Singapore-based financial blog that aims to educate people on personal finance, investments, retirement and their Central Provident Fund (CPF) matters.

Friday, 5 October 2018

CPF: Better Fixed Interest than Fixed Deposit


This post will contain a tip on how to increase your CPF returns, namely in the form of interest.
One way to earn more interest from CPF is to transfer your extra money, into your CPF Special Account.

Your Ordinary Account currently earns 2.5%, Special Account and Medisave Account earn 4% interest while your normal bank Fixed Deposit earns less than 2% annually.

Real Life Example:
My mum is 49 this year. She wanted to buy a 10-year Fixed Deposit which earns less than 3% per year. I suggested that she put her money into her CPF to earn the CPF interest.

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_________________________________________________________________________________
Based on Normal Voluntary Contribution, the money will be split into the 3 accounts in the following allocation:
OA: 51.36%
SA: 21.62%
MA: 27.02%

Assuming she puts in $1,000, the allocation will be as follow:
OA: $513.60
SA: $216.20
MA: $270.2

Based on the above, my mum will get an average 3.23% interest on her $1,000 contribution.
She will not, however, get a tax deduction for the $1,000 contribution she put inside.
_________________________________________________________________________________
Based on Additional Medisave Contribution Scheme, the money will all be put into her Medisave account.
OA: 0%
SA: 0%
MA: 100%

Assuming she puts in $1,000, the allocation will be as follow:
OA: $0
SA: $0
MA: $1,000

Based on the above, my mum will get an average of 4% interest on her $1,000 contribution.
In addition, that $1,000 that she contributed into her CPF is also eligible for tax deduction.
_________________________________________________________________________________
Based on Retirement Sum Topping-Up Scheme, the money will all be put into her Special Account, or into her Retirement Account (if she is above age 55)
OA: 0%
SA: 100%
MA: 0%

Assuming she puts in $1,000, the allocation will be as follow:
OA: $0
SA: $1,000
MA: $0

Based on the above, my mum will get an average of 4% interest on her $1,000 contribution.
In addition, that $1,000 that she contributed into her CPF is also eligible for tax deduction.
_________________________________________________________________________________

She will also get to withdraw the money out when she reaches age 55.
Of course, if my mum fails to meet her minimum sum, the money that goes into her CPF will not be returned to her at the "end of the maturity" - instead, she will get it back as future monthly payouts.
But there will be other factors to consider such as how flexible you want to be able to withdraw the money.

All in all, if you wish to have a higher interest rate than Fixed Deposit, risk-free and not in need of the money being withdrawable, you can consider putting your money into your CPF, especially if you are near 55 years old - where the risk-return profile is more skewed in your favour.
Of course, if you want liquidity - the ability to withdraw the whole sum of money when you need it, this probably is not suitable for you. But, if you have way more than the required Retirement Sum, putting money into your CPF to earn the higher interest and withdraw before the Retirement Sum climbs too high sounds like a good way to make extra money.

Recommended Post: 4 Telegram ChatBots that Helps You Save Money

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Monday, 24 September 2018

4 Telegram ChatBots that Helps You Save Money

Apps are no longer the next big thing. They take up space in our phones, requires us to download and continuously update them.
Instead, chatbots seem to be the next big thing.
Just a few years ago, the mantra was "there's an app for that".
Today, the mantra is "there's a chatbot for that".
Below, we share with you 4 chatbots on Telegram that can help you save and manage your money better.
The list is not comprehensive, with new chatbots being created every day!
As such, if you have any great chatbots that you use to manage your finances, feel free to comment and tell us about it!
We will add it to our list

1) Foodie Monkey Bot
This is the chatbot that sends you a list of food and drinks promo happening all around Singapore daily. Save on food and drinks sounds like a pretty good deal to me.

2) GetMedia Bot
This is the chatbot that lets you download songs and videos from youtube to your phone, saving you tons of data when you are commuting or at places without wifi - and hence saves you money.

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3) WhereIsMyMoneyBot
This is the chatbot that lets you track your expenses easily. Type the expenses you incurred and the amount and it will record. You also get a summary of your total expenses for the month and you can export the information in Excel out.


4) WhoPayBot
This chatbot helps you split your bill among your friends easier. Allows you to split the bill without complex mathematics and helps you track who has paid. No more having friends forget about transferring the meal money now that there is a reminder set for them.

Got any more chatbots that can help us manage our finances better?
Feel free to comment them to us and we will add them to the list

Recommended Post: 3 Reasons Stocks are Better than 99 Year HDBs

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Friday, 14 September 2018

3 Reasons Stocks are Better than 99 Year HDB


Recently, we suddenly start realising that upon reaching the end of our HDB 99-year lease, we are all going to lose our homes - the HDB goes back to the government and we are not going to be getting any money back.
Suddenly, HDB feels like a rented apartment instead of our home, except instead of paying rent every month until the lease expires, I pay for it for 30 years only - and if I'm lucky, I get to sell it for a higher price than I paid.

