28 December 2011

Things to take note when Investing in Shares using CPF monies

For those who are working in Singapore and with citizen/PR status, you will probably have to contribute at least 20% of your salary income to CPF (equivalent to EPF in Malaysia). Once your CPF-OA (Ordinary Account) reach more than S$20K, then you are eligible to use the excess money to invest in various financial products such as Unit Trust, Shares, Gold and others.

To invest in Singapore Listed Shares using CPF monies, you can only take out up to 30% of the CPF OA. Let us do the simple calculation here:

Scenario 1: Let's say you have S$15K in CPF-OA.

The maximum % to invest in Shares is 35%, so 35% * S15K = $5.25K. But because you got only $15K in CPF-OA and does not meet the minimum S$20K, so you cannot invest in shares.

Scenario 2: Let's say you have S$30K in CPF-OA.

Maximum Investment Amount is 35% * S$30K = $10.5K, but because you need to keep aside S$20K in your CPF-OA, so the amount that you can invest in shares is $10K.

Scenario 3: Let's say you have $100K in CPF-OA

Maximum Investment amount is 35% * S$100K = $35K, so you can invest S$35K in shares fully as you fulfill the requirement to keep first S$20K in CPF.


So once you decided to invest in financial products, you can go to any of the 3 Singapore Local Banks (UOB, OCBC, DBS/POSB) to open an CPF investment account. Things to take note when you invest using CPF monies:

1. Agent Bank Charges - Normally there is transaction/admin fees per lot per trade done for each shares. For example, if you buy 5 lots of Singtel shares, then you have to pay 5 * per lot per trade fees.  There is a cap of approcimately S$20 per transaction there. Another agent bank charges is custodian fees which is per lot per shares. So if you are using CPF monies to purchase shares, make sure that your portfolio return is better than those agent bank charges + 2.5% CPF OA return. 

2. Processing Time - Normally it takes about 1 week to open the CPF Investment Account. You can contact the stock broking firm to update your CPF investment account with them.

3. Shares that can be transacted - Please take note that only certain Singapore Listed shares can be transacted using CPF monies. Make sure that you select the CPF approved Shares before you buy, else the transaction would be settled by using cash.

I have a lot of friends who are using CPF monies to purchase financial products in the bid of beating the 2.5% returns in long run. However, I think CPF monies can only be invested in long term basis, as you cannot take out the profit immediately even if you make the profit from the stock market. So my suggestion is to use the CPF money to purchase stock when there is really a market crash. Then you would probably earn better than 2.5% after deducting all the transaction/admin fees involved in your shares investment.

23 December 2011

Client Account Review (CAR) - New Measure to Invest in Shares

SGX recently announced a new mesaure to invest in SIP (Special Investment Products) such as Foreign Shares, ETFs, and Structured Warrents etc. To fulfil the requirement, you must either obtain finance/business/accounting related diploma or above certification or profession certificate such as ChFC, CAIA, CFA etc.  You may pass the online quiz provided by SGX too.

So, what is the impact on Singapore Stock Market? I can foresee that there will be lesser speculators to trade in Highly Speculated Products. But it will not defer those who really wants to speculate to trade in the market.

My advice to you is to quickly pass the quiz online (https://onlineeducation.sgx.com/specifiedinvestmentproducts/) and so you can still able to trade in Special Investment Products.

22 December 2011

Technical Analysis - Good technique to use?

Technical analysis is used by a lot of stock traders and investors to determine the timing to enter or exit the market. I am not so good in this, as I know that I have little time to learn about this. In fact, I would like to focus more on the stock that I invest in.

For example, if I know that the company that I invest can give me a return of 1000% in 10 years time, there is no point for me to keep on buy and sell the shares. But if I cannot find out the shares that can guarantee me the return, then I may use some of the indicators to find out the shares that I can invest in.

Majority of the investors would choose to select a stock just based on few minutes from the chart search. I think it is quite similar to a gambling. (But If you are good in technical analysis, then you can teach me on that, because I really have no clue on that). I am going to join the TA courses conducted by my company and hopefully I can get more clues from there and share with you here. :)

Last but not least, Merry Christmas and Happy New Year.

