The recent break-downs in the Singapore Mass Rapid Transit system or MRT (especially the serious ones last Thursday and Saturday along the North-South line) offers us some lessons in our journey towards financial freedom.

Numerous bloggers have discussed the socio-political issues arising from the breakdowns and SMRT’s top management’s abysmal lack of timely response and updates to the commuters. This post will not go over the same issues.

What is more instructive is to learn about how we can avoid the pitfalls encountered by SMRT during this recent crisis.

Preventive Maintenance is Critical for Smooth Operations

Before the Committee of Inquiry seeks to establish the facts and the causes or contributory factors to the NS line breakdown, it interesting to note how the Saturday night to Sunday 11 AM shutdown of the MRT system for thorough checks on trains and tracks led to the discovery of many faults.

This calls into question the effectiveness of its current maintenance regime as it clearly failed to detect such faults before they caused the breakdowns in service.

In our own journey towards financial freedom, we need to consider the need to do “preventive maintenance”. This is why I will continue to update my expenses worksheet to continue to track my cash flows as well as my personal net worth worksheet to track my net liquid assets and total net assets (inclusive of housing loan but excluding the value of my residential property).

This is a form of discipline to always keep in mind my cash flows and if I am saving each month. The accountability in recording what I spend has an effect of making me reflect on whether my spending is aligned to what I want in life.

Financial freedom is a journey and not a destination rings true, and hence in our journey, we should continue to cultivate habits that lead us to maintain our movement towards the goal. The goal is important, but the journey is as important.

Give Timely Updates to Your Stakeholders

Many commuters were angry and frustrated by SMRT partly because they were inconvenienced by the breakdowns. But many were frustrated by SMRT’s poor crisis management and public information sharing about the breakdowns. SMRT failed to keep commuters updated on the nature, extent and alternative transport arrangements especially on Thursday (15 December 2011).

We are our main shareholder in Our own Funds. But I discovered that through my blogging, there is some accountability when I share my own highs and lows of my journey towards financial freedom. Whilst I do not detail the specifics about the actual dollar value of my portfolio. I do give updates on my performance for the year and also some of my mistakes such as punts that made small capital losses from time to time.

Such scrutiny helps me maintain some level of discipline as I know that I will want to share what I’ve achieved (or not) in my own journey towards financial freedom to my readers. Giving periodic updates helps me to think through the issues and challenges that I face in my journey towards financial freedom and clears my minds when it is transferred in bits and bytes to a blog post.

The Buck Stops with Me

The key lesson learnt from the SMRT breakdown is that we have to be accountable for our own financial health. The buck literally stops with me.  I cannot blame the market for the returns. I choose to invest my monies or not. I choose the risks I want to take.

When you take responsibility for your own decisions, you become more empowered to want to decide properly to achieve a decent return for taking acceptable risks on one’s investible net worth.

My walk towards financial freedom will never stop. It make take different forms and shapes but I continue to work on the principles of living within my means, saving and investing, growing and protecting my means.

What insights does the SMRT incident have for your own life?

Share with Panzer in the comments section.

Be well and prosper.

I was recently approached to speak at an event by the organisers in a neighbouring country simply because I had my professional resume posted up on Linkedin. The organisers had never met me before in person nor had they ever heard me speak at other events. But based partly on the strength of my online profile in Linkedin as well as my track record in speaking at specific events that I’ve listed on my public profile, they invited me to speak at their event.

I am fortunate that they spotted my profile and liked it enough to take the risk to invite me to speak at their event which was run successfully. But what does this little episode have to do with financial freedom?

The world is now open to us through the internet. There are more possibilities and routes towards financial freedom now compared to say, twenty years ago. It is only through networking and having online connections that we can leverage on this global interconnectivity to expand our minds towards possibilites for financial freedom.

Expanding Your Mind Through Old and New Connections

One of the key challenges that I face in my journey towards financial freedom is to think out of the box. When I first started investing my own money, I only knew about fixed deposits and unit trusts. The world of fixed income and equities were understandable to me in theory but alien to me in practice. As a result, it took me some time before I got my hands dirty in investing directly in equities for potential capital gains and dvidend. It also taught me more about portfolio management, cash management and to handle myself pyschologically when the market went south.

Networking through LP’s cbox, having an online presence in Linkedin and Facebook have helped me strengthen existing real world networks and relationships while opening up possibilities for developing new connections and relationships.

