I started serious Investing Journey in Jan 2000 to create wealth through long-term investing and short-term trading; but as from April 2013 my Journey in Investing has changed to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

Since 2017 after retiring from full-time job as employee; I am moving towards Investing Nirvana - Freehold Investment Income for Life investing strategy where 100% of investment income from portfolio investment is cashed out to support household expenses i.e. not a single cent of re-investing!

It is 57% (2017 to Aug 2022) to the Land of Investing Nirvana - Freehold Income for Life!

Click to email CW8888 or Email ID : jacobng1@gmail.com

Welcome to Ministry of Wealth!

This blog is authored by an old multi-bagger blue chips stock picker uncle from HDB heartland!

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

"For the things we have to learn before we can do them, we learn by doing them." - Aristotle

It is here where I share with you how I did it! FREE Education in stock market wisdom.

Think Investing as Tug of War - Read more? Click and scroll down

Important Notice and Attention: If you are looking for such ideas; here is the wrong blog to visit.

Value Investing
Dividend/Income Investing
Technical Analysis and Charting
Stock Tips

Tuesday 31 December 2013

Do you still believe in financial experts or Gurus forecast and calls? (2013) - The Verdict!

Read? Do you still believe in financial experts or Gurus forecast and calls? (2013)

If you follow Guru's stock forecast,  did you huat in 2013?

At 31 Dec 13, market closing price

Swiber: $0.695

$0.665 ( Down - 4.3%)

AusGroup: $0.635

$0.189 ( Down - 70.2%) Suspended!

Biosensors : $1.205

$0.835 ( Down - 37.1%)

DBS: $14.84

$17.10 ( Up + 15.2%)

Keppel Corp: $11.00

$11.19 ( Up + 1.7%)

What do you think?

Chun bo???

Stock Forecast is like tikam tikam.



Wishing You Happy New Year!

May all your wishes come true in 2014!

Sembcorp Marine's PPL yard wins repeat order worth US$211.5m

Sembcorp Marine said on Tuesday that its subsidiary PPL Shipyard has secured repeat order worth US$211.5 million to build a jack up rig for Perisai (L) Inc, a unit of Perisai Petroleum Teknologi Bhd - PHOTO: Sembcorp Marine

Sembcorp Marine said on Tuesday that its subsidiary PPL Shipyard has secured repeat order worth US$211.5 million to build a jack up rig for Perisai (L) Inc, a unit of Perisai Petroleum Teknologi Bhd.

The Pacific Class 400 jack up rig, scheduled for delivery in the third quarter of 2016, will be capable of operating in deeper waters of 400 feet and high temperature wells to depths of 30,000 feet.

The contract is not expected to have any material impact on the consolidated net tangible assets and earnings per share of Sembcorp Marine for the year ending December 31, 2013.

2013 Full Year Investment Performance Report

Read? Q3 2013 Investment Performance Report

Using Goal-based Investing Approach by setting for myself a 10-year progressive Goal Targets to achieve for each year starting from 2012 to 2021.

Year 2: Full Year 2013 Result

Achieved 14.8% against 16% of 2021 Goal Target.

Portfolio XIRR

Track, measure and visualise!

Without doing it how to revise investing strategies and improve year-on-year investing performance?

My Portfolio's XIRR includes all investing cash plus the current stocks value at market closing price as on 31 Dec 2013.

Since one year ago: +4.2%
Since 1 Nov 2008: +6.2%
Since 1 Jan 2003: +10.7%
Since 1 Jan 2000: +9.7%

Riding the market cycles of Bull and Bear
Until Uncle8888 can improve his market timing; otherwise he is definitely not going anywhere.


Liquidity and Permanency
Liquidity of Capital (War Chest) for the Next Bear and Permanency of staying Invested for the Next Bull as we can't effectively time the market.
Having taken back 100% of Investing Capital as War Chest for the next Bear; it will be like Year 2000 all over again; but this time Uncle8888 is armed with Master Degree in Stock Market and going for PhD. in Stock Market.
It is going to be more exciting this round!
This time, regular readers will be able to watch "Full Time" actions on how investing lessons for PhD course are conducted here.
In the last two courses, readers could only watch "Half Time" actions as Uncle8888 has only started to blog in 2006.
When will Mr Bear come?

