SG Wealth Builder

Sharing of personal finance experiences and thoughts

SG Wealth Builder

Sharing of investment insights

SG Wealth Builder

Sharing of entrepreneur insights and business opportunities

SG Wealth Builder

Sharing of career insights

SG Wealth Builder

Sharing of wealth building strategies money making opportunities

Tuesday, January 31, 2012

Investment Notebook: Opportunity Fund

In September 2008, the collapse of Lehman Brothers (an investment firm in the United States.) triggered off the world financial crisis. Before the collapse of Lehman Brothers, fear of a “big bang” recession has been lingering around for months due to the festering subprime mortgages mess in United States. But no one would have predicted the magnitude of the economic crisis. But then, I remember the President of the United States announcing no bail-out for Lehman Brothers as it was considered not “too big to fail” (unlike other megabanks like Citibank, Bank of America, etc). The next day, there were blood-letting carnages in stock markets throughout the world. Dow Jones saw a record drop of more than 770 points overnight. Singapore’s stock exchange (SGX) was not spared either. In the six months following the collapse of Lehman Brothers, from September 2008 to March 2009, stock markets worldwide fell by almost 40%, wiping off about US16 trillion in capitalization. Singapore’s stock exchange also fell by close to 35%.

On looking back, the 2007-2009 financial crisis was indeed a “once in a generation” defining event in the financial sector. Personally for me, it had been both an eye opener and rewarding experience for me. Back then, I had accumulated S$20,000 of “Opportunity Fund” and waiting for the right opportunity to invest in several stocks I had been researching for 6 months. So when this crisis came along and there was so much fear and panic, I knew it was the correct time to enter the market. I pumped in my Opportunity Fund and bought 100 lots of Mercator Lines and subsequently sold off my investments several days later, making about S$3500 of profits. It wasn’t a spectacular profit but then again, I made this amount of money within a few days of trading and it was more than my monthly salary (back then I just started working for only a few years). On looking back, Mercator Lines had been my champion stock so far.

The reason why I am reflecting on this investment episode is that like many people, I had always thought that investing in the stock market can make you rich. I have realized that this was a form of flawed thinking. It is true that you can make extra income from stock investment, but it ultimate won’t make you rich. To make substantial amount of money from the stock market and propel your wealth status to another level, you need a minimum investment amount of S$400,000 to $500,000. But then again, if I have this amount of disposable money, I would most likely invest in real estate, not stocks.

Henceforth, I considered investing in stocks as a form of potential side income to supplement my salary. I don’t see it as an opportunity to become mega-rich overnight.

Monday, January 30, 2012

Three ways to become rich in Singapore Part II

In my previous post "Three ways to become rich in Singapore", I have some readers providing feed-backs and comments. I appreciate readers for taking precious time to read my blog postings and provide their valuable comments.

One of my readers commented that "dividend investing" can also make you rich. Whilst I agree that investing in fixed income, be it stocks or unit trusts, is considered a source of side income, it does not really make you "rich". In my personal context, being rich means to enhance one's wealth substantially. Dividend investing may provide additional fixed income but it also have its risk - decreasing stock prices and liquidity problem.

I still believe that the best three ways to become rich in Singapore is to invest in property, do business and work in the sales line.

Magically Yours

Friday, January 27, 2012

Three ways to become rich in Singapore

Many Singaporeans would agree that the cost of living is very high in Singapore. This is especially so during the last few years in view of the rising inflation. In spite of the global economic downturn, unemployment rate remains low in Singapore. But most Singaporeans struggle with the rising costs, as their salaries remain stagnant. Henceforth, most of us are concerned whether we would make enough money to retire comfortably in our twilight years.

Recently, me and my good friend were lamenting on the rising cost of living in Singapore and pointed out that the same bowl of $2.00 noodle sold in the hawker stall now costs $2.50 or more. That would represent a 20% increase in prices and we were left wondering how an average salaried Singaporean can cope with this sort of inflation. We came to the conclusion that to beat the inflation and get out of the rat race, we need to be rich. And there are mainly three ways to get rich in Singapore:

Doing business
Risk is high as an entrepreneur and there are no monthly fixed pay checks, CPF and bonuses. On top of that, there is no guaranteed success, and any setbacks can be financially fatal. But as the saying goes, high risk, high return, no pain no gain! To me, being a real estate agent, stockbroker and insurance agent can also be considered as a form of business as you are essentially “minding your own business” – commissions is based solely on your hard work. Other good business opportunities include setting up online shops and mobile apps.

