My Financial Achievement in 2009 and New Year's Resolutions For 2010

My Passive Income Achievement for 2009:
CPF(OA): $147.14
Cash: $1500
Total: $1647.14
Target: $3000
Achievement: 54.9%

I give myself a "B+" grade for my passive income achievement for 2009. My passive income has grown from $600 in Sep 09 to $1647.14 in Dec 09.

New Year's Resolutions For 2010:
For the new year, I am hoping to achieve a passive income of $2000 at Jun 10 and $2400 at Dec 10. I will be actively looking for other source of passive income so as to achieve financial freedom.

Last but not least, thank for those who have been following my blogs. I will try my best to write more articles based on my experience in achieiving financial freedom next year.

A Zen Story for those who want to achieve financial freedom

Recently, I have shared my plan of achieving financial freedom with some people around me. However most of them don't seem to be very interested. I believe that most of the people are "too educated". They can do certain task very well for other but are not willing to try out new things to improve their own financial status. Perhaps, this story will explain why many people are not able to achieve financial freedom.

Once upon a time, there was a wise Zen master. Many people would come and ask him for enlightenment in the ways of Zen. One day, a general came to visit this Zen master. He said arrogantly and proudly to the master, “After fighting so many battles successfully, I really tired of it. So how can you enlighten my mind?” He began to laugh loudly while waiting for the master to reply.

The master slowly raised the teapot and began pouring tea into a cup. It was slowly filled up and the tea started to overflow onto the table. The general stopped his laugher as the tea began to drip onto his clothing. The general shouted, “Stop that, can’t you see it is full?”

The master stopped the pouring and smiled at the general, “You are like this cup of tea. It is full and cannot be filled up anymore. Come back to me when it is empty.”

The morale of this story is one must clear his or her opinions before learning new thing.

For those who want to achieve financial freedom, please remember to keep your mind open for any opportunities. Search for opportunities rather than waiting for the opportunities to come to you. And one more thing, "Less educated" sometime can be a good thing too.

My Passive Income (Month of Dec 09)

Some updates on my passive income on the month of Dec 09. There are no changes in my passive income 1, 2 and 3. For passive income 4, there is an increase from $30 on Nov to $100 on Dec. Yes, it has just tripled. However since my passive income 4 is still in the building stage, I will be expecting it to go up and down.

For CPF(OA), I have make a small error in my last calculation. The extra 1% increase from the first $20000 in OA account will actually go into the SA instead of OA account. I have recalculated it and put here as a update.

Here is the summary for month of Dec 09:
CPF(OA): $147.14 (from interest and dividends)
Cash: $1473.84 (from dividends and other passive incomes)
Total: $1620.98
Target: $3000
Achievement: 54%

Forget about achieving Financial Freedom if you do not have perseverance or refuse to learn

Perseverance means commitment, hard work, patience and endurance. That is the most important ingredient that you need in order to achieve financial freedom or in fact any thing in life. Those who give up easily can never have any achievement in their life.
Do you still remember how you learn to ride a bicycle? You will definitely get a fall in the first try. How about second and third try? You are most likely to fall again. Even if you try 10 to 20 times, you might just fall. But after each fall, you learn something important, and that is balancing. The most tries you make, the more you understand how to balance a bicycle. And suddenly at one moment you manage to ride the bicycle for a few seconds but still fall in the end. That is the moment that you feel some success. With more practice, very soon, you will be able to ride a bicycle for one, five and even ten minutes without falling. That is the point that you are feeling more confident. And eventually, you have learn how to ride a bicycle.

I can say that a lot of people simply refuse to learn something that is "uncommon" to them even thought these skills can help them greatly in their lives. Most people like to stick to the common thinking of the majority. They have all forgotten how to learn and be successful in their learning. Most of them may just give up after one or two tries, even though there is a chance to get some success in the third try. If you are those people who give up easily, you can stop visiting my blog as you can never achieve financial freedom.

Currently I am building up my passive income 4, and I will be giving myself one to two years to set up it. I have the perseverance in doing it and now I am able to "balance the bicycle for a few second" already. It is just a matter of time to achieve full success in it.

You may want to read the Jack and Jill story, to understand my point.

My Income Projection Chart (with and without passive incomes)

I hope that this post will motivate you to do more in your life so as to achieve financial freedom in the shortest possible time.

I have managed to plot a chart for my total income projection. As it is confidential, I have to remove the actual value of my total income and have shifted the chart down so that my starting pay is on the horizontal axis. In year 7 of my working life, I have added my first passive income. In year 9, I have a total of 3 passive incomes.

The blue dotted line is the projected income for my main job. You can see from the chart that the growth of my main income is very slow.

The dotted green line is the projected total income for my main job plus my passive incomes. Based on the chart, the value of the green dotted line in year 10 has the same value on the blue dotted line in year 20. This means that I am going to achieve the same amount of income next year which is equivalent to what I might be achieving in 11 years time by solely depending on my main income source.

I only include my three passive incomes when plotting the dotted green line in the chart. If I can successfully build up my fourth and fifth passive incomes, the growth of my total income will speed up more. I have estimated that I will need 1 to 2 years to build up my fourth passive income. Thought it can be hard work but the result that I am achieving is definitively worth to put the effort in.

80-20 Rule for allocating time in building up passive incomes

I have set up my life time table as shown above. My total work time for my main job is 50 hours, and the time for building my passive income is 13 hours. Based on the total of 63 working hours per week, 80% will be used for my main job, and 20% will be used for building up my passive income. Somehow it matches nicely to the Pareto's Principle - The 80-20 Rule. The 80-20 Rule means that in 20% of anything is vital and 80 percent of anything is trivial. It is true that the time used for building up my passive income is more important than the time used for my main job.

The main purpose of setting my life time table is split my working time and family time so that I can take care of both my work and my family. The passive income time is currently used to slowly build up my passive income 4 and to find out what is my passive income 5. My passive income 4 is only 10% done up so I will be spending 10 hours per week in it. Recently I have some rough idea for my passive income 5, so I will be spending 3 hours per week to do some research on it. I wouldn’t feel tired by spending time for my passive income as I have 8 hours of sleep per day.

You can read my post on how much passive income I have achieved @ I have achieved one-half of my targeted passive income!!!

Never put all your time in one income stream

The phrase “Don't put all your eggs in one basket.” should be familiar to you. For financial planning, I would say “Never put all your time in one income stream”. It is because spending time only in one income stream will actually put you in a lot of financial risk. Let’s assume that your only income stream is from working as a full time employee in a company. If one day you are not able to work in the company due to some reasons, you are not going to get paid next month.

A lot of people is putting a lot of time in their main job or core business, but have neglected many other things that they can do to earn or make extra money. As the result when their one and only “basket” dropped on the floor, they are not able to know what to do next. Stress will start to surface as they have no other income source to depend on. Very often people are probably lack of ideas or lazy to find out what are other things that they can do to create another income stream for themselves.

My advice is never put all your time in one and only income streams. Try to understand yourself what you can do to create another income streams for yourself. For myself, I already have four income streams and trying to learn to create more.

Why people don't plan for retirement?

I have seen that many people around me do not have a retirement plan yet. They are simply too busy in doing their own thing and don't bother to think about it.

