Friday, November 29, 2013

Testing the MA Practicality


All right, so I have actually downloaded and copied all the available data onto an excel sheet. It was actually pretty tough. The main issue is that the websites normally only keep daily data back to only 3-6 months, which is not long enough for me to construct the 200 SMA, which is actually the most important MA in this theory.

However, after spending a few hours figuring how hard it is, I've actually found an alternative, and ironically, these come in the form of Phillip's competitors, DollarDex and FundSuperMart. DollarDex doesn't have the JPM and DB funds. Dollardex is a bit tricky, because they don't chart based on NAV, they chart based on the returns from the start of the chart with a 100 base, so the charts might be different. FSM has everything except for JPM's US Agg bond fund. They also have the nicest and cleanest interface. I wonder if the previous week's price it is updated promptly on Friday close or by Sunday. The current information shown is the only site which is delayed. If they do update over the weekend on a prompt schedule, I'd find it very much useful then.

The funny thing is, I never realized that I could just go to Phillip and use the chart that they have on each of the unit trust's page. Truth be told, it loads the slowest, the graph is the ugliest, and I just don't have too much love for it.

Anyway, I just did a sloppy "heat map" of the current funds I have right now. Kind of in a transition when more will come and go. Just from a quick look, you can see that pretty much all the bond funds have been hammered.

I'm hoping FSM comes through for me, so I can use it for everything except US Agg bonds, which Phillip will do just fine for. I'll also try to start thinking how I can use these heat map signals to help me with my allocations, along with my macro viewpoints from Standard Chartered weekly posts.

By the start on next month (which is in a few days), I'll be getting the final piece of my portfolio asset classes (save for international real estate). So hopefully when I post up my November portfolio update, I can also release my weekly digest!

I'm actually thinking about relaunching my fund as of 1st Jan 2014, with proper allocations right from the start, as well as a clearer, more mechanical way of allocating funds to asset classes. I shall ponder this!

Thursday, November 28, 2013

Money Honey Portfolio Proposed Future Improvements

As the sole hedge fund manager of my own private equity (hur hur), I've been floating a lot of ideas in my head recently, only how I can improve my asset allocation model with the aim of adding alpha, reducing volatility and also simplifying the process for myself.

My first idea is implementing a market timing strategy to my portfolio. Mebane Faber has written an excellent paper here which highlights the difference in including a simple form of trend following market timing. He uses the simple 10 month moving average. Page 40 is the really interesting page.

The second idea that has come to mind is to allocate a scoring system based on 2 moving averages and price. By scoring all the current asset classes based on this system, the portfolio can be mechanically defined to OW or UW an asset classes. This idea came to me from 2 sources. The first source was an article that I just can't seem to find or remember. I think it was from Seeking Alpha, and the author wrote about how you can use moving averages based on their crossover and slope to decide when and how much allocation you would give. I have found a similar article by Chris Ciovacco here and here, who incidentally is the influence of my second source, which is introduces the idea of scoring. I think he does this in a very big and comprehensive way with many indicators with the model his company uses. I have a nagging feeling that he actually wrote the article that I was talking about!

Anyway, reading the first paper has given me quite a bit of insight towards using this asset allocation model. Perhaps other than junk bonds and EM bonds, which are the most volatile, the other bond classes do not seem to be largely affected in terms of both returns and volatility from the market timing model. I would imagine it is because they are both greatly muted in bonds comparatively anyway. Therefore, it might be prudent to instead tweak holdings in a minor fashion instead of eliminating or greatly reducing them. This will help anchor the portfolio by ensuring that a large portion of allocation is not suddenly shifted to equities, so as to dampen any shocks in the system.

I have to slowly come up with a system and review moving averages in relation to price before I can come up with anything more concrete. Imagine if this because a fantastic, simple DIY system that people can adopt, add/remove asset classes, monitor themselves and produce good risk-adjusted returns. I would be quite happy if that was the case!

I think the first step of the day however is to start recording down daily closing prices of all the funds that I track. Even though my data will be calculated from daily data (the most sensitive and accurate), I will most likely be looking towards weekly updates of my indicators, their interpretation and implications towards my monthly overview. My monthly overview will take into account the changes in weekly data, though I would like to keep portfolio rebalancing to a minimum, therefore the monthly implication must cross a certain threshold in value, or technical significance to warrant me to rebalance earlier than planned.

Wednesday, November 27, 2013

Health Insurance



Since I've already covered general insurance (motor, home, mortgage, travel), I'm now going to dive deeper into the harder topics.

After general insurance, the 2 big groups of remaining insurance are Health and Life. I'll be covering an overview of the different types of health insurance, before I drill down into the specifics.

The 5 main types of health insurance are:

  1. Medical Expense
  2. Hospitalization Income
  3. Critical Illness
  4. Disability Income
  5. Long Term Care
Medical Expense Insurance

Medical expense insurance covers the costs of medical expenses in the event of an accident or illness. This is different from healthcare packages which cover the costs of routine check-ups or miscellaneous visits for minor illnesses. Therefore this insurance is not meant to reduce your overall forecasted medical expenses. It is meant to cover all related costs of an accident or illness.

In Singapore, this group of medical expense insurance are known as Shield plans.

Hospitalization Income Insurance

In the event of being hospitalized, you will obviously not be able to work. As such, this insurance will provide income to offset the loss of income by you not being able to work.

This insurance is not meant for people to profit from being hospitalized, but rather to ensure that a hospitalization does not affect financial obligations that working adults have, such as loan repayments or even ironically, insurance premiums.

Many of the Shield plans offer an add-on in the form of a daily cash rider, which is essentially hospitalization income insurance.

