Tuesday, December 24, 2013

7 Things to do before End of 2013

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It’s that time of the year. 2013 is going away and the new possibilities of 2014 await us. While the festive season can mean a lot of enjoyment, it can also at times turn into a series of bad financial decisions. That is something you absolutely want to avoid.

Here is a list of 7 things that we have to do before year end to ensure a smooth transition into 2014.
  1. Yearly Income/Expense for 2013
  2. Financial Planning for 2014
  3. Clear off all the pending bills for the year
  4. Get all the paperwork in place for taxes
  5. Reflect on 2013
  6. Write Resolutions for 2014
  7. Call the loved ones who you couldn't call this past year

Merry Christmas!
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Saving every Penny vs Living a good Life

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Each person has a unique lifestyle and thereby a unique spending/saving habit. No matter how much you earn the secret to doing well financially lies in how much you save out of your paycheck. Some guys have shared on various blogs how they are trying to save 60-70% of their income with a dream to retire well before 40. It’s a great plan if you can do it. However, there is one big problem with this plan. If you really go extreme, you start to put off some of the essential fun that you want to have for later on in life. Now obviously not all the fun activities are expensive, but if traveling a long list of places is one of your goals then it can get costly at times. I still believe that you shouldn’t be putting off your big traveling plans in order to save a lot. After all you need to do certain things while you are young. Striking the right balance is super-important.

I think one must save anywhere between 40-50% of their paycheck each month. As part of our multiple accounts strategy, I discussed how we’re going to transfer this money from the salary account to the ‘investment funds’ account as soon as we receive paycheck. Over time, this amount is then invested into stocks and other asset classes after doing research. Then, a part of the money goes to our emergency fund. Now out of the remaining amount, we have a normal family budget with some buffer. Whatever is left over is transferred to another ‘Big Ticket’ savings account just before the next paycheck. This way we can continue to accumulate into this account with whatever is left over from the budget. Then use this account to fund our big ticket purchases including the many important things we want to do in life like traveling. The beauty of this plan is that we decide how much to save well in advance (probably beginning of each year). Once saving is done, then we have money to live and enjoy life while ‘investment funds’ work to help us retire.


Once you have saved as per your goal there is no need to feel guilty about putting the rest of the money to good use and to enjoying the things you like to do in life.
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Wednesday, December 18, 2013

[Recent Buy] Western Union NYSE:WU

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I recently made a purchase of 25 shares of Western Union (NYSE:WU) at $16.40. This is a new purchase. The stock has traded down since the CEO announced additional expected compliance cost from next year and the market has overreacted. pushing the stock to a PE ratio of 10.86. The 5-year low and high PE ratios are 8 and 15. Due to the price move, yield is now higher than 3% which satisfies my requirement.

The 5 year dividend growth has been 60% while the payout ratio is still quite low at 32.5%. 5 year sales growth was around 3% while EPS grew by 8.77% annually. Western Union still continues to be a market leader outperforming the peers by multiples and I like this a lot. There are a couple of negatives for the stock. Firstly, the leverage (Debt/Equity) of 377% is making me quite uncomfortable. Further, recently the CEO resigned in October implying some definite challenges going forward. That said I still find the ROA of 8.9% quite healthy while there is an easy room for dividends to grow even with added compliance costs over the coming years when the management stabilizes. I have taken only a small position in the stock and might add another equal position of $400 if the stock price comes down considerably with the market. It is a high beta stock (beta = 1.37), so that remains a risk. However, I don't want to miss out on this opportunity to invest in this market leader at a reasonable enough price.
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Saturday, December 14, 2013

Why Buffett’s Strategy is Not for Everybody?

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Mr. Warren Buffett has a unique and very successful style of investing. He analyzes businesses deeply and then invests in a few good businesses at a bargain. This goes against the principles of diversification. It works because he is so good at picking those few companies. Everybody is not good at stock picking. So, the next best thing one can do is diversify their portfolio rather than betting on a handful of stocks like Mr. Buffett. Remember that your portfolio is for retirement purpose with a rate of return in your mind to achieve that goal. Diversification can help reduce the risk while your return criteria are met. Mr. Buffett is now managing investments not for his retirement but with a purpose of generating higher than market returns and for him diversification can limit the upside. He has the capacity to take that extra risk for extra return, but you necessarily don’t have that privilege.

