Accredited investors to rock the heaven

“Gerald, do you know anything about accredited investors? If not, why don’t you research and craft an article about it? But please do not ever reveal my name”.

It was 2013 when a former wealth manager-turned-entrepreneur made this request to me during a meet-up. He had come across my blog and knew that my mission is helping investors to make better investment decisions. Through the years, my research on accredited investors make me realize how warped the game is being played against investors.

accredited investors

Be very sure, don’t ever be blur

2019 will be a defining year for accredited investors as Monetary Authority of Singapore (MAS) effect major changes to the regulatory framework concerning accredited investors. These changes probably came on the back of many investment casualties.

And it’s happening all over again and again. From Hyflux perpetual bonds of 2018, to the Swiber bonds of 2016, to the Lehman Brother’s Minibond, numerous Singapore accredited investors had suffered significant losses after being exposed to risky investments. No thanks to the work of wealth managers and private bankers.

The latest case involving Hyflux perpetual bond is not the first nor will it be the last. But why should you care or bother about it?

Well, you should. This is because many people are not even aware that they are being classified as accredited investors. The worst thing is that you may have elderly parents or unwitty relatives who are being deemed as accredited investors, making them extremely vulnerable of being misled into buying risky investment products. Many accredited investors may not be sophisticated investors at all. For example, they might have thought that perpetual bonds are low risk fixed income assets when it may not necessary be the case.

Many of you would presume that you would not suffer the same fate …

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Return of the Structured Deposit and Structured Note

For many years, the loose monetary policy of United States led to a period of low interest rates across many countries, fuelling investors’ interest for alternative high yield products to grow their wealth. Singapore is no exception. Since 2014, Structured Products like Structured Deposit and Structured Note had been making their way back into Singapore market due to the low interest rate environment. Local banks have been promoting these financial products to satisfy investors lust for yields.

While Structured Deposit and Structured Note are in vogue (again), it does not mean you should throw all caution to the wind. On the contrary, you must understand the catch behind such alternative products to avoid losing your hard-earned money.

structured deposit

Era of wealth

Many wealth builders would recall that Structured Products like Minibonds and High Notes 5 were notorious for triggering the Great Financial Crisis in 2008. Thousands of Singaporeans lost their life savings when they bought these risky products, which they thought to be safe instruments.

As a result of the financial crisis, Monetary Authority Singapore (MAS) banned these products for a period of time to conduct investigations on whether the financial institutions selling these products complied to the guidelines and regulations. The bans were lifted shortly after the completion of the investigations. Is Structured Product really the holy grail for yields?

To be frank, when it comes to investing, consumers have to play their part as well and not solely rely on the words of their financial advisors. Most of us forget [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Don’t invest in Bitcoin until you read this!

How high will it go? The recent euphoria over Bitcoin certainly caught the attention of many investors as the cryptocurrency soared past USD17,000, a remarkable 17-fold increase since the start of the year. Many wealth builders lamented that they had missed the boat of opportunity. While on the other hand, experts warned of an explosive bubble forming. In this article, I will share my view on Bitcoin and whether it is worth to invest in this digital currency.

Dawn of new currency

When it comes to investing, ignorance is not bliss. Therefore, it is important to look at both sides of the coin (no pun intended!) before making judgement. To put things into perspective, Bitcoin was first invented at a time of tremendous financial chaos – the Great Financial Crisis in 2008. Many young investors new to the money game may not be aware of the crisis of confidence in the financial markets back then. All over the world, people’s confidence of the banking systems were shaken to the core when Citibank, then among the world largest banks, was almost brought down to the knee.

Singapore was also not spare of the crisis either and the government was forced to intervene. The government announced in October 2008 that up to S$150 billion of past reserves had been set aside to guarantee deposits in Singapore until the end of 2010. The guarantee was supposed to cover all Singapore dollar and foreign currency deposits of individual and non-bank customers in banks, finance companies and merchant banks licensed by the Monetary Authority of Singapore (MAS).

