All posts by Mickey J

What is the Wuhan Coronavirus and will it change your investment strategy?

The biggest topic trending on the streets for the past few days has been the Wuhan Coronavirus that has infected thousands and spread to multiple countries so far. I'm not going to post any statistics here because those numbers are meaningless and you should check official sources for real-time statistics.

One of the major challenges today is the fact that China isn't the most transparent country so you can't really be sure if the information shared on the Internet is true or not.

In fact, there was a false rumour going around Facebook claiming that Woodlands MRT was closed for disinfection due to a suspected case of the Wuhan Coronavirus infection, urging the public to avoid that train station. Ministry of Health has come out to clarify that this was false.

Instead of watching the latest video shared by your friends on Facebook or listening to the latest pantry chatter, I highly recommend everyone to visit the Ministry of Health website to get the latest update on the virus and what we can do to try and reduce the chances of getting infected.

Here are some resources from credible sources

Here are a few resources released by the Singapore government and the Ministry of Health.

Wuhan Virus - Situation in China: Taking Precautions

Infographic on what is Wuhan Coronavirus and what precautions you can take today

Prof Leo Yee Sin of National Centre for Infectious Diseases (NCID) answers a few key questions about the Wuhan Coronavirus

Will the Wuhan Coronavirus change how you invest?

For some people, they have the know-how and the capital to make bets on specific sectors and stocks to capitalise on trending news like the Wuhan Coronavirus.

Brian Halim from A Path to Forever Financial Freedom took a bet on Top Glove Corporation Bhd, a rubber glove manufacturer that owns and operates 43 manufacturing facilities in Malaysia, Thailand, and China. He purchase their shares at $1.72 per share using CFD leverage at 2.8%.

Top Glove Corporation Bhd closed at $2.35 today and I'm happy for Brian.

Are you making bets on companies based on the Wuhan Coronavirus?

Personally, I've not done anything remotely similar because I don't have the know-how and capital to make similar bets. I also know that I've never been good with luck-based games like blackjack, toto, 4D so it's unlikely that I'll get luck with short term stock picks. I also know that I lack the mental strength in making such bets. The last time I shorted a stock many years ago, I wasn't able to concentrate 100% at work and was consistently checking the stock price.

I'm much better at skill-based games like mahjong where I have some level of control over winning and losing, and it's a longer game where the winners and losers are determined after multiple rounds.

I'm better off not making any stock bets for short term gains to take advantage of the current situation.

Keep some dry powder on hand in case the market goes down the toilet

We know that on a macro level, some of the industries are going to be affected if the Wuhan Coronavirus situation continues for a few more months (at least).

For example, we know that retail stores are going to be experiencing lesser footfall which translates to lower sales. If this continues for the long term impact, shopping malls may also be challenged with retaining their existing tenants.

Major businesses like Starbucks and Yum China (KFC and Pizza Hut) are starting to choose to suspend operations until further notice. The profitability of those businesses are clearly going to take a hit in the books.

We are also seeing stock prices of pharmaceutical companies going up but that's mostly investor sentiments since it will be months before any company comes up with a vaccine for the Wuhan Coronavirus.

I'm going to stay invested with the bulk of my cash in my portfolio, my dry powder will mostly consist of my CPF Ordinary Account which will be progressively deployed if the market tanks by say, 20%?

Choosing to stay invested and not lose sight of the long game

As a lazy investor, it's times like these when I have to keep reminding myself that my investment portfolio is for the long game (at least 10 years). I don't intend to make any big changes to my investment portfolio and continue to make incremental investments every month.

Remembering that I'm going to stay invested for the next 10-20 years, the Wuhan Coronavirus is going to look like a small situation when I look back at this when I retire at 50.

If the prices of those ETFs that I'm investing in are heading on a downward trend, I'm happy to be getting them at a cheaper price. I know that this month's incremental investment is going to average down the equities in my investment portfolio.

Staying healthy is also an investment

Don't be overly-fixated in making investment decisions. Remember that your health matters as well!

Take the necessary precautions to reduce the risks of getting affected by the Wuhan Coronavirus, or any other illnesses.

