A New Stock Purchase - Ascott Residence Trust

Just a few days ago, I made a new stock purchase into Ascott Residence Trust at a price of $1.065. Adding this stock into my portfolio, I would have 16 stocks now. Previously I bought on Saizen REIT which was already being acquired and most of the cash has been given out. I wrote that I was seeking to find another company which can potentially replace the lost income from Saizen REIT. Ascott REIT was what I found.

About Ascott Residence Trust - Profits and Assets

Ascott Residence Trust was established with the objective of investing primarily in real estate and real estate-related assets which are income-producing and which are used or predominantly used, as serviced residences, rental housing properties and other hospitality assets. Saizen REIT was a company which has rental properties while Ascott REIT has serviced residences. Although not really the same, there are some similarities shared too. I believe this is also a stable income producing asset which is my objective for investing in it.

Unlike Saizen which has all its properties in Japan, Ascott REIT has its properties in 14 different countries. To me, this is quite a diversified portfolio. It has a total of 89 properties currently. Most of its gross profit is generated from Japan at $34.2 Million followed by France at $32.4 Million and UK at $26.7 Million. In terms of assets in its portfolio, China is the largest at 17% followed by Japan at 15.8% and Singapore at 13.3%.

From the information on its gross profit and total assets breakdown, I would be able to see how its profit or asset value would be affected. I like the fact that its profit from Japan contributes to a big part of its portfolio as rental yield in Japan is certainly going up as in my analysis for Saizen. The risks is we have seen that the QE being done in Japan has not worked out as well as what we thought it would be but the government relentless pursuit to revive back inflation in its economy is certainly sending asset and rental prices up. This is a good thing for Ascott. Another risk is 17% of its total assets are from China. If China would to have a property market correction, it would definitely affect the asset value of its portfolio when revaluation comes.

In its latest financial result, portfolio value was up by 15%  mainly due to properties acquired in 2H 2015 as well as higher valuation of properties in Japan, France and United Kingdom. However, portfolio value from properties in Australia went down. The NAV increased from $1.37 to $1.41 currently. The latest share price is trading at around $1.06. This represents a discount of 24.8% to its NAV. Distribution per unit (DPU) was 7.99 cents in 2015. Taking the current stock price of $1.06, this represents a dividend yield of about 7.5% which I think is quite attractive.


Stability of Income?

If we're investing for income, we have to ask ourselves will the DPU be stable? What will affect the profit and thus the DPU given out? Occupancy rates, currency movements and rental rates are some of the factors which will affect their DPU.

For occupancy rates, Ascott REIT focuses on long stay segments to provide stability in income. 23% of its properties are rented out for more than 12 months contract with the average length of stay about 4 months. In addition, 46% of the Group’s gross profit for FY 2015 is contributed by master leases and management contracts with minimum guaranteed income.

For currency movement,  Ascott REIT entered into foreign currency forward contracts to hedge distribution income derived in EUR, GBP and JPY. On a portfolio basis, 40% of FY 2015 foreign currency distribution income had been hedged. This is a good strategy as most of its profits comes from Japan, UK and France. All 3 different currencies from these countries are hedged. However, DPU will still be affected such as the AUD and MYR declining substantially against the SGD in FY 2015.


Debt Profile & Valuations

On its debt profile, gearing is at 39.3% with 79% of its loans on fixed rates as at 31 December 2015. Total debt is at $1815 Million while cash and cash equivalents are at 220.5 Million. 14% of its loans will mature in 2016 where they will refinance it into fixed rates loans. Another 10% will mature in 2017 and 12% in 2018. Weighted Average Debt to Maturity is 4.6 Years.

To me, I believe the DPU should remain stable at least for the next few years. With most of its profits coming from Japan where I believe rental rates will continue to be stable and even pick up, this will be good for the REIT as a whole. Occupancy for rental housing in Japan is 98% in 4Q 2015. Rental housing in Japan is in demand due to the high cost of owning a home in Japan. 

At the current valuation, this represents a discount to NAV where dividend yield is fairly attractive at 7.5%. I am primarily invested in this for the yield for income. Investing into it now doesn't mean the price would not go lower. It only means I think the company is at a good value now and if it were to go down further, I will definitely accumulate more.

