Financial Update : Optimism on the horizon, but it's so hard to make things work this year

 Before I begin, here's a link to a video I made with Budget Babe. Please support her YouTube channel.

Today, I will provide a personal rundown of my financial situation, which I think is much more optimistic than my business update, which feels like Sisyphus pushing a rock up the hill. 

For folks who follow my blog, I'm one of those stubborn dividend investors who invest primarily in Singapore. We have suffered for many years as interest rates have started to increase. But even before 2022, SGX was not a dynamic place to park your money. There's even a word, "moribund," to describe it. 

For folks who understand why I'm this stubborn, I am animated by the simple idea that our cyclically adjusted PE ratio remains around 12-13, which gives me a rough estimate of long-term growth, natural growth of over 7%, the bulk of it coming from generous dividends. This 7% does not include inflation. After accounting for inflation, we can expect 10+% per year, but it takes a long time to experience such returns. Markets can experience mean reversion only if interest rates drop over the next few years and MAS starts acting on market reforms. With too many if's and but's, my technique has been a butt of jokes for many years. If it does not come from crypto bros, it will come from Chinese and AI investors. 

The critics will change, and we dividend investors will outlive them all. 

Still, the mistakes I made this year are pretty legion but tolerable:

a) Interest rates play is not as easy as it looks

Last year, I had some success putting a big chunk of my assets into local banks as I had evidence of our performance when interest rates increased. This year, I tried to move some banking assets into REITS in anticipation of lower rates, but this has been a frustration as DBS continued up and my REIT picks went down. I was cautious and only bought REITs with the lowest beta on STI, such as MINT and FCT, but I think I would do better if I sat on my hands.

This is why I hate trading. 

b) China bazooka turned out to be a damp squib

The other dumb move was minimal but very stupid. My trend-following algorithms flagged momentum on China technology stocks, so I took a mere $600 position on CQQQ; it leapt 25% and initially then dropped precipitously. It's actually negative today. I seldom act on ETFs and parked about $500 each on MPACT and CLCT to see whether there is a rebound. I was wrong on all counts, and every position is negative today. The central narrative that China is a communist country that does not respect business acumen and private property remains true today.  But let's see how this plays out over the next year.

I don't think SGX investors will see the end of jokes. If we sink lower, we'd be made fun of by folks who invest in Bursa Malaysia, which had an excellent year of IPOs. 

But what about actual numbers?

Capital gains-wise, my net worth in SGX (This includes my legacy positions and partly ERM student positions, which are up with IRR of about 3%.) dipped slightly, about 9%, over the past 6 years. Still, I've also directed my funds into SRS, CPF, and home mortgage equity to optimise my taxes over this time. My net worth never really experienced a down year - all this while we spent money as a family with large sums spent on tuition. While Singapore stocks dipped or stayed flat, real estate prices spiked, and CPF returns stayed steady with a slight appreciation of interest rates. This is a testament to the common sense of local dividends investors - most of us have homes that appreciate value and locked CPF funds. We've never been one trick ponies.

So 2024 has been shaping out to be a great year; the market portfolio is up six digits, and I doubt home prices will retreat much, even with cooling measures. I still have this crazy ambition to make every family member in my household a millionaire over the next few years. We're close, but I need just one year for the markets and my business to succeed simultaneously. 

If it's not 2025, it'd better be 2026.

Is financial literacy considered cultural capital ?

 

I will see whether I can try to blog twice this week, as this discussion has some merit. I was told that in the mainstream press, someone said that demonstrating financial literacy is a signifier of cultural capital. In some parts of Singapore, it can be quite a "flex." I thought I would delve deeper into this issue because I'm deeply interested in alternative forms of capital, like social or cultural capital.

Looking at the surface, I was unconvinced that financial literacy is cultural capital. It is basic knowledge that every Singaporean should know, but the finance industry has cultivated a team of commissioned salespeople to gatekeep his endeavour. Furthermore, rudimentary financial knowledge may subtly hint that you might be a commissioned financial advisor - someone that polite society should avoid in, especially in shopping malls and MRT stations.

Nevertheless, I was able to do some Googling to find out what constitutes culture. We can then apply some analysis to see whether this is true, tapping into ideas from sociologists like Pierre Bourdieu and Jean-Clauge Passeron.

a) Cultural capital can be embodied.

Sometimes, you can cultivate your cultural capital by joining a profession or being born into privileged circumstances. It's rare for someone outside the legal sector to "come alive to an understanding of" something or view something as "apposite". So, these vocabulary markers might hint at being someone from that sector. 

Workplaces focusing on style rather than substance can be places of cultural warfare. An associate was shamed for loving K-pop and asked to watch Andrew Lloyd Weber instead. 

A taxi driver taught me that he knows clients are poor if they speak in absolute numbers, like a watch costing $14,000, but wealthy clients who drop off at posh locales almost always speak in percentages, like a rate of return of 7%.