Sustaining Retirement Income for Life over future market and economic cycles. A Worry-less Approach!
Current: 62% Target: 67%
Work In Progress ...




Dow at record and S&P on track for best year in 16

Any last minute Window Dressing in STI?

NEW YORK: The Dow Jones Industrial Average Monday kicked off a holiday-shortened week with a new record high, even as the other two indices stalled in sluggish trade.

The Dow jumped 25.88 points (0.16 per cent) to 16,504.29, its fourth record close in the last five sessions and the 51st record close of 2013.

The broad-based S&P 500 slipped 0.33 (0.02 per cent) to 1,841.07, while the tech-rich Nasdaq Composite gave up 2.40 (0.06 per cent) at 4,154.20.

"With a lot of people out, it probably will be a fairly quiet week," said William Lynch, director of investment at Hinsdale Associates.

The Dow has risen about four per cent since the US Federal Reserve announced on December 18 that it plans to scale back its stimulus in January.

With so many investors out and not many major economic releases this week, "there will be a lot of consolidation," Lynch predicted. "The market won't go much higher."

US pending home sales rose 0.2 per cent in November, the first rise in five months, but below the 1.5 per cent increase projected by analysts.

Economic releases later this week include reports on home prices and consumer confidence.
Cooper Tire & Rubber rose 5.4 per cent after announcing it had ended a proposed merger with India's Apollo Tyres. The deal, announced in June, became bogged down in legal sniping related to labor problems within Cooper's US and Chinese operations.

Footwear maker Crocs gained 21.1 per cent after announcing that Blackstone Group is investing US$200 million in the company and taking a 13 per cent stake. Crocs plans a US$350 million stock repurchase program.

Hewlett-Packard declined 0.4 per cent after it disclosed in a securities filing that the company is in "advanced discussions" to settle foreign-bribery investigations into its operations in Russia, Poland and other countries.

Social networking company Twitter, which has seen large swings in recent days, declined for a second straight day, losing 5.1 per cent. Rival Facebook sank 3.1 per cent.

Dow component The Walt Disney Company rose 2.5 per cent following a strong performance of its film "Frozen" over the important holiday weekend.

Bond prices rose. The yield on the 10-year bond slipped to 2.98 per cent from 3.01 per cent Friday, while the 30-year fell to 3.91 per cent from 3.94 per cent. Bond prices and yields move inversely.

Monday 30 December 2013

14 Years of Personal Journey towards Financial Independence when staying employed becomes an option! (2)

Just For Thinking ...

Read? 14 Years of Personal Journey towards Financial Independence when staying employed becomes an option!

Why benchmark to well-known investors?

Seriously, it will help you to stop Believing Bullshit!

Read? Believing Bullshit! (3)

Read? Scrutinise financial investment seminars too (2)

You like to hear sexy ones?

How about these?

Uncle8888 made $36K in one month.

Some other months, he made $28K, $23K and $16K.

The above number can be audited.


Sexy or not?

It is like having sex. It is shiok; but it won't last too long!

Long-term investing may be not sexy; but it is more lasting! It is like having relationship.

Why benchmark to Self (Human Asset)?

Unless you are truly passive investors who do cost averaging into ETFs and don't need to spend too much time on your investment.

The rest of us, active investors will have to spend part of our time, effort, energy, and even emotions with our investment.

When we work hard in our jobs; our bosses may recognise our effort in our job and reward us.

But, in the Market nobody knows us. No one care how hard we have worked in our investment. It is up to us to justify for our time, effort, energy and emotions spent on our investment. 

What is the earning from investment are we getting?

Are we better off to spend more time and effort in our jobs and progress in our career?

Get it? Why benchmarking?


Sunday 29 December 2013

14 Years of Personal Journey towards Financial Independence when staying employed becomes an option!

With the mind flip in Dec 1999, Uncle8888 went all out to set his goals, plans and strategies to create wealth through Short-Term Trading and Long-Term Investing in our local stock exchange (SGX).