These people can be classified into two basic types:

1) Work and Pay
This type of people normally works very hard for their careers and they have a lot of financial commitment, like paying huge monthly installment for owning car and expensive property. It is very hard for them to save up money. And even there is any savings, they will just spend it on travel or other thing. Their common reason of not planning for retirement is they simply have no money or time to do so.

2) Work and Play
This type of people normally will spend a lot of time on playing games, watching TV or other entertainment after their work. They will not care too much what will happen next in their life. Their common reason of not planning for retirement is they thought that their savings and CPF are enough for their retirement in the future. I am guilty to be one of these people in the past. I used to play online games like MapleSea and DOTA for at least 20 hours a week.

It is only when my child is born three years ago then I realised that I have to be financially more responsible. Since then I have quitted my gaming habit and have started to have my own financial/retire planning. I am a super saver, so it is not difficult for me to start one.

So are you belong to any of the above two types? And have you started planning for retirement yet?

Three Stages in Personal Finance

There are three stages in personal finance that a normal person must go through before thinking of achieving financial freedom.

Stage 1: Learn how to make your money
For a normal person who has finished their education stages, he or she must find a job in order to earn a living. A lot of people has managed to pass this stage and has a pay which is more than their expenses.

Stage 2: Learn how to save your money
After having a income, one must learn how to protect his or her money. Not all people has passed this stage due to overspending, or too much family commitment. People who are stucked at this stage will have zero or little saving. And they are more likely to take more loan as compared to people who has a higher saving. Taking more loan mean that they have to pay more interest which make them poorer.

Stage 3: Learn how to grow your money
After passing stage 1 and 2, one must learn how to grow his or her money. A lot of people has ignore this stage as these knowledge are normally not taught in school. That is why a lot of people is unable to acheive financial freedom after working all of their lives. Most people work for money, rather than letting money to work for them. They can save a lot, but due to inflation, they are actually "become poorer". One must learn how to grow their money, otherwise they will become a work horse forever.

Once these three stages are cleared, one can start to think of acheiving financial freedom status. As for me, I have managed to clear these three stages and now slowly gearing toward financial freedom.

Everything in life is gambling!!!

Basically everything you do is a form of gambling whether you are young or old.

Studying:
You are gambling with your money and time by choosing the correct field to study that will guarantee you a job in the future. Wrong choice means losing your money and time.

Working:
You are gambling with your time and effort by betting that your company will appreciate your work, so that you will be rewarded fairly. Please note that your company will have 101 reasons to retrench you even though you have put in a lot of hard work for many years. If you are retrenched, it means you will lose your time, your pay and your effort. Sometimes it is very hard to find a similar job without a huge pay cut.

Doing business:
If you are doing business, you are gambling with your time and money. If your business failed, you will lose your money and time. If you will wasting more time thinking what to do next.

So is investment a form of gambling?
Yes of course, you are basically gambling with your time and money by betting on the right stocks. Wrong choice of stocks will just make you lose your money and time.

However, in my opinion, investment risk is not more than that of studying, working and doing business. If your stock happen to plunge, all you need to do is to hold your position. But studying in an obsolete field, being retrenched after working for many years, and failure in business will not allow you to hold in your current position.

I have created another blog for my investment portfolio

As my current blog is a bit messy, I have decided to create another blog for my investment portfolio. Please feel free to visit it @ http://myinvestmentportfolioinsingapore.blogspot.com/

How to invest regularly if you do not have a lot of saving?

A lot of people may say that investment will need a lot of capital and it is almost impossible for them to invest regularly. This is quite true, just imagine you want to invest in Singpost regularly, you will need to save about $1000 just to buy one lot. For some people, it may take 3 to 6 months to save $1000, so it is impossible for them to invest in Singpost once per month.

However, there are plans from some investment companies which allow investor to fix the amount of money they want to invest per month. One of plans that I have found is the Phillip Share Builders Plan (SBP). For those who has a POEMS account might already know about this plan. But for those who don't know, I will just give a short description.

From what I have read from the Philip website, the minimum amount that an investor needs to put in is $100 per month per counter. Investor can select which counter to invest in from the list of counter stated by the company. For dividend, it can be reinvested or you can choose to receive the dividend. You may want to find out more detail by checking out the plan at the PhilipCaptial website.

Another plan that I found is Regular Savings Plan (RSP) from fundsupermart. However please note that this plan invest in funds(or unit trust) instead of individual share or stock.

You may want to google "Monthly Investment Plan" to find out other plans that are not stated in my posts.

Closed my CFD account today

Today I am on leave, so I make a trip to one of the Philip branches to have my CFD account closed. The reason why I close the account is because I don't see myself as a trader any more. So I do not need an instrument to do shorting, contraring and leveraging.

If you are not familiar with what is CFD, you may google "CFD account" to find out more.

I also go to the POSB bank to activate the link for CPF Investment account in my ATM card. I have transferred that unused amount (about 10k) from CPF Investment account back to my CPF. Why do I need to do that? I have recently read a blog post @ http://sti-stocksinfo.blogspot.com/2009/08/calculating-cpf-interests.html

Based on the blog explanation, CPF interest is calculated monthly and not yearly. So if I transfer back the money back to the CPF account, I will get more interest next month as compared to leaving it in the CPF investment account.

If you are interested to find out more about CPF investment, you may google "CPFIS" or "CPF Investment Account".

Planning to retire in 17 years

Currently I have achieved a passive income of $1550, and based on the assumption on my post "How long does it take me to reach a passive income of $3000?", I will be reaching more than $5000 in 17 years time. That will also be the time when my child has become a young adult. I am looking forward for a retirement around that time. Hopefully $5000 is enough for my family expenses. In order to achieve my aim quickly, I will try to source out other passive incomes. Please note that, I plan for my retirement now instead of 20 years later where every thing will be too late.

This is my own way of planning, you may google "Retirement Plan" to find out what are other types of plans that you can use.

Singtel Technical Analysis (13 Dec 09)

Please note that I am only doing technical analysis for fun and I will never use it to predict the direction of the market. If you are reading this, just take it as a pinch of salt.

As in my previous post titled "Investor, Traders and Speculators Charts", I mentioned that there are three type of charts. Guess which chart Singtel is currently forming? I have put in three blue ovals in the three indicators. See it for yourself whether is it a good or bad point to invest.

My stock gains/losses from Oct 09 to 11 Dec 09

I have updated my gains and losses in my investment from Oct 09 to 11 Dec 09. I have added 5 lots of Singpost in 11 Dec 09 in my investment portfolio as my investment capital has increase which allows me to add in new position. As in my previous post, I will continue to hold my current holdings until some of the stocks reaches my expected values. I will put in new positions when I see new opportunites.

Bought 5 lots of SingPost on 11 Dec 09

I have bought another 5 lots of SingPost at $0.98 on 11 Dec 09.

I have achieved one-half of my targeted passive income!!!

I have successfully setup my another source of passive income which make my total passive income to be about $1530. Thanks for my wife for putting in a lot of effort in helping me to setup this passive income. Without her, I will be wasting more time in doing it. By adding this new passive income, I have achieved more than 50% of my targeted amount of $3000.

For passive income 3 it is basically dividends from my stock investment and interests earn from CPF OA account. Currently I am waiting for opportunities to add in new investment positions. I hope to increase it to $500 in two months time, but that will depend whether there is any correction in the market. Reinvestment using dividends earn will help me to increase this passive income in an exponential way.

