Sunday, 30 August 2015

How I used my University student loan to partially pay off my uni fees

Back in 2012 when I just ord-ed from army, I heard of something called student loans to pay for uni... at 0% interest holyshitwhat.

Of course there were a few catches such as
  • Its only interest free when you study
  • It only covers up to 90% of your fees
  • They don't give out the cash, the money goes directly to the school to pay for the fees

Also I wasnt smart enough to get a scholarship (taken from dbs website)

Current amount I owe (+7.5k more when my final year ends)

As the money from the loan doesn't go directly to you but to the uni instead, it stops you from doing 'funny stuff' with the money.

But luckily my mum was on hand with spare cash, which could be used for the funny stuff instead

So instead of just borrowing from my mum, to pay for Uni and then paying her back when I get a job, it evolved into something like
  1. Apply for 0% interest loan
  2. Borrow from mum the $23,000 set aside originally for uni for a small interest 
  3. Use the $23,000 to buy 2 lots of dbs 4.7% preference shares
  4. Collect $1880 a year in interest
  5. Which totals up to $5640 in 3 years
  6. Which helps to reduce my uni fees about 20% (after paying mum interest)
  7. Snort at the irony of borrowing from dbs and then lending them the same money for interest
Here's a poorly drawn diagram


After (initially)

After (when the student loan is due)

Sorry $2820 in interest i meant
Everyone wins!
  • DBS wins by showing the government it was a good bank by loaning students money
  • My mom wins by earning interest in loaning me cash
  • I win in earning $2,820ish to help pay for tuition costs
A bit on DBS 4.7% preference shares
  • Its a cross between a stock and a bond
  • Actively traded on the STI like a stock
  • Pays 4.7% dividend semi-annually like a bond
  • Redeemable after 10 years at par (like a bond)
Why were preference shares my choice of investment?
  • Safe, DBS HAS to pay dividends on the preference shares before its common shares
  • Prices doesn't fluctuate much, also since its redeemable at par, it has always been trading above par (since it pays a dividend)
  • I really liked the irony of loaning money to DBS at the profit, role reversal between the consumer and the bank

Anyone else that has done this before? Please comment below thanks!

Ok, this isn't really true, since instead of borrowing from your parents you are borrowing from the bank

Top 5 points that show that you anyhow invest

Most retail investors have a problem of anyhow investing, I admit, long time ago I fell into the same trap, buying companies on the whim like

'I think GLP is a good stock, it does logistics and stuff.'

'Uhh keppel land sounds good because it trades at 1x book and its expanding to China'

'HPHT gives 7% yield? Omgomgomg'

'Hyflux is good because Singapore needs water'

Until I realized (extremely slowly), like wth am I doing, why am i dumping cash into stocks that 'feel good' because i come up like 3 line arguements?

But what does anyhow investing actually mean? Here's a few good warning indicators

1. You spend more time thinking of whether to buy shirts/dinner than your stock
Its amazing, I can find people willing to dump money into a stock in a blink of an eye on flimsy reasons but take forever to decide where to eat, or come up with more intensive/quality arguments on what shirt to buy.

2. You buy a stock without knowing how the company makes money
Can anyone really explain what is noble doing? Here is an actual conversation below

Friend: I think I should buy noble
Me: Why?
Friend: Because it looks cheap
Me: Do you even know what it does?
Friend: Yeah commodities and stuff, and its cheap!!!

Btw, noble does commodity trading in 'hard commodities' and thats the best I can go, totally no idea how it makes money.

3. You buy a stock because it has been done 5 days in a row
Its the same as the gambler putting his money on black because the ball was on red 5 times previously.

4. You can't quantify the reasons that you buy a stock
#1 mistake, throwing random arguments like I should buy smrt because everyone takes the mrt, or I should buy FJ Benjamin because they have strong brands like banana republic 

Don't get me wrong, those are good reasons to look at a stock (ok actually banana republic is a dying brand but whatever).

But do you know what the points you mean for earnings? If more and more people take the mrt, a new banana republic store is opening , do you think it will help the company grow 10%? 15%? 100000%?

5. You base your selling decisions on whatever you are feeling about the market right now

Please don't do this

What you should have in mind before you buy a stock is a target selling price and a whole list of reasons why you should sell it.

A good way to stop yourself from anyhow investing is to take a deep breath, and write down the reasons (that should fill up a page!) why you want to dump $5,000 moolah into your chosen one.

They should at least include these few points

1. How does the company make money?
Like seriously, you'd be amazed at the number of people just dump things into a stock just because its 'cheap'. Do you know what are the main drivers of revenue and the split between each segment?

2. Whats the growth plans for this company?
This should make up the main part of your decision, are they opening new stores? Gaining market share? How is it going to impact the bottom line? Do you think earnings are going to increase by 10%, 20% next year? If so why?

3. Whats your buying target price?
Even shoppers know what price they feel comfortable with buying their clothes. For stocks, you have to have a set target price in your mind and the reasons for buying at this price

Example: 'My target price for comfortdelgro is $2.70 which is 19x P/E which is x% cheaper/more expensive than the historical p/e. I believe this is a good entry price for a stock that gives x% growth

4. Whats your selling price and why?
Not sure why most people don't have a selling price. But when you buy, you should always have a scenario to sell, this stops you from a) checking the market daily to see when to sell b) being a ganjiong spider and selling when the market tanks

Example: 'My target selling price for comfortdelgro is $4 which is 25x P/E which is x% more expensive than the historical p/e. Or.... I should sell comfortdelgro because the fundamentals of the company changed so much that my reason for buying it is not invalid.

And that covers the main points of investing, without even touching upon the financials of the company. If you don't even know what you are buying, why you are buying, why you are selling, then its time to admit that you aren't really investing.

Tuesday, 25 August 2015

First post!: My investing journey

Hello world, just started this blog after my previous one was forced to close as i took on a sales & trading gig at a big bank, but now the gig has ended I can start a new blog again! Whoopie.

A little bit on my investing journey, I started in 2010 with the green light from my parents to invest for them... and promptly lost my pants because I was a noob investor.

Luckily, Ben Bernanke was on hand to bail me out (QE1,2,3 anyone?) and I managed to recoup all my losses and more. Ever since I made sure I didn't anyhow invest.

My investment experience has taught me that before purchasing a stock, its essential to basically know what you are buying and why you are buying. If you can't fulfill these two simple criterias, then I would say that you anyhow invest. 

I refined my investment philosophy and methods to ensure I myself know why the hell I'm putting $10,000 of my hard-earned money into a stock and so far have been generating 10%+ returns on various stock picks.

This requires looking at screens, slogging over reports, crunching numbers and basically a whole pile of 'why am i doing this and not partying like a 24 year old' work, but like I said, if you spend more time deciding whether to buy a $30 t-shirt than chucking $5,000 into a random stock, you got serious issues yo. (Why do you need a $30 t-shirt anyway??)

And so with this blog I hope to guide new investors into this new world of markets, to teach people the steps to take before investing and hopefully they don't anyhow lah