Monday, November 17, 2014

Property Investment Insights

A few months ago, Mediacorp Channel 8 broadcasted a programme about a Singapore lady who got the shock of her life when the CPF Board froze her CPF account which she is using to service her outstanding HDB loan.

Apparently she is 54 years old this year and she mistakenly thought that her CPF monies was frozen because it would be transferred to the Retirement Account (RA). But actually what happened was that she had reached her CPF Withdrawal Limit and thus, she was not allowed to use further CPF savings to pay the remaining home loan in cash. Her plight is not surprising to me because I believe many Singaporeans are not aware of how this CPF rule works and how it would affect them when they reached their fifties.

Thursday, November 13, 2014

My financial journey


That was the total amount of savings in my bank accounts when I just started working in 2005. On looking back, it was really a "touch and go" financial situation for me. I had depleted all my life savings because I had stopped receiving allowances from my parents when I was studying for a full time degree at NUS. I did not want to burden my parents because my late father's business was not doing well and my mom was a full time housewife. Our household income wasn't that ideal back then partially also due to my father's stroke condition. So I had to supplement my savings with part-time jobs like giving tuition during the school holidays.

So if you ask me what is it like to be poor, I can fully empathize. After all, I have went through this dark journey before and I am thankful that I had emerged from that challenging period to become a stronger person. For those who are born rich, social mobility may be a strange word to them, however I do not blame them because they do not know what is it like to worry for money. For the rich and wealthy, Singapore is like a playground where they can indulge in expensive toys like fast cars, yachts and lavish landed properties. But for people who are born into low income families like myself, the need to improve the quality of life and move upward in the society is not an option.

Tuesday, November 11, 2014

Guest Posting: 5 Forex trading metrics you’re probably not tracking but should be

Guest post by CMC Markets Singapore

Whether you’re a newbie or seasoned veteran in the forex arena, there are several common metrics that we all know we should be tracking. Such as support and resistance levels, pay-off ratios or lows and of course, profits and losses. There are many more but let’s look at 5 lesser tracked but equally critical metrics that could change the game for you:

1) Hold duration

Do you hold your long positions for a few days or are you comfortable with intraday trades? How long you hold a trade can reveal your appetite for risk. Short-term traders will exit at the first sign of a dip while traders who keep their position for more than a day jump in with a fairly good idea of what to expect from a pair. Then, there are position traders who may hold on to a currency for months or even years. 

Keeping a journal of your holding duration will help you to understand your risk profile. This information can then be used to frame a suitable trading strategy that sits well with your risk level, earning goals and trading style.

2) Hold duration part 2 – Hold durations of wins vs. losses

Once you have information about your trading style, it is time to take the analysis one step further. Now, you need to analyse your trades in terms winners vs. losers. 

For instance, if you find that the average duration in which you held onto a winning trade was longer than a losing trade, this would be a good indication that you are holding on longer than you should, and you should exercise more discipline when it comes to losing trades. However, if you are sticking with your strategy and still finding the duration of losses higher than your wins, then it might mean that you are closing your winning trades too early.

Ideally, your strategy should be designed such that you get the most out of your gains and limit your losses. So, what you should see when doing this comparison is a higher hold duration on wins vs. losses.

3) The times of your trading sessions

Still on the topic of time, another important metric to take note of is the session in which you get most of your winning trades. This is something that many traders overlook as they often adopt a trade-whenever-I-have-time mentality. 

For example, you are living in Hong Kong and want to trade yen pairs, so the opening of the Japanese markets offers a convenient trading time for you, but in reality you find that you make most of your money in the London session after Japanese markets have closed. This may be because there is less volatility outside of Japanese hours, which makes it easier for you to execute your particular strategies.

This goes to show that it may be worth the effort to stay up in front of your computer for a few more hours, to be able to trade in a more favourable sessions.

4) Market conditions: Ranging vs. breakouts

Monitoring this aspect of your trading behaviour will help you to learn about the optimal trading conditions for you. With this metric you will be able to find out if you have been making money by following market trends, or waiting to find tops and bottoms.

For example, if you find that most of your wins come in ranging conditions, this may indicate that you trade with support and resistance levels in mind. On the other hand, if you find that you have been making money on breakouts, it may mean that your trading decisions are made based on news and momentum setups.

