What People Misunderstood About Financial Independence

There was an article I read online which depicts on how the norms look at financial independence and what their perception is. You can read it here.

“If only I had a million dollar right now, I would right away resign from my current job”… 

This was what everyone had in mind when they think of financial independence. Right? I can’t say for sure if that is the correct way of looking at things. 

For me, the concept of financial independence comes from understanding the clarity of what money can or cannot do for me. It is about enriching my life through the sustainability of having enough money for the rest of my life so I can do something more for the better of myself, my family or the society. As difficult as it can get with expenses creeping up over the years, I stay committed to my goal of financial independence because it is a concept I believe in – a lifestyle I wanted to commit and sustain. 

To many people, especially outside the circle, financial independence is a taboo that they had never thought of. I mean, most people would think of working as a capacity to complete the most part of their lives. And then now what would they have to do with their spare time when they had essentially no “work” to do to begin? The perception of a human life are often associated in such a way that we interact with challenges everyday and that once these problems are decommissioned, the mind would soon get idle, and that is a recipe for senile. 

These concerns are valid in nature but I’d argue otherwise that these only stems for those with existential crisis to begin with. If a person ties their identities and commit their precious hours to a specific career style, then it’ll become difficult to replace them once the cells are removed. And they will one day because the human bodies are not expected to sustain productivity for a long, effective manner throughout. These are facts that we need to accept and adapt. 

Recently, I had a small trip outside to a neighboring country with my family which I find it interesting to share. The objective of the trip is to purchase some milk powder and diapers which will allow us to save an approximate amount of $50/month. That is equivalent to $600/year mind you. If you had given me the chance to save these money and compound it over 20 years, I can perhaps fund the full education of my children. Well, anyway the true intention of the trip is to allow for some family time together exploring other malls, since it is a Sunday anyway. We would have landed at some other places had we not gone for the trip. 

What surprises me from the trip was there were a couple of friends, including my own wife who find it amusing that we had chosen to go to such length. To them, they felt that it is not justifiable for me to scrimp on that with my career and salary caliber and perhaps what my family did was surprising. I explained to my wife that it is not the amount of money that matters but the behavior which will champion and differentiate us with the other people. The truth is there is a socioeconomic sentiment that surrounds people thinking the rich can afford cars, luxury holiday, branded watch and expensive holidays and financial independence means achieving all that. That is a completely false perception of financial freedom.

Cash vs Conscious Cash Flows

My wife is often worried that our state of resources will not be able to last a lifetime. 

To her, she looks at resources like salary as a form of continuous flow that gives her sufficient comfort knowing these will ensure that our expenses can get paid. In this instance, she looks at cash as a form of resource at a static point in time. Conscious cash flow however, is a state of continuous resource coming in on a perpetual basis so that I'd never had to worry about the source tap.

People misunderstood about financial independence knowing that cash as a form of resource at a static point is what they need in order to sustain their lifestyle. Few people takes the time to build a longer and lasting source which provides them with cashflow because they do not understand the need for financial independence.

What lies behind us and what lies before us are small matters compared to what lies within us. What people have to determine is whether financial independence lies within them.

Managing Money Issues After Marriage Life

Flirting over money issues can ruin a potential marriage life. 

There are many couples that have conflicting money values that there can often be arguments seen on how a household should save and spend money. The common belief that men should handle all the financial planning while the women handle the day to day chores are over in this century. In today's society, it is critical that the financial planning is discussed between both parties, which is why it is all the more important that they are dealt with tender care because it is about two person - two pair of hands.

This can be tricky though because not everyone is savvy in financial planning in the first place, especially if one is stronger than the other in this aspect. Take my case for instance, I am accounting and finance trained and I am more comfortable dealing with financial planning than my wife. This though, as I will share later about my story, does not stop me from making all the decisions myself, though for the most part she entrusted me with the decision I make.

When we got married and started to live under one roof, we started defining on the values of what we believe in and this includes the talk about money and financial independence in general. In order to achieve our goals, we both agree on our respective roles on how to handle saving and spending patterns in an appropriate manner. There are a few general rule of thumbs that we follow. For instance, we ration our expenses appropriately and any big item expenses that go above $1,000 would need both our approvals before it can go through. We also aim for a minimum saving target of 50% each month and if we bust that over, we would think of ways to make it up in the following months. Maybe no travel, or less dining for instance.

