Anything That Interests Me! :)





Sunday, June 15, 2014

How to buy stocks in Singapore through POEMS and how to do simple DCA

This post is dedicated to CT, who asked me about commodities and how to buy stocks in her Philips account (POEMS), as well as about blue chip investment on a regular basis (some form of Dollar Cost Averaging). 

Hi C :)

Here's a simple post to help you get started with buying stocks through POEMS and how to conduct dollar cost averaging - although I'm not an expert in POEMS or Philips, I guess my experiences with Lim & Tan should be roughly similar, and hopefully that will provide a guide for you. I use the trading platform by Lim & Tan. 

Hopefully for some other people starting up their investment journey with POEMS, this might be useful for them as well. 

However, of course, as with any post here on this site: in no way does this constitute professional or commercial advice, and you should think through what materials you read here. In addition, while these materials relate to CT's experience and context (imperfectly, of course), these materials are general advice and ideas, and should not be taken to be professional advice. In fact, one simple and nice rule you should live by is that financial advice often has to be thought through carefully and applied to your own context. I'm not a financial adviser, and am merely sharing my opinions, thoughts, and experiences. 

OK, having said that, there are two parts to this article - one is on simple admin that will hopefully get you started, and one is on the theory and practice of Dollar Cost Averaging. You can do simple DCA yourself from the comfort of your home, and knowing how disciplined you are, it will be a simple and easy method of investment for you. 

How to get started:

First, read the materials on this page to get access to your account and to start trading on POEMS:

http://www.poems.com.sg/p2/trainings/

If that is not how you access your account, and you instead access it from a mobile phone (POEMS mobile), read the materials on this page instead:

http://www.poems.com.sg/index.php?option=com_content&view=article&id=190&Itemid=260#

At the bottom of the page is a nice "demo" which will show you how to get started. 

Second, if there's anything you're unsure of, there should be a broker (or agent?) attached to you, and whose number you should know. 

Call that person and ask for help with logging in and buying or selling. 

For instance, my broker is a gentleman by the name of W, so I just call him up every time I need help in terms of admin (and occasionally because I do silly things haha). Take note that generally these people do not give you financial advice, but they are there to help you execute trades. (Occasionally these people do give you advice but this is of course... let's not go there. Never ask a barber if you need a haircut, as my wise daddy always says.)

Dollar Cost Averaging for Blue Chips

This second part is for another question that you asked me :)

You can do DCA on your own for blue chips, and there's absolutely no need to invest with a bank or any organisation. 

In fact, you can do DCA for penny stocks too, which I personally feel is better because blue chips are really expensive. 

You can do it all on your own, which would be simpler for you. 

First, what is DCA? 

I ripped this definition off the internet (from Investopedia - yes, one must always cite one's sources and be intellectually honest):

"The technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. More shares are purchased when prices are low, and fewer shares are bought when prices are high.

...  Dollar-cost averaging lessens the risk of investing a large amount in a single investment at the wrong time."

There are many pros and cons of this, which can take me a long dinner or supper even to explain, but let's just say for the purposes of this article that we are focused on the how and not the why. 

How do we apply DCA in real life, and not let the bank handle this for us?

Step 1: Identify some blue chip stocks of your own, or identify the blue chips that the bank intends to buy. 

CT, you were interested in commodities, so you could perhaps choose one commodity blue chip. 

Maybe choose also a bank or a construction firm also, or something like that. Personally, I hardly ever invest in blue chips, so I would invest in penny stocks instead, but it's up to you. Just identify a few companies you would want to invest in for the long haul. 

In my view, the central premise or core idea for DCA is that, in the long run, stock prices generally rise despite the fluctuations up and down, and this method helps you invest continuously without worrying about market timing. 

