Monday, 27 October 2014

360 review - SRS, CPF and Saxos

I have recently completed my 360 review on what I want to do with my various investment accounts and this will be my final post on this topic. 

The various 360 topics are:

Today's will be a bumper edition of topics on CPF, SRS and SAXOs. 

360 review - CPF accounts

After reviewing the cash balances in both our CPF accounts and the various restrictions imposed on using it for investments, such as the 35% limit on what you can use to invest in stocks and shares, I decided not to touch them. Given that it is risk free and earns a 2.5% interest, I have decided to keep CPF as a buffer for my home's "mortgage" emergency fund. 



In the unfortunate event that if I loses my job or decided to take a sabbatical, the cash in the CPF accounts will be used for our monthly mortgages. Based on my computation, this emergency fund can support my home mortgages for about 4.4 years.  

One important action item resulting from the CPF review was that I decided to speed up the mortgage repayment even though the all-in cost of borrowing of 1.5% is lower than the 2.5% interest which I can earn in the CPF account. At the end of the day, a debt is still a debt. I think I would rather owe money to my CPF account then to owe money to a bank.  

While I acknowledge that housing is a good inflation hedge, my aim is to pay off my remaining mortgage by 55 years old. I intend to do that by either increasing my monthly repayment or do a lump sum payment and reduce the "CPF buffer" to around 18-24 months instead of the current 52 months. 

360 review - SRS accounts 

I recently top up the SRS accounts for me and wifey. The combined balance has now reached $160,000.  In addition to the tax savings and squirrelling some savings year by year, the good thing is that I finally decided what I should be doing with these accounts and hopefully I have the discipline to stick to the strategies. In case you wonder why Post Office Savings Bank uses a squirrel as well, the nature's answer is here.


I have decided to use the SRS accounts for long term strategies, for dividend or rental income and hopefully with no cut loss levels. I hope I can pass on that portfolio to the next generation. With the breaking down of minimum board lots from 1,000 shares to 100 shares, it will become easier to build up a portfolio of blue chips from January next year. What do I hope to see in that portfolio? 
  • Iconic blue chips. I want to build up a portfolio of iconic Singapore blue chip portfolio that has a strong Singapore Inc flavour and still likely to grow for the next 20-30 years. In that regard, following the weakness in the market, I have recently added Keppel Corporation to my SRS account. I will probably add some banks and telcos but will avoid airline stocks for now.  
  • Strong local brands.  It's hard to describe to you what such stocks are but to give you a flavor of what i am thinking about, it will be stocks such as Osim and Breadtalk. 
  • REITs, Business Trusts and Dividend-paying businesses. I will start adding REITs with good office and retail locations to the SRS portfolio. I want to start thinking of myself as landlords collecting rental every 3-6 months. I may add business trusts if the business model has sustainable and recurring earnings. I would consider toll road operators such as China Merchant Holdings or education provider Overseas Education in this category
360 review - Saxos

I have classified all my other accounts under the topic Saxos. This will include Futures and CFDs as well. I have decided to start focusing more attention on US markets as well given the breadth and depth of the markets there. With the advance of technology, I no longer need to limit myself to the Singapore market that really "cannot make it" 

I will use the Saxos account for a few purposes:
  • Investing and/or trading in global iconic stocks such as Alibaba, Google and Apple. 
  • Use local CFDs and Futures to hedge my positions in SRS in the event of a major crash.
I would like to build up a portfolio of global iconic stocks over time as well. 

360 review - Time 


My time is limited. This will be my last post on 360 review and you can see that it is a long post as i want to save time and squeeze everything into one post. hahaha 

Given my heavy work load, frequent travels and the retirement plans, I find it difficult to blog too frequently. As such, I will not be able to update my investments and trades on a real time basis. However, rest assured, I will continue to review all the IPO companies here and give you my chilli ratings. :) 

Before i sign off, have you watched the video from NTUC Income recently. I thought it was rather thought provoking. While i am not a fan of insurance products, it might serve to remind you to do your own retirement planning and the future you will thank you for that

Here is the video below for your enjoyment. ~ Mr. IPO


Sunday, 26 October 2014

360 review - Pre IPO investments

I spent a while thinking what the subject header should read like. Should it be a sensational one or just a boring 360 review....zzzzz... make sure you read till the end of the post....



What are pre IPO investments?