Next, there are the issues of whether a joint savings account is required for marriage couple. Personally speaking, they are good to have because it advocates an equal share of responsibility towards any money that goes in or out of the account. For us, we don't use that much because most of the household contribution comes directly from me as my wife has decided to step down to become a stay home mommy so the joint accounts are becoming irrelevant for our case.

Our income disparity for day to day activities isn’t an issue because we had our understanding agreed right from the beginning. Neither of us are a big spender and we live pretty much on decent maintenance most of the time, though there are occasion where we would splurge on things like food and travel. I was also allowed complete access and decisions on how I should invest my money because again there are things which we have already agreed upon right from the start.

At the end, if you look at it, it is all about communication, communication and communication. Be open about these things right from the start so there are fewer frictions and misunderstanding about how things will pan out later.

What about you? How did you manage monetary issues with your spouse?

"May 16" - SG Transactions & Portfolio Update"‏

No.	Counters	No. of Shares	Market Price (SGD)	Total Value (SGD) based on market price	Allocation %
1.	OCBC	6,000	8.45	50,700.00	13.0%
2.	Kingsmen	80,000	0.63	50,400.00	13.0%
3.	Ho Bee Land	22,000	2.19	48,180.00	12.0%
4.	China Merchant Pacific	45,000	1.01	45,450.00	12.0%
5.	IReit Global	62,000	0.72	44,640.00	11.0%
6.	ST Engineering	13,000	3.16	41,080.00	10.0%
7.	Fraser Centerpoint Trust	18,000	1.98	35,640.00	9.0%
8.	CapitaCommercial Trust	15,000	1.38	20,700.00	5.0%
9.	HK Land*	1,500	8.33*	12,495.00	3.0%
10.	Ascott Reit	10,000	1.12	11,200.00	3.0%
11.	Keppel DC Reit	10,000	1.08	10,800.00	3.0%
12.	Nam Lee Metals	35,000	0.33	11,550.00	3.0%
13.	First Reit	8,000	1.25	10,000.00	2.0%
14.	Warchest*			28,000.00	7.0%
	Total SGD			420,834.00	100.00%

The month of May has given something for all of us to think about, especially with the "Sell in May and Go Away" everyone was advocating, we've seen part of that coming true on hindsight.

There has been a lot of activities within the portfolio which I will summarize below from the last update in April:

I divested my position in CDL at S$8.66 after the share price run up quite a bit in recent months. Developers was always going to be a short term trading position for me as and when opportunities arise because they don't offer high enough yield for me to hold on to my position, even if they are still undervalued in my opinion. This has allowed me to book in 15.5% gain within a span of 4 months.

Shortly after, I used the proceeds to enter into a position for Ireit Global at a price of $0.70. I also blogged my thoughts here. Ireit Global will continue to become my long term play as I believe this will become something big in a few years to come. The hope is this becomes the new First Reit and it certainly has an opportunity to grow steadily over the years. It also yields a very enticing yield of 8.7%.

I also accumulated more FCT at a price of $1.955 after the share price shows some weakness recently. Like Ireit, FCT remains a core position in my portfolio for the long term as the catalyst are well in place. I have blogged my thoughts in more detail here.

I divested my position in MTQ at a price of $0.52 just before the company announces their full year results. As predicted, they reported a full year loss and had not announced any dividend payment for FY15 after a poor set of results. This represents a loss of about 18% on my original entry but luckily the position is small.

I also divested my position in Neratel at a price of $0.65. As previously mentioned in my analysis here, this was going to be a trading position and I have no intention to hold this long term in my portfolio. This was after the company had initially announced the potential sale of their payment solutions which pushed the share price upwards. This represents a gain of 20% (including the 1 cent dividend received) within a short span of 2 months, which I think is great, though the share price is obviously a lot higher now.

Last but not least, I accumulated more CCT at a price of $1.38 after the share price weakens further upon a down market. I blogged my thoughts here.

I'm pleasantly pleased that the market value of the portfolio continued to outperform the market and this month I had an increase from the previous month of $400,314 to $420,834 in May (+5.1% month on month; +38.3% year on year). The most part of the increase this month is due to the GO from CMP which helped to push up the portfolio massively this month. As of now, I'm still waiting for the offer letter which I will accept when it comes. This should take another 2 to 3 months to complete.

Cashflow has been fantastic this month due to the incoming dividends received in the 2nd half of the month. On the personal front, I've also planned for not one but two trips coming in the month of Jul (Krabi and BKK) and Oct (Cruise to Phuket) so half of the trips expenses have already been incurred while another half will come in later.

