Money makes the roulette table go round

When I was in Perth I visited the Burswood Casino to check out what it was like. It was my first time inside this casino and believe it or not, I have visited casinos but never wagered in one. I have bought lottery tickets before but never made bets in a casino.

Retirees and pokeys
The first thing that struck me when I entered Burswood Casino was the number of elderly people who were there. There were many elderly folks who were playing the pokey machines as well as the various assorted gaming machines spread out in the sprawling casino gaming hall. They were glued to the screens as they pressed the buttons that spun the wheels, allowed a ball to drop on a video screen into boxes where prizes could be won. I am a PC gamer myself and I was amazed at the range of machines they had. Poker machines alone there were many variants but one thing was similar for them, the odds they gave were poor compared to the payouts.

Poker and Card Games
There were young players too and I spied a few who were at the poker table. I am not sure what version of poker they were playing as I am not a real poker fan myself but each player was dealt two cards and the dealer would open up to 5 cards if the bets were called or raised until the "flop". The expression on the various players face was interesting. Some older players hardly had any expression while others were smiling all the time. But what really enthralls you even as an audience is the stress and tension when one party raises the ante puts more money into the pot. The look of tension and stress on each player's face is real and when the cards are played out, you can make out sometimes the disgust of the person who loses although some of the players have truly poker places.

Roulette Table
The way some of the punters played the roulette table was amazing. They walked from one table to the next and put their bets on all 2-3 tables at one go! What was even more amazing was how one guy betted on "0" and hit it twice in a roll! What are the odds of that?

Odds and Ends
There in lies the trap of the casino. The house will always win in the long-run because of the odds. They are always stacked against the player. Take roulette. You can bet on any of the 36 numbers including 0. However, if you bet on 1 of the 36 numebrs, your payoff is 1-35 which is less because there are 37 possible combinations. For a fair game, you should be rewarded 1-37 but that is not how the game is structured. The same principle applies to all the other games. The odds are stacked against you.

What does this mean for me
So what does this mean for you the investor who wants to achieve financial freedom? The key takeaway is that you cannot find financial freedom in a casino. If you want to make a small wager and you are a legal adult (>18 or 21 depending on the country), by all means do so as see it as a game and expense. Gambling in a casino is NOT investing. :) In the long-run the house wins in a casino. In investments, e.g. treasury bills, in the long-run you will win through the accumulated interest yields paid to you. It is slow but it is sure so make your choice - investments or gambling? They are two different ballgames, don't mix them up :-)

Be well and prosper.

Examine your wallet, examine your financial life

Have you ever taken a close look at what you put inside your wallet?

The contents of your wallet reflects your financial personality
Our wallets reflect our financial lives because the wallet is the conduit for how we gratify our needs and desires. The typical contents of your wallet are cash, credit/debit cards, bank/ATM cards, name cards, receipts and other miscellaneous nick-knacks. Let's examine our own wallets and see what you can find out about your relationship with personal finance and money.

Cash
This is the most important component for you as you need to pay for your food, bus or train fare or parking if you drive. Your incidental living expenses are paid for using notes (and coins) that are legal tender for a small sandwich to that magazine you read. How much you carry does reflect on your own financial security. When I was a student and receiving pocket money from my parents. My wallet had only two to three days living expenses in it on average. As I started to work and earn my own income. This amount increased a bit more until I can afford for incidental expenses purely on cash.

There is no golden rule for having too much or too little cash so long as you balance the need for necessary cash expenses vs. being spendthrift because your wallet is too heavy with dollars. My own personal experience has been not to have too much money partly to reduce the urge to spend and to maximise returns on cash in savings or investments.

Credit and Debit Cards
Most Singaporeans own at least 2-3 credit cards on average as once you are qualified to own 1, you can own virtually unlimited cards as the unsecured credit industry is extremely competitive with most financial institutions offering to waive the first year card fee. You may want to consider reducing the number of credit cards that you own so that you concentrate your purchases on that one or two cards that give you the most rewards. Alternatively, reducing your cards also reduces the likelihood of whipping out the card and buying your heart's desire on a whim just because you can afford the unsecured credit is not wise. Debit cards may control you a little but it's still your money. Having fewer of these would also be more prudent as you mainly need one Mastercard and one VISA as most retailers offer one or the other of these two major credit card companies.

Name cards / Receipts and Other Knick-Knacks
Have you ever found your wallet to be so thick and fat and it bulges when you put it in your trouser pocket? For ladies, do you find that you need a wallet the size of a small handbag because of the "miscellaneous" stuff that you need to store inside it?

I too am guilty of stuffing miscellaneous name cards, receipts etc into the wallet and carrying it with me for a few months. Ideally, you should do a weekly clearing of your wallet to transfer name card info into a diary or electronic personal digital assistant. In addition, receipts especially of NETS (electronic point of sale) / credit / debit card purchases should be kept in a file and reconcilied against monthly bills or bank statements to track spending. This helps you to know how much you are spending each month and for you to recognise the cash outflows that is happening right in front of you even if the payments is not in the form of notes and coins!

Our wallets reflect our financial personality. What is inside your wallet says a lot about your attitudes and approach towards financial freedom and what is inside your wallet will always be more important that what you use as your wallet.

I never buy a wallet that costs more than the money I have inside it. :-)

Be well and prosper.

Life and living: your reason for financial freedom

10 days in Perth.

Beautiful houses along the Swan river and East Perth.

Cool temperate weather with cooling breezes tickling your face.

Walking around in 18 degrees temperate with the sun shining brightly.

This is life. This is living.

Western Australia has LAND!
Western Australia is four thousand times the size of Singapore with a population of around 1.5 million people spread out in a huge area. You will find yourself walking along the jogging/cycling trails and only meeting the occasional jogger and cyclist compared to the mass of humanity that is uniquely Singapore.

This is life. This is living.

What is the dream that drives you?
I have talked about what drives you in your quest for financial freedom. Why do you want to work so hard to earn that money. What will the money do for you? That is the crux of your reason for striving for and sustaining your efforts in being financially disciplined to work or run a business, live within your means and accumulate savings into prudent investments that yield you a lifetime of passive income to sustain your standard of living.