Eat more healthy food, exercise regularly, and practice good personal hygiene.

Are you changing your investment strategies because of the Wuhan Coronavirus? I'd love to hear your thoughts in the comments below.

Photo by Piron Guillaume on Unsplash

The most important lesson from Mr CPF, Loo Cheng Chuan (that nobody talked about)

I've heard Mr CPF, Loo Cheng Chuan speak on multiple occasions so far. In his recent talk at an event organised by Endowus, he mentioned a very important lesson about financial independence that was rarely highlighted in articles about him.

Who is Loo Cheng Chuan?

In case you have not heard of Loo Cheng Chuan, here's a quick recap.

Loo Cheng Chuan is your typical Singaporean. Married with 3 children, he created a financial safety net for himself by topping up his CPF Special and Medisave Accounts at an early age, and just let it compound over a long period of time to over half a million dollars. Combined with his wife, they have over 1 million dollars in their CPF accounts since reaching 45 years old, and on the way to a multi-million CPF accounts when they retire at 65 years old. He founded a movement called, 1M65 to encourage Singaporeans to inspire Singaporeans that they can get very rich with CPF.

To date, Loo has shared his story at 71 speaking engagements and he has not received a single cent in payment for his talks. He has also been interviewed by several media and blogs about his feat.

What was your dream job as a child?

Don't we all have dreams and ambitions when we were young?

Maybe you wanted to be a professional soccer player, a crime-solving police officer, or even a world famous musician.

But for most of us, we did not chase after our dreams because they get chiseled away, a little at a time as we grow up, by reality.

Many of us ended up in jobs we may not be passionate about, but they pay the bills. 

Having a strong financial safety net allows you to chase your dreams

Here's something I felt that wasn't given enough emphasis in articles about Loo.

The fact that having a strong financial safety net, knowing that you have a million dollars waiting for you at the age of 65 without the need to do anything more, means you are now free to chase your dreams.

Having read through tons of articles and books about retirement planning, I felt this was an important point that deserved more focus.

Loo chased after his business passions

With a strong financial safety net in place, Loo pursued his business passions.

When I heard Loo speak at the Seedly Personal Finance Festival 2019, he talked about founding the 1M65 movement and starting an online business with his wife to sell leather bags.

Fast forward to almost a year later, he and his wife passionately founded a Luxury Fashion Business. Furthermore, he has invested in several startups and holds director or management-advisory positions in several companies.

According to him, his strong CPF safety net has made his multi-business endeavours much easier. If he did not have this financial safety net in place, I imagine he would still be working in a 9 to 5 job, like most of us.

What are you doing to build your financial safety net?

While I like my CPF Special Account for its stability and guaranteed 4% interest rate (until the government announces any policy changes), it's not my only retirement planning tool.

My financial safety net consists of my CPF accounts, investments made through my Supplementary Retirement Scheme account, cash investment portfolio in AutoWealth and my rental property in Cambodia.

What's your financial safety net like? Please share them in the comments below.

How a Singaporean accumulated CPF Full Retirement Sum in his Special Account by the age of 34

Last Wednesday, Daniel, a 34-year-old Singaporean wrote a post in Seedly's Facebook group to share how he managed to achieve the current CPF Full Retirement Sum of $181,000 this year with screenshots of his CPF account balances as proof.

Screenshot of Daniel's CPF Statement

Shocking? Let's break down the details to understand how Daniel did it.

How it all started

When Daniel was 29, he read the Secrets of the Millionaire Mind by T. Harv Eker and a series of blog posts on A Singaporean Stocks Investor (ASSI) about CPF.

He was motivated to set a series of financial goals for himself to improve his financial situation. One of his mid term goals was to achieve the CPF Full Retirement Sum with his CPF Special Account by the age of 40. He has only one job and doesn't have any side hustles.

Here's how Daniel did it

Like all Singaporeans, regardless of our financial status, we have 3 methods to increase the balance of our CPF Special Accounts.