With the hike rate in Jun almost looks like a certainty now, I'll be looking to exploit the opportunities around if they come but the strategy will not differ from what I've always been following.

Thanks for reading.

How does your portfolio fare in the month of May?

Manulife Reit IPO Balloting Results

Manulife Reit balloting results just came out in late evening which I thought I will just update here.

If you would like to see my earlier analysis on the IPO, you can view here.

The Placement tranche of 350,782,200 units were oversubscribed and 45,787,100 units for the public offer were 1.6x oversubscribed. This actually pales in comparison with the previous other reits IPO sch as BHG Reit and Ireit which was 7.6x and 7.5x oversubcribed respectively.

If we analyse the breakdown below, you would see that the chances of getting the subscription is actually pretty high. 

For instance, if you bid anywhere between 10,000 to 19,900 shares, your chances are 60% (30/50) of getting allocated 10,000 shares. If you bid between 20,000 to 49,900, your chances are even higher at 70% (35/50) of getting allocated 20,000 shares. I was not expecting this much allocation actually after thinking of bidding it myself but decide to pull out last minute due to limited funds. I think this should be interesting tomorrow when it started trading at 2pm and given how the market reacts today, there should be more dumping ahead, especially when there are no support.

S-Reits - May 16 Update

We are almost half way into the end of the first half of the year so I think it’s good that we do another round of review on the latest S-Reits universe update.

For those who are interested in the last quarterly update, you can view them here where the theme was on gearing and sensitivity risk of increase borrowing costs on their respective profile.

Performance YTD 

Let’s first start with how Reits have performed in 2016 Year to date:

• Please note that this is only based on capital gain, excluding dividends.
• Gone are the days where we see double digit abnormally high returns like what we’ve seen in 2013. Still, if you pick the right Reits to invest in, investors can still achieve double digit returns if we include dividends in.
• The top 3 best performing Reits currently goes to Keppel Reit, Mapletree Commercial Reit (MCT) and Fraser Centerpoint Trust (FCT). For some reason, Ireit (9% capital gain return) was not included inside the list. I think it’ll make a strong candidate for the best performing if it was included.
• The bottom 3 worst performing Reits currently goes to OUE Hospitality Trust (OUEHT), Far East Hospitality Trust (FEHT) and Cambridge Industrial Trust (CReit). Ironically, these 3 have one of the lowest price-to-book value compared to the rest. This is precisely why buying based on a discount to the price to book value without further understanding the nature of the business or assets can be detrimental to your overall portfolio returns.

Valuations

If we look through the valuations of the overall Reits, we can see that they are within the boundary range of the average line in the past 14 years. 

There were an obvious period of bubble territory formed from 2003 to 2007 when the yield dropped to about 4% and P/BV goes as high as 1.5x before it went crashing during the GFC period. At the trough during the GFC, yield for Reits can go as high as 12% on average while the P/BV drops to 0.5x. 

We are somewhere in the middle right now, but to wait until valuations go to such level we’ve seen during the GFC, it may or may not materialize at the end of the day. Just waiting for it to happen can lose you opportunity cost during these periods where you can still earn double digit return (see above) provided you pick the right company to invest.

Next, I’ll go into a bit more specific into each respective sectors:

Office Sector

I’ve shared quite a bit on the office sectors in the past few articles. 

If you look at the near term supply of commercial properties in the next 2-3 years, you will see that there are a lot of supply coming and this will dampen the rental yield of a commercial property. This is similar to what we’ve seen in 2011 back then when it is forecast that there will be major supply in 2012. Rental yield should remain depress until 2018 before bouncing back. 

Still, do look out for leases expiry profile of your respective Reits to know how much will it impact the overall portfolio.

Hospitality Sector

Hospitality is another sector facing pressure from incoming supply for the next 2 - 3 years.

The 3 year CAGR is expected to be at around 3.8%, but coupled this with the strong SGD, we may be seeing some downward pressure in the rev/par unless the demand can keep up. The Singapore government has set aside $700 million in a Tourism Development Fund to be invested from 2016 to 2020 and they are forecasting a growth of between 1-3% over the next 3 years.

Retail Sector

There are a couple more supply coming in the next 2 – 3 years mainly from the completion of Northpoint integration mall in outskirt of town, the rest should be more subdued.

If you own a piece of the retail reits, do watch out for tenant retention, sales traffic and historical rental reversion in particular, as this will show how good a management is doing their job to maximize returns.

Final Thoughts

Reits have been a popular investments for many people over the years. Like any other investment vehicle, there are the good and bad ones.