The biggest and most important asset for most people is their house.
Have you ever wondered why most people remain either middle income or poor?
The correlation is not a coincidence.
It is exactly because of this reason - the bulk of their money are stuck in their homes.
The rich park much of their money in stocks and there are reasons why stocks are better than homes when it comes to growing your wealth.

1) Government Intervenes in the Property Markets
Our Government announced a new property cooling measure in July 2018 to cool the prices of properties in Singapore. This is because they find that the property market seems to be heating up - prices are getting higher than they should. The cooling measure is meant to reduce the rate of increase. This is actually a kind of "limit" on the gains you can have from your property investment! 

This is done so that we can all buy a house to live in Singapore. It is in the Government's best interest to ensure everyone can afford a home because it keeps them in power. If I am a buyer, I am not complaining that my Government is making housing affordable by removing rich people from bidding my house prices up. But if I am a property owner, it sucks to know that the value of my property is being "cooled" by my Government.

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2) HDB is an Appreciating Asset that You Own for 99 Years Only
As your HDB reaches the end of its 99-year lease, it goes back to the Government while you get nothing back.
The asset that you had hope to keep and leave it for your children suddenly no longer exist.
While it is yours to keep and sell within that 99 years, you lose it after 99 years.
It is not a permanent asset for you or your future generations to keep.
While it ensures that every generation gets a chance to buy a home in land-scarce Singapore, it also prevents you from passing your asset to your children and grandchildren, even though you worked hard and paid for it!

3) Government Don't Limit Stock Market Gains
When property prices reach a new high, Governments all around the world tend to step in to make sure prices fall back to normal. Imagine if property prices increased 15% year-on-year for 5 years straight - prices would have doubled, and you would be happy if you are a property owner, but you will never be able to afford a home if you are saving to buy one.

But for the stock market, Governments will not intervene if the market rose 20% year-on-year for 5 years straight. The Government will not intervene in the stock market even if it is a bubble because it is not the job of the Government to ensure the stock market does not overheat. Therefore, you stand to make higher gains in the stock market than from the property market.

Conclusion
Should you start considering to invest less in your HDB and more into stocks?
Since technically stocks are forever and you can pass it down easily.
Rich own stocks while middle-income own HDB.
99-year asset or forever asset?

Recommended Post: Is Whole Life Insurance A Scam?

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Saturday, 18 August 2018

An Overseas Clinic Visit Made Me Realise the Importance of Travel Insurance

This is a story of me going to a medical facility while on my America Road Trip and how lucky I felt when I knew I would be covered by travel insurance.

December 2017, I went on a road trip to the United States of America (USA) - it was during the winter period but not that it mattered anyway I guess.
I was on my way to the Grand Canyon when halfway through the bus ride there I started vomiting.
I vomited and felt uncomfortable in the stomach - it was miserable, especially since I was kind of confined to the single bus seat.
Every time there was a break, I would either remain on my seat to rest (if I'm lucky) or I would alight to empty the vomit bag, get a new one, then proceed to vomit more in the toilet (I have no idea how I got so much stuff to puke as well).

By the time I reached the Grand Canyon Lodge, I was half dead.
I alighted the bus and warmed myself in the Lodge.
After a while, I gave up! I felt too miserable that I booked a cab via the reception to drive me to the Grand Canyon Clinic - yes they do have a medical clinic there.

Recommended Post: Is Whole Life Insurance A Scam?

I got myself checked into the clinic and waited about 45 minutes before any medical personnel could attend to me.
Once it was my turn, I was put on IV (intravenous therapy) aka tubes carrying liquid poked into my veins to transfer liquid substances into my body.
Then I had tubes carrying oxygen put into my nose so that I had air going into my body.
Apparently, the nurse said that I was experiencing altitude sickness - more about it HERE
This was how I looked like while lying on the clinic's bed

After 1.5hours of being on IV and given oxygen, I was discharged from the clinic with some medication and isotonic drink.
The bill turns out to be USD 376.12 - which translate to about SGD $500+
Honestly, that was a big bomb! That 2.5 hours visit wiped out nearly 10% of my road trip's budget!
I knew seeing a doctor in America was expensive, I just did not expect it to be this expensive!
At that moment of paying the bill, I was so glad that I actually bought travel insurance!
If I didn't have insurance, I'll probably wait until I was near death before I would go see a doctor because it is just too expensive!
A $100+ in travel insurance cost ended up saving me $400 in medical cost and nearly dying - quite worth it!

I remember going to Taiwan last time with my friends and they had food poisoning. We too went to visit their hospital and good thing they had travel insurance to cover their visit. It is a good thing I was not the who got the food poisoning as I did not buy insurance back then because I did not think I will need it.
So, it turns out it is really easy to fall sick while overseas - so buy travel insurance!
It saves lives!

