Practical Ways To Increase Our Income

The road to financial independence is sometimes not an easy one. Many people in the past such as my parents' generation born in 1950s-1960s were savers. They work hard, they save money and never really had much luxuries. Life was simple back then. However, you would have realised that the baby boomers generation still did not have much savings. This is after working hard and saving money all their lives. Why is this so?

The reason is simple, most of them could not increase their income due to circumstances back then. Some of them had to quit school early to work in order to supplement income for the household. Singapore was also transforming fast during the 1980s and 1990s which means jobs were changing fast too. Some were left stranded with their skills and experience being made redundant and this caused them to suffer wage cuts or stay stagnant in their career.

Income is an important factor on the road to financial independence. You can be saving 50% of your income but if you earn only $2000, that is just $1000 savings which is not a lot. Furthermore, if you want to start a family or have kids, it is quite hard to save if you have a low salary. I have been focusing on increasing my income which I see it necessary if I want to achieve financial independence earlier. It may take years and a lot of hard work to increase income but it will all be worth it in the end.

If you're looking at a career switch or to upgrade your skills for more income, this is the post for you.

Ways to increase your income

Find A Job You Really Like - Mid career switch is possible too

If you hate your job, most likely you're not going to do well in it. Passion has created success for many people as they no longer feel a burden to work. People with passion tend to excel in their work and create more income for themselves be it in their career or business.

The problem with finding a job you like is when we were younger, we may not have chosen the right course to study and thus not able to enter the industry we want. We may have spent $25,000 on a university education which we realise we didn't like at all. When we enter the industry we don't like, we may want to change.

With the most recent statistics by Ministry of Manpower that the unemployment rate has risen and more workers have been retrenched, it is all the more vital to know how and where to acquire the right skills. Some sectors are still lacking in manpower and in this competitive environment, without the relevant qualification, it may be hard to change industry. However, we can actually get some help in this. I too may want to change industry so I've been looking at some relevant courses to gain better competitive advantage. To my surprise, I found various schemes which are really quite useful. In this blog post, I'll list down some schemes which I found that will help us progress better in our career:

U Future Leaders Programme 

(U Future Leaders Summit 2015 speaker line up) 

This is a programme where there are a series of seminars, conferences and mentorship sessions to help us up-skill and even gain access to useful networks.

It comprises of:

1) Future Leaders Summit - The  flagship conference featuring speakers such as the CEO of DBS, Managing director of LinkedIn, vice president of amazon etc.

2) Future Leaders Mentorship - Where industry leaders conduct mentoring sessions in a small group setting behind closed doors to help PMEs in their personal and career development.

3) Future Leaders Sectorial Programmes and Series – These are sector specific such as young engineers leadership programme, aspiring HR leaders programme, finance operations development programme and many more.

Funding for courses

This to me is the best funding for courses I've ever seen. On top of the $500 SkillsFuture which we know of, there are actually a lot of courses which are heavily subsidised for Singaporeans and PR.

Let's take for example you're seeking a career in project management, you would most probably need to be PMP certified which a lot of project management job position requires. PMP stands for project management professional. The PMP® designation is recognised worldwide as the standard of the profession.

The normal course fees for a PMP certification course would cost $2675. I did a search and found the course on NTUC learning hub website with the breakdown of the course fees. Here is a snapshot for your reference:

As you can see above, if you're a Singaporean or PR, the course fees reduces to $1129.75 as compared to the original course fees of $2675. If you're age 35 and above, you get even more subsidies that the course fees comes down to just $100-$200+ dollars. Don't forget we still can use our $500 skillsfutures credit to offset the course fees so in the end we don't really have to pay much for the whole certification course.

To remain relevant in the workplace, Singaporeans have always been encouraged to upskill. Labour chief Chan Chun Sing even said “As our economy transforms, more and more of our people will be in the PME sectors, and it is also NTUC's job to make sure that we help our PMEs remain competitive and stay ahead of the competition."

Aside from the $500 SkillsFuture credit given to all Singaporeans which can be used on a range of 10,000 courses, there are actually so many schemes to subsidise course fees for us. Some of the schemes are workfare training support scheme and SkillsFuture Mid-Career Enhanced Subsidy. If you're an NTUC member, you can also get further funding under the Union Training Assistance Programme (UTAP).

If you're interested in short courses such as communication skills or WSQ certified courses, I saw some by NTU which are quite interesting. Courses such as negotiation skills, or even WSQ Apply Statistics for Lean Six Sigma. More information on the short courses by NTU can be found here. There are also subsidies and SkillsFuture credit can be used.