Whether financial literacy can constitute cultural capital will depend on whether some part of language use is considered "atas," and I don't think that matter has been resolved yet. No matter what some people say, talking about "safe rate of withdrawal" or "sequence of return risk" is not considered posh yet. I also think that dividends in Singapore have a stronger relationship with hawker food than Michelin fare, judging from the food pictures in the Dividends chat group.

b) Cultural capital can be objectified

This is irrelevant to our discussion, but owning something can be seen as cultural capital. Art objects often play this role because they are superfluous and costly.

Not all branded goods denote cultural capital, but brands like Hermes artificially create scarcity so that their Birkin bags can claim that role. 

I believe books can signify cultural capital, but you really need to understand the genre to make this work for you. An old copy of Security Analysis by Graham and Dodd might say something about you, but only if it is a copy that is worn from use.

c) Cultural capital can be institutionalised

You can also gain cultural capital by getting some form of qualifications. This is the same reason parents want their kids to enter law or medical school; it allows their children to qualify for a different stratum of society.

For this to work, the qualification must be hard to attain. The CFA does this by failing 50% of candidates at every level, but I imagine the full qualification to become an actuary is even harder. 

Exams should not be enough to be really valuable. The best professions have their own exclusive access in the form of guilds and a specific way of communicating with each other. 

After this analysis, I don't think financial literacy is yet ready to be considered part of cultural capital. While being practical, claiming some rudimentary grasp of financial literacy is not something you wave around in a cocktail party. In fact, talking nonstop about crypto on a Tinder date is universally scorned by Singaporean women. 

But cultural capital evolves over time. In the past, quoting Shakespeare might create an impression of cultural sophistication; these days, I think you'll be much cooler if you quote Game of Thrones or Dune.

At the end of the day, discussions like this should not really matter; if a reader wishes to develop and cultivate his cultural capital, he should simply make an effort to read more than his or her peers.

Read to make yourself more knowledgeable.

Read to be able to handle a magazine like the Economist. 

The cultural capital will come with more literacy.

What am I struggling with in my business right now?

 

As I approach turning 50, I will reflect on some of the challenges I have been struggling with. I'd like to start with the most complicated area of my life, so I'll discuss the earned income component of my life.

My earned income component has been the least successful area in my life. That also sucks up most of my life energy because I've always felt that it's an essential area of struggle. After all, it answers this question: 

Post-FIRE, what are the possible career moves to enjoy a good income and quality of life? 

Sadly, I don't have a better answer than anyone else after a decade, but I'm here to show everyone my working.

a) My training business

I'll forever be grateful to Dr Wealth because I found an alternative to the back-breaking legal career I initially planned after my JD. The first three years as a trainer brought me 2x my salary in my previous job and paid off my school fees in 6 months, confirming that this is a viable career. It also allowed me to develop skills I could not acquire in my earlier career. A seven-digit revenue for ERM, followed by an appearance on Money Mind, can't hurt my resume. 

Like all businesses, that golden era appears to be over as interest rates begin to go up, but I enjoy the work of investment training a lot. It has even made me a much better investor now. Once I started coding my investment advisors and using AI to generate analyst reports, I could tolerate the work even as a sideline that generated a small allowance. 

Nevertheless, my training business will be in an existential crisis in 2025. I will either need to make adjustments and change the price point of the courses, or the business may need more time to justify the time I spend on it. 

b) My role as an adjunct lecturer in a tertiary institution

To preserve my training job and to earn a more stable income, I spent the year taking on an adjunct lecturer role in a tertiary institution teaching adults Corporate Law and Legal Technology. The value of doing this is exposing myself to life with a more conventional role with the skillsets I developed at Dr Wealth.

The initial plan was to introduce a more stable income to my fluctuating revenues without giving up my business. I would also need a "barbell" strategy in my earned income strategy: a volatile and high-earning job and a stale one that even pays a bit of CPF. 

But this job has its own set of challenges. Contract renewals are done in drips and drabs, so you cannot project your income with certainty a semester moving forward. I was initially unhappy that I was only retained for one subject next semester, but as more contracts arrived, I was too happy to complain about being overbooked. 

Payment platforms can be improved, and you often wait an additional month to be paid. 

Nevertheless, after a year of struggle, during which unhappy and sometimes entitled adult students often yelled at me, I can now sell more weekly lecture hours. 

The system is not designed as a leading source of income, but it's okay if you have a day job and plenty of passive income. 

Is a portfolio career easy compared to a conventional one?

There have been moments this year when I wanted to quit everything and start looking for a conventional job ( likely in AI ) because there were moments when I was just doing administrative unpaid work just to keep this portfolio career machine running. 

The numbers need to look better as well. I'm averaging $4k+ when my basic family expenses are close to $6k a month, so some digging into my dividend income was necessary in 2024. But this is easily the worst year of the decade, and I've already rebounded from 2023. 

