Investing in Thailand – ETFs

ETFs are well known to offer the easiest way to invest. The costs are low, they offer immediate diversification, and they don’t require too much research. If your brain is already occupied with too many things and you don’t want to be bothered with additional decisions, this is the obvious way to get started.

The stock market of Thailand has not missed that trend, and there are several ETFs available for local investors. However, compared with brokers that I use in Europe, the selection is pretty limited.

At the time of writing this article, there are exactly 11 ETFs registered with the SET. 8 of them are focused on different types of assets, companies and industries within the SET, 1 is for bonds, and then we have 1 for Gold as a commodity and only 1 that traces one foreign market: China.

You can find the full list of available ETFs right here:
https://www.set.or.th/set/etfstatistics.do?language=en&country=US

Personally I like ETFs and recommend them as an easy long-term-investment-solution. I have set up a small stock account for my daughter, mainly to have some kind of starter fund for her when she moves out into the world, and this account consists of 4 ETFs:

  • 1 x ETF that focuses on high-dividend stocks on the SET
  • 1 x ETF for the overall Thai market
  • 1 x ETF focusing on small and medium companies in Thailand
  • 1 x ETF focusing on China

This ETF account is performing better than the stock account that I set up for my wife. Well, as we know, it’s hard to beat the market. Her stock account is however focusing on creating a monthly dividend income stream. This target can’t be achieved with only ETFs in Thailand.

Investing in Thailand – DIF.BK

Some trends are in plain eyesight and yet often disregarded by investors. This is especially true for digital infrastructure. While we often assume that things like 3G, 4G, 5G, wi-fi, broadband access, etc. are already everywhere, we are only scratching the surface of what this industry is about to grow into. From industry 4.0 to smart cities. This is a market that should not be missed in any investors portfolio. And one such a stock in Thailand to add is DIF.

DIF is the shortcut for Digital Infrastructure Fund, and the company does pretty much what the name says. Putting money into relevant infrastructure projects. Or as they describe it on their website HERE:

Digital Telecommunications Infrastructure Fund (DIF) (Previous Name: TRUE Telecommunications Growth Infrastructure Fund (TRUEIF)) is Thailand’s first telecommunication infrastructure fund offering opportunity for everyone to invest in telecommunication infrastructure which experiences constant growth and therefore allows investors to enjoy recurring incomes while simultaneously helps developing the sharing of telecommunication infrastructure. 

The Fund has been established with a view to raise funds from investors via both domestic and international offerings. The funds raised from the offerings will be used to invest primarily in infrastructure businesses, particularly in telecommunications infrastructure assets that cover the entire country such as telecommunication tower, fiber optic cable, transmission equipment, broadband system and/or incomes generated from the businesses.

Units of the Fund has been listed and traded in the SET since December 27, 2013.

This gives you a broad overview, but to go a little more into detail and which areas specifically are concerned, the fund is getting involved in the following sectors:

  • Railway or Pipeline Transportation
  • Electrical Grid
  • Waterworks
  • Road, Expressway, or Concession Way
  • Airport or Airfield
  • Deep Sea Port
  • Telecommunications or Telecommunication-Related Infrastructure and Communications
  • Alternative Energy
  • Water Management/ Irrigation
  • Natural-disaster prevention system including the alert and management systems to mitigate the intensity of such natural disaster
  • Waste Management

As we know, most of these areas in Thailand are under strict control and funding by the government, so the income is pretty reliable and the investment yield is high. At the time of writing these lines, the dividend yield is 8.35%.

Another cherry on top: This is one of the few stocks in Thailand that is paying a quarterly dividend. Every March, June, September and December this reliable dividend is being transferred to your account, and as we experienced over the last 2 years, it’s COVID-resistant.

A solid pick for passive income and hopefully another piece of the puzzle to reach financial independence.