Luckily, no financial institutions had failed in Singapore and hence, there was no drawdown of the $150 billion past reserves. Nonetheless, the crisis had made people all over the world to question the role of fiat currency and …

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Investing in bonds

Unlike many countries, Singapore does not need to rely on the issuance of government bonds to finance its expenditure as it operates on very prudent budget. However, in light of the 1997’s Asia Financial Crisis, the Singapore government saw the need to develop the market for bonds so as to meet the banks’ needs for risk-free asset in their portfolio.

One of SG Wealth Builder’s blog missions is wealth preservation and therefore, investing in bonds has always been on my mind. But is investing in bonds suitable for everyone? To answer this question, it depends on which phase of your life you are currently in and the kind of returns you are expecting from your investments.

Generally, for those who are in the twilight stage of their wealth building journey or planning for retirement, bonds offer a source of regular fixed income stream and opportunities for capital gain. But this is not to say that such instrument is safe and of low risk nature. There are certain risks that investors must watch out.

To highlight the risks, many investors were stunned by Swiber Holdings Limited’s swift collapse in 2016. It is unknown whether Swiber bondholders can get back any of their investments.

Bonds

Default risks

A bond is a form of debt security in which you lend money to the bond issuer. In exchange for your loan, the bond issuer would pay you regular stream of income in the form of coupon. Coupon rate is a percentage of the principal amount, which is also known as the “face” or “par” value. Upon maturity, bonds are redeemed at the face or par value.

Broadly speaking, there are two types of bonds – government and corporate. The former usually come with higher quality credit ratings while the latter are [This is a premium

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Will SPH acquire The Finance SG?

When SPH announced its plan to cull staff for the next couple of years, it was a sign of times for the media giant. Faced with falling revenues and declining daily newspaper circulation, SPH is grappling with the disruptions of the media industry. Nonetheless, it is important to note that over the past decade, SPH had made numerous acquisitions of online media platforms. Thus, will SPH acquire The Finance SG?

Ten years ago, SPH set the dot-com community on fire by acquiring IT media company, Hardwarezone, for a cool $7.1 million. The online magazine has a monthly pageviews of over 35 million and is widely considered one of the top websites in Singapore (in terms of traffic). The mega deal came at a time when the online entrepreneur scene was still reeling from the aftermath of the dot-com implosion. The deal set the stage for today’s fintech evolution and let many online entrepreneurs dream again.

SGX

In 2013, SPH splashed out a whopping $60 million for SgCarMart, Singapore’s leading online classifieds website for the automotive industry. The portal has an estimated number of 30 million pageviews per month. Whether this was a panic buy is subject to debate but through this acquisition, SPH has effectively laid down the marker that future growth will be driven by online businesses.

As for the financial realm, SPH has acquired ShareInvestor, founded by the late Dr Micheal Leong. ShareInvestor is a financial portal that provides paid subscribers market data tools and investment applications. The acquisition was estimated to be $12 million and took place in 2008.

With so many online acquisitions being made for the past decade, should SPH continue to pursue this growth strategy? My view is a “yes”, because in this new digital economy, SPH cannot afford to look back. Ultimately, SPH is …

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Three fatal mistakes commonly made by investors during bear market

For many young investors, the current market corrections may seem like a fascinating experience. Some of them may view the volatile swings in the market as opportunities to make money from the stock market. This is not a flawed thinking but to mitigate the possibility of incurring heavy losses, it is important to avoid making three fatal mistakes commonly made by investors during bear market. Below are three lessons that I learned from the 1997’s Asia Financial Crisis and the 2008’s Great Financial Crisis.

Adopting the wrong strategy

Whilst it is true that when stock markets plunge, fear prevail and depress stock prices, thus presenting opportunities for bargain buys. But under such circumstances, I have learned that adopting a buy-and-hold strategy can be dangerous because you never know whether the stock counter can survive the storm. Instead, investors should be flexible and change strategy to momentum investing to exploit the fear sentiment in the market. This is where “contra” (buying and selling of stocks without forking out cash).

For example, during the crisis in 2008, I bought 100 lots of Mercator Lines and subsequently sold off my investments within two days, making about S$3500 of profits. It was not exactly a spectacular profit but then again, I made this amount of money within two days of trading and it was more than my monthly salary (back then I just started working for only a few years).

Subsequently, the stock tanked big time till this day because of the downturn in the shipping sector. The current stock price is even much lower than it was during the 2008 crisis! So investors of Mercator Lines who bought the stock during the crisis and hold it till today will be staring at massive losses (God bless them!)