  1. By working to get 6% (age 35 and below) of our total monthly wages into Special Account.
  2. By transferring money from Ordinary Account to Special Account (before age 55) to tap on the 4% interest rate that Special Accounts earn.
  3. By making cash top-ups to Special Account (before age 55) through the Retirement Sum Topping-Up Scheme (RSTU) to make a direct impact to the account balance.

In Daniel's case, he made use of all 3 methods to grow his CPF Special Account and that required 6 years of disciplined saving and meticulous planning, laser-focused on the single goal of achieving Full Retirement Sum.

On top of full-time employment, Daniel did a combination of cash top up and OA transfer to achieve Full Retirement Sum in his CPF Special Account

Referring to the table above, Daniel started with a $3,000 cash top-up through RSTU and $10,000 transfer from his Ordinary Account to his Special Account in 2015. I imagine the $3,000 was spare cash that he had at that time.

We should also note that Daniel owns a HDB property with his wife and they use the money in their Ordinary Account to pay for the monthly mortgage. The $10,000 that Daniel transferred from his Ordinary Account to Special Account must have been carefully calculated to ensure he has enough cash buffer in his Ordinary Account to service his mortgage loan after the transfer.

From 2016 and 2017, Daniel became more intentional in growing his Special Account as he set aside cash specifically for cash top-ups through RSTU and transferred more money from his Ordinary Account to his Special Account.

In 2018, he pivoted in his plans to not make any transfer from his Ordinary Account to his Special Account in order to be able to make a few more years of cash top-ups through RSTU (both 2018 and 2019) and be entitled to the $7,000 tax relief. This makes a lot of sense, especially when you intend to work for at least a few more years.

By 2020, Daniel was done. He did a cash top-up of $7,000 and transferred $12,266.87 from his Ordinary Account to his Special Account. This was because he calculated that he would have achieved Full Retirement Sum without doing the transfer. But by doing so, he would be able to have more money in his Special Account and accumulate more interest next 20 years before he reaches the age of 55.

That's a smart and intentional planning in getting as much Full Retirement Sum money in Special Account as possible.

Here's what we don't know about Daniel

What I've written above is based on what we know from Daniel's post. It may not be the entire story that allowed Daniel reach Full Retirement Sum by 34.

What if Daniel is CEO of a multi-national company, earning loads of money above the average Singaporean? PS: By the way, I know for a fact that Daniel isn't.

The Ordinary Wage Ceiling for CPF contribution is currently capped at $6,000. No matter how much total monthly wages you earn, only 37% of $6,000 gets into your CPF accounts if your age is 55 and below.

The Additional Wage Ceiling is a CPF contribution cap on your additional wages, such as your bonuses. The formula for calculating the Additional Wage Ceiling is $102,000 – Ordinary Wages subject to CPF for the year.

$102,000 – ($6,000 x 12) = $30,000

As of now, when your monthly salary is $6,000 or more, up to $30,000 of your additional wages will have mandatory CPF contributions.

Personally, I don't believe being a super high earner would have made a drastic difference that the average Singaporean can't achieve with a few more years.

What we can learn from this?

I believe that CPF LIFE will be one of my core retirement income stream when I retire. If you have the same mindset as me, it definitely makes sense to start accumulating more money in your CPF Special Account beyond the usual salary contribution.

By doing so, you can achieve the Full Retirement Sum earlier when the figures are much smaller, and let the 4% interest pay for future incremental Full Retirement Sum adjustments.

Strive to rise up the corporate ladder as early as possible to earn a $6,000 monthly salary as early as possible to maximise your CPF contribution.

Make voluntary contribution* to your MediSave Account to hit the Basic Healthcare Sum so that work contributions to your CPF MediSave Account along with end of the year interest will overflow into your CPF Special Account for those below 55 or to your Retirement Account if you are 55 and above.

* VC to MA for a calendar year is subject to CPF Annual Limit of $37,740 or member’s cohort BHS, whichever is lower. Any excess VC would be refunded without interest.

Create good saving habits so that you have surplus money to be able to make the decision to top up your CPF Special Account through RSTU when it becomes beneficial for you to do so.

What changes are you making to get to Full Retirement Sum earlier? I'd love to hear your thoughts in the comments section below.

Photo by Clark Tibbs on Unsplash