago, my approach was to live on dividend income and then farm my entire take-home pay to super-size the portfolio to become a millionaire. I did not know what retirement looked like, but I definitely understood the prestige and status accorded to millionaires. 

These days, when I am crafting a solution for students, I need to come up with a more universal or simpler approach to FIRE. So, my idea is to try to generate $100 of passive income on average a month. $24,000 into a dividend portfolio yielding 5% can get the job done, and saving $2,000 monthly for a year will let someone try the idea on for size. 

Both approaches help explain financial independence, and folks can only discuss more complicated topics like safe rate of withdrawal or Monte Carlo simulations from other sources when they think that this can be sustained longer for themselves.

b) Think in terms of quantifiable probabilities.

This idea is to learn how to think about probabilities and revise them as we get news from the markets. 

Right from the start of 2024, I was betting that bringing down inflation in the US would be problematic, so my affairs are structured to consider cuts starting in 2025. The wonks are betting a 50-50 chance that a revision will start in November. 

Until September, this 50-50 will be revised when inflation results are reported. It is a superior way to invest, as if the probability drops, I can delay pivoting from, for example, DBS to FCT for my portfolio. 
c) Thinking at the margins

The biggest weakness of lifestyle design around FIRE is the idea that one can resign abruptly after reaching financial independence. We are still determining what happiness levels we will feel when we trade all our working hours wholesale for leisure time. 

So, this idea of thinking at the margin is the solution to the problem of Early Retirement. Your question should instead be: If you reduce an hour of working time to add one hour of leisure, will this result in greater life satisfaction? And then you keep making this trade-off until adding an hour of leisure no longer adds satisfaction to your life. 

There isn't a lot of corporate flexibility to allow you to progressively reduce your hours at work in practice, so a person can quit his day job after financial independence, get a short holiday, and then gradually increase his freelancing time to see whether it can increase his happiness. 

My issue has always been doing bullshit jobs in a toxic work environment. In a better environment where I can feel that I am contributing, increasing my exposure to work may make me happier. 

Anyway, this is a pretty nice book that teaches policymakers how to think, but I think that anyone can benefit from reading it. If it can sharpen the mind of one of the top mathematicians in the world and assist him in running our country, maybe more people in society should be taught this.

Saturday, June 01, 2024

Investment lessons from Shogun


The first TV Series based on James Clavell's Shogun was made in 1980, and I vividly remember watching it when I was about 7-8 years old. The plot was too complicated for a kid, but I recalled the shocking scene of seeing someone boiled alive in the show. Shogun was rebooted in 2024 and is available for Disney+ subscribers; this version is not to be missed. Fans are saying that it is Game of Thrones that is done right.

On the Telegram finance discussion groups, some folks drew financial inspiration from popular characters in the series, like Kashigi Yabushige. Still, the discussion was short-lived because Yabushige committed seppuku at the end of Season 1. 

I would have wanted to have a deeper conversation about whether assessing an investment strategy based on the outcome instead of the process is correct. Still, we might be better inspired to consider what the main character, Yoshii Toranaga, can teach us about investing.

I summarise this briefly into three parts :

a) Toranaga knew when to let go of his pawns to serve his greater ambitions

One gripping aspect of the series was how often people are willing to give their lives for their lord. Toranaga understood that to create the impression that he had conceded defeat, key household staff members had to commit seppuku.

For investors, it means having proper conditions to exit positions when it is no longer to hold onto them. In such a case, dividend investors are not particularly good at letting go of a counter; we often only throw in the towel when dividends are stopped completely. In this sense, technical analysts and quantitative investors are better placed to cycle their positions. 

I probably got out of AEM a little late when the troubles started this year, but my algorithmic positions are always dynamic, and I cycled out of Indian Small caps for the NASDAQ when the momentum shifted.

b) Toranaga does not control the wind. He only studies it.

When Toranaga is about to execute his disloyal vassal Yabushige, Yabishige asks him how it feels to control the winds. Toranaga answers that he merely studies the wind and does not control it. Even in a moment of triumph, Toranaga is humble and understands his limitations.

In investing, Warren Buffett can control the wind. Anyone who can buy enough shares to install his own directors in a company can unlock value in an undervalued company. However, most of us are not at Warren Buffett's level. We can only read financial statements and analyst reports, deploy our capital intelligently, and hope the stock will eventually reach its intrinsic value.

