Year-End Bonuses

Last week's Sunday Times, there was this article that feature how some Singaporeans are planning to spend their year-end bonuses. This comes from the back of the recent announcement on the amount of bonuses civil servants can expect to get. (For more information, check out the article here)

With this in mind, I would like to offer my own opinions of how you should spend your year-end bonuses as a reference. Please take this advice at your own risk. :)

1) Credit Card Debt

If you have outstanding credit card debt, it would be advisable to clear them first and as much as possible. The reason is because of the high interest rate charged, a whopping 24% per annum and do note that it is compounded daily which means the daily interest is 0.066%. (Refer to Section 3f) Let's do some calculation here. Assuming you owe $100 at the start of Jan 1, you would have owed a total of $113 at the end of Jun. Take note that this amount has not even take into account any charges and fees that the bank would put in depending on your payment behavior. So first and foremost, I would recommend that you pay down your credit card debt as soon as possible.

2) Credit Line

If you have outstanding credit line, this would be the next place you use your bonuses on. Credit line is similar to a credit card only thing is you are immediately charged interest when you draw money from it. So although the interest is low about 17% per annum, the compounding effect starts immediately. And again depending on your payment behavior, the existing interest rate can change and new charges added to it.

3) Renovation Loan, Mortgage or Term Loan

Next on the line is these three types of debt. For these types of loans, it can be tricky as they may have many terms and condition if you want to pay down the principal or terminate the loans early. My advice is to ask the respective product managers and inquire about these terms and condition before deciding where to use your bonuses to pay down the principal.

4) Financial Literacy

Before you start making investments after you have paid down any debt, it is strongly advisable that you invest a small sum of your bonuses on increasing your financial literacy level. Spend some money to attend seminars and buy books to read up on the current trends and types of investment. Have a better understanding of how it works, what are the cash inflows and outflows and also when these cashflows occur. Having a good understanding would help you to make a more informed decision on how to invest your year-end bonuses which you have used a year long period of sweat and quality time with your friends and family to exchange it.

5) Investments

After you are familiar with the respective investment products, it is time to 'dip your toes' a bit and 'dive in' when you are confident. Most importantly have fun during the process and also take note of your emotions when you are investing.

SGX buying out ASX

SGX buying out ASX is definitely one of the mega blockbuster acquisition for this year. Judging from paper, there is a lot of opportunities for synergy, the first and most obvious is the economies of scale that comes with such massive acquisition.

The access to capital provided to corporates if they raise their capital through the SGX-ASX entity would be tremendous. If this acquisition does take place successfully, the behemoth size would be able to suck a lot of investors and companies from the region to trade and raise capital through the exchange.

But before this acquisition takes place, there are many hurdles to clear and the biggest would be those coming from regulators. As of now there are a lot of opposing voices from the Australia politicians. Then there is also the large hurdle coming in the form of shareholders from both SGX and ASX.

For investors on both side, these are the things they need to think of.

1) What is the probability that the acquisition will take place?
2) If it take place how fast can SGX complete the acquisition?
3) How fast can SGX create the needed synergies to create value and justify the price it pays?
4) Is ASX worth the price that SGX offered?
5) Would it be possible that SGX might offer a higher price to persuade more stockholders of ASX to agree with the acquisition? (If such a scenario do come up, the dilution effect may hurt the current shareholders)

For investors, my suggestion is to read up on mergers and acquisition, understand what are the possible scenarios that can occur, its respective probabilities that it may occur and decide from there whether they should dispose the stock and when to dispose the stock. And if they decide to hold in which scenarios should they dispose the stocks if things go worse.

In the business world, finding examples of failed mergers and acquisitions are far easier than successful mergers and acquisition. Because in order to integrate a corporate entity into another entity, there are a million and one way it can go wrong for instance, system integration, assimilating two cultures together, the power struggles, the standardizing of policies and so on. All these would take a very long time and only after all these are completed successfully, then the talk of achieving synergy can occur.

So only time will tell if the acquisition would be successful.

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The risk of buying raw land

Buying raw lands came up as hot topic in Singapore news as a group of investors have trouble with their investments with raw lands and other investment products.

When I was at the Asian Investment Fair last weekend, which was held at Suntec City, I also have an adviser sharing with me about the benefits of investing in raw land. The raw land project that was shared with me was situated in one of the state in US, quite far away from Singapore.

Through the discussion with the adviser and based on my limited knowledge of investing in raw land, I find that it can be very risky, although given the natural risk-return matrix, the absolute return can be as high as 25% compounded.

