Savings Needed For My Lifestyle

[Heng]

earlier someone suggested starting your own business. I invested 45k THB(inventory and rights to the rental contract) in a very small (15sqm) rented space outside a convenience store with a lot of traffic, rent 4,500/month.

My GF and her brother in law sell cheap beachware from the space which is located very near the beach. The GF does most of the purchasing in BKK and sends it on the bus to the shop. The brother in law runs the shop. They average a net profit of more than 1,000/day. The deal was that I would get 10% of net profit to pay off my investment. Start was December 2005 and I was paid back in full 12 months later incl. 10% interest. It provides both my GF and her immediate family with an income source sufficient for their needs. They have even expanded/upgraded their house upcountry with another two bedrooms, new kitchen, bathrooms etc with money earned from the shop. ( and now are ofcourse thinking/dreaming about a car!!??!!)

The point I am trying to make is that for very little money/investment and with almost no risk, it is fairly easy to have an income greater than that of the average english teacher. I am seriously considering setting up a business myself here. What kept me from doing it sofar is that I am much too comfortable with my "rat race" job and income here in Thailand and abroad.

Siam American: I would say go for it ASAP, but instead of getting into english teaching, I would start a small business and take it from there. Good luck.

Going entrepreneurial isn't for everyone. There's most certainly risk to doing so it's called market risk (and it'd be a mistake to assume that this doesn't exist here... or worse, to overestimate one's ability to overcome local market risk). And when compared to a lot of the investments mentioned previously, market risk compared to institutional risk is a no brainer. Most looking to maintain and build on their current financial foundation at a conservative rate would choose institutional risk (CDs, fixed accounts, etc.). Nothing wrong with mixing in market risk, in fact it's wise to take some risk on... but betting it all on the market -whether it's the Nasdaq or Chatuchak market- is no better than gambling, no matter how "good" you think you are at it.

That said, I built my revenue streams here in the LOS up from just a few thousand US$ just as you did. But before I got my first 'working business model' (exporting pet fish/aquatic plants/cut orchids), I also crashed and burned 3-4 businesses first.... and that's despite the fact that I've never had to borrow a cent or satang for any of these businesses and have never had to pay a single month's rent (since I owned the properties I was doing business in to begin with)... given an advantage that most can't count on. I have watched us go from nothing to making maybe $100-$200 a day to a few $k a day in profit, for a good run of 7-8 years, and then back down again to barely making $400-500 a day in the present, even though we are much better at what we do than before, have a brand new fleet of trucks (instead of old pickups with turtle backs in the old days), and a full spectrum of time / cost competitive suppliers. Ah, but then the Baht took a dive. Unfortunately for many, they ride their businesses all the way up and all the way back down... still paying rent, not diversifying, and worse yet taking on debt along the way. So goes the market.

Now my bread and butter is 4% (and a bit) fixed accounts + the revenue from my investments in the family pawn shops (loaned out at 12% a year; secured with collateral). Now the gamblers out there will tell you that at 4%, you're not beating inflation. Full respect, and yes that's important benchmark for many, but also considering that the vast majority of folks in the middle classes (much less the vast majority of people on the planet) have a negative savings rate, I'd say they are skipping a step in there somewhere.

Hard to make sense out out of this post. You mention that you started with a few thousand and went bust 3 or 4 times before finding the right model. In your next sentence you tell us you never paid rent and owned the properties you did business in. How could you be broke and at the same time own the properties?

As for the stock market being a gamble, so is getting out of bed each morning.

hi there SA (are you also Thai from the US? I am too),

I started the pet fish/plant/flower export thing with a few k. My businesses BEFORE that were the ones that didn't work. And I never said I was ever broke. I said my previous business ventures failed (these were all in college). Cash allocated towards business X, business X fails, all other assets intact. Kind of like crashing and burning on a solid marble foundation or having one's front yard lemonade stand going out of business. One doesn't have to be literally skint to learn the same lessons. My export thing I actually started from funds raised from teaching English of all things. In my family, whatever assets are allocated to a family member are indeed yours as inheritance, but don't expect any internal loans or cash advances, and as a rule of thumb... never a borrower... but a lender @ market rate interest be.

Nothing wrong with being in the stock market. That's exactly like getting out of bed, perhaps taking a nap or a nooner in the afternoon, and then getting in bed at night. Holding long but keeping an eye on things.

What I feel is gambling is jumping in and out of it or relying on it for one's sole source of income (given, plenty of folks are doing great doing just that). That's getting in and out of bed every 5-10 minutes, sometimes naked, sometimes with your clothes on, while eating, etc.

Edited May 17, 2007 by Heng

[dave111223]

I am confused. It sounds like you have enough to retire a whole village, not just yourself. That amount is an enormous amount here. Are you and other people really concerned it is not enough????? I am no economic wiz, but I really do think that is way way way enough already.

Paul

Totally agreed; can't believe it took two pages of posts quibbling about being .5% too optomistic on the XXX exchange before someone hit the nail on the head.

If you are the kind of person who's happy with a $7,000 car (and there is nothing wrong with that). Then 15,000,000 THB is set for life over here.