How much should we diversify?
I believe that if you are investing in individual stocks, you need to hold at least 25 stocks and from multiple sectors. Typically when investing in mutual funds, portfolios tend to become very financial sector heavy and you need to avoid that situation when investing in stocks. In fact, try to limit your single stock weightage to 4% and sector weightage to 16%. This means you should avoid holding both too little and too many stocks from the same sector. Now often a few of these stocks outperform and their weightage increases beyond 4% over time. Just keep actively monitoring at least once a month. I actually invest money into stocks every week. If stock weightage increases beyond 4%, that should eventually be taken into account when making new investments. I won’t sell those stocks though, as they are winners and we should let the winners run.

How to get super returns?
Having a diversified set of stocks that provide regular income and that grows over time is the basic goal that I have. Once, this core portfolio is set I will start thinking about satellite strategies to enhance returns and have some fun in the market. This would include taking positions in few stocks like Mr. Buffett or even pursuing growth strategies with a shorter time frame in mind. But this is all after I have my core positions set to help me retire. This will also help me become good at analyzing stocks over time and improve my chances.

Mr. Buffett is the greatest investor of the century and no doubt we should learn every bit from his investment style that we can. However, we need to manage our risk while we learn and sail to a safe place.
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Another Way to Look at Retirement

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Suppose you earn $2,000 per month after taxes today. Let’s say your monthly expenditure is $1,000. By definition, retirement for you means having $1,000 coming into your account for you to take care of your monthly expenditure, without you going to work. Now to make this happen you need to have enough assets that generate such income. $1,000 per month translates into $12,000 a year. A good estimate for returns generated by assets is around 4%. To generate $12,000 a year at 4%, you need to have $300,000 in assets to retire. Today you are saving $1,000 per month, so assuming inflation and salary hike remains 0, you need to save 300 months of salary to retire. That means, to retire you need to save for 25 years!

Obviously, a lot of things have been simplified above, but this was to illustrate the point. This is what people typically do today. What people also do is add house mortgages to this equation which pushes this 25 to 35+ years or they end up working will retirement age.
This example wasn't to scare you but to illustrate the reality. The way out of this loop is by saving with discipline and investing wisely. Investments can be in a whole range of assets that you are comfortable with. Diversification helps minimize the risk but the biggest risk is inflation and beating that should be a basic requirement for your portfolio.


I started doing it rather later than I should have. I’m investing mostly in stocks and a few ETFs. I am looking to grow my dividend income through these investments over time to one day make me financially independent and I want that day to come a lot earlier than 60 years of age. You can chose from other asset classes like Real Estate and Mutual Funds as well depending on your comfort and preference. In fact, if you are not good at analyzing stocks you are better off paying fees to Mutual fund managers. Stock investments can grow over 10% annually over the long term and historically outperform most other asset classes. If done smartly, this could reduce the number of years one needs to save for retirement as compounding becomes your dear friend.
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Friday, December 13, 2013

Technical Analysis in my Fundamental Investment Strategy

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I started my investing/trading journey doing a lot of technical analysis. It was a rough ride to begin with but then I learned a lot along the way. Now I know a good deal about technical analysis. Technical analysis works great in the shorter time frame but won’t always be able to explain the longer term dynamics of individual stocks. That’s why I turned into Fundamental Analysis for answers. While I won’t categorize myself as a large-cap value investor, I am looking for buy and hold stock ideas now rather than churning for quick profit for me and my broker. But does this mean that all my Technical analysis knowledge goes to waste? Not necessarily. I know that timing the market is a fool’s game. But technical analysis can at least help you pick the stocks when they are oversold rather than chasing an overbought stock where you saw value and then finding yourself down 5%-10% just because the short term traders sold at those levels. In the long term, this won’t matter so much but a good entry level can sometimes mean saving almost a year’s worth of dividend or even more. Now that’s something.

My strategy going forward will be to look for solid businesses selling at a good price in the market and this stock should be looking oversold on the technical indicators as well. This will help me avoid situations like buying into MCD at $99 and finding the stock at $94 after a couple of weeks of correction. Well, not always avoid. The stock can still continue to trade down, but this just adds one more parameter to the bunch that helps us find good ‘Value’ buys in the market. Hopefully, this addition will enhance my investment strategy.
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Why is S&P 500 inclusion Positive for Facebook?

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Inclusion into an index is always a positive signal for a stock. The biggest reason is that so many institutions invest into index trackers/ETFs. These ETFs have to buy the underlying stocks in order to track the index. There are billions of dollars invested into ETFs tracking a famous index like S&P 500. As soon as FB is included, these ETFs have to sell the stock that was taking out of the index and replace that position with a position in Facebook. Clearly, demand pushes the included stock (FB) price up. This is the reason why we saw Facebook move 4% higher on the news of listing into S&P 500. Do remember that nothing changed fundamentally in the challenges and operations of the business and stock should be analyzed focusing on the business.
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Income/Expense for Nov 2013

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November was an unusual month for me as I did not have to pay much for the utilities. I went home so most of my food expenses were also down. I’ll still share with a disclaimer that I expect my expenses to be much higher December onward.

