What are some of your guilty pleasure?

I know, I know. Everyone has their own long list of guilty pleasure - anywhere from traveling to food to even some fetish things that they have nicely lined up for themselves, and so do I.

 

Being in pursuit of financial independence does not mean the list is going to be way shorter than one who does not pursuit financial independence. In fact, I believe everyone has their own guilty pleasure of joy and happiness, irregardless of what they are.

 

 

"Happiness consists of living each day as if it were the first day of your honeymoon and the last day of your vacation" - Leo Tolstoy

 

So how do I line up in terms of my own guilty pleasure?

 

1.) Tasting different types of food

 

Food is one of the category list which I have a soft spot on. I have been indulging myself on nice and tasty food over the past couple of years, some of those may have been a little too extravagant to my liking.

 

The thing is when it comes to food, I usually will think less of the price than I would when buying clothes or accessories, unless they are priced at ridiculously Michelin price.

 

Even as I probably would have realized that anything that goes into the digestive system would go out twice as fast, I chose to remain bedazzled by the serenity of food chain.

 

2.) Itching to make a betting on outcome

 

The rationale for this is to ultimately test my own strength of intelligence against the higher oddmakers out there and to beat the system. For 15 years now I've been consistently trying to do this and it was unsuccessful, as you would have expected it to be. Luckily for me, I know when to draw the line and not go overboard on this. Habits are just hard to change.

 

3.) Going for a good massage

 

Massage in Singapore is as expensive as hell but we still sign up for it for the indulgence. I guess it is due to the stressful environment from work that we decide to call massage parlor a gift from heaven.

 

At times, when I think back about how many times the massage package price is relative to the other cheaper countries, I feel the pinch. But by then, it was too late.

 

4.) Watching movies on the big screen

 

The price for movies has been escalating rather quickly over the past couple of years.

 

The last I checked was $13.50 for weekend tickets at Cathay.

 

Some of the friends I had decided on boycotting the big screen due to the exorbitant price increase. Still, I liked watching movies on the big screen, which gives me a very different feeling when watching a similar movie on the laptop.

 

 

I am pretty sure that I would have friends who has much more guilty pleasures relating to drinking, clubbing, traveling, IT gadgets, comics, cosplay and many more. I am just glad that despite having a few of these guilty pleasures, I am able to watch my budgets and I would urge everyone to do the same. Once the box is ticked, the world suddenly looks much brighter than we imagined it to be :)

Do you indulge in more guilty pleasure than I do? Please share along if you do and how you overcome it?

Lifestyle Inflation Will Kill You. Really??

I imagine the days back then when I started entering the workforce and getting my first paycheck. It was $2,600. And I was thrilled. Never in my life had I earned so much money just by doing some simple analysis at work. To feel them physically, I even had them withdrawn so I can feel the number of $50 paper bill on my hand. Lifestyle was good back then as I upgraded my eating habits, appearances and IT gadgets. Since I was single back then, the money are mostly expensed off these items.

 

 

A couple of years down the road as I began to accumulate more working experience, my pay increased exponentially. And so was my lifestyle habits. I began upgrading my eating habits, appearances and IT gadgets further to the next level and the money was soon spent on these items which I hardly had any memory today. I figured out back then if I was earning $10k to begin with, I would probably had an equally $10k expense to end with. At that moment, I realised lifestyle inflation was going to kill me if I was persistent in living the rich lifestyle.

 

The rest was history.

 

I had some people asking me if I downgraded my lifestyle habit since I pursued my financial independence journey. My answer to them is not really. Both my wife and myself continued to eat gracefully at restaurants which we wanted to explore (The Sushi Grill & Bar at Wisma Atria was really great btw), we shopped for clothing and accessories (a few branded will not kill I suppose) which we think will improve our appearances and we bought well-equipped IT gadgets (I hope my Note 2 Samsung is still not out-dated) to join in the latest trends. So the answer is we are still upgrading our lifestyle, albeit at a lower pace than our increase in income (both passive and active).

 

I know a few people who was extremist in going the savings path and credit to them, they have managed to do it. But I thought life wouldn't be as fun as we needed it to be. Again, these people might argue the case for the definition of fun so it's really a perspective situation.

 

The truth is if we are able to do these 3 things: Conscious of the danger of lifestyle inflation, understand the things we enjoy and splurge with activities you can afford, then you'll be fine as you did before.

 

You do not need to avoid lifestyle inflation completely but at the same time you will be able to maximise your marginal utility on happiness. Now, that is what we really want.

