I was unwell this weekend. Started developing a cold and cough on Fri before it got worse on Sat. Feeling better now on Sun after sleeping in for the past 2 days. Going for a more straightforward post about our net worth and passive income for June 2017 since I am still recovering.
Cash and Net Worth
If you looked at my expense blogpage, our cash savings for June 2017 is S$5,467 and the savings rate is 29.99%. It’s our worst performing month for the year. But what isn’t going to make sense is that our net worth went up by S$19,127 (i.e. +8.60%), which is our best performing month of the year. Much of this increase is attributed to our cash holdings rising.
I should explain this anomaly in more detail. Every month, I only add S$5,000 to our cash holdings in the Google Sheet regardless of what our savings rate is. This works because we usually save more than S$5,000 in cash each month and I’m too lazy to add the exact amount to our cash holdings. What happens is that every few months, I will restate the cash holdings figure in the Google Sheet to improve its accuracy.
I did this for June 2017 and our cash holdings in the Google Sheet went up by a lot more than the actual cash savings for the month. There should be a better way to do this but it will require more regular checking and updating of our cash holdings in the Google Sheet. And my preference is to keep it simple with less monitoring required.
Investments, Mortgage and Retirement
Watching our ETF and Stock portfolio go up slowly and mortgage balance go down even more slowly can be frustrating. I know progress takes time and I have to resist the temptation to speed things up by being reckless and taking unnecessary risks. Sometimes, I catch myself wondering whether we should have bought a less expensive apartment so we don’t have such a large mortgage balance. But then I think about all the benefits and advantages we have by living relatively close to my parents-in-law and that feeling of regret goes away. You can’t have everything your way in this world. Win some, lose some.
From my previous post about the drop in our monthly housing loan instalment, you should know we pay S$1,000 of this instalment from our CPF Ordinary Accounts. Given that our combined monthly employer and employee CPF Ordinary Accounts contributions come up to about S$2,600 every month, what happens to the remaining S$1,600? We don’t do anything with it and just leave it as our housing loan Emergency Fund.
We like the flexibility of the CPF and being able to use the Ordinary Account funds for housing is a big plus point. Having a safe, secure and evergrowing housing loan Emergency Fund in the form of the CPF Ordinary Account works well for salaried employees like us. Our CPF Retirement Accounts are also coming along nicely. As long as interest rates on the CPF Ordinary Account and Retirement Account balances can be maintained or even increased, our retirement funds should be sufficient provided we don’t get retrenched.
Dividend and Interest Income
We didn’t receive much dividends for the month of June 2017. Just from the 3 companies below.
- Kingsmen Creative (SGX:5MZ) – S$32
- Silverlake Axis (SGX:5CP) – S$21
- Raffles Medical (SGX:BSL) – S$36
Total dividend income for June 2017 – S$89
Interest income has gone up since we sold a significant portion of our investments and increased our cash holdings. I should highlight that a part of this interest income is spending driven i.e. meeting the minimum spending threshold on our credit cards tied to the high interest bank accounts. Once we start to reduce our spending, it might cause a drop in our interest income. Convoluted stuff I know.
- NAB and ANZ AUS bank accounts – S$160
- UOB One SG bank accounts – S$200
- OCBC 360 SG bank account – S$120
- Stan Chart Esaver Promotion SG bank account – S$130
- Other bank accounts – S$11
Total interest income for June 2017 – S$621
Average Monthly Passive Income for 2017
This figure is starting to cross S$1,000 earlier in the year and staying above it more consistently. But I expect the progress towards S$1,500 to be slow with my investment portfolio restructuring efforts hindering it. When we eventually start our robe-advisor portfolios with Smartly and StashAway, we might re-invest the dividends/distributions instead of receiving them as cash.
As we continue to focus on ETF investing, whereby the dividend yields are lower, it means that we might not be able to rely purely on the dividend income derived from such an investment portfolio. We would have to draw down on the capital base of our portfolio for this early retirement model to be sustainable. Should have known this was the case as we moved away from dividend stock investing and lowered the dividend yield on our portfolio. Just got to keep learning!