Recommended Post: 5% Travel Insurance Discount with FWD

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Tuesday, 14 August 2018

We Don't Lack Leaders, We Lack People With Empathy


What makes a leader? What makes a person a leader?
We follow leaders because of many reasons; because they have a strong vision; because they are charismatic; because they inspire us to do great things; because of this and that.

Great leaders like Steve Jobs, had many followers who followed him because he was a visionary, he was charismatic, and he demanded - inspired - people to do great work. We can stretch it a little and say the same can be applied to Hitler - the man literally convinced his people to go to war and risk their lives for him.
These are great leaders, and I believe there are many more of such leaders around us that we know.

I have seen and been under leaders who emits "leadership" qualities. They can give great instructions, make us work together as a team, and make us willing to push ourselves just a little more to achieve their goals.

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But does these "leadership qualities" really make a leader so great that we are willing to go to lengths for them? In the short-run, I believe these "leadership qualities" are key as they get people started, get people to work together, and push people to achieve short-term goals - like completing a project. In the long-run, however, I believe caring for people (empathy) is the key characteristic, is the true mark of a leader.

I do not think that someone who can lead is naturally a leader.
I would work really hard for a charismatic leader for 1 week to complete the project for them. But if they are not caring, not empathetic to people, I can see myself quitting once I am burnt out. Because a leader can only keep us in their 'reality distortion field' for so long before we all break free from it and realise that he/she can lead, but is not a real leader.

We lack people who care for others, who are genuinely concerned about their people's well-being, and not just their own. I am arguing for another kind of leader, the kind of leader that has a normal vision, has minimal charisma, does not really inspire us to do great work, but genuinely cares for us and our well-being, and because of that care, we are willing to work with and for them.

Recommended Post: Is Whole Life Insurance A Scam?

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Thursday, 26 July 2018

Is Whole Life Insurance A Scam?


A lot of people have written a lot about the difference between the 2.
So instead of comparing them again, we recommend you read the difference in the link below:
The Case of Term vs Whole Life Insurance

Instead, I will go into the figures.
Context:
30-year-old male non-smoker planning for $100,000 in death payouts
Quotes are figures I got from CompareFirst.
Term Life:

Whole Life:

I covered the insurance companies - but you can probably do a simple search on CompareFirst to find the insurance companies.

$1,094 per year in premium difference
In total, you pay $3,570 in premiums for Term, and $46,761 in premiums for Whole, a big $43,191 difference.
Had you took that $1,094 difference in annual premiums and invested it in an index fund that has a long-term returns of 6% annually, that pot of money would have grown into $120,815.65 by the end of the 34 years - and it would be a lot more if you survive longer than the 34 years.

To make it an even fairer argument, you invest that same $1,094 premium difference into an index fund that gives you a long-term average return of 4.75%. That too will grow your money to $92,747.59 by the end of the 34th year - still $25,700 more than what the insurance company gives you. Why the big difference you may ask?

Because most of these returns are derived from the insurance companies investing the money into stocks and bonds that you and I can buy as well, and if stocks and bonds give you an average long-term return of 6%, they have to minus away fees and costs before they give you the returns. So net-net you probably are getting only 4% to 5% returns each year from buying an insurance plan (the returns could be worse).

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Important Point to Note:
When buying life insurance, don't be cheated into the mindset that "if I bought whole life insurance, by the end of the time if I do die, I can get the guaranteed amount + additional investment returns."
More often than not, you will get better investment returns if you bought term-life insurance, pay lower premiums, and invest the premium difference into say an index fund that gives you an average 6% annual returns (which is fairly low returns already).

People often think that "if I bought a $1,100 annual premium whole life insurance, after 40 years, I can get $100,000 (guaranteed) PLUS additional returns from the plan (unguaranteed portion), making my insurance a lot more worthwhile".

The fact is, if you had bought the $100 term-life insurance for 40 years, and invested that extra $1,000 in an index fund that pays you a long-term average of 6%, by the end of 40 years, the insurance plan would have lapsed and you get no money back - yes, $40,000 goes into the insurance company's pocket. But hey, the $1,000 you invested in the market that gives you a 6% return each year would have grown to about $164,000 - more than the $40,000 premiums you have made, and also more than the $67,000 given by the insurance company as 'cash value'.

The Psychology Behind Whole Life Insurance Plans
The reason people buy whole life is that it is hard for people to get over the fact that after paying tens of thousands in insurance premiums over the decades, they are not getting anything back. This is a psychological trick that can end up costing you money in the long-term.
So, think twice before committing to a Whole Life Insurance Plan.

The 2 Advantages of Whole Life Insurance Plans

  1. Your beneficiaries will definitely get a payout because (touch wood) everyone will eventually pass away. Whole Life insurance is forever, hence it is a definite payout
  2. If you do not have the discipline of saving aside that extra $1,000 each year to invest in the stock market through a passive index fund, and let it stay in there for 40 years, then maybe whole life insurance is not be a bad plan for you because it ensures that you will definitely pay that extra $1,000 and it will invest and grow the money on your behalf (just at a lower return).