There are also a group of people who shuns Reits in general because they feel they are not able to grow due to the very small earnings they retained. This is not true because there are many example of good Reits where their management are able to work something out to grow organically through positive rental reversion and maximizing the asset's return. There are also a couple of Reits which have the history of not raising any rights to investors in order to grow.

As with any investment, the key is to understand the nature of the underlying assets and management of a Reit better and earlier than what the general public can see on the outside. If you can do that, Reits can be an extremely lucrative investment because it offers you a great dividend plus capital gain yield.

*Vested with Ireit, FCT, CCT, Ascott, Keppel DC and First Reit as of writing.

My Thoughts on the Manulife Reit IPO

I spent the weekend reading the prospectus of Manulife Reit as part of my case study to understand the different set up for Reits better and thought I'll summarized my findings below.

You might recall in late July last year, Manulife was planning to launch their Reits IPO but pulled out towards the end due to poor market sentiments on the stock market and the upcoming interest rate hike.

Recently, they revive their IPO launch on the Singapore Exchange Mainboard to offer shareholders a chance to own a pure US office real estate play, aiming to raise US$519.2 million consisting of 396.6 million units at US$0.83 / share.

In case you are interested, do watch out the indicative timetable below:

Assets Portfolio

The Reit's initial portfolio consists of 3 office properties located in Atlanta, Los Angeles and Irvine in Orange Country, California with a combined value of US$799 million. You can be sure the sponsor has many other offices that they will inject in over time. The portfolio has a WALE of 5.7 years which can be considered decently long on average standard.

The Reit started with a gearing of 38%, which sides on the slightly higher side of things, especially if the US starts to hike the interest rates upwards in time to come. Still, the net impact between the higher cost of borrowings versus the stronger USD would probably net off against one another.

The exciting part about these IPO is that investors are guaranteed by the sponsor a DPU of 3.65 cents (from May to Dec 2016) and 5.475 cents in FY2017, which translate to a yield of 6.6% and 7.1% respectively. This is not uncommon practice as we've seen other Reits in the past doing similar things on financial engineering such as income support and alike. This is to "stabilize" the performance of the assets at least in the first few years until investors are more educated on the Reits itself.


Premium to NAV

Many investors are put off when they pay a price that is premium to its NAV, especially for property related play like Reits. For this case, Manulife Reit is pricing itself at a price to book value of 1.06 while comparably if you look across the other office Reits listed on the exchange, you would find that only Ireit and MCT are trading at a premium while the others are trading at a discount.

There are good and bad about this and I am trying to look at it from another angle, similar to how I did for Ireit (vested).

Reits that are trading at a premium to their NAV are not necessarily bad investment and if the management are savy enough, they will be able to grow the portfolio of the assets much faster than those who are trading at a discount. You see, when the operational performance of the Reit is good and DPU is increasing, this is usually indicated in the increasing share price as a reflection of good performance. Reits manager would then be able to use this opportunity to acquire yield accretive assets by means of placement and grow the underlying AUM of the Reits, without compromising the DPU to unitholders because of dilution effects. A good Reit manager would strive to do and repeat this cycle.

Capitalization Rate

If there is one thing that entices me, it is that the US cap rates for commercial properties are a few spread higher than the Singapore commercial properties, which is between the range of 3.5% to 4.0%. Interestingly, the graph tends to show a downtrend from 2009 onwards, but this can be interpreted in many ways, such as rising net asset value of a building, everything else constant. 

Future Growth

The projections towards the next 2-3 years is an organic growth of rental reversion of up to 2.5% - 3.0% across its properties, where there are natural escalation in the lease negotiated. In terms of inorganic growth, the Reit is expected to acquire around 1 property a year and one of the criteria is yield accretive acquisitions, which many investors are in favor these days.

Fee Structure

In order to look at this, one has to look at the way the manager's fee structure are set up.

The manager's fee structure is set up based on a base fee of 10% of total distributable income and performance fee of 25% of increase in DPU after FY2017. In other words, 7.1% levered yield is the base for benchmark towards what's going to come after that. 

When you see fee structures are being set up this way, they usually bode well for shareholders because then you don't get managers who try to acquire for the sake of acquiring. One only has to look at the case study difference between MGCCT and Ascott Reit and you can see the difference in the overall performance over the years.