Some of the risks I noted is the following:

1) Change in zoning law
2) Litigation Issues
3) Population Trend/Potential Demand
4) The direction of development from the developed city.
5) Laws of ownership and form of ownership

Like all investments, there are a lot of things that investors should study when investing in real estate, especially raw land. I personally feel it is better to be down personally to do some scouting and research, before one commits to such investments. Now although the costs can be high, at least it buys some assurance and build your confident in the investment.

As like all investments, I urge investors to do as much research as possible before they commit their hard earn money. Investors have to note for every large return, there will be huge risk behind. Study hard and ensure that you have reduce that huge risk to the minimum before you commit.

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Should I invest in Gold?

"Should I invest in gold?" I think that is the question that is ringing in any investor's mind. Gold has broke the USD$1100 barrier when I am writing this and some people are predicting that gold will reach the price of USD$2000.

Recently I read this book "Guide to investing in Gold and Silver" and inside it puts a strong case for investing in Precious metals, mainly gold and silver. Why I said it is strong because it uses history to tell us that precious metals should feature in most people's portfolio. In this book it also shows us that there are cycles but these cycles is a derivative of certain numbers that we need to work to get it. I strongly urge everyone who is concern about their financial future to read this book.

There are many ways to invest in Gold and Silver and the bank that has such investing facilities available is UOB, based on my current research. You can either open a savings account that is counted in grams or ounce depending on which precious metal you are investing, or own certificates, bullion coins or gold bars. Each will have its pros and cons. You may visit UOB website to have a look and figure out which investment tools will fit your need.

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Dealing with Retrenchment

Dealing with retrenchment is something out of most people's mind during a boom time. As such most recent graduates would not have any idea how to deal with retrenchment.

Do you know how to deal with retrenchment? Do you know that the preparation for a possible retrenchment is done during the boom time? For instance, controlling your budget and preparation for emergency funds.

Retrenchment is going to be very common now given the short span of boom and bust cycle, as such it would be good to equip yourself with the knowledge of dealing with retrenchment.

For more information on how to deal with retrenchment, please click here.

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Dirty Tricks of Bad Real Estate Agents

Dirty tricks by bad real estate agents is something all of us should know since in our lifetime, we are expected to deal with properties at least once. So here are some of these tricks. Readers do take note of it when engaging real estate agents

Refusing to Co-Broke Property

Co-broking occurs when there are two property agents involved in a single transaction. In a co-broke transaction, the commission have to be shared out between the two agents. Some agents who refuse to share the commission would refuse to meet up or follow up clients from other agents. As such, the seller would not have the full exposure to the market.

Overpromise

Some agents promise that he has a ready buyer who can come up with high price, so that the property seller would appoint them as their agent. Such would force the seller to sell at a lower price than expected because once they realise the agent is lying, it might be too late.

Working for more than one company

Some agents may work for several company, so as to get as much client listing as possible. And because different companies have different payment structures, an agent might close the deal under the structure that is favorable.

Hijacking

Hijacking refers to an agent going behind the back of another agent and engage directly to the clients, promising better deals and urging them to sign with him instead. Such act is deemed unethical, and property buyers and sellers should try to avoid, as you never know you might need the help of these other agents.

For more information on property investment, please click here.

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Credit Bureau and Credit Counselling

Credit Bureau of Singapore recently announced that many Singaporeans are falling back on their credit card debts. The most 'dangerous' group are those in the age of 30-45.

This age group is not surprising as this is the age group where most people are taking on a lot of debt like mortgage loans. Thus it is important that one manage debt carefully or they may overstretch themselves. Do note that you need to manage your loans carefully because it may affect your credit history. It is well understood that banks will disburse loans to you based on your credit history. If you have a bad credit history, banks will be quite unwilling to disburse loan to you unless a higher interest can be charged or your financial situation will be greatly scrutinized which can be troublesome and uncomfortable.

If you feel that you are falling behind on your payments, you should start controlling your 'outflow'. Do note take on more debt but instead pay down your loans as soon as you have the cash. The interest rate charged on credit cards is 24% per annum and 18% for credit line. These are very high interest rates, as such these loans should be cleared first before you take on more.

If you feel very stretched, approach the bank or the Credit Counselling Center in Singapore (CCS) for help. Banks are generally more willing to help you with your loans than you thought.

Below are the contact details for CCS:

Tel: 1800 CALL CCS (1800 2255 227)
Please ensure to dial 1800 before
2255 227.