You can find the definition here. In lay man terms, it is to invest in a company just before it goes for listing, usually 6-12 months prior to listing. For early stage investing, it will be called venture investing, so don't confuse a VC investing, with growth investing with pre-ipo investing. They are all different and has different risk reward profiles. The strategies are very different as well. You can have a quick comparison between the various strategies i mentioned above here in terms of risk profiles and returns.


Is Pre-IPO investing a high risk game?

Is pre IPO investing risky? Of course! In fact it is so risky that SEC actually has some advisory on it. The link is here.


If the Company fails to be listed or fold up, you will lose the invested capital. 

Have i invested in pre IPO company before?

In case you are wondering, my first pre IPO company was in a Chinese S chip in 2008. I have to say that I was quite lucky to get out unscathed despite the financial crisis due to a personal put option we had against the founder and we opted for cash instead of shares when the company was listed. The share price tanked post IPO (See chart below) but luckily the returns was locked in at around 1.66x with high teens IRR (based on my recollection) after 4 years. The share is still listed today but is languishing below its IPO price due to lack of investors' appreciation for Chinese stocks. It was a small investment which i co-invested with my ex colleagues.


How you make money in a pre-IPO investment?


This is a pictorial view in an "ideal" world where you invest at a lower valuation before the IPO and the Company's business plans progressed as planned and managed to list at a higher valuation 6-12 months later. Hopefully, the Company can continue to grow its earnings using the proceeds from the IPO.

You might ask why the Company even want to have Pre-Ipo investors in the first place. There are a few reasons for this.

1.The picture always look clearer with hindsight

At the point of investing for Pre IPO investors, the Company may be at an inflexion point where success or failure is a binary outcome. As such, pre IPO investors are assuming quite a bit of risk in return of a higher return. If things are so clear, investors would have piled into Alibaba, Google or Facebook way before they became 'big'.  Even the so called experts can missed it. I will just share with you some interesting articles in case you are interested in this private equity world.


2. The Company does not want to get diluted too early

By having a pre-ipo round at a lower valuation, the Company can issue less shares to tide their finances till the next big sale or milestone. This is less dilutive than having a full blown IPO. If the business plans did materialize as planned, the Company can sell its shares for a higher valuation in an IPO later.

3. The Company may want to have some 'quality names'

The Company might open a pre-ipo round to investors who can bring 'prestige' to the IPO later. For example in QT Vascular, the Company managed to get EDB and JnJ into the pre-IPO round.

The pre-IPO round can also be one way to 'incentivized' the 'who's who' to support the actual IPO later given that they would have a lower cost base. It can help to ensure a good IPO debut later. 

Some pre-IPO investors can also add value by helping to open doors and create new business opportunities for the Company.

What are the things a small pre-IPO investor should look out for?

This will be the things which i will look out for prior to investing.
  1. A sustainable business model in an attractive sector.
  2. A good story line at IPO and post IPO. 
  3. Reputable co-investors. Obviously i don't belong to this category but if i am investing alongside reputable companies and co-investors, it will be more assuring for me.
  4. Downside protection. There must be adequate downside protection to ensure the Company is able to redeem my shares in the event it can't be listed. 
  5. Upside. There must be adequate upside with formula crafted into the agreement on the conversion formula. In Singapore, it is usually based on a discount to the IPO valuation that ranges from 25% to 50%. 
  6. Lock up. There will always be at least 6 to 12 month lock up requirement. This is inevitable and usually unavoidable. One way to mitigate this risk is to sell some shares at IPO price and be subject to lock up for the remaining shares. In other cases, you just have to keep your fingers crossed that liquidity and valuation will continue for the next 6-12 months and allow you to exit from the investment safely.
Rubbing shoulders with the who's and who

Here comes to the crux of my post today if you bother to read till here. :-P 

Recently I invested in a pre IPO company alongside the who's who in the local investment scene. Those type of names who I know them but they don't know me. Haha. It's quite a key "milestone" for me to invest along side A.Wang, T.Goh and some other familiar names. Of course I ranked at the rock bottom of the list of investors in terms of the amount put in and has to practically "beg" my way in. I will not embarrass myself with the quantum here but in terms of milestone, I will regard this investment as my first official investment into the pre-IPO world. Wish me luck! :)

Mr. IPO is going to be famous !?

If the company is successfully listed next year and my name appears in the prospectus as a pre IPO investor, I am going to frame up the prospectus and hang it in my study room or create a tombstone from it hahaha. In case you are wondering, a tombstone looks like this....




