A Quick Ratio to look at investment now

April 7, 2020

by Chengkok with 2 Comments General Economy Investment Accumulation Money Mindset

The past few weeks have been a downward slope. Some companies have started to cut senior management’s salary, some have been asked to take unpaid leave while others struggling to survive.

With the world’s economy in a standstill, some companies will not be able to see revenue coming in until 2 quarter later (optimistically). An example would be the airline industry. During the coronovirus episode, governments around the world has stopped air planes from entering into their country to stop the virus spread. As a result, airlines all over the world practically stopped. Not only has revenue have stopped, they might need to do a refund for air tickets for people that are supposed to fly for the next few months. To add insult into injury, some airlines have massive debt!

Can these companies survive?

Navigating crisis is never easy. It will be good to prepare for an emergency even before one happens. For discussion, I’m assuming the business from these companies are affected by this current crisis. For companies to survive, they can do either of the followings.

Pray that the government will bail them out (let’s hope we don’t get there)
Borrow money from debt (which will just push the problem into the future)
Borrow money by issuing new shares (which will dilute shareholder’s equity)
Have enough cash to get over these crisis 😉

How do I know if companies have enough cash to get over these crisis?

In personal finance, most of us are familiar with emergency funds. Typically, the sum makes up around 6 months of our basic expenses. It is the same for companies. I want to know if they have emergency funds? Do they have enough cash to pay off their current liability? Does it means if the company have more assets, the better it is? That’s where we can dig into the balance sheet of the company.

Let’s look at Company A. Company A has $50000m worth of quick assets and $25000m worth of current liabilities. This means that is able to meet near term liabilities using it’s quick assets.

PS: Quick assets are assets that can be converted to cash very quickly.

Company B has $100,000m worth of quick assets and $100,000m worth of current liabilities. Even though Company B has more quick assets than Company A, it has more current liabilities. It means that Company B is not as “comprehensive” in preparing to handle its current liabilities as compared to Company A. If we want to compare between 2 companies, we compare their Quick Ratio.

Quick Ratio

The quick ratio indicates a company’s ability to pay its current liabilities without needing to sell its inventory or get additional financing. The higher the ratio, the better a company’s liquidity and financial health; the lower the ratio, the more likely the company will struggle with paying debts.

In the case, Company A’s Quick Ratio is more ideal as compared to Company B.

In my own personal investment, I look at companies with a good quick ratio. This is because I want the company to be able to survive whether in crisis times or not. The health of the company is one way to find out how well the company is run. Why would you want to invest in a company that is heavily in debt?

Bottom Line

No one will care about your money as much as you do. Before you invest in any company or popular investment opportunity, be sure to do your own due diligence. If you wish to learn more about investing, I hope to nurture genuine relationships with all of my readers. Please feel free to contact me on my Instagram (@chengkokoh) or Facebook Page or my Telegram Channel! Or subscribe to our newsletter now!

Is it too late? How do I prepare for an emergency?

April 5, 2020

by Chengkok with 5 Comments CPF Accumulation General Economy Insurance Investment Accumulation Money Management Money Mindset

How to prepare for an emergency: Oh shit~

Many countries in the world have started with various attempts to separate humans from each other. It could come in the form of social distancing, working from home and quarantined. It seems like a global emergency is just around the corner and we are scrambling to prepare for this emergency. The Singapore government just announced a SGD$55B Resilience Budget package to help Singaporeans tie over this period.

Is it too late to prepare for this emergency?

From the Oxford dictionary, Emergencies are serious, unexpected, and often dangerous situation requiring immediate action. I feel the most defining thing about emergencies are that they are unexpected. Looking back, the reason why COVID-19 went out of control is that not many believe it to be serious and so it becomes unexpected.

While governments out there are trying their best to take care of their citizens, is there anything we can do during this emergency? And is it too late to prepare for this emergency?

Keep Calm and Prepare

Wealthdojo is a personal finance blog and so the suggestions will be finance related. We do understand that being mental strong and physically healthy is important in this period, but that’s an article for another day. It doesn’t matter where you start, it only matters that you start now. Here are some financial preparation that you can consider in this emergency.

