If you're not motivated by status / power / glamour like myself, you'll soon come to realise that all jobs suck, with some jobs sucking more than others. So the best job to do is one that pays you the most money on an expended effort basis, in order for you to maximise your savings rate, invest your money wisely and get to living life asap.
The key to being able to get to a position where you can kiss your job goodbye is simply to, as trading parlance goes, "keep your seat". You want to be there to collect a monthly pay cheque, grab your yearly bonuses, and the other typical benefits that come along with that (overtime meal and taxi allowances, health insurance, etc.). Keeping your seat is a little similar to keeping a relationship going. There must be a desire on both ends of the relationship to keep the flame alive. Your employer must want to keep you, and you must want to keep your employer.
Let's talk about the former first. Simply put, you've got to be competent enough to execute your job well and be likeable (i.e. get along well with your team members, be a team player, that kinda stuff) to prevent your employer from terminating your contract. Sometimes even that isn't enough, the Volcker rule which was implemented post Lehman brothers saw many proprietary trading jobs being wiped out "overnight". More often than not, you'll need an element of luck on your end. That being said, internal locus of control ya.
Now to touch on the latter, which seems a little strange to discuss, given most people would only focus on the former. Well, an upfront thought is that this might not apply (I am leaning however, to the notion that it does apply) to situations where you are trying to jump to a better ship, to a higher paying gig, or if you think your team/employer are fucktards in general and you can't wait to get out of the house before it crashes and rains burning embers all over your already tired soul.
Essentially, what I'm driving at is that you've got to maintain an even emotional response to your job, and not burn out in the long run. Two schools of thought for maintaining equanimity in the workplace. The first school of thought is to not give too much of a fuck and just do the necessary in order to maintain your perceived competency. The second school of thought is to throw yourself into the role that your job requires and yet be able to maintaining a strong level of detachment from your job once you're done for the day. In other words, being able to manage yourself, your emotions and desires when you're working daily such that you become adept at compartmentalizing and develop grit through the process.
People do think that the first school of thought is an easier proposition. My own experiences have led me to come up with a differing opinion. If you hang around the fringes as opposed to being wholly immersed in the process, time passes a lot slower, your personal development (in terms of soft skills, general character attributes, hard knowledge (not generally enthused about hard knowledge given it's mostly non transferable)) gets stunted and you just end just treading water instead of slowly moving forward.
But when you go all in all the time, you tend to get burnt out after a while. The key really, is to manage yourself, to manage your responses to daily events and stimuli. That, I do feel, is really a never ending process of daily personal development and self improvement. How to do so? I'm still figuring things out, though I have benefited a lot from stoical perspectives and self meditation.
The more experienced and wiser personal financial bloggers might have better tricks up their sleeves. Care to share?
Sunday, 12 July 2015
Saturday, 13 June 2015
Joseph Schooling - His unquantifiable achievements
I believe in the use of role models in society. Having someone you're able to look up to, an inspiring individual who has paved the way and shown that what he has achieved, is a possibility.
Sports would be one facet of modern society that provides for the sustainable deployment of role models. Sporting achievements has always been a mainstay in society and typically transcends most geopolitical issues. So to have a 20 year old Joseph Schooling achieve what he did over the last week or so provides inspirational goodness on a platter not only for Singaporeans, but for citizens of ASEAN.
If you were living in a cave with no access to media, 20 year old Joseph Schooling blitzed a perfect score, with 9 gold medals and 9 Southeast Asian Games records in all of his nine events, setting a standard that few would be able to surpass. And the kicker is this is part of his training regime for the FINA world championships in August 2015. Meaning the boy wonder is not at his "peak" yet, which makes me shudder.
I do feel that the best thing about Joseph Schooling's achievements over the past week is not just limited to re-writing the sporting books, but also in serving as a role model, and beacon of inspiration to the young Singaporean swimmers coming through the ranks. His achievements clearly spell out that it too, is possible to arrive at his level. You may or may not have the innate talent that Joseph has, but if you work hard and smart, be consistent and put yourself through the grinder, you may stand a fair chance at grabbing some honors. And even if you reach for the stars and fall short, you won't end up with a pile of mud either.
