This morning, 2 young guys showed an IT dinosaur (that would be me) what a Personal Finance Management App is all about.
Quite cool. You can consolidate all your banking and credit card accounts into a single mobile platform and have a clear overview on your liquid net worth in your palm. Remember some bloggers were talking about personal Cash Flows recently? Well, this app is oredi one step ahead! Got pie-charts and bar graphs that would please our Mr fisherman qian-bei, you cannot lie to yourself any longer...
Whether you are cash flow positive or negative every month, which spending category you have spent your money on (wine, women, or song), its all there! Warning: Those who can't handle the truth better don't download this app.
I don't think you need me to remind you only use this app in the sanctuary of the toilet if you are married. If your wife sees you spending a lot of $$$ at Orchard Towers... Hey! Don't look at me!
I love it! I'm a city walker. I enjoying getting lost in the side and back streets of Taipei!
Some of my Singaporean colleagues hate it though... Not used to it.
I still remember my first business trip there.
When I walk down the street near my hotel, I see residential apartment blocks mixed in with office buildings, over here there's a car repair shop, next to it some eateries, then further down more workshops, and lo and behold, a small night market hidden from the main road!
Eh... What happen to zoning and urban planning?
In case you not aware, Taipei is one of the star example if you want to find a city that has "grown" organically bottom-up to suit the needs of the city dwellers.
Singapore of course is the opposite.
We take pride in our cookie-cutter top down urban planning where no hair is ever misplaced. Everything is planned years in advanced. Those interested can take a look at URA's Master Plans for the future.
No surprises. No spontaneity.
But we win awards.
Strata-titled versus mall management
When it comes to Singapore shopping centres, I am impressed by those that are managed by CapitaLand.
Why even in Shanghai, the Raffles City Shanghai opposite People's Square is now a landmark there. Makes me feel at "home" during my 4 years there.
It shows the power of top-down centrally planned mall management - when it works!
Of course, there are poor poseurs for mall management at some of our shopping centres. We know it immediately when we enter. Something feels off..
I have a habit of going to the information counter to check who is the mall management. Occupation hazard, I guess...
Then there are the strata-titled shopping centres. Some are doing well; some suffering badly.
Let's take Queensway Shopping Centre in my backyard. Its still thriving all these years! Despite having no anchor tenant and no being able to chose your tenant mix. Everything is like pot-luck!
It's not top-down centrally planned, but organically grown bottom-up a bit like Taipei city.
However, if we look at Holland Village Shopping Centre, another strata-titled mall, things are not looking so rosy..
For those of you using Blogger to blog, do you face the same problem?
Guess from which countries are the top ranked when it comes to my readership?
Russia and Ukraine!!!???
And one some days, USA. Power right?
I have an international readership despite writing in my colloquial Singlish style and Chinese. Look ma! I or-yi-or Tarzan (泰山) or what?
Of course these are from those spammers or something. All fake readership lah!
Don't look at me; I've no clue how to stop them.
That's why its always good to have a counter-balance KPI measurement to keep us honest.
I have another free StatCounter to track my readership as somehow its able to filter out and not count visitors from "strange" countries.
Imagine I'm a "bei kambing" buyer of advertorials or ad spaces in new media. Bloggers print screen their readership and pageview statistics I believe. I toad or what?
But if I know what I know, since I'm an "insider" as a blogger myself, do you think I know better to look beyond the numbers and ask for "trust but verify" re-confirmations?
Fundamental investor and street smart
If you are a fundamental investor, have you found yourself scratching your head when you "analyse" the numbers, the market price somehow don't move accordingly? Like no logic one?
Bad numbers; price goes up.
Good numbers; price goes down.
Want to bet these companies you analysing are in sectors you have never worked in or no clue about?
You work in banking and you trying to make sense of mining companies...
But when it comes to banking counters, you are super good at CSI. You know instinctively which rock to turnover!
Have you come across some forum members or bloggers who are very sharp when it comes avoiding certain listed counters despite seemingly great numbers?
I share one example.
When shipping trusts were first introduced, they offered a higher yield than REITs to entice yield hogs to bite.
Of course when you make an IPO, you put your best foot forward.
