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.