Financial Planning for Beanie

Little Beanie in the bumbo chair, happily chewing her toys.

Firstly, I think I forgot to mention that I have passed the CFA (Chartered Financial Analyst) Level 3 exam back in June 2011! To think of it, I was almost 7 months pregnant with Beanie and with that stomach, I sat through a grueling 6 hours exam. My whole body was almost cramping with pain after sitting and scribbling non-stop for that 6 hours.

Thankfully, I passed! So technically, upon application and approval from the CFA Institute, I can then rightfully add the title of "CFA" in my name card. With that qualification, I hope to either negotiate for a higher pay or find a better paying job.

Then I quit my job to become a full-time mom. (0_0")

And after reading Ting's blog about the cost of foreign tertiary education for her sons, I started punching my calculator for the amount that I need to squirrel away for my Beanie's education fund. And the amount is no joke if I were to factor in inflation and the higher cost of living in the future.

So, I assume that Beanie can study at a local university and I aim to set aside $100,000, excluding Hub's contribution. Instead of an endowment plan or saving plan, I intend to invest in equities.

I will buy minimum one lot (1000 shares) of a Singapore blue-chip company for Beanie every year, and so long Singapore prospers, that blue chip should clock in decent capital gains, as well as cumulative dividend income in 18 years time.

Since this is Beanie's education fund, I must pick a stock that has very stable recurring profits to pay recurring dividends, and yet at the same time, has the potential for growth and capital gains.

I personally will pick SPH -> Singapore Press Holdings. Why? Because:

1) To invest in SPH is to invest in Singapore, ie: the country's population growth, and the government's commitment to make Singapore a vibrant city. Thus in turn will spur growth in retail, housing, F&B, cultural activities... etc, which will ultimately increase SPH's advertisements , its main source of income. SPH basically has a monopoly control in the mass media industry in Singapore. Even in times of recession, advertisements usually remain relatively stable, so SPH should remain profitable.

2) SPH owns Paragon and the newly completed Clementi Mall. Both malls are situated in excellent locations and enjoy very good traffic. I believe in time to come, SPH will buy or build another 1 or 2 shopping malls and ultimately sells these malls to a REIT (Real Estate Investment Trust) to cash out from its investments and hopefully declare a special dividend to its shareholders!

3) SPH is also a property developer, it's newest completed property: Sky@eleven was sold out. However, as this is a non-core unit, I will not be surprise if SPH eventually carve out its property development unit and list it as a subsidiary.

4) High dividend yield. SPH has been paying about $0.25 per share of dividends for the past few years, which translate to about 5-6% yield. Most endowment or saving plans only pay about 2-4% of annual yield, and without any potential for capital gains.

So, if I were to start investing in 1 lot of SPH per year for the next 18 years, assuming a modest annual gain of 4.5% (inclusive of dividends), my 18 lots should eventually net me $99,364.

And remember that Singapore does not tax capital gains nor dividend income. ;)

Current share price of SPH: $3.66. So, by saving about $300-$400 a month, I will be able to buy a lot of SPH after a year. Of course, as the share price increases, I will have to save more in order to buy 1 lot, however the dividend will help to offset the cost.

So hopefully SPH will eventually fund Beanie's education to Harvard! ;p