Author: Justin Lee

Trip to Turkey

An old college friend was planning a trip and asked if anybody wanted to tag along. Having been through several continuous weeks of noises from the upstairs dwelling (school holidays, ya) I thought to myself: “Why not?” It was also a good opportunity to catch up with an old friend.

So we (me + wife + friend) booked a trip to Turkey — a place I never thought I would go. Now that I have returned, I’d say I have no regrets.

Singapore to Istanbul to Cappadocia

We flew direct from Singapore to Istanbul, then caught a domestic flight to Cappadocia immediately after. It was pretty late by the time we arrived so we did some light shopping around the town of Goreme and then retired to bed so we could be up before 5am the next day to catch our hot air balloon flight.

Sunrise with hot air balloons in the background. Taken from the Kelebek Cave Hotel in Goreme, Cappadocia.

Hot Air Balloon, Rose Valley and Kaymakli Underground City

Pick-up service was at 5am, followed by some paper work and a simple breakfast. The actual balloon flight started around 6am and lasted an hour. We returned to our hotel for the really awesome breakfast spread before joining our day tour to the Rose Valley (no roses in summer, unfortunately) and the Kaymakli Underground City.

Crawling through the narrow tunnels of Kaymakli Underground City. I’m 1.8m tall and ahead of me is a ~1.5m lady — imagine my agony.

Ihlara Valley and Selime Monastery

Day two was a full day (6-7 hour, ~14km) hike with a private tour guide along the Ihlara Valley. A picture speaks a thousand words.

View from the bottom of the Ihlara Valley in Central Anatolia, Turkey where much of the vegetation couldn’t shield us from the scorching summer heat (~38ºC).

At the end of the hike was the Selime Monastery, where some say it is where some Star Wars scenes were filmed. It certainly resembles Tatooine, but I could not find an exact resemblance after Googling. Maybe I’ll watch all three episodes again and take a screen grab if I see it.

The Selime Monastery lies above at the higher section of the rocks in this picture and is a surprisingly short 10-minute hike up, but what’s more important is how this resembles Tatooine in Star Wars.

At the top where the monastery lies.

By the end of day two our feet were sore. A Turkish bath and a nice dinner at the hotel fixed everything.

Goreme Open Air Museum and Love Valley

We spent day three touring the Goreme Open Air Museum. I must emphasize that the extra tickets to the Dark Church is definitely worth the money if you are planning to go. Unfortunately, no photo taking was allowed (so they can sell their postcards, etc.)

We also attempted hiking through the Love Valley but it was too hot to continue, so we chilled out at a small hut, bought some drinks, took a couple of photos and returned to the hotel.

The Love Valley, where rock formations looks, urm… erect. A lone sunflower stands in the blazing hot summer sun.

Cappadocia to Istanbul to Izmir, drive to Sirince

Day four was spent flying domestic from Cappadocia > Istanbul > Izmir, where we picked up our rental diesel Hyundai Accent from Erboy Car. Fuel is extremely expensive in Turkey (around TL 4.70 or US 2.20 for a litre of diesel) so a fuel economical diesel is a must.

It took me a while to get used to the left-hand-drive traffic. After a stressful drive through extremely narrow streets of a small village Sirince, we arrived at a small terrace house where we spent the night.

Ancient city of Ephesus, Basilica of St. John and House of Virgin Mary

The ancient city of Ephesus was a short 10-15 minute drive away from Sirince. It is a big city so if you are driving you’ll likely have to walk up and then walk the same distance back to your car.

I read about tourist traps offering “free” return bus rides, so we took the advice of the locals (from the village of Sirince) to park the car at the lower (south) gate, catch a horse carriage ride up to the upper (north) gate then walk back down towards our car.

Catching a horse carriage ride from the south gate to the north gate is a quick way to ensure you don’t get caught in tourist traps offering “free” return bus rides that may quickly turn into carpet purchases.

If there’s just one place to visit in Turkey, it’s got to be the ancient city of Ephesus. Some say it is better than Rome. Be there early — it can get very crowded in the afternoon.

By noon there was quite a crowd and I couldn’t get good pictures despite having my GoPro mounted on a long monopod. We left and drove to two other ancient sites nearby; The Basilica of St. John was nice, but nothing was left of the ruins of The Temple of Artemis except for one rebuilt pillar (I’d suggest not to waste your time).

