Buy transactions for Mar 2017

Let’s get the part about our Buy transactions for Mar 2017 out of the way first.

Automated Investing

Maybank Kim Eng Monthly Investment Plan

• Buy 30 units of SPDR STI ETF (ES3 on SGX) at S$3.15 per unit on 8 Mar 2017
• Transaction cost of S$1

POSB Invest-Saver

• Buy 30 units of Nikko AM STI ETF (G3B on SGX) at S$3.22 per unit on 14 Mar 2017
• Transaction cost of S$1

OCBC Blue Chip Investment Plan

• Buy 467 units of Nikko AM STI ETF (G3B on SGX) at S$3.19 per unit on 22 Mar 2017
• Transaction cost of S$5

POSB Invest-Saver

• Buy 86 units of ABF SG Bond ETF (A35 on SGX) at S$1.156 per unit on 27 Mar 2017
• Transaction cost of S$0.50

Total invested amount in ETFs of about S$1,800 using Automated Investing for Mar 2017 with transaction costs of S$7.50. All of which goes into growing my wife’s ETF portfolio.

Manual Investing

Nil for Mar 2017.

This is on top of our big sale event in Mar 2017 whereby we sold about S$45,000 worth of shares. Not as exciting on the buy side because we made no manual purchase transactions in Mar 2017. Just look at our automated buy transactions above on the Singapore ETFs. The purchase prices are higher than that in Jan 2017 and Feb 2017. We don’t manually buy ETFs in a rising market but we are happy to let the monthly Dollar Cost Averaging (DCA) keep us vested and grow our investment portfolio.

Don’t knock the effects of regular capital injections. You can argue that our portfolio would have grown at the same rate if we had just kept the monthly DCA amounts as cash. Or that the portfolio return % is a positive number in the single digits, which is only marginally better than earning a high interest rate on the cash savings. You probably would be correct on both counts. But there’s this concept of compounding that I’m exploring. To be honest, I’m not even sure whether we are doing it right.

I got the definition of compounding when it relates to investing off Investopedia and this is directly quoted from the website:

Compounding is the process of generating earnings on an asset’s reinvested earnings. To work, it requires two things: the re-investment of earnings and time. The more time you give your investments, the more you are able to accelerate the income potential of your original investment, which takes the pressure off of you.

Simply put, the more and longer we re-invest our distributions, dividends and earnings into ETFs, the greater our returns over time. The problem with this approach – it starts off slow and accelerates later, much later. Which means you have to stick to it for a long time no matter what’s happening with the markets. Another problem – You have to keep throwing a significant amount of capital at the portfolio for the compounding to really kick in for the portfolio to grow sufficient to fund early retirement. Reason being your investment time horizon is shorter i.e. less time to compound more money. If you don’t have a lot of capital to inject, then you have to increase your investment time horizon i.e. more time to compound less money. But you can forget about early retirement.

Think carefully before you employ this regular investing strategy. If you run out of cash savings to invest during the bear markets of your investment time horizon, you are screwed. What’s going to make this worse is if you invested most of your cash savings during the bull markets of your investment time horizon. It’s the most effective when you can keep higher than normal cash savings that you employ even more of during those bear markets. Of course, market timing has its own set of issues and that’s assuming you have the nerve to hold the course when times are bad. Shall we see whether this works for us?