Also, there's another simple rule here you may want to follow - try to get stocks that are negatively correlated, or at the very least, stocks that are not correlated. This means that as the price of one stock falls, the price of the other stock does not fall. Oil companies and airlines are the best example. If the stock price of an oil company starts to fall because of, say, declining oil prices and revenues, then the stock price of airlines should rise as their costs of production will start to fall (presumably due to cheaper oil prices), ceteris paribus

Why would you want to do that? If you buy a stock that is positively correlated with another one, if one falls in value, the other will fall also and you'll be caught off-guard. For instance, if you buy two palm oil companies, and there's bad news for palm oil, instead of facing one stock going down in price, you will have two stocks going down in price also. 

Step 2: Decide on a fixed amount of money you're willing to invest, and the regular interval at which this will happen. 

For instance, $1,000 per month is the fixed amount and I will invest at an interval of every three months. 

(Personally, it's my view that the larger the investment sum, the better for you, because the transaction costs you pay will be much lower as a proportion, mathematically speaking.)

This makes a $3,000 investment once every three months, at a specific day. 

Step 3: (And this will work for you, CT, as you are dedicated and very disciplined) Invest the money on the specified interval. 

Log into POEMS and buy say Stock A and B (your identified basket of stocks). 

$1,500 goes into A, and $1,500 goes into B. Round up the lot number, so for instance if it's 1,990 shares, just buy 2 lots (2,000 shares). This is a matter of convenience for you, and also so that you don't have to worry about odd lots (lots that do not end in ",000") in future. 

Hope that answers your question, and hopefully you think through carefully about what you are doing, and then commit to your own DCA. 

People say that DCA works over the long term and is best for novice or inexperienced investors, so I guess it would be a good start for you. 

[ Oh, by the way, according to the way that we have set up your POEMS account, the dividends from the stocks should be regularly credited to your bank account once, or twice, or even more than that, every year. Dividend from stocks are tax free from your point of view, so I am sure you'll be happy to know that :) ]

I certainly don't do DCA - I do lump sum investing where I go long on stocks that I really have researched a lot on, and I do some form of asset allocation. 

Nonetheless, hope this article gives you insight into what you want to do and hopefully it helps you!

Thanks for reading and cheers :)

Anything that interests me!

Friday, June 13, 2014

Some Simple Steps to Financial Freedom?

This post is dedicated to WL & YC.

This evening I was treated to a wonderful meal by some former economics students who learnt about economics and finance from me. Our evening's discussion was interesting and wide-ranging, and it was fun to catch up with them over dinner. 

I was asked a few interesting questions about steps to financial freedom or financial independence, and it is one of the topics that interests me, so here's a post on easy and simple steps to financial freedom. Some of the ideas I thought of on my own, some are from research done on the internet, and some are just pure common sense, which I thought I'd like to share. 

None of these ideas in the following discussion, of course, constitute professional or commercial financial advice or investment tips, and all ideas written here should be considered in terms of principles, concepts, and ideas, rather than specific financial advice. I'm not a financial adviser, but in any case I'm sure I will write a more advanced version for my other blogs, since this topic interests me and probably interests many people in general. Take note, further, that while the steps may be simple and easy, implementing them often takes great discipline and effort, and people aren't often consistent or disciplined. Nonetheless, this might be of great use to people who can think through issues or who would like to see the ideas that I have collated and would love to share - would definitely be worth a read! :) 

Here are some simple steps to financial freedom that I have read about (or are pure common sense), which might be helpful to income earners or people planning ahead for retirement. 

Set your financial goals and objectives. First, the most important thing is about goal setting and objectives. You must first think about your life and what you really want. What does financial freedom or financial independence really mean? If you want a luxurious life full of luxuries, then clearly the passive income you might need from investments would be much larger and harder to achieve compared to someone who wants a simple life with basic necessities and occasional luxuries. Are you thinking about having the freedom to work as you please, and for who you like? Or are you thinking about having enough for subsistence? Clearly there are many possibilities, but if you fail to plan, you plan to fail. Some people suggest using SMART goals - specific, measurable, achievable, realistic, and time bound (meaning that there is a time limit to what you are doing); this might be worth a big shot. 