Address: #12-01 Maxwell House
20 Maxwell Road
Singapore 069113

Email: enquiry@ccs.org.sg

Opening Hours: Mondays–Fridays, 9am–6pm

Website: http://www.ccs.org.sg

Want to know more about good credit management? Please click here.
Want to know how to better use your credit cards? Please click here.

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CPF Life - Buying Annuities

CPF Life was recently introduced to Singaporeans and will be launched in September this year. Basically, it is an annuity with a component for you to bequest certain amounts to your beneficiaries. From a myriad of 12 types of annuities offered by CPF board down to 4 annuities. It is to make the choice of soon to be retired Singaporeans easier.

CPF members turning age 55 from 2013, with at least $40,000 savings in their Retirement Account, will be automatically enrolled into the scheme. Members who have less than $40,000 can opt-in from 55, if they wish to do so.

As this is a new scheme being introduced not the full four plans would be offered. It will greatly depend on your age when you join the scheme.

When buying annuities, one have to take note that because it is a fixed amount per month, your purchasing power would greatly depend on the inflation rate. If inflation rate is high, your purchasing power would be greatly reduced. This is exacerbated by the fact that Singapore inflation is usually imported inflation as Singapore is a price taker in the world. As such, you need to calculate how much you need per month for a comfortable lifestyle and add an additional buffer for inflation. There is no general guideline on how much the buffer should be, from what I know. It would greatly depend on your comfort level.

For more information on CPF Life, please click here.

For more information on buying annuities, please click here.

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Managing Finances as Married Couple

Managing Finance as Married Couple might be an issue that most married couple overlooked. Why I said that is because most married couple does not sit down and really work out the finances together. Yes, most of them do work out in the sense of contributing how much to the household expenses and so on but seldom do they sit down and discuss how to build that nest egg together, making investment and purchasing insurance to get a wider coverage.

Couples should really sit down to discuss about investments and insurance. Getting the widest coverage with their pooled money, making investments at the lowest expense through again pooling of investment monies.

Do constantly review your insurance and investment portfolio to see if there is a need to do adjustments especially after major events like having a child or taking on another degree program. Couples can also take advantage of the planning time to bond with each other and understand each other better.

For more information on managing finance as a couple, please click here.

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How to Deal with Recession

How to Deal with Recession is something we should all know. Why I said that is because throughout our lifetime, we would definitely experience at least a few recession. I myself have experienced 3 or at least can feel their impact, the 1997 Asian Financial Crisis, the 2000 Internet Bubble and also the recent Sub-prime Crisis.

Here are a few tips on how to save some money.

1) Cash is King

It would be better to go back to your budget planning and see if you have allow yourself to spend on unnecessary things. Why I said that is because as we all know, recessions follows booms. And during booms, because we feel rich, we would tend to pamper ourselves (nothing wrong with that of course, since we work hard). But because of recession, we would need more cash in the hand and how to get that is to revisit our budget.

2) Go for the second best

It is a matter of needs and wants, usually if the second best can give us similar satisfaction and at a lower costs than the very best, it would make sense to purchase the second best since again, cash is king.

3) Go for housebrands

Provisions is a place where we can save quite a bit since it forms a great part of our expenses. At times like this, maybe we do not need to pay so much for the brand thus I would recommend going for housebrands since they are usually cheaper.

Here are some tips at the moment, will post more tips on dealing with recession as and when I come across. We are survivor, we outplay, outwit and outlast the Recession Demon.

For more information on budget planning, please click here.

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Singapore Budget - What is in store for us

Singapore Budget was announced on the 22nd Jan this year. What are the things the average Singaporean can look forward to?

Firstly, there is the doubling of the GST credits. This means that there will be more money in your pocket this year from the government. If you have debts out there, especially credit card or credit line, it might be wise to use it to pay down the debt. If you do not, congratulations, you might take out a bit to pamper yourself and invest the rest, save it for a rainy day.

Secondly, there is the twenty percent rebates on the tax payable subject to a cap of $2000. This will help to put in more money into the pockets of the middle class which forms the majority of the population. (Ain't it true for most countries? Hmmm....) Again, you might want to invest the extra money to build a bigger nest egg for yourself, using compounding interest to your advantage.

Thirdly, employers will try their best to keep Singaporeans in their jobs because of Job Credits, where the employers will get credits from the government. The size of it will depends on the number of Singaporean, paying CPF, in their payrolls. So it makes it 'harder' for Singaporeans to be out of job. But please do not be complacent, try to get yourselves reskilled if possible.

