Risk Management in Life and Investment

Dear readers,

Time-off Taken for Personal Commitment

I’m sorry for being away for quite some time. Personal commitments has been filling bulk of my life (and time) since last year September. Hence, I will have to attend to these important and urgent stuff. I have already drafted a few posts to what’s has been happening all these while, and I promise you it is going to be exciting. A sneak to what’s going to roll out: Boracay Review, ROM planning, HDB Reno ID review and many more! I hope these posts will aid you in planning your next trip, and for your big event.

Risk Management

As my life progresses, my responsibility gets a free upsize be it in work and personal commitment. And you possibly inferred from the sneak preview statement that, yes I am legally married (in law), but not in customary (traditional customary). Therefore, being a husband (in law), I have to take care of my beautiful wife, build up our nest, and grow our wealth. In order to have all these dreams and goals to be fulfilled , choices will have to be made in every decision juncture, and it does involves a certain risk (or opportunity cost) for every decision made and also not made.

All of us will probably be used to living with risk. For example, with recent aviation ill-fated events, it will still not stop most of us from flying. But it just goes to show that life cannot be calculated. You can call it a random world, where incident (good or bad) can just happen anytime. But this should not be an excuse for not having a crisis management plan. In other words, we should not be betting on plans to work all the time. There should be contingency plans ready to serve in those “what if” moment.

Therefore, I decided to read up about Risk Management on life and investment. During the learning journey, I came across some ideas and teaching are shared consistently by different mentors. So what are these common strategies?

1.  To Have a Margin of Safety

The concept Margin of safety should not be a stranger to those well versed in the financial world. However, this concept can also be used in many areas of our life. For example, when we are planning a travel trip, we would always carry extra clothes/cash with us, just in case we need it. Similarly, in work, when we engineered something, we always would cater extra allowance to ensure it will runs smoothly, same goes for resource planning.

Although to have a margin of safety involves a certain wastage/opportunity lost, we still need to plan in for this.  For example, in terms of investing, it occurred to me a couple of times for not entering the market even though it looks favourable as it has not reached my safety margin. Next moment, the stock rallies and on a path of no return. However, opportunities are aplenty, it takes discipline to stay on to your pre-defined level.

The advice is to define your safety margin and adhere to it strictly. By not risking too much, you are doing yourself a deed.

2. To Prepare for the Worst and Hope for the Best

Once we have the safety margin created, next we will need to plan for the unexpected. One classical example will be buying life insurance. With life insurance, we can allocate a certain portion of the risk to third party when life crisis struck on us. I believe when you buy insurance to plan for crisis, you will hope not to utilise the policy in the near future. I couldn’t emphasise enough the importance of having adequate coverage for yourself.

The advice is to buy ample insurance policies, within your means, to cater for different undesirable scenarios. 

3. Do Not Place All Your Eggs in One Basket

You would not want to count on just one chance to achieve your goals. In investing terms, investment gurus always indoctrinate diversification in their seminars. You don’t buy into just one asset or sector, and if any headwinds is to affect the sector, it could easily wipe out 20-30% of your portfolio. The same goes for career planning, skills can go obsolete with technological advances.One must continue to learn to stay relevant to the market needs. You cannot just rely on one skill to get far in the fast-paced world.

The advice is to plant your seeds widely by practising diversification in investing. For career building, consistently strive for upgrading to remain useful and avoid the risk of being obsolete.


As one’s life commitment grows, risk management is imperative to manage unforeseen scenarios to safeguard the future. By having a proper safety margin, protection and careful planning of resources, we could mitigate the risk and keep damage to the very minimal.

Last of all, I would like to leave you reader a quote by Warren Buffet,

Risk comes from not knowing what you’re doing.

Thanks for reading! 🙂

2 Types of Innovation Growth

source: timfoundation.org

source: timfoundation.org

In evaluating the performance of the company in our investment portfolio, growth is definitely part of the equation that we want to include. This growth can be attributed by new markets penetration (inorganic growth) or simply improving certain service or product (organic growth) that the company is currently having, so as to increase value in turns hopefully lead to increasing revenue.

To put it simply, innovation is the key essential for a change. Be it reflected in the work processes of the company or in the product/services the company is providing.

However, a change doesn’t always have to be good. I like the way how Clayton M. Christensen describe the 2 types of innovations. Let’s us first understand the 2 types of innovation:

1. Sustaining innovation
2. Disruptive innovation

1. Sustaining Innovation

Sustaining innovation seeks to improve the current state of performance and value in products, processes and services.

Do not have the wrong impression that sustaining connotes boring growth, it can be radical at times. For example, with the Retina display on phones and tablet, Apple successfully improve our viewing experience, and created a brand new standard where pixelated words are ugly.

