Books For Aspiring Entrepreneurs

Throughout my life, I never like reading book of any kind. The only type of book that I read was text book so that I can get through Singapore education system. However, there are two books that caught my attention.

Who Moved My Cheese?

When I started the 'new' family business, my brother and I were the executive directors and my father was the 'adviser'. As our business grew each year, I had to deal with more employees and managed everybody problems, needs and expectations. I was stressed out minding everyone business and making sure that the business ran smoothly.

Through one of my friend's recommendation, I bought the book 'Who Moved My Cheese?'. You may ask why this book as I am the one moving the cheeses around in the company. To make a business successful, we need to understand that the most important asset is the people. Without happy and committed employees, the company will not be successful. This book actually provided me some insights on the change in life and work that affect everyone and the reactions to these changes. A good management need to understand and empathize what the employees go through so that the best possible decisions can be made.    


Rich Dad Poor Dad

When I was in my late twenties, I was given a book titled 'Rich Dad Poor Dad' by one of my father's business partner, Mr G. Since it was given by someone that I have respect for, I forced myself to read it and hoped to understand the significant of his gift. I never really finished the book but I gathered that Mr G wanted me to understand that being a entrepreneur is one of the means to gain financial freedom.

It is not difficult for me to understand this concept as my father was a entrepreneur. However, I did not really believed that my father achieved financial freedom just by owning a profitable business. I believe that to achieve financial freedom, we need to convert our asset class back to cash or equivalent so that we can make money work for us and not us working like crazy for the money. Being a entrepreneur need full time commitment and time is very precious to us. We had significant business asset but very little time to enjoy the fruits of our labour. Thus, financial freedom is truly achieved when we have broken free from the 'Rat Race' of the entrepreneur.

The opportunity came when a foreign company expressed interest in acquiring our business. Without much hesitation, I sized the opportunity and convinced my brother and father to sell the business. Selling the business does guarantee financial as we still need to learn how to make the money work for us. I am still learning today and I believe it will be a life long journey.

    
Note:
I understand that many have read these two books but everyone form different opinions and react differently. As for me, I decided that if I am in a dilemma, I will apply the Buddhism concept of Karma to assist in my decision making process that may affect the life of others. I am not a religious person but it helps me to have a peaceful mind

What I did with my new found wealth (2010)

Another year flew past and I am glad that the company I am managing grew its sales by another 15% again in 2009. Fulfilling our profit obligation to the business buyer, I was paid in full the second installment from the escrow account in Jan 2010.

With the second payout, my target for 20K passive income seem to be in my sight. Feeling comfortable with my bonds investment, I decided to load up a few more bonds issues. The following are the bonds that I had chosen for 2010:

1. Temasek Bond (10yrs, 4.3%)
2. DBS Preference Share (perpetual, 4.7%)
3. Olam Bond (3yrs, 4.1%)
4. Olam USD Bond (10yrs, 7.5%)
5. Hyflux Bond (5yrs, 5%)
6. Sembcorp Ind Bonds (5yrs, 3.73%)
7. Arief (3yrs, 4.75%)

I started experimenting with equity linked notes (ELN) and I was sold the following benefits:

• get interest yield of about 7% to 10% if equity price on redemption day is above strike price. 
• get the underlining equity at a price that I am comfortable with if the price is below strike price + interest

I was quite comfortable with ELN and was holding 3 to 4 contracts at any one time. Each ELN contract last about 45 days and I would go for yield that is about 10% to 15% depending on the volatility. About half the ELN that I held expired with the underlining equity below the strike price. I would hold them for a while and sold them at a small profit at a later date. I never really kept track of the average yield but it should be in the range of 7% to 10%.   

After I am familiar with ELN, I become more comfortable with equity. When the market seem to be picking up, bonds yield seem to be dropping below my target yield of 5%. With some successes from ELN, I decided to buy some equities. I must admit that I had zero experience in the equity market and I could only relied on my private bankers for advice. Without any FA or TA, I decided to buy only blue chips and REITS for dividend yields. I end up buying REITS with strong sponsors like Capitalmall Trust, AREIT and Ascott Reit giving yields of about 6%. 

I started reading up on all the equities that I own or had interest in and I started to form some personal view on the Reits market in Singapore. I decided to choose reits based on their dividend payout record for the past 3 years. For example, I found that Cambridge Ind Trust dividend payouts were very consistent for the past 3 years. With this simplistic logic, I added reits like Cambridge into my equity portfolio.