But there are many ways to read the winds. People spend years learning how to read financial statements, and I write code to unveil momentum indicators that work. Toranaga probably has a network of spies and is already aware of who his disloyal servants are pretty early in the series. Increasing how we read the wind would matter. Suppose the methods of reading the markets are conventional. In that case, getting unconventional results will get harder, so I resort to code to search for investment insights. 

c) Toranaga is actually very frugal with the deployment of his resources.

Throughout the series, the audience is led to believe that Operation Crimson Sky is Toranaga's planned frontal assault on Osaka Castle, with maybe a slight twist involving cannons being fired from the sea. But as it turns out, the entire operation to free hostages within the castle was executed with just one highborn woman, Toda Mariko. With one life, Toranaga could break the alliance of the Regents arrayed against him and even cause his rival lord to lose the favour of the young heir. 

Investors may have a different way of framing what Mariko means in their portfolio. For a value investor, Mariko can be a 100-bagger stock. She can also be a longshot bet on an altcoin going viral online. 

For most retail investors, stacking all their resources on a longshot gamble is a mistake. Most retail investors want Mariko to be a lottery ticket that will change their lives. 

That idea is wrong. Toranaga's military forces are primarily concentrated in Edo and can engage in massive battles independently. A small 1% percentage into a 100-bagger or an altcoin can improve your returns without raising too much risk for your portfolio. This insight can only be understood if we study the concept of the economic utility of our investment portfolios. 

There's no need to put all your eggs into a counter that has high returns and a high standard deviation. You can backtest how a 1% investment in a Bitcoin ETF can influence a 60/40 portfolio over the past 10 years. You don't need a flashy, one-sided bet to outperform your peers. 

Anyway, I hope I've not spoiled the series for readers. I'm eagerly awaiting the second season of the story that would have to depart from the original book, but plenty of inspiration can be gained from actual Japanese history. 

Sunday, May 26, 2024

What a beneficiary can do with inherited sums from a departed loved one

Recently, a friend has lost a loved one and has questions about what to do with sums of money left by that loved one. I wanted to write an article explaining my thoughts on what to do if you have a windfall from a departing loved one. 

Before I begin, I want to share that, as human beings, we would usually not treat inherited wealth as earned wealth, so I think the insights from behavioural finance experts on mental accounting may not be helpful when we are still grieving the departure of our loved ones. Even after more than five years after my dad was gone, I still segregate his sums in a separate account and would only use the capital for medical reasons. The dividends are also reinvested most of the time. 

The most important thing I would not do is pass the sums to a banker or financial advisor. As this involves AUM or commissioned sales, it would be tantamount to allowing the FA to inherit the wealth, so all my solutions I will discuss involve the DIY handling of sums of money.

Here are some of my considerations :

a) Singapore Savings Bonds (SSBs)

The most basic answer right now would be SSBs. This is the closest thing to a riskless investment and guarantees that capital can be preserved. SSBs yield 3.28% for the first 3 years, which is slightly higher than the inflation rate of 2.7%. However, it is still being determined whether it can continually beat inflation as the years go by. Finally, you can only have a maximum of $200,000 SSBs in your CDP account. Payouts occur every April and October when stocks generally do not pay dividends. 

b) Globally diversified ETFs with a discount broker

A more savvy solution is to do what most savvy retail investors do: put it with a discount broker and then buy a diversified pool of ETFs from different asset classes. The expense ratio can be meager, at below 0.3% per year (unless it's commodities). You can optimise on taxes by buying accumulating funds and UCITS ETFs on the London Stock Exchange.

I backtested a portfolio that invests 25% in stocks, REITs, bonds, and ETFs. Average returns exceed 7%, with a low standard deviation of around 12-14%. However, this asset allocation must be rebalanced annually, so there's an administrative overhead.

The biggest issue with this approach is that it is emotionally less satisfying as you need to liquidate to spend the sums. There may be a sense of unease with inherited sums, but spending about 2.5% of the prevailing amounts yearly should adequately preserve wealth and even allow payouts to grow over time. 

c) Local dividend stocks

Performing some factor selection of local dividend stocks may only slightly underperform the ETF suggestion and even result in a higher standard deviation. Still, Singapore markets have already gone through some terribly wrong days and are cheaper than foreign markets. Picking 20 blue chips with the highest yields and then cheery picking 10 with the lowest volatility can generate returns of over 8% for the past 10 years with single-digit standard deviations.

While the historical data looks good, this strategy's real strength is its emotional appeal. The more diversified your dividend portfolio is, the higher the frequency of payouts. If you are willing to pay a fee for higher trading costs, stocks in the CDP system can even be paid directly to your bank account at 5.30pm on a payout day.

