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

Friday, 14 February 2020

Is Greta Thunberg Overrated?


I would like to share a perspective after seeing people bashing one environmentalist over another, pitting one against another as if the environmentalists are in some sort of competition against each other.
Except they are not, they are fighting for the same cause: to get people to start acting responsibly for the world.

NARRATIVE PERSPECTIVE:
A tap is running, the sink is overflowed and water is spilling onto the floor.
You got 2 children both of which cannot reach for the tap to stop the water from flowing out.
Your older son took a mop and start mopping the floor dry while the water continues to overflow.
Your younger daughter went to call you up from your bed to come and close the tap.

Do you find your son more useful than your daughter?
Or do you find both of them are actually trying to get something done and you as the parent should f**king wake up your idea and turn off the bloody tap?
Source: Reddit

Pitting of Environmentalists
So instead of pitting one against another, maybe we should wake up our idea, and start doing something for the environment.
Don't pit one environmentalist against the other as your justification to not do anything about the environment.
We use 1.76 billion plastic items in 2018.
473 million of them are disposable plastic items like takeaway containers and cutleries, equivalent to 432,000 people throwing away a food container, a spoon, and a fork, every day!
Maybe, just maybe, if we all just brought a fork and spoon to work and not use the disposable plastic fork and spoon for our lunch, we reduce 2 plastic per person per day, we can make the planet better for our future generations.

Source: The Kritic

"Our plastic are burnt in our incinerators, so there are no turtles being poked by our plastic."
That seems to be the only thing people in Singapore can say.
"I throw my plastic trash into the trash bin/recycling bin, I am therefore a responsible plastic user and a recycler."
Except, things don't work that way.
Less than 20% of our plastics are recycled - most of them are shipped to Third World countries and causing health problem for their people.
Even if we recycle our plastic, these plastic do not bio-decompose; instead, they break down into smaller pieces call 'micro-plastic', and it has been found that we eat about 1 credit card size worth of micro-plastic every week.
Plastic is not a climate problem, it is a waste problem.
Yes, we have the technology to burn it and capture most of the harmful pollutants it releases
We are still releasing a lot of harmful pollutants that we can't capture into the environment, and that will only grow as we continue to use more plastic in our daily lives.
At the rate that we are going, we are going to fill Semakau landfill by 2035, and then what do we do with our trash?
Will we be able to keep finding wasteland to pile up our trash in land-constrained Singapore?

Recommended Read: The HDB Pricing Dilemma


"I just cannot live without plastic, I need plastic bags for my trash, straws to drink my BBT..."
IT IS NOT "ALL IN OR NOTHING"
I have spoken to many people about going green.
I've tried going green - I tried to use less plastic, use reusable food containers for takeout, use bottles/tumbler for takeaway drinks, take more public transport, etc.
Nonetheless, I still use plastic - the candies I eat are wrapped in a wrapper, the ice cream I eat still comes in a plastic container, the food delivery I ordered came in plastic bags, and I still fly around and travel.

People seem to think that if someone is going green,
they must do the following:
1. Use ZERO plastic (no disposables, no plastic bags, etc)
2. Don't fly or travel
3. Don't eat meat
4. Generate minimum waste
You are either environmentally-friendly or not environmentally-friendly, you can't be in between.

Not going to deny, there are those who do live their lives that way, but most environmentalists don't.
Think of it as a spectrum.
On one end, it's the person that uses only disposable items, drives diesel cars, meat-only, and generates tonnes of wastage - 10 tissues to clean 1 mouth. Let's say this is 0 marks.
On the other end, it's the person that uses zero plastic, flies when necessary, vegan, generates waste that fits inside a jar. Let's say this is 100 marks (full marks).
Most of us are in between, we use plastic, eat meat, travels, and generates a decent amount of waste, but we also use cups and plates (at home), take public transport, and turn off lights when not in use.
The goal here is to be as close as we can to the full marks, or a nice 70 marks would work too.
Most of us probably fail - I don't have a matrix for this but if you do food takeout daily (food or drinks, especially coffee and lunch), you probably failed.
Think about it, 1 plastic container, 1 plastic bag, 1 plastic spoon and fork, 1 plastic cup (paper cups are actually just as bad as plastic - surprised?), all used and thrown after about 1 hour of use.
If you go to work 200/365 days, you generated 200 sets of the above combination. That's a lot.

But, we can always improve to a pass.
1. Bring your own food container to put takeaway food (can save $0.20 container money).
2. Bring your own bottle to put takeaway drinks.
3. Turn your air-con to fan mode after a couple of hours
4. Sleep early (if you don't use lights at night, you don't create emissions 😜)

Recommended Read: CPF LIFE in the Year 2020

"Using non-disposable items also waste water"
Yup, I know, I heard people say "but if I wash it, it wastes water. Isn't it just as bad?"
Well, at home you use non-disposable cups, plates, and cutleries, right?
I don't see you saying you are wasting water using these non-disposable options.
That aside, we have a NEWater plant, we have developed ways to clean water so that they can be reused.
I haven't heard we have developed anything to biodegrade plastic harmlessly or reuse disposable plastics.