Why? It should be clear that different people have different goals and objectives, but the idea is to make sure you know what you are doing and why you are doing it. Why is more important than what, since after all it means that you will be more motivated, inspired, and able to achieve what you want, compared to someone who doesn't know why he is doing something. Be sure to know why. Personally, I want to have the freedom and time in future to pursue the many hobbies and interests that I have, and so having the financial means to do so without worrying about my paycheck is a very strong incentive for me. 

Spend less than you earn. Next, the central idea that many people write about - and I agree - is that you have to spend less than you earn. Simple idea. Spend less than you earn. Live beneath your means. 

Earn additional income. In fact, if need be, take up extra jobs or work harder to gain additional income. Earn additional income. 

Grow your money. With the money that you save from spending less than you earn, invest the money. This will take a whole post to write about, and certainly is an important topic, but the idea is simple here - don't let the money accumulate under your bed; invest your money and grow your wealth. 

Get passive income. On this note, many people suggest gaining passive income through investment in stocks for dividends, and bonds for interest, and, for the more conservative amongst us, placing money into fixed deposits might be a good idea. In simple terms, remember to invest your money rather than just putting it into a savings account. Personally, I invest heavily a lot in the stock market and aim for both capital gains and dividend yield. 

Reduce your existing debt. The first thing many people say is: try not to get into huge debts, and if you have an existing debt, try to reduce it as soon as possible. Make sure you pay off your debts. Now, I have a different opinion on what many people say. Many people say, don't borrow; try not to get into debts at all; and debts are bad. I would say instead that it really depends on what the debt is about. If you borrow money to spend on consumption, such as borrowing for a new TV set or a sofa set, then that might not be a good idea. Try to pay those in full, because interest has this nasty habit of expanding and expanding. You always end up paying much more than you expect (due to "effective interest rates"). If however you borrow money to spend on assets, such as a house (which is actually an asset as it can be rented out, or sold for capital gains) or to spend on machinery for your business if you are an entrepreneur, it is rather different from borrowing for consumption. I would say that in my opinion try to reduce "bad debt" and try to pay off your "good debts". However, I think it was Dale Carnegie who once said, and I paraphrase, the best way to get the best of an argument is to avoid it. If you can pay for things in full, it would always be better - but in my personal view if you have to borrow, try to borrow for the right reasons. 

Track your income and expenditure. I keep records of how much I spend and how much I earn, and it was with great comfort and some degree of happiness that I discovered that this is a good idea on the road to financial freedom and independence. Make sure you know how much you spend, and how much you earn, and this will make sure you have the knowledge to cut in the right places. 

Keep within your budget - have discipline! Enough said :)

Learn proper dynamic asset allocation. One of the financial ideas that might be useful here is asset allocation, and in particular dynamic asset allocation. Put your resources across various classes of assets, like stocks, cash, bond, REITs, and insurance, as this diversification helps you ensure that you can build up your wealth while reducing your risks drastically.

Build up an emergency fund. Once you do the above, build up an emergency fund for a rainy day just in case you need the funds quickly. Do this last because paying off existing debts and investing are the main and early priorities. Many people say that an emergency fund should be 3 to 6 months of your income, and that might be a good idea. 

Hope these ideas help you think through your own steps to financial freedom, and provide food for thought in your own journey. Do think through the ideas and concepts, and see which are applicable to your own context and situation. Thanks for reading my ideas on steps to financial freedom. Cheers!

Anything that interests me!

Sunday, June 8, 2014

How to ace your University Scholars Programme Interview

I occasionally get questions from JC students about how to ace the University Scholars Programme interview, and indeed yesterday I specifically had an hour-long conversation with a student about how to get into the USP at NUS. This post is dedicated to that student, WL, but also to all the students who want to know how to ace their interview to enter USP. 

How does one ace the USP interview?

First, let me start by sharing an instructive story

Some time ago I was interviewing students, along with a colleague. They came into the room, and as is the custom, we the interviewers are supposed to ask them questions and prod around for a bit, and the candidates are supposed to answer, in excellent English, as best as they can. 