Right now, I will be concentrating on working for my passive income 4, which currently amount to be $30 only. This passive income is not very stable now but I am targeting to increase it to $50 in two months time, hopefully I am successful. Do wish me luck if you see this post. :)

Although I will be spending more time on passive income 4, I will continue to research on what can be my next passive income 5. I believe that by continuing to find new passive income sources can help me to become wealthier. This is in line with my Cash flow framework.

Rule no. 3: It's far better for other to buy an overvalued stock from you, rather than you buy an overvalued stock from other.

My Rule no. 3 states that "It's far better for other to buy an overvalued stock from you, rather than you buy an overvalued stock from other." As mentioned in my post titled "http://lifelongfreedom.blogspot.com/2009/11/investor-traders-and-speculator-charts.html", stock can be undervalued and overvalued as there are traders and speculators in the market.

I value the stock simply by calculating its yield. See my post "http://lifelongfreedom.blogspot.com/2009/11/buying-stocks-based-on-price-and-value.html" If the yield is no longer attractive as the price of the stock goes up, I will sell a portion of it first. If the price goes up again, I will sell the next portion. It will make my investment less risky as I know that I will be holding less and less overvalued stocks and I have free some money to target to buy other undervalued stocks.

Please note that I am adopting averaging down strategy when buying stocks. This will keep the average buying price as low as possible. As for selling of stock, I am adopting averaging up strategy. This is kept my average selling price as high as possible.

If you are interested in my plan for next year, you may click on the below link.
My stock strategy from now till 2010 (Updated on 27 Nov 09)

Who can be trusted in the market?

There are so many players in the market and who are the one you can trust?

Recently one of my friends told me that his broker recommended him a stock. He bought it, and since then the price of that stock keeps dropping. I don't understand why he chose to believe in his broker where his broker don't even share out his portfolio at all. This incident make me has the urge to write this post.

In my opinion, there are two people that you can trust in the market. The first one is you of course. If you cannot trust your own judgement in buying stock, why buy it in the first place?

The second one is someone who shares with other what are the stocks he buy or sell, show people how his strategy can work by using himself as an example, but will not make any recommendations.

Give you an analogy. If you want to learn how to play a piano, will you find someone who can talk about the history of piano all day, or someone that can demonstrate his skills by playing the piano in front of you? Of course for myself I will choose the second one as he has the skills who can show me the right way to play the piano.

Every morning, some tv channels always have analysts to talk about the market. They can talk very well and normally with some recommendation on what share to buy. Do these analysts ever show you their portfolio, tell you exactly what strategy they are using, any prove of their winning track record? The answer is almost all "NO". Basically these analysts are just paid to write and talk, just like someone who just talk about the history of piano and you don't know whether he can actually play the piano or not.

Dealing with Market Randomness

Before you read this post, you must convince yourself that direction of the market can never be predicted. You may see my other post titled "Rule no. 1: Never predict the market." and see whether you are convinced.

Methods on dealing with certainty and randomness are completely different. For things that are certain, you just need to go for the best approach to get maximize gain. For things that are random, you will need to manage your risk in order to maximize your gain.

So how to deal with the market since it is random? The keys are:

1) Fixed your own winning strategy and follow it all the way. Don't use it randomly or stop it half way. You can find my strategy in my post "My strategy in investing stocks. "

Have you ever hear of stories from people who had bought the same 4D number for many years. For many years, they have not strike the number, but when the moment they stop buying the number, the number suddenly appeared as the first three prizes in the next few days or weeks. I am not encouraging people to buy 4D as it is a losing game in long run, but I just use it as an illustration. Fixing your own winning strategy and following it all the ways is perhaps a better method as compared to those who never follow it consistently.

Following your strategy all the times is one of the hardest thing to do in the stock market as you are facing real time prices jumping up and down every second. If your will is not strong, your emotion will prevent you from following your strategy. "Buy and don't look back" is one of the ways one can use to ensure strictness on your strategy.

2) Make “dropping of price” and time as your friends and not enemies.

As an investor, I will make “dropping of price” and time as my friends and not enemies.
Seeing a good stock falls in price after buying it at a fair value is not a surprise to me. It is because I have already convinced myself that market is random. See my post "Investor, Traders and Speculators Charts ".

For a trader, he may just cut loss immediately after seeing the price drop. But for me, it provides me a good opportunity to buy more. If the price goes up, I will not buy anymore, but rather wait for the stock price to be overvalued to sell.

Time is my friend as I will just wait as long as I like for the stock to go up. I will collect dividends while waiting. Remember, contra player make time as their enemies as they cannot hold their position for more than 3 days. They are most likely to lose money as compared to a investor who is doing averaging on a good stock.

Rule no. 1: Never predict the market direction.

As stated in my post "My Quotes/Rules of Investment", my first rule is never predict the market direction and my second rule is don't forget the first rule. I have been following these two rules since Oct 09. In my opinion, market direction can never be predicted. Why do I say so?

In mathematics, you might see this simple formula,
y = x + 1. So if you know what is x, you can easily know the value of y, the formula is very easy.

Let us see another formula,
y = x + z + 1. Again you must know what is x and z, then you can calculate the value of y. The formula is a bit complicated but still managable.

How about this formula,
y = a + b + c + d + e + 1. There are total of 5 variables and you need to find out all the variables before you can calculate the value of y.

Why economics news make a trader hard to predict the market? Let say there are 5 economics news which can affect the market, you must know whether all the 5 news are positive or negative. To find whether y (the market direction) is postive or negative, you will need to sum up a, b, c, d, and e economics news first. But before you are able to calculate based on your formula, the market direction has already affect in the news. So if you try to predict the markets, you are often too late.

Why Technical Analysis cannot be used to predict the market direction?
I agreed that TA can be used to calculate risk/rewards ratio, but never the direction of the market. If someone were to predict the random market direction accurately, his or her brain will be more complex than the random market direction.

For example let's says the daily share price of a stock is as follow, 1, 2, 2, 3, 3, 4, 5, 5, 4, 3, 5, 6, 7, 8, 9, 8, so what is the next price after 8? You can say is 7, 8, 9 or other number by using TA. That is simply guessing. If you do not know what is the next number in my mind, how do you know what is the next number. The only way you can guess correctly is to read my mind. That will mean that you have powerful six sense or you are a super human being who can control my mind. Even you can read my mind accurately, can you read millions of people mind who trade in the market?

So next time if there is a stock guru tells you that he can predict the market direction, give him a series of ten numbers and ask him to guess whether the next number is higher or lower than the tenth number.

My stock gains/losses from Oct 09 to 3 Dec 09

I have tabulated my gains and losses in my investment from Oct 09 to 3 Dec 09. As in my previous post, I will continue to hold my current holdings until some of the stocks reaches my expected values. I will put in new positions when I see new opportunites.

The Goose That Laid the Golden Eggs

One of my favourite childhood stories is "The Goose That Laid the Golden Eggs". I believe most of you have heard of the story. For those who have forgotten the stories, I have written a summarize version of it below.