Some of the conversations I’ve had in cbox have allowed me to understand a greater variety of ways in which people are pursuing their own versions of financial freedom. In there, I have access to people living, working or studying in places such as UK, US and Taiwan. It has also allowed me to quickly tap on “human intelligence” about what other investments are available as well as how others have managed to get into them. It has also allowed me to connect online with some individuals who have already achieved financial freedom either from physical property or from equities that generate sufficient dividends that cover their lifestyle expenses.

My own ideas and thoughts about financial freedom become richer from interacting with like-minded people who have interesting perspectives about living within our means, about saving and investing as well as growing and protecting our means.

Such conversations and connections serve to enrich the quality of my thinking about ways I can go about achieving financial freedom. I realise the more I talk to people, the more I learn about the world and about myself.

In today’s connected world, it’s easy to go and “meet” up with people online through common interests, topics and hobbies. Over time, when there is sufficient understanding and trust, this process can lead to forming real-world connections and friendships through further conversations over lunch or coffee. Such connections can allow us to break free from the confines of our existing frameworks, paradigms or mental models.

To think outside of the box, we should at times venture out of the box that is our comfort zone, our routine or our day-to-day busyness.

How are you networking and fostering online connections towards financial freedom?

Share with Panzer in the comments section.

Be well and prosper.

Even as the calendar year 2011 draws inexorably towards a close with two months plus left before 31 December beckons, I realise that if I do nothing now, I will end the year with a realised returns of 4.5%.

In fact, I should not buy any more equities now and take bigger positions on the market because most of my returns will come from dividends — truly a form of passive income.  The more I trade or try speculative punts, the more I risk losses on capital due to market moves south in tandem with the general global negative outlook over European debt problems and possibility of US and world slowdown or even recession in 2012.

Is doing nothing a strategy?

Do or Do Not, There is No “Try”

This quote from Yoda of “Star Wars” reminds us that sometimes we have to take decisive action or sometimes we have to refrain from doing anything. At this point in time, I am about 30% in cash and 70% in equities. I am comfortable with this level because dividends will accrue even if I take no new positions.

In fact, the temptation is to try to squeeze a higher return by risking more capital in the market in line with trying to time market moves. My own internal benchmarks (though set at a fairly realistic and not overly ambitious target) have been met. Thus, as the fund manager of Panzer Funds, I have met my key performance indicator and extract some management fee for paying myself for the investment calls I’ve made throughout 2011.

To do more is to risk capital losses. My returns won’t make me rich. Neither do they make me financially free at this point in time, but they have at least mitigated the impact of inflation against my net worth. That itself is important because the next best alternative is currently returning a paltry 1% or less in “risk-free” fixed deposits (for the first $50k).

My main stream of income to build up investible net-worth to power-up my passive income still comes from my career. As the year-end draws nears, I’ll definitely enjoy some of this passive income as a small reward and to motivate myself to achieve better returns next year.

Multiple-Sources of Income and “Compulsion”

After reading Robert Allen’s “Multiple Streams of Income” and whilst reading Felix Dennis’ “How to Get Rich” book, I realise that growing one’s means beyond earned income is really critical in moving towards achieving financial freedom. The ability to execute good ideas into a sustainable business is critical. I am particularly intrigued by how Felix Dennis uses the term “compulsion” to be rich vs. “desire” to be rich as one of the key differentiating factors on what separates those who are rich are those who are not.

In some ways, I realise that my own journey towards financial freedom has to achieve the status of “compulsion” for me to succeed in my journey. Thus, my habits of recording my expenses, of making sure I live within my means will continue no matter what my level of net-worth achieved.

Increasingly, I am opening up interesting doors towards learning more about funding start-ups with a view of participating in their growth and benefitting like a venture capitalist. This learning would help me identify the key success factors and to hone that ability to gauge if a venture could potentially be a multi-bagger with the right funding, mentorship and partnerships.

In terms of the market, doing nothing i.e. not actively taking positions would mitigate unnecessary exposures to risk.  However, I should take this time to review my life-list, to learn more about being a venture capitalist and to enhance my abilities to generate more income to invest in Panzer Funds for ultimate goal of being financially free.

Are you doing nothing or going to be doing something for the last two plus months of 2011?

Share with Panzer in the comments section.

Be well and prosper.

The current market turmoil has seen my stock portfolio’s value decrease as prices of even blue-chips stocks go south. It appears to be 2008-2009 again for many investors. What can we do, how can we overcome the challenges of seeing our portfolios dwindle with the threat of global economic recession threatening growth over the horizon?

