Final Year Thoughts

This is the second year into my financial investing journey and I think this blog has taken more of a financial planning tone rather than a purist investment blog. I also think that my blog can take on a more structured format, though I will be thinking about how to improve on this

Investment Income for 2018

  • Portfolio dividend income: SGD 1,793
  • Fixed income coupon: SGD 87

Savings Allocation

  • Equities: SGD 14,578
  • Bonds: SGD 5,500
  • CPF-MA: SGD 7,000
  • House: SGD 15,000

For this year, I decided to park a proportion of money into fixed income as a form of diversification. I subscribed to some Astrea IV bonds as well as SSB totaling about 5.5k with a blended yield of 3.86%. My intention for the SSB portfolio is to save towards a wedding and renovation related payments. My target for this fund is 30K come end 2020. Hopefully the government will come up with more similar volatility free instruments in 2019. 🙂

For fixed assets, I repaid part of the loan from the CPF board for the house. I still have another half remaining to be cleared. I am dragging my feet on this, as contributions to this fund is a diversion from the equity portfolio. At the same time, I have blogged about how we bought an expensive house and how I intend to reduce the mortgage to 80% of OA contribution. I guess this will be an ongoing work in progress.

Equities have had a rather lukewarm year. Other than Comfortdelgro which returned 30%, the other stocks were all caught in the minor bear that happened towards the end of the year. I took the opportunity during the dip to divest the smaller positions and focused on large cap contrarian plays such as Wilmar, Singtel and Keppel. I had intended to add more REITs during the dip, however none of the orders were fulfilled.

On the CPF side, For the first time I contributed 7k to CPF-MA instead of CPF-SA to reduce taxes payable. I decided to contribute to the MA instead as it has the same benefits of the SA (ie 4-5% interest and tax deductible) while having the added benefit of being used for medical emergencies.

I don’t think more could be done for this year, though I wished I could have increased my passive income streams. I had set out to increase my active income this year but 3 interviews later I am still at the same job. Sighs.

In the next year, I hope that I can increase my network and perhaps make a move in the right direction.

Passive Epiphany

I have written a piece before on why I think the stock market has democratized wealth building, you can about read it hereHere is the back story of how I came to see investing as a source of passive income.

I started working at the age of 28, not early by any standards. In fact at this age, most of my peers would have already have worked for a year or three. Thus to achieve financial independence, I knew I had to work smarter not harder than them.

That was when I started to look for ways to increase my passive income. I realized that investing in stocks was the easiest way to start. Unlike property and business which require either a large sum of money or a large amount of time both of which most people do not have. Stocks offer simplicity and liquidity.

ESBI quadrant.jpg
ESBI quadrant made famous by Robert Kyosaki

I know most people would see the markets as a risky thing. But as the only certain thing in the market is volatility, to that I say “life is about managing uncertainty”. Just because you have that job today does not mean you wont be replaced tomorrow. In fact, I think that there is more to lose from being out of the markets than being in it.

There is no certainty that you will reap the rewards of your hard work at the end of the year. People who believe that putting in crazy hours at work is going to get you that A, probably have yet to wake up from the academic system. Unless, you are a key player, your bonus is probably already predefined. Even then, your managers are likely to be rewarded above you, this is how most people become jaded from working.

Now I am not against working hard or a having a long and distinguished career. I too hope to make something out of my economic life, but I want to do that on my terms. Doing the things I love and making an impact to my organisation. I might not make it all the way up to the top, but I would still like to contribute in a meaningful way. I want to be able to do this while still being responsible to my loved ones and ensuring that they too are not impacted by my career choices. To do so, i needed to be free financially free.

I hope this post has stirred up something in you. More important I hope you continue to wrestle with the idea and take a brave step forward. Investing is not a one street thing and there are many styles to it, but learn to confront your fears and reading and widening your knowledge base is something that everyone can aspire to.

Start being brave today!

Out of balance?

Sometimes I wonder if I in my quest for financial independence, have been overly enthusiastic at the cost of others around me. After all, we know that like a big snowball down a long hill, the bigger your puffy snowball now, the larger the “whambam slamdunk” of an avalanche you will get in the future.

Compound Interest
Compound interest is every saver’s best friend. See how a smaller Invested amount leads to a larger final year end value for the portfolio on the left.

While financial freedom in itself  may seem like some sort of a milestone or a finishing point, I am also reminded that, as I continue towards my first pot of gold, that it is also not a race, and that there are many ways to achieving and enjoying this experience along the way. I like how Dave Ramsey shows us how people are driven by money differently, and that sometimes personal pride and achievement get in the way of what was suppose to be a good intention. You can forward to 4:10 to hear how women and men view money.

Last food for thought in this paradigm is to think of wealth in percentages. How much do we decide to spend, save and give away.