The story goes like this: A farmer had found a goose that will lay a golden egg every day. Even though his life is getting better as he no longer needed to do any farming, he found himself not getting rich enough. Due to his greed, he decided to kill the goose thinking that he can get all the eggs inside the goose. Unfortunately, he was not able to find any egg inside the goose. For that day onwards, the farmer grew poorer and poorer as he can no longer find another goose that will lay golden eggs for him every day.

In the stock market, there are many such farmers or investors around who do not know how to value their stocks. Some of the stocks are actually providing a lot of yields or golden eggs every year, but because of a sudden increase or decrease of stock price, they decided to sell the stock away for a short term gain or cut loss. After selling their stock, they realised that the price and the yield of the stock went up even higher. They had decided not to buy back the stock as the price has increased a lot.

My purpose for this post is to suggest that it is good to hold those good fundamental stocks with good yields which are bought at low prices. It doesn't matter that the price movement of the stocks may be slow. What is more important is that these stocks are providing good yield consistently. So don’t try to sell them for a short term gain or cut loss as most of the times the price of the stocks will go up after selling it. You will find yourselves very hard to buy it back at high price even thought it is still a "Goose that laid the Golden Eggs".

Why I am not afraid of losing money in my investment?

Here are the reasons why I am not afraid of losing money in my investments.

Reason 1:
I am using my own extra money that I can lose.
In my post titled "Do you have a peace of mind after buying shares?", I have mentioned that I am using the money that I can lose, and losing this money will not affect my life at all. I did not borrow any money, or using any leverage instrument to increase the risk of investment.

Reason 2:
I am buying fundamental good stocks.
In my post titled "My Stock/ETF choices", I have mentioned that I only buy fundamental good local stocks that are very safe in my opinion. I only buy stock that I can understand and I will never speculate.

Reason 3:
I am buying under valued stocks which give good dividend.
In my post titled "Buying stocks based on price and value", I have mentioned that I am targeting stocks that produces good value or yield. With this in mind, I am not afraid to hold these stocks for long term as they are constantly giving me good dividends. In the same post, I have stated my formula to calculate the value of the stock.

Received dividends of $187.50 from SingPost (1 Dec 09)

I am happy to see that dividend of $187.50 from my 15 lots of SingPost has been transferred to my bank account today. I will not spend but save this amount of money for further reinvestment.

Vicious cycle of being lazy

If you are lazy, more likely you will be in the vicious cycle as shown above.

Spend more money for convenience
When you are lazy, you tend to spend more money for convenience. For example you may cab/taxi instead of bus/mrt, buying food nearby at a premium price for the sake of convenience.

Work more to earn more money
After spending unnecessary money, you may need to work more to earn more money to pay for your convenience.

Feeling tired after working long hours
Since you are working for long hours, you tend to feel very tired after work.

Become lazy
Since you are tired, you tend to be lazy again.

I have created a new blog "Saving money in Singapore"

I have created a new blog titled "Saving money in Singapore". The objective of this newly created blog is to share tips on how to save money in Singapore.

The blog url is http://savingmoneyinsingapore.blogspot.com/

Feel free to visit and comment.

Why I invest in Cambridge industrial trust?

In my opinion, Cambridge Industrial Trust is a wonderful company. So far it has been giving good dividends ranging between 0.01 to 0.02 cents every quarter. Even during the recession period at year 2008, the dividends given are still very good. At the current price of about $0.40, its yield is about 10% per year.

From the company website, CIT invests in industrial properties such as logistics, storage and warehousing, manufacturing and showroom facilities all located across Singapore’s key industrial zones. With this strong fundamental and high occupancy rate, I believe that this company will continue to do well.

Click here to see my other choice of stocks/ETFs.

"Branded" Bread is Expensive

Have you ever go to shopping mall to buy those "branded" bread from those well-renovated bakeries. These breads from these bakeries look very attractive and people are often are lured by the design and the name of the bread.

However if you look at the price, normally it will cost about $1.20 to even $2 plus per piece. It is very expensive in my opinion. For those normal neighbourhood bakeries, the bread only costs about $0.60 to $1.20 each. Now I am thinking, are people just go for the "brand" and design of the bread, or the taste and value of the bread?

Let's say bread from a "branded" bakery costs $1.50, and you can get the same type of bread from the normal neighbourhood bakery at the price of $1.00. Assume that one month you buy 30 pieces of bread, "branded" bread will cost you $45, and the normal bread will cost you $30 in total. You can see that you can have a saving of $15 per month or $180 per year if you just buy the normal bread.

So are you going to pay a premium for "branded" bread? As for myself, I will just buy it from the normal neighbourhood bakery as lowering my expenses is part of my cash flow framework.

My stock strategy from now till 2010 (Updated on 27 Nov 09)

My current holding is as below:
5 lots of Singtel (CPF) ==> Confirmed dividends of $310 (Dec 09)
5 lots of SingTel (Cash) ==> Confirmed dividends of $310 (Dec 09)
15 lots of SingPost (Cash) ==>Confirmed dividends of $187.50 (Nov 09)
25 lots of Cambridge (Cash)

My strategies:
My stock strategies are as below:
If Singtel reaches $3.50, I will sell 5 lots of SingTel(CPF)
If Singtel reaches $4.00, I will sell 5 lots of SingTel(Cash)
If Singtel reaches $2.65, I will buy another 2 lots of Singtel using Cash.

If SingPost reaches $1.25, I will sell 5 lots.
If SingPost reaches $1.50, I will sell 5 lots.
If SingPost reaches $1.75, I will sell 5 lots.
If SingPost reaches $0.90, I will buy 5 lots.

If Cambridges reaches $0.70, I will sell 10 lots.
If Cambridges reaches $0.90, I will sell 15 lots.

If DBS reaches $12.50, I will buy 1 lot.

If none of the prices as above are reached, I will keep all stocks for dividends.

Please take note that I am applying my rule No. 1, which is I do not try to predict the future. So I have planned for both market directions. I am also applying my rule No.3 which is "It's far better for other to buy an overvalued stock from you, rather than you buy an overvalued stock from other".

I have achieved one-third of my targeted passive income!!!

I have achieived more than one-third of my targeted passive income today, which is $1005.09 per month. My next target is to reach 40% of my targeted passive income which is $1200 per month. I would not set myself a target time, but I hope to achieve it by the end of 2010.

Recently, I have started another new income stream(will keep it a secret at the time being). Although it didn't generate me too much passive income right now, but at least it already breaks the zero dollar barrier. I will focus more on this new income stream so as to increase my passive income.

Bought 13 lots of Cambridge on 26 Nov 09

I have bought another 13 lots of Cambridge on 26 Nov 09 @ $0.415. So now I have a total of 25 lots of Cambridge.

It is cheaper to buy your necessities in bulks

I have failed to realise in the past that it is cheaper to buy thing in bulk. I always buy thing in small amount or quantity just for the ease of carrying. But now I realise that buying in small amount or quantity usually is more expensive than you buy the item in bulk.

This is what had happened two days ago:

I was trying to find the cheapest price for 6 x 250ml packets Milo drink. So I went to various shops to find out the price and here are the findings.

In supermart N, it cost me $3.80 for 6 packets, or $0.63 per packet
In provision shop A, it costs me $3.50 for 6 packets, or $0.58 per packet
In provision shop B, it costs me $3.30 for 6 packets, or $0.55 per packet
In provision shop B, it costs me $12.50 for 24 packets, or $0.52 per packet

First thing I realise is, different shop can have very different price for the same product. What surprise me is the price in supermart N, which is very expensive as compared to other provision shop.
Second thing I realise is, I can get cheaper price if I buy thing in bulk.