Fourthly, which is recently announced is that transport fares maybe coming down this year without any prospects of fare increase this year (now this is something NEW!! =) ) because of the many rebates and cut in corporate tax from 18% to 17%. The exact fare decrease will be announced at the end of February.

Given all these goodies from the government, it might be time to think through your personal budget and investment plans as more information and of course money flows in.

For more information on planning your budget and making investments, do check out the two webpages here.

Planning your budget and Investments

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Renting Properties

Renting properties is a must for many foreigners coming to Singapore. Recently in the newspapers, it reported a rental scam where a Malaysian couple and a Japanese expatriate was conned by a self-proclaim property manager cum landlord of a terrace house in Serangoon Gardens.

Although Singapore is very safe, it does not mean that there are no conmans here. So it is wise to do your due diligence when looking for a place to rent. Before making any payments, it is wise to make sure that you have checked that you are liasing with the right person and all claims are verified.

Ask around those that have rented a flat here, find out the normal practices and also the rental rates of the surrounding areas. All these must be done if you want to prevent yourself from being a victim of a scam.

For more information on renting properties, please click here.

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Having an "Opportunity" Fund

Having and Opportunity Fund is overlooked by many investors, including savvy investors who have been in the investing world for many years.

So what is an Opportunity Fund? Basically, it is a sum of liquid assets, usually cash or saving deposits. At this time where there is a "fire sale" on the stock market where stocks, especially blue chips are at their lowest (usually 52 weeks lowest), an available pool of cash to take advantage of the low price would position investors to benefit when the economy recovers and looking back at history, we know that the economy will always recover. It's recovery is only a matter of time.

For most investors, this fund should not be similar to the emergency fund that you read about in most financial planning books or newspaper articles. This emergency fund as read should be equivalent to 6-12 mths of monthly expenses,(depending on how risk-averse you are). Once this fund has been set aside, you should then start setting aside another sum for your Opportunity Fund.

Economic or financial crises are part and parcel of life so we might as well prepare ourselves to take advantage of it. For those that are just starting out, it would be better to learn more about the available investment tools.

For more information on financial planning and investment tools, please click here.

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Syariah Compliant Funds

Syariah Compliant Funds has been in the radar of most investors since there have been much emphasis on Islamic Finance products. The reason for their popularity is it practice socially responsible investing and the accumulation of wealth of the Middle East, because of the rising oil prices.

Because of its nature, it is found that the risk of investing in them are much lower compared to other normal unit trusts investing in general equities but also due to its nature, it does not have much diversification.

Investors who strongly believe in socially responsible investing and looking to diversify their investment portfolio can consider these syariah compliant funds.

For more information on such funds, please click here.

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Taking Housing Loans

Taking Housing Loans is a must especially when we would like to own our dream home. But owning a home can be a nightmare if you do not do proper homework and become burden with housing loans.

Before you go out and look for your new home, you should first look at the available financial resources that you have. You can take the following steps:

1) Assess your financial resources and decide how much you can come up with to service your housing loans per month, assuming you have to service the loan for a period of more than 10-20 years.

2) From that amount that you have come up with, use only 60-90% as a gauge of how much you can really come up with to service your housing loans. For instance, at the end of first step, you calculated that you can service the housing loan with $1000 per month, and assuming you are very risk averse, that means you can only use $600 to service a loan per month.

3) Next go out and have a look at the housing loan packages available that allows you to service it with $600 (from the example) per month. From the housing loan package that you have selected, you can now see how much you can borrow.

4) From how much you can borrow and how much you have set aside for the 20% you need to pay upfront, you can now go out and look for the dream home that would fit that budget.

For more information on housing loans, please click here.

Investing in Penny Stocks

Investing in Penny Stocks (define as less than $1 for each share) is a viable investment tools for those people who are just starting out to work, and wants to invest in stocks .

New investors have to realise that when investing in penny stocks, the risk is larger compared to investing in blue chips. And the risk is higher if you want to make a fast buck from it.

Young investors when investing in penny stocks should take a long term view of it and the objective in investing in penny stocks is to discover the next Starbucks or Google thus getting a "10-" or even "100-" baggers as defined by Peter Lynch at a very low price.

Because of such an objective, one has to learn the following before deciding which business to invest in and purchase its stocks.

1) Accounting
2) Business Model, mainly how it does its business
3) Management Experience

All these are important if you want to find out the next BIG THING. As Warren Buffet mentioned before, when you purchase a stock, you are interested in owning the business, and you do want to own a profitable business, I presume.

