Tag: T_powDescr

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[23]steward@multi-gen reserve #dementia

Posted on by tiger40490

 

Genesis: Singapore’s past reserve is a multi-gen reserve … requires reliable stewardship

— well-off kids … I did some simple math with my wife.

  • Assumption: grandparents don’t spend too much of their current NAV on nursing homes or medical.
    .. Based on this assumption, after they pass away, most of their NAV would eventually go to the 2 grandchildren. Perhaps SGD 2M ignoring inflation.
  • Assumption: Aunt Genn doesn’t cash out on her Sydney home, and spend most of it.
    .. Based on this assumption, in 40 years she may pass on a large bequest to the 2 grown-up niece/nephew. I would be very old by then.
  • my own NAV… I will not discuss.
  • ^^ All in all, my two kids could end up with SGD 3~5M available to them during their adulthood.

— stewardship .. I’m more concerned about my son. By age 25, I hope he will be mature enough to know budgeting, BurnRate control, risk-taking/risk-assessment, due-diligence, wealth preservation,,, With this maturity, he would take care of his inheritance.

More and more frequently, I’m planning to keep my wealth under my own control, as a steward (guardian) till my 80s or even 90s. But I want to downplay this factor. I can’t let my kids rely on my stewardship. By age 30 they will be independent.

If my kids are unable to hit above the median salary, then my stewardship and the reserve would become important.

I think “multi-gen reserve” and “stewardship” are phrases to capture part of this (vague) concept.

— dementia .. I enjoy cashflow management for my own money and my family’s money.. many big and small daily decisions. These are real-world decisions with implications, so my mind is taking on real tasks. Financial decisions also have some cognitive complexity, so I think it’s a nice, enjoyable brain exercise.

— rEstate appreciation .. Most of my properties would be sold eventually. Hopefully one of them could be held long term, but in which city?

Beijing property … Once grandparents sell it, it would become cash and stop appreciating

— Gold … negative yield i.e. carry cost

Just_Say_No to creep,peerPressure.. #PerTrain

Posted on by tiger40490

Saying NO is one of my G3 most important principles in ffree, burn rate mgmt, long-term fin-security.

median household income & middle-class living standard is one of the first blogpost to introduce this JustSayNo principle.

SG government probably follows the same principle many times, but I won’t digress.

— eg: branded college and SDXQ home
— eg: retirement burn rate .. cpfLife ERS pays out about $2200/M, considered adequate for a Singapore retiree. I think this is a reasonable, sensible assessment. What if many among your cohort are building bigger nest eggs to provide $5k/M of retirement income? Would you feel the pressure to match up? This pressure is comparable to the pressure to buy a SDXQ home [Orchard mansion]
— eg: In 2011 or 2012 I hosted Haitao.Fu in my Newport home. I bought 3 small dishes from a nearby Chinese restaurant. One of them (toufu?) we didn’t finish — I kept the clean leftovers for my next meal. I have recalled this experience many times. I feel the /splurge/ peer pressure in hindsight.

I may or may not be right to assume him as a relatively thrifty student. He didn’t show any negative reaction about our meal but now I assume he has moved to higher positions on WallSt… In hindsight, I feel he might have been shocked by my thrift, even though the meal was way more than basic-healthy!  I probably spent USD 40. In hindsight, I feel a more “decent” delivered meal would be 50% higher. Leftovers would be … discarded?

— eg: Personal Trainer (fitness)
At OneNorth office complex, I visited a fitness center that offers nothing but PT (personal training). Minimum membership is $1800/12 PT sessions. If you earn a decent salary nearby, then you would probably consider this package. Now, suppose most of your colleagues have signed up. They tell you various reasons. You accept some of those reasons, but ultimately unconvinced. Some may point at LKY’s attitude on casinoIR and remind me that “Time has changed”. I think I am not old-fashioned, and would consider to accept that package if the $cost/benefit ratio improves. At the current price level, the ratio can become acceptable if I perceive significant benefit in the package vs the alternatives.

  • alternative: You could try jogging on the street near office (unappealing to me). Re Wayne St…
  • alternative: You could do some simple workout in office, or at home. Re Wayne St.
  • alternative: You could join a regular gym somewhere farther out, for $100/M.

At the current ratio, I would say it’s really important to justSayNo. Even if I earn 20k/M, this salary is /unsustainable/ in X years so now I need to spend like ordinary locals and save. Their business model (designed for the super rich) is too costly for the nearby office professionals.

Yoga membership is comparable, but per-session price is about $15 (compared to $150/PT)

zero-sum games, Productive_Asset[def] #bccy,gold

Posted on by tiger40490

I still believe that on the secondary market, stocks and bonds ain’t zero-sum games, because each of these products generate new wealth/profit out of thin air — NZSG[non-zero-sum games]

  • In contrast, I believe options and futures do not have such trends and therefore zero-sum. I would say for all of these derivatives, there’s no income generated out of thin air like bond coupons.
  • long-dated oil futures .. inflation-based growth asset. ZSG.
  • casino game .. Classic zero-sum game
  • bccy ..  speculative growth asset, related to inflation and FOMO. ZSG.
  • Rental rEstate .. productive asset. Also a speculative growth asset based on FOLB. People’s desire for better home is insatiable mostly due to FOLB.

A related concept is productive_asset — assets that generate  net-positive current payout

  • div stocks
  • rental rEstate having positive cash flow
  • coupon bonds, and short duration zero bonds
  • bank deposits

— stocks .. There’s a general trend of long-term appreciation. We can see the trend based on official closing price (fair valuation).

Many early stage hot tech stocks are not productive. They are speculative assets, driven by FOLB.

Dividend cashcows, are productive_asset. They can also be growth assets. Utility stocks, oil stocks, tobacco stocks, eReit.

Value stocks are still growth assets, (in theory) based on earnings growth.

— bonds + bond mufu .. NZSG. They are suitable for insurers, foreign reserves,

If, hypothetically, the bond coupon is so low as to be wiped out by transaction costs, then between the buyer and seller, this is a zero-sum game.

— How about physical gold coin? If you keep it at home for 50Y, then it is likely to appreciate. This likelihood is the same if the gold coin changes hands over the 50Y. Therefore, trading gold is not zero-sum game.

Fundamental reason behind the NZSG —  accounting_currency (denomination currency) inevitably loses value against gold. If two school boys trade marbles and cards it’s clearly a zero-sum game, but now they receive one point for each game and those points give them special privilege . Counting by the points the trading is NZSG.

gold .. inflation-based growth asset. ZSG.

Now, bbcy also generates no income, but is it an inflation hedge like gold?

 

 

infatuated_investors: rise/fall {buy

Posted on by tiger40490

With recreational stock investing, impulsive trading is usually the precise phrase. [1] Sometimes, I feel “infatuation” describes a different perspective.

I have a mild (not extreme) but uncontrolled tendency to become infatuated with some products

  • eg blue-chip stocks with BUY recommendation .. If it’s a billion-dollar brand name, with a trec, I tend to brush aside the negative analysis.
  • xp (earliest): during my Tritech industrial attachment, I fell in love with some mutual funds and biked all the way to west coast to buy some mutual funds
  • xp: Between Year 3 and Year 4 in NUS, commodity trading cost me $11k due to infatuation
  • xp Allianz high yield fund — once took up SGD 100k of my fund. I didn’t make a loss but the return was much lower than initially perceived
  • xp Saxo FX option trading — I took on too many positions
  • xp (biggest) Cambodia GRR rental properties.

It’s easy to get carried away and underestimate the risks, the long wait, the severe liquidity limitation.

— 4 nights after pre-clear.. Most of my trading tend to happen on the first night … more stressful and less efficient than spread-out. Is it rational or should I change?

  • factor: better price on first night .. in about half the cases, first night has better (some would say no-worse) price than subsequent nights. See the “Rise” scenario.
  • factor: I usually set my own quota. In many cases first night I have used up most of it. This habit can be adjusted.
  • .. sugg: set a smaller quota in the beginning.

— Scenario: I spend many minutes selecting stocks, then due diligence on each including a desirable incremental amount, then pre-clear, then set aside nightly hours, but in the end only invest $10 to $20 over 4 nights 🙁

I feel the most common reason is the “rise” scenario.
Another common reason is implementing the desired increment, esp. when I had a pre-existing position, and I use “too many” fractionals.. hard to keep track of the running total.

