Three Great Ideas to Spend Your Annual Bonus

It did not seem too long ago that I was writing about what I should do with my annual bonus.  Most people will be getting their annual bonus in December and I thought that it will be timely to look at a few great ideas on how to spend one's annual bonus.

1.  Insurance

Most people are under-insured.  But one should also be careful not to be over-insured or to be overpaying for insurance.  Some time back, I wrote about one of the cheaper if not cheapest insurance plan in town.  It is NTUC's i-term insurance.  I don't work for NTUC so I can't vouch for this plan.  Neither do I own this insurance plan.  But looking at the rates, it definitely looks like one of the cheaper insurance options around.

Another cheap insurance plan one could consider (if you are a national serviceman or woman) is the SAF Group Term Insurance plan.  Just recently, Aviva has increased the maximum coverage from $600,000 to $1million.  Another thing I like about this group term plan is that it gives rebates.  I am currently covered under this plan and am considering whether to increase my coverage.

I also wrote about whether one is ready to take charge of one's healthcare costs and you might want to consider reading it especially if you are a Singaporean.

Of course, before you dive in and go out shopping for an insurance policy, I must caveat that everyone has to do their due diligence.  In fact, during one of the polls conducted on this blog,  the poll results indicated that many people considered insurance products as toxic investments.  Of course, there is nothing scientific in the way I conducted the poll and it is just the opinion of readers.  I also recommend the following articles on insurance:

• Can You Trust Your Financial Planner?
• Surrendering Insurance Policies?
• AIA Insurance Agent Scam
• Beware of this Insurance Agent

2.  Invest

Of course, besides saving up your annual bonus, one could also chose to invest it in instruments that could potentially give you a higher return than the interests rates offered by banks (can someone remind me again what is the interest rates banks are offering again?) 

Most readers should know that I invest mainly for income with capital gains as a secondary goal.  To understand a little more about income investing, I would refer you to some of the previous articles that I have written:

• High Dividend Yield Stocks
• Real Estate Investment Trusts (REITs)
• Canadian Royalty Trusts (Canroys) - do note that this article was written before the tax changes kicked in.
• Rental Property
• Investing in Bonds

For myself, I am looking at a few stocks that pay good dividends.  On my current watchlist are Sabana REIT, Saizen REIT, Ascott REIT, Far East Hospitality Trust, Lippo Malls Indonesian Retail Trust, SingTel, Capitaland, United Engineers.

3.  Pay off Your Debts

This is self-explanatory.  If you have credit card debt, you should be paying that off before even thinking of investing.  The interest rates on any outstanding credit card bills is just too high to justify you not paying off that debt first.  

For others, you might want to consider making pre-payments or full redemptions of other outstanding loans (e.g. auto loan, mortgages).  

Random Thoughts

Have been busy lately so have not been finding much time to write anything new.  And not that there is anything new that I can contribute in terms of financial knowledge to the already booming community.  There are so many high quality articles on newspapers, magazines, blogs, etc where one can find information about investing and personal finance that it is making me re-think what is my purpose in maintaining this blog and whether it is still worthwhile to put in time, effort and energy into something where my contributions are perhaps not worth mentioning.  After all, there are so many other ppl who are much more knowledgeable and who write much better than me.

The amount of emails that I get are also way too many for me to reply and track (so sorry if I have not been responding).  I am too busy to attend any events, market products or liaise with people to exchange links/post guests postings.  Ask any blogger and I am certain they will tell you this is like doomsday for any blog.  But this approach has served me pretty well thus far.  I know blogging is about building a community but I don't really have that much time on my hands.

Because I have been "dry" on new things to write, I have started reading quite a fair bit.  Just finished a book by David Bach on the Automatic Millionaire.Homeowner.( I read another of his books previously on the Automatic Millionaire which is sort of summarised here)  It was really easy to read and I skipped all the parts that were not really relevant to me so managed to finish the entire book in less than a day.

It was written in 2005 before the subprime crisis but the main idea is that we should all aspire to own our own homes rather than rent a home since owning a home is a way to automate savings simply by forcing oneself to save.  Of course, that is assuming that your home value does not drop drastically along the way.

Another idea that I like is that one should try to become a landlord and rent out your house.  It has always been something that I have thought of doing.

The last takeaway I had from the book was the idea of bi-weekly mortgage payments.  The concept is to make more mortgage payments (or pre-payments) so that you pay less interest on the mortgage loans.  Of course, I am certain many people disagree with this approach as they will cite low interest rates in Singapore as a very good reason to stretch out your mortgage loans as long as possible.

Just a quick and short sharing.

Learn From a Fool - Believing that I Can Find a Ten Bagger

I wrote two posts recently about my investment mistakes and some mistakes that I nearly made.  I guess that as one grows older and has a longer time spent in investing, one will certainly make some mistakes here and there.