But of course, sustaining growth can also take place in incremental steps, progressively. For example from a 2gb RAM to a 3gb RAM. It improves speed and performance, but nothing to call it a new standard, more of catching up to meet the needs of consumer demands.

No matter radical or incremental, sustaining growth aims to improve performance of a product that the markets values. Most of the technological advances falls under the sustaining growth

2. Disruptive Innovations

Disruptive innovations create a different value existing products, services and processes can provide.

As described by Clayton Christensen, generally products of disruptive innovation will underperform established products in mainstream markets. But they have other features that a few fringe that customers valued.

Ideally the end product should be cheaper and simpler to use. For example, a notebook computer versus hand-held digital devices such as tablets.

This type of innovation is less often employ by companies as it might result in worse product performance at least in the near term. However, companies with established product serving the mainstream market should take note of disruptive innovation that could affect the company position in the market.


It might be interesting to note that although promising it might sounds for disruptive growth – to be a game changer, it is disruptive technologies that account for most companies failure. Many companies lose their stand as market leaders due to disruptive innovation.

On the other hand, even the most radical sustaining innovation rarely account for failure of leading company.

I hope this short article serve you as a food for thought, be it in your workplace or when you are evaluating your invested company. Make a thought on what is the type of innovation is the management team placing the most resources in? What are the upcoming disruptive technologies which will affect the standing of your company? As this might equates to the future success or even survivability of your company.


Revamp to Bus Services in Singapore


There will be a revamp to our bus services in Singapore. Investors of SMRT, SBSTransit and Comfort Delgro look out!

Few weeks ago, The Land Transport Authority (LTA) announced a change to our public bus sector. This change refers to the government will own the buses, as well as the infrastructure such as depots. This kind of system is not novel. It has been successfully implemented in countries such as London and Australia.

Under this new system, the government will collect fares, and pay the operators for providing the service. LTA will contract out 9 packages from 2016 to 2022 which seeks to issue tender for operators to provide bus service and maintenance if awarded the contract. The tenure will operate for a period of 5 years, with the possibility of a 2-year extension after which the road package will be put up for new tender. Under this new system, the government will collect fares, and pay the operators for providing the service.

Commuters will stands to benefit from this scheme

This change is aimed to improve our current bus service standard. The government will set a new standard and determine the routes.  One of the benefits for commuters is that the new standard aim to achieve greater efficiency by reducing the waiting time to be less than 10 minutes for at least 50% of bus services. Not bad.. but I wished it can be 100% instead. =P

New entrants are expected, and this will inject competition into the bus service sector. Therefore, by having healthy competition, the incumbent operators will be motivated to strive harder,  so to secure a tender renewal.

Why it might be beneficial to current public transport service companies?

Private operators will be on asset light operation model where they don’t have to worry about managing physical assets anymore. If you follow closely on their annual reports, you will have already known that bus operators are making operating loses every year. Using last year figures, SMRT and SBSTransit suffered a loss of $28.4 millions and $14.3 millions respectively.

Under the new model, the government will own all the buses as well as infrastructures such as depots, the bus service operator will be asset-light, taking depreciation off their balance sheet. Currently, SMRT assets are estimated to be at $250 million whereas SBS  Transit valued to be $800 million. Maybank Kim Eng estimates the two operators’ profit next year will rise by 18-22% under this new model, if they retain their current market share.

Is there any downside to the current public transport service companies?

As this whole new system purpose is to inject competition, the possible downside will be a risk of losing market share. With more players entering, the bus service provider will have to buckle up to make sure their service is up to the standard.


No matter is good or bad, commuters will be the winner. We are can expect better service from the providers.

As for investors, is your own call in which operators you think will benefit the most under the new model. Have an understanding on how this new system will affect the company balance sheet and its financial health, before putting your money into buying their shares.

I will be looking forward to this change both as a commuter and an investor.

Cheers~ 🙂

To Buy or Not To Buy

Whenever we do our shopping, be it at a retail mall or a stock market, the first thing that should come into our mind is the price reasonability versus the product. In other words, I am justifying whether the price is a true reflection of its value and potential benefits this product can reap. Do not be a blind shopper, where you sweep everything that you can afford into your basket.

The recent STI performance has been quite muted (hovering between 3000 to 3200), with any gain be quickly subdued by subsequent losses. Under this market condition, buyers are caught in a dilemma of whether if they should enter the market or wait a bit longer for a ‘cheaper’ price, bearing in mind that any delay will result in your money sitting in a bank, not working hard enough for you.

To buy or not to buy

To buy or not to buy

The Risk of Reckless Buying (In Singlish = Anyhow Buy)

It kind of scare me when I read an article, ” Danger Lurks as Investors Seek Yield”, under Wealth section, The Business Times, dated 3 May, where it reported investors are turning to lower quality bonds/assets as they are desperate for yield in a cash rich yet with limited availability in the market.