Shareholdings

Cornerstone investors, which makes up currently of Credit Suisse AG, DBS Bank Ltd, Fortress Capital Asset Management, Lucille Holdings, and Oman Investment Fund, have agreed to enter a subscription arrangement of 169 million units. It is important to note that there are no lock-up period restrictions in respect of their unitholdings with exception to DBS Bank Ltd, which has agreed to a lock-up arrangement during the First Lock-Up period. In other words, the rest of the cornerstone investors can sell immediately on the open market when the trading commences.

One thing investors need to also take note is that any single investor can only take a 9.8% stake and not more. This is in order to meet one of the criteria for an investor to avoid an US withholding taxes rule.

This does not bodes well in my opinion because it would mean that with cornerstone investors included, not a single unitholder is able to make the decision that would sway in their favor. Things could get interesting if the performance of the Reit is abysmal.

Final Thoughts

Overall, I had a pretty good impression of the Reit and there are a few things that I like about how this Reit is being set up.

If you are one who would like a diversification into a US commercial properties, then this would provide a good avenue for you to park your money. For myself, my portfolio is rather heavy on commercial reits with Ireit and CCT, so I may decide to try a small bite on it via the ATM, but more for sake of case study in the future as well.

Looking at how the Oxley bonds and BGH Reits are well over-subscribed recently, I have no doubt that this will be well over-subscribed as well. I'll try a few and see if I can get lucky.

Nam Lee Metals - H1 FY16 Results & Thoughts

Nam Lee reported their half yearly results last Friday which I quickly want to update after my last post on the company a year ago.

The company has continued from their momentum last year to churn out good operational performance this half yearly and this is evident from the 27.4% increase year on year from the gross profits and 18.8% increase year on year based on net profit.

A more detailed breakdown can be seen from the table below:

In terms of cashflow, we all know how much they rely on their working capital due to the nature of the business, keeping inventory, longer cash conversion cycle, etc. In this regard, investors who are seeking for companies that are cash rich might be disappointed to know that they will continue to keep their cash for working capital purpose. For those who are curious, their cash equivalent (including long term bond) less borrowings are worth 19.5 cents while their share price are at 29.5 cents. That's how much cash they have to hold on their balance sheet.

It's a pity that the company did not disclose their segmentation on the product level so this leaves everyone hanging guessing around, especially since we know the construction side of the business are slowing down. Having said that, they do disclose based on the metals segmentation contribution and again aluminium came in top, followed by steel. Looking at the results, it appears that they are doing well for the Carrier Transicold side of the refrigerator business.

I happened to attend their AGM in Feb 2016 so I'd like to use this chance to quickly update what I remember based on my memory.

The contract for their refrigeration business are currently in the 2nd year (out of 5 year subject to renewal) and it appears the management managed to negotiate for better contract based on the past 2 years (2016 & 2015) results on improved gross profit margin. While this is an obvious concentration risk investors have brought up, the management are adamant that they will continue to partner because the customer benefits from Nam Lee's dependence and expertise as much as they depend on them. So it's a win win situation. In addition, demand for refrigerated seaborne trade has been trending up in the past 10 years and UTC has projected a 2020 outlook increase of 5% CAGR per year.

In terms of the volatility of the cost of goods in Aluminium and Steel, the management asserted that they are able to pass on the costs to the customer. In other words, I believe what they are trying to say is they are able to control the margins should the costs go up.

The company has also moved all of their operations to the factories across Malaysia, Johor Bahru and Pekan Nenas Pontian so this is where they have kept their overhead cost low.

The management has a habit of rewarding shareholders well in terms of dividends on years they do well based on long term past records so I believe they will dish out another special dividends this year should they be able to keep their momentum going towards the final half.

*Vested with 35,000 shares as of writing.

Recent Action - Capitaland Commercial Trust (CCT)

My last coverage for CCT was done back in Jan when I reviewed their FY15 results. You can view them here.

On Friday, the market went down more and I managed to pick up more CCT at a price of $1.38 for 7,000 shares. My first buy for CCT was at an average price of $1.33, so this is another average up decision. Together with the existing holding, I have now hold 15,000 shares of CCT in my portfolio.

As much as we've been hearing about the weak outlook of the office sector, especially for Grade A offices in the CBD area as a result of oversupply and weak economy, CCT continues to defy the odds by having a committed occupancy of 98.1% for Q1 2016. One only has to look at their past records since inception to understand how well these reits are managed.

Of course, the rental itself is the key variable factor that is going to swing, but that's like any other business. They undergo a cycle of boom and gloom but they'll always come back when the economy picks up.

