Five Cents Ten Cents

Financial freedom, one realistic step at a time.

Five Cents Ten Cents - Financial freedom, one realistic step at a time.

The Sky is Falling: Thoughts on the 1997 Asian Financial Crisis and the 2008 Global Financial Crisis

To many new investors and those who have money on the table (i.e. equities, forex, property etc.) at this point in time. It is not a fun time at all because the market growth (do I daresay “bubble”?) since the 2008 global financial crisis is starting to unravel the profits and gains accumulated since that period.

At this point in time, the STI has falled below the psychologically important 3,000 points. So where does that leave us?

I don’t know where the market is going but what I know is how I felt going through the previous few financial crisis as someone who had started working in 1995.

The Asian financial crisis in 1997 did not affect me much because I was just starting out my career and most of my investments then were in savings and fixed deposits in Singapore. Hence, I was not exposed to the foreign exchange risks and how the overall financial markets tanked during that period.

But what I recalled was shared stories among colleagues and from my parents of people who they knew were retrenched or lost their jobs. That was the very first that I started to have an inkling about job security and how the regional markets and economies could hit one directly through affecting the industry in which one’s employer was in. In a way, some of my conservatism on personal finances and being concerned about financial freedom stems from knowing that the real world was both equally unpredictable and fraught with hidden risks.

The next stage was the burst which came when I happened to work in the IT industry. I was fortunate that my employer was a government-linked company (GLC) hence it had sufficient resources and contracts to ride out the burst. But I also saw first hand how colleagues who were poached to join dot.coms went over and were out of a job within a few months to a year of the crash. I also saw how due to declining profitability, some staff especially those in cost centres e.g. marketing were asked to go and the inherent unpredictability of “seasonal” plays (i.e. the whole internet bubble) in the markets.

By then I had invested in some bonds besides fixed deposits. I was also fortunate enough to cash out on some small number of stock options given by the GLC which was just a small additional year-end bonus before I left the company.

Since then, 2003 has SARS which affected Singapore equity markets. I was lucky to have started building my equities portfolio since that period and was out of pure dumb luck that I made money from my amateurish trading on equities.

By the time 2008 beckoned, the stock market corrected fairly quickly as the global financial markets came close to screeching to a jarring halt with the collapse and bail-outs (or not) of major institutions such as Lehman Brothers and AIG. The resultant fallout saw my equity portfolio facing a paper loss of high 5 digits. I bit the bullet and ate some of these losses but miraculously, through my dividends for those stocks I still held plus subsequent trades on stocks that had corrected, I narrowly avoided making a realised loss on my portfolio.

That was when I realised then one needed to have sufficient reserves to buy when asset values were cheap. Be it property, equities or other assets, one could have bought so many blue-chips at ridiculous prices and valuations.

Since then, I had taken a more conservative approach and set aside more cash. However, the market recovered and picked up since then and the resultant 7 year bull market for equities made me feel that I had missed out again on the bull-run. However, I was invested by then in some core-blue chips dividend paying shares, I had some decent dividends each year. Enough for extra bonus for the year but nothing to make me financially free or rich.

Now that the market has tanked, I realised I finally have some cash to take advantage and pick up good blue-chips for long term. I started to buy on the slide for a blue-chip but didn’t realise the correction was so rapid that I should have delayed my purchases but again I am taught the lesson that I cannot time the market 100%. Even buying at 52 week lows was not good enough as we are approaching newer lows.

All these experiences have taught me to first have a secure source of income. Whilst being financially free from portfolio investment is the dream, the reality is a combination of being good at your day-job and using the savings to build up one’s retirement fund outside of CPF. The investments gives us more options even if we find our employment to be something that is financially rewarding and meaningful. I have met an ex-classmate who semi-retired at his early 40s a few years back as he was in investment banking doing mergers and acquisitions and he confessed that he went back to work on a less hectic schedule because he was bored and realised his brain started to rot once he started his retirement from his career.

The other thing I realise is to have some reserves and not to be 100% invested in the market. Luckily I have still about 30% of my networth not invested so can still pick up some blue-chips when this correction has taken it course. I may not be able to time the bottom but I will be picking up solid blue-chips at good value and would be prepared to hold these and bequeath them to my daughter.

I wish all those vested best of luck to ride out this wave of downcycle. Some pessimists are predicting the start of recessionary phase for the region and Singapore.

As always,

Be well and Prosper.

Happy Labour Day 2015!

It appears that my posts are coming now at quarterly or less frequent intervals. ¬†ūüėõ

That is partly due to my waning interest in blogging on a regular basis as there are other outlets for me in my career to engage in writing articles related to work activities. For instance, I publish an in-house newsletter in my organisation sharing about my team’s activities.

At the same time, one’s interests and hobbies evolve with each phase of life. I am now coming¬†more into parenthood starting to deal with¬†expectations and pressures of “keeping up with the Lims, Muthus and Alis” in the academic rat-race now that my daughter is in Primary One. I can see now how parents are stressed from our education system which loads our children a lot early in their lives.

On a positive note, I am travelling a bit more since last year as I managed to weave in overseas trips as part of my work. This has exposed me to more cultural awareness of other countries. I think now is the time for me to travel more for personal leisure partly because my child is old enough to follow and at the same time I am better able to manage my schedule as well as finances to fund such trips.