Critical Illness

Critical illness insurance will pay out a lump sum when you are diagnosed with a critical illness.

Depending on your plan, it may cover or exclude certain stages and certain illnesses, or the pay out maybe vary across stages and illnesses.

Critical illness insurance can be found either as a stand-alone product, baked-in or offered as an add-on in Shield plans and even life insurance.

Disability Income

In the event that you become disabled (subject to strict tests and criteria), this insurance will pay you monthly until the end of the policy term, or until retirement age, depending on your policy. It is meant to be an imperfect replacement of your previous working income.

Should the disability becomes less severe and allows for work, the claims will either stop, or be paid in a reduced amount, depending on the type of job and the terms of the policy.

Long Term Care

Long term care insurance helps cover the costs of living in old age when ability to look after oneself becomes greatly diminished (again, subject to strict tests and criteria). They payouts may be for a fixed period, or indefinitely until death.

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In Singapore, due to the forced national savings scheme, a portion of the monthly salary goes into a personal medical fund, Medisave. For working adults under 35 years old, it would be 6% of your salary. Since savings are forced into this account, and you are unable to draw the money for any other purpose, it ensures that every working Singaporean has some amount of money tucked away for medical purposes.

This personal medical account just accumulates money over the years as you work. In the event of an accident or illness, you are able to pay medical expenses up to a certain yearly limit. Alternatively, it is allowed and also recommended to use the money in this account to purchase medical insurance. The only approved health insurances are the Shield plans and Long Term Care insurance.

Therefore, since the money in Medisave cannot be used to any other purposes other than medical expenses, I think that every one ought to use the money that they have accumulated in their account to pay for at least a Shield plan of their choice. This will actually free up the amount of monthly disposable income, since insurance premiums will be paid from your Medisave account instead of your take home salary.

I will be covering my personal views on each of the health insurances in my next insurance-related post!

Tuesday, November 26, 2013

Quarter Rebalancing

Now that almost a quarter of the year has passed by since I started my hedge fund in September, I am looking towards a nice rebalancing in the start of December.

I have let my crazy wild ways run amock with speculation and I have deviated from my initial goal. Understanding that, I will be cutting down on overweight positions, and redistributing my asset allocation accordingly.

The most notable change will be the pump up in portfolio value. I have decided to keep 2 numbers on the table, which is the simple nominal input and it's current return. Since capital is continually being added, this is more of a simple way of keeping track and ensuring that I am growing my wealth, and not just my savings. If I am investing badly, the portfolio value will drop below my inputs, which is really quite terrible.

I will also be keeping track of NAV on a monthly basis, to show myself, and others monthly and yearly performances of the portfolio, especially if comparing to others.

Positions which have been largely chosen by unfounded favourtism will be trimmed down. My high yield portion was almost 17% of my portfolio. After this rebalancing, it will just be shy over 11%. My tactical allocations are largely based on the monthly / weekly research provided by Standard Chartered. Tactical allocations meaning keeping UW positions restricted to 5% of the portfolio, and OW positions meaning juicing things up to 12% of the portfolio.

I'll be juicing up my DM equities, split quite equally weighted. A bit of extra into Asia ex Japan equities, more into commodities given the really shallow downside still possible from here, and cutting down on the High Yield.

I will be removing Gold miners out of my portfolio, honestly it really is more of a speculative play. I don't know how I can adequately add in gold into my portfolio without making the volatility go crazy. This will of course be replaced by a proper Commodities fund which only has 6% in gold, but of course is a better representation of commodities. Gold miners will still not be sold though, I'll be holding on to it because I think in the medium term, it might pretty itself quite well. I will be definitely considering adding to it, given a breakout in Gold along with a buy indicator by iMarketsignals' modified Coppock indicator.

I will be waiting for my Asian Pacific Income fund to recover, and I will liquidate the fund.

Math for Monday Night

Anyway, I spent the better half of the whole evening doing lots and lots and lots of mathematics and calculations in front of my computer the whole night. The rest of the night I spent watching Dr Who and reading controversial news, haha.

So, my first math problem was figuring out leverage. I spent probably almost 2 hours trying to figure out how to accurately calculate the following:
  1.  the current amount of leverage that I am applying to my indices trades, taking into account unused margin
  2. the amount of cash to top-up to the account to reach the desired levels of leverage
  3. the optimal conservative scenario which does not allocate cash efficiently
  4. the most efficient way of minimizing cash required to achieve desired amount of leverage
With that in mind, I have actually found out that my initial position today is NOT at X2 leverage, and my stop loss is about 30%, which is not what I would like.

With the new calculations and spreadsheet that I have made (located conveniently on the sidebar under 'S&P Market Timing'), I can now quickly calculate the amount of leverage, leveraged amount, unlevered amount to use and also the safety margin to prevent account close out.

I am currently at a horrible overleveraged at X7.7. But with the current use of my spreadsheet, I am hoping to slowly kick down that leveraged risk amount to under 3, but slowly adding in regular amounts every month. As long as the S&P market timing model advocates buying, I will be buying into dips that occur on the S&P when there is any excess liquidity to hit my targeted leverage levels.

So there goes the 2nd mathematics calculations that I have done for the night, which is deciding the amount of money to be allocated into my personal hedge fund (Don't Worry Be Happy) and how much to allocated into my S&P Market Timing Model.

I have come to the conclusion that I will be allocating my cash flow in a 60% equities / 40% bonds manner. This means that 67% of my monthly cash flow will go into my hedge fund, while 33% of into my market timing model.