It has to be worth it!
My Perth trip has opened up my eyes to what living can be about. Our little red dot has all the modern conveniences, 24x7x365 buzz of noise-activity-sound that packs all the excitement as well as all the stress that comes with modern living. Now, more than ever, I realise my dream is to own a piece of property near water or parkland, to be able to enjoy a temperate climate, to have a balanced life with work-family-leisure to see what standard of living my passive income and get for me. It is to live a healthy lifestyle, jogging, cycling or walking along meandering parks and trails, the sounds of the parkland whispering its alluring song of serenity and peace, of being able to be at peace with yourself and your environment. To know that all your efforts in deferring current consumption for future investment that yields future perpetual cash flows is all worth it!

A trip overseas sometimes helps us to put into perspective what is important in life and why. What would you own trip bring you?

Be well and prosper.

Perspectives from Perth (on holiday)

I am on holiday in Perth, Western Australia (WA) and one of the few things that struck me was the relatively high interest rate in WA! I was chatting with the taxi driver as he drove me from the airport to my hotel in Hay Street and even he was a 60 plus year old taxi driver, was entrepreneurial enough to take a loan of about AUD 185,000 to buy a 2000 sq metres piece of land which he sub-divided and intends to sell for much more than that. He was paying a loan rate of 8.75% for his loan.

Wow, if that is the loan interest rate, imagine what is the interest rate for savings and time deposits in Australia!

The more I start to learn and know more about Australia, the more I believe financial freedom lies in relocating to Australia. Many Singaporeans have already taken this route to migrate there and to establish a home there. Why is that?

Perhaps it is the relatively abundant land relative to a place such as Singapore. Perhaps it is the physical space that you can have as no matter how crowded Australian cities can get, nothing beats Singapore rush hour except for Hong Kong and Tokyo. Perhaps it is the fact that costs of your home and transportation, i.e. a car is not prohibitive. In addition, the economy is currently booming in Western Australian as well due to the mining development arising from China and India's voracious appetites for the mineral resources of this continent down under.

Perth is also a place conducive for family life. People go home sharp at 5.30 pm and the Hay and Murray Street (their equivalent of Orchard Road shopping Mal) shuts down around that time on an average weekday night! In winter (middle of the year), it gets dark around 5pm plus. Only on Friday evenings does shopping hours extend to 9 pm and shops operate 12pm to 6 pm on weekends.

But the high interest rate really sets me thinking as the key financial freedom is living within your means, building up your savings and investing it for positive passive cash flows. When the rate of return on your investments is higher, you would need a relatively smaller amount of portfolio investments in order to be financially free. Our Singapore interest rate is so low that returns on your savings is abysmal. It practically forces investors who want a higher return to punt on the stock market.

Travelling has opened up my eyes and ears as I learn more about other possibilities in financial freedom.

May you have a good week and be well and prosper.

G'day from WA!

Save now and travel the future!

I will be visiting Perth for a holiday with the Wife for a week or so of rest, relaxation and reflection. I have been working for more than one decade plus a couple of years and I have hardly been on any trip that stretches past one week purely for pleasure.

Student tour of Europe in 1989
Before I started my working career after graduating from the university, I went on a 28 day whirlwind student trip of Western Europe covering countries such as France, Germany, United Kingdom, Spain, Australia, Belgium and Italy. It was touch and go and I mainly covered the cities in each of the countries visited. That trip left a deep impression on me as it opened up my eyes to the history, culture and beautiful landscape of Europe. It is a vast land made up of countryside, historic cities and interesting cultures.

Since that trip back in 1989, the Singapore Armed Forces has sent me to Rockhamption for armour training exercises and my work has brought me to places such as Jakarta (Indonesia), Xiamen (China), Brussels (Belgium) and London (United Kingdom). My volunteer activities has also brought me to New York in July 2002 (post 911) where I gazed upon the reconstruction of the gaping hole in the ground that was previously part of the twin towers of the world-trade centre. My toastmasters activities has seen me visit Hong Kong recently for the District 80 Table-Topics Contest as well as the annual convention.

Compared to my parents and siblings, I travel considerably less than them as the last real holiday that I had with the Wife was a couple of years back to the Australian cities of Melbourne and Sydney which was for five days or so.

How does traveling concern financial freedom?
In our daily walk along this long journey towards financial freedom, we sometimes question WHY are we doing it? Why do you scrimp and save instead of travelling many different places now and to enjoy yourself? Why do you not blow that bonus away on that trip to Tibet or Thailand? I too want to travel to experience the different sights, sounds and scenes that will leave me a different person before I stepped foot on that place. But I came to realise, by deferring all that travel in my 20s and 30s, I managed to pay off a lot of my housing debt and to invest in financial portfolio assets that yield future cash flows that will fund future travels!

By not traveling extensively in my earlier years, I channeled more of my savings into paring down my debt as well as creating an investment portfolio that grows bit by bit, dollar by dollar, cent by cent into capital that if protected and invested appropriately yields future cash flows that can then be used for travellng for the future.

It is about striking a balance. In the early days of my career, I did go for short trips of 3-4 days on Star Cruises, trips to Genting as well as Phuket with friends. It was not as if I just stayed in Singapore 24x7x365. It was just that I travelled a little bit less then so that I could travel a little bit more now and in the future.

Now as I trade parts of my youth for experience and a little bit more of maturity, while my energy level for travel may have dropped a bit, I start to learn to cherish the experience of each trip that much more. To savour even the simple fun of getting there. Walking around. Seeing how people live, work and play in another country.

Why do you want to save
The road towards financial freedom is long but the journey is worth it if we have compelling reasons why we are doing it. To postpone current consumption for the future is a powerful form of discipline that you can acquire on this journey. In order for you to stay the course, knowing the "Why" is even more critical so that you can maintain the "How" to live within your means, save and invest for the future.

I wish you a safe and satisfying journey in your own voyage towards financial freedom.

Be well and prosper.

Panzergrenadier's stock portfolio

A reader JK has asked me to list down my stock portfolio to give an idea of what my investment preferences are. I thought that it would be a good idea to share. This is currently what is inside my equity portfolio that comprises wholly shares in companies listed on the Singapore Exchange:

In no order of merit or preference:

1. Ascott Reits
2. OCBC Bank
3. SingPost
4. Suntec Reits
5. Singtel

My approach to picking stocks on STI has been to look out for blue-chip type of companies as well as those that have a track record of dividends. You will notice that I have both Suntec Reits as well as Ascott Reits. The serviced residential segment represented by Ascott Reits should still be doing reasonably well given the tight supply situation for higher-end rentals. However, I didn't get into this stock early in the game. Am holding mainly for dividends.