My next plan is to list out all the things that can be bought in bulk so as to lower my expenses on the necessities. Lowering my expenses is part of my cash flow framework.

Bought 12 lots of Cambridge on 24 Nov 09

I have bought 12 lots of Cambridge on 24 Nov 09 @ $0.415

Sold 4 lots of STI ETF on 24 Nov 09

I have sold 4 lots of STI ETF (CPF) today @ $2.83 for a profit.

Personal Happiness Index

I always wanting to find a way to measure happiness of an individual. After some brain storming, I have come out with a simple formula shown below.

First, we must list out all the events that you will do for a month.

For example.
Working
Entertaining
Sleeping
Relaxing

Second, for each event, we have to state the value for the degree of happiness. The value is range between -1 to 1.
-1 means you are very unhappy when doing the event.
-0.5, you are unhappy when doing the event.
0 mean you are neutral when doing the event.
0.5 mean you are happy when doing the event.
1 mean you are very happy when doing the event.

For example:
Working (-0.2)
Entertaining (0.5)
Sleeping (0.3) (Value can be negative, if you always cannot sleep well due to some reasons)
Relaxing (0.5)

Third, we must know the total duration in minutes for each event done per month.
For example:
Working (14400min)
Entertaining (7200min)
Sleeping (14400min)
Relaxing (7200min)

Four, we will use the below formula to find out the happiness in each Event.
Happiness in each Event = Degree of Happiness X Time Duration

Working (-0.2) x (14400) = -2880
Entertaining (0.5) x (7200) = 3600
Sleeping (0.3) x(14400) = 4320
Relaxing (0.5) x (7200) = 3600

Lastly we will use the below formula to calculate the Personal Happiness Index.
Personal Happiness Index = sum of happiness in all event / 43200 min.

If the index is -1, mean you are very unhappy.
If the index is 0, mean you are neutral
If the index is 1, mean you are very happy

For example:
Happiness Index = (-2880 + 3600 + 4320 + 3600)/43200 = 0.2
0.2 means slightly happy.

Signed up as a NTUC U Member

I have just signed up as NTUC U Member online. The membership is $117 per year.

The reason why I signed up is because there is a wide range of member privileges and benefits which can help me save money.

The best benefit as a member in my opinion is the 4% rebates at NTUC FairPrice. Every year, I spend around $3600 on groceries. So 4% out of $3600 is $144. The rebate is already more than the membership fee. This is a no brainer reason why I signed up as member.

There are many other benefits and you may see it by clicking here.

GOLD VS SGD (20 Nov 09)

In my last post on gold "GOLD VS SGD Chart. Why Gold might be a good investment in Singapore? ", I mentioned that Gold is might be a good investment/hedging for inflation in Singapore. We shall do a update for gold price in term of SGD.

The closing price of GLD 10US$ has reached $112.360, and the USD/SGD is 1.3888 on 20 Nov 09. So if we multiple both the value together, we will get S$156.0456/GLD. In the beginning of 2009, I have calculate the value to be S$121.18/GLD. So GLD has actually increased by 28%.

But having say that, I am not a fan of gold is because it doesn't give me dividends. I treat it as a hedge for inflation. And one more thing, gold is not meant for shorting. Shorting gold has no meaning at all and you are exposed to high risk as you are dealing with both GLD price in USD and the exchange rate in term of USD/SGD in singapore.

Reducing my expenses without affecting my quality of life

Under the expenses in My Cash Flow Framework, there are two items. One is identified necessities and another portion is reduces liabilities. Now it is time for me to check on these two items. I will see whether I can reduce my expenses without affecting my quality of life.

I will start in looking into my groceries list and see is there any thing that I can do to reduce the cost. I will

• Check whether is there any cheaper products that can perform equally well or even better than the current products that I always buy.
• Is there other places that offer better price for current products that I buy.
• Is there any unneccessary items that I will not need in my groceries list.

Another thing that I will look into is how I spend my money on food and drink. I always know that going out for meals in Singapore is always very expensive. For example, soft drink in coffeeshop will cost $1 plus. I found it ridiculous, as a can of coke from supermart is only $0.60. And also a plate of chicken rice in food court will simply cost $3.50, whereas some coffeeshop only sells it for $2.00.

I have no target in the amount of money to save, but if I can acheive to save $20 per month it is already very good. Saving $20 per month is like increasing your passive income by $20. In order to increase your passive income by $20, I need to invest $4800 which give me a return of 5% per year. So which is easiler, reduce your cost of living or increase your passive income?

Choosing the best value chicken rice in my town

In my town, there are a lot of chicken rice store around. I have listed 4 chicken rice stores and their prices in the above diagram.

For coffee shop A, it is only 1 minute away from my house, but price of the chicken rice will cost 66.67% more as compared to the cheapest price in town.

For coffee shop B, it takes me 2 more extra minutes to walk as compared to the coffee shop A. The price of the chicken rice is 33.33% more as compared to the cheapest price in town.

For coffee shop C, its chicken rice price is the cheapest in town. But it will take me 5 minutes to walk and there are less meat in the chicken rice.

For Food court, it will make me to walk the most and cost me the most as compare to other coffee shop.

After the comparison, I declared that coffee shop B has the best value. Walking a bit more to save an extra $0.50 is definitely more worthwhile to me. Just to highlight a point here, cheaper doesn't mean better value.

My choice is inlined with My Cash Flow Framework , under Expenses(Reduce Liabilities).

Investing is boring

After I have set my goal and bought my target stocks, the next thing is to wait. I am starting to find that investing is boring.

Investing should be as boring as possible so that you are not emotionally affected by the price changes everyday.

I found myself no longer look at the dow future and charts. Instead, I would spend some time searching for other quality, high dividends and value stocks to be invested next time.

I finally understand what Warren Buffett meant by "Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years."

What is debt free status?

Before you can achieve financial freedom, you may try to obtain your debt free status first. It is an easier goal to achieve, once achieved you will be more motivated to work toward your own financial freedom.


Debt free does not mean you do not have any debt. As long as your passive income is more than all your debts, then you have already obtained your debt free status. So try to cut down on unnecessary bad debt and build up your passive income. Sooner or latest, you will be able to achieve your debt free status.

I have already achieved my debt free status, and will slowly gear toward financial freedom.

My stock strategy from now till 2010

On 16 Nov 09, I have placed my last position, and my holdings are as below:

5 lots of Singtel (CPF) ==> Confirmed dividends of $310 (Dec 09)
4 lots of STI ETF (CPF) ==> No confirmation yet.
5 lots of SingTel (Cash) ==> Confirmed dividends of $310 (Dec 09)
15 lots of SingPost (Cash) ==>Confirmed dividends of $187.50 (Nov 09)

My stock strategies are as below:
If Singtel reaches $3.50, I will sell 5 lots of SingTel(Cash)
If Singtel reaches $4.00, I will sell 5 lots of SingTel(CPF)
If Singtel reaches $2.65, I will buy another 2 lots of Singtel using Cash.