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The Silent Killer Of Successful Investments

When I first started investing, I thought about how good it would turn out, how investing can be the answer to a better life. I went for seminars where the speakers promised good returns if you learn it correctly. With much hope and expectations of a good outcome, I started investing.

10%, 20% returns were easy at first. Maybe it was beginner's luck, I made over $1K in a short period of 3 months with just only $5K. That was 20% return on investment. If you ask me what was the factor behind the success that time, I would have told you it was because I expected it. However, I was totally wrong. The reason why many people fail in their investments is not just because of a lack of knowledge or luck, it is having the wrong expectations.


Expectations

Fast forward to one year later, I lost everything and more. In fact, I lost half of my savings which I painstakingly saved through my allowances during my school days, the many part time jobs I worked while still studying and the little NS allowance I got. The savings were built up a dollar at a time and I saved so hard by working part time. All the savings for 5 years were wiped out in just a few months. I had many sleepless nights due to insomnia, I didn't know what to do and was totally lost that time.

All these taught me to have a more realistic expectation for investments. In fact, not only just investments but it taught and humbled me on the expectations of life. Sometimes, we have so much expectations that it makes us unhappy when those expectations go unmet, it strains relationships too. For investing, it caused me to lose the hard earned money I saved up. This was a lesson that will not be forgotten.


There is no easy money

If you're thinking investing will be your easy way out in life to give you more money, you may have the wrong expectations. There are people who believe that they can double or triple their money easily through the stock market or think that trading is an easy way to make money so you don't have to work. All these are easy money thinking. Be careful of this as it may land you into trouble with the stock market.

Wanting to make more money from the stock market will indirectly cause you to take on more risk. In the pursuit for more money, people get into speculation to pick the next hot stock. "This stock may be the next big thing and will go up 10 times!!" If this is what you heard, its speculation. Yes it may go up 10 times but what if it went down and worse still collapse instead? We may lose a lot of our money or even everything.


Reality isn't all that bad

Even though there are no easy money, reality isn't all that bad either. Growing our wealth through investing is still important. As we all know, the purpose of investing is not only to preserve wealth but to build up our wealth for retirement. If we do not invest, our wealth will deplete over the years due to inflation.

I have not been good at Maths since primary school. I was careless with numbers and always make silly mistakes during my mathematics exams and tests. To grow our wealth, we need to have plans and see it happen in the future. Fortunately, even for people like me who are not good with numbers, there is an easy way to see how our money will grow in the future.

The rule of 72 is the easiest way to see how much our money would grow. At 7.2% investment return annually, our money would double every 10 years. How you get this number is take 72 divided by 7.2 and you get 10 years. If we have 10% annual investment return, our money would double every 7.2 years. You can just take 72 divided by the annual investment return and you will know how long your money will take to double.

With the rule of 72, I can plan for my future easier. If I want to double my money 3 times in 30 years, I would have to achieve 7.2% ROI every year. $200,000 would become $800,000 30 years from now using this calculation. This is assuming we have $200,000 and stop saving money now and just grow our money through investments.

One lesson from this is the more we save earlier, the faster it is to reach our financial targets later.

This was an example I read before on 2 person, Ben and Arthur.  At age 19, Ben decided to invest $2,000 every year for eight years. He picked investment funds that averaged a 12% interest rate. Then, at age 26, Ben stopped putting money into his investments. So he put a total of $16,000 into his investment funds.

Now Arthur didn't start investing until age 27. Just like Ben, he put $2,000 into his investment funds every year until he turned 65. He got the same 12% interest rate as Ben, but he invested 23 more years than Ben did. So Arthur invested a total of $78,000 over 39 years.

When both Ben and Arthur turned 65, they decided to compare their investment accounts. Who do you think had more? Ben, with his total of $16,000 invested over eight years, or Arthur, who invested $78,000 over 39 years?

The result above shows the stark difference and the power of compounding. Ben just saves earlier at age 19 and stops saving at age 26 but in the end he has more money than Arthur who saves and invest from age 27 to 65. Just that 7 years difference makes a very big difference because of the power of compounding.

