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Wednesday, November 29, 2017

What's Harder than BTO? IPO

I always thought applying for a BTO was hard, until I try IPOs! $6 for 3 tries but did not get any!



Even though we did not get any shares from the public tranche, we decided to purchase MindChamps from the market and hold it long term because we believe that parents are willing to spend money on their children to give them the best. So I place an order before the market open at $0.84 but did not get any (not sure why). I continued to chase (kept modifying the order) the price and finally got in at $0.875 for 5000 units. MindChamps went on to close at $0.92!

On Monday (27th November), MindChamps closes at $0.96 which means it was trading at a PE of 43x! However, the next day, MOE releases a news -
MOE kindergarten kids get priority admission to co-located primary schools from next year which would definitely have an impact on private preschool including MindChamps. Not sure if MOE is trolling or already give face to MindChamps by releasing the news at this time. lol. The price went on to close at $0.915.

Appeal of MOE Kindergartens will shoot up, parents say. Parents simply want the best for their children and this news is a big deal! We decided to put a stop loss at $0.90 and guess what? We got kicked out today with a little bit of profit $104.11 (+2.4%) and an annualized return of +454.5%! So much for holding long term. Hahaha.


Should we chase No Signboard tomorrow? Probably not. Since the public tranche is 268.6 times subscribed, the public demand should be huge! Huat to those that got it!

Saturday, November 25, 2017

Redeeming KrisFlyer Miles for Singapore Airlines Suites = 38.6% Cashback!

One of our goals is to accumulate enough miles to fly to the United States in Singapore Airlines Suites for our honeymoon - once in a lifetime experience! We have finally turned that dream into a reality after 1.5 years of hard work (having > 10 credit cards and using the right credit card on the right occasion) with a confirmed Suites booking.


The last time we used miles for our flight - KrisFlyer 50% Redemption Promotion on SilkAir, the cashback equivalent for our return Economy SilkAir flight to Bandung was around 6.5%. What about this time round?


2 one way ticket to New York, John F. Kennedy International Airport can be redeemed for 240,000 KrisFlyer miles + $259.60! Let's take a look at how much it would cost to purchase the exact same ticket/flight for the same day.


Total fare (all in) would have been $23,419.60! We will never pay this amount of money for a flight! The correct way to generate/accumulate miles is to do it through specialized spending (paywave, dining and online) where one will be earning 4 miles per dollar.


As you can see, the miles earned on average till date is about 4 miles per dollar. The reason why UOB and Citi are below 4 is that there are general spending credit cards (UOB PRVI Miles and Citi Premier Miles) giving about 1.2 - 1.4 miles per dollar. SCB is on a different level because we simply signed up for the Visa Infinite card and paid the annual fee without any spending.

With this assumption, the estimated spending would be around $60,000 (240,000 / 4).

Simple maths:
240,000 miles = $23,160 ($23,419.60 - $259.60)
Cashback equivalent: $23,160 / $60,000 = 38.6%

Wahahahaha. Can cashback card beat that? Milelion shifu/master has already written an article about it so I will not go down that path - The ugly truth of cashback cards banks don’t want you to know.


Our miles journey started March 2016 and our 1st card was AMEX Ascend.


During this period, we had quite a few major expenses such as CZM's ring, wedding banquet, those holidays to London, Iceland, Paris, Hong Kong and Bandung, etc. that gave us the opportunity to accumulate miles at a much faster. We have to thank our parents as well whenever they take out cash to make payment, it will be intercepted by us and replace with our credit card. lol.

The question is should you cancel all your cashback credit card and start accumulating miles? My answer would be nope! Similar to all financial decisions, there is no one/best way to go about doing things. Before we started, we spent hours reading all the articles in Milelion to ensure that we know what we are getting into!

Miles may not be suitable for you due to the following reasons:

1. There is an expiry to it and we know cashback does not expire (but there is a cap/limit). lol. If you cannot generate miles fast enough, it might not be ideal for you. Credit card points expire around 1/2 years so you have to transfer the points out to KrisFlyer miles which has an expiry of 3 years. In total, the lifespan of miles would be around 4-5 years.

2. Devaluation of miles! Collecting miles would mean you will be at the mercy of the airlines. Our initial goal was to get return tickets to the United States but SQ devalued its KrisFlyer earlier this year which I blogged about previously - Felt Cheated by OCBC & SIA on the Same Day. In the end, we got to change our plan instead to one-way tickets.