If SingPost reaches $1.25, I will sell 5 lots.
If SingPost reaches $1.50, I will sell 5 lots.
If SingPost reaches $1.75, I will sell 5 lots.
If SingPost reaches $0.90, I will buy 5 lots.

If DBS reaches $12.50, I will buy 1 lot.

If none of the prices as above are reached, I will keep all stocks for dividends.

For ETF, I have no plan to buy in more or sell away in the near future.

Please take note that I am applying my rule No. 1, which is I do not try to predict the future. So I have planned for both market directions. I am also applying my rule No.3 which is "It's far better for other to buy an overvalued stock from you, than you buy an overvalued stock from other".

My Quotes/Rules of Investment

Rule no. 1: Never predict the market direction.
Rule no. 2: Don't forget the first rule.
Rule no. 3: It's far better for other to buy an overvalued stock from you, rather than you buy an overvalued stock from other.
Rule no. 4: Ignorance is not a good reason for losing money in the market, however having no discipline is.
Rule no. 5: For a wonderful company, be delighted when its stock price falls, be regretted when its stock price rises.
Rule no. 6: Slow and steady will definitely win the race.
Rule no. 7: You can never find it easy to catch a butterfly unless you have a big net.

Bought 3 lots of Singtel on 16 Nov 09

I have bought 3 more lots of Singtel @ $2.95 today using CPF. This will be my last position for this year. Remember few days ago, I sold my only lot of DBS. The money from the sale of DBS shares is used to buy 5 lots of Singtel shares (last friday and today).

DBS is getting speculative. The yield is less than 4% based on the current price. That is why I quickly sold it away. I will consider buying it again if its yield is more than 4.5%. Singtel however is having a better yield. I estimated it as more than 4.5%. It is not as speculative as DBS, as you can see the price movement of DBS is very fast. Singtel price is slow and steady which is what I like as a defensive stock.

Investor, Traders and Speculators Charts

Sun Tzu said, "If you know yourself and your enemy, you fight hundred battles with hundred victories." So it is important to identify yourself and other players in the markets before you do anything.

There are basically three types of player in the stock markets. They are the investors, traders and speculators. Because of these different types of player, the pattern of the charts will keep on changing.

Let say there is only investors in the markets and there are no traders or speculators. A chart of a growing company will be simply like the picture above. It is a pure straight line without any noise.

When traders come into the markets, the chart will look like the above. The price is going up and down in a trend. The green dotted line shows the actual growth of the company.

When speculators (who has big amount of money on hand) come into the markets, the chart will look like the above. The price is push up very high by these speculators in order to lure investors or other traders to buy at higher price. Once the bubble is formed and burst, the price will start to drop very fast. It may even drop below the fair value of the company. The red dotted line shows the actual growth (fair value) of the company.

One very good example for speculation is the above crude oil chart. You can see

that the blue oval highlighted portion shows that speculation has started. The price rose from US$80 to almost US$150. But is this the true value of the oil at that time. The answer is no. . After the bubble has burst (see red oval highlighted portion), the price fell rapidly down to about US$40. From about US$150 to US$40, that is more that US$100 drop. You can see that the speculators are very aggressive. If you are not able to value the price of oil, you might buy it during the speculation time at high price.

For a normal investor, we must know that traders and speculators are everywhere trying to earn money from us. It is not necessary a bad thing to have them in the markets. But you must try to protect yourself against them first. In order to protect ourselves, we must know how to value the company. Buy stocks only when the stock price is undervalued. If you do not know how to value the company, you will not know whether you have bought its shares at the high price or not.

Two quotes from Warren Buffett to illustrate my points:

"If a business does well, the stock eventually follows."

"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."

So don't be afraid if you have bought the stock at a low price and it went down further. But make that the company is good, before you buy its shares.

SingPost is a wonderful company to invest in

To me, SingPost is a wonderful company to invest in. It is a defensive stock with good fundamentals and have been giving good dividends in these few years.

The below dividend diagram is what I get from the Singpost Website. You can see that from FY02/03 to FY08/09, the dividend has been increased. Even during the market crash period, the dividend payout is not reduced. If the total dividend for FY09/10 is 6.25 cents, then is yield is about 6.5% (based on the bought in price of 0.95 cents).


I will accumulate more SingPost shares if it happens to drop to 0.9 cents. If not, I will not be buying any more.

Bought 2 lot of Singtel on 12 Nov 09

Seeing the market panic selling just now in the afternoon, I take the opportunity to buy 2 lots of Singtel stock @ $2.93 using CPF. Reason of buying is because Singtel is increasing its december interim dividend from 5.6 cents last year to 6.2 cents this year. That is about 10% increase in dividend. I will expect the Aug 10 dividend to be 10% more than the Aug 09 dividend of 6.9 cents.

Let assume Singtel is giving 7.6cents(10% more than 6.9 cents) for Aug 10, then the total dividend for the year will be 6.2+7.6 = 13.8cents. So based on the price I bought today, the yield will be about 4.7% which is not a bad deal to me.

Sold 1 lot of DBS on 11 Nov 09

I have sold my only lot of DBS @ $13.98 today for a profit.

Explanation:
This year, DBS is giving 4 x $140 dividends per lot. If based on the current price (about $14) , it is about 4% yield. I feel that 4% yield is not very attractive to me even though it is a good stock with potential to go up. My profit is about 6.9% based on the price I bought. So instead of waiting for one year, I already get 6.9% gain immediately by selling today. I have freed this amount of money so that I can buy other value stocks.

If it happens that DBS shares drop to $12 per lot, I may consider buying again.
If it happens to remain at the current price or go up, I will not buy again unless the value goes up.

Please don't mistaken me as a trader. I am not a trader and I don't depend on chart any more. I am a simple investor who just go for value and price.

Buying stocks based on price and value

Warren Buffett said, "Price is what you pay. Value is what you get."

Sun Tzu said, "The general who wins the battle makes many calculations in his temple before the battle is fought. The general who loses makes but few calculations beforehand."

That is why I always based on price and value and do my own calculation before buying stock See below for the formula that help me to know when to buy stock.


Price is the current price of the stock.

Value can be capital increase or dividend given from the stock. It will be very hard to estimate the capital increase of the stock, but it is easy to identify which are the stocks that are giving regular dividends. I always look for stocks with good fundamentals that give regular dividend even during the recession time. These stocks normally go up and down at a slow rate which is what I like. To me it works like fixed deposit. Click here if you are interested in my choice of stocks/ETFs.

Target return is the minimum amount of return you want to see when you invest in a stock. For example, if you set it at 5%, then every year you will expect to get 5% return from your stock. I will only buy a particular stock when the result of the formula is greater than my target return.

Example 1:
If a stock is giving dividend of $0.05 per year and the current price is $2, then the return will be 2.5%. So if my target return is 5%, I will not buy this stock at the current price.

Example 2:
If a stock is giving dividend of $0.1 per year and the price is $1.00, then the return will be 10%. So if my target return is 5%, I will definitely buy this stock at the current price.

How long does it take me to reach a passive income of $3000?

Currently my passive income has reached about $880, and my target is $3000. So how long does it takes me to reach my target. Let me has some assumptions before doing the calculation.

Assumption 1: I reinvest my passive income and I have a saving of $20000 for my investment yearly.