Going for any of the banking stocks will not get you too far wrong. Both DBS and UOB are a bit pricey so I am holding onto OCBC as the prospects for the local banks are still quite good given the rising property market. In addition, wealth management products are starting to make more inroads into the heartlands and mass market and I think the banks will continue to do well.

SingPost is a very strong monopoly in both postal services as well as agency payment services. Their moneylending business bolstered by the introduction of EZcash and James products are doing very well and basically allows this defensive stock to stay strong and pay very good dividends.

Suntec malls are still very packed during weekdays as well as weekends and it is still prime real estate for retailers as well as for businesses to set up their offices. I think their prospects are still good in the current supply crunch for office properties.

SingTel is a legacy from the group A and group B days and I think I will keep this for the long-term and bequeath it to my future generation. :-)

There you have it, my equity portfolio at this point in time.

My current investment approach is to buy and hold and all my equities do pay dividends so unless I need to sell them to fund something new, they should stay this way for some time.

The rest of my investible savings goes into iSavvy time deposits and treasury bills.

How does your own portfolio look like? :-)

Be well and prosper.

Are you investing if you are monitoring your stocks all the time?

I invest in equities in the Singapore Exchange (SGX) but I work in an office environment. As I am exposed to the SGX, I have one of my internet explorer windows open to the poems stocks section where I monitor the daily gyrations of my portfolio as I do my work.

I have the internet down, I have the internet down
Today, something interesting happened... The internet was down for a few hours! Imagine that, 120 to 180 minutes where I did not know if the stock market had plunged, if my equity portfolio had been totally wiped out or made 100% gain in those 2-3 hours.

This set me thinking, are you investing or are you speculating on the SGX if you were in the same position as I was? Not knowing how much your porfolio was worth at that point in time when you needed to. For a long-term investor, do you need to constantly be monitoring your portfolio so that you can time some of your decisions whether to buy, hold or sell your stocks and shares at that point in time?

Holding power and your investment objectives
The key to answering this question is whether you have holding power and what exactly is your investment objectives? Holding power refers to the ability to let your investible savings continue to stay invested in the asset class you have chosen, be it property, equities (stocks and shares), bonds, REITS/business trusts, derivatives! (only for the sophisticated and the brave) or treasury bills and time deposits. This is a very important aspect of personal investment because without holding power, you become very easily affected by the ups and downs of the market and can be spooked into selling or buying based on fear and greed and sometimes both!

If you have holding power and your horizon is for the long-term, then the daily gyrations of market prices should not have a major impact on you if you are clear about the reasons why you are holding on to those assets that you have. In the case of equities, Peter Lynch recommends that as an investor, you should always have three reasons why you are holding on to the stock and these reasons are simple enough to explain to a child or a layman investor. If you are not able to articulate your reasons, it means that the reasons could be invalid or that you are more a speculator rather than an investor.

Your investment objectives (e.g. to beat 2 x fixed deposit rates) annually would then guide you in terms of how your respond to times when you do not know how your portfolio is doing at a specific point in time. If you have set up these from the start, missing a day or two of knowing what you are worth will not adversely impact you. This is because when you have holding power, you do not need to liquidate your portfolio until and unless the time is right for you in that you need the cash and you have decided that your ride with that asset class is over and you have reaped the targeted returns required.

Am I a investor or speculator
Today's internet disruption showed that while I claim to be an investor, there is still some speculative tendencies in me that I have to curb by holding on to my investment objectives and to keep sufficient cash in money market and cash to meet contingencies. As long as I stay true to my investment principles I should be able to handle times when I am not closely monitoring my equity assets since my investments are to fund my retirement and for my future generation.

How would an internet disruption affect you? Do share in the comments section!

Be well and prosper.

AdSense: Adding Cents to Fivecentstencents

Since I started to blog in earnest in May 2007, I have discovered AdSense from surfing other popular blogs and starting to learn more about how you can monetise your blog by including Google AdSense advertisements.

AdSense as a experiment
I started it out as an experiment to see if I could sustain this blogging momentum and also to discover the writing skills that I have hidden inside myself. So far, the experiment has been an interesting journey of self-discovery as well as learning about new internet business models.

So far, I have managed to hit USD 100 earnings after blogging for 2 months plus and while I still need to keep my day job, the dollars and cents added from this blog allows me to explore alternative income sources and to learn more about the possibilities provided by the advent of internet business models. It is not the money per-se that motivates me to blog but it helps to incentivise and allow my writing to be more focussed to a schedule. I try to blog about five to six articles a week and aim to write articles that either allow me to express my views on personal finance topics or to comment on issues that I have some opinions through my life experiences or from what I encountered in my life.

Beyond financial benefits of blogging
Another aspect of blogging that I enjoy is the ability to share my different interests in life with you the reader. I enjoy the clarity that writing brings, because when you are forced to write a post about a topic, an experience or an encounter, you need to organise your thoughts in a coherent way that makes sense when read by you who may have never gone through the experience.

My favourite blog
Of the four blogs that I maintain my favourite blog is actually my national service memoirs military-life.blogspot.com. My army experience as a conscript in the Lion City had impacted me in many ways. Some of my attitudes in life and my expectations of my fellow man been tempered by the experiences I encountered in NS. When I write out my recollections and reflections about past-army experiences, it allows me to purge out some of the resentment and regret built up from the encounters I had with the people whom I interacted with during my active full-time as well as reserve service in the Singapore Armed Forces.

I see this as a form of therapy as I am able to slowly release some of the toxins that were built up in my system by the imposition of State control over my life in the name of national defence. I cherish the little freedom I have now having routinely been deprived of it for two or twenty-one days every year for the last ten years of life due to my national service reservist liability.

Monetise your blog
If you are currently writing a blog that has a ready audience, you may want to consider monetising it using AdSense or similar type of application as you add cents to your alternate streams of income and take further steps in your journey towards financial journey.

Be well and prosper.

Money in the hand is worth two on paper

One of the challenges of investing is deciding when to exit the market. If you are someone who reads many of the personal finance or investment books, most of them advocate a buy and hold strategy for the long term in equities as it has been historically proven that equities yield a higher return than money market instruments and definitely more than cash in savings and fixed (time) deposit accounts.