Expectations kills successful investments but the reality isn't that bad either. The road to wealth building is easy: save early, invest early and let the power of compounding take effect. There is no shortcut to wealth building. Expecting that investing will make you rich in a short time is a dream but getting back to reality that the effects of compounding has on the long term will create successful investments for us.

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Eight Benefits of Living in a Community Housing

Buying a house is a massive investment any person can make. When purchasing your dream home, you should consider many factors. These can include price, location, size, floor plan, and house type, among others. Gambling with your future is not something you want to try. You have to go for the best housing project available. To save yourself from these conundrums you can opt for community housing. It's unique, unlike the traditional neighborhoods. A Community has areas designed to suit the needs of the residents. The benefits of finding a home in a community include:

You Stand out from the Rest

In the past, architects constructed most homes with the neighborhood concept. But, this has changed in modern times. Current developments are set up with the surrounding area in mind. It means that social amenities such as schools, parks, hospitals, banking, and other facilities are developed around them. Also, restaurants, grocery stores, schools, and entertainment facilities are developed along the community housing. In most cases, any community planning focuses on important details to include all the primary necessities. Most communities are centered on a particular theme such as lakes, tennis facilities, golf, or any other interactive feature. What makes the neighborhood unique is the fact that developers consider everything first before setting it up.

Exceptional Landscaping

Who doesn’t want to live in a community with beautifully trimmed lawns and easily accessible areas? You can reap many benefits by using sites like Property Guru to search for community housing ventures like Desa park city — meticulous landscaping is one of these features. What more the communities provide you with an area to jog, biking, and playgrounds. The pricing is competitive because the communities are all similar in their floor plan.

Don’t Worry About Devaluation 

An exceptional feature of the community housing is that the pricing remains steady. The owners of these houses keep the property in good condition throughout. Your dreams will come true when you settle in the park. The owners use top-notch contractors with years of experience to develop the property so you will get the best talent working on it in the market. Quality construction is beneficial because you don’t have to worry about repairs, you can just maintain the house in its current condition.

Space Brings Creativity 

As expert developers build homes, you will have more space inside and outside. Unlike the traditional neighborhood areas, a community housing will give you ample space for use. You can convert the outside space to be a patio or anything that suits your needs. You will enjoy a wide array of advantages from these homes. The materials used in the construction of the house are top quality, and residents benefit from the convenience of having all the facilities within the area. If you are into arts or any outdoor activity, then community housing is the best option for you.

It's a Proven Model

When investing for your future, you wouldn’t want to gamble your hard-earned cash. Invest in a proven model. AV homes website indicates there is significant growth in community housing. The model has received accolades for being one of the most practical designs. You can live comfortably knowing that the neighborhood is safe. Many have realized the benefits of community housing, and they are buying or renting such properties in large numbers.

You Get Full Value for Your Money

Investing in a home is not something you rush into and make a purchase. When you are looking for a solid housing investment, community housing is the best option. You get full value for your money as you can leverage on different forms of funding. Also, you can use it to borrow against property this allows you to improve your financial position with ease.

Flexibility Factor

Flexibility is the main factor people consider when looking for housing, and community housing will give you the ultimate experience. The housing cost is low, and you can enjoy the freedom of funding through shared equity. This kind of flexibility has made the community model better placed and specialized to address complex housing needs. You can easily fund the housing as Richmond American suggests.

Independent and Responsive 

Community housing is created with the needs of the occupant at hand. Not only will you get a quality house but also a dynamic environment that will suit your needs. The developers put the needs of the occupant in mind when developing the housing and suit your independent lifestyle. You can take a long-term approach to investing in your dream home and customize it to suit your preferences according to Connerton builders.

In conclusion, community housing provides total flexibility, comfort, and adequate space where you can bring your ideas to life. Do not invest in non-proven models, always go for time-tested models when so much money is involved, and it will bring satisfaction to all your housing needs.

Saizen REIT - The Final Closure Of My Biggest Stock Holding

Saizen REIT has been a good investment and this stock is finally coming to a close after it announced that it will be acquired in November last year. I invested in Saizen REIT as early as end 2013. It has been more than 2 years now. Over the years, I added to my position in this REIT and it became my largest stock holding in my portfolio. It is a final closure now and most of the cash will be paid out on 29th March this month.