In Q1, rental rate dipped about 4.8% to $9.90 and we can expect things to come down even more, with the GFC support of $8 probably the bottom in the mid term, given that the grade B rental rate are holding up better these days at about $7.

The Reit has one of the lowest gearing at 30% amongst all other Reits at a net property yield of around 3.8% so if they gear this up further, we can expect the dividend yield to inch closer to the 7% like Keppel Reit, who has above 40% gearing.

There is a potential acquisition pipeline to acquire the rest of the Capitagreen by 2017 so I think we should be seeing some corporate movement pretty shortly. My take is perhaps they will fund the acquisition via borrowings and placement. I don't think they require a lot of funds to do the rights issue at this point.

To me, this is a good opportunity to own a well managed blue chip reit giving investors a 6.2% levered yield at 30% gearing while awaiting for the sector to recover. I think this has the potential to be a strong long term yield play + capital gain.

*Vested with 15,000 shares of CCT as of writing.

Ireit Global - Q1 FY16 Results Review

Ireit Global has announced their first quarterly results this evening which I thought was pretty good and fell within my expectations.

Readers who are new to the blog can read my recent Ireit AGM review here.

The huge increase year on year and also with the forecast on the revenue and net property income was due to the recent acquisitions of the Berlin properties which yielded an NPI of 7.1% and was funded via debt and equity, but the overall distribution per unit was close to the forecast at EUR 1.04 cents. This was important to me because I wanted to make sure that operationally they were getting the rental they think would make sense and it is important that the amount has to be close to their forecast. 

In terms of their distribution per unit in Singapore dollar, it dropped 9.7% compared to forecast to 1.58 cents, while it was higher by 43.6% if we compare year on year due to absence of recognition of rental from the Berlin acquisitions.

The drop in the distribution in Singapore dollar is attributed to the fall in the Euro which the management has decided to hedge 80% of their income at Eur 1: SGD 1.52 so this falls under their expectations. 

A lot of people will be concerned with the Euro risk but I chose to take a different view. To me, weakening Euro indicates that the Central bank continues with their QE bond buying program and this leads to low cost of debt which will help the company in terms of interest costs.

This also reminds me of my previous holdings in Stamford Land and Ascendas Hospitality Trust where the AUD continues to weaken but it helps their hospitality business because more people would come to Australia if the currency is weak. So it really goes both ways.

The company WALE continues to be strong and long, with quality tenant profile and a long lease extended. The latest news coming out of Munster campus is that the tenant Deutsche Telecom will be exercising their lease extension option which will bring the WALE up from 3.8 to 4.9 years.

With an approximately 9% yield based on current price, a long WALE, an extensive QE program in the EU and a volatile stock market, this looks like a good return for me to park my money.

*Vested with 62,000 shares.

Child Portfolio - "May 16 - SG Transactions & Portfolio Update"

This would be a short update to the last edition of the Child Portfolio updated back in March and to journal the entry for accountability purpose.

The Child Portfolio was entitled to $300 dividend payout received today for holding 3,000 shares of ST Engineering. Together with the angbao we received from the grandparents for his birthday last month (link here on how we spent his fun birthday), I have decided to use these money received to accumulate more STI ETF (ES3) at $2.78 for 200 shares. I still think this is a pretty good entry point and an obvious winner for the long term.

For those who are new to the blog, the intention of doing this is to compound these money received from special events such as Chinese New Year or Birthday from the day he was born until the day he turned independent enough to manage his own money. The updates and accumulation will be infrequent but they will add up over the years and snowballed hopefully into something big when he grows up. By doing this, I also want to ensure that I don't procrastinate with the money by combining them with my own. The other thing I can do is to set up a bank account for him and have these money deposited but I'll doubt it earns great interests right now.

Child Portfolio

No.	Counters	No. of Shares	Market Price (SGD)	Total Value (SGD) based on market price	Allocation %
1.	ST Engineering	3,000	3.15	9,450.00	87.0%

2

STI ETF

500

2.79

1,395.00

13.0%

Total

10,845.00

100.0%

Slow and steady wins the race...

Procrastination loses you the race...

Sharing My Thinking Cap As An Employee

Everyone fantasizes being something different once in a while and I am no different from the rest.

When I started the blog, I was inspired by fellow bloggers who walked a certain path of life that are different from the rat group I belonged to. It was always exciting to be different because the experience was not mundane and it gives an escape to the life we have yet to experience. It almost feels as if the grass is always going to be greener than the one we live in today. 

