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Learn to live within your means when you retire

Many people cannot imagine themselves to be retired. It may be so many years away that it does not resonate to the current ideology of working hard for success and financial freedom or to simply stop working.

There are two kinds of retirement: by choice or by circumstances.

If you choose to (or not to) retire, it means you have either achieve financial freedom or you have relieved yourself from most financial obligations such as paying off your mortgage and raising your child to legal age. You may also choose not to retire as you gain satisfaction from working incessantly till the day your body can no longer take it physically. Alas, you throw in the white towel.

Like it or not, the truth is you may also fall in the latter category. With bills to pay and mouths to feed, you try to impress your superior so that you can keep the job as long as you could. Unfortunately, besides culminated years of experience, you are also the few who has inflated the labour cost of a company. In contrast, a fresh graduate costs much less and has more drive and in a company’s perspective, it makes complete economic sense to choose the latter. Fortunately, in Singapore you are protected by the Retirement and Re-employment Act. Under section 7a, your employer should offer re-employment when you attained the specified retirement age of 62, until age 65 or up to 67 as may be prescribed by the Minister. Of course, your work must be satisfactory and you must be healthy in order to be re-employed. What if you are completely debilitate by common illness such as diabetes? Stroke?

Whichever the case, learning to live within your means when you retire is important. You need to ensure your money is sufficient to cover you until the day you call it quits. You don’t want to blow the last candle on your 80th birthday cake knowing that you have spent the last dollar on it,

Here are 8 tips to make sure you live within your means.

Create a retirement budget plan

Look you may have done this when you first started working but circumstances has changed, your income and expenses are no longer the same. Without a budget plan, you simply cannot predict (or to be as accurate as possible) when you will finish exhausting your retirement reserves. And that is dangerous or just plain irresponsible on your part. Start off by aggregating your sources of recurring income such as CPF, stocks dividends, rental income, proceeds from your business and interests from you cash reserves.

Track your expenses

To complement your budget plan, you need to be able to track your expenses to make sure you are in line. There are free money management apps available on your phone which you can use. So you can do away with the traditional way of budgeting with pen and paper and not worry that Alzheimer or Dementia may take them away.

Spend less than you earn

With the two tips above in place, spending less than you earn should be easily achievable. But don’t count on it should you decide to travel often and hit the greens every weekend. It is paramount to make sure that money that goes out is less than the money that comes in so that you will not deplete your retirement savings faster than you are even aware of it.

Don’t keep up with the Joneses

When you retired, you will have an army of retirement kakis (buddies) that are in the same boat as you. You will go golfing, play chess, go fishing and even travel together so no one will blame you when you want to get that Rolex that your buddy has or if you want to buy the most expensive golf equipment to unleash your Tiger-Wood-Skills in Sentosa Golf Club or in your state-of-the-art home theater with your virtual golf simulator. I won’t be surprised when you also pick up expensive hobby such as a punt in the casino when you see your ‘Chow Yun-Fat’-inspired buddy visit the casino daily. These activities are extravagant and while it is acceptable to occasionally indulge yourself, overdoing it will be detrimental to your retirement goals.

Form a saving group

Rather than a group of kakis trying to keep up with one another, why not do it the beneficial way? Form a saving group that reward the one that save the most for the week. A beer or even a treat to an afternoon high tea after living frugally for a week? I will take it.

Look out for free stuffs

Who say you can only keep yourself entertained by spending money? There are many community and social centres that regularly organise activities for the elderlies. Activities such as karaoke, mahjong session, excursions and road trips are easily available so make full use of them. If not there are also many attractions such as the National Orchid Garden, Malay Heritage Centre, or the S.E.A aquarium that offer senior citizens a discounted entry. You can also organise a fishing trip, a chess session or simply parading the birds in birds-singing corners.

Make use of senior citizen benefits

Besides having a concession travel pass, make sure you are savvy enough to know what are the privileges and benefits that are available to senior citizens. Some examples are the 2% discount for your shopping at NTUC Fairprice on Tuesday when you are aged 60 and above, 10% discounts at Watsons and 5% at Unity or Guardians, CHAS programme for the pioneer generation or even catching a movie at discounted senior citizen price.

Monetising your homes

Often viewed as a last resort, your home is an asset which you can monetize when you are asset rich cash poor. There are various options available for right-sizing. You may consider selling your HDB flats and move in with your family members to get the Silver Housing Bonus (SHB) of up to $20,000 to top up CPF Retirement Account. You can also join the Lease Buyback Scheme (LSB) where you sell part of the lease back to HDB and retains a 30 years lease. More info here: http://www.hdb.gov.sg/fi10/fi10325p.nsf/w/MaxFinancesOverviewLeaseBuyback?OpenDocument

There are also alternatives such as renting out your spare rooms and reverse mortgage that is currently in reviewed.