The Four D’s

I like to plan things in my life. I meticulously planned my career. I have a work-out routine and a work-out plan. I like to plan my daily activities for each week at least one week ahead. And I am extensively planning my finances. But no matter how good the plan is, there is always a chance that something unexpected happens, something that will throw your plans into a limbo. That’s just how it is. There is always something that can be difficult to be taken into account.

The four Ds refer to exactly these kind of circumstances, and while they are hard to plan, they are so frequent that the term “the four Ds” became financial jargon among insurers and financial advisors. These unexpected events more than often create uncertainty in our lives, and effect not only our physical and mental health, but also our finances in a dramatic way. These events are:

  • Disease
  • Divorce
  • Disaster
  • Death

Each of these terms is pretty much self-explanatory, but nevertheless let me share a few words on each point either way.

Disease will obviously seldom refer to a cold, a flu, or a fever. But it will refer to an unexpected development like the need for a surgery, a diagnosis with a severe illness like cancer or diabetes. It might also not be directly concerned with you, but with someone you care and are or feel responsible for.

Divorce is further down the line, but given that roughly some 50% of all marriages fail, it’s a pretty common event that can and will have dramatic consequences on one’s financial situation.

Disaster used to be less common, but with all the floods and fires across the globe, earth quakes, tsunamis and who knows what else is about to happen in the next months and years to come, it’s a very valid one. A disaster can literally demolish an entire life of financial investments, especially for those who focused on real estate and other physical forms of storage of value.

Death is the last one, and while even one’s own death is not for free, I’d rather consider this to be an event concerned to people who are close to us. Expenses for a funeral might come hand in hand with the need for additional financial support to someone you care about. In some instances with your direct family, you might also not inherit what you expect. It can happen that instead of adding assets to your net value calculation you get surprised with additional leverage (debt/loans) that need to be balanced and that will fall under your responsibility.

Billions of people throughout many generations have had experience with each of those Ds, and while it’s impossible to know when one of them will hit you, it certainly is possible to prepare for each one of them.

Take the time to think about this.
It will be time well spent.

Is it FIRE or just FI

This pandemic just keeps dragging on, and it’s very interesting to observe how people are handling it all across the globe. When things got started, Asia was on the forefront of effective handling of the pandemic. Vietnam, Thailand, Korea, Japan, Singapore. We managed here to keep infections and deaths on the low, as people were quick to adapt to protective measures and limitations on economic activity. Europe and the US were lagging behind, and there were frequent discussions on what the west can learn from the east in the future.

But now the tides have turned. While Europe and the US is on track to full recovery, here in Thailand I feel like we are back to where it all started. Lockdowns, economic restrictions. It’s like we got stuck somewhere along the way, and can’t find a way to move forward.

This is of course mainly due to the lack of efficient vaccines. Herd immunity is apparently not an option with this virus now circulating in the form of several diverse mutations, and our natural immune system not offering the long-term protection that would be required to keep infections at bay. To top it off, the SinoVac and SinoPharm vaccines aren’t working well, and the local production of AstraZenecca has stalled for whatever reason.

FIRE vs. FI

But let me stop here before I get political. My point is, that since this pandemic keeps dragging on and I am spending more time at home than usual, I realized a few things. One of those things is that I really don’t want to retire any soon. I like to work, and I miss having more action in my hotels, in my office, and spending more time with my guests. I like spending time with people, and the idea of retiring early and spending much more time on non-productive things feels a little less desirable after more than one year of Covid.

I know that there are thousands of people who don’t want to work at all. People who don’t want to report to anyone, to not depend on anyone, and to not being micro-managed by anyone. I am also fairly often at odds with myself over all these work-necessities, which make me sometimes feel not free, dependent, and all the negative notions that accompany these points.

But retiring early… honestly right now, it doesn’t seem for me like the right thing to do. I want to work. I might get out of the hotel business and do something else, become a consultant or stock analyst, turn to freelancing or whatever. But I am pretty sure that I will keep working for a long time to come.

So my goal changes from FIRE (Financial Independence Retire Early) to FI (Financial Independence).