5) Trade sizes

The fifth metric that you should be tracking is the size of your position in every trade. This will help you to understand the optimal position size that you start with and how you react to market trends vis-à-vis changing the size of the positions. For example, if you see that you increase the size of your holdings when you see a strong trend, this is a positive sign. Conversely, you also need to reach swiftly to choppy markets by scaling down your positions and not leaving them as they are.

At the end of the day, whether you choose to adopt all five metrics, just a single one or none at all is entirely your prerogative. However, in any case, it is crucial to maintain a detailed FX trading journal. Often, the difference between an average trader and a super trader boils down to the effort that you put into improving your trading style and strategy. 

You must be diligent and honest about maintaining your forex trading journal. At the end of each week, you should have a clear idea of all the trades made with all the relevant metrics recorded down for each. You may also want to create a summary report at a fixed time every week or month, so it becomes simpler to analyse the data collected.

Monday, November 10, 2014

Buying a Property – Use up CPF before it vanishes into Retirement Account at 55

SG Wealth Builder is pleased to form a partnership to syndicate articles from iCompareLoan Mortgage Consultants, a research focused independent mortgage broker based in Singapore. I share the same passion with Paul Ho, the editor of iCompareloan. He is passionate about helping people enhance their wealth through financial literacy and in making money work harder for them. We must understand that property can be your key to financial success - but only if you play the game right. To this end, mastery of knowledge is important in building the foundation. So join me in the Property Investment Series and start your wealth building journey as early as possible.

For Singaporeans, reaching 55 years old marks a major milestone from the perspective of personal financial planning.

At 55, you can withdraw a portion of your Central Provident Fund (CPF) savings.

Yes, finally after years of waiting, you can use the money locked up at CPF!

But hang on… before you start planning for your next holiday destination or researching for your second property…reaching 55 does not mean you can simply go to the CPF to withdraw any amount you want.

The CPF, Singapore’s pension scheme, has other plans for your funds.

First, you need to make sure that you have enough savings in your Special Account (SA) and Ordinary Account (OA) to make up the Minimum Sum (MS) of $155,000 in your newly set up Retirement Account (RA).

Sunday, November 9, 2014

What is Return on Invested Capital?

This article was written by Willie Keng and was first published in Value Invest Asia on 17 July 2014.


In a previous article, Stanley explained the Return on Equity (ROE). While the ROE focuses on the equity component of a company’s capital investments, the Return on Invested Capital (ROIC) measures return earned on investments funded by equity and debt.

It shows how much profit a company generates for every dollar of investments it makes in the business. ROIC is expressed as a percentage and shown in the formula below:

Return on Invested Capital (ROIC) = After-tax Operating Income / (Book Value of Invested Capital)
where Invested Capital = Fixed Assets + Current Assets – Current Liabilities – Cash

We can calculate the ROIC using an example from Banyan Tree Holdings’ (SGX: B58) financial statement:
Annual Report (SGD ’000) Fiscal Year 2012
Property, Plant and Equipment 729,558
Current Assets 349,304
Current Liabilities 231,875
Cash 120,824
Invested Capital 726,163

Fiscal Year 2013
Operating Income 51,641
Tax Rate 42%*
After-Tax Operating Income 29,951

Return on Invested Capital (ROIC) 4.1%
*The high tax rate was due to the different geographic segments the company operates in

Based on the calculations above, we note that Banyan Tree generated an ROIC of 4.1% for FY2013. Do note that either an average of the past 2 years or the prior year’s book value of invested capital should be used.

Analyzing a firm’s ROIC is complementary to the ROE because it gives investors an idea whether a company has efficiently utilized both equity and debt financing. A company that generates excess returns over its cost of capital is earning is expected to trade at a premium over a firm which does not earn similar excess returns. An investor can measure how the company has fared over the past 5 to 10 years in its capital utilization and can also compare the ROIC between peer companies to have a better understanding of how each company utilized their capital investments.

Value in Action
ROIC is a good complement to the ROE. The ROIC measures an after-tax operating income of a company given its capital investments in its fixed assets and non-cash working capital (current assets – current liabilities – cash). A company which earns a return above its cost of capital is expected to trade at a premium over a firm which does not earn that same excess returns.