Emergency Fund

This is the bedrock of your financial planning. When your income source stops (in normal days, it could be a lost of job), bills will continue to pile up. You will still need to eat, have a roof to stay and also feed your dependents. COVID-19 has pressed the pause button for millions of people in the world. Look at Singapore Airlines, senior management pay cut by 10-15%; staff offered voluntary no-pay leave. This would mean that the employees income source will take a pause for this period of time. If they do not have an emergency fund, how will they be able to continue to feel themselves in the months to come?

Solution: Have an emergency fund of between 6 to 9 months of your expenses.

This will ensure you can continue to live your life while waiting for the situation to be better. (Read more: Life Hedge: How to prevent your life from being a roller-coaster (Part 1))

Insurance

How to prepare for an emergency. Insurance

Call me bias but this is the most important time to review your insurance portfolio. Insurance takes care of medical conditions that are often unexpected (who can predict that they will have an heart attack) and serious. COVID-19 just serves as a reminder that health is the most important asset that we will ever have and COVID-19 is just one illness out of the whole repertoire of potential illness. Why are we resisting on planning for the other illness when they will rob us our ability to earn in the years to come?

Solution: Review your insurance portfolio

This will ensure you can continue to live your life while recovering from your illness. (Read more: Life Hedge: How to prevent your life from being a roller-coaster (Part 2))

Learn new things

There are so much information out there and I can never say that I truly know everything. In the midst of a crisis, the most important thing is to learn or even relearn certain things. It could be range from things like “how to maintain your relationship with your neighbor” to “gardening”. For Wealthdojo, we believe in continuous learning and reading. We have specially prepared 2 things for you to learn and explore new things during this COVID-19 period.

Solution: 3 recommended books to read and CPF Optimization and Opportunity Webinar

We will be having our first ever CPF Webinar on 23April2020. Do join us to learn more on what you can do with your CPF in the next webinar.

CPF Optimization and Opportunity - Launch 1 — CPF Optimization and Opportunity – First ever webinar

Watchlist

The last one is dedicated to all the investors out there. It is bargain season in the stock market now. Many companies are now priced at historically low levels. However, if you don’t have a game plan on what to buy and what price to buy, be prepared to let opportunities slipped away from your hands.

Wishing you the best in this period of time. We hope that everyone can remain calm and healthy during this season. It is a season of crisis but it is also a season of opportunity. Invest with what you have and don’t borrow money to invest in this period of time. If you are new to investing and need help, do talk to me using the contact form or any methods listed below.

God Bless.

If you read until here, thank you again for your patience and your support over in 2019. I hope that in 2020, Wealthdojo can continue to value add you. Let us know what you think in the comments below. This is a working article. The above doesn’t represent my stock recommendation in anyway. Please read our disclaimer for more information.

I hope to nurture genuine relationships with all of my readers. Please feel free to contact me on my Instagram (@chengkokoh) or Facebook Page or my Telegram Channel! Or subscribe to our newsletter now!

Life Hedge: How to prevent your life from being a roller-coaster (Part 2)

March 20, 2020

by Chengkok with No Comment General Economy Insurance Money Management Money Mindset

In the previous post on Life Hedge: how to prevent your life from being a roller-coaster, we talked about investing hedge and how you can use various tools to hedge on your investing portfolio specially during times of the recent coronavirus. In this article, we will talk about something more personal and how to prevent our lives from being a roller-coaster.

Look around you, there are many things in life that we can be grateful for. Just by having a roof over your head, you are richer than 75% of the world. (Source: Elephantjournal). If you are reading this article, it probably means you have assess to the internet, a phone, a laptop, an electricity source and money. Despite that, most of us might feel that life is not enough and demand more of it.

The question that we can ask ourselves is this. Why are we demanding for more even though we know we have enough? This reminds me of a story of The Golden Egg which I will replicate below.

Story of The Golden Egg

Once upon a time, there lived a cloth merchant in a village with his wife and two children. They were indeed quite well-off. They had a beautiful hen which laid an egg every day. It was not an ordinary egg, rather, a golden egg. But the man was not satisfied with what he used to get daily. He was a get rich-trice kind of a person.