Since this has been a relatively successful investment, it would be good to understand what are the factors that make it an attractive investment? Let me share the rationale on why I invested it in the first place and what we can learn from this.

1. Macroeconomic Factors in Japan

The first reason why I decided to invest in Saizen REIT was due to the macroeconomic factors in Japan at that time. 3 years back while I was taking my part time degree in Economics, I heard about the QE that Japan was going to embark on. I understand that the QE in US and Europe were roads to easy money which actually brought US out of a recession from the 2007 sub prime mortgage crisis and the EU also averted a major sovereign debt crisis.

In 2013, I wrote this in a blog post:

Japan's real estate prices were rising tremendously from 1986 to 1991. This formed an asset price bubble and the bubble burst in 1991 sending real estate prices down into negative territory. Japanese Yen was appreciating a lot due to the Plaza Accord. This was an agreement to depreciate the US dollar in relation to Japanese Yen and German Deutsche Mark. Both these 2 events lead to the Japanese economy suffering and ended up in deflation. I will leave out the finer details of what happened exactly but i hope you got a rough idea. 

Japan's government has set an inflation target of 2% to reach by 2015. Prior to that, Japan has been in a deflation state for many years. As prices keep dropping, Japanese people defer their buying in the hopes that they can buy it at a cheaper price later. This is completely opposite from our current state in Singapore where people rush to buy properties because they are afraid that prices will keep going up. It's the thought that if i don't buy it now, it's going to get more expensive.

With this inflation target, asset prices in Japan are sure going to go up. With QE, money flow in Japan's economy will be expanded. Interest rates go down, asset prices goes up. This was definitely going to be beneficial for Saizen Reit which owns properties in Japan. 

2. Saizen REIT has stable income from residential properties

Saizen Reit has a portfolio of income producing real estate. These properties are mostly residential properties. As home ownership is low at about 60% in Japan, rental properties are still in strong demand there. Rental prices are set to rise as the Japan's economy recover. mid market rents in the 23 ward area of Tokyo showed an increase of 1.1% from the year 2013. This was very attractive to me as Saizen REIT offers about 6%+ in dividend yield at the price which I bought. 

3. Attractive valuation

Saizen REIT stock price has been low for quite some time. In fact, it didn't really move even though it was trading at a discount to NAV of 23.7%. Gearing level was around 34% which I thought was quite ok. Of course, we can't just look at NAV alone to determine if the stock is attractively valued. Some REITs overvalue their properties which make their NAV seem higher. However, for Saizen REIT, I do know that they value their properties conservatively as there were a few times they manage to sell their properties at above valuation. 

With rising property prices, rental prices and stock trading at a discount to NAV, I believed this was a good investment. 

4. Good risk management 

Interest rates are sensitive for REITs. 88% of its debt are on fixed interest and all its debt is long term in nature. The nearest loan maturity it has is in March 2020. Although Saizen REIT could have benefited if they are on floating interest rates instead as interest rates in Japan were low but that's any issue for now. 

The Japanese Yen was also declining against the SGD which means it could affect the dividend distribution to shareholders in Singapore. I liked they have hedged their currency risks in view of the falling JPY which means dividend yield will be more or less stable moving forward. 

Its time to bid farewell to Saizen REIT from now onwards. Now, I'll have to find another stock which can replace the income I get from Saizen. I have identified another stock which is quite similar to Saizen REIT and am still looking at it. Will blog more about it later on. 

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Related Posts:

1. The Japan story - Croesus retail trust and Saizen Reit
2. Looking to invest in Japan's real estate

3. Saizen REIT - Income from Japanese residential properties?

My First Investment Into Crowdfunding For SMEs

Just a few days ago, I made my first investment into something which I have been looking closely at for quite some time now. I decided to get into it because I believe it is safe enough and the returns are relatively good at 13.5%.

In just 26 hours, $1 million was actually raised by this particular company. They are going to raise another $1 Million so investors still have a chance to invest in it. What exactly is this investment on?