Happy pre IPOing

Sunday, 12 October 2014

SRS Portfolio - 30 Sep 2014


Here is the portfolio summary as of 30 Sep 2014. 

There is only one portfolio company remaining and that is CM Pacific. I have also sold off Overseas Education when the 90c support level gave way. It was executed by my broker when I was travelling. 

I am back to almost 100% in cash and it is sitting at $116,620. 

If you have followed my blog for a while, you will know that I never hesitate to cut loss when the positions turned against me. I would rather preserve the capital than to sit through the unrealised losses. I will also set protective stops that let me get out at a profit then to see it turn into a loss as what you have seen my japfa position. My only "regret" is i should have sold it at 96c. :-P

This is just an extension of my character and personality. I don't like to hold on to losing positions and hope for the best. There is no "hope" in my investment or trading portfolio.  I wouldn't be happy if I am still holding to Japfa or QT Vascular now. You will have to find a style that suits your personality. Protecting the downside is important to me. 

360 - SRS Account

I am still thinking hard on how my investment strategy for SRS account should be. I haven't got a "landing" yet. Should it be focused on passive income or should it be for more aggressive growth stocks? Every time I think about it, I get a "headache". 

The reason why it is difficult is because I am a risk taker and to invest for dividend or for distribution income just don't sound right but at the same time I also recognize that having a steady stream of passive income is important towards achieving "financial freedom".

Let me give a further thoughts and see if I can get a landing. I will also share what I invested recently in a separate post.  

December is approaching soon. It's time to think about squirrelling some cash into the SRS account...

Till then. Happy SRSing.

Thursday, 11 September 2014

SRS portfolio 31 Aug 2014


The positions as of 31 Aug 2014 for reference. There are no dividends this month. 

I have liquidated JAPFA in my earlier blog post when the share price weakens. Similarly I did the same to QT Vacular this morning.  Having such volatile stocks in my SRS portfolio that is fundamentally not "value-oriented" and yet doesn't allow me to be "flexible" enough to take profit or cut loss doesn't seem right for the SRS strategy I am pursuing. 

SRS strategy

I am still trying to figure out what should be the most appropriate SRS strategy in relation to the 360 review which I have been doing for both myself and wifey. 

I will be spending the next few days thinking about it while gorging on the street food in Bangkok hoping not to get any stomach ache in the process. ^_^

Happy SRSing. 

Monday, 8 September 2014

JAPFA



This JAPFA has been a frustrating investment.

I first bought 50 lots at 85 cents on 19 August. The post is here.

The stock rose all the way to 96 cents. I have to admit that i was seriously contemplating selling it when it broke the interim uptrend line at 93c but given this is supposedly an investment account, i decided to hold on for the "long term".

However, i hate seeing a winning position turned into a losing one, as such i decided to close it off when the 90c support broke today. Sigh...

Happy SRSing ^_^

Sunday, 7 September 2014

360 review - Cash

I have shared with you in my previous post the importance of your career. Today I am going to cover another topic - Cash. 

Cash is king!

Cash is cash. What is there to talk about? Well, you must have heard of the cliche Cash is King! 

When I first started out like you, my starting pay was only $1,850. As such, I am literally "cashless". All my salary is used to fund my daily life and starting my family at a young age is not helping but it help instil a sense of responsibility and gives me a purpose in life. It is also the reasons and motivation in the pursuit for financial freedom. 

However, I worked hard in my career and the pay steadily increases over the years. 

Me and my wife are good savers, or in our initial years at least. Haha. We saved regularly and take only short trips to the region like China and Thailand for vacations. No such thing as flying to Europe. We always spend within our means. 

Credit cards are bad 

I have seen real life examples of people who spent beyond their means and abuse the credit cards. In that process, they have dug for themselves very deep holes. They go for fine dining and luxury vacations, pay the minimal sum each month and roll over the balance. If you think loan sharks are evil, credit cards companies are the Great White Sharks. The printed interest rate is only 2% per month. That translate into a nominal rate of 24% a year and I have not even included the effective interest rate if you roll over your balance. That will be interest on interest and the bank is making compounded returns from you!

If you can't control your credit card spending and always pay the minimum sum, my friendly suggestion is to cut off your cards immediately and plan to pay off the credit card debts before you even think about investing. Get your house in order. 