As a entrepreneur most of my working life, I was used to leveraging to grow my business. With the housing loan at a record low, I figured that getting a yield above 2% should be a piece of cake. Thus I decided to mortgage one of my properties and dump the fund into 'safe' bond such as Temasek bonds and earn the difference in interest spread.

At the end of 2010 my net passive income grew from 14K to 23K, excluding yield from ELNs. I had finally achieved my target of passive income >20K/mth.

Portfolio : 2010

Bucket list & Dream List

When I travel, there are nothing to do on a plane except watching all the movies on Kris World entertainment. One of the movie I like was the Bucket List. This show set me thinking what are the things in life that I hope to do or experience before we leave this world. I drafted my bucket list about 4 years ago:

• buy a sports car (porsche would be nice) :)
• travel with my family and parents at least twice a year :)
• built my dream house (semi-d, land area > 4K sq ft) :)
• retire at 40 with passive income of at least 20K / month :)
• plan my will and probate just in case I kick the bucket for whatever reason :)
• get my 2A/B bike licence :(
• travel to all the exotic places in Asia (e.g. Cambodia (Ankor Wat), Lombok, Myanmar, Nepal (Kathmandu), Vietnam (HCM, Hanoi...) :(
• learn to dance (never been on the dance floor) ;)
• Learn scuba diving :(
• start a business which I enjoy (must break even) :(
• provide guidance and support to my children if they want to be a tow kay :(

I am fortune to achieved some of the wishes :). I had worked real hard in the past and I am glad that I can realized so many wishes in my bucket list in the past four years. This bucket list will be expanded when new ideas pop up in my mind.

I also have a dream list and this list has to be far fetch or very difficult to achieve. If they are achievable now, then it is not a dream. For example, a GTR is a super car but not my dream car. A dream car is a car I cannot afford, something like a brand new lambo or Ferrari. It can also be very difficult to achieve due to family circumstances. E.g. seeing the seven wonders of the world can be realized with money but with three young kids, I expect to be tied down by them for at least 15 to 20 years.  

• See the seven wonders of the world
• own a brand new super car 
• built my dream bungalow (land area 10K ft and above)
• spend half my time living at different countries when my kids are independent
• retire at with passive income of 100K / month

The list above is difficult to achieve but it doesn't really matter if I don't achieve any of them because it is a DREAM. 

What I did with my new found wealth (2009)

I was very STUPID to promised a growth of 10% every year for the next four years when we sold our company in early 2008. Any short fall will deducted from our payout held in an escrow account.  Having work real hard in 2008, I managed to grow our company (or rather their company) sales by more than 15% in both the top and bottom line. It was a great relief to me as my payout will be deducted if the company missed the targets. Having hit our targets, I received my first installment from the escrow account.

2009 is the year I started to subscribe to Business Times and I started to pay attention to what was happening in the global financial world. Engineer by training and entrepreneur by circumstances, I had totally no experience in financial investment. To overcome this weakness, I decided to engage the service of the private bank for my financial planning. With my new bank account, I suddenly become a 'accredited investor'. It is still a joke to me today as I still do not understand what it actually meant!

At the beginning of 2009, the STI saw its bottom in March but I was totally freaked out to buy any equity. To achieve my quest to grow my passive income to 20K/mth, corporate bonds seem to be the safest options. At that time, short term (1 to 5 yrs) corporate bonds from Keppel Land, Midpoint Properties and Capitalmall were yielding about 3% to 5%. Having little time to focus on my passive income portfolio, I practically dump all my 'new' fund into the short term corporate bonds.

 At the end of December 2009, my passive income grew from 11K/mth to 14K/mth.

Portfolio : 2009

What I did with my new found wealth (2008)

What to do with my new found wealth? I am used to running a business operation and managing risk when I was a entrepreneur but I have zero experience in managing my new found asset, CASH. This is what I did in 2008.

1. bought myself a piece of land and build my dream house
2. bought my wife a car
3. paid up all loans, big and small and achieve loan free status
4. opened a fixed deposit account
5. bought some bonds for passive income

Portfolio : 2008

In 2008, I had a contractual obligation to work and guarantee the top and bottom line for the buyer. As I have a full time job commitment, I was unable to paid much attention to my portfolio. Thus I placed the bulk of my bet on corporate bonds like DBS 5.75% preference share, Capital Mall notes and JP Morgan Asia Confidence notes. My passive income was about $11K/mth by end 2008 and the following is my investment portfolio in December 2010.  My target was to build up a passive income of 20K/mth before 2012.