So, if I have $1k of monthly savings, $600 will be heading into long term, while $400 into the S&P. For $1500, it will be a more clean $1000/$500 split. For $2k, it would be a $1400 and $600 split. I think that you can see that I am generally more cautious of my speculating and I'd much rather add savings into my hedge fund.

I aim to utilize only X2 leverage, unless in situations which very strongly suggests a bullish notion, may I amp up positions to X3, and look to make a quick profit to drop down my holdings. Likewise, in rather dubious and scary bearish scenarios, I will look towards reducing my leverage by realizing some profits and adding back to the cash base.

Monday, November 25, 2013

S&P Market Timing

Basically, I have now a new found vigour.

I'm going to try a tiny small amount into a S&P market timing strategy. I will be leveraging and timing the market with the iMarketsignals iM-Best(SPY-SH) model, as well as also combining cues from @CiovaccoCapital.

iMarketsignals model combines the VIX, risk premium, current EPS estimate and the price. I think that the parameters that they are using quite accurately reflect a very clean and simple take on the market, and they have clear buy and sell signals. Buy and sell signals are given and affirmed on a weekly basis, giving their model a much longer term outlook, which means less frequent trading and less chances of false positives since it is smoothed. Their model is pretty lovely and I personally like it, as well as the other models and indicators that they have.

Ciovacco Capital is something that I stumbled upon today. They have a fantastic weekly video as well as sporadic updates on their blog, which goes through charts in a very unbiased and open minded fashion, while closely looking at indicators and reminding us not to hold onto biased views. Their models and calls seem pretty accurate, but they seem to be more actively and not as long-term in the market.

I feel that iMarketsignals only has a very decisive long / short calls, which doesn't really provide too much background information about the calls and the conditions of the market from what their indicators show and how they got the call. Still, it seems pretty good, and it is a open and investible model. Ciovacco Capital will run me down the latest updates of the week and this allows them to issue forewarnings before pointing out decisive bearish indicators. I like this, as it gives me more of a personal insight and opinion, so that when an iMarketsignal is given, I can be more confident following it.

So, I'll probably be using Ciovacco Capital as a leading indicator, with iMarketsignal as the final boss call, especially for bearish calls.

Both of these are updated on a weekly basis, and they both hold a more longer term view, which I like. Now that I've got the input information settled, how I am going to use this information?

Well, I think that I will start with a deposit of $500 into my CFD account. I'm going to keep this $500, with it's realized profits, separate from the current (losing) money that I have in my CFD account playing around with currencies and making intra-week bets. If I go bust with my speculative money, I think I will take a break from speculating and focus more on this S&P model. Perhaps even go back to a dummy account.

With this $500, I'm hoping to actually add in $100 a week for a while, just to see how this investment goes. Of course, if there's a market crash, maybe I'll even add in more. However, I have capped my leveraged to only X2, so that my drawdown won't exceed 50%, and I will always place a trailing SL of 15% (which comes to 30% since it's levered X2). Even though the CFD only offers X5 leverage, I've already done the math so that I'll only be using X2 leverage. The spare cash makes up the buffer. There is a 5% buffer on the drawdown amount, as well as a 10% buffer in cash before reaching the 20% account close-off value. Basically, plenty of buffer to make sure I don't close because of volatility.

I will be monitoring all my inputs to make sure that my speculative value isn't crossing over and eating away at my buffer zones.

I am actually honestly quite excited and thrilled by the prospects of this!

Saturday, November 23, 2013

Rebalancing Issues

Well, the Capital Spectator has just posted up a fantastic post on his blog again, which shows the boxplot for the major asset classes which he follows.

US Stocks (VTI)
Foreign Stocks Devlp'd Mkts (VEA)
Emg Mkt Stocks (VWO)
US REITs (VNQ)
US Bonds (BND)
US TIPS (TIP)
US Junk Bonds (JNK)
Foreign Devlp'd Mkt Gov't Bonds (BWX)
Emg Mkt Gov't Bonds (EMLC)
Commodities (DJP)
Foreign Gov't Inflation-Linked Bonds (WIP)
Foreign Invest-Grade Corp Bonds (PICB)
Foreign Junk Bonds (HYXU)
Foreign REITs (VNQI)


The rationale for making a boxplot? Here it is. "The main attraction is the ability to quickly summarize rolling performance data across a range of asset classes (or markets within an asset class) in search of insight on portfolio rebalancing decisions."

Perfect! That is exactly the sort of information that I would like actually. With this information, I think it will definitely help me make better choices when rebalancing, to know what seems undervalued and overvalued (assuming price is accurately baked in), based on current returns and historical returns.

I've just added commodities finally to my holdings, and after looking at this chart, I feel more sane knowing that I am underweight in REITS and equities. I think that the contrarian in me does not like the idea of topping up anything within the 25th and 75th quartile unless it is balancing day. Anything which is overextended and below the 10th looks like a great contrarian buy to me, and anything over the 90th seems like it is asking for a trimming of positions.

After looking at this boxplot, I am thinking of definitely more positions in US Bonds, perhaps TIPs and EM bonds as well. If EM stocks and real estate finally falls out of favour and drop to 25th or below, I might consider increasing positions, especially for the EM stocks.

It is still very hard for be to get my asset allocations right because I have to invest in lumps of $100-$1500 when topping up existing funds, and between $1000-$1500 when entering new funds. I've taken positions in most of the funds that I have been talked about, except for an additional developed equities fund and a real estate fund. I am now quite perfectly fine missing out on those funds, because I feel that real estate is globally heavy, and I don't like the vibes I am getting from equity markets.