From 1 Jan 2000 to 31 Dec 2013: 14 years of long journey

Without additional funding of capital since Jan 2000 (A single household income with 5 mouths to feed, it was really tough to find any spare money to invest as there were always another competing needs to spend and higher priority to add more into emergency fund as when we become older ;we become more fearful of losing our job); it took him 14 years to finally complete his Investing Goals set out in Jan 2000 with some margin of safety going forward into retirement income for life phase.


After 14 years of investing and trading experiences, Uncle8888 is more convinced and more biased towards Long-Term Investing approach with Growth-Dividend strategy as we are more likely to achieve our long-term Investing Goals in a shorter time frame.

Look at the above diagram again.

Are your Investing Goals similar?

Uncle8888 believes there will be several short windows of opportunity in terms of weeks over the future market cycles to create wealth. But, you must definitely plan for them with sizable War Chest and decisively seize them when the opportunities may seem to appear and that means your Account Size Really Matters as there may be false start!

“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”Warren Buffett

Read? More on Mind Flip

Uncle8888's Investing Performance Benchmarking

1. Against Well-known Investors

He still have more rooms for improvement over the next 6 years (20 Years of Investing from Jan 2000 to Dec 2019)

2 . Against Self (Human Asset) : Earned Income from his Full-Time Job

Over the last 14 years (from 1 Jan 2000 to 31 Dec 2013), his Earning* from Investment is about 46% of his Total Earned** Income after Income Tax from his full-time job.

* Earning means it is always work-in-progress and subject to market volatility.

** Includes Employee and Employer's CPF Contributions

It could have been better!
Now, Uncle8888 believes he is more ready than in Jan 2000; hopefully it could be better.

Saturday 28 December 2013

Is Keppel able to hold its rig prices against competition from the Korean and Chinese yards???

Till Q4 2013, Uncle8888 didn't see any price weakness from its customers' recent orders against competition from the Korean and Chinese yards.

Price highlighted in Red is the lowest rig price paid by the customer.

Friday 27 December 2013

Semb Corp : Trying for the third time???

Keppel FELS delivers 21st rig for 2013

It sets a record for the most number of offshore rig deliveries by a company in a single year.

Keppel FELS Ltd (Keppel FELS) has delivered ARABDRILL 60, a KFELS B Class jackup rig, to Arabian Drilling Company (ADC) five days ahead of schedule, on budget and with a perfect safety record. This marks the 21st new build offshore rig that Keppel FELS has delivered in 2013, setting a new record for the most number of rig deliveries by a company in a year.

The rig was named at a ceremony today in the presence of Mr Mohamed Yousuf Rafie, Chairman, ADC's Board of Directors and Mr Lawrence Wong, Singapore's Acting Minister for Culture, Community and Youth and Senior Minister of State for Communications and Information as the Guests of Honour.

Mr Mohamed Yousof Rafie, Chairman, Board of Directors, ADC said, "The performance of our first new KFELS B Class rig, ARABDRILL 50, has fully met our expectations and we are now pleased to receive ARABDRILL 60 which we are confident will be just as successful. Together, these two high specification rigs enable us to offer Saudi Aramco productive, safe and cost-efficient drilling operations. We have been impressed with the commitment by Keppel FELS in delivering to high quality and safety standards, while ensuring our requirements were met. This is a win-win partnership we have built with Keppel that we hope to continue into the future."

Mr Saad Saab, Managing Director (Administration), ADC, also thanked Keppel FELS for delivering ARABDRILL 60 ahead of schedule and with an excellent safety record. Mr Muhammad Umar Loan, Managing Director (Technical), ADC, added that the project was completed well with some variation orders to bring the rig in compliance with Saudi Aramco's contract. While thanking Keppel FELS, Mr Muhammad Umar Loan also congratulated DNV-GL and the ADC project management teams on completing this project safely and ahead of schedule.