Housing: 2,200
Food & Groceries: 216.85
Travel: 39.15
Utilities & Health: 108.86
Total Expenses: 2,563.86
Income: 5,300
Savings: 2736.14

I haven’t included my travel ticket expenses as that was booked a lot earlier. You will see me including my trip ticket expenses next time.


*All figures are in SGD
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High Dividend Yield isn't Everything

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One is often tempted to add a stock which is currently yielding very high compared to the peers. Using a high dividend yield as the only criteria can be quite disastrous. You have to remember that you are buying into a piece of business and ensure that the business has a future. One of the important criteria to combine with high dividend yield is dividend payout ratio. A dividend payout ratio below 60% means that the high dividend yield might be sustainable over the next years even if earnings were to come under pressure. One must remember that there is always some reason behind stock prices moving down so much pushing the dividend yields higher. My biggest concern is often that there might be an expectation of a dividend cut. If that happens, out entry yield will be cut not to mention the stock price would have already moved into negative territory making it tough to get out even on break even. A thorough analysis of past financial statements is an absolute must for these companies. Competitive forces in the market also need to be studied.

Market often overreacts on bad news. This often creates good entry opportunities to enter into good solid businesses at a discount. The key point is the business being solid. Recently I have been analyzing RSA Insurance. It had been facing some headwinds with its operations in Ireland. A 6% yield was looking attractive to me as I don’t have to pay taxes in UK. I finally decided not to buy the stock as there seemed to be so much uncertainty about the future of the business. So much that recently the CEO stepped down. This was perceived as really bad news by the market and stock sold off 18.76%! Now the dividend yield has been pushed higher to 7.60%. Obviously, in this case just looking at 6% yield and investing would have been disastrous in the short term. It is still too early to say what will be happening with RSA Insurance in the long term. May be the market has overreacted providing a good entry point.


To summarize, high dividend yield is not everything. Look at other parameters like payout ratio and competitiveness of the business to gauge sustainability.
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Thursday, December 12, 2013

[Recent Buy] Textainer Group Holdings TGH

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Right now I'm in the phase where I've been adding a new stock almost every week to my portfolio for the past couple of months. I'm trying to diversify my exposure to new sectors when I'm looking for additions to my portfolio at this stage. I don't mind holding two stocks in the same sector if they happen to be both good businesses like Pepsi and Coke. But my focus at the moment is to build up a portfolio of 25 stocks without having too much exposure to one particular sector. I don't want exposure of more than 4-5% from a single stock.

The stock that we are going to discuss today, that I bought last night is Textainer (TGH). It is a stock from transportation industry. Textainer Group Holdings (TGH) is a holding company engaged in the purchase, management, leasing and resale of a fleet of marine cargo containers. It comes from the challenger category and has raised dividends for the past 7 years. It is currently providing a yield of over 4.75% while paying out only 53% of the earnings. The 1-year, 3-year, 5-year dividend growth rate is a phenomenal 27.3%, 21% and 52.1%. Currently ROE is over 18%. P/E ratio of just over 11 and P/B ratio of close to 2. Debt/Equity ratio is slightly on the higher side at 2.40 from what I'm normally comfortable with.

This would be another addition from the Industrial sector, but as I don't have exposure to transportation stock and the positioning and growth of Textainer is quite unique, so I'm happy adding TGH at such an attractive valuation. Check out my full portfolio.

Zen Fund Portfolio
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New Expense - Gym Membership

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I recently signed up for a gym membership. I admit it is priced at a high S$142/month and I would have never paid this much every month on my own. This expense partially gets offset by the HSA dollars that I get on a yearly basis. So, this will bring down my effective cost. As I'm working for over 12 hours every day, it was becoming really important to have working out somewhere in my routine. All my plans of working out over the weekends didn't quite work out as after working hard over the weekdays I'm hardly left with energy to go to gym and if I was able to go sometimes it was very infrequent. Over the long term this is an investment I'm doing on myself and the return I expect is to get fit again.

If you are motivated enough to work out at home everyday, I salute you. For me going to gym from office works best and so I'm back at it.
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Wednesday, December 11, 2013

Better Budget Management with Multiple Bank Accounts

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I have been keeping budget for just over a year now. I have tried many different methods of keeping a budget. All have some pros and some cons. Today I am going to discuss how I solved one of the problems.