I am also becoming increasingly aware of the importance of health and fitness and realise I must invest in the time and resources to do so if I intend to reach the average male expectancy of 80.2 years for males.

I believe I am still learning as my language learning helps to work my brain in terms of memorising vocabulary, pronunciation and grammar. At the same time, trying to speak even simple sentences is a big cognitive effort and helps to exercise those little grey cells even more.

The market feels kind of over-valued currently given that equity markets have more than recovered from the previous highs prior to the global financial crisis in 2008. I am currently about 44% in cash and cash equivalents¬†with 21% in fixed income and 35% of my liquid net worth in equities. I would likely switch out of one of my investment-linked¬†insurance plans as the mortality charges would be quite high and go into a term life insurance as the ILP has more or less “broke even”.

Wishing one and a a Happy Labour Day long weekend and as usual, be well and prosper.

Happy New Year 2015

It has been half a year since my previous post and 2014 was a decent year with regards to my investment returns. Despite being about 61% invested in 39% in cash and cash equivalents, I managed to generate a return of around 3.12% for the year.

This is not huge but still beats returns on time deposits. The interesting thing I note is that the bulk of my returns came from dividends, followed by interest from fixed income securities (Singapore Government Bonds and Corporate Bonds) and finally capital gains from the occasional punt.

In short, I spent less time on managing my investments but still performed better than 2013 (1.88% annual return).

In my journey towards financial freedom, I am inching closer to my target but realise that in nearing the destination, my journey has made me a different person who now understands that happiness is more in the process than the journey.

2015 sees my daughter enrolling in Primary 1 which is the start of the formal schooling phase in her life. I take equal measures of delight and stress from now helping her cope with our competitive and fast paced education system.

I also have discovered a hobby that is complementary to my interest in learning foreign languages. Besides learning nihongo or Japanese language, I am getting interested in fountain pens as well but have not really splurged on them. I currently own only three all costing below $50. This is just for me to explore how fountain pens work and how to use them to pair up my interest in improving my handwriting by developing a consistent and legible cursive style.

I am also exploring Midori notebooks but because they are so costly (S$53 or passport sized!), I am starting to explore youtube videos and online resources on how to make them by hand.

Work-wise there has been some challenges which will help me become a better person. My role has not changed much but it is interesting because one of the secondary roles in my job exposes me to lots of learning opportunities although they take up my time.

I would like to wish all readers and friends a Happy New Year 2015 filled with happiness, health and wealth!

Be well and prosper.

July 2014

We are past half of 2014 and it has been a while since I last updated this blog. As I grow less hair, my body is now more susceptible to wear and tear. Last month, when I was on a business trip, I pulled by posterior cruciate ligament i.e. the ligament behind my knee while lifting up a heavy luggage bag at an awkward angle. That took me some time to recover before I strained the ligament again during a ball game.

Really once one is past 40, one has to be more conscientious about healthy living and exercise because the recovery of any injury takes longer than when one was younger.

In terms of my journey towards financial freedom, savings from earned income continue to be the main source of my investible savings so I am on track to my targets. Work-wise, it got busy for the first half of the year and looks set to continue. I am happy with the challenges as they are still manageable and allows me to achieve certain “flow” in my work where the tasks and activities engage me pretty much and time flies.

There has been a change in the big boss at my workplace so we are still figuring out the optimal working arrangements. In the meantime, more time is spent bringing the big boss up to speed about the key areas of my area of responsibility within the organisation. It is interesting to note that the big boss is my age but is already the CEO.

Such things hardly faze me nowadays as I had encountered people who were in senior leadership positions even at age of 30+ early on in my career.

The markets seems high to be as equity markets have reached the peak since the 2008 crisis. I am still about 52% invested (22% fixed income, 30% equities) and 48% in cash and cash equivalents.

It will be the second half of 2014 soon and at the rate that the days go by, very soon 2015 will beckon as well.

Be well and prosper.

May 2014

It’s been quite some time since my blog post and we are coming to the middle of the year! Looking back, my net worth has moved northwards mainly due to savings from earned income. In terms of investments, am still not fully invested in the markets and am still around 60% in equities and fixed income (Singapore Government Securities and Corporate Bonds) with 40% in cash and cash equivalents.

Work-wise, things are getting interesting because of leadership transition with a new CEO coming into the organisation. The strategic direction, tone at the top and culture of the new CEO is still unknown as he has only come on board this month. It remains to be seen how he will slowly mould the organisation into his own ideas and views. This is the year also that opportunities for leadership positions have emerged for me and for me to really develop those EQ skills in working with people and trying to build consensus while aligning individuals to the goals of the organisation.

I am entering a different phase of my career in that technical skills, while important, are basically there to allow me to share and coach my staff to be better technicians than I am in my area of work. My real value-add is to make the connections that help the work we do matter to the organisation and people within. My other value-add is to become better at coaching people to their fullest potential and also to understand¬†what others truly want so that I can practice “seek first to understand, then to be understood,” as given in “The Seven Habits of Highly Effective People”.

Health-wise, have made strides in exercising more regularly and eating right that the belt and pants are becoming slightly looser than before. Need to incorporate more weight training into my exercise schedule.

Family wise, as my daughter is going to Primary 1 next year, it’s also time for me to develop the skills of being a tutor to my daughter in those areas that I can. For those areas that I can’t, to get a good tutor for her so that she can keep up in the competitive landscape. :-)