Portfolio Review (August 2022)

Review of my Portfolio (30/08/2022)

• Total unrealised loss = -4.3%

• YTD portfolio down = -25.2 %

Added in August

Growth Portfolio: XLC

Dividend Portfolio: C2PU, BSTZ, Allianz income & Growth

Portfolio Weightage

Dividend Received

YTD dividend received = SGD $ 4,452.60

Opinons

• To me the most important thing is to reach the destination, how to get there doesn't really matter. Making rational decisions and constantly adapt is the key. This is just me, some may think the process is more important.

• In my opinon, monthly income and net asset are 2 important parameters to look at when assessing financial health.
• This influence how i structured my stock portfolio. Dividend portfolio to deal with the income portion, US stock to deal with the asset portion.
• To me building cashflow hold a higher pirority over asset, because with ton of cashflow even if i have zero asset life will still go on.
• However, if i have ton of asset and zero cashflow, life will be miserable.
• The purpose of owning asset is to combat the inflation, asset prices always keep pace with inflation but not your income, even for dividend income.
• Therefore , is important to strike a balance between income producing and non-income producing asset during portfolio construction to weather all economic situation.

#Part-Time & dividend based on 12 month average. While full-time income excludes CPF. Properties asset & income is @ 50% of actual.

How i increase monthly income

• My preferred method to increase my active income is still through part timing / freelancing.
• Often we heard people said "A degree does not guarantee success", which i totally agreed.
• Then why is going for a few month of courses guarantee anything? I often thought to myself.
• Rather than hoping to get recognised by the organisation after all those upgrading effort (that cost my time & money), which might not even happen, i prefer to spend my time actually earning money.
• i just being realistic, how probable am i going to be the top 10% in the company? Looking at the data in the link, i realized how low i am in the food-chain 😆. No chance!

https://blog.seedly.sg/income-inequality-in-singapore/

• While having a stable 9 to 5 is comfortable, minus the politic 🙈🙉🙊. The pro and con of a job is that the salary is fixed.
• Every role there is a salary cap, which is determine by the job market.
• And it is fairly easy to forecast how much you can make in your entire career.

https://blog.seedly.sg/average-monthly-income-occupation-job-guide/

• The median salary growth about 3.7% p.a. barely keep up with singapore long term inflation of 2.5% p.a.

https://stats.mom.gov.sg/Pages/Income-Summary-Table.aspx

• If i soley depend on the yearly increment & promotion. It will be extremely tough to achieve financial freedom before 65.
• Assuming with a median income of $9,360 (you & your spouse) minus CPF= $7,488, that is equivalent of earning ～$20/hr of free cashflow per person.
• With a median household expenditure of $ 4,812, is about 65% of your free cashflow, equivant of earning $7/hr
• Even if you and your spouse are frugal, household expenses = $3,753, is about 50% of your free cashflow, equivalent of earning $10/hr
• Retiring @ 65 is definately do-able (with CPFLife unlocked), but the probablity is low if the goal is to retire at early 50s or below, unless you are a high income earner.

https://www.valuechampion.sg/average-household-budget-singapore

• Having a side income accelerated my asset acquisition rate. However, i also understand that there are limitation to these side. Scaling.
• A job is a race against time. Earning $1 today is more valuable than $1 tomorrow. Time value of money.
• If it takes years to climb the corporate ladder to earn a senior position salary, why not just spend abit of time after work and earn that amount now? From graduate to retire, we only have approx. 30 years of working life. I thought to myself again.
• You may think upgrading skill, climbing the corporate ladder is a more efficient way, that is fine too. There is many way to earn money. Just do what you believe in, i am not here to convince you.

• The long term goal is to use my active income to acquire assets to generate passive income and replace 80% of my full time income.

• Rental alone from property will not make me wealthy but definitely comfortable. Always go for capital appreciation for property investment, rental is a good to have.
• How to invest in properties is country dependent as it is highly influence by the government policies and the tax law.

• Invest in residential property in Singapore, is relatively safe. Because it is highly regulated by Singapore government, the houses are usually fairly priced because all the home transactions are transparent and the policies make it difficult for anyone to be over-leverage.

• Dividend from equities, in singapore, is one of the best option for scaling my monthly income, because it is independent of the market sentiment, instead it is determined by how much you had invested and the actual performace of the underlying companies. This provide certainty.
• Moreover, unlike other countries, we do not have to pay tax for dividend income.🥳🥳🥳
• The perception of dividend investing is slow or for people with huge capital. 🤔🤔🤔
• However, market go through cycles, when returns is difficult to generate through capital appreciation, dividend provide another kind of returns.