The man wanted to get all the golden eggs from his hen at one single go. So, one day he thought hard and at last clicked upon a plan. He decided to kill the hen and get all the eggs together.

So, the next day when the hen laid a golden egg, the man caught hold of it, took a sharp knife, chopped off its neck and cut its body open. There was nothing but blood all around & no trace of any egg at all. He was highly grieved because now he would not get even one single egg.

His life was going on smoothly with one egg a day but now, he himself made his life miserable. The outcome of his greed was that he started becoming poorer & poorer day by day and ultimately became a pauper. How jinxed and how much foolish he was.

Life Hedge Golden Egg — Life Hedge: Why do we want more Golden Eggs

Why do we kill the Golden Goose?

Logically, it don’t make sense to kill something that is good wealth source to us. However, emotionally we want it FASTER and in our journey of doing so, we kill the golden goose.

This primary emotion that we associated commonly is called Greed. However, I believe there could be deeper reasons. I believe that is the reason why many people fall into simple scams, empty promises or bad health (See more: Regrets).

For some, they feel their life is about acquisition and no longer as a means of satisfying their material need. They want to have more than their peers to feel a sense of superiority. For some, they want to have more because they do not have enough when they were young and they fear it will happen to them again. For some, they feel that by buying things they can fills an emotional void in their hearts such as a lack of affection at home. The list could go on and on but it is rooted to the same cause: an emotional void. By understanding, what cause our emotional void can then we protect ourselves from ourselves (read that again :p).

Protecting our Golden Goose

Life Hedge Protecting the Golden Goose — Life Hedge: Protecting the Golden Goose

To prevent your life from being a roller-coaster, there are some hedges that we MUST put in place so that life will not change so drastically. In a certain sense, we are the golden goose and the ultimate treasure/asset that we have to protect. We hope that by sharing the two life hedges, you can live a life of abundance and laughter.

Discover the emotional void

I can say with confidence that many people live their lives without truly understanding about themselves. When we are young, some of us are force to go through education and we are constantly chasing for academical success. It seems like the success in life was to have good academical results. Then we come into the workforce and we are constantly chasing for material success. It seems that the success in life now is linked to our net worth. We constantly seek what the society wants from us and because of that, we might develop some sort of emotional void.

Spending some time with ourselves and asking ourselves deeper question is the start for us to discover the emotional void that we might have. For some, it is certainty. For others, it might be love and connection. I have listed 6 potential voids which people are looking for in their life.

The 6 voids are. “Lack of certainty”, “Lack of variety”, “Lack of love and connection”, “Lack of significance”, “Lack of growth” and the “Lack of contribution”. If this seems familiar, Tony Robbins, an American Author coined the above the 6 human needs. (Read more: 6 Human Needs) . Can you relate to them?

Maintain the Golden Goose

To have good quality eggs, I can only assume the body of the golden goose have to be strong. Just like ourselves, we need to work and maintain our body by exercising and also eating well. Take reference to the first Singapore’s Prime Minister, even well into his 80s, Mr Lee stuck to a strict exercise routine – 12 minutes walking on the treadmill every morning, 15 minutes after lunch, and another 15 minutes after dinner.

“Without that, I would not be in my present condition physically,” he had said.

Source: Straits Times: Staying fit anywhere, in any way

Income Hedge/Insurance

Even if we do the above, an illness might still strike us. In an event of major critical illness, we might need to use our life savings to spend on our treatments or new lifestyle. Some treatments could be life-long and we might be forced to sell away our homes to fund those new treatments.

At the same time, we might not be able to work at the same capability after an illness. This would mean that our income might not be as high as before and this will result in a lower standard of living in future.

Is your income hedged after you stopped working?

God Bless.

Life Hedge: How to prevent your life from being a roller-coaster (Part 1)

March 14, 2020

by Chengkok with 4 Comments General Economy Investment Accumulation Money Mindset

Life is a series of ups and downs. We go through different seasons in life, explore different emotions and without fail, we make mistakes in life. Some mistakes can be funny to remember, some cringe worthy and some.. just not worth it.