13 December 2011

Some Guidelines on Constructing a Stock Portfolio

From my previous post - Why do we construct a stock portfolio, now I would like to share with you on how to construct a stock portfolio.

Based on my previous experience, I found out that constantly performing a portfolio rebalancing at least once a year would beat the 'Buy and Hold' strategy unless you can find some extraordinary shares that can beat others in long run. So, with portfolio rebalancing in place (e.g. Buy and Sell to maintain a Strategic Asset Allocation ratio is crucial to stay through the up & down of the market).

In Singapore/Malaysia, you do not need to pay for the capital gain. So it really depends on you on how to take profit and cut loss depends on the market condition. The Thumb of Rules on constructing a stock portfolio is shown as below:

Maximum % of Stock in your Portfolio = 100 - Your Age

For example, if you are a newbie investor, then above rule is quite good for you. This is based on the assumption that your potential Total earnings will be reduced over time and you need more cash flow when you are reaching retirement age.

However, this is based on your 'mentality' and 'risk-adversion attitude' towards 'unrealized gain/losses'. I was once near to 100% invested all my cash in stock portfolio. I also borrowed money from my parents to buy shares and able to return money to them after few months later. Why was I able to do so? This was because I invested in shares since I was very young and at that time I lost a big portion of money in the stock market. However, as I started to work and able to get more cash flows, I used it to put it in the stock market and treat it as a long term investment. Once you started to invest with a smaller amount, the amount that you lose in the stock market will not be much. Then you can start investing like 'Monthly-Investment-Plan', which allow you to continuously put in the money in the stock market as and when you have the extra money after deducting the daily expenses budget.

Next, once you started to invest in monthly basis, then you would be able to keep on monitoring the market movement and decide whether to sell or buy. Normally I would encourage you to do homework on the stocks you buy before you invest into it. This is because stock portfolio is different from Unit Trust, as you will be facing concentration risk. However, you can reduce those risk by investigating in details on the stocks that you are interested. The first rule would be 'Make sure the company will not go bankrupt or delisted'. You can only buy the 'Good Quality' stock. How to know whether this stock is in a good quality?

1. Consistently higher ROE compared to the peers.
2. Able to generate cash flows / dividends in consistent matters.
3. Able to grow sustainably in long run.
4. The management focus on their core business for quite a long period.
5. The management has the integrity and responsible to the small shareholders.

Once you get the 'Good Quality' stock, then you can start accumulating the stocks in a portfolio. Normally I would suggest you not to hold more than 35% for a stock in a portfolio when you just started to investing, even if you look very good on this business, but the good thing of being a shareholder is to know to sell your shares when market condition changes.

Try not to concentrate on one sector for your whole portfolio, as you may experience a huge volatility of the portfolio value. What you need to do is to pick the best stock in that sector and select another best stock in other sector. You will then be more comfortable on investing in long run.

Cash - Stock Percentage in the Portfolio is crucial, as you can reduce the risk of not able to 'Buy in Bear Market' or not able to 'Sell in Bull Market'. I would encourage you to manage a Cash - Stock percentage in 25:75 to 75:25 ratio, so you will not be too over confident or too over pessimitive to the current market.

If you ask me, why would I risk myself to invest in a downturn? My answer is - I cannot tell when is the best time to buy / sell. But I believe that the revenue and net profit will be growing in long run (say, 10 years) and if you have a long term investment horizon, then you should be able to Buy at Low Prices and Sell at High Prices.

Welcome for your feedback. Have a nice day. :)

12 December 2011

Iskandar Malaysia News - 12 Dec 2011

JPO planned to increase their stores from 70 currently to 130 through RM100M in investments expected to be completed by next year with a water theme park, convention centre and a 2,000-room hotel setup there.
Legoland Theme Park will be opened to the public by end of 2012. I believe that the income from tourism will be increasing significantly especially now people can have more choices to stay longer period in South East Asia. They can choose to go to Johor Bahru after visiting Singapore and take a flight from Senai Airport to another destination or vise verse.


