Portfolio Review (June 2024)

Review of my Portfolio (30/06/2024)

Total unrealized profit: +12.4 %

YTD performance: + 8.1 %

Added in June

Goal 1: ( $44,646.63 / $81,594) ⚔️

Growth Portfolio: XLY

Dividend Portfolio: Allianz Income & Growth, United Global Durable Equities

Portfolio Weightage

Dividend Recieved

Goal 2: ($ 6,576.72 / $14,212) ❤️

Dividend recieved in June = $ 792.10

🏰 Building a Financial Fortress 🏰

• After we had maximised our earning capability to “Get Rich Quick”. We now have more capital for investment.
• To maximise the compounding effect of investing, we must always be comfortable to all in and able to ride the volatility.

• Investing is crucial in growing our wealth, the ability to withstand any financial crisis are equally important.

• The general rule is to build up 3 to 6 months worth of expenses for emergency fund. This is just a guide and a good starting point for most individuals.
• However, emergency fund are for urgent short-term needs. We will never know how long the situation will last.
• The cash reserve can eventually run out if we do not to resolve the situation within the timeframe.

Water Tank Theory

Theory that i made up... 😂

Normal Circumstances

• Whenever we recieve our salary it will flow into a leaky tank.
• Those with some financial knowledge will set a limit to the cash reserve and invest whatever in excess out of this tank.
• Instrument like SSB, T-bill, cash management account, fix deposit are not really considered as investment, rather they are just different places for parking cash and will still lose value due to inflation over the long term.

During Crisis

• Whenever there is a crisis, outflow will be greater than the inflow. It can either be an income crisis, an expense crisis or both.
• During a crisis, we will probably stop any investment activities to conserve cash.
• Income crisis- The financial pain is more gradual, such as losing our job, we are still able to reduce our expenses to buy more time to resolve the problem.
• Expense crisis- The financial pain is more acute, such as medical emergencies, home repairs, car repairs, they can deplete huge portion of our cash reserve within a short period.

Worst Case Scenario

• We dont really know how much cash reserve is enough, sometime things beyond our control can happen, such as unemployment during pandemic.
• As the crisis persists, our cash reserve continue to deplete, we may need to start liquidating our investment to fund our expenses.
• When we are forced to sell and the asset prices are dropping, it will be a double whammy.

Building the Piplelines

• We were always told to focus on growth rather than building a passive income especially when we are young and have the earning power.
• Passive income is a defensive move, we gain more financial stability at an expense of growth.
• While cash reserve help us to deal with sudden short term problems, passive cashflow is able to provide ongoing support for any coming storm.
• If the passive income is greater than the monthly expense the water in the tank will never deplete when we are facing an income crisis (loss of active income)

• In addition, during normal time, all other active income stream can flow 100% into the investment while just surviving on our passive income, supercharging our investment portfolio.

• During an expense crisis, such as hospitalisation, on top of the medical bill there are other bills to settle and we will not be able to work during these period of time.
• For salaried workers, we will still get paid every month while on hospital leaves.
• But for self-employed, once they stop, the income will also stop leading to Income crisis.
• Thus self-employed usually need a bigger cash reserve and a passive income stream is more crucial.
• Building a passive income stream is the ultimate goal but it may take decade.
• Meanwhile, we can build other active income stream to accelerate the process.

How much passive income is Enough?

• Money is never enough. 😂
• Level 1: Monthly passive income = Monthly expenses. Losing our job doesnt affect much to our daily life, but will need to stop investment activities to conserve cash.
• Level 2: Monthly passive income = Monthly salary. We can continue to invest and live as normal even losing our job.

• Level 3: Monthly passive income = 6 month expenses. Our cash reserve, emergency fund, basically get refilled every month.

• To put it into perspective how big a dividend portfolio for different level in 2024.
• Assuming we investing $2.5k per month into our dividend portfolio.
• Level 1: A person needs $1,500 per month for basic survival in Singapore, excluding rent. Which is equivalent to $300k dividend portfolio with a yield of 6% p.a. (Capital = $240k, 8 years)
• Level 2: with a median Singapore income of $ 4,117, ~$730k dividend portfolio. (Capital = $450k, 15 years)
• Level 3: ~$1.45M dividend portfolio (Capital = $660k, 22 years)

Previous Review

https://seedly.sg/opinions/portfolio-review-may-2024/