While the basilica looked grand from the outside, the interior is only partially excavated. A large part is still covered in earth.

We also drove up the mountains to the House of Virgin Mary. Unfortunately no photography was allowed and we left empty-handed and started our long journey to Pamukkale where we stopped mid-way for grocery shopping and … McDonalds!

After checking in to the Tripolis Hotel at Pamukkale we couldn’t resist the pool after five days under the hot sun. The view of the Travertines from the pool was amazing.

Taken from the pool at the Tripolis Hotel in Pamukkale. Service was lacking, but the pool was worth the money.

After a refreshing swim we proceeded to gobble down our complimentary dinner — which not very fantastic but had a fancy belly dance which was somewhat entertaining.

Travertines, Hierapolis and Paragliding

We set off a little later than usual on day six and made our way to the Travertines. We spent maybe an hour soaking in the limestone spring waters before we hiked to the Theater of the Hierapolis. The entire Hierapolis is massive and it was too hot out, so we did not continue.

Theater of the Hierapolis in Pamukkale.

We did, however, see people paragliding and went hunting for a paragliding company, joined them, and paraglided past the Hierapolis and Travertines.

Travertines and Hierapolis from up above. Can you see the Hierapolis Theater?

We probably spent too much time paragliding so we skipped two archeological/ruins and drove straight to Bodrum.

Our rental Hyundai Accent 1.6 CRDi Automatic by the beach at Bodrum.

We spent the evening enjoying a nice seafood meal (we haven’t had proper seafood yet) and watched the finals of the World Cup (Germany won) at a bar. Yes. Seafood, beer, world cup in Turkey by the beach. What could be better?

Yatches against the sunset at Bodrum.

Istanbul, Mosque, Mosque and more Mosques

We took a flight from Bodrum back to Istanbul where we remained for the rest of our stay in Turkey. The first thing we did in the morning was to visit the Blue Mosque.

Blue Mosque, Istanbul opened in 1616.

We also visited the Ayasofya, the Basilica of St. John, then wandered to the Grand Bazaar where our friend found the Suleymaniye mosque, which in my opinion, was a nicer mosque to visit. The Suleymaniye Mosque is not only bigger, it is about 50 years older than the Blue Mosque. What’s interesting is that the Suleymaniye Mosque’s architect Mimar Sinan was the teacher of the Blue Mosque’s architect Sedefkar Mehmed Agha, and because the teacher probably knew better, he designed the mosque with ventilation ducts which prevented the interior walls from turning black from candle smog in the old days before electric bulbs.

Interior of the Suleymaniye Mosque, Istanbul opened in 1558.

We took a tram, then switched to a bus to get to the Chora Museum. Apart from the Dark Church in the Goreme Open Air Museum, this is one of the most beautifully preserved churches we’ve seen.

The Chora Museum is a must-visit place in Istanbul. Getting there can be confusing, though.

The last few days were spent — well — shopping! No Singaporean goes overseas without shopping! There are many touristy shopping districts in Old Istanbul (European Continent). The popular ones are the Grand Bazaar and Spice Bazaar. I’d recommend not buying anything at the Grand Bazaar, and maybe some spices and coffee grounds from the popular store Mehmet Efendi at the Spice Bazaar. These two tourist districts are filled with unmarked prices and touting shopkeepers. Once you’ve seen those two places and had photos taken, take a tram and head straight across the bridge to New Istanbul. There’s a big shopping district/street starting from Taksim Square headed towards the south(west).

The Spice Bazaar is filled with touting shopkeepers, but ranks better than the Grand Bazaar in our opinion. But hold on to your money and travel across the bridge to shop along the shopping district near Taksim Square at New Istanbul (European continent) instead.

July 7-20, 2014

Caveat: July is probably during the worst time of the year to visit with the combination of hot summer and Ramadan (fasting month for Muslims). If you think hot and long summer days weren’t tiring enough, imagine being constantly awoken at 2am by drums for Muslims to have their pre-dawn meal.

August 2, 2014
Continuation to the CPF MSS Debate

Here’s a continuation to the big CPF Minimum Sum Scheme (MSS) debate that made a record 128 comments on my Facebook wall post.

The entire debate broke up into two topics of discussion. One of them is whether CPF is good for us (vs. a welfare system) and while I do agree that CPF is generally better than having to pay high taxes for the general welfare of another misbehaving person, the other part I’m going on and on about is that the MSS is way too, urm… stringent (for the lack of a better word)?

Based on my extrapolation there is a possibility that the MSS becomes so high that a graduate making the maximum possible CPF contribution from the day he starts work at the age of 25 may never meet MSS despite not spending a single cent on property. This will continue to hold true unless some variables are changed, such as raising the $5K cap, or raising the age at which MSS computation is taken.

What happens after 55 (till 65)?

There’s a period between the time we are 55 to 65 that we’ll likely have little or no money left in our CPF OA because it all went to our RA. If people aren’t able to meet the MSS it means that *all* their OA balance will be transferred to RA and they’ll have to cough up cash for property at 55 years of age.

There is a workaround, however, and that is to fully pay off the property with any balance in the OA before one reaches 55 but not many are aware of this option.

This period between 55 to 65 is also a pretty harsh period for most people as their kids would have just entered tertiary education at around 20 years old (expensive fees) and their parents are probably also getting really old at around 80 years old (expensive healthcare). Adding a sudden property commitment could be disastrous for a family that’s already tight on financial resources.

Mortage repayments will go beyond 55

Most people around me are buying properties in their very late 20s and across their 30s. This means that their 30-year mortgage commitments will extend beyond the age of 55 and the MSS will definitely affect a lot of people.

I could continue to argue that had CPF not been allowed for property purchases, property prices wouldn’t have been this high. After all it’s money we can’t use in the near term, so people willingly spend it all on a property. However, it is also true that some people with literally no cash savings will never be able to buy a property. It’s a double edged sword, and that’s a discussion for another day.

So what good is a payout from 65 to 85 that when those who haven’t had sufficient cash savings (presumably that’s the group that the government is trying to save from dying of hunger) aren’t even sustainable 10 years prior?

Leopard will never change its spots

The second part about MSS is the question of how useful would a payout of $600+/mth be (at current MSS of $155K). I know of people who will receive $600 for the week and blow it at a horse race. Assuming if the MSS is raised to provide a payout of up to $1,000/mth, nothing would change. If they didn’t have enough money they’ll take a loan, and I’m sure moneylenders, legal or illegal, would be glad to make a hefty interest by advancing these old folk’s government payouts. Whether it is paid annually, monthly, or daily, there’s no solving this problem, really. Old habits die hard and the burden will continue to be on their children/spouse/siblings/country/state.

Those who are financially prudent will likely meet and exceed the MSS, so why let that money get stuck in CPF while they could have used it for something more important, like their kid’s education, or to fund a new business venture, or if they’re feeling generous even donate it to charity?

Thoughts on alternatives

If the MSS was meant to help those in need, then there should be criteria established to qualify for withdrawal of lump-sum CPF monies. One such example would be for emergency healthcare. If a person had cancer — a very common disease at older age, he/she should be eligible to withdraw a reasonably large percentage of all his RA monies to fund for his treatment. Similar to any form of health insurance scheme, one could surrender early — albeit possibly at a loss, but at their own discretion because not all types of diseases are covered by general health insurance schemes.

Those who are prudent and have sufficient cash savings could possibly present proof, such as a bank statement, to allow withdrawal of their CPF savings for other purposes, such as for investments, children’s educational funds, or simply to immigrate and live in a peaceful island away from Singapore. In this manner, it would also encourage people to save sufficiently before 55. Cultivating the habit of financial prudence does not occur overnight.

P.S. I just found out that there is indeed a way to exempt yourself from the MSS. To do so you must have have purchased your own annuity program or have a pension payout that is equal or more than the current MSS monthly payout. But what isn’t clear at this point (to me) is whether I am eligible to receive my CPF monies in full cash once exempted, or if there are other fine prints.

May 9, 2014
CPF Minimum Sum at $155K?!

The government just announced that the CPF minimum sum will be raised to $155K this year. Back in 2003 the min. sum was $80K.

Minimum sum will be $600K by 2037

Looking at this chart I came up with a very conservative 6% compound per annum, the min. sum will be almost $600K by the time I’m 55!

I (personally) wouldn’t have met the min. sum

Provided that I continue working till I’m 55 and am paying off my flat with CPF, I would have only accumulated approximately $370K by the time I’m 55 (including CPF interests). I’m no where near the minimum sum projection.