At this Valuebuddies forum, there were some sane voices who "warned" others on the sustainability of their business models.
I myself was acting Transport Manager for a time, and working in Supply Chain, I am in close contact with my shipping counterparts whom we have lots of exhilarating "battles" - I want shorter leadtimes, more carrier choices, and fewer stop-overs; transport focus on cost savings and fewer optionality.
And they hate me for knowing all their "bawu" (secrets) since I was in transport once...
Luckily, despite the then yield of 8-9%, I pass on Shipping Trusts.
Risk is not knowing what you doing
See? So what if we call ourselves "investors"?
If we can't read beyond the numbers, or ask the right "trust but verify" questions, how are you any different from a gambler?
Invest - risk capital to capture (outsized) capital gains and/or income.
Saving - seeking conservative yield in return for no risk to capital (in nominal terms).
Why in nominal terms? Well, if you include inflation adjusted returns, it gets us no where since you and I know the CPI is just a statistical index. What we chose to include and exclude, we can manipulate it to whatever we want to show.
For eg, if CPI shows inflation is 3.5%, then voluntarily contributing to CPF OA to get the 2.5% interest is "dumb"... When it isn't necessarily so. Especially when the more you invest, the more you lose... Ouch!
I am also excluding bankruptcies to banks and insurance companies, collapse of governments, regime changes, tsunamis, earthquakes, fire and brimstone scenarios. I think you know why.
But its not unimportant.
This scenario is relevant when you are super rich. That's why you see the super rich spread their assets and money across different geographic jurisdictions and their wealth denominated in different currencies.
Just look at the rich Indonesian tycoons. They even send different members of their family to different parts of the world. One daughter in Hong Kong, one uncle in Singapore, one nephew in New York, another cousin in London. This way, if the patriarch is jailed or purged, the business empire will carry on.
Chose you own poison; not offered by others
Is the above invest and saving distinctions important?
No and yes.
If you know what you're doing, then its not important.
But if you are easily "sold to", then it may help to find out whether you can accept losses to your capital and seek the "right" instrument or vehicle accordingly yourself.
Examples of mismatches of what you think and reality
1. You regularly saves $2000 per month to your savings account as you are clueless to investing. However, that sweet tight skirt at the bank convinces you that you'll get a much better "interest" return if you channel that $2000 per month to a regular monthly "savings" program into the STI ETF. After all, in the loooooong term, the projected return is 8% right?
2. That insurance "friend" of yours persuades you that you should "invest" and not let money rot in the bank. So you bought wholelife and endowment policies thinking that you are "investing". Which is not so bad by itself if you wish to have a comfortable nest egg by 65, but if you have delusions to be financially free by 40...
When successful "savers" are most at risk
Have you read in the papers some victims of scams are in their late 50s or 60s? And the amounts they have lost are in the hundreds of thousands!?
You would wonder how on earth these people with some many years of life experience under their belts can be so "bei kambing"?
Same goes for the big amounts of money some of our retirees have lost "investing" in properties and stocks once they have access to their CPF funds.
If all of your whole adult life you have been "invested" in saving instruments and vehicles, its understandable when you have access to hundreds of thousands or even millions in your 50s or 60s, you would think you are "better" than your peers.
Forgetting that money you have, but you have not built up your craftsmanship in investing all these years.
The reason for starting young in investing is not the power of compounding so evocated by so many books. That's the saving route.
The main reason for starting young is so that you get yourself inoculated by the slings and arrows of the investing arena.
You personally have lived through a few bull/bear cycles, know how it felt to swear buy and hold only to see your stock goes to zero...
Experience the euphoric highs of a 10 bagger, forget to take money off the table, and let it turn into a 2 bagger. You didn't lose money, but still...
Say your REITs are under water by 20% but if you add all the dividends collected, you are breakeven. Then realise that's not the purpose of income investing - use the bricks of the eastern wall to patch the hole in the western wall? You invest to breakeven?
Its much better to lose all your money in your 20s than in your 60s.
The best reason to start investing early is to know yourself.
Without doing, how to know whether you are cut out to be an investor? There's no shame in taking the saving route (OK, harder to impress that "chio bu" at the pub; but you'll attract the gold diggers).