The lives he would touch, sparks of inspiration that reinforce the platform for other swimmers to move forward. These are some of his unquantifiable achievements that in my humble opinion, would matter more than his tally of gold medals.
And strangely enough, each of us has that innate ability to provide inspiration for our loved ones, for our friends and immediate colleagues. Through the proliferation of the internet, this ability is immediately amplified. You can google for different "role models" through blogs, not just the old school way of learning through studying the classics. In fact, setting the standards and providing some much needed inspiration may just be the motivation to keep ourselves pushing forward.
Which is one of the main cornerstones for this, and I would say, probably many of the other personal finance blogs around. As long as I have affected one life for the better, my work would have been done. If future generations of junior investment bankers / professionals kick start their careers and are in need of some advice, I do hope this series of blog posts would help provide some guidance.
That would be my largest contribution to moulding the future of the Singaporean society. haha :)
Sports would be one facet of modern society that provides for the sustainable deployment of role models. Sporting achievements has always been a mainstay in society and typically transcends most geopolitical issues. So to have a 20 year old Joseph Schooling achieve what he did over the last week or so provides inspirational goodness on a platter not only for Singaporeans, but for citizens of ASEAN.
If you were living in a cave with no access to media, 20 year old Joseph Schooling blitzed a perfect score, with 9 gold medals and 9 Southeast Asian Games records in all of his nine events, setting a standard that few would be able to surpass. And the kicker is this is part of his training regime for the FINA world championships in August 2015. Meaning the boy wonder is not at his "peak" yet, which makes me shudder.
I do feel that the best thing about Joseph Schooling's achievements over the past week is not just limited to re-writing the sporting books, but also in serving as a role model, and beacon of inspiration to the young Singaporean swimmers coming through the ranks. His achievements clearly spell out that it too, is possible to arrive at his level. You may or may not have the innate talent that Joseph has, but if you work hard and smart, be consistent and put yourself through the grinder, you may stand a fair chance at grabbing some honors. And even if you reach for the stars and fall short, you won't end up with a pile of mud either.
The lives he would touch, sparks of inspiration that reinforce the platform for other swimmers to move forward. These are some of his unquantifiable achievements that in my humble opinion, would matter more than his tally of gold medals.
And strangely enough, each of us has that innate ability to provide inspiration for our loved ones, for our friends and immediate colleagues. Through the proliferation of the internet, this ability is immediately amplified. You can google for different "role models" through blogs, not just the old school way of learning through studying the classics. In fact, setting the standards and providing some much needed inspiration may just be the motivation to keep ourselves pushing forward.
Which is one of the main cornerstones for this, and I would say, probably many of the other personal finance blogs around. As long as I have affected one life for the better, my work would have been done. If future generations of junior investment bankers / professionals kick start their careers and are in need of some advice, I do hope this series of blog posts would help provide some guidance.
That would be my largest contribution to moulding the future of the Singaporean society. haha :)
Saturday, 6 June 2015
The Sanctity of Productivity
Productivity.
A buzzword that has been instilled in all Singaporeans since nursery. You probably see this word used more often than a public bicycle gets taken for a ride, and definitely more daily than a KTV hostess can play "butterfly" on a nightly basis. Through various outlets, we have been told to be more productive, to work harder, better, faster and stronger in all facets of life, be it at home, at work, on your relationships, on yourself, which might have provided the spark of inspiration for that awesome Kanye West and Daft Punk remix of "Stronger".
In all honesty, I don't think there's anything wrong with that ideology.
Given the only natural capital Singapore has is its people, I would think it's absolutely rational for the administration to want to beat the productivity drum 24/7. And for the citizens to continue dancing to that same beat (only faster post each round of music :p). After all, if your only asset is a milk bearing cow and you're trading milk for other goods, you would want to squeeze the cow to its maximum, to the thin red line that separates it from death, in order to generate maximum milk production, and yet keep the cow alive in "good enough" condition so it wouldn't "burn out".
I do identify with this as an investor, where I want my dollars to be working 24/7, with employees of companies I have partial ownership to be working like dogs to generate higher profitability and better returns on my capital. "Do more with less" seems to be making a come back these days, especially with banks cutting ranks of front-line grunts. Oh wait, that has been in vogue since 2008. My bad.