After you have decided this much you are going to save and this much you are going to spend in the coming month, what happens to the salary that comes to your account. It still sits there all together. In theory, you have an allocation but not in the account. You did follow the budget but then all the emergency funds and savings sit together and tight like a family in that one account. And then to add to the worries the next month's salary comes and we are just a couple of months away from complete chaos. I'm sure this happened to many of you. In fact, often on discussion with friends who are saving up money I have found they have thousands of dollars just lying there in the account for months. How does one manage this problem? The solution is quite simple.

This is what I did. I opened two new Savings Account connected with the already existing salary account. This is very easy to do online nowadays and usually there aren't any additional charges associated with it. The first savings account is for investment funds. My plan is to invest SGD 1k/week and if I don't separate out the funds to take this 1k from my salary account has lots of transactions to keep track of at the end of the month. And it is harder to keep track of whether I was able to invest SGD 1000 every week or not. Instead I'm going to transfer SGD 3k each month to my 'Investment Funds' account and then I use this money to make all the stock purchases. This makes it much simpler to track and also to implement the age old saying of 'pay yourself first'. As soon as the paycheck comes now, I'm going to transfer this amount. You must be wondering how I'm only transferring SGD 3k/month to spend SGD 1k/week. Actually I have some buffer in investment funds right now which will be slowly used. I'm also hoping for a salary hike in April after which I should be able to save SGD 4k/month for investments.

The second savings account is for emergencies, so I'll call it the 'Emergency Fund'. Currently I have 2 months worth of expenses in this account and I'm not going to touch this unless it's an absolute emergency like losing my job. I do want to supplement this account each month with some more cash to have a bigger emergency fund over time. I can survive on SGD 3k/month, so this account has SGD 6k at the moment.

Ideally I want to have one more savings account 'Big Ticket Fund'. This will be to help me save up for the big ticket purchases including any home appliances, travel tickets, etc. My budget is SGD 3k/month. So, everything that remains from this 3k allocation will be transferred to my 'Big Ticket Fund' account each month on the day of payroll. Over a period of time this would grow and I plan to purchase stuff without any debt.

To summarize, open three more savings accounts connected with the salary account. When the salary comes, transfer all the left over money from last month's budget to 'Big Ticket Fund' account. Now your account will have only amount equal to this month's salary. Transfer investment money to 'Investment Fund' account ("Pay yourself First"). Then transfer a fixed amount into 'Emergency Fund'. Use the remaining money for monthly expenses.
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[Recent Buy] Religare Health Trust RF1U

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I have been on the lookout to add some good REIT recently. There are two names that I considered namely VIVA Industrial Trust and Religare Health Trust. Both are different types of REITs. While Viva's major asset is a business park and a few others. RHT's focus is on hospitals in India.


  1. P/NAV: One key parameter that I look at when I'm buying REIT's is P/NAV. If this ratio is more than 1, that means the REIT is overvalued and I'd be paying more to hold less valued asset. I don't like such a situation. Though at any given time a whole bunch of REITs trade overvalued and there is another bunch that continues to trade undervalued. NAV/share for RHT is estimated around 0.80 cents (price = 0.785 cents) while for VIT it is estimated to be 0.745 (price = 0.765 cents). So, P/NAV (RHT) < 1 and P/NAV (VIT) > 1. RHT 1 VIT 0
  2. Dividend Yield: Both of these REITs are fairly new with not even one full year data available. However, analyst estimates say that yields should be around 9% for both of them. This will give my portfolio yield a boost and we can call this round a tie. RHT 1.5 VIT 0.5
  3. Gearing (Debt/Assets): For RHT, the net gearing is under 10% while for VIT it is around 38%. It is a clear win for RHT which has an ability to take additional debt and boost shareholder returns further. RHT 2.5 VIT 0.5
  4. Dividend Growth: Next I look at the growth prospects for dividend. RHT's returns also depends on the occupancy rates which can fluctuate depending on a number of factors. For VIT, once the occupancy has been attained it would fluctuate less on an individual basis. Though the overall occupancy would be dependent on how the economy is doing. Analysts are expecting business park rents to go up by 9% over the next couple of years. Assuming this is passed on to investors as a boost to dividends, VIT is a winner in this case. For RHT, the additional risk is currency fluctuation. I believe that once Fed starts tapering, USD will strengthen and INR weaken. This might put pressure on RHT's dividends. RHT 2.5 VIT 1.5

There are some other parameters that I look at that haven't been decisive in this case. I was actually inclined to buy both of them. I bought 1000 shares of RHT at 78.5 cents/share for now. I would be looking to buy one lot of VIT as well once P/NAV drops below 1. 9% yield is looking very attractive and I'm happy to hold with slow dividend growth over coming years.