Not Having All Your Eggs in One Basket

The key take-away I got from the 2008/09 global financial crisis was not to put all my eggs in one basket. I.e. I should not invest almost all of my investible net worth in one asset class which in my case is stocks and shares or equities.

That painful lesson has served me well today because I am currently about 70% invested in equities and 30% in cash and cash equivalents. This allows me to ride out the market downturn as most of my portfolio is invested in SPH and UOB that are very sound businesses and continue to pay dividends at a yield higher than what I can receive from investing in fixed deposits.

The other thing I learnt in my journey towards financial freedom is that capability development is very critical in growing oneself. We are still the biggest asset in our portfolio as our ability to generate earned income during our economically productive lives is the main cash generator that allows us to build investible savings for passive income.

Continuous learning of new skills, abilities and relevant experiences allows one to develop capability to navigate tomorrow’s changed situations mainly because we have the capacity and skillsets to handle new situations and tasks arising from work.

The Markets are Not Everything

Nicholas Nassim Taleb’s point of not using the stock market as a repository of wealth rings true during periods of market downturn like what we are seeing today. As I was watching the Korean entertainment series “Invincible Youth” on youtube, it rekindled my interest and dream that one day, I would like to transit to a lifestyle where I can grow some of my own food and also provide eco-tourism activities on a farm or rural community. Living in the City-State of Singapore does not allow one to have many opportunities to experience rural life unless one travels to Kranji area or out of Singapore to neighbour countries smaller towns and rural communities.

I would like eventually, when my daughter is old enough to be independent, to settle down in some low cost Asean country in a smaller town to basically live a simple lifestyle based on sustainable living supplemented with the occasional creature comforts. In order to achieve this, I would need to keep myself fit and healthy to be able to continue to work the land for some basic subsistence.

The stock market is not everything, I would rather convert my paper assets to real world assets such as a farm with a water source and arable food, livestock and live a simple life till I depart from this world.

What is your own strategy for dealing with the current bad market?

Share with Panzer in the comments section.

Be well and prosper.

One of my life goals that I’ve listed in my life list in 2009 was to obtain a class 2B motorcycle licence. That list was written in April of 2009, more than 2 years plus ago. It is timely to revisit that list as there has been some changes to it since I last wrote it.

I started my new journey to challenge myself by registering for the class 2B motorcycle licence at one of the training centres in Singapore. The road will be long and challenging as one needs to clear quite a number of theory lessons even before one can book the practical lessons to get hands-on training with the motorcycle.

Why Challenge Yourself

One of the interesting and thought provoking personal development books I’ve read is “The Art of Learning” by Josh Waitzkin. The book is about the personal journey of Josh Waitzkin who was an American chess prodigy who managed to achieve peak performance in fields that are vastly different – chess and competitive “pushing hands” or tai ji chuan martial arts. His striving for and achievement of great performance in different fields reflects the pursuit of the renaissance man concept, one who is interested in the world and can see how there is commonality in the pursuit of excellence in different disciplines.

The Mind is a Terrible Thing to Waste

Challenging oneself in learning new skills is to widen one’s life experiences and to grow as a person. My pursuit of financial freedom has led to to the realisation that I need to also invest in myself as person to grow my capabilities. I become more “valuable” to the market place because I can add value to the world around me. And the way to do so is to learn useful skills that can be used for leisure (i.e. travel to ASEAN countries where motorcycles are a cheap and convenient form of transportation).

I also see learning new skills as listed in my life list as a way to experience life more fully because I can engage in life in more varied ways. Riding a motorcycle is a useful life skill that can enhance my lifestyle as I would be able to operate another class of vehicle. The older I get, the more I realise that my time on this earth is not forever and that if I do not learn to ride a motorcycle in my 40s, it would get progressively more difficult in my 50s or later.

Some of you may think this is a mid-life crisis that I’m going through. Perhaps it is. I am not learning to ride a bike with the ultimate aim of zooming off to the sunset in a Harley Davidson, but rather, I get excited about learning a new practical skill that I can use for travelling in the future and could come in useful should I choose to retire in a low-cost country 20-25 years down the road.

Looking at my life-list reminds me that there are many things I want to see and do and the available time for me to do them becomes shorter each year that I grow older.

I have posted this article also to act as a way to motivate myself to achieve the class 2B licence. I will try to achieve this with the best of my ability.

What goals in your own life-list are you thinking of achieving in the near future?

Share with Panzer in the comments section.

Be well and prosper.