Actually, I just did a review of the funds in my portfolio, and I must say that I am quite disappointed with Schroder holding my Corporate bonds portfolio. The minimum subsequent top-up value is at a very disgusting high value of $1500, while all the rest are either $500 or $100, with pretty much no restrictions on redemption, other than First State, which is in no means any shape to have its position reduced, haha!

Now then, I think come around Monday, I will be liqudating my Schroder's fund and moving into JPMorgan's Global Corporate Bond Fund. It has the same rules as the other JPM funds, minimum fund value of $1000, top-ups of $500 and no minimum redemption, which means I rebalancing downwards can be quite pinpoint accurate. Yes, I think that I'm definitely going to do that on Monday. This move will help me when it comes to portfolio rebalancing, especially in the first few years when the difference between $500 and $1500 makes a large impact on my portfolio.

I'll spend the rest of the week reviewing the allocations that I have spread across the different funds I own, and look towards owning a more precisely balanced portfolio which is much in line with my initial plans, as well as give some thought on where I would like to minorly overweight or underweight assets! I know, so exciting right? Haha!

Friday, November 22, 2013

iM-Best(SPY-SH) Market Timing System by Georg Vrba

Meh, I feel quite crappy lately because of my CFD trading. When I happen to be doing pretty well, suddenly some crazy ass news NON event comes out and wipes out all my pips and put in the in red.

The first time was the Chinese rating agency downgrading the USD when I was massively short the cable.

Just yesterday it was the non-rumour that the ECB will be adopting negative interest rates.

Both of these events happened while I was at my screen, thinking it was a normal day. It wasn't any scheduled event. And suddenly, boom, my account takes a massive hit.

So, summary if you missed my bitching: This shit be cray, I don't have the emotional stamina to handle this sort of intensive, yet fruitless labour. Therefore, I've decided to take on another approach. 

Now, let me link you to this bad boy. I have to say that I am dumbfounded by the awesomeness that has gone into the construction of his fantastic system, the iM-Best(SPY-SH). Let me give a quick intro to this method.

Firstly, it uses an array of parameters to generate long and short positions. The VIX, the risk premium (difference between Earnings Yield and 10-year T-bond), current EPS estimate and of course, the daily price.

Secondly, it does not do intraday trading. This is because it's purpose is meant for ETFs or mutual funds. How it does that, is that it will only rebalance on a weekly basis, even though daily data is used for the parameters. (I think) That means that speed of execution has no advantage, and it is very possible to mimic his portfolio through a variety of methods.

Third, drawdown is controlled. This is done by having a fixed number of -8% as a trailing stop for the trade. The maximum drawdown of his tested portfolio was reduced from 25.5% to 23% by doing this. Therefore, instead of waiting for the parameters to switch signal, a drawdown of 8% in either position would automatically switch between long and short.

Fourth, this method has been launched in real life since Sep 2013 and it has proven itself to outperform the S&P within that short span. Also, based on backtests, it has a super sick 10-year CAGR of 32%, say whuttttttt?

Now, that I'm done with the facts, let me gush about this for a while. I have been telling a mathematician friend of mine that she should help me look a some simple parameters lumped together, and we should try to see if we can create a lovely model that is sensible, accurate and most importantly, profitable and realistic.

I've been a fan of Georg Vrba site for a while, but I am really going out on a limb here to say that I think that this system that he created seems perfect to me! I honestly love it, and I think that given how badly I've been doing with crazy nonsense CFD trading blowing me out of the water, I'm seriously thinking of using my CFD account to trade this system.

I'd like to ask Georg some questions about leveraging and some other details before I embark on it, but I think that this might actually be a nice and good step for me, to step back a bit from all the investment noise going on and stick with something that I understand and makes sense to me. I'm just waiting for a new position call now!

Thursday, November 21, 2013

Compound Interest


I love the concept of compound interest. I think I have mentioned before how I just find it so amazing, and so grossly underappreciated and undervalued. The older post is here.

I was never a firm believer of compound earnings myself, until I stumbled upon this study and chart. I was reminded by it by a recent post by InvestmentMoats, so I had no choice but to blog about this so that I can permanently remember about it.

Here is the magnificent table! It was from a study done in the US a while ago by Market Logic.


Now, compare investor A and B. The difference is digusting, and all it took was just merely time. This is under the assumption of $2000 annual contribution, and 10% interest rate. What a difference time makes!

I took the liberty of making a quick excel sheet example of my own, but perhaps in a more modern day context. I used $5000 annual contribution and a 5% interest rate, starting from age 25.

Why 25? Because guys have to serve in the army, that's why. Of course, if you're starting at 20, then the table will end at 50. The timeframe here is just 30 years. At 55 we also finally have access to our CPF money.

Why $5000 annual contribution? I think $5000 is definitely a realistic goal, as long as there aren't any extravagent purchases and you get a year-end bonus. $5000 is also a very realistic sum in the future to be able to squirrel away.

5% interest rates is considering how low rates are at the moment. Although historical returns have been about 6-8%, I think it would be better to be more conservative with our numbers. Hopefully, a well diversified portfolio can manage to get a 5% smoothed out return in the long run.