The next mistake I will like to highlight it a mistake that can perhaps only be described as ..... sheer craziness.

There is perhaps this unspoken dream amongst investors to find that ten bagger stock - the stock investment that will return your investment capital by ten-fold.  That is an alluring argument since most investors start off with a small capital base and to multiply your returns with a 5 to 10% returns seems almost meaningless.  After all, a 10% return on a $1000 investment is only $100 in profits.  Yes, we all know about the effects of compounding.  But in the Singapore stock market, most stocks don't make 10% year in and year out.  They go up 10% one month and drop 20% the next month.  So it is almost impossible to get a consistent 10% return every single year.

But most people still hang on to the dream that they might find a stock that will appreciate in value by 10 times or more.  How many stocks are actually capable of doing that in the Singapore stock market?  Some times, in the blind pursuit of such a stock, many investors throw in lots of money on a penny stock hoping that it will increase in price by ten-fold.

How possible is that?  You judge for yourself.

How To Buy US Stocks in Singapore

I received a query from a reader about how to buy a particular US stock from Singapore.  This is a common question that I get and I thought that I might as well answer this through a blog post instead of replying to the email.

First of all, you will probably need a brokerage account.  When you open a stock trading account with a brokerage firm like UOB Kay Hian, they will give you the option on which markets (e.g. Singapore, Hong Kong, U.S) you want to trade in.  There are a few particular forms that you will need to fill in. To trade the US market, you will need a W8-BEN form which is downloadable from their website (usually).

I leave you with a few links that might be useful if you are interested in opening a trading account. As it is really self-explanatory, I will leave it up to the reader to navigate the technical details of how to open a stock trading account to buy US stocks that are listed on the US stock markets.

1. UOB Kay Hian.  http://www.utrade.com.sg/index.jsp  (go to the top menu bar on Getting Started and read the questions.  Pretty self explanatory)
2. POEMs.  http://www.poems.com.sg/ (go to Getting Started on left column)
3. Standard Chartered.  http://www.standardchartered.com.sg/personal-banking/services/online-trading/en/index.html
4. OCBC. http://www.iocbc.com/

Dynasty REIT IPO

Dynasty REIT is the first RMB denominated REIT to debut on SGX. The sponsor is ARA Asset Management Ltd and its estimated yield will be around 7%.  The IPO price range is from SGD0.86 to SGD0.94 with expected listing date on SGX on 30 Oct 2012.

Dynasty REIT holds commercial properties in Nanjing, Dalian and Shanghai.

Given that this year seems to be bumper year for IPO, I think it one should proceed with caution.  Singapore REITs are trading at a high price now and Mr Li Ka Shing is probably a good market timer when it comes to cashing out of the property market.  As the saying goes, buy low sell high.

I am not vested and will probably not be subscribing for the IPO.  I don't usually subscribe for IPOs anyway.

A Fellow Investor Passes On - Only learnt the news today

As I was flipping through some investment magazine today, I just read the news that Mr Dennis Ng had passed away.  I had a particularly weak feeling in my stomach as I have sort of "known" Dennis through his regular posts in the old Wallstraits forum and also seen him appear on TV as well as youtube videos.

Though I never met him in real life, my knowledge about investments and personal finance would have been much poorer without his selfless sharing.  If I recalled, he even left a comment on this blog before though I can't really remember which post it was on.  He also contributed to CPF's IMSavvy site.

To find out about his passing so late is quite a shocker to me.  He left at a very young age and certainly was still in his prime.  A weak feeling went through my entire body as I read and re-read the news time and again.  He passed on in Jul 2012 but his knowledge that he has shared will probably endure in the minds of those who were willing to accept his ideas.

It is sad to know that Singapore has lost somebody who was passionate enough to stand up for his beliefs in personal finance.This news is only a stark reminder to me that life is too short to let it pass it by just like this.  Enjoy your life even when you have not accumulated your first million. My heart goes out to his family and friends.

Learn from a Fool: Mistakes I Almost Made Last Month

I almost made some serious investment mistakes last month.  While reading various analyst's reports, I came across trading BUY calls  for Bumitama Agri and Golden Agri.  In what was an almost rash moment, I was very close to buying into those shares hoping to make a quick buck that just seemed so tempting to resist.  After all, the upside forecasted by the analysts in their target price suggested that I will get a good return on my investment.  And besides, I had also liquidated quite a fair bit of my other shares.

It was good that I was too busy to think much about it over the past weeks and so I did not enter into any positions.  The prices did go up a little and finally slipped due to expected weak crude palm oil prices.  Apparently, there is going to be an oversupply in the near future and palm oil prices are expected to be low in the near future.

It shows that one should not be too quick to jump into investment decisions based on other people's analysis.  At the end of the day, all forecasts and projections are just anyone's guess.  We can make educated guesses but that is what it remains at the end of the day - just an educated guess.