[blizzard]

did the guy say he made thousands a day for 7 or 8 years?

and now he has interests in a pawn shop. jesus, what happened to all the money you made.

with that much money the only thing you have to worry about is if usa go broke.

Edited May 17, 2007 by blizzard

[Heng]

did the guy say he made thousands a day for 7 or 8 years?

and now he has interests in a pawn shop. jesus, what happened to all the money you made.

with that much money the only thing you have to worry about is if usa go broke.

Actually my primary concerns would be if HSBC (HK), UOB (Singapore), and to a lesser extent the local big three banks went "broke." As to what happened to it: it's loaned out, in property, in fixed accounts, and also in a few hundred 'to scale' cash paper mache sculptures.

But anyway, the point was that it's (IMO) not a good idea for just anyone (especially those with limited savings, those who have only lived here for a short period of time, whose visa status is murky, etc.) to "just start a business." "Just start a business in Thailand" is really just another cousin of "I think I'll buy a bar in Thailand." I am mentioning it because the poster was giving "not much risk" as a reason to do so.

[samran]

That's getting in and out of bed every 5-10 minutes, sometimes naked, sometimes with your clothes on, while eating, etc.

sounds like a typical weekend at home before I got married and had kids there, heng.

[Heng]

That's getting in and out of bed every 5-10 minutes, sometimes naked, sometimes with your clothes on, while eating, etc.

sounds like a typical weekend at home before I got married and had kids there, heng.

Or after kids (crib in the master bedroom).

[siamamerican]

Youngkiwi; I do as such not disagree that Siamamerican can be in growth stocks - but he should ALSO be in value, small caps, international, reits, commodities and even bonds in Siamamericans case.

Focusing on the growth/value discussion first: Growth stocks have not done better than value stocks in the long run - average returns are about the same - so why not reduce volatility by holding BOTH growth and value? And in all sizes and geographical(giving added currency diversification) areas too.

Adding OTHER asset classes like reits, commodities Etc. having equity like (historical) returns also makes good sense - again; giving less overall portfolio volatility and re-balancing bonus.

Finally; your situation is NOT the same as Siamamerican's. He NEEDS some income from his nest egg as he is sick of the "hamster-wheel"-work style, and have reached a nest egg already having the potential to cover all his needs. I.e. I fully agree that you can take on much more risk - being willing to work the big job for much longer - and in fact; a big drop (say 50%) in overall stock prices would be GOOD for you as you can buy "on sale", while Siamamerican would not have the new capital to buy "on sale".

THis is why for HIM it might make sense to have a part on bonds/fixed income/CDs paying enough to cover all base-budget costs. For YOU that would not make much sense, except maybe 10% or so for re-balancing bonus.

Cheers!

I agree that I shouldn't have all my money in growth stocks. Currently all my investments are in US and international stocks of all types(growth, large & small cap...). When I make the move to Thailand, I plan on still investing most of my money in stocks, but having enough in CDs and cash to cover a few years basic living costs. This would allow me to ride-out most market drops without selling my stocks to cover basic living costs.

If I start 2008 with $400k in stocks and $50k in cash equivalents, I should be set-up comfortably when I'm 60 yrs old. No guaranty, but historical market return averages are on my side. Even if I use an 8% return on stocks, which is substantially lower than the 12.74% the S&P has returned over the last 30 years with reinvesting dividends.

You mentioned investing in other asset classes. This is probably great advise, but my lack of knowledge of investments vehicles has forced me to keep it simple. When I'm out of the "hamster wheel" work situation, I'll have the time to strengthen my investment acumen.

Thanks for the well thought-out post.

[PCA]

As for the stock market being a gamble, so is getting out of bed each morning.

The stock market is a losing game for the small private investors in the long run and it always was. The problem is that you are buying too much of an illusion by looking back to historical price developments. Millions of stocks and thousands of funds come and go like the people participating in the markets. It is a permanent washout and ripping off idiots who have absolutely no idea about the markets but start smelling a fast buck and get trapped in a casino. You dont know when to get in, you dont know when to get out, you dont have a plan and so you gonna blow your money away like 95% of the rest. One leaves and two come.

In your case I would go to a private bank which is specialized in currencies and global government bonds. They select investment opportunities (3 month up to a few years) based on economic fundamentals + seasonl currency fluctuations. You can expect a return of 10-30% a year.

There is one bank in Denmark (Jyske) and they are the best worldwide. Another one is the Everbank in USA which you would probably like to avoid due to taxation issues.

[siamamerican]

As for the stock market being a gamble, so is getting out of bed each morning.

The stock market is a losing game for the small private investors in the long run and it always was. The problem is that you are buying too much of an illusion by looking back to historical price developments. Millions of stocks and thousands of funds come and go like the people participating in the markets. It is a permanent washout and ripping off idiots who have absolutely no idea about the markets but start smelling a fast buck and get trapped in a casino. You dont know when to get in, you dont know when to get out, you dont have a plan and so you gonna blow your money away like 95% of the rest. One leaves and two come.