Recommended Post: 5% Travel Insurance Discount with FWD

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Image Source: NTUC Income

Friday, 6 July 2018

5% Travel Insurance Discount with FWD


At Investment Stab, we are always finding ways to help you save money, earn money, earn more money, and learn about money.
And we have just this offer right here today:
5% discount on your insurance premiums with FWD Insurance!

Simply click on the link below and you will be brought to the FWD website with a promo code to reduce your insurance premiums by 5%!
https://www.fwd.com.sg/?ref=180619MAOFyDcU

Nope, this is not a sponsored post.
A story about how this 5% discount came about:
Our content coordinator went on an overseas trip recently to Japan and bought travel insurance online via https://www.gobear.com/sg.

Here is why it is important to get travel insurance: Do I Really Need Travel Insurance?

He ended up choosing FWD because of price and coverage.
After buying the insurance, FWD offered a 5% discount promocode for him and his friends to use.
He figured it would be great to share it with our readers - EVERYONE SHOULD GET 5% OFF.
And that's why we are sharing this great promo code with you.
Utilise it well! :D

Recommended Post: Free $5 with DBS PayLah

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Thursday, 21 June 2018

Differences in investing viewpoints for bonds and equities

15:11 4 comments

Recently, Azalea Group has just released its Astrea IV Class A-1 bonds. It was widely marketed as the debt instrument which provides access to private equity investments. This was definitely confusing (at least for me) and here are the reasons.

Bonds and equities have different long-term investing objectives
Bonds are predominantly debt instruments while equity, regardless private or public, are stake holdings in companies. Debt is primarily raised externally with the purpose of investing in the company’s operations for higher future returns. Interest and loan repayment is required. Debt is classed higher than equity for repayment in the event of a default. While the risk of failure of loan repayment can be mitigated by securing the loan with collaterals (where the collateral can be sold in the event of default), the investment returns are still from the interest payments. Hence, simple judgement of the attractiveness of a bond is based on the underlying company’s ability to pay (risk) and the interest rate it is offering (reward). Investors should look for cash flow stability for company’s ability to pay.

Equity funding can be raised internally or externally with the similar purpose of investing in the company’s operations for higher future returns. However, the principal amount invested is not required to be repaid. Investors get their returns from the performance of the company through dividends issued or sales of its shares. As such, the attractiveness of a company’s equity is based on its probability of default (risk) and its business potential and performance (reward).

Why I am confused
While Azalea Group is a Private Equity firm, Astrea IV is a debt instrument which relies on Azalea Group’s cash flow for interest repayment. The attractiveness of this bond should be based on its relative interest rate offered and its underlying ability to pay the interest and principal loan amount. If the underlying private equity investments do perform better, the bond investors do not receive further benefits from the interest rate offered. In addition to this, even though Azalea Group is indirectly wholly-owned by Temasek Holdings, the bonds are not guaranteed by Temasek. 

While I understand that the rarity of these private-equity-backed bonds may be the reason of its attractiveness, getting exposure to Private Equity via debt instruments do not resonate well unless the debt instrument has an option to convert into equities or equity-related benefits. A better gauge of bond attractiveness will be to compare its relative default risk and interest rate among other bonds offered in the market.

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Conclusion
The Astrea IV bonds have definitely performed well in the light of the positive marketing and its early performance (heavily oversubscribed). The purpose of this post is also not to discount its merits but to offer my 2-cents thoughts of how investors should differentiate the investment perspectives of an equity and debt instrument.

Click HERE to find out more about the offering.

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Wednesday, 23 May 2018

SGX My First Stock Carnival (AKA Stock FunFair)


SGX will be holding a carnival this coming weekend at Vivo City!
This event is suitable for those of you who are wanted to start their investing journey.
Join us at this event to learn more about investing and how to start the journey.

MOST IMPORTANT THING TO NOTE:
There are prizes to be won: 50 Units of STI ETF - it is worth about $170!!
There are also free goodies bag being given out on that day - like we always advocate: free thing just take~

In addition, we (Investment Stab) will be sharing with you on stage what we think is important to you before you start your investing journey.
Details of our segment are below:

Sunday, 27 May 2018
13:15 - 13:30
Topic: 3 Concepts to Understand Before You Start Investing
Sneak peak of the 3 concepts:
     1) What is Investing?
     2) When to Invest?
     3) How Risky?

Join us at the event during our segment to find out what we have to share!
You can also come find us and have a chat with us (or any other partners above) to find out more about investing.

See You There!

Wednesday, 25 April 2018

Get $2 Cashback & More When Watching Avengers

Yes, movie promotions are here, and of course, it is for any movies, not just Marvel The Avengers Infinity War.
This promotion is by DBS in conjunction with Golden Village (GV).

Simply pay with DBS PayLah App when you buy your tickets at GV's automated ticketing machine to receive $2 cash back from now till 31 May 2018 - regardless of how many tickets you buy.