To prevent our life from going out of control, we have certain hedges that we placed on ourselves like not spend our entire bank account on one meal or slapping another person’s face when we are angry. Put simply, a hedge is a way of protecting oneself against financial loss or other adverse circumstances (the people you slapped could be a UFC champion). This protection is important for us to feel safe so that we can live our lives without feeling like it is out of control.

Let’s talk about Amy, her parents are avid gamblers. There was once her parents had to borrow money from her (at that time, we were just 18) to repay the loan sharks. Eventually, the amount that her parents owed was so large that they had to sell away their HDB in Toa Payoh to payoff the debt. In one night, Amy no longer had a roof over her head. Her life just turned 180 degrees and she live her life shuffling between different relatives at different times. That was the last I heard about her.

John Locke, an 17 century English Philosopher once said: “When there is no law, there is no freedom”. If there is no certain laws in place, life could be messy and out of control. Taking things a little recent, Ronald Reagan said: “Law and freedom must be indivisible partners. For without law, there can be no freedom, only chaos and disorder; and without freedom, law is just but a cynical veneer for injustice and oppression”. To use this one a personal level, I can rearrange the above to be “To achieve freedom, there are certain limits I have placed on myself.” (IE: How Can You Stop Buying Shit You Don’t Need?). Without going too deep, let’s limit the discussion to Investing hedge.

Investing Hedge

Unless you are living under a rock (you probably won’t be reading this), there was a global selloff in the market (Covid19) in the last 2 weeks. We are officially in the bear market territory. If you are a millennial, congratulations! You can finally boast that you will live through your first bear market!

Being in the investing scene for a while, I met different types of investors. There are people celebrating this moment and they are also people panicking at the moment (Investing Mistakes I wished I knew).

Ivy is a newly minted investor. She started investing in July 2019 after attending one of the investing programs in Singapore. On 31 Dec 2019, she looked at her P&L (profit and lost) for the year and smiled to herself. Ivy made 35% that year and she started in July. Ivy thought if she could do this for a few years, she could retire in 5 years time. She shared her results with a few of her friends and she REALLY felt good doing so. The happiness continue until the coronavirus came in early 2020. Initially, she saw her portfolio went down by 10%. She thought that was just a small drop and it was normal. After that, her earnings last year was wiped out. Ivy started to feel regret as she didn’t take profits earlier. On 12 March 2020, she saw her portfolio is at -30%. She is starting to feel that investing is a mistake. During my conversation with her, I asked if she had any hedging strategy. She said she was 100% invested as she felt it was a good time to invest. She refused to open her trading account now and feels like investing is like a roller coaster ride! Poor Ivy!

Excellent investors I know have a Plan B. Plan B is a plan to allow us to enjoy the ride. Excellent investors knows that the market will present certain opportunities for them and because of that, they can take certain actions to allow them to enjoy the ride. In this way, they feel excited even when the roller coaster takes them up or down! They do so in three ways.

A Cash Hedge

Excellent investors know the importance of having money during a sale. Can you imagine if the $1,000,000 Dream Condo that you want to buy is now worth $100,000? How many will you buy? Or rather, the more important question is, how many can you buy? When life presents you with the opportunity of the lifetime, are you ready to buy and are you ABLE to buy?
Imagine if you seized the opportunity and bought 5 $100,000 Condo units. When the market recovers and the price reverts back to $1,000,000. You will now be $4,500,000 richer!
An Alternate Asset Hedge

Some assets class have an inverse co-relation to the stock market. It means if the stock market prices go down, these assets prices will go up. Some people use gold, bonds or bitcoin as an hedge to the stock market. Personally, I don’t think they are perfect hedges. But they work generally well most of the time (disclaimer here). Ray Dalio is famous for his “All Weather Portfolio”. He believes that by combining different asset classes together in different percentage, he can beat the market by doing a re-balancing of his portfolio due the co-relationship between the asset classes.
Buy a put option on the stock market

Put Options is a derivative which advanced investors use to protect their portfolio during a crisis. Essentially, it is like an insurance contract. You pay a premium for a certain protection that we call a strike price. If the stock falls below the strike price, the put options buyer will have to pay you the difference of the strike price to the actual price. This allows their portfolio to remain stable during a crisis. Eventually, they will close their put option contract and allow their portfolio to go back to their previous prices.