As you reflect on your retirement options, make sure you work towards creating a strong pot of retirement funds. While money is not everything, you would not want to rely on others if given the option to. Start saving for your retirement now and of course, don’t be penny wise and pound foolish.

A Simple Guide to Analyse Companies

“How to analyse a company?” – This is a question that almost every new investor will ask. Especially for first-time investors, this can be a very daunting task, where does one begin? Without proper financial education and experience, it is definitely hard to know what are the signs of a good or bad company.

There are 2 ways to analyse a company.
1) Fundamental Analysis
2) Technical Analysis

Fundamental Analysis

What are the differences you may ask. Fundamental analysis looks at both the macro and micro economics. We look at the prospects of the industry and the way the business positions itself to grow. Fundamental analysis looks into the financial statements (Income statement & Balance sheet) and dives into all the nitty gritty details of the company such as management, business model, etc. This the type of analysis that Warren Buffet and many other value investors subscribe to. A company with good fundamentals will stand strong through the test of time and be able to ride through the market cycles. Couple a company with good fundamentals and at the right valuation, you’ll be paid off handsomely for your labour. When you do your research, you are taking calculated risk and you avoid exposing yourself to taking on unnecessary risks that may not want to take on. Investing is not simply buying or selling, it requires making sense of the ocean of numbers you see. When first starting out, I can assure you that it’s information overload and all you see are numbers that do not make sense. Give yourself time, start with one set of numbers at a time and with practice, you will eventually be able to make sense of everything!

Technical Analysis

Technical analysis on the other hand, is more focused on the entry and exit timing when trading. Pure technical analysis will ignore the fundamentals of a company. These are the people who looks at charts, chart patterns, price-volume action and technical indicators. They also tend to enter and exit a trade very quickly because they are riding on the hype of the market. A company without solid fundamentals may rise due to speculators buying up the share prices hoping the next fool buys it higher. But these stellar movements will not sustain without fundamentals just like how a skyscraper needs a solid foundation. They will not stand the test of time and will come crashing down as shown by the not-so-recent crash of the trio (Asiasons, Blumont, LionGold). However, let’s not discredit technical analysis just yet. Technical analysis has a lot of advantages and can give you hints of when the stock will move in a certain direction. Every single bit of information in investing is important and the one who has the most accurate information is the one who profits. I urge you to keep an open-mind about technical analysis because although it starts off confusing, just like with every other thing, it will reward you just as well.

Combining the best of both worlds

Allow me to introduce you the third style. This combines both technical analysis and fundamental analysis. This is perhaps a more mixed up approach, which attempts to take the best of both worlds of investing and trading. Personally, I subscribe to this style of investing because I believe that a company with good fundamentals can get cheaper for external reasons such as poor market sentiments, short-term fluctuations, etc. This is when good fundamental analysis meets good technical analysis; to be able to buy fundamentally good companies at the cheapest price with the given opportunity. This style of investing is especially useful when investing in companies for their dividend yield. Dividend yield can be affected by two factors, the dividend payment and the share price. Take for example a company like SingPost, it gives out the same dividend year after year since 2006, 6.25c. The only way to get a better dividend yield out of it is to purchase it at a lower share price. This is where I feel having good technical analysis skills come into play. To be able to spot the bottom of price movements allows you to get better yield. I believe that even good companies can get even cheaper due to external reasons which are short-term in nature. You would effectively be able to apply the “Buy low, sell high” concept as well as value investing. Take time to learn and understand both ways of analysis and you will come out a better investor at the end of the day!

Original investments for the next 10 years

Wouldn’t you want to know where to put your hard-earned money, so it can work by itself? Don’t you want a secure and profitable investment that will bring money in the long run? Well, who doesn’t? But if it was so easy, why isn’t everybody doing it. Because it isn’t that easy and the markets become increasingly unsteady. However, there are certain areas that come close to what you would want to call a safe investment.

Those are areas that are less dependent on the fluctuations of the market. For example – as the world tries to stir towards renewable energy resources, an increasing number of governments are subsidising this particular industry. Hence, the industry grows and becomes more profitable – no matter whether another financial crisis will hit or not. Although nothing is even 100% secure, certain areas of investment are very likely to create profit. Not all are in Europe and North America though.

Investing in Asian markets is nothing new. However, some markets are booming and won’t stop for another decade at least. Singapore is one these markets. This sovereign city-state has the highest concentration of millionaires in the world and therefore plenty of investment power within the country. The construction industry is already booming for over a decade and there isn’t a sign for a halt. Property agents have turned wealthy, as land is being reclaimed and developed with the speed of light.

