Asked on 28 Oct 2020
I have about $200K in savings (mostly in FD, high yield savings account), ~$60K in my OA and SA combined. I do not have any dependents and my only liability is my housing loan which I'm servicing fully with my OA, til the age of 60.
I have only just started to invest with robo, stashaway global portfolio at 18% risk preference and syfe reits. What can I do to grow my portfolio? I'm looking at adding ETF but I'm not sure whether it will overlap with my SA portfolio?
Im am by no means a specialist , but im gonna take a crack at this using some really elementary methods. Sorry if it look abit half baked.
1.5million at age 50
Starting from age 33 with a savings of 200k and 60k from CPF
Leaves you with 17 years to accumulate 1.27million
You wanna make use of 2.5k monthly take home to reach this amount , if you manage to save 2.5k a month for 17 years , you would have roughly 500k saved up over that many years. Assuming you never got any pay raise or any promotions .
Ill use the the rule of 72/17yrs, assuming it will take a regular interest of 4.2%++ to double your investment ( thats if you have 500k now )
The safest way would be to put into your CPF SA , earn a return from SA as well as some Tax rebates.
Although this limits you from withdrawing the full sum at 55. You can still withdraw til the BRS limit at 55.
(Correct me if im wrong )
With the info given , and the safest route , my reccomendation is monthly top ups to SA for 17 years and you may well have your 1.5m or more by 55 (SA is at 4% interest per year)
Great to see that you have a good retirement plan in mind.
i'm also striving to reach FI by 45.
Currently 29 yrs old.
Sadly i'm self-employed, no CPF and think it's worthless to put it in as there are a lot of restrictions in place.
So here's what i'll do if i were you.
I'll continue paying my Housing loan with CPF. Because my cash can be used to generate a high growth returns than the 2.5% growth in CPF.
I'll set aside 6 months worth of expenses in DBS Multiplier.
I'll also set aside any short term(1 yr) committments(Large amount) that i'll be going to spend aside.
Like Holiday, Insurance, income tax and medisave( For self employed)
Next i'll deploy the remainder into 2 tranche.
First will be lump sum.
Second will be DCA for the next 6-9 months.
For myself i do my own ETF investment.
Though i have 20% in my high growth stocks.
But my main 80% is in ETF.
For ETF, i don't time the market. Because it's kinda wasting time.
If you want to wait till it drop and buy also can. Like how it drops in the late Oct Period.
But why i don't time is because i don't know when the recovery will be.
Like what happened in Oct 2020 is that it drops for 3 weeks.
But it recover and Exceed the previous high in just 1 week.
So I'll lump sum in 50% of the allocated amount.
Then i'll DCA over 6-9 months depending on how comfortable you're with it.
When i first started, i only did 40 % Lump sum, 40% DCA and 20% Warchest.
But it seems like the 20% warchest is quite waste of time Because it always seems that i'll be buying higher than what i would have bought in the 40% Lump Sum tranche.
So example if 100k is what you have decided,
Then 50k in lump sum first
Remainder 50k split over 6-9 months.
Overlapping with SA is not so much of a concern for me.
Initially i had SA also. But i find the growth too slow.
So i went all in with my ETF.
My logic is that i think no point worrying about overlapping and stuff like that because my investment horizon will be 10 years - 15 years.
So doesn't matter to me.
I started this year Jan till Now.
Still buying in every month, week.
Hoping to FI by 45.
There's just too many variables here to be able to give you an answer. Since you've got a housing loan and you're involving your CPF saving and I don't know what kind of interest rates are you getting on your FD... HOWEVER! Here's a bit of good news.
You can use this CPF Retirement Calculator to figure out if your retirement goal of $1.5mil at 50 years old is possible based on whatever it is that you've provided. You'll need to provide more confidential info tho. So it's not a bad idea to do that there, since it's on the privacy of your own screen.
With that aside, I'll now address your portfolio question.
When it comes to growing your portfolio, I'm assuming you're looking at growth investing (meaning buying the stocks of companies that are expected to grow at an above-average rate s compared to their industry or the market, aka you're focusing on capital appreciation). If that's the case, then you'll need to take on some risk. How much depends on your risk appetite. And to do that you'll need to do your research and identify potential companies to buy.
I can't tell what is exactly in your StashAway portfolio with an 18% Risk Index (but I do know that it is 45% in equities and 55% bonds).
However, you should be able to see what is exactly in your portfolio by logging in and checking eg. what kind of equities and bonds? does it contain REITs or ETFs etc.
You mentioned adding ETFs (side note: what kind tho?) to your overall portfolio. But, for example, if you see that your SA portfolio is heavily weighted in say... global ETFs. Then maybe you might not want to add more global ETFs to your investment portfolio outside of StashAway, because your overall portfolio will be unbalanced or overweight towards global ETFs.
Hope this helps!
Using TVM, all of your current 260k and annual 30k savings (assuming no pay raise) will need to compound at 5.75% to reach $1.5m by 50yo. 5.75% is not tough but mind that ALL of your $ have to generate that returns. And clearly, your CPF portfolio will drag you down. Honestly, I think $1.5m is not ambitious at all, probably even too much of a comfort zone.
Me same situation as you. But i choose to DIY.
I treat US stock as fix deposit. I invest 80 - 85% of my salary
To retire ,
1) u need to calculate ur monthly expense.
2) Assume 4% (conservative) from dividend
I calculate for my case when reach 50yr old will have sufficient dividend to live comfortably. (Without selling US stock)
U may also need to buy some insurance. As u dont want to sell ur investment when something happen.
Jiayee, Salaryman at some company
Top Contributor (Dec)
Answered on 28 Oct 2020
You'll need to do your own math because none of us here know your exact interest rates. I did some rough math and you were about $100,000+ away from $1,500,000. What I did:
I underestimated some interest rates because there were parts that were subjected to higher interest rates and others lower. I didn't use the compound interest formula; I just powered the total principal to 5.
Also, is $1,500,000 enough for retirement?
Insurance coverage, monthly expenses which may increase if you want to "enjoy life", insurance coverage for dependents, are these taken into consideration?