It may not sound like much, but there is a significant point to it: Since I will keep working for a long time to come, I can be a little less frugal. I don’t need to maximize my savings all the time, because with a continuous stream of income from work, I have significantly more time to reach retirement. Striving “only” for financial independence first will give me the feeling of security and freedom that I want and need, while not thinking too much about retirement will take some stress and pressure out of the equation.

What’s the right thing for you?

Being financially independent offers a lot of options to do things that you actually want to do. If you don’t worry anymore about a low income, then you can start a new career, change your field of expertise or interest. Hell, you could even do an internship again in your 40s or 50s. Why not? It can open up some very exciting opportunities for you to learn more about the world, to pursue dreams which you set aside when you were younger due to financial concerns, or simply to just gain new perspectives. For me, this is absolutely “good enough”.

But of course, this means that hanging out on the beach all day and sipping Jim Beams with Coke will have to wait. That’s probably for the better anyway.

Cutting through the noise

We live in a time where information is abundant. The internet has become this fantastic tool, that gives us the opportunity to connect and access information all around the globe. We can read blogs (like this one), and we can gain access to newspaper articles and magazines. We can connect to professional writers and to amateurs. To complete strangers writing on some Reddit boards, or to follow the thoughts of such successful personalities like Warren Buffett.

The amount of information on the net is amazing. But it also creates a lot of noise. We can’t trust everything we read. It’s often hard to differentiate a fact from an opinion. Numbers can be skewed and often require to be verified. And we never truly know the agenda of anyone who puts things out there for others to read. Finding reliable sources is more challenging than ever.

Finding the right information

I spent a lot of time looking for informative sites, that can feed me investment ideas, offer some basic stock analysis, and that have enough followers to know that they actually have an impact when they write something. And (actually not surprisingly) I ended up with a slim selection of mostly professional analysts and journalists.

All this talk about mainstream media and fake news is just that. Talk. But fact is that people who actually work in and for the business still remain the most credible sources out there. Because they learned that stuff. They know how to gather information. They know how to ask questions. They know when something doesn’t “smell” right, and they have the means to dig deeper. They are being paid to do that.

The WIRECARD scandal in Germany would have been on a much smaller scale, if people were trusting more The Financial Times than some blogs and forums which were hyping the stock. Reading the Financial Times is also seriously more educating in the field of finance, even though I don’t like their political stance. The New York Times can give us more accurate ideas about what’s happening in the world than any Facebook forum. And a forum for professional investors like Seeking Alpha can give us much more valuable information than Reddit. I also like to regularly take a look at the finance section of Yahoo! (https://finance.yahoo.com) which is incredibly informative and the last piece of Yahoo! that still has some value to me and to many professional investors.

Verifying is key

But no matter where you do your due diligence, I still recommend to go a step further and to trying to verify the information you read. Are the numbers of the company that you want to invest in really matching up? Go to their investor relations website and download their annual report. Is the new technology they are touting really so revolutionary? Google it and read about it from some sceptic voices. It’s good to know alternatives and other perspectives, and these might actually lead you to other, better ideas.

About being independent

I have been working now for about 27 years. I started in 1994 when I was 14. This was the legally allowed minimum age in Germany when teens were allowed to have part-time jobs at that time. And since I started, I never stopped.

Filling in shelves in supermarkets, fixing computers, tutoring math, working as a part-time instructor at our local martial arts gym, doing translations in German, Polish and Korean, teaching German and English. And when times got rough, I was working on construction sites, painting walls and fences or digging holes around houses. I also did two years of a vocational training in a bank and got certified as a martial arts stuntman. The day never seemed long enough to follow up on all my commitments, which continued throughout high school, university, and until I finally settled on the hotel industry.

When I started working in hotels in 2008 I was already 28 years old and just about to finish my Bachelor’s degree. I started with an internship, and then became a full-time employee.