So when is the right time to get out?
The right time is when you need the cash and for most of you, unless you are contemplating retiring right here right now and need the money to buy an annuity, you should stay invested in your portfolio of investments depending on your risk profile.

So if you still working or running a business generating income, you do not need the cash and can keep it invested in the market or in whichever investment asset class that suits your risk profile. Holding power is one of the most powerful forces that allow you to resist the temptation to take quick profits on a rising market. If you are investing for a long term, you should not be overly bothered by the gyrations or movements up and down of the stock index where some of your equities could be correlated to but instead look towards to long term. But life doesn't always play out like the personal finance textbooks, instead there could be times when we need to lock in our gains from our a portion of investments to pay off debt.

My periodic exits
This brings us back to the fundamentals of personal investing which is pay down debt first, put away some spare cash for emergencies and put the rest of investible savings into investment assets that reflect your risk-return profile. However, if you have bought a home that is financed by debt, you will realise that paying off the debt requires you to not just pay your loan instalments using your central provident fund (CPF) but also to make periodic repayments of your outstanding loan principal so that you save the interest costs that you are paying to service your loan.

In my case, I paid off my housing loan periodically whenever I received my annual bonus or when I managed to lock in some realised gains from investing in equities (stocks and shares). In this way, I was fortunate to ride the bull run of the SGX from 2003 (SARS period) to the current irrational exuberance of the stock and property markets. The paper gains I had would have been even greater if I had held some of my stocks. Imagine, DBS was going for $10+ per share a few years back. However, I needed to realise some of the gains because paring down my debt allowed me to save a lot of interest cost and allow me to accelerate my journey towards financial freedom even faster. This realisation of gains was for a purpose: to pay down debt. Currently, I will remain invested in the stock market because this allows me to participate in the stock market gains and generally bullish sentiment. For prudence's sake, I am not 100% invested and still have 54% in money market, treasury bills and some cash.

A number of investors I encounter on internet investment and money forums ask this question on when does one exit the market. I hope that some of my thoughts above will help them along in some way to clarify their own thinking.

When do you want to exit the market, you decide!

Be well and prosper.

My favourite top 3 savings accounts

My current favourite top three bank accounts are as follows:

1. Maybank iSavvy account
2. Fairprice Plus Savings account
3. Standard Chartered e$aver (in the process of applying)

The detailed features of each bank account can be found in the respective banks' websites but the key factor why they are my favourites is the interest rate they pay for savings accounts.

Internet banking
All three are savings accounts and are operated mainly as internet banking accounts. This means that there is no passbook or statement that will be sent to you. Instead, you need to logon to your internet banking account if you want to check your balances, transfer monies out of the account etc.

Interest rate
As at 12 July 2007, the interest rates for the respective accounts are as follows:

1) Maybank iSavvy - 1.68% for balances exceeding $5,000 and 1.98% for balances exceeding $50,000. Balances below $5,000 will be paid at prevailing lowest tier of savings rate which is currently 0.25%.

2) Fairprice Plus savings - 1% for all amounts starting from the first dollar.

3) Standard Chartered e$aver - 1.5% for balances below $50,000 and 2% for balances exceeding $50,000.

For balances between $5,000 and $50,000, Maybank iSavvy offers the best deal at 1.68% based on current available information. For balances < $5,000 Stanchart eSaver is attractive at 1.5%. Balances exceeding $50,000 can take advantage of eSaver at 2%. (Do monitor the banks websites as interest rates change at the banks' discretion). Therefore, if you are deciding purely based on interest rate, you should consider how much average balances you are likely to maintain as this will affect your decision.

Automated Teller Machine (ATM)
Of the three, Maybank's iSavvy offers ATM service but only through their own ATM network which has lesser machines compared to big three local banks (DBS, OCBC, UOB). Fairprice Plus savings account uses OCBC ATM network while Stanchart's eSaver has no ATM service. If this is important to you, you should consider if there are available ATMs near your home or workplace before deciding which one to go for. There are also charges for using other banks' ATMs in the case of Fairprice Plus savings so do check before deciding.

My assessment
The main reason why these banks are my favourites is because of interest rates. Even the lowest, i.e. Fairplus Plus savings offers 1% so I can get at least that return regardless of the amount I want to save. I have broadband internet access at home and find it quite convenient to transact my banking needs online. Transfers between my main salary crediting account (POSB) and the others can be quite easily done using internet transfers through there are daily limits. While my investible savings are also invested into equities, treasury bills and time deposits, there will still be times where I need to temporarily park my funds in savings accounts and these internet-based accounts provide a good alternative to the big three local banks traditionally savings accounts which pay very low interest rates.

If you are internet savvy, do not go to the bank counter for transactions and have one of the above banks ATMs near your home or workplace, you may want to consider opening up accounts with these as there are benefits to doing. Please do evaluate if the respect bank account is suitable for you and read the detailed fees and charges for operating, maintaining and closing such accounts.

Be well and prosper.

Fear and greed: releasing the past, looking towards the present and the future

As you travel along this journey towards financial freedom, have you ever encountered situations where you lost money on a bad investment, an expensive item or by lending people money which was never returned back to you?

Fret not as what was lost can still be found in the future IF YOU LET GO and look to the present and the future!

Fundamental principles for financial freedom remain
The fundamental enduring principles that guide you in your quest to achieve financial freedom does not change. It is still about living within your means, saving and investing wisely. Even the mightiest investment gurus such as Warren Buffet and Peter Lynch admit that they too are human and make wrong investment decisions too. The difference is that they make far more correct decisions that pay huge returns compared to most of us. What happens when we make wrong investment decisions and lose money?

To err is to be human
I punt in the Singapore Exchange on equities. If you have punted in the stock market, you will realise you can make profits and you can make losses too and sometimes both on the same day! And one of the worst feelings you can get is selling and seeing the price of the stock that you sold skyrocket! This has been happening with increasing regularity this past few months because of the buoyant stock market. China Aviation Oil is one counter where I missed the boat. :-) I had bought in at SGD 1.04 when I heard from forums that it was a growth story given its restructuring woes were over after they had settled with their creditors. The price bounced around a little and shot up to SGD 1.17 and I sold out. Now, roughly 3 months later, its share price is SGD 2.94! --A whopping 182% return when I went in at SGD 1.04 per share.