But there isn’t only property. The government and the Singapore Economic Development Board have opened up the country for foreign investors. The economy is not limited to construction and property, but excels in trade and shipping as Singapore has the busiest port in Asia. Also other sectors, such as technology, tourism and financial services, are welcoming and prosperous. As Singapore’s government stirs the economy towards further development and growth, there isn’t any end in sight for long-term investments.

Another interesting location for investments is Qatar. With the FIFA World Cup 2022 coming up, the investments from within the country are enormous. Qatar is not only investing stadiums and infrastructure, but aims to create a wonderland for tourists, just like Dubai has done. Stocks are being predicted to rise, if not triple within a decade. Different sources recommend the Qatar investment fund. However, there is a bitter taste to the bite. The Arab country has recently been criticised for the unfavourable treatment of their foreign workers. Furthermore, the FIFA is under pressure, due to accusations of bribery during the bidding process and allegations of slave labour. Although the FIFA says a reallocation of the World Cup 2022 will not happen, one should keep it in mind when investing in the Gulf country.

Properties can be in another sense an interesting investment. As certain cities loose their population, others are becoming increasingly popular. Detroit for example has lost half of its inhabitants in forty years. However, there are other urban centres that are already experiencing a scarcity of housing. Berlin for example has a rising demand for housing for ten years straight. The German capital has once been cheap with plenty of living space. Investors have renovated entire neighbourhoods and created upscale living. As the popularity of Berlin isn’t declining, the rents have not only increased, but property has become the hottest commodity in the city. Those who have invested in property early enough have made significant financial benefits.

Similar developments can be seen in various cities around the world. Brooklyn, London, Paris and Amsterdam are only a few examples. Furthermore, due to the housing crisis and the collapse of the international market in 2008 and 2009, the prices for houses and properties broke down. Five years later the prices are slowing picking up speed with the tendency to rise rather than to fall again. An investment in inner city housing and urban property will in many cases be a profitable one.

Barcelona, Madrid, Austin and other cities are becoming increasingly attractive. As the rents there are down at the moment, these cities provide investors with interesting prospects. The prices on the international housing market were terribly bad for a couple of years. As the crisis is passing and most countries are recovering, the prices will go nowhere but up. While the market in some cities might take some time, other city markets are already starting to boom. Furthermore, the trend of urbanisation is speeding up the process. London, however, is no longer interesting, as the rents have become too expensive which minimises the profit margin dramatically.

Up and rising are also leisure and entertainment. Never before have we consumed such a quantity of entertainment. Hence, the technology sector will not just be interesting, but also offer itself as a profitable investment opportunity. Social Media brands and small start-ups, such as Facebook and Whatsapp have in an extremely short period of time generated a large amount of value and money. Many others are following the example. The technology market has grown tight links to the entertainment and leisure industry. Therefore, it will be interesting to watch what is coming.

Surely there are people that keep reminding us constantly of the bursting dotcom bubble. However, investments in technology are profitable now and in the future. The dotcom bubble was an entity in itself – complex and difficult to understand for investors at the time. Through smart phones, iPads and HD gadgets the world has become more receptive towards this kind of technology. All these devices seem to be irreplaceable already – just imagine where the industry will be in only five years.

Furthermore, it is not only leisure and entertainment, but the finance and business world that aim to catch up with the speed of the technology. Entire industries are upgrading – no matter whether medicine, manufacturing or construction. The technology industry offers a wide range of investing possibilities. Brands like Facebook, Google and Apple are one option. However, there are also special technology funds that offer themselves ideally to long-term investors. These are a perfect alternative for those who don’t want to bother with daily fluctuations.

4 Great Things You Learn Indirectly When Investing

Like you, I was young and fresh to the world of investing. I was 18 and finally eligible to invest! I remember thinking to myself; I can finally put everything that I have learnt into practice! Along the way, I have learnt so much more, directly and indirectly, about investing.

1) Saving

The first obvious thing about investing is that you can’t even start it when you have nothing to start with. My growing interest in investment was a very strong motivation for me to save. I knew I had to have enough to get into the playground of the rich. Diligently, I put aside half my allowance every week and continued that way for months. Eventually, I had enough to make my first investment. From there on, I never stopped the habit of saving at least half my allowance to put into investments. You’ll be surprised how little you actually need once you begin on this journey of budgeting your week. Also, I advocate cash payments instead of credit cards because it is easier to track how much you have left and be less likely to overspend or spend unnecessarily.