In addition, you buy popcorn also got promotions:
A) DBS PayLah! Combo for $7 - 1 regular popcorn & 1 regular drink
B) DBS Combo for $9.90 - 1 large popcorn & 2 regular drink

Use the DBS PayLah! App to get all these promotions when you are going to watch your movie.

No PayLah App?
Check out our link here to find out how to download the app
How to Download DBS PayLah!

Of course, this kind of thing got terms and conditions (as always):
1) Limited to first 10,000 transactions only
2) Only for first time transaction only
3) Have to be GV member and need to scan your GV e-card before you can enjoy this offer
4) Not valid for premium priced, 3D, Gemini, Gold Class, D-box, group screening, film marathon, film festival, premieres, Sneaks and other possible events

For more details about the promotion, visit the link HERE.

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Monday, 23 April 2018

How to Buy Real Estate in Singapore?

Property purchases in Singapore can be some of the most lucrative if done right. However, it is without a doubt challenging. For instance, anyone looking to invest in the property project should understand what it offers in its entirety.
You need to follow a process, and some decisions need to be made early on. Like buying property anywhere else in the world, in Singapore too, owners incur costs like repairs, maintenance, and a commitment.

Do Your Research
Researching the market is a great way to find out what type of properties are available and what you can expect to pay. Prepare a short list of homes that meet your requirements. Your requirements may include things like:

  • The number of bedrooms.
  • The overall size of the home or real estate.
  • Your preferred location.
  • Reoccurring costs associated with the property.

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Usually, it's better to start your research from the websites of the best property developers. Here is the list of the Top 10 property developers in Singapore, created by https://www.asiapropertyhq.com/property-developers-singapore/ :

  • Far East Organization
  • El Development Pte Ltd
  • City Development Ltd
  • Frasers Centrepoint Ltd
  • MCC Land
  • Qingjian Realty
  • GuocoLand
  • Bukit Sembawang Estates Limited
  • Hoi Hup Realty Pte Ltd
  • CapitaLand

Take the New Futura Condo for instance. If you were considering the condo, you would have to research to determine which size will fit you the best. You’ll also need to determine if you have the required budget for the beach facing view. Other things you’ll need to consider when choosing a condo is if its near to your place of work. Also, what type of maintenance costs you’ll incur.

Types of Properties You Can Buy – Freehold VS Leasehold
When buying property in Singapore, you’ll be faced with a choice between freehold and leasehold. The difference between the two is significant, and so that has influence over the price as well.
Freehold properties can be held by the owner forever or transferred to their kin.
On the other hand, leasehold properties will revert back to the state when the lease expires.
Lots of properties in Singapore are freehold. That means you can own the property for as long as you want and sell it when the time comes.
However, keep in mind that generally speaking freehold properties are 10% - 15% more expensive.

Price Valuation
Before you buy any property, you’ll want to get it valuated. Now even though property price has already been valuated, it is essential to make a comparison. When you compare the costs of this project with others, it becomes easier to estimate how big a loan you can or should get.

You should also consider the total duration of the loan and its subsequent monthly instalments.
Individual borrowers who don’t have an outstanding house loan, the LVL or Loan to Value Limit is 80%.
If the tenure exceeds 30 years or extends beyond the age of retirement of a borrower, then it's 60% of the property’s value.

Closing the Deal
Once the buyer and seller have agreed on a price, the sale can be completed. Completing the purchase will require paying the seller, and transferring the CT or ‘Certificate of Title’ to the purchaser.
The CT is only issued by the Singapore Land Authority (SLA). It is also proof that you own the property.
Your lawyer then inspects the CT. It is also at this point that the lawyer holds on to the CT.
The next couple of steps are handled by the lawyer. This usually requires that the solicitor holds the CT until legal formalities have been completed. After that, it is surrendered to the SLA, which then reissues a new CT in the name of the new owner.
It takes a total of around ten weeks for the process to complete. If a mortgage has been sought the solicitor lodges a caveat for the property and coordinates with the bank or any other financial institution.
Finally, the mortgage documents are prepared, and the property is officially yours.


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If you don't put your two cents in, how can you expect to get change?

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This article is brought to you by:
Author: Robert Lamp
Position: Ghostwriter in New Property Guide
Blogger Email: robertlamp10@gmail.com

Monday, 9 April 2018

Free $5 with DBS PayLah

Here is a guide to finding your promocode to share with your friends.
The first part of the guide is to get you signed up and get your first $5.
The second part of the guide is to get you familiar with how to share your promocode with your friend so that you can get your subsequent $5.
Get them to download DBS PayLah so that you can both of you can get $5 from DBS!
Just by downloading an app you can get $5!
And if you like, you can transfer that money to your POSB or DBS bank account.
You don't have to use the app, we just want you to get that free $5 first.

Part 1: Getting My First $5

Step 1: Downloading the App
iOS link: App Store
Andriod Link: Play Store

Step 2: Login into the App
This is the home page, click on the bottom right 'More'.