I loved the job and the industry. Traveling the world, meeting people from all walks of life, and being paid to do that. I went to Korea, Japan, China, Scotland, back to Germany and finally to Thailand. I didn’t mind working 12-14 hours a day, often 6 to 7 days a week. I didn’t mind working when others had holidays, missing Christmas and New Years events. And I didn’t mind the low payment. All I wanted was to travel to exotic places and to be meeting people, learning about their stories, and solving the problems they had during their stays in “my” hotel.

This attitude and flexibility allowed me to promote quickly. By 2014 I was already 2nd in charge of a large hotel operation, and by 2017 I became a General Manager. Starting late and after only a little more than 8 years on the job.

Things are sometimes not what they seem

Becoming a General Manager was my dream. I wanted to be fully in charge. To make all the decisions. To be the one who can really make a difference and implement all the things that would make my hotel great.

But after becoming a General Manager, I became quickly disillusioned. Between the actual guest requests, the requirements of hotel owners, the corporate office, and the whims of the companies vice presidents and executives for operations, sales, marketing, finance, and all the other people involved, there is actually very little room to navigate.

I enjoyed being a GM for a very short time. Yes, the salary and benefits were finally coming closer to the actual effort, but I still didn’t feel to have the full freedom to do what I wanted and how I wanted. I still had to justify myself, had to restrain and to adjust my processes and ideas to what everyone else wanted. I used to think that the General Manager of the hotel has all the power to make a hotel truly great, but the reality is that a General Manager is barely performing a balancing act, holding up a house of cards that is constantly being pulled by different people from different directions, each of them with different agendas and varied interests. The job is truly not what I expected it to be.

Time to get real

That’s when I came to realize, that no matter how much I would push myself, how much effort I would put into my job, how much time I would dedicate trying to appease everyone who is higher in rank, I would never get to the point where I would consider myself to be free. Even IF I would pull off the impossible and become CEO of a hotel company, between shareholders, the board of directors, and majority stakeholders, I still wouldn’t be free to do things the way I want.

So there is only one solution. I need to do what I can to become financially independent, and then, only then, I will have the freedom to do things the way I want.

Starting my own business will be another key step, but given my current responsibilities towards my family, I need to be cautious. Every successful entrepreneur tells you how liberating it is to be your own boss, but having worked in a bank, I also know that more than 80% of businesses fail in the first year of operations. I can’t put my family through that.

So, I am working diligently, saving and investing. And in about 4 years from now I should get to the point that I can give real independence another try. I will be 45 by then. Maybe a little late. But the game is not over at half-time.

About Real Estate

It is well documented, that purchasing a house or a condo is a major contribution to building wealth. It’s a large and serious investment that requires commitment over a long period of time (typically anywhere between 10-30 years), and one which offers several benefits, financially and personally. For most people this is also what they would consider a “safe” investment which they feel comfortable with.

Phrases like “real estate never looses value”, or “when all things go down, I will still have my property” are pretty common, especially when it comes to discussions about whether you should invest in real estate, or in stocks.

It’s more complicated than that

I have diversified my investments across several segments, including real estate. However I have not purchased a house or condo. I have bought land. 1,2 ha of agricultural land, and another 0,54 ha of land that is destined for future housing. The agricultural land is currently being leased out to a neighbor of my parents, with a very simple arrangement that doesn’t really provide me any money, but instead supports my parents with agricultural goods for daily use (think of potatoes, lettuce, cucumbers, onions, etc.), and it covers any involved taxes for that land. The other 0,54 ha I bought 6 years ago on an auction. It’s a piece of land right across the land of my parents, and I bought it with the idea of building a vacation home out there.

After a couple of years I realized that this vacation home will never happen, so I decided to evaluate the market and to see if I can sell that land. Lucky enough, prices have increased greatly and I expect to come out of this investment with a good deal.