Investor A Investor B
Contribution Year end value Contribution Year end value
25 0.00 0.00 5,000.00 5,250.00
26 0.00 0.00 5,000.00 10,762.50
27 0.00 0.00 5,000.00 16,550.63
28 0.00 0.00 5,000.00 22,628.16
29 0.00 0.00 5,000.00 29,009.56
30 0.00 0.00 5,000.00 35,710.04
31 0.00 0.00 5,000.00 42,745.54
32 0.00 0.00 5,000.00 50,132.82
33 0.00 0.00 5,000.00 57,889.46
34 0.00 0.00 5,000.00 66,033.94
35 5,000.00 5,250.00 0.00 69,335.63
36 5,000.00 10,762.50 0.00 72,802.41
37 5,000.00 16,550.63 0.00 76,442.53
38 5,000.00 22,628.16 0.00 80,264.66
39 5,000.00 29,009.56 0.00 84,277.89
40 5,000.00 35,710.04 0.00 88,491.79
41 5,000.00 42,745.54 0.00 92,916.38
42 5,000.00 50,132.82 0.00 97,562.20
43 5,000.00 57,889.46 0.00 102,440.31
44 5,000.00 66,033.94 0.00 107,562.32
45 5,000.00 74,585.63 0.00 112,940.44
46 5,000.00 83,564.91 0.00 118,587.46
47 5,000.00 92,993.16 0.00 124,516.83
48 5,000.00 102,892.82 0.00 130,742.68
49 5,000.00 113,287.46 0.00 137,279.81
50 5,000.00 124,201.83 0.00 144,143.80
51 5,000.00 135,661.92 0.00 151,350.99
52 5,000.00 147,695.02 0.00 158,918.54
53 5,000.00 160,329.77 0.00 166,864.47
54 5,000.00 173,596.26 0.00 175,207.69
55 5,000.00 187,526.07 0.00 183,968.07

So, what do my results show? Simple. If you invested from 25-35 and only made $5000 contributions yearly, with a total capital outlay of $50,000, it would have turned into $184k when you're 55.

Alternatively, if you hadn't saved a penny until you were 35, and then started actively saving in a similar fashion, with a capital outlay of $100,000, it would turn into $187k when you're 55.

The difference in final value is small, but the capital outlay is huge! If you don't believe me, I invite you to make yourself a simple spreadsheet as well, and fudge around with the numbers.

When I first started my portfolio, I was under the impression that I would be receiving dividends occassionally from some of the funds that I purchased which gave out distributions. I would be able to accumulate the bits, research into which fund looks to be the best to top up, and it would be a odd form of value investing combined with reinvesting dividends.

However, I was quite sorry to find out that my platform actually does not pay out dividends. It instead immediately converts the payout to additional fund units. I was initially put off by this, until I read a few posts by the Monevator and decided that this method will work the best for me. Not only does it efficiently compound returns, it also never gives me the choice of not reinvesting my dividends!

After seeing such a compelling table above (either the study or mine), don't you feel massively motivated to at least start saving early and start compounding interest? I am reinvigorated! 

Wednesday, November 20, 2013

Home Insurances


So, under home insurances, I've decided to talk about home contents insurance and mortgage insurance. Although sometimes classified with home insurance, I do not think that I will be talking about maid insurance because it's something that I don't necessarily believe in. The job of maids, not the insurance of them.

Home Contents Insurance

From my understanding, home insurance is different if you're a private landed property home owner. Since in my young lifetime that would be seemingly impossible unless I suddenly become a billionaire, let me focus on condos / HDBs.

For HDB owners, it is required to purchase Fire Insurance directly from HDB's appointed insurer. It costs less than $2 a year and it's valid for 5 years. Honestly, it's chump change. It will cover the standard HDB fittings and fixtures. It's actually a steal of an insurance.

For Condo owners, the Management Corporation Strata Title (MCST) would have taken up insurance to cover fire damage to the building and communal property. Therefore, only renovation and contents ought to be insured for both HDB and condo owners.

I suppose that the basic insurance that all owners should have covers any of the big 3 events, Theft, Fire, Flood.

The insurance ought to cover renovation costs as well as replacement costs, mainly for furniture, clothing and electronics. Personal liability should also be included, in case of any spillover that causes third party damages. Compensation to put up in an alternative accommodation is also a standard feature.

Yup, so those are the basics. Nice add-ons that I have seen includes replacement of locks and keys, and replacement of broken fixed mirrors and glass. Everything else seems kind of hokay, so I personally wouldn't pay premiums to have any other benefits. Especially silly ones, like death benefits, since you ought to be covered properly with a real insurance.

Mortgage Insurance

Mortgage insurance is insurance to cover the outstanding loan amount that you have owing to the bank should anything happen to you, such as death or disability.

Although there are 2 types of mortgage insurances, I will be referring to the reducing mortgage insurance instead of the fixed coverage, which is more suitable for investment properties. Reducing coverage makes the most sense when you're living in that house, because the outstanding loan amount also reduces with your loan repayments.

Currently within the reducing coverage, there are 2 types of insurances as well. They are either non-refundable or refundable (only offered by OCBC). You can get the non-refundable insurance which has lower premiums, but of course, it has no final value. Or you can get the refundable insurance and receive back all your premiums as a lump sum at the end of the insurance, assuming you don't make any claims.

The way I see this, is that the banks are trying to merge insurance together along with forced savings. Going through the refundable route, you'll be able to recover all the premiums paid for the nominal value that they had. I personally feel that the 2 ways pretty much end up in the same position.

If you are tight on cash flow and want a lower capital outlay, have confidence is achieving higher returns, opt for the non-refundable mortgage. You'll will still have suitable cover, as well higher returns for that extra money saved.

If you don't know how to invest your money, or cash flow isn't a recurring problem, but you have poor savings discipline, going for the refundable premiums might be the way to go. At the end of the insurance when you recover all the premiums paid, you'd pretty much were just charged the interest and compounded interest of your capital over those years. If your money was just sitting in the bank, that would have been a good use of your money, because you were insured throughout that period.

At first glance, I was quite impressed by the refunded premiums. However, when I looked at it a bit longer and crunched numbers, I don't think that I would opt for the refundable insurance. With more cash flow, there is more freedom. It gives you a lot more opportunities to taken advantage of market opportunities. Even if not, having a reasonable investment strategy ought to provide better returns. And all these benefits without being any less insured.