God Bless.

Wuhan Coronavirus: Masked Opportunity 2019-nCoV

February 6, 2020

by Chengkok with 3 Comments General Economy Investment Accumulation

A new term has been coined after Wuhan Coronavirus. It is now officially called 2019-nCoV. The first Spanish Flu (H1N1) pandemic lasted from 1918 to 1920. It infected 500 million people worldwide, of whom 50 million to 100 million died. It was a dark age for mankind. It was a time where medical facilities was not as advanced as it is today. Today, we are more equipped medically (though we can do much better).

According to the World Health Organisation, another influenza pandemic will happen – it’s a question of when. (Source: WHO 8 Things to Know) In 1918, we had the most devastating infectious disease event in recorded history: the 1918 influenza pandemic. Since 1918 three influenza pandemics have occurred – in 1957, 1968 and 2009 (H1N1).

This article is another working article to find companies that are producing masks. I find it enlightening to learn from the past.

We will also be focusing on producers of N95 mask. The National Institute for Occupational Safety and Health (NIOSH) and the Centers for Disease Control and Prevention (CDC) recommend the use of a NIOSH-certified N95 or better respirator for the protection of healthcare workers who come in direct contact with patients with H1N1. (Source: NIOSH).

We also note that Singapore and most countries in the world currently promote the use of surgical mask rather than N95. I believe that the opportunity might be over to invest in these companies as opportunistic plays.

In fact, you can find a list of N95 mask on this web link. (Source: N95 Mask)

Kawamoto

The stock of Kawamoto (3604. Japan), a Japanese medical supply company that makes masks, appears to be reacting to the surge in demand. The stock has jumped 479% this year, experiencing a particularly large spike around Jan. 17 when the outbreak began receiving more attention. The stocks also recorded multiple spikes during the time of epidermal.

Honeywell

Honeywell (HON) provides eye and face protection equipment, hearing protection equipment, fall protection equipment, hand protection equipment, first-aid, head protection equipment, lockout-tagout, and professional footwear. Salisbury, a Honeywell brand, is the leading manufacturer of PPE for electrical safety. Its solutions comply with ATSM International requirements and OSHA regulations. It offers a complete solution with insulating rubber gloves, line hose, blankets, voltage detectors, clamp sticks, distribution dead-end insulators, temporary grounding equipment, plastic cover-up, and dielectric boots.

Unlike Kawamoto, Honeywell is a big company and the N95 mask only give a small revenue source for them.

3M

3M (MMM) offers a wide range of products that are used to enhance personal protection of people, facilities, and systems. Products offered by the segment include PPE, traffic safety, civil security solutions, and commercial solutions. 3M offers a strong line of PPE like reusable and disposable respirators, head and face protection equipment, protective eyewear, hearing protection equipment, and reflective materials used in footwear, clothing, and other accessories for enhancing visibility in low-light conditions.

Just like honeywell, 3M business does not depend on the N95 mask as their main source of revenue.

Alpha Pro Tech, Ltd.

Alpha Pro Tech, Ltd. (APT) develops, manufactures, and markets innovative disposable protective apparel and infection control products in the United States and internationally. Its disposable protective apparel products consist of shoecovers, coveralls, lab coats, gowns and bouffant caps; infection control products including various face masks and eye shields produces and markets a line of construction weatherization products, such as housewrap and synthetic roof underlayment.

Last Edited 06/02/2020. More companies to follow.

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Wealthdojo

Can these companies survive?

How do I know if companies have enough cash to get over these crisis?

Quick Ratio

Bottom Line

Is it too late to prepare for this emergency?

Keep Calm and Prepare

Story of The Golden Egg

Why do we kill the Golden Goose?

Protecting our Golden Goose

Discover the emotional void

Maintain the Golden Goose

Income Hedge/Insurance

Investing Hedge

A Cash Hedge

An Alternate Asset Hedge

Buy a put option on the stock market

Kawamoto

Honeywell

3M

Alpha Pro Tech, Ltd.

Other Opportunities

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