According to the article, it reported that money has been poured into mutual funds that invest in bank loans, often low quality ones and to a lesser extent, it has gone into buying bonds rated below investment grade, known as junk bonds. This posed a potential danger to our capital money as low quality bonds are more likely to default. Despite market guru like Mr Fridson, Chief Investment Officer of Lehmann, mentioned ” the next upsurge in the default rate” was likely to begin in 2016 and going to last for four years. The face value of bonds and loans going to default can amounted to near US$1.5 trillion, investor are still poured money into such investment medium.

If what the analyst said is going to be true, then it will going to be another painful experience for us, investor to face with another market turmoil.

The Reasoning Process

No matter you are cash rich or not, when looking in investing into any of the instruments available, please stay rationale and have a bit of scepticism do help at times. You should understand what your investment goals  are and your risk appetite. This is follow by buying any investment product that fits both your goals and risk appetite.

Do not be greedy or “kiasu” (singlish). Like what Richard Brandon have said, “Business opportunities are like buses; there is always another one coming.” Therefore, take caution and do not rush into pouring your hard earned money away.


There will be times when you will buy in a market when it is not deemed to be cheap. For example, currently SREITS is giving an average yield of 6.634%, not really high (considering the potential risk such as interest rate hike, currency depreciation etc.) nor really low (compared to bank interest of barely 1%).  As long as you are clear about your goals and objectives, you can take the necessary actions and stock up.

I shall leave with you what F&N’s Chief Executive for non-alcoholic beverage, Mr Ng Jui Sia, views about buying business and expanding. Hopefully, you can resonate to what he said, like what I have enlighten from his wise words.

” When the deal is available to you, you have to make the decision. You cannot peg it to a history. You have to make a decision whether it fits your purpose,  it fits your strategy, and is the target available. But we are not saying you must always buy low to sell high. We never sell high. F&N has never sold any of its businesses (willingly).”


Bad Days are Over for SMRT?


The share price for SMRT increase by a whopping ~20% last Thursday from $1.025 to $1.20. Although it is still far away from its ~$1.70 in end 2012, many fellow investors are asking if this could signify a turning point for this counter.

Analysts from various stock broker firms were quick to generate a report to give their commentary regarding this sudden price hike. The reasoning were as follows:

1. Speculation that SMRT will be privatised/ nationalised and therefore, be delisted from SGX.

2. SMRT submitted their interest to adopt the new financing framework that was introduced by the government in 2010. Under this framework, Singapore government would own the assets of SMRT (Railway tracks etc.), and be responsible for maintaining them. This proposal if successfully go through would free SMRT from having to sustain huge capital expenditures on asset replacement, which has been eating their top line and drastically affecting their bottom line of its Profit and Loss statement. 

The verdict was that the first possibility is unlikely to happen, whereas the second possibility is the one that investors should be betting on.

SMRT (S53) - A sharp increase in price

SMRT (S53) – A sharp increase in price

What’s Next? The Bear Argument

In the most recent announcement for the third quarter, SMRT fare related profit was reported to be at a loss of $9 million, while non-fare related profit reported to be at a profit of $27 million. As a result, the company’s net profit dropped to S$14 million.

The loss for the fare segment was mainly due to a rise in operating expenses, which went up 10.6% to $284 million on the back of higher staff costs and depreciation expenses.

In my opinion, even if the submission is to get approved, it will still require a few years for this stock to shine or in investor’s jargon to be a multi bagger. There are still several challenges that SMRT has to grapple with such as increasing manpower expenses which went up 10.6% to $284 million. SMRT also has to get their tainted reputation back on track with the disappointment events that had happened.

What’s Next ? The Bull Argument

On the other hand, it is indeed a stock worth to look at after several good news released recently (from 6 Apr fare hike and this new financing framework).  Furthermore, SMRT does has a huge pie in the public transport sector in Singapore. Using porter five forces analysis, you would realise that there is no doubt on why SMRT can be a good bet in the long run.



The transport sector, especially the railway train service, is highly regulated by the government. This limit the number of players in the market (currently the only competitor is SBSTransit, even though so, they are serving different routes). With the COE at ridiculously high price, people are forced to sell their private car and take the trains instead. We as customer/commuters although can sound out our displeasure on squeezy and stuffy trains, at the end of the day, we still need to take the train to work or school. The best point is that even though the train is still breaking down now and then with the track is still as faulty, we cannot stop the fare from rising.


The question on whether to buy or to sell largely depend on your investment horizon and risk appetite. In short-term wise, the price has run up quite much, so if you are holding you might consider to sell to pocket in some profits. In long term perspective, there is still room for upside. As long as there is no teleport machine being invented, majority of us, the working class will still have to take trains to work. That will means endless business for SMRT.