Everyone regrets
To say I did not regret selling would be a lie. Of course I did! But I was also happy that I made 12.5% return (non-annualised) in a short period of a few weeks! There in lies the danger and risk of punting, greed telling us that you should not have sold, you should have waited for bigger and bigger profits! That is the emotional and risky part of you that is talking. To continue to be successful in your daily journey towards financial freedom, you must be able to let go of that greed and be satisfied that capital was preserved, a return of more than 2x the prevailing fixed deposits return was achieved (my own targeted returns) and that your cash is freed for safe investments or for the next punt based on market conditions.

It is only with releasing the past, letting go of the "if only I..." and focusing on the investment opportunities in the present and the future that we will have the mindset that facilitates our daily progress towards financial freedom.

So far, while I have not made the type of triple digit returns on investments, my overall investment returns have managed to hit the double that of prevailing fixed deposit rates. It is not sexy but my portfolio allows me to sleep very well at night and to still participate in a market rally.

Lost and found
Losing further profits from selling some of your shares early results in lost potential earnings. But remember, no-one can predict the future and profits locked in are real and tangible while possible future profits can sometimes turn into paper losses when the market corrects or worst, into realised losses if you trade on margin or do not have holding power.

Remember, what lost profit can be earned back tomorrow slowly and steadily through treasury bills, time deposits and savings. Be aware of the human tendencies for greed to want to lock in gains only when the price is the "highest".

Be well and prosper.

My electronic ROLEX Excel worksheet

Luxury time pieces. Branded handbags. Big name cars.

I have none of the above! :-)

Instead, I have my very own electronic ROLEX Excel worksheet.

What am I saying
You may be thinking now what is Panzergrenadier trying to say? Does he or doesn't he own an rolex? The answer is a categorically "no". The most expensive watch I own costs about $200 and it was a present from my parents. The current Hamilton (khaki) watch that I am wearing was given to me by Mindef for having completed my ten years of national service liability and cost me nothing in dollars and cents but a lot in blood and (unseen) tears.

I do not believe in luxury goods because they do not add much to my life. Of course, if someone gave one to me I would not refuse it but I would not buy them with my own money because they do not reflect my lifestyle. More importantly, my own self-esteem vests not in the watch or clothes or shoes that I wear. Rather, it vests in my electronic ROLEX excel worksheet as it is with this worksheet that I track what is truly important to me.

My net worth.

Are you tracking your net worth
In your journey towards financial freedom, are you tracking if you are on track or off track to achieving your goal? How do you know how much you need to earn, save and invest to reach your target? I track my goal and my journey using the excel worksheet. It calculates my assets, liabilities and gives me my net worth where :

ASSETS (cash, fixed deposits, treasury bills, shares) - LIABILITIES (housing loan) = NET WORTH

The whole idea of financial freedom is to build up sufficient assets that generate positive cash flows that in time will be more than living expenses. When that happens. One then can truly say that he or she has achieved financial freedom.

Am I there yet? Of course, not! I still need to work possibly for at least one more decade to be anywhere near my goal. Is it achievable? Definitely. What my excel worksheet tells me is that I should intensify my efforts as with each passing day, month and year, I am reducing my liabilities, increasing my assets and building up slowly but surely my net worth.

What will I do when my networth hits my target
The motivating factor for me is to truly live my dreams. To pursue activities and projects that I want to do such as public speaking, coaching and mentoring, learning new languages, becoming a full-time writer and trying to create "perfect moments" in life. To truly live the life without having to worry about your ricebowl because it is being replenished by passive income generated from portfolio investments and other cash flow generating assets.

But that does not mean that I live like a miser and deprive myself of life's pleasures. I watch movies, have a nice meal with my spouse, buy a new gadget now and then and go for tours on occasion. However, I do all these with a mind on saving and investing a portion before I spend what is left-over.

What is the ROLEX in your life
What will you do with every dollar you earn? Will you save and invest most of all for growing your net worth or use it to buy that ROLEX in your life?

You decide.

Be well and prosper.

Job Insecurity in the Lion City

What drives you in your quest for financial freedom? What is your motivating factor for reading this and other blogs about achieving financial independence through passive income and multiple source of income?

Why did I start fivecentstencents?
I started this blog partly because I have an interest in personal finance and being able to choose when and how I can retire or semi-retire by working for fun rather than slaving for my debts. Hence, this blog "Five Cents Ten Cents" was conceived out of personal interest combined with my love for articulating my thoughts and ideas out in the written form.

I became fascinated or even obsessed with striving towards financial freedom because I had a close encounter with job insecurity when I was working in a local IT company during 2000 to 2005.

Headcount reduction up close and (almost) personal
Back during the days of the dot.com boom, IT was the rage and the industry was growing amidst close competition, however, the dot.com bubble burst sometime in 2000 and the industry was starting to see consolidation and restructuring. Fortunately, I was working in IT consultancy in a niche area and was relatively unaffected, but my colleagues in innovation (research type of department) and in training were effectively retrenched. Only, the company did not use that mechanism, they were counselled to go. One was asked to go as his department dealing in innovation was more a cost centre and was not a core IT infrastructure or services type of profit centre. In addition, his age (39) and salary was higher than the median. The other colleague who was in the training department was also counselled out as he was (40) and a lot of the training functions too were being restructured (management buzzword for downsized with headcount reduction).

I knew those who were asked to go
What made these headcount reduction impact me so much was that I knew these two persons. They were not digits in a report that spells of xx numbers of people retrenched or laid off. These were real people with families (one of them just had new born daughter) who would be directly impacted by the management decisions to lay them off WITHOUT compensation by asking them to resign. It was not that their performance was poor, it was because the company wanted to show a healthier profit (the company had been profitable for the last few years but wanted to show profit growth).

This adversely affected my morale and my belief in the company as the naive old me finally saw what corporations were about. Naked profitability and we as employees are all means to an end. Some corporations take care of their employees, many do not. The Singapore labour marketplace is tilted in favour of the employer. There are very few mechanisms that protect the worker from unfair treatment by the employers as my example above shows if you are non-bargainable and outside the ambit of the Employment Act.

You create your own financial security
Job security or rather job insecurity is the prevailing situation in our economy. Thus, it is for each of you to think, plan and develop your own financial security to provide your own safety net should your job be outsourced or eliminated due to the shifting economic forces affecting the Singapore economy.