Lack of holding power

If you …

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Capital Match on making money from Peer-to-Peer (P2P) Lending

In this article, SG Wealth Builder is pleased to catch up with Pawel Kuznicki, co-founder of Capital Match, a homegrown Singapore-based peer-to-peer (P2P) lending platform that helps Singapore SMEs obtain loans financed by individual investors.

1) Peer-to-Peer lending is something new in Singapore. In your opinion, what are the potential pitfalls that investors should look out for when choosing the right platform to invest?

The key risk of this type of investment is a default risk of the borrowers. The investors should carefully assess if the information provided to them about the potential borrower is sufficient to make an informed decision on the risk involved and if the proposed interest rate is sufficient to compensate for the risk.

2) How does Capital Match deal with default loans and what mitigating measures can investors expect from Capital Match?

If the default were to happen, we would employ a debt collection agency to attempt to collect the debt from the borrower. The directors of the borrower have to provide personal guarantees so the debt can be collected both from the company and its directors. If the debt collection is unsuccessful, we would then advise lenders if they should start the legal action against the borrower. The cost of debt collection is on us, the cost of subsequent (if any) legal action has to be borne by lenders. In the future we will also introduce secured loans to provide better security to lenders?

3) How does Capital Match differentiates itself from other P2P lending platforms and how much market share do you foresee Capital Match will gain in the next five years?

There are currently only two peer-to-peer lending platforms in Singapore. We believe our key competitive advantage is a credit risk capability allowing more borrowers to get approved (despite potentially unfavourable credit …

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Crowdfunding will be a game-changer for retail investors

For many years, investors in Singapore have been lamenting the lack of fixed income investment opportunities. This is because most of the corporate bonds in the market are accessible only to the institutional investors. Further to this, the dream of owning a second property to generate rental incomes for retirement purposes has also become unattainable for many retail investors after the implementation of the slew of property cooling measures. The emergence of crowdfunding is set to change all this. In fact, crowdfunding could well be a game-changer for the financial sector in Singapore.

In a consultation paper issued by Monetary Authority of Singapore (MAS) in February 2015, the MAS recognizes the enormous growth potential of crowdfunding and defines crowdfunding into four forms, namely: donations, reward-based, lending-based and equity-based. MAS deems that the latter two involves exchange of “debentures or shares”, and hence, they would be subjected to securities regulation.

Currently, there are a few companies in the market that offer lending-based crowdfunding services in the form of “peer-to-peer lending”. One of them is Capital Match, co-founded by Pawel Kuznicki. According to Pawel, Capital Match aims to provide business borrowers with the next best interest rates after banks and at the same time, offers investors access to attractive yield with a low investment entry amount.

Contrary to what most people thought, peer-to-peer lending companies like Capital Match compliment, and not compete, with the banks. This is because they address the capital needs of small enterprises which do not qualify for bank lending. In this regard, peer-to-peer lending companies offer an alternative source of lending for start-ups and small enterprises.

On the hand, peer-to-peer lending opens the door to retail investors who hunger for fixed income investment opportunities, at very accessible level, usually minimum of $1000, and at lucrative returns, at …

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Homegrown start-up Capital Match launches peer-to-peer platform to lend to Singapore businesses

SINGAPORE – 14th April 2015 – We are pleased to announce the launch of Capital Match, a homegrown Singapore-based peer-to-peer (P2P) lending platform that helps Singapore SMEs obtain loans financed by individual investors.

The objectives of the company are two-fold:

–          provide business borrowers with the next best interest rates after banks, and

–          give investors access to an attractive yield with a low investment entry amount.

Capital Match (CM) has an in-house credit function that carefully evaluates the circumstances and purpose of each borrower to determine an appropriate loan amount, tenure and interest rate.

This in turn allows CM to provide investors with a curated selection of loans to build their investment portfolio.

Helping SMEs with financing

According to figures released by Singapore SME consultancy Loyal Reliance, only about 13% of loan applications made by its SME clients in 2012 were approved.