In your case I would go to a private bank which is specialized in currencies and global government bonds. They select investment opportunities (3 month up to a few years) based on economic fundamentals + seasonl currency fluctuations. You can expect a return of 10-30% a year.

There is one bank in Denmark (Jyske) and they are the best worldwide. Another one is the Everbank in USA which you would probably like to avoid due to taxation issues.

Wow, I assume this post is partly in jest, but I'll respond.

Private banks have some great products and Everbank has had some nice returns the last few years. Many of their products have benefited from the dollars decline. They also have some great products that guarantee returns over specified periods of time.

In the longterm, I still think individual stock market investors returns will beat most private bank products that aren't tied to world equity markets. You seem to think most stock market investors are idiots that try to time the market. For those that successfully time the markets - more power to them. Myself and many other investors don't attempt to time the market and almost always are rewarded over the longterm(10-20 yrs).

Another benefit of not timing the market is the small tax bill. In the US, you only pay taxes on realized gains(gains when the stock is sold). In 2005 I paid nothing in taxes and less than $1000 in 2006. I'm currently in the highest tax bracket, but when I move to Thailand, I'll probably be in the lowest tax bracket. Most years I'll not have to pay any taxes. Tax consequences are minimal for US ex pats that don't have millions in the market or jobs with high earnings. I can only hope that my portfolio grows to the point where taxes are an issue.

For now, I'll keep most of my money in stocks, but after reading this post and doing some research, private banks do have some interesting products. Some of the no risk Everbank products would make it easier to sleep during stock market fluctuations.

[backflip]

"In your case I would go to a private bank which is specialized in currencies and global government bonds...You can expect a return of 10-30% a year."

A list, please, of government bonds that return 30% per year. Thanks!

[PeaceBlondie]

siamamerican, the OP, asked me to respond to his post #110 in this topic. My answer to him is:

I assume you were right and I was wrong. In fact, your reply humbled me enough that I stopped even looking at the topic. Since you asked:

I used Yahoo Finance, and should have known it didn't include dividends. In fact, I've been in a European social index fund for the last six months, and the return shown on Yahoo of 16% does not include a 2% dividend.

I was amazed at your numbers, frankly. I just didn't think that many S&P500 companies paid that many dividends.

I accept your inflation data being lower than what I was thinking of without having a precise reference. However, I do think there's too much political pressure on the Dept. of Commerce statisticians, to under-estimate the cost of living, and the real figures are a bit higher. I thought we were only quibbling over fractions of a percent in either case, but we probably aren't. Of course, each country's inflation rate is different, and so is its degree of accuracy.

Back to the basics of long term investment strategy for eventual retirement: one incredibly important strategy between ages 25 and retirement, is to SAVE TOO MUCH. Save more than you think you need to save. Live on 40% of your take-home pay, or have your employer deduct all kinds of funds into pension, profit sharing, 401(k) and IRA programs, etc. The only way I retired at age 56 was that for much of my final 20 years, my employer and I were putting away more than 20% of my nominal salary toward my retirement. I raised six kids, worked for half the salary that a lawyer or CPA would earn, and still made it to Thailand.

[desktop]

At the bottom of this post is my 35 year plan. I'm currently 39 years old and in good heath. Do you think the plan makes sense?

etc etc.

You are 39 now,in 35 years you'll be 74. Or maybe it's your 35 year plan from when you started working? 22 + 35 = 57. I moved here at 58. Have lived here (Pattaya) for 5 years now. I keep track of monthly expenses, so far averages 100-120,000 baht/month which

excludes vehicle purchases. Rented for 1st 3 years, now own. No change in spending after ownership. Have a live-in Thai gal. Live somewhere near upper middle (I think).

I agree with other poster about 8% investment return being a little high if you want to invest in quality safe/secure stock.

Signed, Beenthere Donethat.

[Naam]

"In your case I would go to a private bank which is specialized in currencies and global government bonds...You can expect a return of 10-30% a year."

A list, please, of government bonds that return 30% per year. Thanks!

i am interested too

[PCA]

"In your case I would go to a private bank which is specialized in currencies and global government bonds...You can expect a return of 10-30% a year."

A list, please, of government bonds that return 30% per year. Thanks!

i am interested too

Starting a question with cutting out one essential point of my initial message shows already a lack of interest.

Though I know your motivation for this, anyway there are others reading so here we go.

It is not the yield in government bonds what makes the performance but the move in the currencies be it based on seasonality, economic or political situations or simply corellation studies in combination with the yield.

The pros are using that studies since decades and invest there accordingly. So you want to have an attractive bond yield filtered with a confirming move in the underlying currency. You have to stay in the bonds depending on maturity starting from 3 months. The specialists for example at the banks I mentioned are offering during the time you are invested in the bonds a hedge for the risk part of the currency in case both investments (and they are 2) dont get along like expected. They have various ways and basket models for doing that.

Looking for 30% yield bonds you might find them but with an immense currency risk and they are not the ones to look for. I said between 10 and 30% performance a year. So put your glittering bank brochures in the trash and either become a specialist or let one work for you.