Here are the details:

Issuer Summary

Date of Listing: March 17, 2016
Amount: S$500,000
Tenor: 12 months
Repayment Type: Callable
Repayment Term: Quarterly
Target Interest Rate: 13.50% p.a.
Purpose: Asset Purchase

About the company: 

The Company is a well-known brand started in early 2002 by a very experienced entrepreneur with over 25 years of experience in the IT industry. It was established with the objective to be a one-stop digital lifestyle store by offering a comprehensive suite of digital lifestyle products and high quality pre- and post-sale services.

Revenue Source: 

The Company generates revenue through a multi-channel point-of-sales strategy using both offline (retail) and online (e-commerce) channels to transact physical merchandise. Their products consist of a wide range of exclusive computing and mobile equipment (such as laptops, tablets, smartphones, accessories, cases, headphones, and stylus) from top IT brands and the Company's private label.

Purpose:

The purpose of this funding is to finance the purchase of inventory as well as for general working capital.

Corporate Guarantor: 

Her parent company (an SGX-listed company) will provide a corporate guarantee for the notes.


This investment is brought to you by Moolahsense. They got the company on board their platform where the company started this funding campaign to raise cash. When we invest in this company, we are actually lending money to the company to expand their business in return for interest.


Risks of this investment:

Many of you might be worried about the risk involved when investing through crowdfunding platforms. While risks are always present in every investment, we can reduce it by doing our homework. The risk of notes/bonds investment is when the company defaults on its payment. Looking at its financials, the company has a operating profit of $330K and cashflow from operations of $5.1 Million in the current financial year. It also has an average cash balance of $1.4 Million. This particular investment is also guaranteed by the parent company which is a SGX listed company.

I am sure the company name is familiar to most people here in Singapore but due to some confidentiality, I will not be able to mention the name of this company in this post. If you are interested to find out about the investment, you will need to sign up for an account with Moolahsense and view the opportunity in their platform. If you already have an account with Moolahsense, you can login to view this opportunity straight away.


WHAT IS A CALLABLE NOTE? 

This particular investment is a callable note. In a Callable note, an issuer has an option to early redeem the note on a quarterly basis. If the note is not early redeemed, the issuer pays a quarterly interest. The principal will be fully repaid on the quarter that the redemption is early called or at the maturity date.

SAMPLE Scenario (only intended for illustration). 

Assume that you invested $10k in a campaign at a final note rate of 13.5% p.a. in a Callable note.

This is a short term investment which I have also participated in. I believe it is a good opportunity with decent returns for the short term.

To invest in this short term note, check out the investment opportunity on their website here.

P.S: There have been comments on concerns regarding the investments. I have gathered the facts as below:

1. For a company which is 100% owned by a Holding company, no Director will provide the Guarantee

2. Investors need to understand, this is Credit Line to the borrower and not an Equity investment where repayments happen base on cash flows generated by operations in the borrower company

3. Corporate Guarantee of a listed company certainly has some meaning. Even today the company has a market capitalization of 16 mil

Some further facts:
1) Grp Equity is 5 mil as per latest SGX filing

2)  Company is making operating profit in FY15

3) For Parent company, majority revenues comes from borrower. As the borrower financial profile has certainly shown improvement over the last FY, dividends shall accrue back to parent company.

4) about RTO being a red flag >>> not so relevant for a 12 month credit investment (vs an equity investment)

Hope this clarifies. While i understand there are still risks involved, I calculated and invested base on the risk i would be willing to take. Readers are advised not to invest more than what they can lose in any investments.

Disclaimer: This article is not to endorse any products or investments or to give any advise on any investment matters. I have written base on my experience and what I have done. Readers are strongly 
advised to do their own due dillengence before investing. 

This article is written in collaboration with Moolahsense. All ideas portrayed are independent by SG Young Investment.

The Opportunity To Invest In SMEs in Singapore

Did you know that we can actually invest in SMEs (small-to-medium enterprises) in Singapore? This allows individual investors to earn attractive returns while supporting the growth of local businesses. We can invest in SMEs through debt-based crowdfunding platforms. This is where SMEs can issue bonds and everyday investors can buy the bonds and get returns on their investments.