I'll just stick to the bread and butter.

Tuesday, November 19, 2013

Car Insurance


Car insurance? What the heck? How old are you and why are you telling me about car insurance?

Well, I specifically chose to write about car insurance, because I'm sure that is going to be one of the last insurances that I will be getting, plus it is also again a straightforward sort of insurance.

Car prices in Singapore are through the roof, gas isn't cheap, neither is the upkeep through parking, ERP, maintenance, insurance and air fresheners. A car would probably be my 1st big ticket expense once I start my life as an independent adult. However, that being said, car insurance in Singapore is rather straightforward and simple to comprehend, which is why I'm going to tackle it.

Of course I don't know too much about car insurance. Truth be told, I only ever had 1 minor accident before, when my car rolled into the rear of another car. At a red light. Because I split milo in the car. Silly reason to have an accident though. No damage on my vehicle, huge dent in his. Other than that, the only other accident I ever had was accidentally reversing into another car in a carpark, but that didn't have any damages at all, thank goodness.

I do help evaluate my company's various insurance plans, so I have some knowledge of what's going on. I've also searched the web and found a very decent variety of articles which I found very straightforward and easy to understand. The first one is from MoneySmart about the basics of car insurance, followed by another article by them regarding reducing premiums. Lastly, this is a forum post with a bit more no-nonsense approach about the different components of the premiums. These articles are really insightful and I would advise anyone curious to know more about car insurance explained in a simple manner to look at them.

So from my understanding, to reduce your total spending on car insurances and excesses:
  1. Ensure that the restrictions of the driver suits the usage and users of the vehicle 
  2. Opt for no preferred workshops if you are indifferent
  3. Don't have traffic offenses to be able to get a Certificate of Merit (COM)
  4. Don't have accidents to accumulate the amount of No Claim Discount (NCD)
  5. Make sure the excess/premiums suits your needs
  6. Don't get extra coverage that you don't need it
I think that actually point #3 and #4 can rake in huge amounts of savings. I didn't even know about the COM and that having it will reduce premiums by 5% if you have had no traffic offences over the past 3 years. Click here to check yourself out. I have it... for now, haha! I also didn't know that the NCD could accumulate up to 50%! Together with the COM discount, you could be looking at a very pretty 55% off your auto insurance if you're a very safe driver.

I would also like to add that the car insurance should also cover personal liability in case of an accident which affects a third party in terms of property damage, or even injury and death. The vehicle itself should also not be a financial liability even if it is completely wrecked.

So having a small, old car and being a safe driver can probably kick down your premiums to over 60% compared to what a young gun would be paying. While of course this sounds like a fantastic way to save money on car insurance while having the adequate coverage that you need, I suppose the main hurdle to this would be affording to buy a car in the first place, haha!

The way prices are, I might never even get to worry about this though!

Travel Insurance



The first insurance that I'm going to be talking about is travel insurance because it is something that I am familiar with.

Travel insurance is really straight forward. Do you travel often? Are you clumsy or disorganized? Are you travelling to any exotic locations? Are you doing any non-lame activities there? Well, if the answer to any of these questions was a yes, then you need travel insurance.

Sure, if you're going to Malaysia to eat seafood at JB or to BKK for weekend shopping, then I suppose that the question to get travel insurance or not is a legit review case. In those instances, I would personally not get travel insurance. But then again, I do feel that I'm a pretty seasoned traveller so I can usually get by trips without making any rookie mistakes.

For both my long overseas trips, I took travel insurance. Throughout my 7 months in Europe, I was completely insured for my duration there, but thankfully nothing happened to me. With such a long duration, plus intensive travelling (17 countries, say whutttt), it actually is quite a small wonder that nothing happened to me. Sure, I got pickpocketed once, but I didn't lose anything valuable and I wasn't going to waste a day in a police station trying to recover back $100 instead of exploring Barcelona! When I went back to the US for a month, travel insurance came in handy when we missed our connecting flight in Beijing due to weather conditions. Because of that connection missed, I managed to file a claim and the amount I received was the cost of the insurance for the whole trip, and a bit of extra! (It was a single trip insurance by MSIG, the claim process was very easy)

The main point of the above 2 stories is that:
  1. Yes, I am EXTREMELY well travelled ;)
  2. Even well travelled people can have unexpected things happen to them
One of the saddest stories I heard is about a schoolmate and army friend that I knew. He was in New York and he was hit by a car while cycling. Although he had travel insurance, it wasn't ample enough and the whole ordeal has caused a massive financial strain on his family. The point of insurance is not to profit from accidents, but to make sure that any accidents would be handled without any costs to you.

Anyway, so let's drill down a bit. If you travel often, and sometimes for a bit of an extended period, then it might be very worthwhile to opt for an annual insurance plan instead of just single trip. The benefits here on top of lower costs, is that you also don't have to worry about being covered during trip extensions or forgetting to apply for the insurance. Of course, this only makes sense if you do travel quite a bit. If it's once a year for a week holiday, then a single trip would be enough. Most likely, an annual travel insurance is not cost effective unless you travel for work as well. Depending on the amount of trips per year, destination and duration, the base case breakeven point of being indifferent to annual or single trip travel insurance is about 8 trips a year and it can drop to as low as 2 extended trips.

