20 Oct 2020
Would like to pay off the HDB price largely by cash so I don't have to worry about paying back accrued interest or hitting basic/ full retirement sum 30 years later.
Stashaway suggests 1.5k/mth investment for 5 years in order to achieve 100k. However I will be stretching myself quite thin by locking that money up. How should I portion my salary if I intend to pay for the house that's ready in 2026 largely by cash?
Initially I was planning to leave 1.5-1.7k in savings acc per month.
You may be stretching yourself rather thin if you invest that heavily. Remember to take into account your CPF deduction, daily expenses and emergency savings. If you are not investing for a living, invest only with spare cash.
Investment monies cannot double as your emergency savings. And, you cannot assume your investments will grow. You must still be able to live comfortably and happily (physically and mentally) even if the investment monies become 0. So, with this in mind, think of an investment amount you are comfortable with.
Also, it's best to slightly overestimate your expenses so that you will never have to feel like you are shortchanging your current quality of life. Your expenses may even increase in the next year (it happened to me, I became more willing to spend in exchange for QoL).
As for mortgage loans, never rush to pay it off. You should save up for other big ticket expenses which have higher loan interests e.g. renovation and wedding.
Lastly, I am convinced that 5 years is not a long enough investment horizon if you are going for investment portfolios with higher proportion of equities. For monies that need to be used in next single digit years, it'd be best to put them in portfolios with lower proportion of equities or cash management accounts.
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Hey OP, I'm also a fresh grad and intend to pay off my HDB by cash as much as possible so I understand your concerns.
Before diving in, I would just like to clear a misconception you might have. Stashaway investments are liquid so withdrawing the deposit is not an issue. It takes at most a few days for them to transfer to your bank account, but there is absolutely no lock-in period.
However, as mentioned by others, it may not be wise to invest the money given that your investment horizon is pretty short. If the market further dips due to unforeseen circumstances (e.g. another global pandemic or WWWIII... who knows eh? But touch wood haha) or undergoes a correction just as you're about to withdraw your money, your returns may not be as high as expected or worst still, decrease far below your target amount of $100k. Therefore, it might not be wise to invest the money which you intend to use for your downpayment, especially not in equities as they can be volatile.
Personally, what I'm doing instead is parking my money reserved for my downpayment in:
This is a high-interest savings accounts (or what used to be high-interest anyway), which earns you 1% p.a. for your first $20,000. Eligibility criteria: only if you're 26 years old or below.
This is an insurance savings plan which earns you up to 2% p.a. for your first $10,000. So far they have consistently credited the promised amount since I opened my account in June 2020, other customers have verified this as well. I was lucky as I joined early when it was 2.5% p.a. Nonetheless, 2% p.a. is still a really attractive offer given that most banks have decreased their interest rates. If you're also keen to start an account, you can click on my referral link which will reward both you and me with $10 each: https://app.singlife.com/Zlc9urWzwab
This is a cash management account which has projected returns of 1.4% p.a. on any amount. Although there is still some risk involved, it is very little as compared to investing through their core portfolios. So far I've had pretty good returns as well. Again, much better than what I would reap if I were to leave the money in my bank accounts, they all have really dismal interest rates at the moment. If you're also interested to open a Stashaway Account, you can click on my referral link and we'll both get up to $10,000 SGD managed for free for 6 months: https://www.stashaway.sg/referrals/gabrielbkz
Here is an average breakdown of what I do with my take-home pay (close to yours):
60% for future downpayment in Stashaway Simple
10% for personal expenses (e.g. food, transport)
8% for emergency savings (low % as I have amassed sufficient savings)
10% for warchest
12% for retirement savings/investments in kristal.AI
That said, if you're willing to take the risk to invest (really not advisable) in one of Stashaway's core portfolios, you might want to set it at a lower risk index.
Hope the above information is helpful and good luck on your journey to $100k!
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First of all, let me say that it is a great time to get started in the investment world ev...
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