Here's an example of a campaign that local crowdfunding platform, MoolahSense, had previously:

This was the first campaign listed under MoolahSense platform. It has paid out successfully to all investors at a rate of 9.9%. The target amount of the company was initially only $100,000 but due to popular demand, offers went up as high as $207,000.

Company: SMATHS

Smaths Consulting Pte Ltd is a boutique education centre that tailors solutions and learning needs in Mathematics, Physics, Chemistry, Biology and Economics, with additional activity streams in adult and continuing education.

They have four upmarket, mixed use education centres by end of 2014, targeting affluent customers who are quality sensitive, staffed by the best qualified, most motivated tutors in the business.

Programmes are free to try, backed up by money-back and results guarantees.

History:

• Founded 2010, first learning centre opened 2011
• Second centre opened 2011
• Third centre 2013
• Fourth centre (and our second in Bukit Timah) by end of 2014
• Projected ten centres by end of 2015

Issuer Summary:

• Date of Listing: November 5, 2014
• Amount:S$100,000
• Tenor:12 months
• Repayment Type:Equal Instalment
• Repayment Term:Monthly
• Target Interest Rate:18.00% p.a.
• Purpose:Business Expansion / Growth Capital

Use of funds:

• Development of additional education hubs during first quarter of 2015
• This will increase the usable space for learners and expand the number of educators available
• Will allow us to continue to grow the range of subjects on offer
• Expected to form a base to increase Smaths revenues substantially and free cash flows by over 100% within one year

Before investing, it is prudent to do our own due diligence to know the financial health of the company. For investment like this, which is similar to bond investing, there is always risk where the company goes bankrupt and default on their payments. In the case of SME investment, the bonds will have guarantors. For SMATHS's case, the guarantor of the bond is the Group Chief Executive of the company itself. 

Under Moolahsense platform, it has a section called MoolahCore, which shows the financial strength of the company. Here's a screenshot of it:

Click to enlarge

Under this section, you will see the turnover of the company, profitability, current ratio, debt/equity ratio, interest coverage ratio, cash flow from operations and the average cash balance of the company.

You can also ask any questions before investing, through an internal forum – MoolahPost. Moolahsense also organises info sessions for investors to meet the business owners personally for you to understand more before investing.

Investing in SMEs have its risk and thus the returns are higher than the average retail bonds out there. Investing in SMEs through Moolahsense allows you to reap an average of 11-12% p.a. on your investment. Most notes are only for 1 year period with some less than a year.

I have an account with Moolahsense and am looking out to invest part of my money into SMEs which I think is worth investing. You can check out their website and sign up for a free account to try out their crowdlending platform. Who knows you may just find a good company to invest in and at the same time get good returns on your money.

For local SMEs owners, this could be an interesting alternative financing option as well.

Click here to visit MoolahSense Website.

This article is written in collaboration with Moolahsense. All ideas portrayed are independent by SG Young Investment.

What Really Is Contentment?

Last week, many of you may have read a Straits Times article about Dr Lee Wei Ling on "More Than Life Than The Pursuit of Happiness". In the article, she said:

" Happiness, in whatever form one sees it, becomes more elusive the harder one tries to pursue it. That's why my personal aim is much more realistic: All I ask for is calmness and contentment. These at least are partially within my control."

In case you do not know, Dr Lee Wei Ling is the daughter of the late Mr Lee Kuan Yew, who's Singapore's first prime minister and minister mentor. Contentment is not easy to achieve in life. But I can see that most people who are contented are happy in life. They don't compare with others, they don't seek happiness from things that are superficial. There is this inner happiness and peace in those who are contented in life. Don't get me wrong. Contentment is not being lazy. It is also not an excuse to not improve or work hard.

Writing a financial blog is not about the pursue of money. It is the pursue of freedom. I have never set myself out to pursue money but its more about learning how to create a system where money grows so that it takes care of itself later on. This lets me have more time for the more important things in life such as spending time with my loved ones and living a fulfilling life that makes a difference. As the saying goes, why work for money if you can have money work for you? Contentment is part of the freedom equation. If we keep seeking more things or more money in life, there will never be an end. We will never achieve freedom even if we work all our lives if we live like this. It is not wrong to be rich but to be blinded by material things will leave us feeling empty.