You've got to be learning 24/7 to be ahead of competition. Take as many "co-curricular" activities as you can to boost your resume. You don't have to be interested, just get it done (thank god I had natural inclinations towards finance since I turned 17 or so. I shudder at the thought of what I would have been doing now if I was not). Push on, or someone else will have your lunch. Do all these gibberish sound familiar?
As an adult who has been through the Singapore education system for more than 12 years, the "productive" word has been drummed into my thick skull, so much so that I've had to fight off the hordes of self-conjured monsters hell bent on inducing guilt in myself if I'm not doing something "useful" with whatever free time I have, say during commuting, on "holidays" and on seemingly down time, such as the "weekends".
I admit, a major part of it is personality driven. Which has been made functioning along the lines of maximum productivity something that I do find somewhat enjoyable as I've always viewed that as a personal challenge. However, for some unknown reason, in recent times, I've been questioning the means which has got me to my current state of play. Questioning the sanctity of productivity, of whether it really makes sense from an individual perspective.
And the conclusion I have come to is a resounding fuck no. My theory is that humans are essentially animals. Do you see a cat working 9 to 6 daily in the office, trying to attend countless meetings which are seemingly productive but leaves much to be desired? Do you see a dog thinking it has to do a daily 5 km run for exercise? A cat does what it pleases. If it feels like sleeping, it sleeps. If it feels like hunting for rats, it hunts. If it feels like mating, it just goes ahead and does it. In essence, it does what it is interested in doing.
Granted, humans are "somewhat" different from other animals, among other differences, a more scientifically attuned one would be that humans are blessed with the ability to control their primal needs (err most of us do I think). But don't you think this productivity concept is somewhat flawed (at least at the individual level)? I would like to think that a human being has the right to pursue his/her own interests.
He should be able to pass an entire week watching reruns of Breaking Bad Season 1 to 5 if he so desires. He should be able to plan and execute a trans-national motor bike riding adventure if he would like to. He should be able to learn Spanish or French if he so desires. In essence, he should be able to call the shots in his life, to direct his precious life essence towards things that matter to him. Not meddle about and marching to the "productivity" beat being drummed out by someone else, regardless of whether he is conscious of it or not.
But he can only do so if he is free of the shackles of society. The very shackles that he has unwittingly tied himself with, through a culmination of past decisions. The very shackles that he can rid himself of. All he has to do is to make the right choices and stick with them till those shackles disappear. Only then, can he ignore the concept of "productivity" and partake in activities of his sole interest. Such as spending an entire week slaying monsters in Dragon Age: Awakening.
Boy I certainly feel the time used to pen this post was productively spent. Did you feel that you had a productive use of your time reading this? :)
A buzzword that has been instilled in all Singaporeans since nursery. You probably see this word used more often than a public bicycle gets taken for a ride, and definitely more daily than a KTV hostess can play "butterfly" on a nightly basis. Through various outlets, we have been told to be more productive, to work harder, better, faster and stronger in all facets of life, be it at home, at work, on your relationships, on yourself, which might have provided the spark of inspiration for that awesome Kanye West and Daft Punk remix of "Stronger".
In all honesty, I don't think there's anything wrong with that ideology.
Given the only natural capital Singapore has is its people, I would think it's absolutely rational for the administration to want to beat the productivity drum 24/7. And for the citizens to continue dancing to that same beat (only faster post each round of music :p). After all, if your only asset is a milk bearing cow and you're trading milk for other goods, you would want to squeeze the cow to its maximum, to the thin red line that separates it from death, in order to generate maximum milk production, and yet keep the cow alive in "good enough" condition so it wouldn't "burn out".
I do identify with this as an investor, where I want my dollars to be working 24/7, with employees of companies I have partial ownership to be working like dogs to generate higher profitability and better returns on my capital. "Do more with less" seems to be making a come back these days, especially with banks cutting ranks of front-line grunts. Oh wait, that has been in vogue since 2008. My bad.
You've got to be learning 24/7 to be ahead of competition. Take as many "co-curricular" activities as you can to boost your resume. You don't have to be interested, just get it done (thank god I had natural inclinations towards finance since I turned 17 or so. I shudder at the thought of what I would have been doing now if I was not). Push on, or someone else will have your lunch. Do all these gibberish sound familiar?