Conclusion
We have gotten used to our lives that we cannot revert back already.
It is almost impossible now to work without air-conditioning or to expect us to not travel as the world gets more interconnected.
But what we can do, is to use renewable and sustainable alternatives.
Use renewable energy instead of coal, generate less waste, push for greener materials in buildings, push for more energy-efficient transportation, etc.



WSG can provide you with a career coach that is able to help you with that. 
And if you are looking for a free career coach, visit Workforce Singapore via the link below.
They can link you up with the career coach and you 
might be able to find new opportunities on their jobs portal.


Happy Lunar New Year!
As we progress towards the next phase of our journey, we would like to find out what would make you like us even more.
So we hope you could help us fill in a short survey of 8 questions (4 of them are MCQs) so that we can help better tailor our content to you.
Survey

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

Have feedback? Tell us now!

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Friday, 31 January 2020

Can I Use CPF to Buy a House After 55 Years Old?


Today's post will be on: Buying a House using your CPF after age 55.
This is part of the chain of housing-related posts.
We have the misconception that upon reaching age 55 if we sold our house, the money we get from it will be transferred to our Retirement Account (RA) until the Retirement Sum (or Minimum Sum) is met.

We would like to share today that, you can actually use the money in excess of half your applicable Retirement Sum to buy your next house if you are age above 55.

Example:
You are 54, you recently sold your house, and your applicable Retirement Sum is $155,000.
If you wish to buy a new house, you can withdraw the amount in excess of half your Retirement Sum ($90,500) to pay for your house.
However, let's say you do not meet your Retirement Sum (you only have $130,000).
Then you can withdraw the amount in excess of half your Retirement Sum ($90,500), meaning that you can withdraw ($130,000 - $90,500 = $39,500) to partially finance your new home.

Recommended Read: The HDB Pricing Dilemma

However, this usage of your Retirement Sum to finance your new home is not an automatic option.
You would need to make a request to CPF to allow you to reserve a portion of your OA to not transfer to your RA.
The instruction on how to do it can be found here.

For more information on this, you may visit CPF's website, or more simply email/comment us with your questions and we will do our best to find you the answers.

Happy Lunar New Year!
As we progress towards the next phase of our journey, we would like to find out what would make you like us even more.
So we hope you could help us fill in a short survey of 8 questions (4 of them are MCQs) so that we can help better tailor our content to you.

And for helping us help you, we are going to have a lucky draw.
5 lucky readers who fill in the survey will be selected at random to win $5 Grab voucher.
Survey


WSG can provide you with a career coach that is able to help you with that. 
And if you are looking for a free career coach, visit Workforce Singapore via the link below.
They can link you up with the career coach and you 
might be able to find new opportunities on their jobs portal.
Link me up with a coach


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

Have feedback? Tell us now!

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Thursday, 30 January 2020

The HDB Pricing Dilemma


As for if it is a problem of cooling measure of economic failure, I would say it's probably neither, but it's the social phenomenon in modern societies - we technically see it in most asset classes like stocks and bonds too.

HDB Problem:
The older generation (those with HDBs) or any sellers would love the prices to be high so that they can sell it for a profit and have a comfortable retirement egg nest.
The younger generation (those buying BTOs and resale) or any buyers would love the prices to be low so that they don't have to pay as much for a home (lower debt burden).
It's a struggle (or tug-a-war) between people of different generations and it is tough to say which side should get more help.

Help the Buyers of Houses?:
Sell BTO at the cost of construction to buyers
Buyers can buy cheaper BTO flats.
After the 5 years minimum occupancy period (MOP), these buyers can sell their flats in the resale market.
That will probably result in a drop in HDB resale prices on a whole (you as a buyer would not pay a huge premium for a resale flat if you knew it was sold initially at cost price).
The result is people who previously bought a flat before the drop in resale prices (ex-buyers who bought at a high price) will now be underwater (loan amount > HDB value).
It is also possible that these ex-buyers are retirees relying on their flats for retirement income, and suddenly the drop in the value of their flats might affect their ability to retire.
Qn: Do you want to give subsidies to those homeowners who are underwater to compensate them on their losses?
Let us know in the comments below.

Help the Sellers of Houses?:
Sell BTO at marked-to-market prices to buyers
Buyers buy more expensive flats.
Initial buyers are given subsidies to afford the high cost of homeownership.
After the 5 years MOP, these buyers can sell their flats in the resale market.
Flat prices in the resale market will probably remain high.
Sellers can sell at even higher prices in the resale market.
Qn: Do you want to give subsidies to the new home buyers to help them afford their first home and make homeownership a reality for them?
Let us know in the comments below.


Our View:
Housing is a sensitive issue that requires delicate handling and balancing of the interest of both the buyers and sellers.
We think the Singapore Government did manage to solve this pretty well with all the grants being given out to the younger generation to ensure they can buy a home.
It is more important to ensure that homes in Singapore are kept at a fair value so that it does not disadvantage the older or younger generation too much.
So some form of cooling measures and some form of grants would be needed.
That's not to say that what we have now is perfect - there is always room for improvements.
What are some improvements can you think of?
Let us know in the comments below 😉.