Assumption 2: My reinvestment gives me 5% return in term of dividends

Assumption 3: Dividends from my investment is constant

By taking the assumption, I have the following result:

It is calculated that by year 14, my passive will be more than $3000. So how to reduce the number of years to achieve my aim? If you see my cash flow framework, there are two methods. First, I must work harder to increase my income from my job. Second is to find other income sources.

Bought 3 lots of SingTel on 9 Nov 09

I have just bought 3 lots of Singtel @ $2.89

My Cash Flow Framework

Creating a framework is good for me to keep track where my money comes from and where it goes. You can see from the diagram, I have stated what are the things to be done in each of the five core areas namely Income, Expenses, Saving, Buying Asset and Passive Income.

Income:
I will concentrate on increase my monthly income and find other income sources.

Expenses:
I will identify what are the necessities and try to reduce my liabilities.

Saving:
I will split my saving into two portions. One portion will go into my investment, and the other portion save inside the bank.

Buying Asset:
I will identify what shares or ETFs to buy, and plan out a strategy on when to buy.

Passive Income:
I will use the dividends for reinvestment.

Some of my favorite quotes from Warren Buffett

1)It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

2)If a business does well, the stock eventually follows.

3)Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years.

4)Only when the tide goes out do you discover who's been swimming naked.

5)Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.

6)We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.

7)You only have to do a very few things right in your life so long as you don't do too many things wrong.

8)Price is what you pay. Value is what you get.

Things to avoid in stock markets.

There are a lot of things you should avoid in the stock markets. These are the things which put you in an unfavourable position and increase your chance of losing money.

1) Contra
Contra is a method of buying stock without having to pay for it. The catch is you have to sell your stock after certain number of days, normally is 3 days. If the stock price goes down during the 3 days, you will be force to sell and lose money instantly including commission.

2) Shorting
Shorting is a method where you sell a stock without owning it, and after some time you buy it back. The difference between the buy price and sell price is what you gain or lose.

Why avoid shorting?

• The maximum gain from shorting a stock can never be or exceed 100% of the share price. For example, you short a stock at $1, and you buy back at the price of $0.005, you will gain $0.995, or 99.5% gain.

• Using CFD is one of the proper way to short a stock. CFD stands for contract for difference. CFD will incur cost when you borrow shares to short, normally is about 5% or more PA on top of the commission. You also need to pay commission every month if you intend to keep the short for long. If trading is halt for the company, you will be stuck with your short and you still have to pay interest.

• If the shares are giving out dividends, instead of receiving the dividends, you have to pay out the exact amount of dividends.

3) Leveraging
Leveraging means "buying" of stocks by paying only a certain percentage of the total stock prices. Currently CFD is one of the facilities that provide leveraging. For example, your total stock cost is $10000, if the leveraging is 20%, than you need to pay only $2000. This is very risky. In case, your stock value fall by 50%, your loss will be $5000. In that case, you have to top up additional $3000 to pay for the losses. My advise as a investor is don't ever use leveraging, as it can cause you to become bankrupt if you are not careful. Just imagine, based on my example just now, what if you do not have the additional $3000 to pay for the losses? And also remember that using CFD will require you to pay interest and commission every month as you don't physically own the stock.

These three things are normally used by trader for short term gain. Unless you are one of the top best traders, if not you should avoid these things and invest normally. I always look at long term recurring gain rather than short term gain.

Bought 5 lots of SingPost on 6 Nov 09

Today I have bought 5 more lots of SingPost.

Reinvest money from passive income

In my cash flow diagram, I mentioned about the reinvestment of money from passive income can help you achieve financial freedom faster. I will use my example as show below to demonstrate my point.

As you can see, my passive income has almost reached $850 per month, which means about $10K per year. I will be using this money to reinvest in stock/ETF. Assume I get 5% dividend from the $10K, which is calculated to be $500 or about $40 per month. In that sense, for every year my passive income will at least increase by $40 per month. As I am applying the power of exponential here, the increase in passive income per month will be higher for each year.

Let say my saving for one year is $20000(just a figure that I put in for demonstration), and I use it for investment. That will give me $80 per month.

So in total, my passive income will increase $40 + $80 = $120 per month every year.

I am waiting for STI to be 2500 or 2800 before I will invest again. So for now, I will relax myself and focus on other things. Having a peaceful and undisturbed mind and a winning strategy are keys to successful investment.

I am not going to subscribe the UOB China A-Share exchange-traded fund.

After reading the prospectus, I have found that this fund is very complicated. It involves in P-note which is link to a sub-fund which is very confusing to me. And lastly I am not sure whether dividends will be paid or not.

Although I am in favorable of China economy, I have decided not to put any money into this UOB China A-Share exchange-traded fund. Always invest into something you know. If you unsure, don't put any money in.

STI Chart looks bullish

The STI chart looks bullish and a good time to buy since the graph has touched the lower trend line. Of course like I always say, market cannot be predicted.

Bought 10 lots of SingPost on 4 Nov 09

Today I have bought 10 lots of SingPost today. In my opinion, SingPost is a safe stock which gives regular dividends each year.

My strategy in investing stocks.

Since I have identified the stocks/ETFs to be bought for my portfolio, I will be using my strategy to buy these stocks. My strategy is using averaging. I believe that it will be very hard to maximum your gain by guessing the market. However using averaging has a good chance to get half the maximum gain (or half the maximum loss). If got time, I will explain the mathematics for this strategy. My only assumption for this to work is market will go up to break new high in the future.

Using averaging strategy, I will buy at equal amount at each hundred level of the STI index. For example, when STI reaches 2700 I will buy some, STI reaches 2600 I will buy some, STI reaches 2800 I will buy some. I must maintain a discipline not to overbuy at each level. In my planning, the lowest level will be at 1000.

In that sense, I won't be worrying about uptrend or downtrend of the market. Dividends are what I am targeting, so a strategy that can restrict my loss to 50% is very important.

Bought 2 lots of Singtel on 2 Nov 09

I have bought 2 lots of Singtel and prepare to hold for long term. I don't really care it will go up or go down after that. If it can go down to $2.60, I will buy other a few more lots.

My Stock and ETF Choices

I will only be interested in buying the following for long term:
1) DBS
2) Singtel
3) SMRT
4) Singpost
5) STI ETF (this is ETF which track STI index)
6) Cambridge

If you are a Singaporean, which company from (1) to (4) you are unsure of? Even you ask a primary school kids, he or she can roughly tell you how these companies make their money. I will only buy company that I know and understand what they are doing.

They may not be the best performance stock but I consider them as very safe stocks/ETFs in my opinion. I choose them is because they give regular dividend and they give me a peace of mind after buying them for long term.

The reason why I include STI ETF is because only 35% of the investable OA CPF money can be use to invest in stock. I will use the rest of the investable OA CPF money to buy STI ETF. I don't buy Unit Trust as they seldom or never give out dividends, and also their management fee and sale charge are quite high in my opinion. STI ETF in the past has been giving good dividend in my opinion.

Upgraded my computer from Windows Vista to Windows 7

I have just upgrade one of my old laptop from Windows Vista to Windows 7. It is amazing that the performance has greatly improved. I don't feel lag any more when I using the old laptop. To play safe, I will use it for a few month first before upgrading my the other laptop.

Dow crashing 250 points, after rallying 200 points the day before.