I admit, a major part of it is personality driven. Which has been made functioning along the lines of maximum productivity something that I do find somewhat enjoyable as I've always viewed that as a personal challenge. However, for some unknown reason, in recent times, I've been questioning the means which has got me to my current state of play. Questioning the sanctity of productivity, of whether it really makes sense from an individual perspective.
And the conclusion I have come to is a resounding fuck no. My theory is that humans are essentially animals. Do you see a cat working 9 to 6 daily in the office, trying to attend countless meetings which are seemingly productive but leaves much to be desired? Do you see a dog thinking it has to do a daily 5 km run for exercise? A cat does what it pleases. If it feels like sleeping, it sleeps. If it feels like hunting for rats, it hunts. If it feels like mating, it just goes ahead and does it. In essence, it does what it is interested in doing.
Granted, humans are "somewhat" different from other animals, among other differences, a more scientifically attuned one would be that humans are blessed with the ability to control their primal needs (err most of us do I think). But don't you think this productivity concept is somewhat flawed (at least at the individual level)? I would like to think that a human being has the right to pursue his/her own interests.
He should be able to pass an entire week watching reruns of Breaking Bad Season 1 to 5 if he so desires. He should be able to plan and execute a trans-national motor bike riding adventure if he would like to. He should be able to learn Spanish or French if he so desires. In essence, he should be able to call the shots in his life, to direct his precious life essence towards things that matter to him. Not meddle about and marching to the "productivity" beat being drummed out by someone else, regardless of whether he is conscious of it or not.
But he can only do so if he is free of the shackles of society. The very shackles that he has unwittingly tied himself with, through a culmination of past decisions. The very shackles that he can rid himself of. All he has to do is to make the right choices and stick with them till those shackles disappear. Only then, can he ignore the concept of "productivity" and partake in activities of his sole interest. Such as spending an entire week slaying monsters in Dragon Age: Awakening.
Boy I certainly feel the time used to pen this post was productively spent. Did you feel that you had a productive use of your time reading this? :)
Sunday, 24 May 2015
I could flip the bird and "retire" now, but...
(This is going to be a long post. I did think quite a bit over whether I should actually do a post on this, given this essentially is a first world problem, but I figured articulation of my thoughts might prove helpful to myself and it might be useful to folks who are embarking on the FIRE path in realising some of the challenges and downsides FIRE might yield.
Oh yes by the way it's my blog (like it's my life). So please hit "back" if a whimper of disgust has arisen in your soul. I don't really care. Or do I care by writing this disclaimer up top? Hmm... nah...)
Before I got educated on the nuances and strategies required to sustain an FIRE path, my initial target for my FU stash was set at S$500k. Somehow that became S$1.0m along the way, then S$1.5m, and at this current point in my life, it's contemplated to be S$2.5 - 3.0m. Large does of pure dumb luck, coupled with some discipline, loads of hard work, sleepless nights, and a persistence to drudge along the path less taken has resulted in a decent stash of S$1.3m before I turn 30 years of age, which comprises of pure liquid investable assets without any form of leverage.
In case you think I'm some trust fund kid, when I started out in the corporate world, I only had less than S$7k from pocket money, savings through scholarships and liquidation of a life insurance policy that my parents had bought for me when I was much younger. That being said I'm extremely thankful to my parents for paying off my tuition fees in college, which I estimate at S$35k in total, and for providing me with a base to work on.
S$1.3m - certainly a result that the 14 year old version of me would have never thought of being possible in my wildest dreams when I was just mucking around in secondary school chasing skirts and pulling hokey pokey BS around town, and a form of catharsis that the 24 year old version would feel as a result of putting faith in my abilities and choices over the last couple of years, which were somewhat fearful to make in hindsight.
Using the results of the trinity studies and from other pieces of analyses, a typical 4% p.a. withdrawal rate would result in c.S$52k of passive income a year, which means c. S$4k of free cashflow a month. Technically I could call it quits now, but I realise the further I go along this path, the nearer I get to the end result of my FU figure, the more uneasy I feel. And this comes as a surprise to me, as I would have thought that I would feel much better as I progress towards achieving my goals.