• Having a diversified portfolio, ensure that there are always returns no matter what.

• As the income increase the amount of income tax will also increase. Thus is important to know the tax relief avaliable. While i continue to build my income, paying as little to no tax is key.
• The less money i give to the government, the more money for myself.

https://blog.seedly.sg/guide-income-tax-singapore/

How i increase my total asset

• In order to invest 80% - 90% of my full-time job income into the stock market, i simply increase my total income and keep my expenses low.
• I mainly surviving with my part time income. Technically, i am living paycheck to paycheck.😱😢

• Being an introvert + minimalist, really help in saving money, i am totally fine with staying home and doing nothing. 😆

• The property that i own is purely for investment and there is an intention to sell in the future. Thus i include it in my asset portfolio.
• I used my rental to build up my home equity. For private properties, in my opinion, is better to pay by cash rather than your CPF-OA.
• Because the monthly instalment is huge, when i sell my property, most of the profit will be return back to CPF with accured interest, leaving me with little cash for next property, which required 5% cash downpayment.

Accured interest is still your money, it is just being locked up.

• As of today, my property had increased $150 psf since Oct 2021(based on recent transaction record). Which is equivalent to a unrealized gain of ~$120k.

• I have no intention of investing my CPF, it serve as a safety net, because i am using debt to grow your wealth. Debt is a double-edged sword.
• Will be achieving ERS in next ~3 years if i just simply stay employed.

• Personally, i exclude CPF for my retirement planning. My investment should be the main source of funding my retirement, CPF is supplementary. This is just my preference.

• In addition, i have 8% trapped in insurance products , ILPs & endownments..... we all make mistake when we are young.😆
• I cant do an early withdrawal for my endownment else i will lose money. As for ILPs it still provide me insurance coverage after i stopped paying for the premium and the cash value did not have any major decline, YET. So i just let it sit there.

• i classify these insurance products as assets as they still hold cash value, if i choose to terminate it.

• Currently, i am trying to pump all the housing fund (profit from previous property sale) into the Singapore Saving Bond to earn more interest. Is a challenge as SSB is always over subscribed.

Risk mitigation plans

• I am a very conservative investor. Thus, i always ensure i have the holding power when i make an investment.
• Buffett's rule#1 "Never lose money." My interpretation for that is:

(1) Don't buy overvalue and speculative assets. Buy real assets.

(2) Invest money that you don't need.

(3) Have the holding power when the whole world turn against you.

What are the Risks?

• Loss of job- I have my other sources of income.
• illness/accident- i got my insurance coverage.
• Stock crash 50% for next 10 years- i still have income to pay bills
• No tenant for my property- i have my housing fund.
• Housing fund run out- i have my CPF.
• Other unforseen things happen- i have my Emergency fund.

• Emergency fund not sufficient- i can do a home equity loan from bank.

• The Real Risk is actually insufficient positive cashflow. Amount of cashflow is determine by the stream of income.
• To solve the problem is to simply get a JOB 😆, always stay employed if you dont have enough cashflow generate from your assets, even if you have a million dollar portfolio.
• Owning non-income producing asset, in order to get the income, we have to sell. The price we sell will always subject to the market sentiment, which create uncertainty.
• We often heard story, people return back to work from FIRE, because of market downturn, investment suddenly not enough to cover expenses.
• It is actually not easy to budget while factoring in uncertainty into it.
• Investment should always be the cherry on the cake and not the cake.

https://m.youtube.com/watch?v=Pb4xU1UkD1c

• If you are retiring or aim to FIRE, you must be able to convert those assets into income either by selling it or the assets itself is able to generate dividend/rental income.

Conclusion

• Non-income generating assets will provide higher returns with lower certainty.
• Income generating assets will provide lower returns (relatively) with higher certainty and you will underperform the S&P500.
• Need to strike a balance during portfolio construction.
• It is always important to identify your risks, not only your investment but other aspect of life.
• How you interpret "Never lose money", will shape how you approach your risk management.
• During the financial journey everybody will make some mistake, eg. I bought into ILPs🤦 ♂️, but just move on, as long you are not wipe out & you still have a job, you will recover. Just dont make the same mistake.
• Cashflow is always king. The main reason we get a job and buy assets is because we want the cashflow either for now or in the future when we sell.

Previous Portfolio Reviews

https://seedly.sg/opinions/review-of-my-portfolio-july-2022/