On how Keppel FELS managed to deliver 21 rigs in a year, Mr Wong Kok Seng, Managing Director (Offshore), Keppel Offshore & Marine and Managing Director, Keppel FELS said, "Building a KFELS B class jackup rig involves coordination among multiple parties and over a thousand workers. This year, we had some 45 projects going on at the same time. We streamlined the building process through new technology and equipment as well as having an innovative construction methodology. All our departments worked seamlessly together to set new benchmarks.

"Even though we had so many deliveries, every customer, such as ADC, is important, and we worked closely with them to understand their needs. We set out to deliver 20 and ended up delivering 21 rigs on time or ahead of schedule and safely. Our previous record was 13 in 2009. That is the Keppel standard. We always challenge ourselves to do better."

ARABDRILL 60 will be ADC's third jackup rig from Keppel FELS and has been chartered to Saudi Arabia's national oil company, Saudi Aramco. The first of the two new rigs, ARABDRILL 50, was delivered earlier this year and is already working successfully for Saudi Aramco. ADC also owns ARABDRILL 30, another KFELS B Class rig since 2009 and the rig is operating for the Al-Khafji Joint Operations (AGOC/KGOC). A strong supporter of Saudi Arabia's offshore drilling programme, Keppel FELS also previously delivered SAR 202, a KFELS Super B Class jackup for Saudi Aramco. Three other rigs, AOD I, AOD II and AOD III delivered to Asia Offshore Drilling this year are also contracted to Saudi Aramco.

ARABDRILL 60 is the 51st KFELS B Class rig delivered since 2002, and this class of rigs makes up more than 30% of the total jackups completed globally since 2000. This award-winning design has a proven track record of global operations, and has established itself as the benchmark in the industry. In 2013 alone, a total of 15 KFELS B Class rigs were delivered while another 18 were ordered.

Developed by Keppel's technology arms, Offshore Technology Development (OTD) and Bennett Offshore, the KFELS B Class jackup design is able to operate in water depths of up to 400 feet and drill to depths of 30,000 feet which is readily upgradeable to higher performance capabilities.

The robust rig incorporates Keppel's advanced and fully-automated high capacity rack and pinion jacking system, and Self-Positioning Fixation System. Designed with industry-leading features for safety and environmental friendliness, the KFELS B Class provides maximum uptime with reduced emissions and discharges.

Dow, S&P 500 close at new record highs

US stock markets Thursday continued their bull run of 2013, closing at fresh records after a strong US unemployment report.

NEW YORK: US stock markets Thursday continued their bull run of 2013, closing at fresh records after a strong US unemployment report.

The Dow Jones Industrial Average shot up 122.33 (0.75 per cent) to 16,479.88, finishing at a record high for the sixth straight session.

The S&P 500, closing at a record high for the fourth straight session, added 8.70 (0.47 per cent) at 1,842.02. The tech-rich Nasdaq Composite Index increased 11.76 (0.28 per cent) to 4,167.18.

The latest record came after US Labor Department data showed first-time claims for unemployment benefits fell to 338,000 from an adjusted 380,000 the previous week. Analysts had projected that 350,000 claims would be filed.

Other better-than-expected economic news in recent days has increased confidence in the US outlook after the Federal Reserve announced on December 18 it was scaling back its bond-buying program.

The yield on the 10-year US Treasury bond hit 3.0 per cent earlier Thursday before retreating. Higher yields sometimes crimp enthusiasm for equities, but the recent rise has been gradual, said Michael Gayed, chief investment strategist at Pension Partners.

"If you have a spike in yields, it is a negative," Gayed said.

"But as the yields are gradually going higher despite the Fed tapering, that means there is a growing sense of confidence that the stocks market does not need the Fed as much."

Online retailer Amazon gained 1.3 per cent after reporting that subscriptions to its Amazon Prime two-day shipping program jumped in December ahead of Christmas and now counts tens of millions of members worldwide. Amazon characterized the 2013 holiday shopping season as its best ever.

Shipping company UPS advanced 0.2 per cent despite criticism after it missed some Christmas deadlines for gift-package delivery due to an unexpectedly large volume. Rival FedEx, which appeared to have somewhat fewer problems, rose 0.9 per cent.