Place and Train Programme

Lastly, I also noticed that there is this place and train programme under WDA where it enables companies to hire workers first, then to provide them with structured training to equip them with relevant skills and knowledge.Under the programme, the trainees do not pay any fees as their training will be supported and co-funded by their employers and WDA. These trainees will also receive their salaries as usual, as they are already employed once they join the programme.

There is a whole list of conversion programme where we can switch our career to. We get employed and we get the training without any cost.

Since 2008, NTUC’s e2i has also worked with various industry partners to create over 50 Place-And-Train programmes.

Getting relevant certification will help us to increase our income. The courses will also help us if we want to make a career switch into something we feel more passionate about. With the heavily subsidised courses, I think all of us can look to upgrade our skills and increase our income. Also, with programmes such as the place and train programme, switching career is no longer just a dream. There are many ways to increase our income. By just knowing more about the schemes available, we can see a better light for our career and also able to seek a passion which we yearn for.

Enjoyed my articles? 
You can Subscribe to SG Young Investment by Email 

or follow me on my Facebook page and get notified about new posts. 

The Top Down Approach To Investing

Many people have asked me how do they start investing? There are so many ways and so many techniques to investing that it makes a lot of people confuse. Do we look at charts? Do we use financial ratios? How do we know which companies to invest in?

I too was confused about the whole world of investing many years back. It was until I discovered what investing is really about that this confusion begin to disappear. Its like I saw the light at the end of the tunnel. In this post, I'll share with you a method of investing using the top down approach. Before we begin, let's understand what investing is really about and clear some misconceptions about the stock market once and for all. This will help you in understanding the top down approach better.


Misconceptions on Investing

Over the years, I've realised one main thing which caused the confusion for investing. It is that we do not understand investing at a deeper level. You see, most of us want to invest because we want to make a profit or grow our wealth. This is not wrong but it is not entirely correct either. Most of us end up trading the stock market which is totally different from investing.

Trading makes the stock market look like a gambling den. We look at charts and buy low sell high. Most will end up buying high and selling low. The main purpose is to make a profit and make as much money as possible. Some people even use software to give them buy and sell signals which makes the whole thing purposeless. In the case of trading, the companies we buy and sell is just a name. We just look at numbers instead of the company itself. If we take away the name of the companies and replace it with football team names, it becomes sports betting. If we take away the name of the companies and replace it with horses name, it becomes horse betting.

Don't get me wrong. I'm not saying trading is bad and there are professional traders out there who are successful in their own way. But if you're thinking about investing, then invest with the right approach and it'll be much clearer for you.


What exactly is Investing?

Investing is owning a part of a company. When a company is listed on the stock market, it becomes a public company. Investors who wish to own a part of that company may buy the shares of it through the stock exchange. When we own shares of a particular company, we are entitled to certain rights such as voting rights and we also get a portion of the income in the form of dividends. When the company grows, the value of our shares in that company increases as well. It becomes more valuable.

Credit: http://pixabay.com/en/analysis-pay-businessmen-meeting-680567/

Top Down Approach To Investing

Now, when we know that investing is owning a part of a company, we should really ask ourselves what do owners of a company really want? What do we as owners want to see for the company?

I'm sure most of us would know the answer to the above question. We want the company to make money and grow. This is the best way to get return on our money for investors like us. There are two main elements that move a stock price. One is earnings and the other is news.

Bearing in mind that what we really want for the company is to make profit, the top down approach will start making sense now. This approach takes into consideration of the whole macro economic conditions that is happening now and also would happen in the future.


How to use the Top Down approach in investing? 

The first step to the top down approach is to understand the elements of the macro economy. Some of you may have studied economics in JC or University which will be useful for this approach. If you have zero knowledge of economics, do not worry. I'll list down some elements and examples here which will be simple for you to understand. Let's start!

Currencies

Every country has their own currency except for the countries in the European Union which uses the Euro. More often than not, companies would have their business operated in a few different countries. Take for example a local company, Breadtalk. Although this company is started and headquartered in Singapore, they have branched overseas to more 15 countries including China, Philippines, Vietnam, Hong Kong, Taiwan, Cambodia, Malaysia etc.

Credit: https://www.flickr.com/photos/epsos/8463683689

As Breadtalk's main HQ is still in Singapore, they report their financials in Singapore dollars as well. When currencies of other countries weaken, it does affect the revenue and profit of Breadtalk. Companies can limit their exposure to currency risk by hedging using currency swaps.