Also, because of the need to balance between buyers and sellers, we think that HDBs are not really a great investment - because the Singapore Government has to keep it at a fair value, which means there is kind of a "cap" on how high prices can go.
That is also why we prefer stocks over HDBs, as we had previously written in an article.
Link here: 3 Reasons Stocks are Better than 99 Year HDB

Happy Lunar New Year!
As we progress towards the next phase of our journey, we would like to find out what would make you like us even more.
So we hope you could help us fill in a short survey of 8 questions (4 of them are MCQs) so that we can help better tailor our content to you.

And for helping us help you, we are going to have a lucky draw.
5 lucky readers who fill in the survey will be selected at random to win $5 Grab voucher.
Survey

WSG can provide you with a career coach that is able to help you with that. 
And if you are looking for a free career coach, visit Workforce Singapore via the link below.
They can link you up with the career coach and you 
might be able to find new opportunities on their jobs portal.

Recommended Read: CPF LIFE in the Year 2020

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

Have feedback? Tell us now!

Follow us on Facebook and Instagram for more timely updates about finance-related articles and memes! 😁
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Wednesday, 29 January 2020

What Happens to the CPF Accrued Interest when the Owner Dies?

Today we will be answering this question: What happens to the CPF accrued interest when the Owner of the HDB passed away?
This question was submitted by one of our readers.
We would like to thank all our readers who post questions or tips to us.
We would love to see more of that coming in, so do feel free to keep sending us these messages!
You can contact us via email (investmentstab@gmail.com), comment on our blog, or drop us a message via Facebook or Instagram.

Answer:
If the owner of the house dies, the accrued interest is waived.
Think of accrued interest as something the owner needs to return into their CPF account in order to ensure that they have sufficient money for their retirement.
The accrued interest is technically taken out of their profit from the sale of their flats.
If the owner passed away, there is no need to plan for their retirement, and hence the accrued interest is cancelled.
The new owner(s) of the house will now be able to sell the house without the need to pay back any money into CPF.

Recommended Read: $20,000 Silver Housing Bonus: Should You Apply For It?

Side Note:
The paying back of the accrued interest is to ensure that your "retirement egg nest" is not reduced because of the act of taking money out to buy a home.
And that accrued interest in a way would be funded by the profits (if any) from your home sale.
Even if the sale of the home results in a loss, technically the accrued interest would not affect you much because we technically never have to pay it back anyway.
The accrued interest would keep accumulating in this case, but we technically will never have to pay it back until we buy another home, sell it again, and make profits on it.


Happy Lunar New Year!
As we progress towards the next phase of our journey, we would like to find out what would make you like us even more.
So we hope you could help us fill in a short survey of 8 questions (4 of them are MCQs) so that we can help better tailor our content to you.

And for helping us help you, we are going to have a lucky draw.
5 lucky readers who fill in the survey will be selected at random to win $5 Grab voucher.
Survey

WSG can provide you with a career coach that is able to help you with that. 
And if you are looking for a free career coach, visit Workforce Singapore via the link below.
They can link you up with the career coach and you 
might be able to find new opportunities on their jobs portal.
Link me up with a coach


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

Have feedback? Tell us now!

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Subscribe to our newsletter too in case social media platforms decide to stop showing you our content.

Tuesday, 28 January 2020

$20,000 Silver Housing Bonus: Should You Apply For It?

Source: HDB

Today we will be answering this question: is it advisable to put $60,000 into my Retirement Account (RA) to get the $20,000 Silver Housing Bonus?
This question was submitted by one of our readers.
We would like to thank all our readers who post questions or tips to us.
We would love to see more of that coming in, so do feel free to keep sending us these messages!
You can contact us via email (investmentstab@gmail.com), comment on our blog, or drop us a message via Facebook or Instagram.

Answer:
When it comes to CPF, there is not really a one-size-fits-all solution.
There are some flexibility and restrictions that you will have to consider before making such an important decision.

Assuming you apply for the Silver Housing Bonus
If you sell your home, and your net proceeds from the sale is less than or equal $60,000, immediately all of the proceeds will go into your CPF RA.
Under this scenario, you get only $1 for every $3 you put back into your CPF RA.
Eg; if you put into your RA only $30,000, you only get $10,000 in Silver Housing Bonus instead of $20,000.
If your net proceeds exceed $60,000, the bonus will be capped at $20,000.
Below is an image from HDB on the calculations for SHB
Source: HDB

Recommended Read: 6 things to do with your CNY money

Conclusion
If your goal is to have cash after you downsize your home, then this might not be suitable for you because it is possible for you to end up with no cash if the net proceeds is less than $60,000 (Of course if you managed to exceed your cohort's CPF Retirement Sum after you topped up $60,000 + any SHB to your CPF, you will be able to withdraw the excess. So that's another consideration you can and need to consider).

But if your goal is to ensure you have enough for retirement (in terms of monthly payout from CPF), then SHB is a pretty good option for you because, by downsizing, you get an extra $20,000 from the government to support you during your retirement.
Our motto is always 'Free money just take'; but of course that is after you understand all the conditions attached to it.