BlackBerry shed 8.7 per cent after co-founders Michael Lazaridis and Douglas Fregin disclosed they were selling a large percentage of their shares in the embattled smart-phone maker.

Telecom company Sprint rose 3.1 per cent following a report that its parent SoftBank is in talks to purchase US wireless company T-Mobile. T-Mobile rose 2.3 per cent.
Bond prices slipped. The yield on the 10-year US Treasury rose to 2.99 per cent from 2.98 per cent after breaching the 3.00 per cent level earlier in the session.

The 30-year increased to 3.92 per cent from 3.90 per cent. Bond prices and yields move inversely.

Wednesday 25 December 2013

Amazing Grace

Why long-term investing is not sexy???

Just For Laugh ...

Read? The Most Successful Dividend Investors of all time

Why long-term investing is not sexy???

When you are starting out as retail investor with a small account size, your investment return may be too small to boast about.

So after many many years of successful investment and re-investment of dividends, you may not feel the need to boast anymore. It is not sexy!

People just like to hear how to make XXX% return in a few days!

It is sexy!

It simulates the Brain!

Real-life success stories of  koiptiam uncles and pasar aunties are often not told so we don't get to hear them.

Even your own old relatives may not talk about it during CNY gathering.

Tuesday 24 December 2013

Earned Income and Earning From Investment??? (2)

Read? Earned Income and Earning From Investment???

Most of us, our Earned Income is likely to be progressive and incremental up to certain point in our career.

We work hard.

We work smart.

We will be paid increasing annual salaries and bonuses and that will put us in wealth building phase just by just spending less and saving more.

There is no such natural forces at work with Earning from Investment. We can't never assume it is progressive and incremental without pumping in part of our Earned Income into it.

See the difference?

Wishing You A Merry Christmas!

Merry Christmas to You!

Dow, S&P 500 close at new record highs

NEW YORK: US stocks Monday jumped to new records after strong economic data gave new momentum to last week's rally.

The Dow Jones Industrial Average gained 73.47 (0.45 per cent) to 16,294.61, while the broad-based S&P 500 advanced 9.67 (0.53 per cent) to 1,827.99. Both were new records, building on record closes from Friday.

Meanwhile, the tech-rich Nasdaq Composite Index added 44.16 (1.08 per cent) at 4,148.90.

The new peaks came after fresh Commerce Department data pointed to a 0.5 per cent increase in consumer spending in November, the second month in a row to see a rise.

An estimate of consumer confidence by the University of Michigan also showed an improvement in December.
"The economic news was very good," said Peter Cardillo, chief market economist at Rockwell Global Capital. "It's all about the economy expanding at a faster rate."

Monday's data came on the heels of last week's surprising upgrade to the third-quarter estimate of gross domestic product growth and a move by the US Federal Reserve to scale back its bond-buying program due to the improving economy.
Tech giant Apple jumped 3.8 per cent after announcing it reached a long-awaited deal with China Mobile to significantly boost its iPhone presence on the world's biggest wireless operator.

Facebook rose 4.8 per cent after Cantor Fitzgerald boosted its earnings estimates, citing a strong advertising performance during the crucial holiday shopping period. Monday was also the first day of trade since Facebook was added to the prestigious S&P 500.

Other technology companies also jumped, including Google (+1.3 per cent), Twitter (+7.6 per cent) and LinkedIn (+0.6 per cent). A report Monday said mobile phone consumers are spending more time on websites associated with all three companies, according to Bank of America Merrill Lynch.

Jos A Bank Clothiers dipped 1.3 per cent after announcing it had rejected a takeover proposal from Men's Wearhouse after concluding the offer "significantly undervalued" the company.

Jos A Bank said it would continue to look at strategic acquisition opportunities. Men's Wearhouse fell 0.7 per cent.
Micron Technologies lost 3.1 per cent after Bank of America Merrill Lynch downgraded the chip maker, citing more promising offerings from other competitors.

Bond prices fell. The yield on the 10-year US Treasury rose to 2.93 per cent from 2.89 per cent, while the 30-year edged higher to 3.84 per cent from 3.82 per cent. Bond prices and yields move inversely.