As you can see, market is unpredictable. One day can rally up by 200 points, the next day will crash down by 250 points. If you are an investor, will you have a peace of mind when you see dow crashes after the day you had bought your stock? Will you be panic in selling your stock in the next trading day at a loss? What if dow goes up by 300 points in the next trading day?

In the past, I definitely will not have a peace of mind when I see dow crashes. One of the reasons why I cannot have a peace of mind is because I invested too much at one go, hoping the markets will go up from the day I invested. This is a wrong thinking. Two days ago, I have added 2 lots of STI ETF in my portfolio, and I am not afraid of losing that money.

In another thought, I really hope that STI will drop below 2400 again so that I can buy some more. I have my own winning plan, so I just follow it without any fear. My advice to all the investor is to stop trying to guess the markets. Plan for your strategy and follow it strictly and fearlessly.

My Passive Income (30 Oct 09)

I have done a detail calculation for the passive income from OA. It works out to be about $150. I will keep the remaining money in my OA account to earn 2.5% interest. I will use this money to invest again if the STI drop to 2400 and below. My house monthly payment is $400, so minus away $150, I just need to pay $250 per month.

For my cash, I will not be targetting any Singapore Shares. I am interested in the China A Shares ETF which is going to launch soon. I will slowly invest in this ETF. I will do up another post why do I want to invest in this China ETF.

Do you have a peace of mind after buying shares?

Do you have a peace of mind after buying shares? If you don't, it is possibly due to one or more of the following reason?

1) You are speculating. You buy because the shares keep going up without reasons, hoping that the shares price will go up somemore.

2) You are buying shares of the companies, without even knowing the fundamental of the companies. You buy just because of the influence of the analyst, your friends or colleagues.

3) You are using someone else money.

4) You are using money that you cannot afford to lose.

5) You invest too much money at one time, and left no more money to invest when market goes down again.

6) You are leveraging. There is a possibly to lose more than your initial investment amount.

Bought 2 lots of STI ETF on 29 Oct 09

Today market gapped down again. I quickly use this opportunities to buy 2 lots of STI ETF using OA CPF.I don't care whether the market will go up or down as long as the dividends keep coming in.

Why I prefered to become a investor rather than trader?

Sun Tzu said, "If you know yourself and your enemy, you fight hundred battles with hundred victories." Knowing yourself is important when it comes to investment.

I preferred to be a investor due to the following reason:

1) I am not a TA expert for short term (I try to learn for one year, but the chances of success is still 50%). I don't think I can predict stock better than a kid who is just merely guessing.

2) I want to have a stress free mentality when it comes to buying stock. I prefer to buy and hold for good stocks for dividend rather than trading speculative stocks for short term gain. Receiving constant dividend is a source of passive income. Trading for short term gain is a type of gambling. The more stocks I buy, the more dividends I get, that's why my passive income is increasing. With this in mind, I can sleep well every night.

3) I rather spend more time to do other thing that can increase my active or passive income, than mindlessly looking at the prices of the stock jumping during trading hours. Reminder time is money. There is no need to keep track of other thing like the Dow Jones future.

4) Trading need to pay a lot of commission for buying and selling. If one trade is $30, ten trade per month already $300. That money can be better used for long term investment.

5) I have constantly saving part of my income for investment. Together with my passive income, I can buy any time when there is any correction from the market.

Lastly Sun Tzu said, "The best outcome for war is to win without fighting". I am currently following my winning plan with ease and stress free.

3rd quarter 2009 residential price index

URA has released the 3rd quarter 2009 real estate statistics. Click here to go to the URA website. I have done a snapshot of the chart on the residential price index. I draw a blue line to see whether there is any trend. Will the index goes up some more? Is now the best time to buy property?

My housing loan

In 2003, I have bought my flat with good location(5min to mrt, amenities, swimming pool, shopping mall and sport hall). The price that I paid is at a good bargain, I am considered very lucky to buy it. Seeing the property agent leaflets, the flat may cost $100000 to $200000 more if I buy now. So I am seeing myself at least $100000 richer than my peers who bought the flat now. If you are interested how I select my flat, you may click on the link under "My Lessons on choosing a house" on the right side bar of my other blog "Singapore Property Guides"

If you can see at below my blog, my housing loan monthly payment is $400. My wife is actually paying a lot less than me. I manage to gain $167.60 (from interest and dividends) from my OA account. Remember the OA account currently give you 3.5% interest per year for the first $20000(cannot use for investment). That alone already give me 0.035x$20000 = $700 per year or, $58 per month. Other amount are from the dividends. I look at passive income and not capital gain or loss when it comes to investment.

I am currently paying $400-$167.60 = $232.40 per month for my flat. That will mean that I can save more OA amount to be invested next time. By following this cycle, sooner or later about 3 to 4 years, my OA passive income will eventually reach $400, and my house is free!!! See my cash flow diagram for reinvesting passive income.

You may want to find out more about whether it is better to take 15 years or 30 years housing loan here.

STI Index movement Prediction (Oct 2009 to 2011)

I always believe in long term trend rather than short term trend. In this post, I am making two predictions for the STI Index from now to 2011. Here are two possibilities pattern that might be slowing forming.

The first pattern is head and shoulder pattern. The diagram below suggested that STI may be reaching 3000 before the next big correction. The correction might send STI back to 1600 again. This is what most of the people will expect now. Remember, if a lot of people have the same thinking, the chances that they are wrong are very high.

The second pattern is double top pattern. The diagram below suggested that STI may be reaching 4000 before the next big correction. Yes, a lot of people might say I am crazy, but see the two blue highlighted circles; they might be similar points for past and current bear market. EXPECT THE UNEXPECTED. The next major correction might also send STI back to 1600 again.

So after seeing these two patterns, what are your views? Which pattern will be forming? Or do you have another pattern in your mind? No one can be sure what will happen next. It is your planning and strategy that will determine whether you are the winner or loser for this game.

Looking for new blog template

I personally feel that my blog is ugly. I will try to find a better design template for my blog.

STI INDEX (Comparison between 1998-2000 and 2008-2009)

I have done a comparison for STI index between 1998-2000 and 2008-2009 period. You can see that there are a lot of similarities in it. By looking at the picture above, we are in the last phase of the bear rally?

Cash Flow Diagram

Cash flow diagram is used to find out where your money go to when you got your pay. The above is the cash flow diagram that I have designed for myself. Of course, I have taken out the exact amount in each item.

Cash flow is basically what you get after deducting your expenses from your pay. Those people who have a lot of liabilities are more likely to have less cash flow or even worse, negative cash flow. Remember in my last post, I say reduce your liabilities and increase your assets is the way to be rich!!! I have put part of the money in cash flow to saving and another part into buying assets.

Re-investment of money received from the passive income is very important. By doing that you can compound the growth of your money . If you do it properly, you can achieve financial freedom faster.

I also draw out My Cash Flow Framework , which has more details than my cash flow diagram.

My Passive Income (23 Oct 09)

I managed to increase my passive from $ 600 to $761.00. My target is $3000, so that mean that I need to achieve $2239 more. I am glad that I am 25% there.

S&P(2007 to 2009) VS NIKKEI (1990 to 1992)

I have tried to align the chart for S&P500 (2007 to 2009) and NIKKEI(1990 to 1992) chart. Can you see the similarity? Guess what will happen to S&P500 in the next few months.