Step 3: Click on 'Add Promo / Gift Code'
Click on 'Add Promo / Gift Code' to enter the promo code 

Step 4: Enter the promocode to get $5
Enter the promocode 'CLAXCU863' and click submit.



Part 2: Getting My Subsequent $5

Step 1: Login into the app
This is the home page, click on the bottom right 'More'.



Step 2: Go to 'Invite and Earn'
Click on 'Invite and 'Earn' to find your promo code 

Step 3: Click on 'Share' to share your code with your friends
Click on 'Share', options will pop up for you to share your promocode to your friends either via WhatsApp, Facebook or any other platform you wish to use to reach out to your friends.


MAI TU LIAO!
Hurry and grab your promo while it last! :D


*A bit of disclosure: while we are not working with DBS to promote this app, we do get a $5 when you sign up with our promo code :D So thank you in advance.

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Thursday, 29 March 2018

Uber's Partnership in Recent Years


Biggest news in Singapore yesterday was the merger between Uber's Southeast Asia wing and Grab. This is not something new. After years of fighting and bleeding money in markets all around the world, Uber decided to try a different route and has been partnering with many of its competitors in major markets.

Exchanged its China's operation for 17.7% stake in Didi Chuxing
On August 2016, Uber sold its China operations to Didi Chuxing (China's leading ride hailing company). Didi invested US $1 billion into Uber (Parent company) at US $68 billion valuation. Uber on the other hand, receives 17.7$ stake in Didi. One year after the merger though, there have been feedback that it is now harder and more expensive to get a ride through Didi. 

Exchanged its Russia's operation for 36.6% stake in Russia Ride Hailing Company
On July 2017, Uber merged its Russia operations with another ride-hailing company startup to form the Yandex.Taxi company. Yandex is the largest internet company in Russia, the Google of Russia. It owns a ride-hailing service as one of its subsidiary. The subsidiary is the company that merged with Uber Russia. Uber owns 36.6% of this combined entity.

Exchanged its Southeast Asia operation for 27.5% stake in Grab
On 26 march 2018, Uber sold its SEA operations to Grab for a 27.5% stake in Grab. Grab will take over Uber's ride hailing and food delivery business. 


There is this underlying person behind the scene that not many of you may know, Japan's richest man - Masayoshi Son, founder of Japan's SoftBank Group (and no, it is not actually a bank, and FYI again, he's Korean and not Japanese). SoftBank invested in many ride-hailing startups around the world. Just to name you a few, he invested in Didi Chuxing, Grab, Ola (India), 99 (Brazil startup that was recently bought by Didi) and recently Uber. Just to make things look a little more interesting, here is what SoftBank owns.
  • US Sprint Corporation (83%)
  • Yahoo! Japan (43%)
  • Alibaba Group (29.5%)
  • Nvidia (4.9%)
  • Flipkart (23.6%) - India's e-commerce
  • ARM Holdings (100%) - the company that makes your smartphone chip
  • A ton of other startups beside ride-hailing companies.
This is what SoftBank owns outright. But its effective ownership in many companies are more than what is stated. That is because Alibaba also invests in tons of other startups, many of which overlaps with SoftBank's own investments. This significantly increases the effective ownership SoftBank has over these companies.

Is it possible for this to be the last merger in the ride hailing business scene? Probably not. There are probably going to be a lot more mergers as companies start to consolidate, merge, and partner up in order to compete with other startups and to reduce the rate they burn their capital. SoftBank will probably also push for more of such deals since less loss-making = more profit-making, which will increase the value of its investments.
I think the most important question thus far is: Will I still be getting my weekly dose of promo codes and discounts for rides? Probably not :(


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Tuesday, 13 March 2018

How Warren Buffett Convinced Me to Invest & Not Speculate


This quote was the reason that convinced me to invest instead of speculating, to invest long-term instead of short-term. Investing to me is putting money to work to build the future. That is why we say "invest in infrastructure", "invest in human capital", "invest in healthcare" etc. It is because it is not a guess or gamble. Investing has a purpose, has an output, and is beneficial to the economy. Imagine someone saying "let's speculate in our infrastructure, human capital and healthcare". How scary is that!

Using Warren Buffett's example, imagine you are stranded on an island with another 99 people (total 100 people on the island). In order to survive, the people are grouped and allocated different tasks:

10 wheat farmers
10 corn farmers
10 pig breeders
10 chicken breeders
10 cow breeders
10 fishermen
10 dig wells and cleanse water
10 build houses
5 auditors/accountants
5 police to ensure law and order
5 leaders to govern the place
5 traders

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The leaders created a currency (stranded dollar) to facilitate the business transaction between the people living on the island. You know what 95 people on the island do: they produce some sort of output that ensures that 100 of us survive. There are people making food, water, homes, security, etc. But there are 5 people who produce no economic output. They basically come together every, sit at a round table, and start betting with one another how many pigs is the pig farmer going to have by end of the year, how many fish will the fishermen catch etc. These "talks" create no positive economic output to the society.