Monday 23 December 2013

Ensco gets Keppel jack-up

Singapore’s Keppel Fels has delivered another high-end jack-up to rig giant Ensco, with the unit set for work in the North Sea.

The Ensco 121 is the second in a series of ultra-deepwater, harsh-environment rigs to be delivered to the US owner.

The KFELS Super A Class jack-up is also the eighteenth jack-up to be delivered by the yard to Ensco and the twentieth to be delivered by the yard this year.

It can drill in water depths of 400 feet and to a drilling depth of 40,000 feet.

The third newbuild in the series is set for delivery in the middle of next year with the fourth in the second quarter of 2016.

Singapore November inflation rises to 2.6 per cent

By Elena Torrijos | Yahoo Finance Singapore

Singapore's inflation rate rose to 2.6 per cent in November from 2 per cent in October, largely reflecting higher accommodation costs.
That was according to a joint statement by the Monetary Authority of Singapore and the Ministry of Trade and Industry released Monday.

The agencies noted that accommodation costs rose by 3.3 per cent in November, higher than the 1.9 per cent increase in the month before, when rebates to HDB households helped to lower the cost of "minor repairs and maintenance".

Private road and transport costs rose by 3.4 per cent in November from 2.7 per cent the month before, mainly due to the rise in Certificate of Entitlement premiums, they added.

Petrol pump prices also went up in November from the level in the same month the year before.

Food inflation inched up to 2.6 per cent in November from 2.5 per cent in October amid higher prices for non-cooked food items, the government reported.

Sunday 22 December 2013

Earned Income and Earning From Investment???

Just For Thinking ...

Read? Those few years of Foolishness in the stock market!!!

If you look at the above diagram carefully, our wealth will come from Human Asset and Financial Asset.
Human Asset will provide our Earned Income while Financial Assets will provide Earning from our Investment.
Is there any difference between Earned Income from our job (Human Asset) and Earning from our Investment (Financial Asset)?
Our Earned Income is for us to keep and Earning is NOT!
Even after few years down the road, we screw up badly in our job; we still keep our Earned Income. It has been earned!
But, not the same for our Earning from our Investment; it is not earned yet!
Some folks may not know the big difference and boast too much on Earning on their Investment.
Hopefully, many years down the road, they don't screw up their Investment in big ways; or else they will return part of their Earning back to the Market.
So chim?


Game Plan 2014

Current STI against historical major market cycles since 1990

The Game Plan 2014

2014, Year 3 Goal : Achieving at least  25% of the 10-Year Goals Target (2012 to 2021)

Saturday 21 December 2013

Those few years of Foolishess in the stock market!!!

From Jan 2000 to Dec 2013 : 14 years of practical experience in the stock market with even many more years of learning investment and trading theories.

Uncle8888 smiles when he read some blog posts and comments boasting of their winning contra trades and penny stocks; he too has these experience.

Those few years of foolishness in the stock market cannot be forgotten!

Yes! Losing money is part of the Investing Game; but staying Foolish for a long time without realizing it. Is No!

If not for that few years of foolishness for not sticking passionately to the core principles of long-term investing, the investment outcome could have been much better.

From Jan 2000 to Dec 2013: Uncle8888's Investment Outcome


Sometime, in the moment of glory or luck, we tend to forget that in the Market; it is us against the Market.

There are always Buyers and Sellers in the Market.

We bought while others were selling.

We sold while others were buying.

We wait while others were buying or selling

For the next 6 years, from Jan 2014 to Dec 2019, Uncle8888 must not be foolish again to think that he is smarter than the Market to make easy money. It is more important than the last 14 years as not that many years left to prove that he is wrong and correct his mistakes.

By Dec 2019, he will have 20 years of true life experience in the stock market to be able to pen down a few practical pointers in his Kung Fu Manual on "Create Wealth from the stock market through long-term investing and short-term trading - Less Analysing. More Investing" and pass this Manual to his children, nephews and nieces.



US stocks finish higher on the week, with Dow and S&P at records

NEW YORK: US stocks bolted to new records on Friday after the Commerce Department reported that US economy grew much faster in the third quarter than previously estimated.