3. Big family. First class/business ticket for your child/children does not really make sense.

4. You prefer to have only 1/2 credit cards for whatever reasons (too many cards make the wallet fat, forget to pay bills, etc.) because the common misconception is that people think they can accumulate miles with just 1 credit card. Sure, never say never :)

5. It is your principles in life that you will NEVER EVER pay any credit card annual fee. It is perfectly normal, we used to think that way too. However, playing the miles game would require you to do that because that is the best arbitrage opportunity! KPO simply cannot resist the thought of paying $2 for a $10 service.

The simple maths behind paying for annual fee:
Citi Premier Miles: $192.60 / 10,000 miles = 1.926 cents per mile
SCB Visa Infinite: $538.5 / 35,000 miles = 1.539 cents per mile
Singapore Airlines Suites: $23,160 / 240,000 miles = 9.65 cents per mile

6. Last but not least, "I am not interested in flying First Class/Business, Economy will bring me from point A to B just fine". The choice is obvious then. Stick to your cashback cards :)

Having said that, we do have cashback card where we make sure that we spent at least $500 on our OCBC cards every month to get the additional interest and everything else goes into miles. Who says one cannot have the best of both world? Hahahaha.

Hope that this article will encourage you guys to start playing the miles game or reinforce your plan to continue using cashback cards. No right or wrong :)

Time to research on what are the must do, must eat, must visit places in the US! We also need to look for a cheap economy ticket back... Hahaha.

Friday, November 24, 2017

CPF RSTU - Is It Worth It?

We are close to the end of the 2017 year and have worked for almost another year. In a few months time, we will be thanked "for our contribution towards nation building". lol. I am referring to the income tax.

NOA Sample from HDB

I have been thinking if I should be doing a CPF RSTU (Retirement Sum Top Up) to lower my tax. It is interesting to see how the facebook finance communities (Seedly Personal Finance Community (SG) and BIGS World - Build Wealth, Live a Good Life) advocates topping up of CPF as compared to my random conversations with my colleagues who almost all showed disgust towards doing it. My colleagues would look at it as though I am crazy and say something along the line of "topping up of CPF is one-way direction, you will never get it out". I would not argue with that statement because it is true to a certain extent.


I double confirm with CPF Board via Facebook messenger and gave them a hypothetical question to ensure that my understanding is correct. As you can see, one will be able to withdraw any amount in excess of FRS (Full Retirement Sum). Based on my FRS forecast, it will probably be around $300,000 when we are 55 years old (28 years later) assuming the FRS continues to increase at a 2-3% rate. I am pretty confident I will be able to exceed FRS if I continue to work and the policy does not change again. lol. My previous article on CPF Milestone ($40k in Special Account) and The Power of Compound Interest assumes that even if I stop working now and do nothing, the SA would have grown to $141,000.

As usual, KPO starts punching various numbers into Google Spreadsheet... The numbers generated are based on KPO's profile who has an earned income $1,000 relief and an NSman $3,000 relief which is group under "Other Reliefs". You can download the spreadsheet and modify the numbers to fit your profile.


The taxable/chargeable income is calculated by deducting the 20% CPF employee contribution and other reliefs against the total annual salary + bonus. The income tax rate would differ accordingly based on the taxable/chargeable income. You can refer to IRAS income tax rates for more information.


A $7,000 CPF RSTU would lower the taxable/chargeable income. When the stars are aligned, one can even have a 100% tax savings! lol. Having said that, it is definitely not feasible when we look at the below table. The amount $7,000 is relative to one person income. To enjoy that $80/100% tax savings, he would have to contribute 25% of his take home pay.


Besides looking at it from a tax saving point of view, one can also look at it from an investment point of view. The dollar tax savings can be treated as a return on investment/dividend. The reason is that I would probably use the $7,000 to buy stock and continue to grow our portfolio. From an investment point of view, the ROI would be equivalent to your income tax rate (most of the time except when you suddenly belongs to a lower tax bracket). On top of that, there is also a guaranteed 4% capital growth (SA interest) year on year. Hence, your guaranteed return for the first year would be your tax rate + 4% interest. The higher your income tax, the higher the return, the lesser it affects your cash flow (take home pay) which is limited to the CPF Annual Limit of $37,740.

To be honest, I have no idea where/how one can find such a high return, risk-free investment elsewhere. The market return may be higher but it is definitely not guaranteed. With this numbers, I am pretty sure what I will be doing. So is it worth it? It depends. Hahahaha. If someone says it is good, it doesn't necessarily mean that it is good for you, you got to make the decision yourself.

You can download a copy of the spreadsheet here - CPF RSTU. Have fun with the spreadsheet and I hope it helps in your tax planning/investment!

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