Secondly, the amount of coverage and the range of coverage should also reflect what kind of traveller you are. If you're the shopping, eating kind, then there really isn't a need to get maximum medical benefits and other coverage under the most expensive tier. The main basic sort of coverage that you'll want and need is related to missing flights, lost baggages or travel documents. However, if you're the adventure seeking sort of traveller, you might want more coverage associated with the more active style of travelling, as well as take note of activity exclusions in the insurance.

I'm quite pleased to announce that I am covered with an annual travel insurance plan, the Comprehensive SmartTraveller under AXA. This insurance policy was taken up for me by my company because we usually have between 2-4 overseas trips, and it is also a form of employee benefit. I helped with the comparisons between Tenet Sompo, AIG and MSIG, and the company eventually decided to go with AXA.

Of course, as with all forms of insurance, the point of having travel insurance is not to make a profit from any mishaps, but instead to ensure that should anything unfortunate happen to me, I will not suffer financially. I am quite confident that this travel insurance will more than sufficiently protect me in that aspect.

I'm pretty glad to be covered. It makes me happy that I have this employee benefit, and it is also an added motivation for me to remind myself that I should also go out and travel and make use of this insurance, because I can travel worry free! 

So, that's all for my post on travel insurance, I wonder which one I will tackle next.

Fiat, Gold and Bitcoin



About 2 months ago, when Bitcoin was about 150 USD, I had discovered it for myself and was asking a friend of mine if he was interested in starting a local or regional mining pool. That would mean that we would get a cut of whatever mining happened on our watch. That never really happened. I just read news that yesterday Bitcoin popped to 900 USD at one point of time. It opened at 500, went up to 900, plunged to 600 and went back up to 700.

Honestly, I do find the digital currency quite appealing in many ways, but I have some major gripes with it.

Firstly, let's compare it to gold. The pros of BTC is that is more divisible, easier to transport and transact, as well as convert to currency of choice. However, the cons of it is that it is digital and the main issue to me, it has no intrinsic value.

It's value comes only in people's willingness to trade with it. It has to be simple, used for the masses, pretty much all the traits that any modern day currency has. I do not believe that this will become a thing because as simple as it may be, it seems complicated. The awareness of BTC is so low, as well as the mass adoption rate. I can't foresee how anyone over the age of 30 would be willing and able to securely store some of their wealth and transact in it on a frequent basis.

Next is it's intrinsic value. From the logical perspective, it is pretty much as good as fiat currency, with the only difference that more can't be produced... eventually. Putting aside the fear that this digital currency cannot confirm that there will never be more coins in the system than a certain amount (which would make it fiat), where is it value of it in itself?

At least precious metals like gold and silver have uses. They are rare and unique in a physical tangible way that can be compared to the environment and surroundings. They are long term symbols of wealth and decoration. They also have industrial uses because of their elemental properties. These metals have the dual use of being both currency, as well as materials.

For these reasons, I firmly state now that I see value in BTC as a means of online, secure transactions, but I do not seeing it massively rising in value and usage and preserving that value. There was too much time for early adopters to have cornered the market, it is so volatile, and it seems that everyone in it is speculating. Mass adoption won't occur, because people would feel that the market is already rigged and there are other available digital currencies also to choose from, which actually may have superior properties to BTC. BTC is just the most popular and mainstream digital currency because it is one of the oldest. The whole thing still gives me a gut feeling that something wrong. It feels like a global pump-and-dump penny stock.

I do believe that in my lifetime I will see precious metals surge forth in value. It's hard to be patient watching it get monkey hammered down on any news.

Monday, November 18, 2013

First Post on Insurance



Well, here we go. Insurance.

I never thought I'd be blogging about insurance, but then again, blogging about things is a useful tool for me to help me review the things that I ought to be thinking about, while also reminding me how I logically came to whichever conclusion I ended up at.

I suppose now that I'm a young working adult, it is my personal responsibility to ensure that I can look after myself. That doesn't only mean making sure that I can operate independently on a daily basis. It also means that I am able to provide for myself should there be any unfortunate incident.

I guess the way that I look at insurance is a sort of negative investment. While investments requires capital and generate returns for the future, insurance sorts of does the opposite. It still requires capital, but instead of generating returns for the future, it prevents drawdowns in the future.

So I guess it basically is what it says it is, it is an insurance. It protects you from unforeseen large expenses. You're just gambling against the odds of life that something shitty might actually happen to you.

Now I guess the most logical way to look at insurance from a expected value viewpoint, which is probability and value. Are the premiums being paid costing equal or more to the likelihood and the cost of an incident occurring? I suppose the best case in point is the whole Obamacare debate that they have going on in the US. From what I understand, it is heaps and worlds cheaper for younger and healthier people to just wing it without health insurance and pay directly out of pocket if something happens. Now, in Singapore, this isn't the case because comparing healthcare plans, it seems that the healthcare costs are much much lower and probably even more comprehensive.

Anyway, deviating a bit back there. So, now I am trying to figure out the world of insurance. What sort of insurance products are out there? What sort of insurance should I have now? What sort of insurance should I eventually have? When is the best time for me to get insurance? All these things cross my mind now and then, but I suppose now would be a good time for me to sort of plan these things and get them out of the way. Just like how I'm trying to figure out the best long term strategy to manage my finances and do it in a very passive and mechanical way.

A lot of my understanding comes from reading articles on the net, especially from people in the financial world, as well as browsing through insurance websites themselves. I really like the write up by InvestmentMoats here and here. He even managed to speak to Aleph Blog writer David Merkel who I also follow diligently!

My theory on insurance so far is that people have different needs at different points of their lives, and therefore there should be different focuses on insurance at different point of times, and for different duration. I've also long known that ILP's are a scam, and it is basically only useful for people with bad saving habits to force them to save a bit. I also know that term insurance is heaps cheaper than whole life insurance, especially if you're talking about rate of return. However, I did not know that actuaries actually feel quite strongly against ILP's and whole life insurance. From this, I'll definitely have to take a better look and review what sort of insurance I want, and why.