For more information on stocks investing, please click here.

Hospitalisation Insurance

It is very unfortunate to be in the hospitalization, especially when you need surgery. Things can be worse when you look at the exorbitant hospitalization bill. It can range from a few thousands to tens of thousand of dollars. Such exorbitant hospitalization fees can be avoided in total if you study and plan your insurance covers.

Health insurance companies have a whole range of hospitalisation insurance which can cover critical illness, accident, surgery and hospitalization. Individuals need to assess their family medical history, their finances and decide how much premium they can afford. And from the premium they can afford to give, shop around to give them the widest coverage and also the highest amount insured.

Nowadays, there are plans that covers deductible as well, if you can afford the premium. So do take some time to look around. If you hired a financial planner, ask for their advice and do take note of how they are 'rewarded' for the advice they give you.

For more information about insurance, please click here.

Share Investment Strategy: Buy Low Sell High

This morning in the Sunday Times, there is an interesting article on the most talk about share investment strategy and that is "Buy Low Sell High". But in stock market, when is the market bottom? When is the bottom of your stock? Grasping the market timing would seem to be the best option but timing market is extremely difficult due to volatility of the market.

So in the news article, they have experts to tell us how to "buy low, sell high" using 6 buying strategy.

1) Target and hold blue chips

Blue chips are suitable for people who do not have time to monitor the market and they are usually the first to benefit in any uptrend

2) Promising Business models

This is somewhat similar to Warren Buffet's investment style where the business model have great influence on his stock decision.

3) Look for promising 'turnaround' companies

These companies are usually ignored by investors and their stock prices are at the bottom. Studying the development of such companies might let you know when they are making a turnaround.

4) Look for bad news

Bad news that have temporary effect on companies usually will drive stock prices down, that is when buying opportunity comes in.

5) Spot undervalued stocks using PE ratio

Company stocks that have low PE ratios and having robust earnings growth might be a good stock to buy. Low or high has to be measured against those other companies from the same industry.

6) Identify bargain buys using PB ratio

Stocks that trade at a discount to its book value are worth looking into. This strategy usually applies to property developers and fiance companies which depend greatly on their assets for income generation.

To learn more about stock investments, please click here.

Beating Inflation

The top headlines in most newspapers these days are high inflation rates. Most countries are experiencing historically high inflation rates. Causes of inflation rates are because of commodities prices like rice, flour and most importantly oil.

Usually if inflation is caused by commodities, the poor and middle level income would be greatly affected. In Singapore, inflation rates are predicted to be between 5-6%. Such rates would greatly erode the purchasing power of your deposits, even if it is left in a fixed deposit which is earning between 1-2%.

Commodities like all other investment tools are subject to business cycles, thus it is important to take that in your consideration when planning your personal finances. To beat inflation and ensure that your retirement nest egg, it is important that you keep your money invested in the relevant investment tools. Which tool is relevant depends on your investment horizon.

For the immediate reality, it is very important to plan your budget carefully. Have records of your household expenditure for the month. Such records would inform you which are experience the highest inflation.

At the end of the month, when planning your budget, have a look at which area of expenditure would have increased greatly, in this case, would be your food expenditure. Have a closer look at this area and see what changes you can make to bring the expenditure down.

In the long run, try to build another source of income, preferably passive source or increase your financial literacy level and start investing.

For more information on Planning your Budget, please click here.
For more information on Investment tool, please click here.

Being bankrupt

In Singapore, recently there are many articles on people especially young ones are not able to pay down their debts. In Singapore, you could be made a bankrupt as long as your aggregate debt is more than SGD$10,000.

A bankrupt is duty bound to account for any money or property he receives after bankruptcy. He is allowed to keep a reasonable part of his income for himself and family, and then handover the excess to Official Assignee (OA) for distribution to creditors.

Depending on your occupation, you might be required to terminate your services or redeployed to another job. So note that you might lose your dream job, jeopardizing your career. You might be required to inform your employer of your bankruptcy status, and also do note that your bankruptcy status would be announced in the newspaper.

You still can take a holiday overseas but you must seek for approval from OA. The OA might require you to declare who is paying your traveling expenses.

Having been a bankrupt, your credit record is held in the Credit Bureau, keeping your bankruptcy record for up to six years. Such records might be passed to banks when you apply for loans after your discharge, making it likely that the bank would reject your applications.

For more information on Bankruptcy in Singapore, please click here.
For more information on Planning your Budget, please click here.