Stock dividend yields from developed markets around the world have become compressed over the last 8 years due to QE/ZIRP & the rush for yield. So is no surprise that almost all the standard well-known ETFs have low yields too. And most equity ETFs don’t include REITs or biz trusts — REITs are normally in a REIT ETF or property ETF as they are considered a separate asset class.
I believe US robo-advisors now have portfolios designed for income and retirees, where the focus is on Dividend Aristocrats & Dividends Achievers ETFs together with the usual REIT & Biz Trust ETFs and safer investment-grade corporate bonds. But even then the current yields are on the low side as many people have rushed into good dividend-paying stocks over the last 5-8 years, driving up their prices.
The key for such stocks is not so much for the current lowish yields, but the fact that these companies have decades-long track records of continuously increasing their dividends every single year, sometimes by annual 10% increases. So it’s a medium-to-long term building up of dividend machine.
Anyway, now people are talking about building up war chests, forgoing putting new money into stocks, as more & more believe a major correction or even a bear market will happen within 1 to 2 years. The blueprint is to accumulate as much ammunition as possible and then deploy in the depths of recession when even a mundane S&P500 or MSCI ACWI ETF will have historically high dividend yields.
Of course there may be a 100++% exponential blow-off top before the crash / recession occurs. So either stone cold discipline and/or super fleet-footed nimbleness is required.
That’s a great explanation on what’s been happening the past few years and what might happen in the near future. I just try to invest every month and wait for the major correction or bear market before injecting the rest of my funds. Discipline is the key to an effective execution of the investment plan but I can be lacking in this skill due to my lack of experience when the time comes.
Hi,
Stumbled on your blog quite by chance, and I got to complement you on your journey. The discipline is really great!
Having recently moved to Singapore I’m looking for a way to deploy savings as well. I’ve been put off by high commissions on the traditional brokers like Vickers, etc. Standard Chartered apparently used to be cheap but now they’ve also increased fees.
The robo advisors seem to be filling a gap but of course right now they are yet to even launch.
For a new investor (though I’ve invested in my home country) in Singapore, how would you go about investing. Seems like going with the traditional brokers (as you’ve done with Kim Eng) but via the MIP method is one option. Otherwise wait till the robo advisors come online? Are you looking at moving most of your assets to robo advisors? Are there any good reasons to stick with the traditional brokers? Are the brokers mostly the same or is there a benefit in going with say Kim Eng over OCBC over POSB?
Would be great to hear your opinion. All the best to you!
Thanks and I hope you find the blog useful!
Yeah, the commissions charged by our brokers here in Singapore continue to be high even though the SGX lot size has decreased. I use the Stan Chart Online Equity Trading Platform for now. They used to have no minimum commissions but have since introduced a minimum commission of $10 for each trade. It’s annoying but the others are usually even more expensive.
I prefer the Monthly Investment Plans for the Dollar-Cost Averaging of SG ETFs and Stan Chart for the Value-Cost Averaging of SG and Foreign ETFs. I should also be setting up a robo-advisor portfolio for the Dollar-Cost Averaging of Foreign ETFs. The idea is to automate as much as I can so I can focus on everything else outside of investing.
Thanks, good to know.
I like the system of both DCA and VCA. I feel like it always makes sense to deploy a small amount DCA and then put aside more in the markets when you have more funds, or when you feel the market is giving a bargain. Easier said than done though, I know.
By the way, stashaway seems to be online – I received an email but not yet signed up. Will be interested to see what choices it offers!
Yup, the DCA and VCA system works well if you are disciplined enough in your execution. That comes with experience though. During the bear market in 2016, I didn’t increase my DCA and VCA sufficiently to take advantage of the market dips. It’s tough making buy transactions when people are selling out and your existing portfolio is deep in the red.
My wife set up her StashAway Singapore robo-advisor account already. