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"E-book" by AK

Second "e-book".

Another free "e-book".

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Was Soilbuild REIT a shabby investment?

Tuesday, January 16, 2018

Soilbuild REIT had to juggle not one, not two but three hot potatoes up until last month.

With the sale of KTL Offshore's property to its sponsor, they have two hot potatoes left (i.e. Technics and NK Ingredients).

In a blog in September last year (see related post at the end of this blog), I said that with the reduced DPU assumed then, if we demanded an 8% yield, we should only be buyers at 66c a unit.

Now, with KTL Offshore gone, with lower income, we won't be wrong to downgrade the REIT.

I wonder also if the REIT would see lower valuations which would impact its NAV and, therefore, its gearing level?

Estimating a more aggressive 10% reduction in the DPU assumed in September 2017, all else remaining equal, we might be looking at a full year DPU of 4.8c.

At 71c a unit, that is a prospective distribution yield of 6.76%.

From an industrial REIT with leasehold properties in Singapore, to me, it hardly seems adequate.

I say this partly because a REIT distributes cash flow and does not retain earnings.

So, the relatively low distribution yield is just not attractive enough for me.

If we demand an 8% yield, then, we should only be buying at 60c a unit with the reduced DPU assumption.

If we are less demanding, a 7.5% yield means we should pay no more than 64c a unit.

However, if we demand a 7.5% yield, we can get that by investing in AIMS AMP Capital Industrial REIT which has a lower gearing level too.

How has the investment in Soilbuild REIT turned out for me?

To be fair, Soilbuild REIT's business parks (with relatively long remaining land leases to boot) are attractive and they were the main reason why I invested in the REIT in 2H 2014.

Unfortunately, bad things happen sometimes.

I believe that selling at NAV is a good outcome although I estimate a capital loss of around $4,000 from the sale.

Having said this, I have received more than $17,000 in income distributions from the REIT since I first became a unit holder.

Yes, I did say before that my investment in the REIT was a relatively small one.

So, roughly, the investment returned more than 8% per annum.

Not fantastic but, as an investment for income, not too shabby either.

Having plonked quite a bit of money in SingTel and ComfortDelgro in 4Q 2017, the money from this sale will shore up my cash position.

Related post:
Decline in Soilbuild REIT's DPU likely.

8 years AAA bond with 2.5% and 4% coupons.

Monday, January 15, 2018

Conventional wisdom tells us that we should have some investment grade bonds in our portfolio because they help to smooth out volatility.

Investing in good quality equities is probably more rewarding in the longer term but we have to develop a stomach for the volatility that comes with the territory.

Whatever the case may be, when I turn 55, there is no way of knowing if equities would be in a rough patch or not.

So, having some money in investment grade bonds makes sense to me.

It gives me peace of mind.

The CPF is as good as a AAA rated sovereign bond and it is one that pays relatively attractive "coupons".

OK, to be fair, for a younger person, the "coupons" are less attractive than they are for an older person like me.

The closer we are to 55 years of age, the more attractive the "coupons" because the waiting time is shorter.

For anyone who has met the Full Retirement Sum (formerly known as the Minimum Sum) and who believe in having investment grade bonds, taking full advantage of the CPF Annual Limit is a good idea.

Why mention specifically people who have already met the Full Retirement Sum?

Well, at age 55, we will be able to withdraw all CPF money (from OA and SA) in excess of the Full Retirement Sum (formed by savings in our SA and OA) which would go into the newly created RA.

So, for people who have met the Full Retirement Sum, maxing out the CPF Annual Limit, we are setting the stage for a bigger "windfall" when we turn 55.

CPF Allocation Rates.

The CPF Annual Limit is $37,740 for now.

If mandatory contributions (MC) fall short, we can do voluntary contributions (VC) to hit the limit.

So, what am I doing?

I am buying an 8 year tenor AAA rated sovereign bond (i.e. making voluntary contributions to my CPF accounts) with "coupons" of 2.5% (OA) and 4.0% (SA and MA).

Now, you know my age. Alamak.

Read also the blog before this one:
CPF savings grew almost $200K in 3 years.

Related post:
Buying a AAA sovereign bond.

CPF savings grew almost $200K in 3 years!

Tuesday, January 9, 2018

I don't know if you would agree with me but I think the CPF Board has improved by leaps and bounds when it comes to communicating with CPF members.

I especially like the graphics they have produced to make things easier to understand.

Important or interesting information is clear at a glance when graphics are used well.

While waiting for the updated pie chart to be ready (see past pie charts: here), I will share this bar graph:

It is so easy to see how my CPF savings grew almost $200K in 3 years from end-2014 to end-2017!

The total amount was slightly more than $600K at the end of 2014.

By the end of 2017, it was almost $800K!

The CPF is about the government helping us to help ourselves.

For most of us, this is as close to State welfare as we can ever get in Singapore.

The government offers help.

Let us not foolishly reject it.

For those of us who play the MMORPG "Neverwinter" and have explored Sharandar, this should sound familiar.

Bad AK! Bad AK!

The growth of my CPF savings is really stunning when we remind ourselves that a big chunk of that growth is made up of contributions from the government.

Interest received in 2015:

Interest received in 2016:

How much was the interest income for my CPF savings in 2017?

See related post:

Helping to fund my retirement.

My CPF money forms a cornerstone in my retirement funding strategy.

Risk free and volatility free, it helps to give me peace of mind.

Confession and what AK thinks of retirement.

Monday, January 8, 2018

AK said...
"I have left behind the prescriptive world of responsibility and routine which demanded that I made regular and meaningful contributions to the establishment and clients (in ever more difficult conditions)."

(See related post at the end of this blog.)

Reader says...
I see things quite differently. I never felt the world demanded anything from me.

It’s more like what I wanted from the world. And now that I have most of what I want , I do feel a moral need to give back to this world. 

Ranging from being a good son (which you agree) to a good father/husband/friend but also to help other less lucky humans whom I do not know.

As for structure, disciplined people usually remain rather disciplined even in retirement. 

I find myself disciplined in exercise and the way i run portfolio. I am sure you are extremely disciplined on your portfolio thinking and actions too.

Structure and routine is not a bad thing even in retirement. I spoke to quite a few retirees and all speak of having some loose routine and structure. Of course no need to be siao on like during wealth forming days.

Anyway thanks for sharing. I believe each of us have different philosophies and happy that you have found your own balance! 

Was it always so stable or did you take a few years? I took about 3-4 years since retirement to reach this stage of thinking

AK says...
Ultimately, for me, financial freedom is but a stepping stone to a life of freedom.

I guess this is why I can identify with Charlie Munger when he said he wanted to be rich because he desperately craved freedom.

As I have always known what I want, it was easy to slip into retirement when it finally happened.

Mentally, I have always been prepared for it.

There are things which I have always wanted to do or to spend more time doing.

So, I am also prepared for a busy retirement.

I keep saying that I am busier in retirement than I was before.

However, I am happier because I am doing things I want to do which includes being charitable to the needy and this is something I have blogged about many times before.

Unlike you, I don't feel a strong moral obligation to give back to society but I am quite happy to contribute because I can and because I want to.

The only strong moral obligation I feel I have is to my parents.

OK, yes, you are right about having some degree of discipline and loose structure in retirement.

In my case, probably very little to the extent that I don't feel it is there.  

Definitely not "siao on" which I probably was a little when I was a young working adult.

To be honest, I do not feel that I am a very good investor.

A fellow blogger told me before that he thinks I am financially very comfortable because I am better at personal finance matters than most people, all else being equal.

I agree with him.

Financial prudence is the foundation of wealth building and preservation.

For people who make a lot of money, if they have a modest lifestyle and save most of their money, in a relatively benign inflationary environment, they don't really need to do much else to have a comfortable retirement.

As an investor, I have an approach that is pretty forgiving if I were to make mistakes.

I also don't aim to beat any benchmark.

Again, it is all "agar agar".

Enough of KPIs at work.

I tell myself that as long as I don't do anything ridiculously stupid, given time, I should do well enough.

If I am right more often than I am wrong, given time, I should do well enough.

So, I have to be very clear what is an investment and what is a speculation.

Having said this, I do allow myself to speculate but I keep speculations relatively small.

Apologies but AK is very long winded.

Finally, to me, structure and routine are not bad nor good things in retirement.

Some people have a greater need for them and some don't.

In retirement, we shouldn't have to worry and  we should be free to choose whatever makes us happy. :)

Related post:
Financial freedom or freedom in retirement?

Financial freedom or freedom in retirement.

Sunday, January 7, 2018

AK is a very responsible person and is a good role model.

I get the feeling that some people think that way.

Well, I don't think so.

I am sharing something from my FB wall here and you are welcome to eavesdrop.

AK says...
I am enjoying life now and doing stuff that I didn't have enough time to do before.

I was disciplined and thoughtful so that I can be less disciplined and thoughtful as I enjoy an early retirement.

Don't ask:

"When you have to stop working, can you afford to?"

Ask instead:

"If you want to stop working, can you afford to?

Reader says...
That make sense and was my motivation and is my justification nowadays. 

But to probe more if you are ok to share, what criteria is used to decide how you spend your time on stuff you like?

Eg for me, there are issues of still contributing, being useful, example for kids etc.

AK says...
I don't have a framework. 

I just do what I fancy doing each day.

MMORPG, gardening, aquarium keeping, family, friends, blog related activities, reading, watching documentaries, anime, K-drama, doing some physical exercises etc.

There isn't any routine per se. 

More of this one day and more of that another day?

Maybe, even doing mostly one thing some days?

If I want to, yes.

I am like a cook in a Chinese zhi char (cooked food) store, agar agar (estimate) the amount of this and that in the cooking.

Nothing exact.

Everything is by feel.

Happy (and yummy enough to eat) can already lah.

I have left behind the prescriptive world of responsibility and routine which demanded that I made regular and meaningful contributions to the establishment and clients (in ever more difficult conditions).

Not only do I not want to ever go back, I don't want a retirement life that even remotely feels like that.

AK the escapist!

AK doesn't want to be reminded of work.

AK is lazy but he really has good reason to be.

OK, if I had to take care of kids (or old folks), I can imagine that my life would partially, more or less, be run according to their needs and there could be a routine of sorts imposed on me.

I don't know about kids but the time will come when I would have to take care of the old folks at home.

It is something that is probably inevitable.

It is a responsibility that I accept.

Other than that, for now, free from chains, I am enjoying a life that is anything but structured.

Financial freedom is not the same as freedom in retirement.

In retirement, even in doing the things I enjoy, there isn't any structure per se.

This really is freedom.

Yes, AK is so utterly irresponsible!

AK is a bad role model!

Bad AK! Bad AK!

Related post:
Average income workers can be rich.

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