So, the main factor actually pushing me to review and maybe get insurance now is the fact that I am still young and healthy. For some types of insurance, especially ones that are concerns life, starting the insurance younger locks in a lower premium rate throughout the course of the insurance, which may be forever. So I'm still 23, turning 24 frighteningly soon, but I am quite sure that the age step-up is 25 and above. I am shy of less than a year to quickly know what I'm doing!

Like I said, the main reason for me to start with insurance now is so that I review the whole arena and understand the playing field and the game that I'm in, before any golden opportunity slowly sneaks pass me, which is time itself. If I can make a fair conclusion that locking in lower premiums because of younger age makes sense at this point of time, I will most definitely make a strong consideration in doing that, as well as follow-up plans concerning other areas of being insured.

Anyway, just wanted to have a quick write up to puke out all the information that I had floating around in my mind regarding insurance. I'll follow up on this topic in my next post hopefully!

Wednesday, November 13, 2013

Utterly Disappointing

I think my biggest disappointment is setting a stop entry last night in the NZD and a trailing stop. I was so bloody spot on, because it hit exactly at my stop entry to enter and turned around exactly at my stop. How unlucky can that be? Perfectly turned around, just to screw me over.

I was doing marginally okay for the past few days. I lose a lot, I win some, I was pretty much the same when I closed my good USD/CHF trade. But basically, over the past day, especially with this absolutely horrid NZD trade, I've managed to lose half my profits of that trade. It's a horrible slide down.

I am now trying to shy away from event risks as well as weird fundamentals and I've been looking at all sorts of pairs and only basing on fundamentals. Hopefully I can catch a slow stoch reversing and set my SL just behind it's peak and let it run well for me. I'll be looking for slow stoch that are bumping off fib lines, low volatility and nice candlestick patterns.

Once I exit my current trades I have, I should be looking to always have 3-5 trades open for these technical trades. All while I'm waiting for the equity market to go haywire. I think that I will most likely be going 1/3 each into S&P, Russell and the NASDAQ. I'm under the impression that when things go sour, people are going to pull out of Russell and NASDAQ first.

Monday, November 11, 2013

Early Nov updates

Well, honestly, things seem to be going as my predictions said they would be. US dollar has strengthened remarkably, however equities didn't really go down as much as I expected. Resilient sods. Gold has been rightly monkey hammered down by the stronger USD. The USD seems to be going in a small upward correction now... or maybe it's consolidating before it flash crashes? Anyway, so far most of my predictions are going as I thought it would be.

If what I think is going on happen continues, we should be seeing gold prices get hammered a bit more, with the US dollar going up, before we get a nice reversal. This time, I'm expecting the drop of the USD to also coincide with a drop in the equity markets. Though the relationship has been rather inverse because of the new normal, I think things are changing from then. The markets aren't sure anymore is bad news is still good news, and good news isn't great news anymore. Good news is now bad news, while bad news is good news? Soon, both good news or bad news will be bad for the US economy, especially when things are in free fall. Honesty, the ONLY way I see things picking up for the US economy is that if QE is actually increased. Logically, this is an absurd idea, but with Yellen up front, who knows what she's going to do.

My plan is to wait for gold to dip and start to recover, buy in a fraction more to DCA down my initial positioning cost, and hope things go as planned. If the market really starts to look like panic, I will be liquidating my EM bonds, HY bonds, EM equities, Asia equities first. If shit really starts to fit the fan, my developed equities as well as my Corp bonds and SG real estate are going to move into cash as well. I'll likely only be holding onto Intl Bonds, Inflation bonds and gold. As different as a lot of asset classes have their correlations now, I think when things goes south, a lot of them will have positive correlation... downwards, and I don't want to be caught in having to sit through that storm and watch my asset values bob up and down. I rather exit with a loss small and enter back when most of the move is done so that I can capture upside and reduce downside risk.

Now, my current portfolio is actually doing worse than my benchmarks that I look at. I think that the Nikko portfolio C is actually my closest contender is terms of a robust 60/40 portfolio that I would even consider to put my money in for the long term. However, I still believe that I have an edge over that portfolio, mainly for a few reasons. Firstly, I'm not restricted to hold onto underperforming asset classes by a mandated percentage with it is obvious that a storm is coming. Next, I have more asset classes to increase diversification and probability of weathering tougher economic scenarios. Finally, my asset classes are equal weighted, instead of market-cap weighted, which I have a strong belief will outperform a market-cap weighted allocation.

Below is my current portfolio, I think it looks pretty well diversified, isn't it! As much as I gripe about my portfolio being underwater, it's honestly less than 1% down on cost, which includes sales charges. In fact, it is probably valued exactly as what it would be with sales charges, haha. Therefore, my portfolio pretty much hasn't moved much.



Oh yes, I am also following the Short Side of Long, who is actively watching the commodities market. When commodities start breaking out, which I actually also assume to be midway towards down the decline of the dollar, I shall also be entering with perhaps a slightly larger speculative position. Commodities hasn't been performing for the past 2-3 years, so I think it looks quite about ready to recover.

As of now in my CFD account, I'm looking for intra-day or short swings to go on, as well as shorting the S&P when technicals are in my favour. Like what Dale is guessing, I also have a strong inclination to believe that there is going to be a serious market correction in the US indices by the end of the month, and it think sacrificing 1% of account every other day to get an anchor and feel of how the indices are doing will really help me enter the market short when things starts to tank.