What largely contributed to the price increase is the great location of the village, the diversified and international folks there (we got people from Poland, Germany, Switzerland, France, and Italy) and the fact that people who live there care about their properties and their houses, contributing to a good look and comfortable atmosphere of the entire village. The next small town is only 5 km away, the next larger city only 30 km, and if you want to go international: It’s only some 120 km to Berlin in Germany. Great for a weekend trip.

All this contributes greatly to the location, but there are tons of other examples where things can go very wrong. Mismanagement of land, houses and condos can significantly contribute to a depreciation in value. Having the “wrong” neighbors can diminish the reputation of the location and drive prices down, rather than up. And building “on-the-cheap” can create early deterioration of look and shape of a house or condo, requiring additional investments not only from yourself, but also from all those around you in order for a location to gain value.

When things go wrong, real estate can turn out to be not the dream package that your parents were always talking about. There are several and significant risks involved, which are largely out of your control. Putting money into a piece of land, a house, or a condo, is surely not risk-free and real estate doesn’t always gain in value.

Do your research

Similarly with stocks, you need to do some research before you put money into this sector. Check and evaluate the location, visit the place, say hello to some neighbors. If it’s a country-side village, take a look at the condition of other houses nearby, the roads, bridges, public transport, water supply and electricity. Where is the next restaurant? How are small businesses doing there? Is it a family or a single place? Is there a school? A church? Wha’ts the median age of the population, and where is the next doctor or hospital?

Tick off some of these boxes, do the due diligence, and see your odds of putting your money into the right place increasing dramatically. Of course there is still no guarantee, but there never is. After all, it’s all not about guaranteeing anything, but only about increasing the odds to do the right thing.

Oh, and don’t get into the discussion whether stocks or real estate is better. It’s pointless. If you can, just do both.

About paying taxes in Thailand

I got to admit, I don’t like to talk about taxes. Depending on where you live it is either a complicated, or very complicated topic with lots of things to know, to consider, and plenty of pitfalls. But of course, this is only the case because taxes are so important. Taxes can make all the difference when it comes to building wealth, and like it or not, it’s worth spending some time to learn about the challenges and opportunities that come with the tax code in your country.

I am living in Thailand and the tax code here is rather simple. For investors, it is a paradise. There is no capital gains tax, meaning that no matter when and how much I profit from trading equities, there are no taxes due at any point. Not today, nor tomorrow. There is a withholding tax on dividends in the acceptable amount of 10%. There are no loopholes or exceptions to avoid it, so the bank will deduct it automatically upon pay-out. There is no need to declare or report anything when you do your tax declaration. Simple and fast.

But there are hidden opportunities

I am mostly trading regular equities and ETFs and since the regulations are so easy, the tax part was never really on my radar. But I certainly should have invested more time to learn about it much earlier on.

I have learned by now that the government is actually actively supporting investors in building wealth through retirement funds. As an employee with regular income in Thailand, I can invest in mutual funds designated for my retirement, and receive significant tax benefits for doing that.

The so-called RMFs (Retirement Mutual Funds) can invest in either foreign or domestic equities or funds, and need to be hold for a minimum of 5 years before withdrawal. From your total annual investment, up to THB 500.000 per year can be deducted from your total taxable income. The tax code for personal income in Thailand in 2021 looks like this:

Taxable Income
(baht)
Tax Rate
(%)
0-150,000Exempt
more than 150,000 but less than 300,0005
more than 300,000 but less than 500,00010
more than 500,000 but less than 750,00015
more than 750,000 but less than 1,000,00020
more than 1,000,000 but less than 2,000,00025
more than 2,000,000 but less than 4,000,00030
Over 4,000,00035

Now here is how this works. Let’s say you have an income of THB 2,600,000 per year.
You will then pay:

THB 0 – on the first THB 150,000 (total 150,000)
THB 7,500 (5%) – on the next THB 150,000 (total 300,000)
THB 20,000 (10%) – on the next THB 200,000 (total 500,000)
THB 37,500 (15%) – on the next THB 250,000 (total 750,000)
THB 50,000 (20%) – on the next THB 250,000 (total 1,000,000)
THB 250,000 (25%) – on the next THB 1,000,000 (total 2,000,000) and finally
THB 180,000 (30%) – on the last THB 600,000 (total 2,600,000).