The $5K max contribution limit will be raised very soon

I strongly believe that the current max of $5K will be increased very soon because the sums just do not work out. Here’s a fictitious example of a highly paid young and energetic local graduate drawing a salary of $5K/mth so he can make the maximum possible CPF contribution from day one.

Edit: I made some mistakes in the calculations earlier, this is an updated sheet.

(I’m having trouble uploading graphics, will do so later.)

He would have around $807K in his OA + SA by the time he’s 55, but check out his minimum sum! That’s provided if he doesn’t buy a property.

But I’m sure he wants to get married and buy a flat… and have kids… the government strongly encourages that!

He’ll have no money left in CPF if he bought a condo

So after working for 30 years and paying for a flat together with his spouse, it is fair assumption that this bloke would have $300K less in his CPF for a decent HDB flat at current prices ($600K for a flat including interests divided equally between husband and wife).

If the couple buys a million dollar, they will have nothing left in their OA.

If his wife gets pregnant and stops working we may find another dead body in Bedok Reservoir/Singapore River.

Singapore tax rate is effectively >36.5%

Given that our current CPF rate is 36.5% (20% employee + 16.5% employer) our income tax rates can be considered to exceed 36.5%. Just as an example, the highly-paid graduate above would pay about 3% income tax for a salary of $60K/yr. This would add up to around 39.5% in taxes. This is higher than many developed countries. Even in US the highest tax bracket in the most expensive state is around 40%.

What the hell are we still contributing to CPF? We should be contributing as little as possible.

On hindsight, maybe it is a good idea to spend all your CPF money on a property since you’re never ever going to get it back.

The other question would be why are we even buying older and shorter tenure properties for more money?

May 8, 2014
Investment portfolio reshuffle
Earlier I wrote about the painful (and expensive) financial lessons I learnt over the last few years. I’ve been reading books and articles and will slowly reshuffle my investment portfolio.

My current investment portfolio looks like this:
- My nett investments are approx. 25% of my cash, i.e. if I have $20K cash, I would have $5K of investments (total $25K).
- Around 30% of my investments are in Prudential ILFs and not doing very well.
- The remainder are in SGX in various stocks and REITs.
(more…)
February 14, 2014
Property ownership and investment in Singapore

Living and investing in property are two different things. Being risk averse, I believe that the first home where we plan to live in should always be cheap and well within our financial comfort zone.

The half CPF OA rule

Apart from being able to make the down-payments and still have enough money to do a nice renovation, my real comfort zone is when my mortgage payments take less than half of my monthly CPF OA contributions — this meant that for every month I get paid, I would save an extra month in my CPF for rainy days. Relatively speaking, I should be able to fully pay off my mortgage loan in half the time, i.e. 15 years instead of 30 years. I would then be free of this debt at the age of 42.

Sell high, buy high

Everybody knows that the property market will be on the uptrend in the long run, but most people barely save enough to pay the first 20% down-payment. I’ve had friends who buy million-dollar condominiums as their first property and are waiting for the right time to “flip” it for a profit but little did they consider the fact that when they sell their properties they’ll have to buy another at the same exorbitant price. They either end up taking up more debt for their resident property (refer to my “comfort zone” rule above) or downgrade in either location or size to keep the profits.

Location vs. practicality

In my opinion, the only way to make money from property is to hold a second investment property. Investment properties have slightly different selection criteria from a resident home. For example, I may consider a SOHO unit near Bugis as an investment property but will never buy one for myself if I had a family.

Grow money elsewhere first

Unfortunately, most average young working Singaporean adult like myself will not have that kind of money to buy a second property, especially after the recent cooling measures introduced by the Government. Since we can no longer buy two HDB units, investors will have to turn to private properties. A small SOHO-type unit would cost upwards of $800K. If I wanted to buy a $800K private property while still servicing my existing HDB loan, I would have to cough up 40% or $320K in initial down-payments — that’s before stamp duty and GST.

IMHO, the only way for the average Singaporean to become a property investor is to start saving and investing money early and wisely in other financial instruments first. Some may realize that property may not be the best investment afterall — who wants to pay 1% commission to agents? It’s just disgusting.

February 13, 2014
Financial Lessons

Several times a year for the past few years I would revisit and update a spreadsheet that I created sometime back in 2010/2011 to track my (and wife’s) financials. It tracks our incomes, expenses, investments and assets and gives a projection of savings over a time horizon. Ever since we got married and bought a property in 2009 (with a loan, of course — as most Singaporeans do) I was concerned about the $200K+ property debt I had incurred; I worry that I may not be able to pay it off — let alone “retire” comfortably although I do not really buy the idea of a retirement. I believe in a working retirement, but this will be a topic for another day.

