The Beauty of OPM To Spice Up Life

I love Other People’s Money, otherwise known as OPM. So what is OPM?

OPM is most associated with finance, meaning the use of leverage or third party capital for investment purpose. It provides access to capital beyond one’s own means. Mortgages, loans and crowdfunding are examples of OPM, the use of someone else’s funds to generate financial returns.

While no one really knows who first coined the term ‘other people’s money’, Adam Smith was noted to have mentioned it in his book “Wealth of Nations” back in 1776. It was further expounded by Louis D. Brandeis in his harshly critical book “Other People’s Money and How the Bankers Use It” published in 1914. In more recent times, Robert Kiyosaki applauds OPM as a tool of the financially literate, enabling higher or even infinite return in some cases.

Having made use of OPM for my investment, especially for real estate purchases, I value its power and life-enhancing benefit when used wisely and appropriately. It has worked so well that I started applying it to other aspects of my life, in a modified way.

Whenever I want something that has not been budgeted for, like a new mobile phone or something frivolous like a pair of designer shoes or handbag, I set myself an investment target with the goal to generate the return to buy the item.

Let me showcase what I mean: I got infected by the buzz over Apple iPhone 12 upon return from Holland to Singapore in November 2020, after more than 10 months away. Singapore has always been amongst the first countries for Apple phone releases, drawing many die-hard foreign fans to Singapore each year. Singapore had just released the iPhone 12 series in late October 2020. Having read reviews about the new and improved features, I decided it was time to upgrade my iPhone 11 for the iPhone 12 Pro, which cost about S$1,500 for the 128GB version.

To make use of OPM, I will need to identify a suitable investment that can generate S$1,500. As the amount was not large and that I would like to have the phone as soon as possible, the modus operandi had to deliver the return rather quickly, ie within 3 to 4 months. My thinking then was to trade some stocks, seizing upon optimism of Covid vaccine and post-election euphoria of a new US president. There would be some volatility, which can translate to some opportunistic stock earnings.

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I value the power of OPM and its life-enhancing benefit 

when used wisely and appropriately.

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As the US currency was expected to weaken under an increasingly plausible Biden presidency (then) coupled with the cumbersome time difference between US and Singapore, I decided that the trade should be in the Singapore bourse SGX.

After weeding through my long list, I selected a relatively active stock that took a slight dip on 30 November – Yangzijiang (SGX: BS6). The counter already constituted approximately 5% of my portfolio. I bought additional 10,000 stocks at S$0.90 a piece. To afford the phone, my target sell price would be $1.05. With the entry executed and a target price set, the wait began with daily checks via my POEMs App – a share trading platform provided by Phillip Securities – accompanied by adrenaline rush in tandem with price fluctuations.

On 11 January 2021, the stock price started to spike and when it reached $1.055, I liquidated the position having reached my target price. Voilà, the net proceeds after deducting commission was enough for me to go shopping for my new phone. This is 1 recent instance on how I challenge myself to generate investment returns, in other words OPM, for things I desire. 

In addition to the feeling of having “earned” my purchase, it also gives added motivation to select and execute a good investment. With a goal in mind, the exit strategy becomes clearer and more satisfying upon successful execution. I liken it to a game of using ‘tools’ within my armour to get my ‘rewards’. In the strictest sense of the phrase, OPM requires the borrowing of 3rd party funds to generate returns from investment. I apply it somewhat differently by using my own funds to earn a profit (OPM) to buy what I like.

In my case, no loan was involved but the principle of using someone else’s money to make my acquisition is similar. The idea is to make others pay for things I want, and the satisfaction is intoxicating.

I grew up with sports throughout my formative childhood and youth years. I was very involved in both individual as well as team sports. To me, sports and games are appealing because:

• There is always a goal, be it score or time 
• Rules are clearly defined and communicated upfront
• Feedback or performance tracking is easy and straightforward
• An outcome always prevails, ie win, lose or draw

The comparable aspects being

 – Goal: a set target, as in the case above, an iPhone

– Rules: funds to be raised from an investment undertaking, within a certain timeline (up to 6 months for an iPhone would be acceptable). Without this additional time rule, I could also have raised funds from dividends which can take much longer. 

– Performance tracking: stock value is easily tracked providing instantaneous and accurate feedback.

– Outcome: a win means a new iPhone 12…yeah; a loss means making less than $1,500 in return or worse, loose a portion of my original $9,000 capital, both of which means no gratification, ie no iPhone.

Flushed from the success, my husband and I have set ourselves a new joint acquisition goal –  a motorboat that we can enjoy in the waterways.

Since shutting down our Singapore base, we will be spending a lot more time in Netherlands and have more visiting friends and relatives so a boat would be nice not just for ourselves but also for them. What is more Dutch than enjoying its landscape along the many meandering canals and waterways? Moreover, it is a nice goal to achieve together.

Coming from a rather successful bout of cryptocurrency trading, we have decided to use a combination of crypto and stock trading for the purchase. Simply thinking about this challenge brings on excitement and  thrill in me.

Deploying OPM in this way has been fun and rewarding for me. It is an effective way to supplement non-critical expenses and purchases, the ‘nice-to-have’ stuff, especially those that have not been budgeted for.

Go ahead and challenge yourself. Isn’t it refreshing that instead of digging into a piggy bank, that you can make use of investment knowledge to generate the return required to buy things you desire? Once you adopt this strategy, your mindset about money will change and you will start seeing investment in a fun and motivating way. 

“Life is a game, play it.”      ~ Mother Theresa

 

Game, set and hopefully match,

Savvy Maveric

 

Disclaimer: The views expressed here are drawn from my own experience and do not constitute financial advise in any way whatsoever. Nothing published here constitutes an investment recommendation, nor should any data or content be relied upon for any investment activities. It is strongly recommended that independent and thorough research is undertaken before making any financial decisions, including consulting a qualified professional.