This will be my first REIT purchase and will add around 75 SGD/year in dividend income for the coming year. Dividend distribution is semi-annual for RHT.

Zen Fund Portfolio
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[Recent Buy] BHP Bulliton Plc BLT

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Recently I made a purchase of 34 shares of BHP Bulliton Plc (BLT.L). It is a diversified natural resources company operating in 9 segments and 100 locations worldwide. The company has a solid dividend growth history in recent years and a current yield of around 3.80%. Return of Equity is just over 15%, while PE ratio is just under 15. 5-year dividend growth rate is over 10% and payout rate of 56%. It just makes the cut meeting most of the criteria. However, there is one red flag. The 5-year EPS growth rate is negative for both the company and the industry.

As I have no exposure to Mining/Metals space right now, this should provide good diversification. Over the next couple of years I see economies fully recovering and this stock should do well. Dividends should remain steady, with a hope of some growth. This seems to be a good addition to my portfolio. Check out my portfolio for a full list of holdings.

Zen Fund Portfolio

I invested in the London listed stock as that is more tax efficient for me (I have to pay 0 taxes on the dividends).
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Friday, November 22, 2013

ETF Investing in Australia: EWA, AUSE or FAUS?

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I recently published an article on why I’d not invest in ETFs. In that article I also discussed the reasons to actually invest in an ETF as well. One big reason can be that you want an exposure to the stocks in a country that you don’t necessarily know well enough to pick individually. One such country would be Australia. Australia has the big 4 banking corporations which are considered solid: Commonwealth Bank of Australia, WestPac Banking Corp, ANZ and National Australia Bank Ltd. These corporations usually have yields that fall under my desired range of yields. But to pick one stock out of these would require a lot of research. The second biggest sector in Australia would be Materials, again a sector where it is tough for me to pick up individual stocks. Hence, I decided to invest in an Australia focused ETF. Australia also has a dividend withholding tax which dampens the initially high looking yields.

I considered three ETFs to invest in Australia: EWA (iShares MSCI Australia ETF), AUSE (WisdomTree Australia Dividend Fund) and FAUS (First Trust Australia AlphaDex Fund). As my primary aim is to generate income, all these three funds have a dividend yield of over 4% which satisfies my criteria. Do note that this is on a pre-tax basis.

*as of 22-Nov-2013
Parameters
EWA
AUSE
FAUS
AUM (mil USD)
2073
58
1.6
Expense Ratio
0.53%
0.58%
0.80%
Inception Date
12-Mar-96
16-Jun-06
15-Feb-12
Dividend Yield
5.50%
4.08%
4.70%
Number of Holdings
72
65
42
% Assets in Top 10 Holdings
60.19%
27.98%
41.98%
PE Ratio
14.95
15.65
n/a
Standard Deviation
1.37%
3.53%
n/a
Sector
EWA
AUSE
FAUS
Financial Services
42.48%
19.94%
7.42%
Basic Materials
16.93%
15.39%
18.70%
Consumer Defensive
9.49%
15.98%
9.98%
Real Estate
7.44%
0.00%
10.09%
Energy
5.73%
7.62%
8.04%
Industrials
5.34%
11.25%
12.42%
Health Care
4.30%
6.44%
7.77%
Consumer Cyclical
2.83%
13.10%
13.19%
Communication Services
2.01%
3.70%
6.03%
Utilities
1.50%
2.94%
2.51%
Technology
0.79%
3.64%
3.33%
Market Cap Breakdown
EWA
AUSE
FAUS
Giant
50.61%
19.79%
2.40%
Large
32.92%
27.56%
24.81%
Medium
11.06%
50%
70.57%
Small
0.00%
0.00%
0.00%
Micro
0.00%
0.00%
0.00%

Clearly EWA has been around for a while and has large AUM (2B) compared to very small for AUSE (58M) and FAUS (2M). Expense ratio is also the smalles for EWA at 0.53%. While FAUS and AUSE have more diversified sector exposure, their exposure to medium cap stocks is quite large for my appetite. EWA is a bit concentrated on Financial Services and Basic Materials. But they are the stocks that will do well when the economy picks up especially demand from emerging markets. Finally the PE ratio is most attractive for EWA, and standard deviation (1.37%) is also much better than AUSE (3.53%). I’m expecting FAUS to be on the higher side too given such high exposure to medium cap stocks. EWA would not be the pick for those who are not comfortable with such large exposure to Financials. But given my portfolio so far has exposure to only Utilities and Pharma, I’m quite comfortable with this. EWA would be my top pick here.

I bought 31 units of EWA on for $25.64/unit on 22-Nov-2013 for my Zen Fund.
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Saturday, November 16, 2013

Avoid Debt to buy Property

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I don't like the fact that most of my initial monthly payments on a home loan go to pay interest while my principle outstanding reduces at a very slow rate. Hence, I have decided to avoid taking debt to buy a property. I know that the goal is to have 5 real estate properties for the family by Dec 2020 and it is going to be tough doing that without taking any loans. But that is exactly the point. I want to own those properties and not owe money on them. We'll see where this decision takes me. This might mean that I buy land plots and get houses constructed as and when I have spare cash.

If you are in an area where interest rates are all time low and you can get a fixed rate loan, there couldn't be a better thing to do than take up a loan. But do investigate well before you invest as when it comes to real estate investments the most important three things are Location, Location and Location!
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Why I'm not Investing in ETFs?

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ETF is surely a good lazy man's tool for investing. Because we can't know everything about all the companies, it makes sense to go invest in ETFs for diversification. But is it definitely a better way? It might be for some people who have absolutely no idea about the companies. But I'd recommend them not to invest in stocks at all. Warren Buffett only invests in companies he understands. That is the reason that he never invested in Tech stocks until he finally did in IBM recently. It is hard to beat the market on an average by stock picking. So it is not a surety that even after investing hours and hours into doing research you will be able to outperform the market. So, we can agree that some of the Mutual Funds and ETFs provide a good solution if one just wants to mimic market performance. It saves a lot of time. However, now that there are thousands of ETFs to pick from, selecting an ETF to invest in itself would be quite a task.

The other big advantage of being able to invest in ETFs is that we can get exposures to markets that we can't easily get knowledge about. Let's say the Spanish stocks have been beaten down badly recently and we want to get some exposure to the upside there, it would take a lot of time to research and pick stocks in Spain, not to mention it won't be easy to beat the market without enough research. For this scenario a Spanish stocks large cap ETF might be a perfect solution.

Now that we agree that there are some definite advantages to investing in ETFs, I want to answer why I haven't invested in ETFs yet. Firstly, I have started to feel that a correction is now due and I don't want to put money into ETFs only to find myself go through the whole correction and recovery cycle again. I'd rather hold cash. Secondly, I'm looking at only income generating stocks for my portfolio. While ETFs are well diversified, when I research on their holdings I usually find some low yielding stocks in there that I don't necessarily like to hold. If I invest I would be forced to hold them even when I don't like it. I want to have more control there.

If the valuations do become more attractive in the market and I decide to invest, I'd be doing that in installments over a period of time. I do not recommend investing lumpsum amounts into the market. If you do a historical analysis when investing lumpsum your return over the years depends heavily on the valuation you invested in. I'd divide my amount into equal small parts and invest them each month into ETFs. Some do believe that the market is not fully valued yet and there is still some upside. If you want to invest now, do follow this method to average out the price over a period of time and avoid buying a big chunk at the peak levels.
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Travel Goals - 100 Cities

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One of my travel goals is to live at least one week each in 100 different cities across the world. I'll share my progress on that here.

  1. Singapore: Oct2013-Present
  2. Hong Kong: Sep2012-Sep2013
  3. Mumbai, India: Apr2012-Aug2012
  4. Lille, France: Sep2011-Dec2011
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Travel Goal - Visit 100 Countries

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Countries I have visited

  1. Austria
  2. Belgium
  3. Bhutan
  4. Czech Republic
  5. Denmark
  6. France
  7. Germany
  8. Hong Kong
  9. Hungary
  10. India
  11. Italy
  12. Luxemberg
  13. Malaysia
  14. Maldives
  15. Monaco
  16. Netherlands
  17. Norway
  18. Singapore
  19. Slovenia
  20. Spain
  21. Sweden
  22. Switzerland
  23. Thailand
  24. Vatican City

Countries I have to Visit

  1. Argentina
  2. Brazil
  3. China
  4. Egypt
  5. England
  6. Greece
  7. Indonesia
  8. Ireland
  9. Mexico
  10. Philippines
  11. Portugal
  12. Scotland
  13. Sri Lanka
  14. United States of America
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Friday, November 15, 2013

Real Estate Portfolio

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My goal is to have 5 Real Estate properties by December 2020 between me and my wife.