The Dow Jones Industrial Average advanced 42.06 points (0.26 per cent) to finish at 16,221.14, a new record.

The broad-market S&P 500 rose 8.72 (0.48 per cent) to 1,818.32, also a new record, while the tech-rich Nasdaq Composite Index added 46.61 (1.15 per cent) at 4,104.74.

Analysts said investors were cheered after the Commerce Department raised its estimate for third-quarter gross domestic product growth to an annual rate of 4.1 per cent, from 3.6 per cent.


Friday 20 December 2013

CPL : Still struggling at support???

It’s safe to invest entire life savings in stocks. But it can be safer!!! (2)

Read? It’s safe to invest entire life savings in stocks. But it can be safer!!!

For pre-retirees, what do you think it's safe?

Trust this one?

Read? It’s safe to invest entire life savings in stocks

or better to do this?

Read? Is Your Nest Egg Holding Up?

The Balance Sheet

A more sophisticated way to measure the success of a retirement portfolio is the one used by large pension plans. You compare what's called the actuarial present value of your assets and liabilities. The twist: Instead of looking at current assets and liabilities, you look at the value of all your expenses in retirement as a lump sum as compared with the value of all your assets as a lump sum.

Take a married couple where the husband, 69, and the wife, 68, have an after-tax portfolio of $1 million, an annual Social Security benefit of $25,000 with a 2.5% cost-of-living adjustment, and a pension of $10,000 a year with a 75% survivorship benefit and no inflation adjustment. That income stream's present value would be $588,686. Add that to the value of their portfolio ($1 million), and you get $1,588,686 in total assets, in today's dollars.
On the liability side, if the couple wants to spend $60,000 a year in retirement, after taxes, with a 2.5% cost-of-living adjustment, they would need $1,402,156 in today's dollars to fund their living expenses.

In essence, investors with a surplus are in good shape, while those with a deficit don't have enough to pay their expenses in retirement. The latter likely would have to adjust their savings, investments or projected expenses.

Few advisers—just 15% in Russell's survey—use this method, but Mr. Greenshields suggests that it works the best. A balance sheet uses today's market information and today's interest rates as a starting point, he says.

"Our take on this approach relies on using current interest-rate curves, specifically Treasury yield curves to reflect a 'risk-free' rate. Those are about the most robust predictions of the future you can get."

Uncle8888's Retirement Balance Sheet

(Liabilities @ 3% inflation rate. Assets exclude value of residential home and Self-insured Fund of CPF RA, SA, MA. MediShield and Emergency Fund)

How much is enough?

Uncle8888's Formula

Expected Monthly Expense =

(Highest ever monthly expense + 4 x Average monthly expense + Lowest ever monthly expense) / 6 = $X,XXX

Annual Expected Expense = 12 x $X,XXX = $YY,YYY

Enough = 25 x $YY, YYY = $Z,000,000

Read more? Retirement Income for Life??? (9)


Decoding DuPont Analysis

By Wayne Pinsent | Investopedia 

Return on equity (ROE) is a closely watched number among knowledgeable investors. It is a strong measure of how well a company's management creates value for its shareholders. The number can be misleading, however, as it is vulnerable to measures that increase its value while also making the stock more risky. Without a way of breaking down ROE components, investors could be duped into believing a company is a good investment when it's not. Read on to learn how to use DuPont analysis to break apart ROE and get a much better understanding about where movements in ROE are coming from.

ROE: Simple, Perhaps too Simple

The beauty of ROE is that it is an important measure that only requires two numbers to compute: net income and shareholders' equity.

ROE = net income / shareholder's equity

If this number goes up, it is generally a great sign for the company as it is showing that the rate of return on the shareholders' equity is rising. The problem is that this number can also rise simply when the company takes on more debt, thereby decreasing shareholder equity. This would increase the company's leverage, which could be a good thing, but it will also make the stock more risky.