“The SMEs we speak to tell us it is increasingly difficult for them to get loans from banks”, says Pawel Kuznicki, an ex-management consultant formerly from Rocket Internet, who co-founded the company with Kevin Lim, an ex-investment banker and Dr. Arnaud Bailly, a software engineer.

“P2P lending will provide a much needed source of alternative financing for our local SMEs. We chose to start our operations in Singapore because of the robust regulatory and legal framework, but we have ambitions to grow regionally”, states Kuznicki.

The P2P lending model is already very successful in the United Kingdom, the United States and China, but is still in its infancy in Southeast Asia. Last year alone, P2P lending platforms in the United States arranged almost US$ 9bn of loans.

Working with banks to fill gap

Local banks have also been focusing their efforts on innovative technologies to improve their offering.

“The banks do not see P2P lending platforms

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Capital Match: Singapore’s Peer-to-Peer Lending Fintech

Capital MatchKevin LimCapital Match

Capital MatchSince SG Wealth Builder was founded in 2010, I had the opportunities to meet CEOs and entrepreneurs who unselfishly shared with me their visions and investment insights. Today, I am excited to be granted an email interview with Pawel Kuznicki, co-founder of Capital Match. The company is a peer-to-peer lending fintech start-up in Singapore.

1) Can you share with the readers your background and business model?
I started my career as a consultant with McKinsey & Company in Europe and Africa. Then I moved to Rocket Internet, global venture builder, to build their portfolio companies in Southeast Asia (Zalora and Lazada). Last year I started my current business, Capital Match.

Capital Match is a peer-to-peer lending online marketplace to SMEs. Peer-to-peer lending is essentially banking without a bank as an intermediary – investors lend money directly to companies with Capital Match facilitating the transactions by providing credit risk assessment, legal documentation and debt collection services.

We mainly serve SMEs who cannot get a bank loan (a majority of SMEs in Singapore). We provide them loans of SGD 50,000-200,000 for a term of 3-12 months. Loans are syndicated with multiple investors providing funds to one borrower. The interest rates vary from 1.5% to 2.5% per month (on top of it there is additional processing fee of 0.2-0.5% per month). Investors have full discretion which loans to invest in and what amount. Their return is interest rate less 20% commission that Capital Match collects.

2) What are the needs that your business is addressing?
Two-fold:
1. Of SMEs: Providing SMEs with a substantial alternative financing option to improve their working capital or stimulate the growth
2. Investors: Providing alternative investment option with full operational support offering 1.2-2% return per month (15-25% annualized) and a minimum investment of S$1,000

3) How does

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Singapore investors set to lose $70 million

According to today’s Property Guru’s news article, 400 Singapore investors are suing Ecohouse for investment losses of up to $70 million. Apparently, the company had an office in Suntec Tower and managed to attract many first time retail investors hoping to make money from overseas property investments. Investors were sold investment schemes that promised to deliver “20% in 12-months on its S$46,000 social housing property investments”.

To put things into perspective, many of these Singapore investors are not your typical mom-and-pop types of investors who are uneducated and ignorant. Most of the victims are middle-class people with high incomes seeking to enhance their wealth through schemes that promise high returns within a short time frame. Usually the scheme involves pooling of investors funds and the money is typically managed solely by the operator. The first principle that investors should always bear in mind is that if something is too good to be true, it is! Retail investors should first of all check whether these schemes are regulated, instead of just focusing on the rate of returns.

Ecohouse managed to sell more than 1000 of their investment schemes in Singapore and other South East Asian countries in 2012 and 2013. That was the period when the property market was in blistering red hot form in Singapore and also coincided with the slew of cooling measures implemented by the government. Due to the unfavorable investment climate for real estates, Singapore investors hoping to make money from overseas real estate investments were lured by schemes that promised 15 -25% returns within a year. In fact, last year one of my friends had an interest in investing in Japan property market but I warned him that his lack of knowledge in the Japan market and the language barrier would pose a huge risk. …

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Hotel Investment Opportunities for Singaporeans