As an employee myself, most people will be able to relate to what I am experiencing. You wake up everyday at the same time, do the same activities in the given time, take the same bus with the same group of equally dreaded passengers and reach the office to do your required task from 9 to 6 after which you reach home for dinner and repeat the same again Monday to Friday. During the weekends or public holiday, we usually chose to escape from the reality because for the sake of the 2 seemingly short days, we need a break from the routine. We need a holiday to slow our mind down and perhaps a laid back resort by the beach would be the perfect vacation plan to recharge our energy. Towards the month end, we get paid for our labor and this is perhaps the most looking forward moment of any employee's life. After all, it is a fact that in modern slavery, we had exchanged one resource after another - our precious time for a glamorous life and money.

When I started the blog, I had written about such escape from reality as a measure of attractiveness to readers, for instance you can view the About Me page. You can say I am just like any other salesmen on the street trying to sell you insurance or any other products. I was selling an envious lifestyle to readers, an opportunity to join me in what I do in order to escape the dreadfulness of reality. But this is no longer the case now. To me, the blog has grown to a matured stage where I should be able to offer readers some insights that I get over the years more than just dividends and envious lifestyle. I want readers to know that there are many path to a greener grass and my path is not the only way for you to reach that ultimate zen that you seek for unconsciously.

Based on B's personal scoring

Table Factor Matrix

The above table you see will show an underlying matrix to how much each factors will mean to me as an employee, early retiree and an entrepreneur. The score input on the table is based on my personal scoring so that will be different for different people.

Let me provide the breakdown of each factors in more detail:

Money - This is a rather straightforward decision for me. As an employee, I can say that I am extremely comfortable with the amount of salary I continue to receive because I get paid rather well as an employee, admittedly. Note that I don't earn sub-abnormal high salaries like what you read on the paper but nor do I earn such a low pay that I have difficulty paying my butter and bread. In fact, for most of us who are an employee, I think we get paid an obscenely high amount of salary that it can easily feed hundreds or even thousands of people in a poor nation. I think that's a pretty fair statement for people who are earning at least a median salary.

I rated 3 for early retirement because obviously I will not receive any sort of income when I am no longer working. The score of 3 is there because I have at least a small dividend I received that can pay off the basic necessities. But for now, they are inherently not sufficient at all to fund our family lifestyle.

As entrepreneur, it is often a risk in terms of money. You can either be very rich if you are successful or very poor if your start-up goes bust. Because of the unknown factor, I have factored the score at 3 for now.

Risk - As an employee, the one risk is always going to be retrenchment when the economy turns sour, as much as we dislike it to happen. However, there are certain roles that I think are more durable than the others. Myself for instance, it is pretty unlikely that I will be let go even in dire conditions because it is one of those thing that you will need an accountant no matter what happens. Phew, safe score checked.

Again, quickly dissecting the risk factor as an early retiree and entrepreneur are pretty self-explanatory.

Fulfillment - I rated this as 5 for myself as an employee because I do not get the kind of fulfillment others get in my role as much as I would have liked. It is okay because this has probably got to do with the role I'm playing in my company. I certainly can't be an accountant yet at the same time reach a fulfillment such that I scored a goal in the extra time in a football match. That just will not happen unfortunately.

I rated a high 9 for early retiree and entrepreneur because I guess they'll be more aligned to what they prefer to be doing and have that sort of drive and satisfaction that the corporate world cannot give. I can be very wrong in this of course because I have a few friends who get a high 9 fulfillment in their corporate role and I congratulate them for it.

Autonomy - As an employee, I think it's fair to say that we don't usually get an autonomy to do the things that we want to do, pick an idea that we think is right or take leave from work as and when we feel like it. There are corporate rules and hierarchy to follow no matter how much you disagree with and this is why I am scoring myself 3 for this as an employee. I think most people would agree with me on this.

As an early retiree, the biggest takeaway is perhaps the release of this autonomy that tied you as a rat in a tight race. When you get to this stage, you no longer have a boss to report to nor do you have to follow an SOP that someone unknown has created in the past. You do what you want and need to do at your own leisure and disposal. This is why I have rated this as 9.

Sharing My Thinking Cap

Based on the above table matrix I've shared, you can see that there are different combinations you can choose in order to obtain happiness.

For instance, if you are an employee with a low score of fulfillment and autonomy just like me, you can perhaps take on roles that might increase your fulfillment and autonomy score over time. You can change multiple jobs to trial and error and see where the sweet spot might hit best for you. That is one option.