Your total tax will be therefore: THB 545,000 or 20,96%.

If you now max out your RMF contribution up to THB 500,000, you can deduct this investment from your total taxable income. This would reduce the total amount from THB 2,600,000 to only THB 2,100,000. Therefore your tax obligations for the last 30% bracket would also shrink, from THB 180,000 down to only THB 30,000. After your tax declaration you will get a refund of THB 150,000.

So on the one hand you get a tax benefit. But as an investor, I look at it another way: I receive effectively a guaranteed 30% annual return on my investment.

Do some reading

Every country has its own rules and regulations, but since we are all part of the same system, there are similar opportunities everywhere. Whether it’s the 401k in the US, the RMF in Thailand, or the “Arbeitnehmersparzulage” in Germany. Chances are that the tax code in your country offers you opportunities to boost your savings and investments. These can be quite significant and strongly support you in reaching your financial goals. So don’t be lazy. Do some reading, educate yourself, and grab the opportunities which have been designed for you to get the most out of the system.

Investing in Space – Part 2

It’s already May. In just another month we will have already finished the first half of 2021. I am kind of happy that time is moving so fast now, because this whole COVID situation just doesn’t seem to end.

But COVID or not, the world doesn’t stop turning and one of the most exciting investment frontiers is gaining more traction. As I wrote last year about investing in space, today I’d like to share the updated infographic from one of the most devoted space investment specialists: Seraphim.

Not all of these companies are publicly listed. Some are even still simple startups. But this smart overview can give you more ideas how vastly diversified this sector already is, and what opportunities lie ahead of investors who are willing now to take the first steps.

By the way, for those who don’t want to research too much but are eager to invest in space, there is an ETF available on the US market. It’s called Procure Space ETF and the trading shortcut is pretty spot on: UFO. Another option is the ARK Space Exploration & Innovation ETF (Shortcut: ARKX).

Investing in 2021

April is coming to an end, which means that a third of the year has already passed. In as little as two more months we will be through the first half of the year. What started out more on the optimistic side is now back to where we were almost a year ago. At least here in Thailand.

But you wouldn’t know that if you would pay attention only to the stock market. Most company shares have recovered, and even grown beyond their pre-pandemic levels.

The explanation for this is multi-faceted, but given what I can see from my own company and competitors, it’s a mixture of pre-mature optimism, and the now all-too popular FOMO. Fear Of Missing Out.

Optimism

Most investors I know are optimists. Most tend to be a little greedy. And, unfortunately, many are trying to time the market. When the crisis started and markets fell by 30% or more, many saw a great buying opportunity. Myself included. The expectation was that a pandemic can’t last that long. Many of us didn’t actually believe it to be real. Or at least not ‘that’ bad.

Plenty of us tried to estimate the lowest possible market point, and then started to get back on the train. The more people started buying, the quicker shares started to stabilize, until demand overtook supply, and prices started to rise. Then FOMO kicked in. People noted the turning trend, and scared of missing out joined in the purchase frenzy. This is how we got here.

So far, this optimism has served us well, but the long-term success will depend on how things play out in the next 2-3 months. The US, Europe, and leading economies of Asia need to show that they can control the situation without sacrificing their economies. Otherwise optimism might turn into disappointment, and drag the market down once again.

What’s the plan?

For the young investor who is not in any financial distress, the simple strategy is to just hold your ground. It’s impossible to predict what and how it will happen, but for the long-term focused investor it doesn’t really matter that much. Stay your ground. When shares go up, enjoy. When they go down again, look out for the next buying opportunity.

For those who might have cash issues, this may be the time to trim some positions for shares which reached their all-time highs. Put some cash aside, re-fill your emergency fund, and be patient. You will sleep better at night.