Below are the part of the news source from Bernama.

Source from Bernama:

Iskandar Malaysia that receiving RM78B investment can now creating thousand of jobs to employment seekers, said Johor Human Resources, Science, Technology and Innovation Committee chairman M. Asojan.

He said since its launch at the end of 2006, over 50k job vacancies in various sectors of the industry were created in the development corridor.

"We expect 800K more jobs to be created in Iskandar Malaysia throughout the development period from end of 2006 until 2025," he told reporter after attending the Johor Skills Development Centre (Puspatri) convocation cermony at the Persada Johor Convention Centre, here today.

Why We need to Construct a Stock Portfolio?

Yesterday I happened to saw that Kim Eng Investor Club was having a 1 day course with regards to constructing a stock portfolio. It is a $50 dollar course that I think it can benefit you on constructing a stock portfolio.

Back to the title, first of all we must understand why do we need to construct a stock portfolio before we gotta know how to construct a stock portfolio. According to a modern portfolio theory, that diversification tends to reduce the individual risk. For me, I would like to diversify the portfolio by 3-5 stocks in a portfolio. Let me explain to the reasons why we need to have a stock portfolio to you first:

Reason 1

I am using Cash & Stocks in my Total Portfolio. As the cash can minimum earn about 4% - 5%, hence I would only invest into the stock market if the stocks that I invest can let me to earn more than 5% per year.

Reason 2

I have limited time and energy to monitor all the stocks in the stock exchange. Although I do access to the information in the stock market, but it tends to make over fed by the information in the market.

Reason 3

I would take a longer time to find out which stock that fulfill my stock selecting criteria, such as PE Ratio, ROE, Dividend Yield, Current Ratio, Debt-To-Equity Ratio, Growing Propect etc. It is unwise if we just want to diversify the stocks to those that not fulfilling the searching criteria.

Reason 4

You may experience a higher volatility of the portfolio value in short run. But if you can take time to do your own homework, and find out the stocks that worth to be invested and set your buy price and sell price target, I believe that you can still able to beat the market. This is based on the theory -

Reason 5

Over a longer term of investing, I found that performing a portfolio re-balancing on timely basis for portfolio that I hold, I could actually achieve a better result compared to just buy and hold strategy. This happened because the particular stocks may react more or less on the market news, and we could actually make use of the information and access whether we add or reduce our position in Equities. If you already construct a stock portfolio, you may actually Buy 'Undervalued' stock and Sell 'Overvalued' stock. It is hard to define whether the stock is 'Undervalued' or 'Overvalued' as we tend to not to buy the shares when the market is dropping and tend not to sell the shares when the market is rising.

Okay, now you may say - "I understand the reasons behind now and want to learn how to construct a portfolio, please tell me more". I shall share with you on next few articles here. So, please stay tuned.

09 December 2011

Singapore Property - Another New Measures that Hurts It

The government's latest round of property market cooling measures - imposing a range of additional buyer's stamp duties on private home purchases - helps most genuine owner-occupier buyers, specifically citizens and permanent residents who may be affected by affordability issues.

Wednesday's announcement of an additional buyer's stamp duty of 10 percent for foreigners and 3 percent for Permanent Residents already owning one or more properties and for Singaporeans already owning two or more properties caught the market by surprise.

In my own opinion, this will give a negative impact to Singapore private property market, as well as its HDB resale market. Developers with many unsold units would have to spend more years to clear out it stocks. And to answer whether it is a good time to start accumulating stocks now, I can't give a clear answer but we will see the impact by another next few more quarters.

"Cash Is King" is always a good choice when we can foresee that the market is dropping. Let's wait for the bad time to come and buy it at cheap price. :)

05 December 2011

Cyclical Stock VS Defensive Stock

Today I would like to share with you more on the concept of investing in cyclical stock vs defensive stock.