Does lifestyle inflation bothers you? Do you have friends who are extremist on the two sides of the poles?

2 New Books Trending - Update

It's been a while since I last purchased a new book on personal finance and updated my page on Books Trending.

This week, I've purchased two new books from Amazon which I think was very interesting and might came up familiar to some of you here.

The first book is entitled "How Much is Enough?" by Robert Skidelsky.

The author explains what constitutes the true value of money vs the true value of life. He also quoted the Keynes theory that as technology becomes more prevalent, human being should work lesser and lesser as each day passes. Apparently, that is not the case in many parts of the world. We seem to be working longer and longer, perhaps to the needs of the economy and we tend to forget the true value of why we live over time. This should be a good book to read why you need to obtain financial freedom in the first place - knowing what you really want in life and accomplishing it within the sight of time.

 

The second book is entitled "Your Money or Your Life?" by Vicki Robin and Joe Dominguez.

 

 

 

 

Here, the book explains the real wages you are earning in your workplace as you incorporate various other items such as travelling time, overtime and so on. Many times, the real wages is much lesser than you think it is. The book also explains on the concept of Crossover Point where income meets expenses and that is the time to call for financial independence. Some of the concepts I've talked about in my post previously but good to re-enforce for a bedtime storybook ;)

Have you read these books? If so, can you share your thoughts with us?

Mistakes I've made in my 4 years of investing

I take comfort in knowing that the construction of my current dividend investing portfolio has performed admittedly well so far. However, it doesn't mean that it has been a smooth path constructing it these few years. In fact, I've made a fair share of mistakes over the past couple of years and I will be the first to admit that there will be more to come over the next few years. But experiencing these mistakes myself makes me a better investor, whether true or not it's still unproven.

 

 

1.) Focusing on purchase price, not valuations

 

I used to place a lot of focus on the purchase price I bought the stocks, irregardless of whether they are considered cheap or expensive in valuations.

 

When the stock advances 10-20%, I will take profits and kiss goodbye to the stocks I owned. Because I was so fixated at the percentage of profits earned, I never really allow the stock to run to reach its true valuation. As a result, I missed the additional run in profits for the few stocks I used to own.

 

2.) Focusing on not making "realized losses"

 

Many people have it in their brains that they do not connect with losses, realized losses specifically. And so was I guilty of the same.

 

When the stock I purchased declines in price, again I refused to cut loss on it, thinking that the stock might one day come back higher. As a result, there were plenty of missed opportunities as the stock declines lower and lower. Again, this could be attributed to the lack in focusing on the valuations we mentioned above.

 

3.) Buying on Analyst's call

 

Back in my early years of investing, I used to depend a lot on an analyst call reports, especially if I saw a few consensus report calling for a buy. I think this is a trap that many retail investors still fall into until today.

 

Upon reading it much conservatively, the analyst's report is taking in a lot on assumptions which was not evident and backed by stronger evidence. For e.g, they may use a constant growth rate over the next 5 years or they may use a higher multiples to substantiate their justification in their target price. All of these assumptions are ambitious in nature and should be taken with a pinch of salt.

 

4.) Buying only the blue chip stocks

 

I used to only frame my stock list on blue chip stocks and ignore the rest, thinking that these companies are more stable and they are less subject to volatility and external shocks. And I was proven wrong of course.

 

Stocks such as Noble and Olam have seen their fair share of volatility in the past few years and have perhaps a lesser return on equity than other mid-cap stocks.

 

Now, I have expanded my lists to include the mid and small cap stocks to see if they are fundamentally good and is worthy to be added to the portfolio, depending on risk appetite and returns.

 

 

These are the 4 main mistakes that I have made over the past couple of years of investing and I hope I have learnt from it. What about you? Any mistakes you have encountered that you are willing to share with us?

Win-Win-Lose - It's the end that ultimately matters

Many people advocate the journey as a process of learning while others remain skeptical and put their focus on the big price at the end. Which one matters? Here are two real life examples I encountered this month.

First scenario

A friend of mine visited Singapore for a 3 day visit to the casino. He went to the casino with a capital of $3,000. He win some and lose some.

On the first day, he wins an overall sum of $3,000+. That gives him a return of 100% for the very first day he visited the casino. Maybe the casino was giving him some beginner luck. 

On the second day, he started off with $6,000 including his win from the day before. He continues his magical run and wins an overall $2,000 this time round. Now, he has over $8,000 in his pocket.

On the third and final day, his momentum started to fade off and began losing games after games. He loses a total sum of $4,800. He was now left with $3,200 and he decided to call it a day.