I spent some time ruminating about why I would have felt this way. And I also spent time trying to draw some form of vicarious experiences through other FIRE websites and forums (special thanks to LivingAFI for providing some guidance on this through his piece on his experience with a therapist). And I kind of figured that my uneasiness revolved around the below themes:
- Focus (Goal vs Progress approach): I've spent the last 7 years totally focused on a goal. Delaying gratification, pushing ahead and against the consensus view. Now that some of it has come to fruition, I'm going through a phase where I feel a loss of drive to progress, as if the carrot does not taste that sweet after all. Similar to the law of diminishing marginal returns, or how one would feel where after chasing a chick for 6 months and realising hey I've placed the girl on the pedestal. It wasn't that good after all. Or maybe delaying gratification and saving money have been providing the endorphin rush and now that there should be less emphasis on saving and instead experiencing life for what it has to offer, I feel lost.
- Identity: Although being a banker ain't fun at times, I've managed to tough things out and ride the waves (though I do admit that there were some monster waves that I thought would cause my demise) in a proficient enough manner that I have become good at what I do, ranking at the top of my class since I've started out. Trust me, for most things, if you apply yourself wholeheartedly and mindfully to it, you'll eventually become good at it too. But undoubtedly, you'll find yourself drawing a form of your identity to it. Honestly, I started off in this world with a huge chip off my shoulder, wanting to prove myself that I could excel in this role even though I thought it sucked balls, but I think I've actually grown to enjoy some aspects of this, such as the analysis involved and decision making process. In some senses, it has become a parasitic relationship where I need to find a replacement outlet for throwing myself into if I do leave. I thought of living in a different part of the world for 6 months at a time, experiencing different cultures and pushing through several hardcore physical endurance goals such as the four desserts ultra marathon series, but somehow I do feel like I'm tethering on the edge, the edge of either lifting off or engines down.
- Worries: Anxiety over whether my lifestyle is going to blow through my free cashflow. Anxiety over whether my portfolio is built to last for the next 50 years. Anxiety whether I'm adequately covered from an insurance perspective. Anxiety whether I'll be able to take care of my parents in the future. Anxiety over what I'll eventually be doing. Anxiety over whether I'll be able to contribute any value to the immediate society next time. Anxiety over whether I'll just be sitting on my ass watching TV serials 24/7. Anxiety whether I'll degenerate mentally and whether I'll lose my drive and focus that has kept me well heeled since graduating junior college. Anxiety over being anxious about the above. Perhaps it's easier to be a lemming and follow the herd instead of branching out. That way, you could blame someone when you turn 60 and realise your life has been a "template" and you've wasted it.
- FOMO (Fear of Missing Out): If I leave the finance industry, there's going to be little chance to turn back. Am I doing myself a disservice when my path to being a senior banker is pretty clearly laid out. In 3 - 5 more years, I'll be able to make "Executive Director". Am I letting my parents down by choosing to FIRE? Am I wasting the first 22 plus years of my life getting educated and then beating the capitalist game in less than 8 years? Am I missing out on the finer things in life by leaving now? What if my stash runs out? This is as good as it gets for a middle class boy made good, why would I want to leave the gravy train?
I never did think much about these issues when I first started out. It was all guns a blazing and a head first endeavour into the great challenge with much relish, but it's obvious that these are pertinent issues and probably needs more analysis and experimentation with over the next couple of years as I move towards FIRE.
What do you want to make out of your life? My honest answer is I have yet to find out.
Sunday, 17 May 2015
Thoughts on leading a template life
Have you ever thought about how your life is panning out and developing? If you have, you're most likely at the stage of bridging towards the self actualization phase under Maslow's hierarchy of needs, which is what I would like to term as a first world problem.
The truth is being able to actually entertain such thoughts on a regular basis means you actually are in a pretty decent position right now. You have the basic necessities fulfilled and are looking towards self fulfillment and really building a life worth living. I met a couple of banker friends for a round of drinks this week, and most of them were lamenting that now they had some sort of free time given the crappy markets and their even worse pipeline, they were really bored with their current lifestyles. Putting the unpredictability of banking aside, where you won't know what you'll be doing on nights and weekends, they mentioned the predictability of leading a typical existence, AKA living life according to a template.