Defensive stocks means that the share performance is not impacted much by the macro-economy environment as their revenue actually not really affected by the market. For example, people still need to eat when the market is in the downturn. Normally defensive stock fulfill some of the criteria:


  • The revenue and earning growth is growing even if the market is not performing well. 
  • Cash Cow Company - Those companies normally is having a lot of cash flows since they do not require high CAPEX (Capital Expenditure to purchase a lot of Fixed Asset)
  • High Current Asset Ratio - As they do not require a lot of debt to grow their business, hence they do not really go for low Current Asset Ratio. 
  • High Interest Coverage Ratio - As they do not borrow much money from bank, hence they also do not need to pay more to bank for loan. 
Cyclical stock normally react more than what market reacts when the market turns better or worse. Normally you can see some patterns there: 
  • High Debt to Asset Ratio - Normally those company will borrow a lot of money when the time is good and prevent it from having cash flow problem when the market turns worse. 
  • Inconsistent Growth in Revenue and Earning as well as Cash Flow - As the cyclical stock will face difficulty during downturn and enjoy a very fantastic growth when the market turns better, hence it is showing inconsistent growth in revenue and earnings. 
  • Normally you will see some industry is experiencing this - for example Coal / Iron / Palm Oil / Exports / Construction etc. They require a lot of cash flow to strive through. 


Different investors will have different required return and risk appetite. If your risk appetite is low (for example, if you do not like to experience 50% losses in a year), then my advice to you is to avoid those cyclical stocks. If you are OK to experience 50% temporary loses, then you may go for the cyclical stocks. Be make sure that you fully understand that industry and also the company's management's ability in fighting through the hard time (at least not having problem on cash flows).  

You can drop me an email to share about your views on my opinions on this topic. Have a nice day. :)

02 December 2011

Iskandar Malaysia Progress (Dec 2011)

Johor Premium Outlet is launching soon at the Indahpura City, Kulai which is about 1 hour drive from JB downtown. Legoland is also targeted to be completed and launched next September 2012 and boost the tourism industry in Southern Johore area. With few University starting at Nusajaya and more foreign direct investment flow into this area, I believe that Iskandar Malaysia is definitely another growing engine for Malaysia.

01 December 2011

My Portfolio Update + Opinion on Current Market Movement

My Cash + Stock Portfolio Update (1 Dec 2011)

Stock - 52.78% - MSIA - 40.76%, SG - 12.02%

Cash - 47.22%

Long term Investment strategy would be at least 50% in Equity and can be Up to 90%. The bear market (Or so called 'weak market sentiment') started since August 2011 and I would foresee another few more months to go. It takes time for a government / countries to have a critical decision be made to stabilize the economy as well as its socio-political issues.

EUROPE - Euro is still at the weak side compared to USD. As more governments are taking efforts to discuss and solve the problem together, I do not see a further deterioration of Europe economy. It can only be better after it becomes worst.

US - If we can see a better decision made in between the two parties to solve domestic problem in USA, we would see a better economy in 2H 2012. Of course you can be patience enough to wait for economy recovery which we can only see the impact by 2H 2012.

CHINA - China govn. nonetheless is still battling for the inflation as well as its export directed economy. For my humble opinion, I believe China govn. can still cope with its economy as it is controlled by one party and the policy change made can be faster than Europe / US.

SG - Singapore Economy will slow down to expected 1-3% growth according to Sg. Govn. Forecast. In my own opinion, I hope that SG economy can return to its normal growing speed at 3-5% per annum after 2H2012. So far I still cannot foresee a long recession in Singapore thanks to its government efforts on monetary policy as well as "Open Economy Policy".

MY - Msia will be undergoing an election next year. Normally we will see a better economy environment on the election year (in general). Nonetheless, I do hope that Msia Economy can be better than last year due to its export sector (e.g. Palm Oil & other commodities, Tourism, Export sectors etc.). With labor cost rising in China and disaster at Japan/Thailand, I hope that there will be more FDI coming in to Msia.
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