I will be looking at a mix of both rental generating units as well as land property at good locations that has a chance of appreciation over the period of next 5-10 years.
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Passive Income from Websites

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I have one other website that I'm running (not actively adding content nowadays). I'd like to share my progress, even if modest in terms of adsense income. TheZenFund.com is currently not generating any ad revenue as I'm still building content for this.

$0.25 - Jul 2012
$1.97 - Aug 2012
$9.09 - Sep 2012
$6.03 - Oct 2012
$3.66 - Nov 2012
$4.27 - Dec 2012
Total for 2012 - $25.26

$3.13 - Jan 2013
$2.15 - Feb 2013
$3.27 - Mar 2013
$1.66 - Apr 2013
$1.39 - May 2013
$2.88 - Jun 2013
$3.45 - July 2013
$1.57 - Aug 2013
$1.90 - Sep 2013
$1.32 - Oct 2013
         - Nov 2013
         - Dec 2013
Total for 2013 - $23.46 (till Nov 15, 2013)

My Goal is to achieve $6,000/month through passive income from my websites by December 2020.

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Saturday, November 2, 2013

Zen Fund - A Financial Freedom Project

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After analyzing the various methods of generating passive income, I have found that the method of investing in dividend growth stocks identifies closely with me personally. Being inspired by others who are investing in dividend growth stocks regularly, I have decided to document all my investments here on this blog as soon as I make them. I'll also try to share regularly how my portfolio looks and what dividends I'm receiving.

My goal is to achieve financial freedom through dividend income. This doesn't necessarily mean that I will leave my job but I want to feel free to be able to choose my own path without the need for money. I want to achieve a portfolio value of USD 500k in 7 years. I won't invest in any stocks whose current yield is less than 4%. So, assuming no stocks cut dividends, I want to be receiving 4%+ on a yield to cost basis from my portfolio. This amounts to USD 20k/year from dividend income from my Zen Fund.

Right now most of the things are looking full-valued, so I need to be extra careful in picking stocks as I don't want to see my stock get beaten down badly when the market corrects, which I'm expecting would happen in 2014. QE tapering coupled with rising interest rates would mean a lot of money might be moved from equity holdings to fixed income investments. This would put downward pressure on the stocks. I'm actually looking forward to that 'correction' as an opportunity to invest in some solid stocks at attractive valuations. Right now I'm saving away some cash for that investment while I keep investing in the stocks that would still be good on Yield to Cost basis if the market corrects in 2014.

Keeping that in mind I recently decided to buy BP just before the dividend increase and quarterly earnings report was released. However, I wasn't able to execute the trade on my account due to some operational issues. While I regret that I couldn't be part of the big move that followed in BP stock, I am still happy with my call. BP was certainly my top pick. My other two being AstraZeneca and National Grid. I'll be buying both of them from London Stock Exchange as there is no tax withholding tax on dividends in UK. Both these stocks have investor friendly policies and continue to return capital through dividends and dividend increases. Healthcare and Utilities sector also looks attractive to me and I expect it to outperform the market when the market corrects.

I bought 25 shares of AstraZeneca at GBP 32.77 and 100 shares of National Grid at GBP 7.87. Both stocks will give me a 5%+ yield and I expect to receive around GBP 84 in dividends from my current portfolio (Average GBP 7/month). The payout ratios are on the higher side at 74% for AstraZeneca and 66% for National Grid, however this is still acceptable for a single digit dividend growth rate for these stocks. I would be looking to add more of these stocks in the future when the price comes down, preferable when they give around 6% yield (maybe that's too ambitious but we'll see). However, my immediate goal would be to look for another sector for investments to diversify. Any Suggestions?

I am considering investing in REITs but I'm not entirely convinced on the growth story there. The dividend payouts seem to be quite high (90%+) for some of the names and so it seems not very sustainable. But 8%+ yield would still be good enough for me to just earn and not worry too much about fast rental increases. Once I shortlist any names, I'll share with you guys on this blog.

Inspired by my fellow bloggers, I'll also try to share my income and expenses for each month as I try to achieve my goal.
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Saturday, August 24, 2013

Passive Income Series - Part V - Selling Photos Online to Make Money

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ShutterStock is a Revolution. If some years back you were a good photographer, a really good one, you still had no way to make money by reaching a wide audience other than doing all the dirty sales work yourself. Technology prevails! Technology not only lets us have an easy access to such enormous media content online, but also lets the creators showcase and even turn their talent into aShutterStock is amazing. It allows, the creators (you) to upload Images/Video Footage and sells them to the huge customer base they already have, which consists of various businesses or individuals who are looking for original artwork to use in their media productions or websites.
living. Now this is not even the part that excites me the most. The part that excites me is about separating out the creators of the content with the ones who take care of showcasing and selling them. Well, you still have to sell for yourself. But today technology makes it possible for a photographer or a graphics designer to just focus on what they like the most and leave the part that makes them uncomfortable (selling or marketing) to technology.