2) No more reckless purchases

Having begun investing and seeing the kind of return it can give, I learnt to forsake a lot of luxury purchases just because my friends around me have it. A $1000 investment can make me $100 or it could buy me some stuff that I don’t really need and impede on my investing journey of creating a sizable portfolio. I chose to focus on growing my investment portfolio instead of indulging in luxury purchases. Of course, that’s not to say that it’s wrong to indulge. Indulge when necessary, not all the time!

Eg. If I wanted to buy something $100, I would want to make that $100 off the market before buying it instead of using my capital of $1000, depleting it to just $900. If you choose not to spend, you’ll still be rewarded with the compounded growth! This method of spending teaches you to delay gratification and to give you time to think twice before making a purchase. Also, you will cherish and enjoy your purchase even more, knowing that it comes from the fruit of your investment. You not only get what you want, you learn valuable lessons about investing as well!

3) Investing shows your true self

Investing will show you your true self and what kind of a person you truly are when money is involved. Are you the same person when you make a lot of money or lose a lot of money? When I first started investing, I definitely did not expect that I would be in for an emotional roller coaster ride. One moment I was feeling good about myself for making the right decision to buy a particular stock. The next moment I was feeling angry at myself for being greedy to want more instead of taking my profits. From profits, they turned into losses. Over the years, I have grown to stabilise my emotions and accept that market swings are normal. I was then able to embrace them and learn to see the bigger picture instead of allowing my emotions to get in the way over short-term market noises.

4) How well can you tolerate risk?

When it comes to risk tolerance, it is all about discipline. When the share price hits your target, are you willing to stick to your target and take your profits? Or, will you continue to let it run hoping that it continues to go further up and disregard your primary research on the existing resistance level? Too often, traders in the market lose money due to the lack of discipline to take profit or to cut their losses. We all know that it is best to ‘Buy low and Sell high’. However, when real money is involved, greed and fear often overcome logic. Discipline is what will keep your rationality and nurture emotional stability. This would eventually translate into profits that you put into your pocket!

Singapore: What does deflation means to us?

Singapore experiences its first deflation in 5 years when consumer prices fell 0.3% in November on a year-to-year basis. Deflation, in economics is defined the decrease in average price level of good and services.

While it may be good news to the consumers as their purchasing power increases with more money in their pocket for other things, investors and the government get cautious over a sustained decrease in the price level.

‘Decrease? I am still paying the same for my food, public transport and medical bills.’

Prices of food, healthcare and education amongst other items has in fact, avoided the drop and in fact rise by 2.9%, 1.8% and 2.7% respectively. For the average consumers, there is nothing to cheer about besides a drop of 2.1% in clothing and footwear.

What led to the overall fell in prices is mainly due to the fall in the price of private road transport – a decline of 7% as compared to last year. This is attributed to the decrease in the price of COE premiums from almost $100,000 in January 2013 to around $76,094 for Cat E in the first round of bidding in December 2014. With over 100,000 cars hitting 10 years old next year, these decade old cars is due for de-registration and thus expect an influx of COE supply and prices to fall further.

The fall in Brent crude oil from US$115 a barrel in June to the current price of US$61 a barrel has caused downward pressure to the average price level of good and services. With the advent of better technology such as hydraulic drilling in the US and the use of alternative fuel, coupled with a slow growth in China and OPEC’s price war, it is unlikely that prices will hit the US$100 mark in the near future.

The housing sector is also affected as the property and rental market start to slow down.

What does it means to the consumers?

If there is sustained deflation, there will be a downward deflationary spiral where aggregate demands will fall and companies to cut down on production. Consumers will put off spending knowing that future prices will be cheaper and this hurts the economy and increases unemployment. With lower wage, the problem exacerbates and price declines further – something you witness in Japan over two decades.

Fortunately, Singapore seems poised to be able to resist the deflationary pressure due to a tight labour market and increasing population. The fall in the general price level is unlikely to be passed on to the consumers as companies face high rental cost and sticky wages. So don’t expect the price of your groceries, MRT and Bus fares and other necessities to fall.

What about investors?

Investors should remain cautious if the prices of Brent continues to decline to inflection point. The slide will cause concerns for companies in the offshore and marine industry such as Sembcorp, Keppel and COSCO as profits dwindled with declining global demands.

The roubles crisis may further inject uncertainties to the market and may often lead to spillover effects on countries that are exposed to Russia such as the US, Germany and eastern Europe that relied heavily on Russian economy. For example, Germany’s company Siemens lost 14% of the revenue, Volkswagen has lost 20% in the same period and Adidas has shut down stores in Russia. American companies like McDonalds, FordMotors and ExxonMobil were also hurt by the fallout due to sanctions and decline in sales.

While there are mixed results from the falling prices, there is no cause of concern for Singapore, for now. Core inflation is expected to average between 2 to 3 per cent in 2015.

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