How do you navigate the winds of change that are constantly blowing across the bows of our ship that is heading towards financial security?

You do this by living within your means, saving and investing for the future.

Robert G Allen puts it across very well in his book, "Multiple Streams of Income" where he uses the analogy of seeing each dollar that we save as money seeds sowed that will grow into a money tree that yields future cash flows.

Job insecurity is here to stay in Singapore.

Do you want to be better prepared for it?
Do you want to be in control of your financial security?
Do you want to choose when and how you retire?

Choose to live within your means, save and invest!

Be well and prosper.

Investing vs. Gambling on the Singapore Stock Exchange

In my quest to achieve financial freedom, I frequently find it a challenge to separate between the thin line between gambling and investing. If you too invest in equities listed on the Singapore Exchange, you will find that there are the two primal forces at work within us whenever we make a decision to buy, hold, sell or do nothing in the market-- The forces of FEAR AND GREED.

Fear and Greed in the Stock Market
How do these two emotions work within us to complicate the already challenging decisions we make on the stock market? If you are an investor who is already investing in stocks and shares (equities) on the Singapore Exchange or if you are a newbie to the world of stocks and shares you will encounter these two emotions. They are part of our human DNA and to deny their existence is to deny our very own humanity.

The stock market as represented by the Stock Index, for instance, the Straits Times Index (STI), goes up and down according to demand and supply for the shares in a company. While the STI may go up or down or remain flat, the prices of the individual shares in companies also go up and down. In investments, what you want to do is to put buy shares in a company whom you think will rise in the future. The price of a share in a company is affected by many factors such as the company's profitability, its dividend policy, its future growth prospects, its fundamental business. The share price is a function of buyer's and seller's expectation of future cash flows either through capital appreciation (price of share going up) or through dividends.

Fear
Fear comes in because of uncertainty. No-one can completely predict how the price of a company's share will rise or fall in the future. Hence, when the price of a company's share goes up, you fear that you have missed out on capital gains when you did not buy its shares earlier. Conversely, when the price of a company's share goes down, you fear that you may be buying at a price that will fall in the future. This fear is very real and good investors are those who recognise this and invest based on their objectives, risk profile and their knowledge and understanding.

Greed
Greed comes in when you hold on to a company's share when it is going up and up and you want to sell at the highest price you can possibly get. Greed also sinks its jaws into us when we see the price falling but we cannot get ourselves to cut loss and sell the shares because we think it will eventually rise.

The combination of these two emotions make investing in shares an activity that is very close to gambling because we are trying to time our entry and exit of the price of a company's shares. We are basically taking a bet on how prices will move based on fundamental analysis, technical analysis and sometimes based on pure luck.

I too am victim of this gambling mentality to gain short term gains on the stock market. If you read personal investing books, most of them advocate an index fund approach. This is because experience has shown that only a handful of professional fund managers or investors can consistently beat the market or the index return. Hence, unless you are the calibre of Warren Buffet or Peter Lynch, you are better off doing regular investment into a low cost index fund.

However, you will find that the thrill of participating in SGX by punting specific stocks plus the added emotions of fear and greed can make a very potent combination.

How do I overcome these two emotions
To invest safely and not succumb to the gambling mentality of short-term gains, it is important to consider the following principles:

1) Determine your investment objective
- what is your investment objective for buying and holding shares of companies listed on SGX?
- what is your targetted returns and over what time horizon

2) Determine your risk profile
- what type of companies you pick will be affected by your approach to risk
- do you prefer blue-chip stable companies with established dividend payout or high growth small cap companies

3) Determine that amount of money you can afford to invest (and potentially lose!)
- investing in the SGX is not the same as a fixed deposit or treasury bill
- you can potentially lose ALL of your investment monies as the price of a share could possibly drop to zero should a catastrophic event happen e.g. major fraud, collapse due to business calamity, natural disasters etc.

4) Know yourself
- know that you also have fear and greed inside your DNA
- beware of what these two emotions can cloud your investment decisions

Fear and greed will always be with you. Learn to deal with these two emotions by having an investment objective and plan to achieve your targetted returns.

May you be well and prosper.

The Money Tree Formula by Robert G. Allen

I read Robert G Allen's book "Multiple Stream of Income" over the weekend and was intrigued by his Money Tree formula. His book was written in 2000 but still contains useful nuggets of information about how we can build our own financial security through building multiple streams of income. His Money Tree formula is a way to evaluate opportunities to see if they fit into his overall framework relating to building multiple streams of income.

Money Tree Formula
Here is the formula:

• M - Multiple Streams of Income -- the idea needs to be able to have expansion potential for additional streams of income
  
• O - Outstanding -- being more outstanding that your competitors
• N - Nothing down -- does not require huge capital requirement
• E - Employee resistant
  
• Y- Yield -- high yield cash flows
• T - Trend and Timing -- starting a business that goes WITH the trend
• R - Residual -- passive income, where the income flows even if you do not have to invest time into it e.g. dividends, interest, capital appreciation, royalties etc
• E - Essential to everybody everday - this will help generate repeat cash flows if people need to buy it again and again
  
• E - Enthusiasm -- you have to love what you do

The money tree concept struck my interest because it gives a common-sensical approach to evaluating what possible opportunities one should be looking out for. In his book, he shares ten streams of income ranging from stock market investments, options, real estate, infopreneuring etc. While some of the real estate examples were more US centric and some of the internet ideas were a bit behind time as the book was written in 2000, a large chunk of the ideas he presented were still useful.

What I learnt from the book
The book was helpful in reminding us that opportunities for building up multiple streams of income exist if we develop the type of receptive mindset to receive them and to act upon them. Singapore's open economy that ebbs and flows with the tidal forces generated from globalisation requires each of us to think hard about building our own multiple streams of income. Having a job and relying on our own financial security on our careers and central provident fund is an illusion as jobs move to the countries that can do the same work cheaper and faster. We either build up different avenues for us to have lunch or let our lunch be eaten by global competitors.

If you are in a comfortable job and feel that you just need to work hard and save, you should consider building up your own multiple streams of income for you can never know what tomorrow may bring.

Be well and prosper.