He makes his assessment at the end of the whole trip and concluded that it's not a bad deal afterall coming back with an overall $200 win.

How many times have we been in this situation? Thinking that it's ok to lose the few extra money earned as long as we do not damage or affect our capital? How many realise that the $5,000 "profits" he won was actually his own money and the reward from the risk that he is taking? 

These are all Realized Profits that he could walk away with.

Second scenario

A friend of mine bought into a counter called UMS sometime a year ago at a price of $0.40. 

He collected a few rounds of dividends over the year and saw its price rise to a 52-week high of $0.77. Including the dividends, my friend would have probably made an unrealized profits of 100%. 

Recent news on UMS began to dominate and the selling were massive for the past few weeks, sending a plunge of over 40% to its recent low of $0.56.

I asked my friend about it and his response was that as long as the price does not plunge below $0.40 (which was the price he bought), he was essentially still making a decent profits from the counter and will continue to hold.

Now if he holds the counter on the basis that the fundamentals of the stock doesn't change, then its a fine deal. My question is many investors weigh their selling decision based on the purchase price they bought. But is this the right way to look at it?

Unlike the first scenario, the increase and decrease here are all Unrealized Profits unless he decides to take profits on them.

Do you think there are any differences between the two scenarios? What could these people have done better? Is it all in their mindset?

Factor decisions that propels me to accept the new job

There are many reasons that can play a part on whether an employee should stay with the company or move on to his or her next role in another company. Based on Davenport, having the right career is important as we tend to spend at least one-third of our entire lives in the workforce (precisely why I guess I'm seeking financial freedom?). In his book, he mentions that the right career is a positive, productive and natural extension to your value system and your natural talents.

Readers of my blog would probably know that I was recently contemplating a move for a new role in one of the REITS industry which I was offered. There were intially some terms in the contract which I was not very comfortable at the beginning but after a few rounds of negotiation, we managed to come up to reach a consensus. Bottomline - I decided to take up the role.

 

 

Just like many others, I weighed in both the advantages and disadvantages when considering the option both qualitatively and quantitatively. I used a few metrics which I thought was crucial to me at the point of consideration - Salary, Learning, Career Growth, Change and Bosses.

1.) Salary

 

At this stage of my career, the salary factor still plays an important factor in my consideration for a change as I continue to need them to fund my family's increasing expenses. The fact that I have yet to attain a financial freedom status means that the money could also be used to fund my portfolio or anything else for that matters.

 

The new job offered was a 10% increase to what I currently earned at my current company. That looks like a good start.

 

2.) Learning

 

There were probably little learning curve I had left with my current role in my current company. To be fair, this was a typical scope an accountant would face in any company - reporting, closing, accruals, budgeting, forecasting...repeat.repeat.repeat. So I wouldn't point finger on anything on anyone for this.

 

The new job can perhaps offered a different set of learning something new at this point. Being a Reits investor myself, it will be interesting to learn about the "inside" of how a Reits company actually operates and how the management makes certain decision. Also, since the company is listed in Singapore, there will be regulations that the company had to comply. These will all be new things for me.

 

3.) Career Growth

 

To be fair, this is the part that I struggled most with when making the consideration.

 

If I look over the horizon of 5-10 years, I feel it would be more beneficial for me to stay put and slogged for that 5 to 10 years horizon. The progression by then would be immensely critical. On the other hand, Reits is more of a niche industry and they are set up such that their structure within a team is small and simple. Remember, the bigger the team is, the higher the overhead and this leads to a lower DPU for the unitholders (Ouch!!!). That leaves room for upward progression really scarce.

 

However, if I were to think of just working for the next 6 years (until I'm 35 as planned), then I guess it doesn't really matter to climb the top. I would have reached my version of "peak" one day.

 

4.) Change/Environment

 

The working hours (9 to 5.30 Mon to Thurs and 9-5 for Fri) and environment in my current company are good. For one, I can leave mostly on time.

 

I would be the first to admit that "Change" is uncomfortable for the most part of the first few months almost for everyone. New role, new friends, new seats, new lunch partners, etc can be a detering experience for some but one which we had to deal with.

 

5.) Bosses

 

Last but not least, how bosses treat their employees will be an important aspect of employee happiness in a company.

 

At my current company, the bosses are good to me and for the past 2 years they have been my lunch partners so I guess I can fit with them.

 

I won't say about the new bosses but hopefully they will not be hard to deal with either.