But from another perspective, this is a massive win because many post-FIRE folks complain about needing a real career identity, which we are primarily conditioned to do in Singapore. When people ask me what I do, I tell them I teach investing classes over the weekends, but I'm also a law lecturer at a local institution. Afternoon swims, fooling around with my kids, and meeting folks for coffee when they have a work break doesn't hurt. 

If I sound very theoretical right now, I'd like the more savvy readers to recall Coarse's theorem about the firm in Economics. Firms are hierarchical structures that prefer to contract work that can be well-defined to someone else who can do the job better. 

My Dr Wealth work is something society contracts out to me to perform. I'm subject to the same business forces and cyclicality as every other entrepreneur. My work with a public institution puts me in a complicated bureaucracy, where a bulk of my work is administrative in nature, just to get the system working. 

There may be no way out if you want a portfolio career. 

You must have a passive income flow, actually a large one, to avoid going crazy.

Insights from my volunteering work at Raffles Institution in 2024

 

While I can still give pro bono financial seminars, I would do my best to present to any secondary school willing to have me. Even so, only Raffles Institution has a systematised programme to invite speakers from around the country to talk about special topics like Finance as part of their Gap Semester programme, which targets 16-year-olds exempted from doing the O levels by being ultra-smart. Picking someone to speak in another secondary would require a lot of red tape, and perhaps my slides, which do have controversial material, would not pass the scrutiny of the more orthodox educator.

However, Raffles Institution thinks that my material is acceptable for their students, so this is the fourth time I'm conducting "Millionaires of a Better Age." In 2024, I was invited twice due to the positive feedback from the students themselves. 

This time, I have to be careful as some folks managed to find my blog, so teenagers will be reading my posts these days. 

Firstly, I tried using the very crude MBTI survey tool I built myself for my investment courses and found that the smartest teenage boys tend to be INTJs/INTPs. They are incredibly logical, and some may not be as conscientious as the RI brand name would imply.  

Next, I wish to address something strange that happens when I openly talk about volunteering in RI. I get brickbats from social media, implying that I am helping the rich get richer. I agree—teaching dividend investing will always give the folks with more investible capital an advantage. But it is unfair to talk about this when I volunteer in RI because I've been asking around to help even in my own secondary school. 

There's no system for me to do a similar programme elsewhere because O level preparations are more important.

I have, in RI's defence, conducted a survey on pocket money they receive. 

The majority get about $100-$200 monthly, so parents can decide on pocket money based on this data. Do note that there will be outliers. I detected two whales who get over $500 monthly, but about 4 have very little pocket money. 

The savings data is also quite interesting.

Except for the same two whales (maybe they were from ACS Primary), most teenagers find it hard to save money.

Finally, folks must remember why presenting ideas to intelligent teenagers can be rewarding. Some specific points in this latest encounter left a deep impression on me.

a) When I entered the classroom, the kids updated each other that Iswaran had been sentenced to 12 months. I got the news from them because they actively monitored it throughout the day, whereas I wondered why the bubble tea in the school canteen was so expensive at $4! They must be trained well to be intrinsically motivated to follow current affairs. At their age, I'm more interested in who the current WWF Heavyweight Champion was. ( Those days, it was always Hulk Hogan or The Ultimate Warrior. )

b) The first really great question was whether knowing some kind of URA  15-year master plan can lead to the possibility of buying houses that increase in value over time. I was stunned because even I didn't follow the master plan when I bought my EC. To answer the question, I explained that knowing public information may not lead to outsized gains because other people see the information as well, which I had to explain second and third-order thinking to the audience.

c) The second impressive question was whether introducing Central Bank Digital Currencies or CBDCs would be a bullish or bearish indicator of cryptocurrencies. It was not designed to impress because students thought about both scenarios in painful detail. I told him I didn't know the answer, but I am more inclined to agree with his argument that transparency in digital currencies will drive grey and criminal use cases to employ existing crypto or Monero even more fervently. 

I have graduated with 700+ students in my ERM class, and my students include PhDs in finance, board directors, and MAS regulators. I can't get the high-level Q & A participation like what I get from these 16-year-olds. 

At this juncture, just to entertain readers, let me share the stupidest question I ever got from someone 2-3 years older than the RI youths who study in a tertiary institution I will not name on this blog. The question was," You are a millionaire, but I want to make my first million earlier than you. Can you teach me how to do this?" I was stunned like a vegetable for a moment at how dumb this was; I could only mutter, "Maybe you can do some sales job because of the unlimited upside." Even today, I pray that the person who asked me this was a troll, not an idiot. 

I can't, honestly, coach someone on something I cannot do myself.

This gives readers an idea of why I always make some room in my schedule when RI contacts me. 

But that should not stop other schools. I've also been dying to do a pocket money survey on ACS and Chinese High.