So, it really depends on what is the end goal you want (immediate cash or monthly retirement income).
You could discuss further in details with an HDB officer or a financial adviser to assist you in making the decision.
Like we said, there is no one-size-fits-all solution, it really depends on what you want and what your circumstances are.

WSG can provide you with a career coach that is able to help you with that. 
And if you are looking for a free career coach, visit Workforce Singapore via the link below.
They can link you up with the career coach and you 
might be able to find new opportunities on their jobs portal.

Recommended Read: CPF LIFE in the Year 2020

Happy Lunar New Year!
As we progress towards the next phase of our journey, we would like to find out what would make you like us even more.
So we hope you could help us fill in a short survey of 8 questions (4 of them are MCQs) so that we can help better tailor our content to you.

And for helping us help you, we are going to have a lucky draw.
5 lucky readers who fill in the survey will be selected at random to win $5 Grab voucher.
Survey

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

Have feedback? Tell us now!

Follow us on Facebook and Instagram for more timely updates about finance-related articles and memes! 😁
Subscribe to our newsletter too in case social media platforms decide to stop showing you our content.

Monday, 27 January 2020

Is Technology After Your Job?

In 10 years, the pilot and the cameraman lost their jobs, but new jobs like drone pilot sprang up.
There will always be jobs in the economy, but are we able to take up that job if we do not upkeep our skillsets.
In the past, the pilot and the cameraman have to take on great risk in order to do 360 degrees kind of shots in the sky (imagine spinning the aircraft).
Today, just a drone will do, and if anything goes wrong, it is the drone that gets killed, not the people on board the aircraft.

Ford & Horse Carriages
We might think that technology is killing jobs, killing good jobs like pilots and cameraman.
But that is how capitalism, or how the world works.
Imagine your great-great-grandfather was trained to be a horse-carriage driver and was making a decent living until Henry Ford came in with his cars and completely killed the horse-carriage industry.
Your great-great-grandfather would probably feel angry at Ford and might blame his government for not protecting the horse-carriage industry or his job.
But fast forward to today, do you miss horse-carriage?
Do you think the world would be a better place if everyone owned a horse or rode in a horse-carriage?
Same goes for the elevator operators, people who operate lifts for you so that you can go up or down (Yes, there used to be such a job in case you are too young to know 😉, and back then lifts were a lot more complex than pushing a few buttons).
Can you imagine how much more expensive things will be if we did not improve the lift technology to make it simpler?
Just imagine every HDB, every unit has to contribute a sum of money to pay the lift operators' salary (and we probably need a few on shift work) in order to go up and down the block.

Recommended Read: 6 things to do with your CNY money

Conclusion
Back then, if you make horse-carriages for a living, had you upskill yourself when the car industry came in, you might be able to get a job in the car industry, or maybe in carpentry (since horse-carriages and carpentry seem similar in nature).
If you rode a horse and ferried people around, you could upskill yourself by getting a driver's license and ferry people around in cars.
Technology will continue to change, so will how we live our lives.
The unfortunate thing is, change is going to become ever faster.
Source: reddit

You can sit back and grumble all you want about how you hate this change and how you want things to go back to where it was when it was easier for you, but it is not going to happen.
Change hit the horse-carriage drivers; it hit the elevator operators; it definitely is going to hit you some point in life.
So it might be better if you pick yourself up, train and upgrade your skillsets so that when the unavoidable change comes, you are better prepared for it.

WSG can provide you with a career coach that is able to help you with that. 
And if you are looking for a free career coach, visit Workforce Singapore via the link below.
They can link you up with the career coach and you 
might be able to find new opportunities on their jobs portal.

Recommended Read: CPF LIFE in the Year 2020

Happy Lunar New Year!
As we progress towards the next phase of our journey, we would like to find out what would make you like us even more.
So we hope you could help us fill in a short survey of 8 questions (4 of them are MCQs) so that we can help better tailor our content to you.

And for helping us help you, we are going to have a lucky draw.
5 lucky readers who fill in the survey will be selected at random to win $5 Grab voucher.
Survey

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

Have feedback? Tell us now!

Follow us on Facebook and Instagram for more timely updates about finance-related articles and memes! 😁
Subscribe to our newsletter too in case social media platforms decide to stop showing you our content.

Friday, 24 January 2020

6 things to do with your CNY money


1. Save
Emergency fund, HDB down payment, wedding down payment, car down payment, investment war chest.
These are all good reasons to save your Ang Pow money for.
Your Ang Pow is like a windfall, and like all windfall, you should try and save preferably 50% of it at least.
If you are below 26 years old, you might want to consider Standard Chartered JumpStart savings account - it gives 2% interest on the first $20,000.

2. Invest
What good is it if your money is just sitting in your bank account earning that miserable 0.1% interest.
Make it grow.
Invest in index funds, or stocks, or REITs, or assets that you are familiar with.
Never invest in anything you have no clue about.

3. Pay Debts
Pay down your debts if you have any.
Whether it's a credit card loan, mortgage loan, car loan, student loan, whatever debts you can think of.
Including the friends and family members that you owe money to (if any).
Aim to be debt-free fast!