— Scenario: I often find a stock with positive rating + CDY + stable div history. The more pre-trade effort invested, the more pressure I feel not to waste the effort. I end up tweaking my order and trying to get a fill.

Therefore, the Kun.H style of deep analysis is dangerous for me, esp. when I want to buy dozens of names within a month.

I tend to enter a limit price somewhere low, and wait for hours to get a fill 🙁 My new Suggestion .. fractional buy to release the tension. Also reduces the tcost of manual handling (different from babysitting an existing position)

— Scenario: After buying, the stock rises 🙂 ……. I had sometimes given in to the urge to top-up at the now higher price, partly due to the pre-trade tcost (a sunk cost).  This is an example of infactuation, but more infatuation than impulsive. See [1] above. In hindsight, I think it’s usually better to stand aside. Quite likely the price would fall, and buying that same quantity would be better at the lower price.

Jolt: stand-aside habit interferes with my plan to increase U.S. eq allocation.

Realistic example: I had set out to invest “up to $100 or 2 shares” but have bought only $1 before price went up. The initial tiny purchase tends to but should not dictate what I can/can’t do now. If you feel justified to top-up, then buy fractional please.

— Scenario: After buying, the stock falls 🙁 ……. Paradoxically, i often rub my hands in glee, because “I can have more fun buying!” Still, it’s prudent to use fractional buys to release the emotional build-up.

ROTI — tend to become an issue. Beware!

Risk_Capital [def]

Posted on by tiger40490

https://www.fool.com/investing/general/2015/08/20/what-is-risk-capital.aspx says “It refers to funds that are invested in high-risk, high-reward investments…. Risk capital is money that, if lost completely, would not have an overly harmful impact on you financially. It’s money you can afford to lose.” Exactly what I told my sister.

Investing (he didn’t write “investment”), at its core, is about accepting a certain amount of risk to achieve a reward.

Some people can’t (won’t bother to) articulate and formulate their risk appetite, risk sensitivity, risk profile and risk attitude as carefully as I did in my blog.  For them, it may be useful to decide on the amount of risk capital. It’s a concrete amount of money.

In fact, every investor need to decide for herself an amount of risk capital. There’s nothing wrong with a zero risk capital. My wife once had a zero risk capital.

Note risk capital is a form of capital, a seed to grow.

A defining experience of risk capital — In 1997, my 3rd year in college, I failed to define my risk capital cap and committed my entire family’s savings (600k?) into high-risk, leveraged commodity day trading. I now have probably .5 to 1 million risk capital invested across

— eg: E12
— eg: PE assets from Jill
— eg: overseas rental properties
— eg: SIA investment .. defines my wife’s risk capital
— when you decide the risk capital amount for yourself, you need to determine the amount and quality of a stable foundation beneath the risk capital.

Q: What’s the stable foundation for me? See mail to Joshua.

##[17] frugal indulgence #din`

Posted on by tiger40490

By “indulgence” I mean things not absolutely necessary for work, study or well-being. Creature comfort.

Depriving yourself of all indulgence is harsh/punishing , unfair/unjustified, and unsustainable.

Q: is there a (cognitive) conflict and tension between ctbz and frugal indulgence?
A: not sure. Frugal indulgence is supposed to be guarded by my ctbz habit, so frugal indulgence should not create guilt or degenerate into lifestyle creep

Frugal indulgence are personal. (In contrast, luxuries are more universal, like nice clothing/gadgets, spacious and new home/hotel …) Look into your heart. Each of us need to identify those nice little luxuries with the highest pleasure and enjoyment for “ourselves”. For me:

  • [Feb 2023] Saizeriya: $4.90 fancy dessert.. small but not frugal indulgence. Not worthwhile
  • [Christmas 2022] $35 log cake
  • [S] coffee shop 杂菜饭 (mixed vegie rice)
  • exercise or yoga classes
  • free: jogging in big park
  • [S] free: stadium. In contrast, activeSG swimming pools and gyms are low-cost
  • movies — luxury
  • [S] taxi to bring family to east coast
  • [S] free: Pasir Ris resort next to the beach
  • free: beach
  • dining with old friends
  • tech books, even though ebooks are widespread nowadays.
  • [big ticket] frequent flights to see my immediate family
  • WPCH
  • [S=SG specific]