Investing in property
Surely the best way to make money in Singapore due to the scarcity of land in Singapore. You can make passive income from your investment property through rental or you may opt to sell the property for capital appreciation. But the cons of property investing are that it usually requires large amount of capital and is very illiquid. Unlike stocks and gold, you usually need 6 months to 1 year to liquidate your investments. In addition, government measures and policies may also affect property outlook and affect prices and demand.

Sales job
Every business needs sales, period. Sales executive and managers who delivers can earn good money, especially those in the financial sector. However, the art of selling is a skill which not many people possessed.

Magically yours

Monday, January 23, 2012

Investment Notebook: Investment Principles

For the past few days I have been doing spring cleaning and happened to flip through my investment notebook. I went through some of the interesting lessons learnt during the period 2007-2009. The collapse of the Lehman Brothers really changed the investment world forever and the old strategy of holding stocks for the long term for capital appreciation no longer works. In view of this, all of us need to equip ourselves with well-planned strategies to protect and grow our investments. In 2009, I had made three guiding principles for investment:

Invest in myself
Many people, myself included, tends to chase the money and invest in everything under sun (stocks, ETF, property,gold, unit trust, etc). Everything, except themselves. We all failed to realize that our knowledge, ability and skills are the most important asset that help us to generate recurring income through jobs, sales, investment and business activities. Henceforth, most of us tend to neglect investments on acquiring new knowledge or skill. I had told myself that I must acquire or gain new mastery of knowledge in niche area.

Invest in health
As cliche as it might sound, health is really wealth, this is especially so in an expensive society like Singapore. Many Singaporeans slogged hard in their 20s and 30s, neglecting their health and ended up suffering in poor health in their 40s and 50s. Most of them relied on their family members to help them cope with the hefty hospitalization bills and medical fees. I made a resolution to eat more healthier food and jog at least twice a week.

Invest in family and friends
Making money is important but what is the point of winning the world but losing your soul? Family and friend supports are the most important thing that can pull you through times of crisis. I told myself to spend more quality times with my family and touch base with my friends more often. In addition, I hope to settle down and set up my own family in a few years.

Looking back, I am glad that I am going to achieve my last resolution soon.
I am expecting my first baby girl in two months time. So excited.
I wish all my readers a haapy chinese new year. Gong Xi Fa Cai!!

Magically Yours

Thursday, January 19, 2012

ACE Startups

The Action Community for Entrepreneurship announced on 19 Jan 2012 that it will be providing funding, networks and mentorship to 500 startups in an effort to promote entrepreneurship in Singapore.

Under this new programme called Ace Startups, Singaporeans and permanent residents who are first time entrepreneurs can receive up to $50,000 in a one-off grant for their startups. One interesting aspect of Ace Startups is that applicants older than 26 years old are eligible for this funding.

The grant will be disbursed in a co-matching basis – 70% provided by ACE Startups and the remaining to be committed by the applicants. Approval process takes about 6 weeks and applications will be evaluated by a panel team of venture capitalists, angel investors and entrepreneurs.

The aim of this fund, estimated to be $25million, is expected to help startups become sustainable businesses.

Thursday, January 12, 2012

My Investment Notebook

I started my investment journey more than 10 years ago when I was serving my National Service. By then, I had bought 2 lots of Unisteel using my brother's account and I remember I had invested about SGD2000. Unisteel is a company specialized in producing fasteners and screws for computer hard-disk drives. By and large, it was a successful investment as the stock price increased substantially throughout the years. I sold my shares in Unisteel before it was de-listed and had went on to invest several other shares in the SGX.

Throughout the years, I had also kept a little blue notebook to capture down my various "victories" and "defeats". To me, investing in stock is like being engaged in a war. You have to prepare and research well; devise strategies and tactics to win the battle. Of course, choosing the right generals (stocks) is crucial as well. Nothing beats the thrill of finding a multi-bagger and the anguish of owning a "falling knife".

It is through all these battles, through all these ups and downs, that I became a better and wiser investor. The little notebook contains my various thoughts and reflections made throughout the process of investing. It has served me well and honed my investment experience. Do you keep a investment notebook as well?

Magically Yours

Tuesday, January 10, 2012

Funding options

I was doing some research on funding options for entrepreneurs in Singapore and decided to blog down some of my newly-acquired knowledge. We have often heard about angel investors, venture capitalists, seed funding and incubators. Many question and wonder the roles, involvement and motives of these various categories of investors with regards to the development of enterprises. Hope this article can bring some form of clarity.