Recommended Read: Why I Stopped Value Investing

4. CPF
Top up to your CPF or your loved ones' CPF account (Retirement or Special Account).
You get a tax deduction and by putting your money into CPF early, you allow it to earn more CPF interest (4%!)
Consider the top up as planning for your retirement.
If you are not well-versed in investing or have no idea how to do it, then CPF is actually not a bad place to park your retirement savings.

Click here to find out more about Retirement Sum Topping-Up Scheme and click here if you want to do the top-up.

5. Strengthen Relationships
Treat your family/friends/colleagues/subordinates to a meal or coffee.
Build relationships!
They are an important aspect of your life.
People who are healthier and live longer lives all have good relationships with the people around them.
It is a good return on investment if it benefits your physical and mental health.

6. Education
You are the engine of your wealth.
There is no better investment than an investment in yourself
Use the money to educate, upgrade, and upskill yourself.
Maximise your SkillsFuture credits and sign up for courses.
If you are thinking of changing job, WSG might be able to assist you in it.
WSG can provide you with a career coach that is able to help you with that. And if you are looking for a free career coach, visit Workforce Singapore via the link below.
They can link you up with the career coach and you might be able to find new opportunities on their jobs portal.


Recommended Read: CPF LIFE in the Year 2020

Happy Lunar New Year!
As we progress towards the next phase of our journey, we would like to find out what would make you like us even more.
So we hope you could help us fill in a short survey of 8 questions (4 of them are MCQs) so that we can help better tailor our content to you.

And for helping us help you, we are going to have a lucky draw.
5 lucky readers who fill in the survey will be selected at random to win $5 Grab voucher.
Survey

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

Have feedback? Tell us now!

Follow us on Facebook and Instagram for more timely updates about finance-related articles and memes! 😁
Subscribe to our newsletter too in case social media platforms decide to stop showing you our content.

Monday, 20 January 2020

Why I Stopped Value Investing


There are many definitions as to what value investing is, it is the kind of question that you will get different answers depending on who you ask.
Generally, there are 2 kinds of value investing.
  1. Asset-based: invest in companies selling below their net asset price
  2. Income-based: invest in companies selling below their earnings potential
The kind that I stopped doing, is asset-based value investing.

Case Study with Properties:
You deal with buying and selling of properties.
There was a house that you were previously considering buying but did not do so because it was selling at $500k, which you think is not cheap enough.
However, due to a recession in the economy, the owner is now willing to sell the property for $400k if you are willing to sign the deal within 1 week.
This presents you with the opportunity to buy the house for $400k, then take your time and wait for the economy to recover, then find a buyer who is willing to buy the house at $500k, earning a good $100k in the process.
While waiting for the economy to recover, you also made some rental income ($10k per year) renting out the property.

The above scenario happens frequently in the stock market as well.
Just replace the words 'property' with 'stock', 'rental income' with 'dividend'.
A company can have net assets (total asset - total liabilities) of $500k, but the market capitalisation (price) can be $400k.
This presents an opportunity for investors to purchase the company at a discount, and earn a good return on investment when the stock market recognises in the future that it had previously undervalued this company.

Do a quick search on any stock screener and you will see many companies in Singapore selling at below their company's book value (net asset value).
On SGX, there are 156 companies that are selling at half their book value.
Does this mean they are all good investments?
Source: SGX

Recommended Read: CPF Accumulated Accrued Interest

Problems with Asset-Based Value Investing:
1. Time:
It takes time for the market to realise that it had undervalued the company, and subsequently revise the price to make it equal its value.
However, this can take some time, it could be in weeks, months, years, even never.
I have seen a fair number of companies who are undervalued and have remained undervalued for half a decade or more before they are priced to value in the stock market.

2. Worth More Dead Than Alive:
Net Asset Value (NAV) is the remaining value left in the company after all its assets are sold and all its liabilities paid.
It is kind of like declaring that the company is dead, you will cease operations and sell everything.
If you as a person, bought a $1 million dollar life insurance policy, do you call yourself a millionaire?
Well, you are not, but if you do pass away, your beneficiary will become a millionaire.
Same can be said for a company with huge NAV - unless it ceases operations, sells everything, and return those value to shareholders, shareholders will almost never get the value.
But, the chances are, a normal company even though worth more dead than alive, is never going to close itself down; just like how a normal person would not kill themself so that their beneficiary can be a millionaire.

I Still Value Invest
Don't get me wrong, I still do value investing.
Just that instead of asset-based value investing, I do income-based value investing.
To me, investing in a stock is like choosing a life partner, would you prefer
  1. a partner who is earning more every year, or 
  2. a partner that has a $1 million life insurance with earnings that has not been growing

I'll pick the first one any time, any day.
What about you?
Which will you pick?
Let us know in the comments below!



Recommended Read: Your HDB is like a Stock Option


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

Have feedback? Tell us now!