Growing our piggy bank for now and forever

The more books I read about personal finance and financial freedom, the more I realise the basic concept is similar and the magic formula is there for all of us to learn but few of us apply it consistently, day-in and day-out, with every cent that we can spare in order to achieve financial freedom.

It is to:

LIVE WITHIN YOUR MEANS

SAVE AND INVEST FOR THE LONG TERM

This may sound overly simplistic to you. Just talk to ordinary people around you who are not flashy and have low consumption of large houses and large cars, you may realise that those who have high net worth are those who practice these two simple rules. The way they practice these rules may differ but most subscribe to this fundamental principles of financial freedom.

Why must we live within our means?
Even if your name is Paris Hilton and you are heir to a large inherited fortune, if you do not live within your means even wealth like Paris's would vanish in her lifetime. Take Mike Tyson, former multi-millionaire boxer who is now made bankrupt. Even as he earned millions from his professional boxing career, he spent even more millions on consumption for his lifestyle. Hence, it is not always about the amount of money you make but it is about the amount of money you can save by living within your means.

Living within your means does not have to translate into us living like paupers. There are stories of misers who died alone by themselves in shabby homes but bequeathed more than $1 million dollars to charities. For these people, they may have high net worth but they did not even spend the little bit on themselves to lead a quality life. What you want to seek is a balance. The balance between spending on things for our lifestyle while keeping it within the amount of earned income as well as passive income you generate.

How to save and invest?
When you live within your means, you will find that at the end of each month, your savings account actually grows larger and larger. However, our savings accounts currently pay a very low rate of interest -- at less than one percent per year. In order for us to grow our piggy bank for now and forever, we should use these savings to invest wisely in assets that generate more returns for us to grow our piggy bank.

Deferring your present consumption for the future releases savings for you to invest now for the future. The time value of money allows every dollar that we save and invest now to yield many times its value in the future through the power of compound interest. Hence, every dollar you save and invest is working hard for you to grow your piggy bank. For those of you who are first-time investors, take the time and effort to learn more about personal finance and the various avenues where you can invest.

Different types of investments assets come with different levels of risks and returns. If you are a total newbie to investments. I would strongly suggest you put your money in fixed deposits and treasury bills. These are relatively safe and will grow your money slowly but surely. If you want higher returns, you have to equip yourself with the knowledge by going to the public library and visit many free forums online to ask around for investment principles. Educate yourself and liberate yourself with financial literacy.

May your journey in growing your piggy bank be rewarding and satisfying!

Be well and prosper.

Should I pay off my housing loan first?

One of the most popular questions that I encounter in forums discussing personal finance is whether you should pay off your housing loans or save some spare cash or balances in your central provident fund for other uses.

The perennial debate on using leverage never ceases and sometimes can get very heated in some of the forums I participate in. Some of the main arguments for and against paying off debt early are as follows:

Arguments Against Paying off Debt early
1) Spare cash for potential investment opportunities at a higher return than debt
2) Using the spare cash or Central Provident Fund (CPF) balances as a buffer against possible job loss
3) Insurance would cover the housing debt (i.e. mortgage insurance of CPF's dependents' protection scheme)

Arguments For Paying off Debt early
1) Interest rate on debt if fixed, paying off your liabilities saves you interest costs
2) When you are younger, job less is less likely vs in your middle age
3) Difficult to find investments that will give a risk-free rate of return higher than your mortgage interest rate

There are more reasons but my own view is that you should generally pay off your debt first for the following reasons:

Alternative investments yielding more than mortgage interest
This is one of the main reasons why I decided to pay off my housing loan as much as I could each time I received my bonus or had some cash savings or CPF ordinary account balances exceeding my monthly instalments. It is very difficult to find risk-free investments that paid a return higher than my mortgage interest rate, which at one point hit 4% plus as it was a bank loan and not a HDB concessionary loan.

By paying off your housing loan, you confirm getting a "return" through the savings on interest payments that you would have to pay. This can be significant if you compute the present value of the stream of interest payments you save!

Loss of Job and Income is less likely when you are young
In today's globalised economy, Singapore is very susceptible to external shocks to prices of commodities such as oil prices and energy. The economy's growth is dependent on the global economy and the US's economies. Our job market is such that when you are young in your twenties and thirties with the relevant education and experience, keeping your job is not too difficult. The picture changes when you hit your 40s and 50s as our Singapore labour market practices subtle age discrimination. You just have to look back to the 1997 Asian crisis and th number of those educated men in their 40s and 50s who were retrenched. Many were not able to get back their similar jobs at previous pay levels and had to become taxi-drivers or accept lower paying jobs.

This reality scares me and is one of the key factors that make me paranoid about my own financial security. Hence, it helped to shape my attitude and approach towards paring down my housing loan early.

HDB Concessionary Loans (2.6%) vs CPF Ordinary Account (2.5%)
Many of you have taken up HDB concessionary loans at 2.6% concessionary rate. You argue that by stretching the loan to 30 years, you will have more spare cash every month to invest. This allows you to "borrow" from HDB at 2.6% and invest for a return higher than 2.6%. However, this approach is not without consequences. For instance, unless you have investible savings more or equal to your outstanding mortgage loan balance, you would need to find investments that are significantly higher than 2.6% to be able to gain.

For most people who are relatively inexperience in personal investments, this is not easy. Current treasury bill yields are about 2.1% which is the closest thing to a risk-free return you can get for small amounts of $1,000. Hence, let's say you only have $50,000 spare cash and CPF ordinary account balance to invest, you would need to find an investment that generates more than 7.8% to be able to "gain" by having investment returns exceeding your borrowing costs. :)

If you intend to buy a home, it is inevitable that you would have to take up a bank or HDB loan to finance it as most of us would not have the amount of cash to pay 100% of the purchase price. But be prudent in how much leverage you want to take on because compound interest on the housing loan makes your home cost much much more than the purchase price!

Be well and prosper.

Alternative investments

In our modern era of "get rich fast or die trying" culture, investments promise both financial freedom and financial ruin both in equal measures to the unwary and the unprepared investor.

Why is this so?

There's a sucker born every minute
As the famous saying goes, "There's a sucker born every minute." Investment scams abound in today's world especially with the internet replacing face-to-face interactions with websites, URLs, forums, MSN, emails and electronic communications. This helps to create an environment where fraudsters, scammers and other unethical scoundrels can leverage on the internet to lure you, yes -- you! the unsuspecting investor with lures of low risk and high returns. "Sure-thing" type of investment products and packages.