The other option you can choose is to take the leap of faith to become an entrepreneur. Perhaps, cooking is your passion and you've been dying to do this from young. Taking a leap of faith to entrepreneurship from an employee will increase your fulfillment and autonomy almost immediately but will increase the risk and monetary factor. In other words, if you decide to become an entrepreneur, you better think thoroughly on the amount of money you have to burn and risk of failure should the business doesn't work.

For me, I decided to go with the third option.

The availability of option to increase my autonomy scoring appeals to me very much because I don't like to be tied with decisions and time. For instance, in my current role, it is often very difficult to take leave during the last week of Christmas and New Year because they are my peak period and it is almost impossible to be away during such a time. In fact, there was once when I was seriously sick and I had to come to office to close my year end book. Being an early retiree appeals to me because it gives me the option to do what I wanted to to during Christmas and New Year. Perhaps, a white Christmas getaway vacation would be nice for my family. I do not know how it feels because I am bounded by my job at the moment.

The other thing that weighs on my mind is money. Obviously, regular readers of this blog know what I am trying to do with this one. I am trying to slowly but surely transition my income from an active one to a passive one in the form of dividend income. When the amount of dividend has reached an inflection point and able to cover my expenses, that is when I declared myself financially free and I can transition to an early retiree lifestyle when it comes. Of course, who knows by then I might be offered a role as a coach for my favorite soccer team and by then my fulfillment score will shoot up and I won't be dreaming of early retirement again. Anything is possible.

Final Thoughts

Please be warned that the above scoring is purely based on my current input and you are welcome to disagree. But if you are picking on that, then you're missing the forest for the trees.

Everyone has a process thoughts on the things they do but they are often crumbled together that it is often difficult to put a piece of the puzzle together. Writing them can help to organize the thoughts more concise and properly.

Now that I've shared my thinking cap, it's time to close the cap and get back to work. See ya!!!

Dividend Income Updates - Q2 FY2016

I am writing this dividend update in an attempt to compile my quarterly dividend performance for the year. The last update for Q1 was written a couple of months ago (Link Here). 

The theme of this post will be based on my understanding of the advantage of dividend investing and that is to compound dividends for as early as we can, for as long as we live. 

I am sure by now many of you have heard the common saying of “Sell in May and Go Away” phenomenon that has been going around, lurking and prompting investors to sell their portfolio holdings and seek a hideout until the bear comes out. There are some truth in this, as hindsight statistics have proven over the years that resembles many other hidden truths but do note that they are not bound for absolute certainty given how some years they’ve turned out otherwise. 

If we take a step back and think what it really means, we will soon realize that they are all but a bull of crap, no pun intended. They are noises to stir around the emotion of an individual, to test and see if they are investors who have a developed mind of their own or simply buying and selling based on what they heard on the street. I’ve been tempted myself not once, not twice but a couple of times, many times in fact over my investing journey and with the ubiquitous of the media stream, I believe the same goes for many.

Now, if you decide to sell them based on the above reason, you will soon find yourself to be in an extremely difficult position to allocate the capital you have at hand as you have to find a better company with a better valuation, which does not come across too often. I’ve shared in my previous post (Link Here) how difficult it can be for an individual to sell and buyback and unless you’re a proven winner in this category, you are better off compounding those dividends you receive from your company as much, as early and as long as you can. I think that’s a slower but a pretty high success rate in the long term. 

Counters	Dividend (S$)	Payable Date
Ascott Reit	159.00	27-Apr-16
ST Enginnering	1200.00	10-May-16
China Merchant Pacific	1575.00	19-May-16
Neratel	130.00	20-May-16
Ho Bee	1540.00	27-May-16
First Reit	169.00	30-May-16
Kingsmen	1600.00	31-May-16
FCT	395.00	31-May-16
OCBC*	1080.00	14-Jun-16
Total	7848.00

*Scrip

After tabulating my dividend for all my companies, the 2nd quarter dividend amount came up to $7,848. Together with the Q1 dividend amount of $3,056, the 1H FY16 dividend amount came up to $10,904, which is still below my targeted amount of $2,000/month or $24,000/year. I'll keep going and see where it takes me though at the end of the year.

I am treating this dividend income as part of my cashflow which would be reinvested into the market that will give me a higher dividend income in the future which would fund my early retirement, if that is ever going to happen.

If you think that this strategy might work out for you, I’d suggest you give it a try for at least one year and see what happens. For most, I think it’s a pretty addictive exercise to churn out year after year.

How are you doing in terms of dividend in the 2nd Quarter?