2008 is considered one of the darkest period for the financial world but it proved to be my best investment year as I picked up some bargains like DBS 5.75% preference share at par. I also bought myself a semi-d plot of land at rock bottom price and build a house based on my dream house. I also learned my lesson not to invest in high risk structure notes such as JP Morgan Asia confident notes. This notes was based on the market indices of Singapore, Malaysia, Taiwan and Thailand. I never expected the market to crash so badly such that there was a trigger event and I am in danger of losing more than 70% of my initial capital. However, lady luck must be with me and the all four market indices recovered to its initial level on redemption date in 2010. I managed to get 100% of my capital back! 

Lesson no 1: No more high risk, high return investment for me ever again.

Too Young to Retire at 39?

What is the ideal age for retirement? For me, the ideal age is when we achieve financial freedom. The next question will be how much is enough for retirement? I define financial freedom as follow:

1. yearly passive income > yearly expenses
2. having emergency fund for unforeseen situations
3. sufficient insurance for any critical illness or disability
4. having sufficient fund for the children education
5. ability to maintain current lifestyle

I had done my due diligence on my check list and I had met all my conditions for retirement. All these conditions were met before I hit 40 years old. In fact, I had been planning my for my retirement for nearly four years before I decided to truly retire. 

The the big day came when I 'lost' my day job in Nov 2011. My day job was a contractual obligation when my father, brother and I sold away our business in 2008. Although I am excited about my life turning point, I was never prepared for the following situation:

1. What to fill in on the application form field 'parent occupation' for my second son primary school enrollment form. 'Retired' is not a occupation and technically I am 'unemployed'. In the end, I decided to chose 'investor'  as my occupation.
2. My application for a new credit card was rejected when I told the bank that I do not have a job.
3. When someone ask me what is my occupation. I told them I am retired and they all give a skeptical look.

I am sure I will be experiencing more unpleasant situation due to my new found status and I hope I will get used to them soon. On the other hand, there are many advantages: 

1. I can wake up at 9 am everyday  
2. no more Monday blues
3. indulge in my interests any day, any time.
4. .....

The privileges of being retired at my age goes on and on. I hope I will not get bored too soon.

     

About myself

This is the first time I am blogging and it will basically tell my life story in achieving my dream life style. I was born into a fairly rich family and stayed in a semi-detach most of my life.  My father was a businessman and he owned a hardware distribution business with his business partner (my uncle). Business was successful and my younger brother and I never tasted hardship.

My father was a businessman most of his life and he always provide us the best life he can afford. I still remembered him buying me a car just after I passed my driving license when I was just 19 yrs old. At that time, I was one of the very few JC students driving to school. I was enjoying life in JC1 and I nearly failed my promotional examination. One fine day, my father asked about my study and instead of giving me a scolding, he asked me to quit JC and help him in his business. I was a little shocked as he seldom talk to me or show concern about my study. Deep down in my heart, I knew I can easily get into our local University as I was not even trying hard for my JC1 exam. Nevertheless, I told my father that I will try my best to get a degree. I never really understand my father's intention but now I truly understand his feeling. My father is a tow kay most of his life and he doesn't want his sons to be working for someone else. He strongly believes that being a entrepreneur is the only way to achieve the life style most people dream of.

When I was in my teens, I love to day dream about owning big bungalow with many fancy super cars lining up at the garage. I would also dream about running a business more successful than my father and retire at age 40. As I grew older, I realized that life is not a bed of roses and I have to downgrade my dream. The big bungalow became a condo and all the super car became just one continental car.

I graduated with a Engineering Degree in July 1997 and my first job was a System Engineer earning $2450/mth. I still remember that it was the beginning of the Asian Financial Crisis and everything seem so gloomy. This further dampened my dream and I was brought down to Earth.

I started working in my father's business in 1998. After 1-1/2 year with my father and uncle's business, my brother and I established a new business in 1999 and ended the 26 years of business partnership with my uncle. Life was good to us and our new business was quite successful. In 2008, we sold our company to a foreign listed company and our family pocketed a tidy sum. Life as a entrepreneur was very different after we sold our business. We were asset rich but cash 'poor'. We are now cash rich and I have to quickly adapt a new strategy to manage my new found wealth. After experimenting with different investment strategy, I grew more confident of my investment strategy to generate passive income. I decided to 'retire' at age 39, one year before my dream retirement age.

I will blog about my life from an entrepreneur (10 yrs) to an passive income investor (4 yrs). I never expect to blog about myself as I consider myself to be someone who likes to live a private life. Maybe I have become too bore after retirement.