Currencies fluctuate mainly due to monetary policy changes which shifts the demand and supply of it. For example, when US embarked on its massive quantitative easing which in essence is the printing of more money, the US dollar depreciates in value. Similarly, when Japan also embarked on its massive QE known as Abenomics, the value of the Yen depreciated as well. From these news on policy changes, we can predict quite accurately the movement of a particular country's currency and make smarter investment decisions.


Interest Rates

Interest rates drives the economy and affects a company's earnings. When a company has unsecured loans, they will be affected when interest rates rise. They will need more money to pay for the higher interest rates which in turn lower their profits.

Interest rates movement are mostly determined by the central bank of each individual country. The US central bank, called the federal reserve, often announce an increase or decrease in interest rates. Many countries practice an interest rate monetary policy including the European union and China. However, Singapore has an exchanged rate policy where our central bank strengthen or weaken the Sing dollar. Interest rates are increased when the economy is doing well and decreased when the economic situation is undesirable.


Commodities Prices

Commodities prices such as oil, sugar, gas and other raw materials affect different companies and different sectors. When the price of oil dropped recently, there were concerns that those companies in the oil & gas sector would be affected. As such, this concern sent the prices of these companies down drastically. Similarly, when the cost of raw materials such as aluminium goes up, it can affect the margins of construction companies and they will earn a lower profit.

Commodities prices are mainly affected by the supply and demand of the economy. For oil prices, it is mostly controlled by the Organization Of Petroleum Exporting Countries (OPEC). OPEC is a cartel that aims to manage the supply of oil in an effort to set the price of oil on the world market, in order to avoid fluctuations that might affect the economies of both producing and purchasing countries. Simply said, when they pump in more oil into the economy, the prices of oil drop and when they withhold oil from the economy, the price of oil increases.


Picking Stocks using the Top Down Approach

The above 3 elements are just some of the factors that can affect our investments. When picking stocks, we can look at the general outlook of the economy and determine which companies or industries will possibly do well in the future. Remember, if the companies do well, we get good returns on our investments while if the companies perform poorly, we can lose money.

Back in 2013 when I first looked at the economic situation in Japan, I thought it might be a good time to invest in the Japanese real estate market. The whole motivation behind investing in Japan's real estate is fundamentally due to economic reasons. Japanese prime minister Shinzō Abe has launched Abenomics which is a combination of measures such as quantitative easing (QE), increased public infrastructure spending and the devaluation of the Yen. All these stimulates growth which will increase asset prices. Investing in Japanese property may be a good choice if growth does set in and bring the Japanese economy out of a decade of deflationary economy.

True enough, real estate prices has been rising in Japan over the past 2 years. Rental yields have also gone up. As a result, the dividends I received from the Reits and business trusts I invested went up as well. It has given me stable income of about 7% consistently for the past 2 years.  You can read about my investments in Japan here.

Knowing how the macro economy functions can help us narrow down the potential areas we could invest in. This is just one of the strategy in stock picking. To learn more on how to pick stocks, you can read my previous post on stock picking here.

Enjoyed my articles? 
You can Subscribe to SG Young Investment by Email 
or follow me on my Facebook page and get notified about new posts.

Related Posts:
1. Buying the company on the streets (Part 1) - Discovery stage
2. Company in focus - Breadtalk
3. Investing in Japan's Shopping Centres - Croesus Retail Trust Retail Investor Seminar

How The Weaker Singapore Dollar Affects Our Life?

By now, most of us would have realised that the Singapore dollar is weakening especially against the US dollar. 2 years ago, the exchange rate for USD/SGD is $1 US dollar to $1.22 Singapore dollar. Today, it is close to S$1.40 per US dollar. In laymen terms, this means we who are in Singapore, would require more money to buy the same US goods 2 years ago.

It was reported last week in the news that the Singapore dollar outlook is worst since the Asian Financial Crisis. The Asian financial crisis in 1997 was one which many people in Asia would remember. Stock markets plunged, currencies devalued to extremely low levels and jobs were lost. So how will the weaker Singapore dollar affect us this time? Will we see another Asian financial crisis?

When I was in University taking my degree in Economics, I had to research and write on how MAS conducts its monetary policy in Singapore. Currency movements certainly have impacts in our economy and it will surely affect our lives as we use money every single say. The depreciating of the Singapore dollar definitely signifies that something is happening. How bad and how long is still unknown.


An Asian Financial Crisis all over again?

The Asian financial crisis was triggered by the depreciation of the Thai Bhat and it quickly affected other major currencies in Asia including Korea, Indonesia, Malaysia and also Singapore. In the chart below, it shows the USD to SGD exchange rate. As we can see, the Singapore dollar depreciates against the US dollar during all major financial crisis. The 1997 Asian financial crisis was the worst as seen by the spike followed by the 2008 global financial crisis and also the recently sovereign debt crisis which saw the European region having trouble.