In order for us to be equipped to know more about the risks of investing, especially in fraudulent schemes, the Better Business Bureau (BBB) has some useful resources for us to check out.

The BBB warns us to consider the following taken from http://www.bbb.org/alerts/article.asp?ID=358, article titled, "Investment Fraud Proliferates":

• Take your time before investing your money. Don't be pressured into buying. Be wary if you are urged to "buy now or forever lose your opportunity to profit."
• Research the investment opportunity. It's unlikely you will make money in a business deal you can't understand or verify.
• Find out about the company's reputation. Invest only in offers you know something about.
• Obtain all the information you can about the company and verify the data with impartial, outside sources. Contact the Better Business Bureau to get a reliability report on the company.
• Be extremely skeptical and cautious about any unsolicited phone calls you may receive about investments.
• Also, don't believe everything you read - or assume that all slick promotional materials and web sites offering investment deals are legitimate.
• Don't send money by overnight delivery or wire transfer, or authorize a credit card, payment or automatic debit to your bank account to anyone you don't know.
• If in doubt, do not part with your money. Seek professional advice."

One of the key reasons why people lose money to scams and fraudulent schemes is the lack of understanding of the investment product or scheme. We fall prey because of lack of knowledge and sometimes because of lack of due diligence on our part to find out more about what we are investing in.

Before you go on into the next "sure make" type of investment be it land banking, wine investments, paintings, commodities, practice what Confucious said, "know what you know and also know what you know not, that is true knowledge."

Be well and prosper.

I signed up for PayPerPost!

Now what is PayPerPost? It is a place where you can write posts on your blogs and earn some cash doing what you love best, blogging! Their website describes their value proposition as follows:

"Get paid for blogging. Write about web sites, products, services, and companies and earn cash for providing your opinion and valuable feedback to advertisers. Disclosure required."

What is payperpost?
What payperpost does is that that match up advertisers with bloggers to generate interest about the advertisers' products or services using the viral marketing element that blogs and bloggers provide. It is a form of ads on blogs. You can see it as word-of-mouth type of advertising except that the mouth is more the blogger, the computer and the blog site that allows you to monetise your favourite activity: BLOGGING! :-)

I have signed up with PPP since June 2007 so I have been with the program for about one month. Initially, I was a little bit sceptical on when I would see my first paid post as while there were a number of paid blogging opportunities on payperpost, a number of them had pre-requisites which as a newbie postie, I didn't qualify. However, there were also a number of paid post opportunities that were open to newbies as well. I tried one of them and guess what? I snagged my first USD 7.50 for that post. It was not all smooth sailing, one of my other posts got rejected as I didn't use the requisite key words and appropriate labels as requested by the advertiser.

Due to personal commitments, I didn't check out payperpost opportunities for about 2 weeks and then one day I received an email saying that there was a PPP direct opportunity. That meant an advertiser wanted me to blog about something and would pay me USD 5.00 for doing it! I managed to login and wrote a post reviewing the website www.debthelp.com. That took me the whole of about 30 minutes. After the post was done, I was surprised to find that after a couple of days, payperpost credited my paypal account with USD 5.00! That was very quick and efficient on their part!

What I love about PayPerPost
What I love best about PayPerPost is that they pay relatively fast once the post has been approved. The approval part for my initial posts were a bit longer but for my recent post it took about 3 days. In my 1 month plus experience with PayPerPost, I have made USD 5.00 + USD 7.50 (with USD 5.00 already paid into my paypal today!).

I will use this money to buy myself a nice cappucino to reward myself for a job well done! :-)

While I have not made any new friends through PayPerPost, I have learned more about writing for a specific purpose and to sharpen my skills in reviewing and commenting about a website or topic. The opportunity to practice writing and evaluating some content helps me to write even better for my other blog posts as well!

If your interest is piqued and you like to write blogs, why do pay PayPerPost a visit? You might find that they can help you monetise your blog and reward you for what you already love to do: write blogs!

Wealthly within vs wealthy without

Have you ever wondered if those who look wealthy are truly so?

Do you think if you are wealthy you need to show it or it shows through your inner confidence, self-esteem and self-assurance?

Have you ever wondered if that lady next to you wearing a Rolex or that gentlemen with a thick gold bracelet has a high net worth?

Read on to find out if you are just as curious as myself in knowing how well your fellow commuter on public transport is faring in his or her journey towards financial freedom.

A game you can play on public transport
One of the activities I like to do when I take public transport is to observe my fellow commuters. Those of you who take public transport may want to play this little game that I do, guess their net worth! This is just a game and I am not advocating that we judge people by their net worth but rather to examine to see if there might be relationships between how people display their wealth within through showing off their wealth without. :-)

Rich within and without
I've read "The Millionaire Next Door" as well as articles about the legendary thriftiness of billionaires such as Warren Buffet, Ingvar Kamprad and they have inspired myself to do the same. Hence, I believe that many who have high net worth do not indulge in ostentatious displays of wealth while those who have low self worth tend to compensate by appearing to have wealth in terms of jewellery, luxury watches and other more public displays of wealth.

One way of looking at it is that people who have a relatively high net worth know that they have money and do not want to stick out in the crowd with public displays of wealth. Hence, they tend to wear ordinary everyday clothes and accessories that allow them to blend easily in a crowd. The interesting thing you may notice is that people who tend to have gold chains, jewellery, tend to be those whose likely net worth is lower than the average. I've seen many ah-peks who dress is singlets and shorts and spot heavy gold bracelets while travelling in the MRTs. I've also seen more senior ladies who also dress simply but are heavily adorned with gold jewellery. Are they of high net worth? Perhaps. My intuition tells me that it's more likely they don't have too much in their bank accounts and in the way of investments but rather the more flashy on the outside, the less flashy is their investible savings.

You decide on the wealth within or without
How does this relate to you? Life is short, you have the power to decide what you want to do with your money. If it is to use that bonus for an Audermars Piguet timepiece or that Toyota Camry or even that Mont Blanc pen you have been eyeing, so be it. But think about what is more important to you? Having the wealth within as part of investible savings that yields positive cash flows to help build your retirement fund or that Audermars Piguet timepiece that will do wonders for your ego and self-esteem but works essentially the same as a $50 Casio watch?