Friday, November 7, 2014

The REIT Association of Singapore

As a financial blogger, I received a lot of media invitations from various financial institutes, banks and companies. Most of the times, I declined the invitations because of work commitments. Recently, I was invited to attend the official launch of REIT Association of Singapore (REITAS) on 17 November 2014. I would like to attend this event to find out more about the role of this association but as usual, I am unable to attend because of work schedule conflicts.

It seems to me that the association consists of big players from Keppel, Mapletree, Capitaland, Frasers and ARA Asset Management and their key thrusts are to engage Monetary Authority of Singapore on regulatory issues and to promote the understanding of REITs. This is a good development because as the industry matures, the association can help to look into areas that can be improved, especially on the structure of REITs. For example, in my previous article on REITs, I don't understand why is there a need for external manager for REITs. Such requirement only incur more costs which would be eventually passed down to investors.

Most retail investors claim they know about the REITs they invested in but I suspected they are none the wiser than me on the business model. I hope the newly-formed association can conduct courses and seminars to promote the understanding of REITs and the risks involved investing in them. This would help to address a lot of myths on REITs and enhance investor's knowledge.

Magically yours,
SG Wealth Builder

Tuesday, November 4, 2014

SmartKarma: Popping the Startup Cherry

SG Wealth Builder was recently approached by Ms Chong Li Ying, who works in SmartKarma. The fintech start up provides a platform that helps clients make intelligent investment decisions through discovery of highly differentiated insight. It also enables people who produce research/insight to collaborate and monetise their work. Below is an article from Ms Chong to illustrate her experiences working in a start up.

We moved into our new office just before the new paint smell wore off. I excitedly emailed a photograph of our new meeting room to my parents, expecting a reply about the dirt-attraction properties of white shelves, or our unusual and possibly headache-inducing wallpaper — laminate that looks like bricks of rock. As always, my father’s brevity and practical-mindedness surprised me. “Very nice. But the chairs look uncomfortable.” He would be pleased to know that no bottoms were harmed in the meetings we have had there since. My father is a Buddhist and his respect for the sanctity of life extended to respect for body parts he feared might not last into his old age.

My parents have always been confused by my career choices, but it was not always thus. I started out promisingly, in the eyes of the parents, as an engineer in a large, established company, and they would proudly distribute my name card to relatives and even to neighbours we bumped into. I don’t think they knew what I did then either, but as part of the holy trinity of careers (Asian edition), the other two being medicine and law, other Asian parents would nod approvingly at my sensible career choice. I later joined a hedge fund and even though I was quickly promoted to Chief Operating Officer (partly to fill in the vacuum left by the previous COO), my parents could see the shiny veneer of their world crumbling. “What do you do? Are you a secretary?” asked my mother, perplexed by what she should tell the neighbours.

Shares Investment Insight: SPH in panic mode and invested $30 million in CoSine Holdings Pte Ltd

In October 2014, when SPH announced a decline of 6.8% in advertising revenues from newspaper and magazine, it was a sign of things to come. After all, the media giant derived the bulk of its income from advertisements and with the proliferation of cheaper and more effective online marketing platforms, they are beginning to feel the heat. In fact, social media and online blogs like SG Wealth Builder are giving SPH a run for their money. This is because with online blogs and websites, clients can market their products and services to the international market. In today's context, the motivation for companies to advertise in Singapore newspapers and magazines is becoming less appealing due to the limited market reach.

Indeed, SPH might have seen this coming many years ago when it invested $18 million in ShareInvestor Holding Pte Ltd. Given the high internet penetration rate in Singapore, it made sense for SPH to make its foray into the digital media and establish revenue from its online media arm. Other notable online investments by SPH included Sgcarmart (bought for $60 million in 2013) and Hardwarezone ($7.1 million in 2006). Apart from these mega acquisitions, SPH had been relatively slow in acquiring new online start-ups. The reason for the inertia could be because of the risk in e-commerce and digital start ups. That is probably why SPH only invested in tried and tested online business models with established track records. But then again, if these companies are already successful, why would they want to be sold off cheaply? To invest in these companies, SPH has to make large amount of investments which could take many years to break even.