Chart of USD/SGD from tradingeconomics.com

Fast forward to now, it seems like the Singapore dollar is depreciating at a much faster rate than the 2012 sovereign debt crisis and almost similar to the 2008 global financial crisis now. The depreciating of the Singapore dollar just means that more people are selling the currency than buying it. This was partly driven by the data showing the slowdown in China, Singapore's largest trading partner. Investors confidence in the Asian region is shaken.


Why the Singapore dollar is depreciating?

The Singapore dollar has been strong for the past few years in an effort to combat inflation. Singapore adopts an exchange rate policy instead of an interest rate policy. This has been the case since 1981. The primarily objective of this policy is to maintain price stability and sustainable economic growth. The appreciation of the S$ dollar in the past has made it more expensive for foreigners to buy Singapore’s assets and at the same time increase export prices thus slowing down the economy and bringing down inflation.

Inflation has slowed down significantly and MAS said in January that it will slow down the appreciation of the Singapore dollar too. This has led to the Singapore dollar depreciating to what we see now. However, we have to note that our neighbours currencies are depreciating at a faster rate than us. Malaysia and Indonesia both have their currencies weakening for the past few months. If our currency stays strong, we'll lose our export competitiveness as goods in neighbouring becomes cheaper for international buyers.


How the depreciating of the Singapore dollar affects us? 

A strong local currency indicates a strong economy with high productivity growth and high savings rate. A weaker local currency indicates the opposite. The US economy is recovering and money is definitely flowing back into the US now. Apart from all the economic theory, let us take a look at how a weaker Singapore dollar will affect us directly?

Higher prices of import goods

With a weaker currency, importing goods from other countries especially the US would become more expensive. Singapore's top few largest trading partners includes China, Malaysia and United States. While our currency has depreciated against the Yuan and the US dollar, Malaysian Ringgit has depreciated at a much faster rate than the Singapore dollar.

A lot of us in Singapore also like to go online to buy stuff and some are businesses based overseas. A lot of these online shopping websites which are based overseas use the US dollar as their base currency. It'll be more expensive for us to do online shopping now.


Property Price Drop

Property prices in most Asian countries have been rising over the past few years. Singapore too was one of the hot property market places. When the market was bullish on Asia and bearish the U.S. dollar, the Singapore dollar did exceptionally well. Now, its the opposite. 

Property prices will drop mainly due to the increase in interest rates. The spike in interest rates is attributed to expectations of further currency weakness. Think of it this way, when Singapore's currency is expected to weaken, it reduces the attractiveness for people to buy Singapore government bonds. Interest rates need to be pushed higher since investors need more incentive to hold onto the local currency. 

During the Asian financial crisis in 1998, property prices dropped about 40% over a one year period. The government of Singapore also took drastic measures to cool the property market in May 1996. If those cooling measures were not implemented prior to the crisis, it could have been worse. Currently, the Singapore government has also implemented cooling measures to cool the hot property market. I would be expecting property prices to drop further as its only the beginning now. 

Interest rates have been rising but still at a low currently. As seen below, the increase in interest rates has always been accompanied by a drop in prices of properties. Interest rates (3 month SIBOR) have risen above 1% as at 24th March 2015.

No matter what happens, we can always be prepared for any situation which is to come. Being prudent in our finances, having emergency funds set aside and not taking on too much debt would ensure that we do not get into serious financial problems. 

Enjoyed my articles? 

You can Subscribe to SG Young Investment by Email 

or follow me on my Facebook page and get notified about new posts.

Related Posts:

1. How MAS conducts its monetary policy in Singapore?

2. How the economy works? - A must watch video

All About Oil Prices - Who Suffers or Benefits?

The recent drop in oil prices has caused the market to become volatile again. Oil prices have dropped from a high of $100+ to a low of $40+. That's more than 50% drop so far. Those who drive will notice that petrol prices are cheaper now. Instead of seeing the digit $2/litre, we start to see it at $1+/litre.

Crude oil is the most important natural resource of the industrialized nations. It can generate heat, drive machinery and fuel vehicles and air planes.  Its components are used to manufacture almost all chemical products, such as plastics, detergents, paints, and even medicines.

The drop in oil prices seems good for most of us. Petrol prices become cheaper, electricity will become cheaper also. To know which countries will benefit and which countries will suffer because of the drop in oil price, we have to look into which are exporters or importers of oil. Those countries who import most of their oil will benefit while those countries who export most of their oil will suffer.