Basically there are two ways an entrepreneur can obtain funding: either through debt financing or equity financing. Debt financing is usually secured against certain assets and the creditor has the power or rights to demand repayment of any money owed, should the company be forced to close down. On the other hand, an equity capital involves the exchange of shares in the company for funds. The equity investors bear the risk of losing their investment should the company failed or benefit through participation in profits. Below are some common form of equity financing:

Angel investors
Angel investors are private investors who are wealthy individuals looking to park their excess wealth into new ventures. They usually provide capital for commercial start-ups, in exchange for equity or convertible debt and they typically invest between $25,000 to $500,000. Angel investors are usually very experienced investors with a lot of contacts and business experience and majority of them look to benefit from tax relief, which varies in different countries.

Venture Capitalists
Venture capitalists (VCs) are usually corporate firms looking to invest in start-ups, in exchange for equity in the company. VCs invest from $500,000 upwards and usually demand greater control of the company, as compared to angel investors. This is because VCs invest with the end-point in mind and they expect quicker and higher return on investment; henceforth, they are often more demanding and aggressive in order to grow or expand the business.

Seed funding
Seed funds usually support cash required for pre-start research or prototype development. Seed funds are usually for technology invention and innovation companies, for example, companies developing mobile apps and social networks. Risks involved are usually higher but the returns can also be potentially great.

Incubator funding
Incubator funding are usually focused on early stage companies which have a few or no revenues yet but looking at equity financing for marketing and operation needs. Business incubation usually provides a nurture and supportive environment for entrepreneurs during the early stage so that the commercial entity can succeed. The objective of incubation funding is to shorten the lead-time and reduce the cost of establishing the business.

Stock Markets
Of course, the ultimate vision of most entrepreneurs is to have their companies listed on the stock market. The potential rewards, in exchange for shareholding in the companies, can be millions. In Singapore, the local stock market operator and regulator is SGX. To qualify for listing in the local bourse, applicants need to meet a stringent set of requirements.

Monday, January 2, 2012

Investment 2012: Wrap fee for CPF Investments to be capped at 1% per annum from 1st July 2012

From 1st July 2012, the CPF Board will subject wrap fee charged for CPF Investment Scheme investments to a maximum of 1% per annum. A wrap fee is an ongoing fee charged by financial advisors for providing bundled services such as advisory, brokerage and administrative fees. It is typically levied monthly or quarterly by liquidating a small portion of the investment. Currently, CPF members who maintain wrap accounts for their CPFIS accounts are charged up to 1.5% per annum by their advisors.

Since 2006, CPF board has been progressively implementing new measures to lower the cost of investment and enhance the quality of funds under CPF Investment Scheme. This new measure should bring cheers to retail investors as high costs may potentially erode investment returns over the long term. Such development is in the right direction and will go a long way to encourage more Singaporean to invest responsibly using their CPF funds.

Sunday, January 1, 2012

Guidelines for Writing a Business Plan

Before you take the leap into the path of entrepreneurship, it is essential that you done the homework and write a business plan. As cliché as it might sound, if you fail to plan, plan to fail. Having a good business plan will provide you a clear business objective and an organized way of looking at all the important aspects of your business. Most importantly, it will provide you a crystallized view on whether your business idea can be successfully implemented. A well written business plan will also come in handy, when you are looking for funding from potential investors (venture capitalists or angel investors). Key elements of it should focus on:

Stating/defining the problem
Your plan must define the problem which your business is addressing and not just stating your business idea. Nobody will be interested in a business idea if it is not solving a problem and is impractical. The plan has to be precise and easy to understand for layman (nobody likes to read a long-winded business plan filled with technical jargon, especially bankers and venture capitalists). Focus on how and why your business can deliver and solve the problem.

Market size and industry trend
Define the estimated market size and industry trends, dynamics and customer landscape. Describe and list your competitors, including substitutes. Highlight your competitive strength and the barriers to entry which will help to reduce competition.

Commercial viability
Explain in details how the business is going to make money, revenue source, volume growth and gross margins. This section is also a good place for forecasting both revenues and expense totals for the next five years. A good business opportunity with scalability should show double digit positive growth per year, and revenues projected to $20million or more within the next 5 years.

Marketing, sales, and partners
In your plan, you should have a strategy for marketing so as to penetrate the market. You should define the sales channels, pricing and plans for strategic alliance with partners.

Goals and milestones
Besides listing the milestones you want to achieve, identify the potential show-stoppers and obstacles that can impede the growth of your business. In addition, the milestone dates and goals have to be specific and realistic.

Funding assessment
If you intend to use your business plan to seek funding from investors, explain how the funding requirement is derived and provide details on the planned usage of the funds.

A good business plan must include all the necessary elements, though requirements of a business plan vary from case to case. If the business plan’s objective is to satisfy both venture capitalists and angel investors for funding purposes, you have to prepare the plan from the investors’ perspectives. Remember, the best plans are the longest with impressive charts, but rather one that answer every question your investors might ask.