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Unhappy with your job? There's something you can do about it.
A. Save up enough money from your job so that you can fire your boss - the problem is it might take some time and some effort
B: Find a new job, search for new opportunities. A career coach might be able to help you with that. And if you are looking for a free career coach, visit Workforce Singapore via the link below.
They can link you up with the career coach and you might be able to find new opportunities on their jobs portal.
http://ow.ly/GY8150wlfrF

Tuesday, 14 January 2020

CPF Accumulated Accrued Interest



Today's topic will be on the interest you pay to CPF on your housing loan.
This is a follow-up article to our previous article.

When you pay your monthly mortgage via CPF Ordinary Account (OA), you are doing several things:
Here's what happens when you pay your mortgage via your CPF Ordinary Account (OA):

  1. You borrow money from a bank or HDB to pay for your home.
  2. Every month, you repay your loan with money from your CPF OA.
  3. The amount that you use to repay your loan will accumulate accrued interest.
  4. Upon selling your home in the future, you are required to pay back the amount that you had used from your CPF OA to pay for your loan PLUS the accumulated accrued interest, back into your CPF OA.
Step 1:
If you borrow from HDB (the stat board) to buy an HDB (the house) flat, HDB charges an interest of CPF OA rate + 0.1% (which is currently 2.6%).
If you borrow from a bank, the rates will vary.
This part is simple to understand (I hope).

Step 2:
You borrowed money to purchase your home, you will definitely need to repay your loan.
To repay your loan, you use money from your CPF OA (instead of paying via cash).
By using CPF, you pay it with money that is saved for your retirement - or money that you technically cannot touch.

Step 3:
Because you used money that is "meant" for your retirement, and that effectively reduces the ability for that money to earn CPF interest, that CPF money will start to accumulate accrued interest.
The accumulated accrued interest is meant to ensure that in the future if you were to sell your home, there would be sufficient balance left in your CPF for your retirement.

Step 4:
You sold your home; you can earn the price appreciation of your home (selling price greater than buying price).
However, if you used CPF OA to pay for your home, you are required to CONTRIBUTE back into your CPF
         a) the amount of money you took out over the years from your CPF OA to pay your mortgage.
         b) the amount of interest you could have earned if you had not used the money in your CPF OA
              to pay for your house (accrued interest).

I used the word to CONTRIBUTE instead of the word PAY.

Recommended Read: Your HDB is like a Call Stock Option

Case Study:
Assuming you used $100k of your CPF OA to pay for your home, and 30 years later you sold it.
If there was no accrued interest, $100k would be deposited into your CPF OA after you sold your home.
But that $100k would not hold the same value as the $100k you used 30 years ago - because of INFLATION!
The same as "last time fishball noodle 1 bowl $0.50, now $3.50".
Your $100k 30 years ago can buy 200,000 bowls of noodles.
Now in 2020, your $100k can buy only 28,600 bowls of noodles.
So to ensure that you can still buy 200,000 bowls of noodles in 2020 after you sold your home, there needs to be an increase in the amount of money that goes back into your CPF.
That's what the accrued interest portion, it is to ensure that the $100k you took out is able to retain its purchasing power.
However, CPF will only take the accrued interest from the profit you get from selling your home.
If you made no profit from selling your home, you need not pay the accrued interest in cash.

Conclusion:
In essence, you are not exactly paying to CPF with the profits of your house.
Instead, the money is actually sent to your CPF OA.
You can actually use the money from that account to invest, buy insurance, participate in schemes applicable for OA.
Think about it another way, you are "profit-sharing" with your retirement fund.
While it may be unpleasant, the greatness of it can only be seen in the future.

Recommended Read: CPF LIFE in the Year 2020

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

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Unhappy with your job? There's something you can do about it.
A. Save up enough money from your job so that you can fire your boss - the problem is it might take some time and some effort
B: Find a new job, search for new opportunities. A career coach might be able to help you with that. And if you are looking for a free career coach, visit Workforce Singapore via the link below.
They can link you up with the career coach and you might be able to find new opportunities on their jobs portal.
http://ow.ly/GY8150wlfrF

Monday, 13 January 2020

Your HDB is like a Call Stock Option


What is a Stock Option:
Before we begin, you need to understand what is a stock option first.
So here's a link to help you understand what is a stock option.
Continue reading after you understand what's a stock option 😉.

TDLR (Too Long Didn't Read) of a Stock Option
A stock option is a 'contract' that lets you buy a specific stock at a specific price by a specific date.
Eg; I pay $1 to buy a stock option that allows me to buy 1 Microsoft share at $50 before August 2020.

Scenario 1: I exercise my stock option
I can exercise the stock option to buy the Microsoft share, and my total cost of the share is $51 ($50 + $1).
It makes sense to exercise my stock option when Microsoft's share price is above $51 (eg; $52) because then I can sell it straight to the stock market and profit from the difference.

Scenario 2: I don't exercise my stock option
But if Microsoft's share price remains below $50 by August 2020, I will let my stock option expire, and I will lose $1 that I spent buying that option (cost of the stock option).

Scenario 3: I sell my stock option
I can also sell my stock option to other people in the market that are interested in it.
Eg; if Microsoft share price rises to $52, people can bid for my stock option for $1.50 (they can then exercise the stock option, sell the stock, and profit $0.50).
If I sell to them, I will earn $0.50 without going through the hassle of buying to exercise my stock option and then selling my shares to the market.