It's not how much you earn but how much you save!



I want to stress again and again that it is not how much you earn but how much you save. Earning more means that you can shorten the number of years that you need to save but it doesn't take away the need to save up. You can make $10,000 each month but if you spend $15,000 each month, you are worse off than a person who makes $5,000 and saves $2,000. 

Unless you are born with a silver spoon, you need to save up. You need to accumulate a sum of money for rainy days but more critically, be your seed capital. Without your seed capital, you can't break out of the rat race. The capital can then be deployed into investments such as stocks and properties. 

To purchase a property, you should have saved up for at least a 20% downpayment to avoid over leveraging. We will talk about 360 review on property another day.

Holding cash is a position

I am never fully invested. In other words, I always hold some cash. I hold cash in anticipation of both opportunities and crisis. It also serves for rainy days in emergency. 

What do I mean by opportunity? For example I am currently evaluating another opportunity to invest in a pre-IPO company. I have blog about such opportunities way back in 2008, how time flies! That investment turned out to be a good one despite the GFC. I will blog about it another day. 

Such opportunities come by every now and then and if I like the company, I can then deploy the cash. If I have no cash, having such opportunities will be meaningless as I can't take advantage of it.  I will be investing in the next pre-ipo company, i will blog more about pre-ipo companies in 360 - Investments next time.

What do i mean by crisis? During the global financial crisis, you will have to opportunity to invest in properties and shares. There will be at least a few "global financial crisis" in your life time, remember to make full use of it and you can get out of the rat race much faster than anyone else. However, if you have no cash to deploy, the crisis will further add to your misery as you watch the opportunities slipped by.

Isn't holding cash means losing money everyday?

I have shared with you previously that your cash is losing money every day. The post is here

So while saving is important, knowing how to utilize the cash to get a higher return while waiting for the opportunities and crisis is even more important. This is the reason why i trade the markets and punt the IPO market with my "war chest cash". I also recognize that investing for dividends and passive income is important, hence I invest for the longer term using my SRSKnowing your own time frame is also very important. I will blog about 360 - SRS funds in my future posts. 

Bonds for retail investors

It's good that MAS is finally relaxing the rules on retail investors investing in bonds. You will have more opportunities to invest into higher yielding and relatively safer instruments. However, I am personally not into bonds. The spreads are currently too low. The best time to invest in bonds is actually during the GFC where the bond like instruments are giving equity like returns and yet "safer" than equity given it's protection and liquidation priority over equity. The complacency since the 2008 crisis has set in again with borrowing rates and spreads at record low. 

Will history repeat itself? 

Frankly, I wouldn't be surprised, so get your war chest ready. A black Monday (or black swan) event will just hit the markets when you least expected it. I am expecting one to occur within the next18 months but I may be wrong of course. 

How much to save for war chest?

It really depends on what you are looking for. If you are investing in stocks, you need at least $100,000 as war chest to deploy into 3-4 positions for a return on investment of 2x. 

If you are investing in properties (not buying a home to stay), you will need between $250,000 to $500,000 to invest in a decent size property. The reasons why I favour properties over stocks because of cheaper financing, leverage effect and passive income while you patiently wait for market to recover. 

Are you ready if a black swan appears today?

If you are prepared, you will rub your hands with glee instead of panicking when history repeats itself. 

Save up today and you will thank me when the black swan appears. 

Happy saving up ^_^

Sunday, 31 August 2014

360 Review - Career

As promised, I will briefly run through the 360 review I did. This will be a series of posts whereby I share my thoughts and views on what I believe are important to achieve my personal financial freedom. Career, Cash, CPF, Properties, Trading, Investments and Travel. Each plan is unique so you will have to devise your own plans that is tailored towards your own circumstances.

I will not blog in any particular sequence but whatever that "inspire" me. Today I will blog about the first topic 360 Review - Career. 

Career

I have shared with you previously two posts on the topic.

Post 1: Your Career is very important
Post 2: Don't treat your career marathon like a sprint

If you are not doing your own business, then this will be the main source of income from which you can utilize wisely to fund your retirement. 

From young, I have been brained washed not to "job hop". My dad and mum both had their one and only job till they retire. Unbelievable but true for their generation. They used to frown very heavily upon job hoppers but have since changed their perception.