 

 

There has been many moments like this when we say perhaps let's wait another year to see the situation how things are progressing before making the dive and I guess we are all guilty of that (I blogged about ways to overcome the "One More..." syndrome recently). Since life is short, I think we should try not to overthink and let the heart runs its course. After all, with these 2 choices, how bad can it goes even if things go wrong?

 Have you experienced of such situation where you have thought very hard about choices and finally came up to a decision? How do you feel?

"Jun 14" - SG Transactions & Portfolio Update"

No.	Counters	No. of Lots	Market Price (SGD)	Total Value (SGD) based on market price	Allocation %
1.	FraserCenter Point Trust	30	1.855	55,650.00	22.0%
2.	Vicom	6	5.94	35,640.00	14.0%
3.	SembCorp Ind	5	5.35	26,750.00	10.0%
4.	SPH	5	4.21	21,050.00	8.0%
5.	Ascott Reit	15	1.235	18,525.00	7.0%
6.	Mapletree Greater China Commercial Trust	20	0.87	17,400.00	7.0%
7.	China Merchant Pacific	17	0.95	16,150.00	6.0%
8.	FraserCommercial Trust	11	1.365	15,015.00	6.0%
9.	Neratel	20	0.75	15,000.00	6.0%
10.	First Reit	10	1.17	11,700.00	5.0%
11.	ST Engineering	3	3.90	11,700.00	5.0%
12.	Second Chance	13	0.46	5,980.00	2.0%
13.	Ascendas Hosp. Trust	7	0.75	5,250.00	2.0%
14.	Stamford Land	3	0.64	1,920.00	1.0%
	Total SGD			257,730.00	100.00%

I sold my only single lot in Mapletree Logistics Trust (MLT) this month at a price of $1.195. Considering that I bought this at last Dec at $1, this means that I have locked in more than 20% gains including 2 rounds of dividends received. I thought that was a good gain.

I also added a new counter in Stamford Land for this month by purchasing 3 lots at $0.635. I have blogged about this in my previous post on why I think they may be a good fit to my portfolio in the long run. I guess we'll just have to see if that's the case.

The market has ran up pretty well in the past few weeks and I can feel sentiments on the ground for retail investors that it is getting much harder to pick out good value stocks. For me, I will try to be cautious and hopefully protect the gains in stocks I have in my current portfolio while accumulating cash behind the ground to see if there are any opportunity to enter the market. If market continues to be bullish, there will be less buying activity within the next few months as I continue to await a good opportunity entry.

What about you? How do you feel the current market sentiments affect your buying or selling activity?

Recent Action - Stamford Land

This is a counter which I have been following for some time now and this month I have made a small addition to my portfolio.

 

 

Stamford Land is the largest independent owner-operator of luxury hotels in Australia-NZ with 7 luxury hotels in AU and 1 in NZ. It is also a property developer with some iconic developments that include the Stamford Residences and The Reynell Terraces situation in Sydney.

If you have been following this counter for some time, you would probably have known that Stamford values its hotel assets on a historical costs basis (less depreciation). Comparing this to the latest transaction that FCL makes to purchase Sofitel Sydney Wentworth for A$202.7m (Dividing by 368 rooms, this came out to be around A$550k/room). On paper, this looks like a counter that is sitting deep underneath at cheap valuation (Stamford cost at book value is around A$50m and each room came out to be around A$218k/room). However, it remains a question when will Stamford unlocks its true value.

For the latest FY14 results, the hotel segment reported an overall increase in AUD terms only to decline due to unfavorable AUD exchange rate. Moving forward into FY15 however, the management are optimistic about the prospect of the hotel segment and growing tourism industry in AU - guess this bodes well for my AHT as well :)

In the property development segment, they have registered good turnover growth of $48m, which more than doubled previous year turnover from the sale of its Auckland project (Stamford Residences Auckland) and Sydney (Stamford Residences Reynell Terraces). The group has also recently sold its upcomiong project Macquarie Park Village, for which revenue recognition will be recognized gradually upon completion in 2017. They have also obtained development approvals for the redevelopment of its Stamford Circular Quay hotel and Dulwich Hill property and we can expect higher sales to come for these projects.

I have seen investors who bought into this counter and are still awaiting for the management to unlock its true value. I think with AU economy picking up, this counter could rise further in the next few years. In the meantime, the 3 cents dividend it recently proposed does not sound too bad while we wait for the true value to be unlocked.

Overcoming the maybe "One More..." Syndrome

As a legitimate human being on this planet, I think many of us have been in a situation where we are suffering from a "One More..." syndrome. 