Other decisions are harder, e.g. should I cut loss on my paper losses or hold on to a stock? Should I set my asset allocation at 50% equities to 50% cash or 70% equities to 30% cash or 100% cash and 0% equities.

Being paralysed and afraid of making a decision sometimes inhibits our growth as a person because we do not want to accept the consequences of our own decisions.

Life can only be lived looking forward

Steve Jobs’ commencement address that talked about how we can only connect the dots looking backwards reinforces the concept that life can only be lived looking forward. No-one can predict what the future will be. Will the stock market continue its bearish trend and stocks become cheaper? Or will there be a rebound that sees stock prices go up.

The reality is no-one knows, but we should know enough to be able to take a decision and live with the consequences. Currently I have 70% invested in equities and 30% in cash. I am comfortable with this level because I do not have any major cash needs for the next 6 to 7 years and the 30% cash buffer allows me sufficient flexibility in meeting cash outflows if they materialise in the short-term.

The more I started to invest in equities, the more I realised that reading about a company in its annual reports as well as analysts reports were well and good. But summoning the courage to act on the conviction to buy/sell was not as easy as it seems. It takes willpower, a bit of decisiveness to make a buy/sell decision and stick with it according to one’s investment objectives.

I’ve become more decisive now compared to when I first started investing in equities in 2003. I also realised that I needed to live with buyers’/sellers’ remorse when I bought and sold and prices moved lower and higher almost immediately after I made the decision. I continue to learn the lesson that one should act on one’s conviction and be prepared to live with the consequences.

We can only live life looking forward and making decisions based on what information we have and how prior experience had molded us.

How has being decisive or indecisive helped or hindered you in your own quest for financial freedom?

Share with Panzer in the comments section.

Be well and prosper.

I am a science-fiction fan and one of the better sci-fi drama series I have watched in recent times was “Battlestar Galatica” the re-imagined series. If you follow that drama series you would be familiar with their tagline:

The Cylons Were Created by Man.
They Rebelled.
They Evolved.
They Look and Feel Human.
Some are programmed to think they are Human.
There are many copies.
And they have a Plan

What is your Plan?

Planning for financial freedom does not mean having an a to z, 1 to 100 steps to achieving financial freedom. Rather, it is about thinking strategically about your own financial goals and working out some clear direction that one needs to move towards that goal.

In the series, “Battlestar Galatica”, the Cylons started with their plan to destroy all of humanity in the twelve colonies. But as the plot developed, we realise that the plan is more complicated that to seek out all humans and kill them that was the apparent premise.

I hope none of you have the hope of destroying humanity as your overall plan in life and if you are reading my post you should have some inclination towards financial freedom and personal finance.

My personal plan has also evolved through time. When I first started taking charge of my investments in 2003, the seeds of my plan were germinated and started to grow. The more I moved from fixed deposits, unit trusts (mutual funds) to direct equity investment in SGX etc, I started to delve more into the details of what I needed to know about personal finance and investing in general.

This led me to understand the gaps in my knowledge and also to start reading books related to personal finance. Some useful books I recommended to those who are new to personal finance include, “The Richest Man in Babylon” and “Your Money or Your Life”.

The more I read, the more I started to crystallise my ideas about personal finance and more importantly how I should direct my life towards financial freedom.

My core principles are to:

1. Live within my means
2. Save and invest
3. Protect and grow my means

I have kept it deliberately simple to make it easy to remember and easy to follow. Each core principle can be expanded into more detailed action plans and skills that I need to acquire to achieve those principles on a daily basis.

Working Your Plan

As my plan became clearer to me, I realised that my actions taken in how I allocate my money and choose to use my time began to subtly shift. Because of the live within your means principle, I became less uptight about spending money because I tracked my income and expenditure and thus was fairly clear on whether I was saving money each money.

That savings allowed me to pay off most of my housing loan. What is left is more than covered by my equities and cash in bank/deposits leaving me with a decent positive net-worth that is 20% cash/deposits and 80% in equities. It also allowed me to have my equity portfolio that earns dividends and is aimed at keeping up with inflation.

It is because of my plan and the implementation that I am not too worried about the current equity market volatility. I stuck to my limits on equities and did not do much after committing up to 80% of my investible net-worth into equities.

What I learnt over the years from developing, working and fine-tuning my plan is that it helps you to be focussed and to help align your actions because you have a overall strategy and direction.

Your plan may vary from mine. It could be to expand your business or scale up your income from your career to hit your financial freedom targets. It could be to go to the casino and hope to hit it lucky. Whatever it is, planning is an important aspect in focussing your mind on what it is your ultimately want and how you may be able to get there.