The intent of this blog post is to share with you several expensive and painful financial management lessons I have learnt over the years. I know that it may be too late by the time people read this (as is usually the case) but hopefully those who follow my blog will be able to share their experiences or gain some good knowledge before shit hits the fan.

This entry will be more of a summary since I will not be able to cover everything in a single post. I will try to write detailed follow-ups in the near future, and possibly also use this to track/share my investment moves and progress over time.

A little history

In 2009, I bought my current 5-room HDB flat with zero — yes $0 — COV. I was lucky to have bought it during a minor downturn in the property market. Even then, it was rare to buy a flat with no COV.

Before I purchased my property, I set aside $10K of my CPF OA monies into Prudential Investment-Linked Funds (PruLink Singapore Managed Fund and PruLink Global Basics Fund). I was lucky (or maybe not) to have done this before the government imposed a minimum balance in CPF OA before money could be used for investments. The primary goal was to prevent HDB from taking all the money from my CPF OA for the property downpayment so I’ll have some rainy-day reserve. The secondary goal was to grow my money at a better rate than the prevailing CPF OA interest rate — as of this writing, 2.5% p.a..

In 2010, I decided to speak to a friendly financial advisor on how to grow my savings. I bought into two Prudential endowment plans (PruFlexiCash and PruSave).

In early 2011, I received a lump-sum payout from my business and once again approached my friendly financial advisor. I invested 30% of my cash savings into more Investment Linked Funds (ILF). The funds were distributed between a mix of global equities, bonds and commodities — something I thought to be very balanced and risk averse until the markets dipped in July/August 2011 right after I invested my money. FML.

In late 2012, I finally got my online account for Prudential working and found out that my “investments” weren’t doing very well. In fact — they were in a mess. I switched several funds around to something that was relatively stable and growing — Singapore bonds.

In 2013, I decided to buy some shares on SGX myself after realizing my Prudential “investments” were a load of bullcrap. Listening to my old man (who by the way is not your typical uncle trading tips with other uncles at the coffeeshop; he reads lots of books, of course including Warren Buffet’s book) and his theory of “it is never the wrong time to buy for the long term”, I bought into several shares between April and May. The government announced a bunch of cooling measures that killed a large % of my real estate shares and then a big market slide in September dealt a second blow. It’s the 2011 deja-vu. How unlucky can I get?

Fast forward to 2014

My flat has since gained approx. 38% in (unrealized) asset value but I ain’t going to sell it just yet. However if I do sell it, the nett gain after deducting interests would probably be somewhere around 25%.

My CPF “investment” was at -36% of its original value before I switched funds in 2012. As of this writing, it has improved but is still at a miserable -32%. This is after 5 years!

I also learnt that my endowment plans pay hefty commission charges and may possibly not yield the projected 3-7%, but forgoing it early would mean massive losses so I’m just keeping it for the sake of keeping it. Premiums paid-to-date (after exactly 4 years) are around $26K but the current value of the policies are only around $13K. That is almost 50% of losses for early surrender.

My cash investment-linked funds from 2011 are at -8.3% its original value as of this writing. This is after waiting it out for more than 2 years. It was even worse prior to me switching to bonds in late 2012.

My SGX shares are at -6% of its original value as of last week when STI fell below 3,000. But after adding dividends this turns out to be not too bad — my losses are around -4% nett considering that I entered at a really bad time near the peak of 2013 when STI was >3,400. I take this 4% loss as “school fees”.

So with 4 years of crappy financial management, I asked myself if I could have done better.

Summary of lessons learnt

Not all debts are bad. I believe most articles on financial prudence would advise against debt, but it is near impossible for a young working couple to own a home in Singapore without a loan.

Don’t trust your friendly financial adviser. Even if he meant well, the training he had received may not.

Endownment plans are bullcrap unless you are the sort who does not know how to save, then it forces you to save (somewhat).

ILFs are the ultimate garbage. The commission charges will kill you.

As a summary of the three points above, never trust somebody else to manage your money for you… well… because it’s not their money.

The one thing I am not sure about yet is the stock market which I will learn about and experiment with over the course of the next one year.

Stay tuned for further updates…

February 13, 2014