How do you make money?

Customers of ShutterStock are subscribers of the content. The way ShutterStock works is quite different from others as its primary way of selling content is not through individual downloads but through subscriptions. So customers have monthly/yearly subscriptions and they can download unlimited images under those subscriptions. Each time they download your uploaded image, you make money! Image payout rates range from $0.25 to $28.00 USD per download. Footage contributors earn a 30% commission each time a clip is purchased. Because the customers don't have to choose too carefully before downloading due to this model, the number of downloads are far higher than other approaches. Individual downloads are also available where sales revenue is shared with the creator, YOU.

Is ShutterStock really Free? 

Absolutely! All you need to do is Sign Up and upload your valid identity proof. Everything is very smooth. They monitor the content very strictly for plagiarism and you have to get the content approved before it makes it to the galleries. It might sound a bit restrictive but if you think about it, it's indeed a good thing. Restrictions help keeping the site clean. And if you are a serious Contributor, your content will get approved and stand a better chance of getting notices and ultimately SOLD.

Anything else you need to know about ShutterStock?

The initial Sign Up process is smooth. But ID approval takes around 48 hours. Further, for each image you upload it will have to go through the approval process. It might become irritating sometimes, as you want your recently clicked million dollar snapshot to be up there and selling immediately. However, a little patience will go a long way as once approved the photo can sell for as long as you want and as long as its up there. 
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How to Organize Important Documents on a Computer

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Organizing computer files can be a daunting task, and with more stuff like pictures, movies, songs, books and even work files being stored in soft format. It is very important to de-clutter the PC, like it is to de-clutter your desk. To begin with, you need to at least organize all the important documents into folders.

Which documents are important?

Firstly, having soft copies of all your certificates and degrees help a lot when you have to send something through email. It is a one-time effort and can save a lot of duplicate effort if exhaustively done once and for all. So just get all the important certificates and degrees out of your closet and sit down to scan them all. Nowadays, even the phone camera can scan very good images, so use that if you don’t have a scanner at home.

The other documents are all the things that are unique in nature. There might be some childhood photographs for which we never had any soft copies. It would be a good idea to scan them too before they get damaged. Of course, you also need to save and backup all the pictures from your digital camera regularly.

Steps to Organize Important Documents

I use a very simple folder structure which I find easy to use. Let’s say the outermost folder is called ‘Docs’, so I create folders for each of the family members. Say we have Mark and Mary in the family, so we’ll have two folders, “Docs/Mark” and “Docs/Mary”. If there are many family members, I suggest using numbers to sort in the order that makes it easy for your use. Example may be “Docs/01 Mark” & “Docs/02 Mary”. This trick works very well as you can name and sort things based on their importance. I recommend using this trick again and again for organizing stuff. It saves a lot of time while searching for the important stuff. An alphabetical sort is not necessarily the best sorting for all purposes and using numbers give us control of sorting. If you want to use DOS for accessing, you might want to consider using “01_” instead of “01 “.

Now inside each family member’s folder, there would be multiple folders like “01_Work”, “02_Academic”, “03_IDs”, “04_Certificates”, “05_Investments”, “06_Tax”, and “07_UnSorted”. This sample list covers most of the things we have important documents for. I normally don’t include all the utility bills in this folder. I have a separate folder structure for utility bills which I arrange year-wise, as that might be shared among family members. The documents structure is for individual’s important documents.

How to Organize Photos and Videos?

The best way that I have found so far is to organize them by year and then by event. There aren't so many events that happen in one year. Maybe we have pictures for 25 events, which still won’t be too much. We might have a folder for a place we visited that year. This may span over months. Organizing it by year at the top level is also very important as it provides completeness. Once, the year is complete you know when you have organized all the photos for that year, and then you just need to incrementally take care of the photos clicked during the new year. The videos could be either given their own folder if there aren't too many of them, else they can be clubbed with the photos folders to give them proper context.

Back Up all the Important Documents

The above structure that we create needs to be saved and updated locally on the machine. However, I strongly recommend you backing up these regularly. You can either buy an external hard disk and make a backup every month, or you can use some of the free cloud based services that are available like DropBox, SugarSync, Microsoft SkyDrive, Google Drive or any other services that are secure and serve the purpose.

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