There are times when I am anal when it comes to precision in our choice of words - we mean what we say; we say what we mean. (Of course it helps if we have a wider grasp of vocabulary)
However, there are times we should not let the trickery of words fool us. Nor get trapped by words by insisting to split hairs when it comes to semantics...
Today, I shall illuminate the difference between investing and saving.
When we invest, we tend to think in terms of windfall. Its the emotion of greed. We try not to admit it, but deep down we know it is.
We also know there is a possibility of loss. Like starting a business, completely loss of our capital is real. Again, conscious or unconscious, we acknowledge this fact.
The synonyms for investing are: gamble, speculate, punt, wager, bet, venture.
When we save, we are not expecting fireworks, thunder, or lighting. It like planting a acorn and hope one day it will turn into the giant oak.
We don't expect to lose our capital. Planting is not like going into the forest to hunt for game. Underneath the veneer of conservatism is the emotion of fear.
The synonyms for saving are: preserving, conserving, keeping, safeguarding, maintenance.
Various Instruments of Torture
Voluntary contribution of CPF is saving. So is transferring of CPF OA to SA.
But the moment we invest our CPF funds under CPIS, its investing. Hence the majority as in 3/4 of CPF members who utilised their CPIS underperformed the low CPF hurdle of 2.5%...
2. Bonds and Debts
Buying short term duration triple A rated bonds and holding them till maturity is saving. You won't lose the capital.
Buying Greek bonds is investing. I don't care long or short term duration!
Buying bond funds is investing. Capital loss is real. (Too complicated to explain here)
Buying unrated corporate bonds is investing. That's why they are known as junk bonds.
Lending money in peer-to-peer platforms is investing. Don't cry default when you are getting 18% yield as compensation. Or course the borrower is glad as if he would to borrow from credit card companies with no collateral down, he would be charged 25%! Make a guess where the missing 7% went?
3. Life Insurance
Noticed I put a "Life" in front? That's precision. Insurance without the Life in front is totally another ball game altogether...
Wholelife and endowment policies are saving. You will recover the capital intact. The projected "return" is not returns as in investing returns. They are more like savings or fixed deposit interest rates.
However, there's a big "but". Wholelife you must hold till 20 years and beyond, and for endowment till maturity. Its no different from bonds or voluntary contributions to CPF. The price for capital protection is you must accept your money to be "locked-up". No free lunch!
Investment-linked policy is investing. Albeit one of the dumbest kind. You not only pay management fees to the investment portion, you also pay the sales commission so your agent can take that holiday to Europe. And you thought buying unit trusts from banks with a 5% sales charge was dumb!
Term policy? This one is unique. Its neither saving nor investing. It's like those other sort of insurance without the Life in front.
For eg, if you bought travel insurance and nothing happened during the trip, the premium you bought that travel insurance for is now money down the toilet. This is like Dirty Harry, "Do you feel lucky? Well, do you!?"
4. Equities and Properties
Of course its investing lah!
Although some "investors" thought by calling themselves "Passive Investors" they would be accorded immunity. I not investing what? I passive! See? I'm just "saving" money every month into this ETF...
5. Gold, Silver, and Bitcoins
Those who bought gold at USD $1,800 per ounce as an inflation hedge is finding out the hard way what the synonyms for investing are... Not saving right?
Look! Just cut your tennis balls in half and you can save more space! Wah lah! Don't laugh. Just look at some of the shitty financial "advice" out there: 1) The more you spend the more you "save" kind... Enough said. 2) Collect air miles and fly or upgrade for free! Hello, unless your Ah Kong (corporate company) pays for the air tickets, or you charge your business expenses on your personal credit card, these air miles are not "free".
3) And then there's this come here little mouse... See the loops and hoops over there? Now jump through all of them and we'll "reward" you with a little cheese as in 1% extra interest. That's how Jedi use their mind control technique on feeble minds...
Tip: Try to see things from the perspective if you are the sales or marketing maverick making the above proposals to your bosses. Why throw away good margin away by offering these "incentives" to your customers? What would you say to "sell" why its in the best interests of your corporation to do so?