How has your own plan been in recent times?

Has it helped or hindered you in your quest for financial freedom?

Share with Panzer in the comments section.

Be well and prosper.

This post is more philosophical and takes a step back from the focus on financial freedom. It really aims to put into context why I want to achieve financial freedom rather than the financial freedom strategies and techniques.

Happiness is Fleeting but Achievable

Underlying my own search for financial freedom is this elusive thing called being happy. We all want to be happy but knowing what exactly we seek that makes us happy is a challenging thing.

I start to realise that happiness is not about a big bang hitting a target and whoosh that feeling of happiness kicks in. The whole concept of happinesses is transient and fleeting and consists of small little moments of happiness that enriches our lives and gives us the memories that will last a lifetime.

One of those little moments struck me when I started this practice of eating frozen yogurt with my daughter. I send her to an enrichment class every Saturday at a shopping mall and that class requires a parent to be with the child during the class. Since I fetch my daughter to the class, accompany her during it and the parking is a fixed sum for first 2 hours, I usually stay on for half-an-hour after the class bringing my daughter to taste the frozen yogurt together.

It is the experience of eating the yogurt together that gives me immense satisfaction. I order a regular serving and share it with her slowly, tasting and asking her if she enjoys it [she does ] To be able to do so, I need to have that level of financial independence to indulge in this weekly practice within my means. As I look back, I realise that being in a financial position to create these little moments of happiness when I’m with my daughter, after her class and just enjoying each other’s company and the frozen yogurt is the epitome of fatherhood.

One can be happy by spending quality time with family and friends. But with some degree of financial independence, we can enhance that experience with little luxuries like frozen yogurt which I hardly ate before my daughter came into the family. Happiness comes from spending money on family and friends as well, those whom we have connected relationships.

Even amidst the market upheaval, how do you find that happiness in your life through those little moments that mean so much?

Share with Panzer in the comments section.

Be well and prosper.

It’s sometimes scary to think that every dollar you save in your bank savings accounts gives you 0.10% to 0.30% or so per annum. Thus, our savings are technically losing their real value of 4%+ every year if we do nothing.

So what can you do against inflation?

Should you run out and buy any blue-chip index stock on SGX to hedge against inflation? Or should you go out and buy a property as a hedge against inflation?

Inflation is here to stay

The hard truth that we don’t like but face everyday is that the cost of living rises over time. We face it when the same $2.50 or $3.00 bowl of noodles comes with lesser or lesser ingredients even when the price does not increase. Or at times, the price increases in 10 to 20 cent does like the not too recent hike in prices of coffee/tea in foodcourts and coffeeshops and the anticipated increase in public transport fares put up by the transport operators to the Public Transport Council.

What can you do about inflation?

Perhaps the simplest thing one can learn to do with inflation is to learn to live within one’s means. The key to not being bothered too much about inflation is to accept that it exists and it applies to the cost of purchasing basket of goods and services that is being tracked.

If you live a simple life that meets most of your needs and just a few of your wants, you will find that inflation may not hit you with the full brunt of the 4.5% hike. Hedging against inflation is to avoid excessive consumerism. If you don’t buy stuff to meet your wants, it doesn’t affect you as much.

Investing your savings does help. In reality, it’s quite challenging to find safe investments that yield 4 to 5% per annum consistently. I have about 50% of my investible savings in equities because that is the level that I’m comfortable with given the amount of risk in the market. Hence, I am exposed to both the upsides and downsides of market moves. I also collect dividends on some of the counters and hold and some give a dividend yield that exceeds fixed deposits and for some REITS even inflation.

But the risk of holding equities is capital losses, hence my strategy of not having all of my investible savings in stocks and shares because I can hold out for long periods without selling since my cash buffer is rather high and I have virtually negligible debt in a small amount of housing loan more than matched by my cash and cash equivalents.

While buying property could help, investing in a second property for rental income or capital gain requires huge capital outlays and lots of investible cash. Also, it is a rather illiquid asset and is not in everyone’s capability to do so.

Ultimately, one needs to focus on the fundamental principles of financial freedom, i.e. to live within one’s means, to save and invest, to grow and protect one’s means.

Knowing how to save money and balancing needs and wants in life will help one hedge against inflation effectively through one’s own personal finance decisions.

What are you doing to hedge against inflation?

Share with Panzer in the comments section.

Be well and prosper.