For grandma

  • swimming pool

— family dining out .. up to $15/pax .. not really “frugal” but it has become a conscious joint decision of me and wife. We spend this extra money and time to have a “good time” for the family, hopefully something fancy and memorable. You can call it a small luxury, but always in a family context.

cashflow LowGround^HighGround [def] #sdxq

Posted on by tiger40490

See also

I like the visual (albeit loose) concept of “cashflow highground”, similar to “moral high ground “. Physical flow is usually from highground to low ground. Sometimes, I prefer the shorter phrase “PFF highground”.

Each household (single or family) can move between lower ground and higher ground as their life unfolds. Even a country can go through the same, as SG did during covid19.

On a low ground, household outlays exceed income, debts exceed assets, debt servicing is a major recurring expense, or salary income stability is in doubt. Some households sink lower and lower, apparently unable to escape. Common among the immigrants and non-white, non-Chinese Americans. In a contrast, JackZ (Raymond to a lesser extent) lost his job and then hit the pandemic, but thanks to his savings and low burn rate, he probably didn’t sink further.

In a down turn such as the widespread job loss during covid19, you don’t want to find yourself on the lower grounds as they are more at risk of “overrun”.

Remember the WhyFactor production on scarcity? On the lower ground, people struggle to cope. On the higher ground, you can enjoy, relax and live in relative peace and comfort, but lifestyle creep can erode the high ground.

Therefore, on the high ground I feel a need to build up my defense, strengthen my foundation, and raise my ground even higher. So What type of insurance would protect my high ground? Not endowment, not life insurance. Here is my insurance plan:

! Even a middle-lower income household can achieve cash flow high ground, by reducing burn rate (and lifestyle creep), debt,, and build up a reserve and nonwork income stream. I feel Raymond has not done enough on the income side.

— How is BRBR related? Big ticket infrequent outlays are less visible in BRBR, but more clearly felt in high/low ground.

  • Personal prognosis — If I were to take on a USD 700k school-district house, I would slide into lower ground, partly due to high interest and pTaxes.
  • UChicago MSFM — did I slide into lower ground? I would yes slightly due to the high burn rate like 20k/Y.

— How about Fuller wealth?
Fuller wealth as a barometer is one of the best indcators of high/low ground.

— Disaster insurance — such as TPD, major medical and eldershield.
These are rare events so hopefully successful claim rate is low and premium is low. Such low-cost insurance plans help strengthen the foundation of my high ground.

Recall the tallboy vs K3 story?
— How about lifestyle creep? I would venture to say if your income is below 300k/Y, a key difference between high ground and low ground is the attitude/habits on lifestyle creep.

The creeps don’t make a huge difference numerically (because they are small spends) but the attitude does make a huge difference. You have to be conscious of where you spend. You need to review your paste decisions critically.

HighRisk_HighIncome_SmallQuantum: %%fav

Posted on by tiger40490

Look at my analysis of the SEA rental properties vs other assets. There is valuable self-knowledge that I gained by building the investment experience and by comparing against my friends —

Compared to other small investors, I’m more willing to believe in my research and discussions, and trust the sales agents. I’m more willing to embrace the risks in emerging markets.

I can see that most of my friends will not take these risks, so they won’t have this level of high-yield, long-term passive income. They may have rental yield from China or SG or U.S. High risk high (current) income.

— With these investments, we tend to think the hazard rate is rather high (hit and miss) but a hazard may not turn into a realized loss if you manage and contain it effectively.

eg: Megaworld delay — they didn’t promise a deadline

eg: Ritz delay

— Other examples of high-risk-high-return:

  • Some friends invest in U.S. rental properties with active management. Also high-risk-high-income.
  • Ashish’s INR time deposits feature 7% interest rate but currency devaluation risk.
  • Energy12 is high-risk-high-income
  • high-yielder currencies