This is particularly good for grieving individuals as it feels like your loved one is always looking after you and sending you money to buy a meal at the restaurant. I suspect this is one of the reasons for 1M65's hilarious outburst that SGX is all about Kiasu and Kiasi investors who will not take a risk on innovative tech counters. As such, I actually think Mr Loo Night would be right, but we dividend investors would like things to stay this way!

The downside I noticed about this strategy is that it is, after all, focused on high-yielding stocks of a single country, so the strategy can have its bad days. You can occasionally have drawdowns that are very large compared to the ETF strategy. 

As for me, I did not have to convert my father's holdings into dividend counters because I had been doing it with his blessing for decades while he was still alive. He transitioned from asset to cash-rich, while I did the opposite as I took on a mortgage loan for my executive condominium. These days, even closer relatives remarked how much I now looked like my dad as I reached my 50s.

Right now, I can share some of my thoughts because I collect rentals from a shophouse my father bought when I was a JC student in JB every few months. This shophouse supported me when I was getting my first degree. The ringgit has weakened immensely, so after all my diabetic meds and my mum's blood pressure meds, there's only so much left to buy relatives a treat in KSL

I always tell my uncles and aunties not to thank me as the money came from my dad's savvy moves when he was younger. 

My dad would have been 82 years old next Friday.

I hope he would approve of my actions as a steward.

Sunday, May 19, 2024

Better alternatives to Early Retirement


I had much to think about this weekend because we just had a secondary school reunion. I did not intend to attend the event initially because I didn't know how to pitch my "lifestyle choice" within such a short timeframe. I need to use mathematics to explain how I could foot off the pedal 10 years ago, and it might get as awkward as the last family gathering I had. But because my cohort over-ordered table tickets and folks talked about sharing the cost of unsold seats, I threw my hat into the ring because I was free that evening. I should catch up with my secondary school classmates entering their 50s this year. 

As it turns out, quite a few folks follow me on this blog, CNA's Money Mind, and my material on YouTube, so there's no need to explain it to them. Still, folks in their 50s are now contemplating whether they can just stop work, so I had to tell them not to do anything rash unless their investments exceed 300 multiplied by their monthly expenses. Even so, I told them about the awkwardness and the loss of personal identity I faced when I gave up on regular employment, and even turning myself into a lawyer did not fully solve that issue. 

But I did not prescribe too many specifics. My classmates are successful in the corporate world but stuck with the skillsets they have honed over the years. If they need to get out, I suggest they find something passionate about first. 

This brings me full circle to what I am currently doing with my life.

I'm actually doing some kind of reverse FIRE. 

In the past, I struggled hard to get my passive income to exceed my expenses with some legroom so that I could do something else with my life instead of just accepting what my workplace offered me. But I stayed on for 7 years after financial independence because I enjoyed my work. It took a stint out of the public sector work to make me throw in the towel, and by then, my dividends had exceeded my take-home pay. 

As business is terrible, I'm struggling to do the opposite.

I'm seeking part-time gig opportunities to supplement my business income and live on my earned income. This number is below my family expenses, including mortgage payments, so I must use up a small part of my passive income to keep everything sustainable.

Of course, I have set some ground rules for my work. 
  • It has to work where, psychologically, the positives of work outweigh the negatives. 
  • It should also not touch weekday office hours because I consider my daily afternoon nap and swim one of the biggest positives in my life. 
As it stands, this is a challenging goal. 

If I succeed, I can pay all my expenses with passive or active income. My active income will only be earned at night or over weekends, and my engagement with clients and stakeholders must be positive and make me look forward to doing the work.

So, I think I might be able to make this arrangement work if interest rates start going down before the end of the year and I add another gig to my current list of engagements. 

If rates stay higher and longer, I might have to bite the bullet and start selling my weekday time to meet my objective.

But I will miss the afternoon naps if I do that.

Wednesday, May 08, 2024

Deeper thoughts about FIRE


I just wrote a basic article on FIRE on the Dr Wealth website. You can read it here.

This article allows me to share miscellaneous thoughts on the topic that might not be appropriate for a primer on the movement.

a) Why did FIRE splinter into so many variants?

I had the same questions when I first read about Barista and Coast FIRE - both movements do not eschew the working world altogether, so they are short-cuts at best and half-baked ideas at worst. But I'm convinced that very few folks will complete the journey over time. FIRE influencers are overwhelmingly Tech or Finance professionals, and the MBTI personality type that dominates the movement is a rare INTJ type that is less than 5% of the human population.