Brisbane Targets Singaporean Hotel Investors

Hotel investors, operators, developers and financiers from Singapore are being targeted in an on-going campaign to provide more hotel rooms in Brisbane each year for the next decade.
An active approach to attracting hotel investment has reaped rewards for Brisbane with more than 500 additional hotel rooms either available or coming on line this year, but many more are needed.
Speaking at the launch of the updated Guide to Hotel Investment in Brisbane, Lord Mayor Graham Quirk said more investment in hotel rooms was needed to attract high spending visitors.
The Lord Mayor outlined opportunities for hotel operators, investors, and developers keen to establish a footprint in the city.
“Due to a shortage in internationally-recognised, full-service hotel room supply, Brisbane is forgoing about 121,000 visitors a year,” Cr Quirk said
“The shortage is causing the market to defer an estimated 278,000 room nights every year — about 14 per cent of current demand.
“This deferred economic benefit is largely contributed to the lack of hotel supply which in turn is hampering Brisbane’s ability to attract major events and conferences. This lost visitor expenditure equates to about 1100 jobs and AUD$114 million in economic activity that would otherwise exist.
“More hotel rooms are needed to realise this deferred demand, and enable the city to procure more international business events and conferences.”
Queensland’s Tourism, Major Events, Small Business and the Commonwealth Games Minister, Jann Stuckey, said that investment in internationally recognised hotels was a key part of the Queensland Government’s goal to grow Brisbane as a business and leisure destination.
“We are delivering a pro-business environment which supports new and renewed investment, as well as driving demand through attraction of new international airline routes, marketing campaigns and major events,” Minister Stuckey said.
“Brisbane’s events calendar is
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Investing in Singapore Government Securities (SGS)

As a form of risk diversification, it is important for every investor to maintain a portfolio investment consisting of different asset classes such as equities, currency, precious metals, property and bonds. Typically, these asset classes move in opposite directions and therefore smooth out the volatility in your portfolio in different economic scenarios.

In the current low interest rate environment, it may be prudent to invest bonds. Below is some of my research on Singapore government bonds – SGS, extracted from the www.sgs.gov.sg. The information below is for sharing and not to be misconstrued as financial advice or recommendation.

What Are Singapore Government Securities (SGS)
Singapore Government Securities (SGS) are marketable debt instruments of the Government of Singapore. These debt instruments take the form of either Treasury bills (T-bills) or bonds, and are considered safe investments, as they are backed by the full faith and credit of the Singapore Government. The terms of issuance for T-bills and bonds are governed by the Local Treasury Bills Act and the Government Securities Act respectively.The Singapore Government is obliged to pay the holders of SGS a fixed sum of money on the maturity date of the securities. SGS cannot be cashed in before their maturity dates, but investors can always sell them in the SGS market. SGS Primary Dealers are prepared to buy and sell SGS at any time during normal market trading hours.As the fiscal agent of the Government, the Monetary Authority of Singapore (MAS) acts to undertake the issue and management of SGS on its behalf.
What Are The Types Of SGS
T-bills are short-term debt securities that mature in one year or less from their issue date. They are bought and sold at a discount, i.e. at a price less than their face (par) value, and when they mature,
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Stock Investments 2013

A Happy & Prosperous Chinese New Year to all bloggers and readers! I would like to thank all my readers for visiting my blog. SG Web Reviews has reached 200,000 pageviews so far. Hope to share more of my views and investment journey in the coming year.

Creating CPF Buffer
So far, 2013 has been good for me. I have sold off all my stocks, except for my CPF Investment Acount, which has risen by 15%. I opened this account and invested a portion of my CPF Ordinary Account before buying my first HDB flat. For the uninitiated, it is HDB’s policy to use up all your CPF monies in Ordinary Account if you intended to purchase a HDB flat. So if you intend to set aside a portion of monies in your Ordinary Account for emergency purposes, the only way is to open a CPF Investment Account and then liquidate your investments after the HDB purchase is completed.

Personal finance

Bull or Bear?
I have always advocated to invest during crises. But the way I see it, 2013 could be the start of the economic recovery for most developed countries. Since 2010, the market has weathered U.S’ fiscal cliff, Europe’s debt issues and China’s slowing economy. So far, the market’s performance has been pretty resilient against all these negative developments and investors’ confidence remain high on equities.

