Finance Smiths

Personal finance apprentices-in-training

Leasing out my new place and delaying our moving in

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Happy CNY to everyone and I hope all of us enjoyed the holidays. I didn’t do any visiting this year and only had CNY lunches and dinners with our immediate families at their homes. I took the chance to rest up and it was a nice break away from work. As we start to settle into a new flexible work from home/office arrangement, the positive is an increased engagement with our teammates and stakeholders resulting in a higher level of productivity. It felt good to be able to socialise in the office setting again. The negative is an increased travel time & schedule coordination resulting in higher levels of fatigue. There’s always a trade-off and we just have to keep balancing the benefits and costs.

writing business money research
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The tech stocks and cryptos markets have continued to be volatile, rising and falling by quite a bit from day to day. I have just been averaging down and dollar-cost averaging into existing positions. Might as well take this opportunity to increase my investment portfolio allocation to tech stocks and cryptos. The Singapore stock market has been doing better and my local banks and STI ETF positions have been going up in value. I don’t plan to do any further rotation between the various components of my investment portfolio. Now that my cash position is recovering with savings from the salary income inflow as expenses start to stabilise, I can invest the cash and weight the investments accordingly to rebalance the asset allocation.

I have decided to delay my family’s moving in to our new place to next year. It was supposed to happen this year but I couldn’t line up the end of our tenancy agreement for the unit we are renting with the end of my tenant’s leasing agreement for the new unit. In short, I’m going to be a landlord for another year. While I prefer to renovate and move into our new place, it would have been a big negative impact to our finances. Mostly in the form of a double payment of rent and mortgage for several months along with renovation costs. Under normal circumstances, I may not have had such an issue with it – not ideal but manageable. Circumstances have changed on my wife’s side as I expect a spike in family expenses towards the end of the year. I don’t think we can handle what would be a massive negative impact to our finances. A delay of our moving in to the new place puts us in a stronger financial position next year to be more ready.

Private property purchase completion and StashAway Thematic Portfolios

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This is the week I complete my private property purchase and I have submitted the cashier’s order for the remaining portion of the downpayment to my lawyer. It’s the most significant sum of money I had to put down so far and I have been preparing for this in the last few months. Even though it’s an expected big drawdown of my cash balance, I’m still shocked by how little cash I have left. This is going to be a long rebuilding journey of my cash position given the upcoming renovation and car purchase costs in the next few years. I have allowed for this lifestyle inflation on housing and transport because I believe they will bring more value to my family in terms of time and effort savings in the long run.

While it will cost us financially in the short run to set up, the right level of lifestyle inflation can pay off. We are able to access our offices, kid’s preschool, general amenities (groceries, dining, etc) and parents’ caregiving support more easily than before. Resulting in a positive cycle of time and effort savings that allow us to squeeze more activities (personal, couple and family) and rest in a week. It’s not obvious when we look at it on a daily basis but more noticeable on a weekly basis. Especially when things go badly such as over the weekend when everyone was unwell because of my son falling sick and spreading it to us. It could have been a lot worse but we managed to weather it. The important thing is to know when to stop the lifestyle inflation because it doesn’t offer much value after that point. Instead, it does the opposite and the the upkeep drains you mentally and financially.

Anyway, we got emails today about StashAway introducing Thematic Portfolios. We have been wondering how long it would take for StashAway to start offering thematic investing since it has gotten more popular this year. We logged into our StashAway mobile apps to explore the 3 available Thematic Portfolios:

  1. Technology Enablers – Invest in Artificial Intelligence, Blockchain, Cloud Computing, Robotics, Semiconductors, and more.
  2. The Future of Consumer Tech – Invest in E-commerce, Fintech, Gaming, Internet, Future of Mobility, Social Media, and more.
  3. Healthcare Innovation – Invest in Biotech, Genomics, Medical Devices, Pharmaceuticals, and more.
brown field and blue sky
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These are exciting themes that offer a lot of upside potential in the future. We decided to increase our automated monthly investment plans with StashAway and split the deposits equally between our General Investing Portfolios and the 3 Thematic Portfolios. Essentially, we have diverted some of the monthly cash funds meant for investing into our General Investing Portfolios to the 3 Thematic Portfolios. Given the size of our General Investing Portfolios, we are comfortable with increasing the overall risk using Thematic Portfolios to generate higher returns from StashAway.

Automated monthly investment plans into a variety of ETFs and funds form a key component of our investing strategy. Regular capital contributions contribute to the growth of our investment portfolio just as much as gains. The selection of ETFs and funds used to be narrower but has since gotten wider in the past few years. This is the set and forget part of my Dollar-Cost Averaging approach where I just let the consistent capital injections do the work over time. While we use the remaining cash savings to manually invest to market time for even higher returns when there are good opportunities.

It’s an optimal combination investing strategy that works for us. Allows us to stay calm and vested with continuous investing to ensure we don’t feel like we are missing out on not buying into dips or not enjoying further gains in the markets. Also gives us a warchest on standby to use during market crashes for more excitement. A natural balance between being objective and emotional to managing our investment portfolio. The longer we stick to this, the higher the pay off. It just requires a lot of time and patience to see the results as we go through more market cycles.

How much CPF-OA to use for private property

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We had steak and wine for dinner tonight as a last hurrah before the Phase 2A (Heightened Alert) restrictions kick in tomorrow. And we are having the 2nd vaccine jab in the afternoon as well so we are preparing to go down for a few days. We are expecting more severe side effects this time around and will just be resting at home as much as we can. Not looking forward to it but at least we start the 2 weeks countdown to the time when we will be considered fully vaccinated. We are hoping for a relaxation of the restrictions around the National Day public holiday for the fully vaccinated but are otherwise mentally preparing ourselves to weather the storm until mid Aug.

As I prepare to raise more cash funds within these 3 months for the purchase completion of my resale condo, I have also been thinking about how much CPF-OA to use for the downpayment and for the monthly housing loan instalment payment. Buying a private property at such a high price involves a large downpayment and I don’t have sufficient cash on hand. I have been asked whether it’s better for me to wait for the property market to fall before making a resale condo purchase. Probably true if I have the luxury of having a big enough place to house my family without having to pay rent. But I don’t and renting is not a long term solution to my family’s need for a home.

I could rent somewhere cheaper or find a way to squeeze my family into my parents-in-law’s house in the meantime to time the property market. But I refuse to compromise on my family’s lifestyle and rather spend the money to maintain it. I have also been asked whether I considered buying newer condos with well-maintained facilities. I’m not touching any new or recent condo launches at the current price level and I don’t think the 3 bedroom apartments are big enough to house my family. I can make do with older facilities and renovate a resale condo to refresh the apartment. But I can’t create more space and change the layout so these are important considerations for me.

Anyway, I plan to wipe out most of my S$120k worth of CPF-OA for the private property purchase to reduce my cash outlay at the start. But keep a small portion of it leftover as a building block. For my monthly housing loan repayments, I plan to pay about S$1k from my CPF-OA each month and keep the few hundred dollars of contributions remaining to stack on top of that building block. The interest accrued on CPF-OA used for private property is a difficult problem to manage. Overusing my CPF-OA means eating into my sale cash proceeds if I ever decide to sell the apartment. Because I have to pay back both the CPF-OA used and interest accrued. I saw that happen to my wife when selling our previous private property. Unless the price has appreciated significantly, chances are I will be left with little sale cash proceeds.