Sunday, 27 November 2016

Getting ready for year end

If it's not obvious by now, the number of posts each month is dropping significantly. This is due to the workload at my job getting heavier as I start to integrate into the team. I have much less time and energy to devote to the pursuits of my non-core personal interests such as blogging.

As for core personal interests such as spending time with my wife, family & friends and exercising, I continue to make the effort to do so on weekday nights and especially during the weekend. Which results in me being less engaged with this blog as I try to achieve some level of balance between all these various aspects of my life.

But this is me trying and I hope to get a better handle on things going forward. Anyway, the year end is coming and it's a good time to start getting ready for it. Or at least reflect on how the year has gone so far although I might write a more proper post for it in the new year.
1. Should we make any CPF cash top-ups?

Since we will have worked the full year, we are considering making cash top-ups to our Special Accounts for the tax relief and building up of our retirement funds. We did this for the years 2014 and 2015 but are likely to make an exception for the year 2016.

It was essential then because we haven't worked full-time in Singapore before 2014 and wanted to build up our CPF balances (especially the Special Accounts) quickly for the decent interest earnings to kick in.

With the monthly CPF contributions, our balances have grown to an acceptable amount and in line with our asset allocations. There's no longer a need to make cash top-ups to our Special Accounts to build up our retirement funds but maybe just small amounts for the tax relief.

2. Should we make any changes to the investing strategy?

The focus has always been to increase our passive income received and I continue to invest in ETFs and dividend stocks to achieve that. Changes are already in progress as I try to automate the dollar-cost averaging of the Singapore ETFs at the cost of incurring higher expenses via the monthly investment plans of banks.

Once Smartly is launched, I intend to automate the dollar-cost averaging of the International ETFs again at the cost of incurring higher expenses via the robo-advisor. I still make periodic investments into dividend stocks such as my recent averaging down of local telecom stocks but they are less frequent.

3. Should we continue tracking our net worth, income and expenses?

Yes! It can be a time-consuming exercise pulling together all the relevant information to make the updates but the data obtained has been useful. I intend to further develop my data collection and analysis tools to start making financial projections based on identifiable variables. Or tap into FinTech to plug the gap for me.

4.  What are the major risks to us now?

It's become increasingly apparent that our investing strategy is turning into a numbers game. The more funds we allocate to ETFs, the less important our ability to apply any investing strategy or even the need to be concerned by financial news.

Both the economic conditions and job markets are definitely deteriorating. Our retrenchment risks will continue to climb if the situation doesn't improve. We might still be okay for 2017 but are likely to have problems in 2018. We will have to watch our cash allocations carefully next year to buffer for this. No point over-investing our cash early on and are forced to liquidate our investments later on.

Friday, 11 November 2016

1% commission charges and updates

Biggest news of this week is that Trump will be the next president of US. I didn't take any positions before or after the polling day. The markets are especially volatile and my portfolio & investing strategy are designed to try and navigate times like these more calmly. Sometimes by staying out and doing nothing.

I have just been fine-tuning the auto-purchases of the ETFs in the Monthly Investment Plans (MIPs). As it turns out, the auto-purchase of 1 share of the SPDR Gold Shares (O87) under the Maybank KE MIP did not happen again for the month of Nov 2016.

Decided to stop this component of the Maybank KE MIP but only continue with the one for the auto-purchase of the SPDR Straits Times Index ETF (ES3). Made other changes such that these are the current auto-purchase constituents of the MIPs:
  • S$300 - ES3
  • S$600 - Nikko AM Singapore STI ETF (G3B)
  • S$100 - ABF Singapore Bond Index Fund (A35) 

Which means that S$1,000 is auto-invested every month via the MIPs into local ETFs. Some in the first half of the month and the rest in the second half of the month. Purchase commission charges are at 1% of the invested amount i.e. I pay S$10 as fees every month for the MIPs.
I have to admit that this is high but acceptable to me when it comes to my dollar cost averaging strategy. Reason is simple - I expect to pay more when someone is doing the work for me. For the value cost averaging and dividend investing components of my strategy, I invest larger amounts and the commission charges drop to less than 0.50%.

I know I have to lower my transaction costs but I'm already doing that for the most part. The S$10 is not significant to me. I have already reduced our general spending slightly every month to make up for this S$10 so the net effect is zero.

What's important to me is the fact that I'm automatically diverting S$1,000 of my cash savings into Singapore ETF investments every month. In fact, when Smartly launches, I plan to divert another S$1,000 of my cash savings for the robo-advisor to allocate into an aggressive risk profile portfolio of overseas ETF investments every month.

Again at 1% annual fees initially before decreasing to 0.7% when the asset balance exceeds S$10,000. It could go down further to 0.5% if I decide to keep at it for several years. You see how the robo-advisor fee structure mirrors the transaction costs in my own portfolio?

It only starts to drop the more funds I can commit and the more experienced I become over time. This works for me as my preference is to spread out my investment cash through market cycles. It's a slow and steady investing approach but the portfolio & strategy should weather market volatility and crashes more effectively.