The typical template of a seemingly well heeled life in the corporate system typically starts when individuals are mere tadpoles, with life milestones put in place via societal and inter-generational expectations through scoring well in nationwide examinations, getting into the best schools and colleges, getting lucky and obtaining offers for internships / full time positions, and then starting corporate life with much enthusiasm and vigor, only to realise what's next.
For most of my friends, they then fall in love, purchase their first property and before you know it, some kids are popping out and then it's groundhog day everyday. And you know what, most of my friends are actually "resigned" to experience life like this, and I can totally understand why. From well meaning relatives, and expectations that are both subconsciously and consciously imposed on us by society, it seems like the perfectly normal response to follow the herd.
Though I would question if life is really worth living by through the motions via following the herd instead of pushing for what makes you really happy. The more dangerous, unpredictable and insecure path of padding through the snow as a lone wolf, living life in a contrarian, unconventional, and exciting manner. The way I see it, you get to be proficient at what you do after 7 to 10 years of doing so with deliberate practice, assuming a typical 40 hours a week based on the notion that you'll become an expert with 10,000 hours of practice.
So if you live till 80 years old, that means you get about 6 chances to reinvent yourself, to build different facets of your personality and character. Doesn't that excite you, to know that your current job is only a small part of the grand scheme of your life, and no matter how exciting or tiresome it is, you'll eventually move on to more fulfilling experiences? Ultimately, life is all about choices, with some choices mattering more than others.So start making those choices that will yield dividends in the future, with the knowledge that you are the sole captain of your ship and the master of your fate. You can choose what kind of life you can live, and it is your responsibility to take charge of that. Yes you can be a MMA wrestler by night and a equities trader by day. You can be an investment banker and a triathlete. You can be an accountant and a adventure racer.
Beware of the pitfalls that might throw your scheme into disarray though. These pitfalls typically include revolve around you providing a form of commitment that you aren't ready for, be it on an emotional or financial commitment. I.E. kids, mortgage etc. But the most commonly overlooked pitfall would be to live life in the past or in the future, and not being in the present. I feel that focusing on the present, and being mindful in an objective manner in observing present reality, is perhaps the only way to save us from swinging between the cycles of unhappiness and happiness, and to experience everything with the knowledge that regardless of our preferential bias, it is impermanent. The moment we avert or crave something, someone, or a particular sensation, we are left feeling anxious about the situation internally.
That last paragraph of prose might run contrary to what I've been saying about the exciting future one can have, but if you do read more in depth, living in the present moment would have more of an impact on how your future pans out, as you become more aware of what you do on a day to day basis and the impact that has going forward. Think about it.
Oh the decisions we make. And the choices we have. How exciting it is, to live, to experience, and to strive forward. Carpe diem and may you find happiness in life :)
Friday, 1 May 2015
Thoughts on blogs and insurance
Have been pretty busy over the last couple of weeks traveling for business. Thank goodness for this long weekend. Counting thy blessings.
Came across a blog called LivingAFI which I would rank as one of the top three financial freedom blogs that I've come across. Have been quite a fervent reader of the The Financial Samurai and Early Retirement Extreme since commencing my "career". The Financial Samurai feels very relatable as we basically come from the same industry and Early Retirement Extreme seems like a hardcore straight out logical thinking fellow who's pretty impressive -I could never do what he has done to get to where he is.
But LivingAFI, at the risk of sounding like I have a man crush, boy I've hadn't such an inspirational feeling from reading a blog since goodness knows when. Have gone through almost all of his posts and his attitude towards work, though in a different industry, is strikingly similar. Although the effort taken to elucidate our blog posts are rather different - I literally just regurgitate my thoughts all over blogger instead of taking the time to do nice illustrations and frame my thoughts in a coherent manner.
I think most financial blogs in Singapore generally comprise of investments, analysis on what to buy next and what not, but I seldom see local blogs portray a strong attitude to championing FIRE, nor provide a how to FIRE description in a local context. Fucking boring. I honestly think the investment concept is pretty simple - for folks just starting out in investing, a low cost Vanguard (or similar) index fund that tracks say the S&P 500 index or a global world index would be your best bet. If you want to do stock picking, I suggest starting a mock portfolio first and tracking your performance over 5 years before actually implementing it. There would be a high probability that you'll generate lower alpha on a portfolio basis as compared to low cost indexing.