Job hopping is no longer a taboo

Job hopping is no longer a taboo and probably the younger ones don't really care anyway. However, you cannot be hoping from one job to another every 6 months. You need to build up some track record and experience and then try to get headhunted to the next role. Each role should give you give you a new experience (if you are changing industry) or higher pay (if you are moving vertically upwards) or better title (if you are moving from one competitor to another). If you can achieve a better pay with a better title in a better company, that will be the most ideal situation. However, make sure you are culturally able to adapt. Having worked through quite a few firms with very different cultures and bosses, i have to say i am pretty adaptable except that as i aged, with all due respect to ladies, i find it more difficult to work for female bosses.

How to get a higher paying job with better prospects?

To achieve a higher pay with a better title and prospects, the best way to do it is through the headhunters. As you progressed upwards, the compensation for headhunters are not aligned with the employers. They are on the same side as you because their final fees depends on a % of the annual package you receive.  A lot of jobs are never advertised in the papers. The job description reached the headhunters, who then run through their databases and then they will start profiling suitable candidates to be shortlisted for interviews. So if you have never send your CVs to headhunters before, start doing so and keep them updated as you gained new experience.  Always make it a point to send the CVs to the reputable headhunters in your industry even when you are not actively searching for a new role so that you are "always in their mind".

Headhunters have different specialization as well. Some are more well connected in the financial industry, others are more proficient in the manufacturing industry, etc. So find out the one that is specialized in your field of competence. 

One good website to hunt for finance-related jobs will be efinancialcareers. I think many headhunting firms in the finance space uses this portal to advertise their roles.

Is there secret formula to a successful career?

If you want a magical formula from me, i can give you one. It's the 3R.  

RIGHT TIME 天时
RIGHT PLACE 地利
RIGHT SKILLSETS 人和

There is no other formula i can give you. haha. No use being the most talented person in your firm when your boss is blocking your path and has no intention to change job. I have also seen many instances where the bosses left and someone then stepped "up" to be the new head. 

Right place and right time - probably you need some divine guidance but right skillsets, which includes EQ, can be learned. 

360 review on Mr IPO's career

Every now and then, i will take a step back and review my own career. Things i ask myself will be
  • Do i still enjoy what i am doing? Am i learning new things?
  • Am i given new roles and responsibilities or am I already stagnant in my role?
  • What are the pull factors? (pay, work-life balance, meaningful role and responsibilities, etc)
  • What are the push factors? (long hours, lousy bosses, bad culture, no flexibility, etc)
  • Is my pay pegged to the market and whether I have reached the "peak" of my potential. 
In my view, the best time to negotiate a package is when you have no push factors. This is where you will really weigh your options very carefully and not be blinded by the offer on the table.

In my life and line of work, i meet many talented and successful people. I have mentioned in my facebook page to work on your "Emotional Quotient". The people at the top have the right connection, right friends and right aptitude. 

Another area to work on will be your personal network. Treasure the friends, colleagues and acquaintances you make in your field of work. 

EQ + solid working experience + strong personal network = Well sought after professionals

I have been through 4 different jobs with 4 different cultures. I started work in 1997 and my starting pay was $1,850. I was headhunted 3x in my life so far. The first time was in 2000 (pay rise of 81%), second time 2008 (28%), third time 2010 (36%). I had wanted to start my own fund management company back in 2008 but on hindsight that will be probably be derailed by the GFC. 

Just to give you some ball park figures, the increment in pay from each change should range from 25% to 50%. 

How did Mr IPO fare?

I wouldn't say that I have done extremely well but I will say that I manage to grab some of the opportunities that come my way be it in my career or personal investing. The pay has also risen to a decent level where the family can be comfortable.

Although i have been "headhunted" a few times, please don't have the wrong idea that I have done very well. I am still far from it. 


What's next?

I think I have a few more years to go in my current role as there are still things to learn, fun stuff to do and talented people to know better. 


Learn to fish for yourself

While I mentioned that your career is important, I also stress that a skill set outside of work is important too. I would encourage you to pursue something that you are passionate about. Many second career are started from hobbies and passions. If I am retrenched one day, I can trade for a living, I can start my own fund management company, I can start a financial education company. I can start my own business. You will have to find a relevant skillset that you are passionate about. That is also probably the time where I will no longer need to use a stage name or be a Batman and do a Mr. AK from ASSI. Lol.

Happy being hunted

That is all for today. I will cover other 360 topics like Cash, Investing, Trading, Properties and Travel in separate posts.
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