Today, a large number of people are participating in this form of mindless activity. Not everyone on Wall Street is speculating, they are also providing a form of service - a positive economic output. They provide us with insurance, facilitate money transfers, provide retirement advice etc. But way too many are speculating on asset prices and other assets.

For the average mom-and-pop investors, I would recommend investing for the long-term, invest instead of speculating. It is really not that difficult, it can be as simple as a savings plan except instead of money accumulating in a savings account, it gets invested in the stock market. But that is beyond the scope of this post. Read up on why it is easy HERE.

Recommended Post: Infographs about SG Budget 2018 that You Should See


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Wednesday, 21 February 2018

Infographs about SG Budget 2018 that You Should See

Budget 2018 was announced 2 days ago on 19 February 2018. Took us a while to digest everything, especially the 2% GST hike despite the budget surplus we got. Nonetheless, after 2 days of reading, these are some of the infographics that we thought you should know about Budget 2018 that will affect you. The list is not exhaustive, there are many other things that we did not include like 10% increase in tobacco products and increase in maid levy because they don't really affect the majority of the people. But if you want to know more, there are 2 links below you can click to find out more.


THE GOOD

SG Bonus for all Singaporeans above age 21.
I guess this is the most important part of the whole budget. The part that we are waiting for where the government will announce how much it will be giving us back. This time it is called 'SG Bonus' and is given to all Singaporeans based on their annual Assessable Income. 


GST Voucher (Cash)
In addition to giving you a 1-time cash bonus, Singaporeans above the age of 21 will also be getting a GST Voucher (Cash) this year. If you own not more than 1 property & its annual value does not exceed $21,000 and your Assessable Income for FY2017 (which is income for the year 2016) is not more than $28,000, then you will get this extra money in August 2018.








Source: GSTVoucher


GST Voucher (U-Save)
The utility bill rebate scheme. Those who own more than 1 property or private property are also not eligible for this GST Voucher. This voucher will be paid in April, July, October, and January.









Source: GSTVoucher


Enhanced Proximity Housing Grant
Families buying a resale flat near their parents or children will now receive $30,000 (previously $20,000) worth of grants. Singles who buy a resale flat WITH their parents will get grants of $15,000 (previously $10,000) and those who buy resale flat NEAR their parents will get $10,000 in grants. The definition of 'near' has also been revised from '2KM' to '4KM'





















Source: Channel News Asia


Service & Conservancy Charges (SCC) Rebates
Households living in HDBs will receive at least 1.5 months of SCC rebates from Budget 2018, the same as last year.





















Source: Channel News Asia


THE BAD

Increase in GST by 2%
GST will be raised from 7% to 9%. While GST increase is bad - there is no doubt about it, it won't be coming anytime soon. The increase is scheduled to be implemented between 2021 to 2025. Meanwhile, shop till you drop while you can before the increases kick in! Although GST will increase, more money will also be set aside to help those the middle and lower income household cope with the increase in GST. An extra $2 billion will be set aside for GST Voucher schemes to help the lower-income households cope with the increase in GST. Despite the increase, our GST is still one of the few lowest among the Asian countries.

Source: Bloomberg


Increase in Buyer Stamp Duty (BSD)
If you are looking to buy a home that cost more than $1million, then you better be prepared to pay extra 1% of BSD for any amount above $1million. This is to ensure that those who can afford to buy a more expensive home pays more taxes to make society more equitable. This probably affects more for those buying private properties and less on those buying HDBs. Then again, HDB prices are also rising, so maybe it won't be soon before HDBs also hit that $1million bracket.









Source: IRAS


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Monday, 19 February 2018

#ICYMI: Uber is planning to sell majority stake in its Southeast Asian unit to competitor Grab


After years of fighting for dominant market share, Uber has finally thrown in the towel and deciding to sell Grab a majority stake in its Southeast Asian unit to its regional competitor Grab. This decision will have important effects in the market especially for existing players such as current taxi operators. This trend is not its first as Uber is losing its market share against region-focused players such as Lyft, Didi Chuxing and Grab. A good case study to evaluate its market impacts is China.

China market
Several years before Uber conceded its Southeast Asian territory, it lost its fight in China against Didi Chuxing. The China taxi industry is huge with an estimated of 1.1 billion daily commutes. Even with such market size, the ride-hailing market has since consolidated largely between traditional taxi operators and tech platforms such as Didi Chuxing. Different from Singapore, the China ride hailing market has consolidated with Didi Chuxing being the main player, possessing more than 80% of the market. This could likely be a key movement after Southeast Asia's consolidation.