Update on Capitaland: The Acquisition of CapitaMall Asia


I have introduced Capitaland and its portfolio in my earlier post, in which I shared about Capitaland growth story in China and its future expansion plans.

This post is about one of the most exciting financial news that released this week, which will be Capitaland multi-billion dollars deal over CapitaMall Asia (CMA). The offer was a $2.22 per share which worked out to be a 22% premium to $1.80, the price at closing last Friday.

Capitaland’s CEO, Lim Ming Yan, explained the intention to privatise CMA is to provide the group with more agility to react to increased opportunities in integrated project in Singapore and China. Integrated projects refer to mixed property development such as residential apartments build on top of a shopping mall (widely seen in Singapore) or town development in China.

Why am I excited about this deal?

If you are staying or visited Singapore regularly, you will know how rapid CapitaMall Asia has transformed the local retail shopping sector. From owning the top 2 most profitable malls in Singapore (Tampines Mall and Junction 8, source: The Business Times 24 March 2014 page 9) to successful transformation of shopping malls such as J-Cube (one of the 2 ice skating venues in Singapore), Bugis Junction and Bugis+. There is also a potential increase in future earning from the most recent built Westgate Shopping Mall in Jurong area to the upcoming Project Jewel to be situated near the famous Changi Airport.

Project Jewel- A future shopping mall in Changi Area

Project Jewel- A future shopping mall in Changi Area

These successes of CapitaMall make me wants to hold a share of the company. However, due to limited resources, I was torn between Capitaland and CapitalMall Asia. However, the news of Capitaland going to acquire CMA gives investor like me a bonus. If this deal is successful I will have exposure to residential, commercial and retail sector just by owning one counter.

How is it going to benefit Capitaland?

First of all, it is going to strengthen CapitaLand’s financial report card. This deal once cast and stoned will immediately raise the return of equity from 5.4% to 6.7%, which is a good news to all existing Capitaland’s shareholders. Even market analyst are bullish about Capitaland long-term growth in the property development sector.

Secondly, it streamline the group’s operations and strengthen the group focus on how it manage the available resources. For example, there will be no competing of land resources and its intended use (residential or retail) once the deal is confirmed. Both parties now become one entity to develop the land for the highest overall return on property, be it retail, residential or mixed development.


Whether or not to put in your hard-earned cash, you are going to make your own decision and judgement when investing. After all, there are a few potential headwinds that Capitaland has to face with such as the cooling of China’s economy and the various cooling measures roll out by the Singapore government to curb the rising price of residential property in Singapore.

In my opinion, these are just short-term risks and challenges. Looking forward, the growth should outweigh the weakness in the long-term.

Have fun investing! 🙂

A Poor Man Asked the Buddha

15 celebration days of Chinese New Year 2014 marked its end yesterday on 14 Feb 2014 which coincides with Valentine’s day. Throughout the 15 days, we have been greeting people with wishes such as having good health, wealth and youth in this year of horse. Among all these wishes that I received,  I was particularly impressed by one wish that I was greeted by one speaker in a seminar. He wished us in the coming year to enjoy a year of abundance.

You might think hey what’s so special about having abundance? Isn’t it related to wealth again? But think again. Do we always need to associate  abundance with only wealth? What resonated with me is the reason when the speaker further explained himself that he always love to wish people having abundance because it does not solely refer to attaining wealth, but also having wisdom and happiness. This is so much so important that this seminar happens to be an investment seminar. It just questioned our fundamental reason for investing again, what is our investment goal? Not everyone aim to become a multi-millionaire like Warren Buffet. The reason you invest could perhaps you invest for the fun, or you enjoy acquiring new knowledge and investing is one of the important lesson that everyone should learn. Most people perhaps invest so as to achieve financial freedom hence to have more freedom making choices in life such as an early retirement to have more time for the things/people you value the most.

No matter what your reason, I do not think we should always centred to wealth. Look broader and perhaps we will understand life better. To end off this post, I would like to share with you an interesting reading I came across a few days ago.


Source: The ManKind Project http://www.mankindproject.org

Source: The ManKind Project http://www.mankindproject.org

 A poor man asked the Buddha, “Why am I so poor?”

The Buddha said, “you do not learn to give.”

So the poor man said, “If I’m not having anything?”

Buddha said: “You have a few things,

The Face: which can give a smile;

Mouth: you can praise or comfort others;

The Heart: it can open up to others;

Eyes: who can look the other with the eyes of goodness;

Body: which can be used to help others.”

So, actually we are not poor at all, poverty of spirit is the real poverty.

ps: you can read about what I feel to be a sequel to this post here.

Cheers~ 🙂