Recommended Read: CPF LIFE in the Year 2020

How is Owning an HDB like Owning a Call Option?
  • There is a time value to both HDB and Stock Option
    When the stock option reaches its expiry date, it becomes worthless. Before that date, however, there is a value associated with it.
    The same can be said for HDB also before it reaches the end of its 99-year lease, it has a value to it. Once it reaches the end of the 99-year, there is no more value to it.
  • You can sell your Stock Option or HDB to reap a profit (or loss)
    You bought a stock option for $1, after some time the price of the stock option increases to $2 before its expiry date. You can sell the stock option to earn $1 in profit. Similarly, if the price of the stock option drops to $0.50 and you sell it, you will incur a loss of $0.50.
    The same can be said for HDB as well, you can buy an HDB for $500k and sell it for $600k after 10 years and earn a $100k profit. You can also sell it for $450k 10 years later and incur a $50k loss.
  • You own the Stock Option or HDB, not the underlying asset
    In the case of a stock option, you own the stock option and not the underlying stock (the asset) the stock option is tracking. Eg; you buy a Microsoft stock option, you do not own any Microsoft share as a result, you merely own the stock option that allows you to purchase the Microsoft share.
    For the HDB, you own your HDB, but not the land it is built. 
  • The Difference?
    You can exercise the stock option to buy the underlying stock (eg; Microsoft). But you cannot exercise your HDB to buy the underlying land. Once the 99-year lease is up, there goes the HDB. So you either apply for Lease Buyback Scheme before the end of your HDB or sell it to someone before your 99-year lease expires.

Are there any other similarities that you have spotted between HDB and a Stock Option?
Let us know in the comments below 😉

Recommended Read: What is CPF Enhanced Retirement Sum (ERS)?

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

Have feedback? Tell us now!

Subscribe to us or
Follow us: Investment Stab on Facebook


Unhappy with your job? There's something you can do about it.
A. Save up enough money from your job so that you can fire your boss - the problem is it might take some time and some effort
B: Find a new job, search for new opportunities. A career coach might be able to help you with that. And if you are looking for a free career coach, visit Workforce Singapore via the link below.
They can link you up with the career coach and you might be able to find new opportunities on their jobs portal.
http://ow.ly/GY8150wlfrF

Thursday, 9 January 2020

Best cashback credit cards to use with SimplyGo for paying Bus/MRT fares


Source: TransitLink
This article is a guest contribution from our friends over at WhatCard

Using Credit Cards To Pay for MRT/Bus

LTA launched SimplyGo 6 in May this year, enabling commuters to use credit cards to pay for their MRT/bus fares as an alternative to the trusty EZ-Link cards which have been a part of people’s wallets for more than a decade.
We had written about this new scheme in an earlier article 9, and it sparked some great discussions about the pros (you get credit card rewards, no longer have to carry an EZ-Link card around) and cons (you may drop your credit card, there is a short delay/lag when tapping) of using a credit card as opposed to Ez-Link to pay for your rides.
To add to this discussion, we thought that it would be good to do a more in-depth review of some of the best cashback cards compatible with SimplyGo, as we had not devoted much space to it in our earlier article.
For the miles lovers out there, a separate article for best miles cards will be coming soon as well!

The volume of comments on just one Facebook group

Best Cashback Cards for SimplyGo

We had shared this table in the earlier article:
Best Cashback CardsRewardsMinimum Monthly Spend
CIMB Platinum10% Cashback$800
DBS Live Fresh5% Cashback$600
Maybank Friends & Family5% / 8% Cashback$500 / $800
UOB One CardUp to 3.3/5% Cashback$500/$1000/$2000, it's complicated 27
While these listed cards all give really high cashback rates, the thing with all cashback cards is, it is all in the details. Here’s what to look out for and our assessment of these cards:

1. CIMB Platinum - Highest headline of 10% cashback, but there is a $20 cashback cap for each of the 5 categories

The CIMB Platinum is well known for its marketing of exceptionally high cashback rates (10%!!!) - far surpassing other cashback cards in the market which in comparison have paltry bonus cashback rates from 1.5% up to 5-6%. Furthermore, 10% bonus cash back is awarded across 5 really common spending categories:
  1. Wine & Dine
  2. Transport & Petrol
  3. Health & Medical
  4. Selected Electronics & Furnishing merchants (e.g. Harvey Norman, Best Denki, Challenger)
  5. Foreign Transactions
HOWEVER, we almost never recommend this card because the T&Cs are one of the most restrictive in its peer group of category cashback cards. Not only is there a rather high $800/month minimum spend, but the biggest issue is also that there is a cap of $20 cashback per category (or $200 spending on that category). Any spending above $200 per category gives a base 0.2% cashback. This implies that: to hit the minimum spend requirement AND maximise your 10% cashback, you have to split $800/month between 4-5 different categories, making sure to spend as close to $200 on each category
We can see a scenario where somewhere has quite a regular spending across these 5 categories and able to optimise their spending well enough to take advantage of the 10% cashback, but for us, it is just a tad bit too much effort to optimise spending to this level of detail. This card may suit you if you have the bandwidth to track expenses to be within a narrow $200 transaction range for each category consistently every month.