So, some kind of moderation to create a form of FIRE for ordinary humans is inevitable. Even my challenge to ask my students to set aside $24,000 to generate an average of $100 a month in dividend income is quite challenging to some. 

b) Does FIRE threaten the financial industry?

If FIRE does not threaten the livelihoods of commissioned FAs, we are not doing FIRE correctly because we can save 2-3% in fees when we invest directly using a low-cost broker. I think the financial industry understands this point, and I'm detecting many "dog whistles" to that effect. 

An increasingly common strategy is to ask whether people make personal sacrifices regarding FIRE. Talking about some folks' relationships or appearance is also a low blow. Another approach is to "forgive" and "give permission" to others to start saving later in life. More complicated strategies will pick on a person's inheritance. 

It's all an attempt to convince folks not to start, but it ignores how much freedom a person can achieve with even $100 in passive income a month. 

c) Does FIRE threaten policymakers?

If done correctly, policymakers should actually promote FIRE. A severe practitioner will have to work really hard and maybe hold multiple jobs to get a credible portfolio running before they reach the age of retrenchment. 

There are certainly worse movements that are gaining more traction, such as the idea of lying flat.

d) What can policymakers do to make FIRE less attractive? 

Actually, policymakers threatened by this movement can take welcome steps to make FIRE less attractive in Singapore society. 

I can imagine myself continuing working on a statutory board today if some really toxic managers did not exist because I liked IT work, and I have no issues going to work even with a passive income of $20k+ a month. I'd like to hang out with friends in the office, too. 

If you want to blunt the impact of FIRE, we need to take further steps to make Barista FIRE a reality. More work from home, flexible work arrangements and a four-day workweek are a good start. I don't think you can remove the assholes from the government offices or any corporate HQ overnight, but creating a means to minimise contact with these people and creating outcome-based work objectives will help immensely. For me, the potential for AI is to require less middle managers so assholes will be stuck in individual contributor roles. 

Suppose a double-first from Cambridge prefers a life as debating coach rather than a path to say, the Admin Service, I'm not really interested in his choice of FIRE - I want to know specifically what kind of Ministry culture will drive him to freelance instead of becoming an Elite.  

e) Are there viable alternatives to FIRE?

Every successive generation of folks will reach adulthood and get their shit together at a much older age. They will also become more individualistic. This is a common trend from Boomers all the way to Gen Alpha. 

I'm seeing younger Millenials and Gen Z taking up a gap year after years of work to travel or do whatever they want. This is a viable alternative as they effectively separate their retirements into multiple parts and enjoy small bits of it when they are young. 

My generation will not do this because it can taint our resumes. 

But HR will be unable to do anything if every young Singaporean aspires to this lifestyle. Just like the CCP will note able to do much if every young person in China starts to lie flat. 

I actually love what young people are doing here when it comes to lifestyle design, I welcome credible alternatives to FIRE and love hearing about them. If done collective as a population, the working world can become a much better place even for older folks like me. 

Thursday, May 02, 2024

Strengthening the case for dividends investing


Interestingly, folks are still publishing books on dividend investing since most of the top-performing stocks in the US are tech stocks that give tiny payouts to investors. Daniel Peris is one of those rare authors who are still trying their best to push dividend investing in the US despite multiple decades of very ho-hum performance.

First, he admits that dividend investors have become underdogs in the US. He has, in fact, placed his bets that with higher interest rates, a new trend will emerge where US companies will eventually clarify their dividend policies and increase payouts to appease investors in the future. This is an incredible leap of faith, but he has great arguments for this.

When arguing for investing based on dividends, the first hurdle is Modigliani and Miller's Dividend Irrelevance Theory, which, over the years, has generated enough influence to get company bosses to dispense with dividend payouts entirely. Furthermore,  tax authorities who apply a different rate to dividends and capital gains taxation make this worse. Peris found academic arguments to counter M&M, citing the stability of dividends as a reason why it remains a good factor and putting M&M within the context of a different economic era where free cash flow is often negative.  

With the big argument out of the way, it's easier to understand why dividends have underperformed. A stock that returns dividends to shareholders retains lower earnings and would appreciate in price less than a stock that keeps its dividends or performs a buyback despite the same business performance. But there's a lot of pressure for growth investors to stay vested, as the lack of dividends means more volatility and a nasty drawdown if the growth thesis fails later. 