Having a monopolistic market as a ride hailer, Didi Chuxing has reigned in on discounts and bonuses for both drivers and consumers. The discount-centric model was unsustainable and the company is transiting back to profit-focused model. Consumers previously attracted by the lower fares are now looking to switch back to taxi operators as they are more affordable comparing to surge pricings. Ridership dropped by 40% for some time after subsidies were withdrawn. Although the national government has lifted regulations governing ride-hailing, local cities implemented their own rules specifying stringent criteria to qualify as a private hire driver. For example, Beijing and Shanghai require all drivers to have a local residence permit before they can drive. This resulted in a significant drop in supply of drivers and indirectly raising the price paid by consumers. Consumers are also finding it more difficult to hail a ride on the app. There is prevalent negative consumer feedback where 81.7% of consumers find it more difficult to hail a ride. As such, consumers are slowly turning back to taxis as a solution. This can potentially increase the growth of China taxi market to moderate as parties look to negotiate deals that will appease the majority.

In the taxi industry, there is strong network effect where consumers tend to look for the largest taxi company as this assures them the least waiting time and highest chance of getting a taxi. Being a taxi driver (potential leasee of the taxi company), it is best to go to the largest taxi company which can reach the largest pool of consumers. This cycle reiterates itself, allowing the taxi company to grow.


The current SG market
Comfort Delgro (CDG) owns the largest fleet size in Singapore of approximately 17,000 taxis or 61% of the market. As a result, it has strong network effect present in the Singapore market. There are also low competition rivalry from other taxi rental companies, as taxi annual fleet growth is capped at 2% enforced by LTA. CDG is likely to remain the largest taxi company in Singapore.


Traditionally, there is low competition from other taxi companies such as SMRT and TransCab. However, when the disruptors entered the market, it has faced structural challenges where Uber and Grab are offering heavily discounted prices to consumers and drivers. In addition, Grab has formed strategic partnerships with other taxi companies, such as Prime and SMRT. This has eroded CDG’s market leadership where its traditional competitors now have a higher combined fleet size.

In response to obtaining the network effect, disruptors also offer steep discounts and incentives, compared to taxi companies, to attract potential drivers or existing taxi drivers. TODAY has reported that at least 3,000 CDG drivers have switched operators [TODAY, 29 September 2017]. CDG has also responded by offering similar discounts to taxi drivers and consumers, increasing its marketing efforts and investing into its booking apps.

The taxi industry also faced an uplift in marketing costs to match the discounts and promotions offered by disruptors to retain its market share. This has extensively eroded the competitive advantage of network effect and increase the overall supply of drivers who can fulfil the need of private transport. These increased its operating costs and squeezed margins, while losing its competitive advantage of network effect. It is now the second largest private transport fleet, behind private hire companies, Grab and Uber. CDG and Uber previously announced a partnership to enhance user experience where Uber can tap on CDG's existing fleet to boost driver supply. With Uber's new decision, there is likely to be changes with the partnership and possibly, negative impacts on CDG as Grab nabs more market share.
There are massive synergistic revenue generation from its automotive engineering business with CDG’s taxi fleet. Previously, with high taxi fleet utilisation, CDG enjoys high engineering revenue as more taxis are being brought for maintenance and servicing. CDG also sells diesel to its taxi drivers. However, with Uber and Grab attracting its drivers away, CDG is facing a drain on both businesses as they are highly correlated.

What is unknown now is whether Grab will transit to a profit-focused strategy, similar to what Didi Chuxing is employing. If so, the consumer preference shift might also be witnessed and CDG could prove to be an attractive buy right now. However, only time will tell as Grab is also focusing on its e-payment platform and may continue its discounts to synergise that area. What is known now is that consumers will flock to whoever provides more value for lower prices and who has the biggest coffers to sustain that will survive.



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Friday, 2 February 2018

Good Stock Market Performance in January = Good Stock Market Performance for the Year?

January 2018 is a great month for the stock market, and probably a good start too!
The Straits Times Index (STI) is up about 3.4% for the month of January.
The S&P500 is up about 5.6% in the same month.
But does this mean that stocks will continue to do better for the rest of the year?
Here's a short video clip to explain if this will happen.


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Saturday, 27 January 2018

Is EZ Link Too Late for Cashless Payment Push?


The Straits Times reported a few days ago that EZ Link Cards will soon be accepted in hawker centres and subsequently with other merchants. This is all in a bid to move Singapore towards a more cashless society. Although this is a good initiative - and one that has finally arrived, it really came a bit too late.

For those of you who have been to Hong Kong before, you would know that they have a really good cashless payment system, the Octopus Card. It was created in 1997 mainly for payment of public transport but subsequently expanded to become Hong Kong's main wireless smart card payment system when the Government allowed it to be used for more than just transport payment in the year 2000.


Meanwhile in Singapore, although we have a similar card that does that does the similar function, EZ Link was never promoted to be used for anything more than transport (maybe 7-11). Or maybe it did try to mimic what Hong Kong's Octopus Card did but fail badly, and this time it is attempted to try it again. But, with the push from NETS' Flashpay, Mastercard's PayPass, Visa's Paywave, and many other cashless payment services coming out, can EZ Link succeed its push this time?

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