A 20-year old Chinese student came into the room, dressed appropriately for the part of candidate in a serious interview, and then sat down. The first question we asked was: what subject would you like to read in university, and why? 

The candidate, amazingly, had no good answer to this one... 

Eventually it transpired that it was her mother who wanted her to go for this course. 

In other words, she wanted to enter university because her mother said so

To the following questions about where she saw herself in the next few years, and what did she want to do with her life, and what interested her, she had vague and unclear answers also. 

She replied, in respective order: (1) she wanted a good job (well, I'm sure most would agree with that, and only a rare person would want a bad job); (2) she wanted a good job (again, I'm sure of that); and (3) she had no interests other than joining university. 

In the end, both the other interviewer and I had to conduct a 10-minute long career counselling session out of the kindness and goodness of our hearts. 

The candidate, needless to say, did not get into USP. 

What do we learn from this simple and sadly true story?

I'll give you a moment to think about it before I give you a simple checklist. 

Think about it, really. 

Before you go for the interview, 

(1) You really need to think about what you're doing with your life and why. What's your life story? Please don't something because others have told you to do so - you will need some intrinsic motivation and some self-knowledge. 

(2) You must really think about whether you're a good fit at the course you're applying for, as well as the programme you are applying for. Are you a good fit? That means that you are someone who should be in that course and you fit right in. Can you cope, and will your survive the gauntlet?

(3) You really need to think and reflect about your life. Oh, I've said something like that already? :)

Now, for preparing for the interview, these would be major areas that you need to seriously consider. 

I'll ask you some further thinking questions and then you have to do your own thinking. 

Come up with your own responses and suggestions; tinker around with your answers for a bit. 

Note that these questions to follow are areas to consider, and these are not the exact questions you will get at the USP interview, or for that matter in any other real-life interview. These are thinking questions that you need to think through for yourself and prepare yourself for:

(1) What is it about the programme that really draws you? Do you really know the programme and what you are getting yourself into? In fact, in your opinion, what are the strengths and weaknesses of the programme?

(2) What are your strengths and your weaknesses, and do you have some major examples of each? Think about your various qualities and characteristics. 

(3) What are your academic interests? What really, really inspires and motivates you?

(4) What are your non-academic interests? What really, really inspires and motivates you? What are your hobbies and how are these interesting, helpful, useful, or exciting?

(5) What specifically do you hope to achieve in your years in university? Why?

(6) What do you want to achieve after university, and why? What career do you want, and how will the programme help you? These objectives will play a major role in understanding what you are all about. 

(7) Are there any questions that you want to ask the interviewer? What are they and why do you want to ask those questions?

If you can think through these points, you will find that you can ace the programme with a lot of ease. 

You would really have a good hard look at the USP website (here it is: http://www.usp.nus.edu.sg/), think a lot about yourself (academically and CCA-wise) and the course, read up a lot on your academic interests, read up a lot in general, and do a lot of "futures thinking". You might even do some chats with seniors, ask your parents or trusted senior advisers to give you a good assessment of yourself, and do some serious soul searching. You might even meditate and ponder on the questions above, and even prepare some specific questions and answers. 

These thoughts and actions, all considered, will put you in good stead to ace the interview. 

Why do I want to help good, able, motivated students get into USP? 

[Presumably if you have found your way to my blog post here, you're most likely a tech-savvy, motivated, intelligent, and inquisitive student, just the sort of person we would want in the programme.]

Well, I enjoyed my time at the USP very much; after all, I spent a good four years there, and made a lot of friends (and frenemies) there as well. In fact, I enjoyed my experience there so much that I often attend alumni activities and go back to USP many times to make various small (and for the moment insignificant) contributions. Nonetheless, I do my part, and I do my best. Hope this simple article helps you clarify your thinking. 

Good luck and all the best! Let me know how it goes :)

Anything that interests me! and in this case, something that interests you too :) Thank you for reading and cheers!