The 1970s Oil Shock (Price Increase)

Right now we're seeing a drop in oil prices but what if the opposite happens? In the early 1970s, oil prices more than doubled from about $4 to $10 and caused chaos in some countries. One such country was Japan. Japan imports almost all of its oil for consumption and they were badly affected. The government even made a statement that their country would run out of oil in 4 days during that time. The whole country had to save electricity by turning off lights on the streets and buildings also shut down every alternate lifts they had.


The 1980s Oil Shock (Price Decrease)

Fast forward 10 years later, from 1980 to 1986, oil prices declined from a high of $39 to a low of $12. That is a 70% drop in oil price. The rise of Asian economies was evident during the late 1980s and the 1990s as lower oil prices increased industrial production. Saudi Arabia, which is one of the largest exporter of oil, suffered because of the falling oil prices. They did cut their oil production back then but this lead to 16 years of budget deficits that left the country deeply in debt.

Crude oil price chart

What is happening to oil prices now and how it affects our investments?

It seems like history is repeating itself that oil prices have dropped more than 50% now. As investors, we will want to know what is happening so we can better position ourselves in allocating our investment capital.

Let's take a look at some net oil exporters countries which will likely be affected by the fall in oil prices:

Russia

Russia's economy is heavily dependant on oil exports. In fact, oil and gas accounts for 70% of its export income. Russia's currency, the Ruble, has fallen more than 50% against the US dollar. This prompted the central bank to increase rates to 17% in order to limit the negative effects of the depreciating currency.

Malaysia

Malaysia derives 30 percent of state income from energy exports. Malaysia currency (Ringgit) has also fallen substantially. Most of us who live in Singapore will know the exchange rate of the Ringgit and a lot of people have went on to exchange more Ringgit to spend in Malaysia.

Saudi Arabia

Saudi Arabia has the world's largest crude oil production capacity and is the largest exporter of total petroleum liquid in the world. Recently, the previous king of Saudi Arabia passed away and caused a spike in oil prices as investors bet on a change in the country's policy to reduce production of oil which can lead to an increase in the price of oil again. This is how powerful its production capacity and exports are.


Now, let's take a look at some net importers of oil. These are the countries who will most likely benefit from the decline of oil prices:

Japan

Japan is the third largest net importer of oil behind China and the US. Previously, Japan suffered badly when oil prices rose substantially during the 1970s to 1980s. In 1985 when the oil price started to decline and crashing in 1987, Japan still could not recover due to its strong YEN that stalled its economy.

Today, Japan has embarked on an aggressive monetary policy, dubbed Abenomics. This has caused their currency to depreciate  which lead to a boost in exports. With oil prices falling, this will benefit the country as they can import oil at a cheaper rate. Of course, the depreciating currency will offset some decrease in oil prices but I think overall it should still be good for the Japanese economy.

I've invested substantially in the Japan market since last year. You can read my previous post here: The Japan story - Croesus retail trust and Saizen Reit 

China

China may be the largest or second largest net importer of oil before or after the US. It was said that the decline in oil prices now is partly due to the decreased demand of oil from China. It is hard to know what exactly is happening in China. Recently, its stock market also slumped more than 7%. That is a scary decline. I'll choose to stay out of any investment in China until I know what is happening.

European Union

The European Union has been suffering slow growth ever since the sovereign debt crisis in 2012. With the EU importing most of its oil, lower prices will certainly lead to an increase in economic output.

India

India imports 75% of its oil. With its account deficits, lower oil prices will help to ease it. India has also been going through many economic reforms to spur growth.


Industries that will benefit from lower oil prices

Industries that rely heavily on oil for transportation will benefit from the lower oil prices. Airlines and Shipping industries are two examples of it. Previously, airlines and shipping companies have suffered a prolonged period of slow or even negative growth for the past few years when oil prices were above $100. There may be a turn around soon for these companies.

Oil affects all of us and affects the profits of various companies. Having a little knowledge of oil will help us in our investment decisions in times like this. There are also opportunities that we can look out for in the oil and gas industry. Stocks of companies in the oil and gas industry have fallen significantly for the past few weeks. This is a good time to accumulate good companies at undervalued prices. But before you invest in these companies, make sure the company's balance sheet is healthy and they can ride out the tough times. Many companies will go bankrupt during bad times and the few strong ones will emerge out even more successful. Invest wisely and safely.

Enjoyed my articles? 
You can Subscribe to SG Young Investment by Email 
or follow me on my Facebook page and get notified about new posts.

Related Posts:
1. Saizen REIT - Income from Japanese residential properties?
2. Looking to invest in Japan's real estate