At the end of the book, I suspect that Peris is nostalgic. He wants the stock markets to return to an era where investors place their assets on well-run businesses and companies. In this current era, speculators bet on technology trends that push the markets higher and higher, allowing ridiculous PE ratios to take root in the US.

This is the same fantasy in the hot Japanese Anime Frieren. 

Frieren, possibly the best anime of late, invokes the same fantasies, where Fern uses only the basic offensive magics to defeat all the mages of this era. I had to make this reference as I just completed watching this series with my son. 

Strangely, the Singapore market is precisely what Peris desires. In Singapore, you find our local public companies being carefully focused on a good dividend policy and selling stocks at current PEs of less than 10. If you attend AGMs, that's what the boomer uncle investors really want. 

They just want to get paid and eat an excellent buffet simultaneously.

I am currently testing a few screens based on the book. There is some outperformance, but Sharpe ratios are around 0.5 at best. 

Always good to have a lab to test assertions.

Friday, April 26, 2024

Wisdom from "Useless" books

Folks who wish to read up on my financial insights will need to wait a while as I'm having multiple headaches trying to maintain my business, so I'm thinking about my finances a lot. It's just not something I can arrange neatly into a blog article at the moment, I might actually be in crisis mode. 

At the moment, I'm gradually tilting my reading into less practical territory. As I spend hours on a bus to teach evening classes in faraway lands, my reading speed has increased quite a bit, and I have to moderate the pace at which I read the helpful programming, finance, and law stuff I tend to be more obsessed with. Of late, I think that I'm getting some applicable "wisdom dividends" from the stuff I'm reading, so I'm sharing them here. 

a) The Way Home by Ben Katt

The first unusual book I read is The Way Home by Ben Katt. It's not easy to empathise with the author because I find his life very rabak. Imagine spending your entire life serving a Christian ministry, then having a mid-life crisis after experiencing the bigotry of your faith and feeling envious of peers who actually earn more because they built conventional corporate careers. The solution to this mid-life is worse, involving spiritual guides and vision quests and communing with a Jaguar spirit animal. Stuff worse than an RPG splatbook about D&D druids. 

Surprisingly, the book broke my creative impasse, as I've run out of ideas to sell my course on operating and tuning your own robot advisors. Ben Katt's idea is to reimagine himself as a protagonist in his mid-life crisis hero journey, and I thought I could do the same in a future review. To do that I need to take a much closer look at Joseph Campbell's Hero of a Thousand Faces

If this does not turn my business around, it should put me in good stead when markets recover much later. 

b) It's Okay not to look for the Meaning of Life by Jikisai Minami

This is another unusual read which I was only willing to pay for because my son won some awards last year, and I brought up his Popular vouchers from him in exchange for fiat. 

The author is a Zen monk, but I thought he was a troll like me. The book starts out quite nihilistic, as he dismisses the need to have any meaning in life and then proceeds to argue that it's okay not to have hopes and dreams. ( And it's all well reasoned stuff )

Eventually, I warmed up to him as he shared some insights I couldn't get in Western works. 

His best idea builds on the theory that there is some kind of relationship that is neither friendship nor family. This is someone you can talk to about your personal problems for hours on end without violating personal boundaries or exacerbating existing tensions. A shrink cannot do this because therapy is expensive and based on the hour, and only rich people would hire a lawyer to do this.

This is where a religious figure can play the role. but the best part of the book warns against the religious figures we meet in our daily lives. A good spiritual advisor will not interrupt your questions, will not claim that they understand you, will not talk about money ( thus ruling me out ) and will not brag. Also avoid anyone who claims to want you to "become one with the universe".

 I devoured the book in two hours and I find Zen Buddhism refreshingly down to earth and kinda brutal in a kind sort of way.

c) A Travel Guide to the Middle Ages by Anthony Bale

So I got lucky with two "useless" books, I'm just sharing my next one which I have yet to finish. Some guy decided to piece together historical travelogues to imagine what a travel guide in Europe during the Middle Ages was like. 

I think it's a safe bet that I will enjoy this because it features Constantinople, which I visited last year. 

At the very least, it can become a useful sourcebook for my RPG hobby.

Something has to give to allow me to engage in more reads. I have already reduced my personal engagements due to the sheer volume of work that I fully intend to intensify all the way to 2025. 

The only casualty I have so far is that I'm reducing the amount of binge-watching. I'm just watching Frieren because my son has developed quite a liking for it.