I don’t think any further bad news with regards to these issues will have further impact on the stock market. After all, investors would have factored these developments already. So I would say it’s going to be a bull cycle for the stock market this year, and probably we would not witness the kind of volatility of yesteryears. Of course I am not an economist, and the above predictions are just my personal views.
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Investment Insight: Fixed Income Securities

As mentioned in my previous posting, I am sharing my views on fixed income securities, which refers to financial products that offer investors a return in the form of fixed periodic payments (coupon) and the eventual return of principal at maturity. Example of fixed income securities include government bonds and preference shares issued by companies.

Benefits of Investing in Fixed Income
Historically, the returns of stocks and bonds moved in opposite directions at the same time. Investors can reduce their portfolio risk through diversifying their investments on fixed income securities, which offer investors a predictable income stream during times of market volatile.

investment

Fixed income securities are very transparent in the sense that investors would know how much interest they can expect to receive, how often they will receive it and when they can get back their principal investment monies. Investors can also check the prices in real-time and the volume information from SGX website and their broker’s trading platforms. Fixed income securities also operated like shares and investors can buy and sell them through broker anytime during trading hours.

How does it works?
Issuer borrow principal amount from investors and repay the money at maturity. In exchange, investors receive coupons (interest payments), usually paid in twice-yearly installments. For example, a $1000 bond paying $45 a year as a $45 coupon, or a coupon rate of 4.5%. Investors can also choose to dispose the security for capital appreciation. 

What are the risks?
Like all other investments, fixed income investments is not risk-free. The bond’s value will fluctuate with market conditions. For example when interest rate rise, bond prices fall. However, you need to be concerned with market risk only if you decides to sell the bond before maturity date. There is also a possibility that issuer may not be able to …

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The correct way to invest your money

In life, besides working hard for money, you have to also ensure money work hard for you. This is especially so in this era of low saving interest rates. Currently the inflation rate is about 4 to 5% in Singapore and the bank saving rates are below 1%. So effectively, your purchasing power is eroded. So how do you go about beating the inflation and make sure that money is not slipping away from the pocket? The key is to invest your money correctly.

When I mean the correct way to invest your money, I do not mean that we should immediately  take out all our money from the bank and start investing in various financial instruments. Rather, we should do our homework first before making any moves. Always remember the mantra “Don’t be in a hurry to lose away your money”.

invest

I always believe that there is a systematic approach to investing and that laying a strong foundation is crucial for every investors. We should educate ourselves the way of financial wisdom, preferably at young ages, so as to give ourselves a strong head-start. Remember, the journey of investment is a long one and there are always many new things to learn, no matter how established you are. So, it’s essential that we pick up new knowledge along the way on how to invest.

Friends around me always lamented that to invest is to gamble. I bet to differ. Investing involves taking calculated risk and making tactical move. You can manage the outcome of your investments through analysis and doing homework. For gambling, most of the times, the outcome is beyond your control. For investment, you can reduce risks through diversification across different asset allocations, such as stocks, bonds, gold, ETF, REITs and property investments.

My personal view on …

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Investment Notebook: Opportunity Fund Part II

In my previous posting, “Investment Notebook: Opportunity Fund”, one of my readers posed this question to me “how many percentage of my net worth coming from the return of my stock investment, would I consider it has made me rich”.

This is a very interesting question and it has set me pondering hard for several days. One thing for sure is that I did not have a clear cut answer to that question but nevertheless, I shall try my best to reply.

Rate of returns VS net worth yield
When I invest in anything, normally I look at the potential rate of return on my investment capital. For example, if I rent out a HDB flat I would set a yield target of 10 -15%. Likewise, when I invest in stock, my target is value appreciation of 10-20%.

For example, when I activated my “Opportunity Fund” in 2008, I made a return of about 17% from my stock investments of S$20,000. Setting return target based on personal net worth is another matter altogether. It requires one to consider their personal income, fixed assets (housing, CPF,etc), insurance policies, investments (gold, shares, property,etc) at that point of time.

Furthermore, one’s net worth changes all the time, subjected to economic situation. For example, we may get retrenched and lost our sole incomes due to downturn. So I would say it is not easy to determine one’s net worth.

My best investment
If I have to consider the percentage of net worth coming from my stock investments that I think will make me become “rich”, I would say it has to be at least 1000%.

When I obtained my degree in 2005, my father helped to pay the student loan of $22,000. I had since repaid him back several years ago and “recouped” the …

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