Anyway, I saw another article written by Dr Lee Wei Ling which is so profound but yet easy to understand. What do we really seek in life? Read on and find out more...

Article written by Lee Wei Ling

In 2007, in an end-of-year message to the staff of the National Neuroscience Institute, I wrote:

‘Whilst boom time in the public sector is never as booming as in the private sector, let us not forget that boom time is eventually followed by slump time. Slump time in the public sector is always less painful compared to the private sector.’

Slump time has arrived with a bang.

While I worry about the poorer Singaporeans who will be hit hard, perhaps this recession has come at an opportune time for many of us. It will give us an incentive to reconsider our priorities in life.

Decades of the good life have made us soft. The wealthy especially, but also the middle class in Singapore, have had it so good for so long, what they once considered luxuries, they now think of as necessities.

A mobile phone, for instance, is now a statement about who you are, not just a piece of equipment for communication. Hence many people buy the latest model though their existing mobile phones are still in perfect working order.

A Mercedes-Benz is no longer adequate as a status symbol. For millionaires who wish to show the world they have taste, a Ferrari or a Porsche is deemed more appropriate.

The same attitude influences the choice of attire and accessories. I still find it hard to believe that there are people carrying handbags that cost more than thrice the monthly income of a bus driver, and many more times that of the foreign worker labouring in the hot sun, risking his life to construct luxury condominiums he will never have a chance to live in.

The media encourages and amplifies this ostentatious consumption. Perhaps it is good to encourage people to spend more because this will prevent the recession from getting worse. I am not an economist, but wasn’t that the root cause of the current crisis – Americans spending more than they could afford to?

I am not a particularly spiritual person. I don’t believe in the supernatural and I don’t think I have a soul that will survive my death. But as I view the crass materialism around me, I am reminded of what my mother once told me:  ‘Suffering and deprivation is good for the soul.’

My family is not poor, but we have been brought up to be frugal.. My parents and I live in the same house that my paternal grandparents and their children moved into after World War II in 1945. It is a big house by today’s standards, but it is simple – in fact, almost to the point of being shabby.

Those who see it for the first time are astonished that Minister Mentor Lee Kuan Yew’s home is so humble. But it is a comfortable house, a home we have got used to. Though it does look shabby compared to the new mansions on our street, we are not bothered by the comparison.

But I personally think the hard times will hold a timely lesson for many Singaporeans, especially those born after 1970 who have never lived through difficult times.

No matter how poor you are in Singapore , the authorities and social groups do try to ensure you have shelter and food. Nobody starves in Singapore ..

Many of those who are currently living in mansions and enjoying a luxurious lifestyle will probably still be able to do so, even if they might have to downgrade from wines costing $20,000 a bottle to $10,000 a bottle. They would hardly notice the difference.

Being wealthy is not a sin. It cannot be in a capitalist market economy. Enjoying the fruits of one’s own labour is one’s prerogative and I have no right to chastise those who choose to live luxuriously.

But if one is blinded by materialism, there would be no end to wanting and hankering. After the Ferrari, what next? An Aston Martin? After the Hermes Birkin handbag, what can one upgrade to?

Neither an Aston Martin nor an Hermes Birkin can make us truly happy or contented.. They are like dust, a fog obscuring the true mean ing of life, and can be blown away in the twinkling of an eye.

When the end approaches and we look back on our lives, will we regret the latest mobile phone or luxury car that we did not acquire? Or would we prefer to die at peace with ourselves, knowing that we have lived lives filled with love, friendship and goodwill, that we have helped some of our fellow voyagers along the way and that we have tried our best to leave this world a slightly better place than how we found it?

We know which is the correct choice – and it is within our power to make that choice.

In this new year, burdened as it is with the problems of the year that has just ended, let us again try to choose wisely.

To a considerable degree, our happiness is within our own control, and we should not follow the herd blindly.

The writer is director of Singapore’s National Neuroscience Institute. And also Lee Kuan Yew’s daughter…

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