2. Maybank Friends & Family - 2nd highest headline of 5%/8% cashback, with a relatively higher $80 cashback cap across all the categories

The relatively less well-known Maybank F&F card went through a major upgrade 15 in Sept 2019, and with that, it has actually become a rather decent all rounded family spending card similar to the OCBC 360/BOC Family card. With a minimum monthly spend of $500 or $800, you get either 5% or 8% cashback across a wide range of common categories:
  • Dining
  • Telcos
  • Groceries
  • Petrol
  • Transport
  • Selected Learning & Retail merchants - Popular bookstore, Toys ‘R’ Us, Yamaha
The only thing to take note of is that there is an overall cashback cap of $80/month, regardless of whether you are getting the 5% or 8% cashback rate. That there is an overall cashback cap makes this a much easier card to optimize for than the CIMB Platinum and DBS Live Fresh (covered below) since you can get great cashback by more easily spending the full $500/$800 on whatever you are currently spending on, even if that is spending the full $800 on just Groceries and Petrol categories - for example for a family person who owns a car.
The bonus cash back categories are rather comprehensive and should cover most of your spending needs already, the only major category that it is missing is for Online Spending.

3. DBS Live Fresh - 3rd highest headline of 5% cashback, but again there is a dollar value cashback cap of $20 per category

The DBS Live Fresh card is very popular among Singaporeans who use cashback cards, and for good reason - it gives 5% cashback on two very common and easy to hit spend categoriesOnline and Contactless (which covers many offline places such as restaurants) spending. It definitely also does not hurt that any spending on this card helps with getting a bonus interest rate on the DBS Multiplier Account 6.
There are some limitations to note: On top of the minimum monthly spend of $600, cashback is capped at $20 per month per category (i.e. you only get 5% cashback on up to $400 spending on each of Online and Contactless category)
For those whom we worked with for our free 1-1 credit card consultation service 4 2 months back (we have changed it to a waitlist now for those who are still interested), you already know that DBS Live Fresh is one our favourite cashback cards to recommend. This card works best for those who have relatively low and regular monthly spending that can be funnelled to either online or contactless spending.
Spend at most $400 on each category (Online, Contactless) to this card to maximize the dollar cashback.

4. UOB One - Up to 3.33%/5% cashback, awarded on a quarterly basis based on hitting a minimum monthly spend each month for the quarter

The UOB One card works in a completely different way from other cards that give a percentage cashback of your spending amount. Instead, the UOB One Card gives a flat quarterly rebate based on you hitting the minimum monthly spending per month, for each month of the quarter. For example, to get the Q1 quarterly rebate you have to hit the minimum monthly spending in January, February, and March. There are 3 tiers of monthly spending which give different quarterly cashback amounts as below:
Spending TierQuarterly RebateMaximum Cashback of Up To
$500-$999 per month$503.33%
$1,000-$1,999 per month$1003.33%
$2,000 and above per month$3005%
Given these 3 tiers and the fixed quarterly rebate, the UOB One card gives the optimal cashback rate if you spend just above $500, $1,000, or $2,000 per month consistently. However, do note that if you miss the minimum spending for even 1 month in the quarter, you will lose the entire rebate for that quarter.
The big benefit of UOB One is that all spending counts, so you don’t need to worry about where you are spending your money, instead only worrying about how much you are spending total each month. Works best for those who prefer to just track their total spending each month without worrying about which category to spend on.

Summary

Given all the T&Cs around cashback cards, we encourage our readers to never just focus on the headline percentage when choosing a cashback card - especially so for category cashback cards like CIMB Platinum and Maybank F&F.
Readers should take note of the dollar value of the cashback caps, and determine a strategy to charge at least the minimum required monthly spend and at most up to the cashback cap (for e.g. $400 spending on the online category with the DBS Live Fresh Card gets the maximum $20 or 5% cashback, but this must be coupled with another $200 of spending elsewhere to hit the minimum monthly requirements of $600 for bonus cashback to be awarded.
You can use our affiliate links below if you are interested to apply for any of the cards listed above. WhatCard was set up to help the community get the most from their credit card rewards. We have been delivering objective commentary with no ads or sponsored content, and affiliate links help us to keep the site running :slight_smile:
If you would like to get the maximum rewards from your credit cards, do consider integrating WhatCard 20into your lifestyle to help you optimize your credit card rewards, and follow us on Facebook 1 to stay updated on the latest tips, tricks, and hacks (like this article!) to get the most out of your credit cards

About WhatCard
WhatCard was created by a group of credit card and personal finance enthusiasts with a simple mission - how can we build something that will help each person get the most value out of their credit card spending.
With the best credit cards willing to give up to 5% and more of the total amount spent back as rewards, typically either cashback or as airline miles, people who do not pay with a credit card (where available) or use a sub-optimal credit card strategy are essentially giving the credit card companies a free lunch on all their spending.