Take a drug victim for example, he may be so addicted to the drug that even when he promises that this will be his last use, he will never comply to it and uses it again the next time.

Similarly for us, we may be guilty of such syndrome at times, even myself admittedly.

Take the example for myself 3 years ago, I promised at that time that the next job will be my last and I would be comfortable with a $5k/month salary that would meet the needs of my financial freedom. I took it for granted, get used to it and perhaps realised that I've got more responsibility to care for than I originally had planned and suddenly I was awaiting for the next higher paying job. Maybe I was suffering from the "One More..." syndrome and I know many people too did. 

I had devised myself a 10 year roadmap plan to financial freedom and I've 6 years left to go for before I turned 35. If everything goes to plan, I'll probably have around $1.5m yielding me about $90k/year, which is an equivalent to about $7.7k/month. By our current spending pattern, the amount should be more than enough for our family to live comfortably. What I am worried is I do not know if by then my "One More..." syndrome will kick start another roadmap plan for me. If so, this is a mental block, more than anything else.

There are a couple of reasons that might relate to why many people are having this "One More..." syndrome. The most obvious reason is greedy. Humans tend to be greedy in nature and especially in the society we live in, it is almost inevitable that we look across our neighbours to compare and see how each other is doing. For a more conservative reasoning, we could perhaps look at how people tend to perceive a higher margin of safety net which enable them to be more comfortable. Take for example, if I decide to work for an extra year until the age of 36, it would give me an additional 6-figure sum which would placed me at an even better stead. But the million dollar question remains, how much enough is enough?

Overcoming The Syndrome

Overcoming the syndrome is not the easiest thing to do and as much as we tell ourselves this can be done, many people still failed to do so. Here, we look at how we can potentially overcome this syndrome:

1.) Get the mental block out of the way

Almost everything we do starts from the mental and getting the mental block out of the way is one of the foremost important reason we need to convince ourselves before we can start overcoming this syndrome.

2.) Think of the upside

Many times, when we forego a certain situation, we tend to think more about the opportunity cost rather than the upside benefit to it. For example, if someone foregoes another year of working, the first thing that came up to their mind would be the opportunity loss of their active income for that one year. But they failed to see the upside. Think more of the upside of how you can potentially use the time you spent on working your ass off in the office to spending more time with family and friends. Remember, time is irreversible, what is gone is gone and you are always ticking closer to death as each second past.

3.) Stress test your expenses

If you are worried that the money you have will not last you a lifetime, perhaps a good thing to do is to stress test your expenses while you are still working. Test yourself in a situation where you do not draw out your active income and instead you will only use other passive income as a means to support your monthly expenses. If that works well for you, then hoola... you are ready for financial freedom.

Remember, happiness is a given and everyone in this earth can make it happen.

There will be a positive correlation for level of happiness against income but to certain point, a gradual increase in income does not lead to a corresponding gradual increase in happiness. This shows that even if one day you become a billionaire or trillionaire, nothing else will change. It is what you do that makes the situation around you and life even more special. To end off, I would like to show a simple story that might have been shared before:

An American investment banker was at the pier of a small coastal Mexican village when a small boat with just one fisherman docked. Inside the small boat were several large yellow fin tuna. The American complimented the Mexican on the quality of his fish and asked how long it took to catch them.

The Mexican replied, "only a little while."

The American then asked why didn't he stay out longer and catch more fish?

The Mexican said he had enough to support his family's immediate needs.

The American then asked, "but what do you do with the rest of your time?"

The Mexican fisherman said, "I sleep late, fish a little, play with my children, take siesta with my wife, Maria, stroll into the village each evening where I sip wine and play guitar with my amigos, I have a full and busy life."

The American scoffed, "I am a Harvard MBA and could help you. You should spend more time fishing and with the proceeds, buy a bigger boat with the proceeds from the bigger boat you could buy several boats, eventually you would have a fleet of fishing boats. Instead of selling your catch to a middleman you would sell  directly to the processor, eventually opening your own cannery. You would control the product, processing and distribution. You would need to leave this small coastal fishing village and move to Mexico City, then LA and eventually NYC where you will run your expanding enterprise."

The Mexican fisherman asked, "But, how long will this all take?"

To which the American replied, "15-20 years."

"But what then?"

The American laughed and said that's the best part. "When the time is right you would announce an IPO and sell your company stock to the public and become very rich, you would make millions."

"Millions.. Then what?"

The American said, "Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos."

The moral of the story -- Know where you’re going in life — you may already be there.