Saturday, April 20, 2024

Friendly Career Update


Maybe I'm lucky this year, but I got some free training that is more useful to my freelance training business than the institution providing the training. Still, only because the training is meant for folks lecturing older teenagers, but my work involves training adults. But if free training falls into my lap, I will not squander it, and I've spent a lot of time reflecting on how I can improve my materials. 

The fundamental problem is that I think many educators specialise in pedagogy, but I earn a living doing andragogy, a shiny new word I just learned a couple of weeks ago about teaching adults. 

I suspect that many folks don't practice andragogy at the moment, so with enhancements to mid-career training coming online as an ersatz welfare system, I'm probably at the vanguard of another life-changing sunrise industry. If I ride the wave, it will not matter if dividends fall out of vogue; I will be able to sustain this career-lite knowledge-intense lifestyle until the markets get well again. 

Some points for myself as a parent and instructor paid by direct customers and now tax-payers :
  • The doctrine that says adults are more motivated learners is BS in a world where taking diplomas can earn a meaningful allowance. It falls to the instructor to motivate them to pay attention. 
  • ERM instinctively got it right five years ago with diagnostic assessments, online pop quizzes and real-time feedback via apps.
  • Coming up with a hook and a narrative is essential, although I need to improve myself at this. I only use previews in private-sector work where I have to sell. 
  • My peers don't like smart alecks in class, but I'm happy to trade away my boomers with smart alecks anytime because they often can detect poorly made lecture materials and sharpen your wits as a practitioner. 
  • If a class polls heavy introversion, they will often be very grateful if you give them online means to interact with the class materials rather than call them out to embarrass them.
  • At a personal level, I find it hilarious that I can now discuss high-falutin ideas like Bloom's Taxonomy and Gagne's 9 events with actual MOE trained philosopher kings. 
I'm doing my own bit at being a radical within the system. I'm injecting 2 to 3 slides on how adults can learn to study in my training program and tying it to my official materials. I openly tell my students to put their opinions on the feedback poll at the end of the semester. 

This explains why my blog is not getting updates as often as I would like. 

I'm finally feeling a good kind of busy where my work makes a difference and is remunerated accordingly. After attaining Financial Independence, I've searched for that mysterious "third gear lifestyle" that eludes many Barista FIRE practitioners. 

Wednesday, April 10, 2024

Will FIRE's enemies grow stronger?


It's been a tough stretch and I've not been writing as much as I wanted to. This week, I've been attending training, which has benefited my trainer role. Over the weekend, I've got another run of courses to conduct. Last week, I was fortunate to participate in the Seedly Personal Finance Festival.

I'd just like to pen my thoughts on personal finance because recently, we've seen a few high-profile retirements in Singapore.
  • First is a Rice Media report on 31-year-old Ashish Kumar, a top scholar who quit Ministry work to run his debate coaching business.
  • Next is gold medallist Joseph Schooling retiring from the competitive swimming arena.
  • Finally, my favourite comedian actor, Henry Thia, talked about reducing the number of acting projects and entering retirement mode. 
While I've yet to follow the recording of our Manpower Minister, it seems, from third-party mumblings I have yet to confirm, that Tan See Leng is also suggesting that people find greater meaning in their work instead of doggedly pursuing financial independence. This intrigues me because for a Minister to say something, the scholar machinery needs to come up with and vet the speech's contents.

It points to the possibility that our local elites are becoming more familiar with our subculture.  

Finally, for my own panel on Saturday, we can clearly see that financial institutions are struggling with the idea that FIRE is catching on with Millenials and Gen Z. I can only inform readers to look out for the recording of my session and see the results for themselves. I sense an attempt to paint FIRE as a great sacrifice, and folks who do this are missing out on a lot of fun in life. This conveniently skips the consequences of not at least trying FIRE out, which tends to be the subject of many financial discussions in the past.

So, my question for readers right now is: Is Financial Independence such a dangerous idea that both the public and private sectors are concerned about its adoption among the masses?

I won't comment in detail as I'm waiting for Seedly's recording to come out. I want to hear the speeches myself.

I imagine that if FIRE came under the government's radar, parallels would be drawn with my poet friend Gwee Li Sui's Op-Ed in the New York Times, which drew a rebuke from the PMO for promoting Singlish. 

Finally, I'll share something I decided not to say on the Seedly PFF as it might become misunderstood. Initially, I wanted to paint the FIRE movement like the Fremen in the Dune 2 movie. Many of us are finance fanatics who have truly optimised our financial resources, like the way we recycle water in our stillsuits. 

If you tangle with FIRE, you might be tangling with a bunch of financial zealots.