Three-Step DuPont

To avoid mistaken assumptions, a more in-depth knowledge of ROE is needed. In the 1920s the DuPont corporation created an analysis method that fills this need by breaking down ROE into a more complex equation. DuPont analysis shows the causes of shifts in the number.
There are two variants of DuPont analysis: the original three-step equation, and an extended five-step equation. The three-step equation breaks up ROE into three very important components:

ROE = (net profit margin) * (asset turnover) * (equity multiplier)
These components include:

  • Operating efficiency - as measured by profit margin.
  • Asset use efficiency - as measured by total asset turnover.
  • Financial leverage - as measured by the equity multiplier.
The Three-Step DuPont Calculation
Taking the ROE equation: ROE = net income / shareholder's equity and multiplying the equation by (sales / sales), we get:
  • ROE = (net income / sales) * (sales / shareholders' equity)
We now have ROE broken into two components: the first is net profit margin, and the second is the equity turnover ratio. Now by multiplying in (assets / assets), we end up with the three-step DuPont identity:
  • ROE = (net income / sales) * (sales / assets) * (assets / shareholders' equity)

This equation for ROE breaks it into three widely used and studied components:
  • ROE = (net profit margin) * (asset turnover) * (equity multiplier)

We have ROE broken down into net profit margin (how much profit the company gets out of its revenues), asset turnover (how effectively the company makes use of its assets) and equity multiplier (a measure of how much the company is leveraged). The usefulness should now be clearer.

If a company's ROE goes up due to an increase
in the net profit margin or asset turnover, this is a very positive sign for the company. However, if the equity multiplier is the source of the rise, and the company was already appropriately leveraged, this is simply making things more risky. If the company is getting over-leveraged, the stock might deserve more of a discount despite the rise in ROE. The company could be under-leveraged as well. In this case it could be positive and show that the company is managing itself better.

Even if a company's ROE has remained unchanged, examination in this way can be very helpful. Suppose a company releases numbers and ROE is unchanged. Examination with DuPont analysis could show that both net profit margin and asset turnover decreased, two negative signs for the company, and the only reason ROE stayed the same was a large increase in leverage. No matter what the initial situation of the company, this would be a bad sign.

Five-Step DuPont

The five-step, or extended, DuPont equation breaks down net profit margin further. From the three-step equation we saw that, in general, rises in the net profit margin, asset turnover and leverage will increase ROE. The five-step equation shows that increases in leverage don't always indicate an increase in ROE.

The Five-Step Calculation

Since the numerator of the net profit margin is net income, this can be made into earnings before taxes (EBT) by multiplying the three-step equation by 1 minus the company's tax rate:
  • ROE = (earnings before tax / sales) * (sales / assets) * (assets / equity) * (1 – tax rate)
We can break this down one more time, since earnings before taxes is simply earnings before interest and taxes (EBIT) minus the company's interest expense. So, if a substitution is made for the interest expense, we get:
  • ROE = [(EBIT / sales) * (sales / assets) – (interest expense / assets)] * (assets / equity) * (1 – tax rate)
The practicality of this breakdown is not as clear as the three-step, but this identity provides us with:
  • ROE = [(operating profit margin) * (asset turnover) – (interest expense rate)] * (equity multiplier) * (tax retention rate)

If the company has a high borrowing cost, its interest expenses on more debt could mute the positive effects of the leverage.

Learn the Cause Behind the Effect

Both the three- and five-step equations provide deeper understanding of a company's ROE by examining what is really changing in a company rather than looking at one simple ratio. As always with financial statement ratios, they should be examined against the company's history and its competitors.

For example, when looking at two peer companies, one may have a lower ROE. With the five-step equation, you can see if this is lower because: creditors perceive the company as riskier and charge it higher interest, the company is poorly managed and has leverage that is too low, or the company has higher costs that decrease its operating profit margin. Identifying sources like these leads to better knowledge of the company and
how it should be valued.

The Bottom Line

A simple calculation of ROE may be easy and tell quite a bit, but it does not provide the whole picture. If a company's ROE is lower than its peers, the three- or five-step identities can help show where the company is lagging. It can also shed light on how a company is lifting or propping up its ROE. DuPont analysis
helps significantly broaden understanding of ROE.

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