On a side note, I think the worst place to start learning about investing, money management or FIRE would be from the "Me & My Money" series on the Sunday Times. That used to have a few gems, but I would say almost every single article that has been published in 2015 lacks character. You'll be served better following the blogs linked above or I would probably go out on a limb and say this blog.
So I managed to meet with my insurance agent over the last couple of weeks for a yearly "catchup". It's been three years since we've caught up because I didn't see the need to do so. I've got this term insurance policy which costs c. S$600 p.a. for a payout of S$200k on death or suffering caused by total/partial permanent disabilities or sickness (I think there are 30 plus of them). I bought this when I began working sometime back on the pretext that my family could be taken care of with S$200k, with the assumption of some form of medical insurance from my employer. Now I've accumulated a certain net worth which covers the insured amount by [ ]x and I am thinking of discontinuing this term policy. After all, if I pass, or fall ill, my family gets to inherit that net worth, and past a certain inflexion point it wouldn't make sense to pay out that S$600 p.a.
Question to the internet: What would be the net worth that you'll be comfortable with prior to discontinuing term insurance?
Further to that, assuming ceteris paribus, I think I'll have a maximum of 5 years in banking left before I can call it quits for good. To do that I estimate a net worth of S$2.5 - 3.0m, excluding property (i.e. investable net worth that can generate passive income through dividend distributions or portfolio rebalancing). Thus I've begun to explore hospitalisation and medical insurance, with the whole idea of complementing the government's medishield life such that you won't have to pay for any hospitalisation bills at all. I'm not yet 30 years of age, but I think these are important concepts from an FIRE perspective. If I've missed any other types of insurance (please don't get into life insurance with ILPs proponents...), kindly hit me up.
Came across a blog called LivingAFI which I would rank as one of the top three financial freedom blogs that I've come across. Have been quite a fervent reader of the The Financial Samurai and Early Retirement Extreme since commencing my "career". The Financial Samurai feels very relatable as we basically come from the same industry and Early Retirement Extreme seems like a hardcore straight out logical thinking fellow who's pretty impressive -I could never do what he has done to get to where he is.
But LivingAFI, at the risk of sounding like I have a man crush, boy I've hadn't such an inspirational feeling from reading a blog since goodness knows when. Have gone through almost all of his posts and his attitude towards work, though in a different industry, is strikingly similar. Although the effort taken to elucidate our blog posts are rather different - I literally just regurgitate my thoughts all over blogger instead of taking the time to do nice illustrations and frame my thoughts in a coherent manner.
I think most financial blogs in Singapore generally comprise of investments, analysis on what to buy next and what not, but I seldom see local blogs portray a strong attitude to championing FIRE, nor provide a how to FIRE description in a local context. Fucking boring. I honestly think the investment concept is pretty simple - for folks just starting out in investing, a low cost Vanguard (or similar) index fund that tracks say the S&P 500 index or a global world index would be your best bet. If you want to do stock picking, I suggest starting a mock portfolio first and tracking your performance over 5 years before actually implementing it. There would be a high probability that you'll generate lower alpha on a portfolio basis as compared to low cost indexing.
On a side note, I think the worst place to start learning about investing, money management or FIRE would be from the "Me & My Money" series on the Sunday Times. That used to have a few gems, but I would say almost every single article that has been published in 2015 lacks character. You'll be served better following the blogs linked above or I would probably go out on a limb and say this blog.
So I managed to meet with my insurance agent over the last couple of weeks for a yearly "catchup". It's been three years since we've caught up because I didn't see the need to do so. I've got this term insurance policy which costs c. S$600 p.a. for a payout of S$200k on death or suffering caused by total/partial permanent disabilities or sickness (I think there are 30 plus of them). I bought this when I began working sometime back on the pretext that my family could be taken care of with S$200k, with the assumption of some form of medical insurance from my employer. Now I've accumulated a certain net worth which covers the insured amount by [ ]x and I am thinking of discontinuing this term policy. After all, if I pass, or fall ill, my family gets to inherit that net worth, and past a certain inflexion point it wouldn't make sense to pay out that S$600 p.a.