Quick updates for the month of Nov 2016 so far:
  • My wife received her annual performance bonus letter and the amount is okay considering how tough the market conditions were for the past year. Not forgetting how bad the impact on the profits of her bank is due to that.
  • We will allocate the bonus when received into savings, spending and investments accordingly but I will not be reflecting the full amount on this blog.
  • Averaged down on REIT ETF, Starhub and Vicom this week.
  • Auto-purchases of G3B and A35 coming up in the next 2 weeks.

Friday, 4 November 2016

The Tracking Effect

Another week of work has gone by! I have to say the new job environment is tougher than my previous one. It might have to do with the fact that I'm not settled in yet. But I can feel the higher stress levels, more intense workpace and increased number of things to follow up on.

Benefit - Day/week passes faster. Con - More exhausted at the end of each day/week. Still not sure whether the benefit outweighs the con.

Anyway, I have continued to track the changes in our net worth, portfolios, passive income and spending on Google Sheet, SGXcafe and this blog. After doing this for one year, I'm noticing certain effects from doing so.
1. Reluctance to overspend

I used to be less aware of how much we were spending on travel, food, entertainment etc. We enjoyed engaging in these leisure activities and it hurts less when you don't know how bad the overspending is.

Now that I'm tracking most of our expenses, this increased level of awareness has unconsciously made me question the need for some of our high spending items. Sigh, gone are the days of blissful ignorance. Just need to find a balance between our spending and utility derived that works for us.

Especially with above average incomes, our dollar spending level is too high even though our savings rate of about 40% is okay. Goes to show how percentage spending tracking can sometimes cause you to miss the detail.

2. Observing the relative growth of portfolio components

I started taking note of the different growth rates of the cash, investment and retirement components of our portfolio only after recording the monthly ending balances over time. I know it sounds obvious but it's quite something to see how the different parts are moving.

Especially when there's stuff happening in the month such as greater investment activity, attempts to save more money, increased spending from higher stress etc. I can actually observe the impact of changes that I make in my daily/weekly/monthly actions when it comes to saving, spending and investing. Nothing quite like financial data crunching to show me what's working and what's not.

3. Noticing a pattern in passive income

The dividend income received varies with each month and spikes every 3 months and 6 months in a year. The interest income received is more stable but spikes every 6 months. In addition to the changes from year to year, this will allow me to determine how effective passive income is for expense management purposes.

4. Better understanding of your risk profile

Before I started tracking our entire net worth, market swings and threats of economic recessions or retrenchment will make me panic. I had no clear idea of how much cash buffer I had, minimal contingency plans and little understanding of the extent of risk I could take.

Once I had all the information, I had a clearer idea of my risk profile. Not just as an investor on how much losses I can handle in my portfolio. But as an employee with varying probability of retrenchment investing during bull markets and economic booms as well as bear markets and economic recessions. The more cycles I go through, the better the understanding of my risk profile.

Have a good weekend everyone!

Wednesday, 2 November 2016

Oct 2016 Net Worth Update

I have started work at my new job and it's been keeping me busy. Won't be writing long posts anytime soon but will try to provide financial/portfolio updates when I can.

This only serves to reinforce my belief in automated index investing. Even though my new job is essentially a parallel shift in roles, the learning curve is steep since I have never worked in the financial services industry before. I also have to adjust to interacting with new colleagues and bosses.

It takes a while and a lot of effort to settle in, perform, improve etc. This is on top of making sure I continue to spend time with my wife, our families and friends. All of which reduces my focus on monitoring and research & analysis of the equity markets. It starts becoming a lower priority item.

I imagine my life as a series of changes and phases. Each one more significant than the one before. You can see the draw of automated index investing to me, even at higher costs. Build a big enough base of index ETF investments by being consistent every month and even less than market average dividend yields & rate of returns can be sufficient.

Net Worth - $163,846 (+ $18,038 and + 12.37%)
  • Made ETF and Share investments
  • Standard monthly cash savings
  • Monthly reduction in housing loan principal
  • Normal CPF contributions

ETF Portfolio - $51,126 (+$3,185 and 6.64%)
  • Bought Philip SGX APAC Dividend Leaders REIT ETF S$ (BYJ)
  • Auto-purchase SPDR Straits Times Index ETF (ES3) [Maybank Kim Eng MIP]
  • Auto-purchase Nikko AM Singapore STI ETF (G3B) and ABF Singapore Bond Index Fund (A35) [POSB Invest-Saver]

Share Portfolio - $120,335 (+ $3,423 and + 2.93%)
  • Averaged down on M1 (B2F)

Other Portfolio - $155,800 (+ $2,000 and + 1.30%)
  • Was able to allocate monthly savings as investment cash (standard increase)

Cash On Hand - $78,000 (+ $2,000 and + 2.63%)
  • Was able to allocate the rest of monthly savings as cash on hand (standard increase)

Average monthly passive income ($1,039) still above $1,000. Most of the dividend income was received from Vanguard ETFs. Higher than normal interest income due to a corporate bond coupon.

Spending multiple increases to 4.95x but savings rate drops below 40%. Decent growth in assets and travel spending resulted in this.