Question to the internet: What would be the net worth that you'll be comfortable with prior to discontinuing term insurance?
Further to that, assuming ceteris paribus, I think I'll have a maximum of 5 years in banking left before I can call it quits for good. To do that I estimate a net worth of S$2.5 - 3.0m, excluding property (i.e. investable net worth that can generate passive income through dividend distributions or portfolio rebalancing). Thus I've begun to explore hospitalisation and medical insurance, with the whole idea of complementing the government's medishield life such that you won't have to pay for any hospitalisation bills at all. I'm not yet 30 years of age, but I think these are important concepts from an FIRE perspective. If I've missed any other types of insurance (please don't get into life insurance with ILPs proponents...), kindly hit me up.
Sunday, 12 April 2015
Thinking of "investing" in the next IPO?
Back when the markets were going hot in 2006 - 2007, just before the Lehman Brothers and Bear Stearns collapse took centre stage, the common water cooler topic was whether you managed to get allotments for shares in the latest IPO on the SGX. It seemed like the gravy train was running full speed ahead on wards to nirvana for retail investors. Not a bad move isn't it, getting some allotments and then selling onto the market, after all in a red hot market the only way is up up and away. It certainly was, till the music stopped and most investors found themselves without the proverbial chair.
Maybe if you had a better understanding of the IPO process, you probably would have stayed clear of the entire she-bang, so perhaps I can provide you with some insight of what an IPO process is all about, after working in investment banking for a good number of years. Maybe you would then have a better understanding of whether subscribing to allotments in the future would make sense.
Rationale for an IPO
The IPO exists as a method for either one or a combination or two things. Firstly, to raise new equity for the incumbent shareholder - typically the incumbent tries to tap the equity capital markets for US$[ ]m in exchange for a [ ]% of his company through the issuance of new shares, called a primary issuance. The enlarged company would then be worth US$[ ]m plus the additional US$[ ]m raised through the primary issuance.
Secondly, to raise proceeds for the incumbent shareholder - typically the incumbent tries to sell down a portion of his shareholding in his company through the equity capital markets, called a secondary issuance. The incumbent sells [ ]% of his company through the exchange of his existing shares for cash. There is no enlargement of anything but the incumbent shareholders' wallet. Sometimes this is called cashing out (exiting) or raising liquidity for the incumbent investor.
Now... an IPO is most likely a combination of both a primary and secondary issuance, on the pretext of raising capital for expansion (growth story anyone?) and providing the current shareholders with some liquidity as well. There might be many reasons for an IPO, from government privatization exercises to a form of exit for big boys (private equity investors), to a more genuine form of capital raising for expansion purposes by normal businesses.
Do think about it in more detail though, equity is the most costly form of investment as opposed to debt, so if you are raising capital for expansion through an equity issuance such as an IPO, it probably means that you are tapped out on your leverage and your capital structure really needs some equity. Common sense would dictate that is hardly a good sign... but then again common sense is not really common is it?
The Investment Banks and your interest do not go hand in hand
The sole job of the investment banks underwriting the IPO is to maximize value for their clients through selling the share issuance. A small technical point is that these days, banks seldom fully underwrite (meaning the banks take the entire risk of the IPO on their books and then tries to sell down in the public market later) IPOs, they do them on a best efforts basis.
The key word is "selling". And when you sell shit, you want to maximize value for what you get, so there is nil chance of something being fairly valued, or even under-valued. Nil. Donut. Kosong. And that is totally aligned with the investment banker's thoughts, as he wants to maximize deal size in order to generate more fees. Typically these guys are paid 2 - 4% of the total proceeds brought in.
Ah yes, one small caveat is that if you want recurring customers in the form of institutional investors, you might price down your share issuance a little to provide some "perceived value" so that there is some money left on the table and every one gets rich. But that to me, is pretty much gambling. From a retail investor's perspective, you are betting on the next dude in line bidding your price up as you unload.
You surely don't get anything at a discount to value, because the sole job of the investment banks are to maximize price for their clients. So if you are thinking of "investing" the next IPO, maybe you should just go play blackjack at MBS, might be a more exciting way of "investing" since you are gambling anyway :) Huat ah!
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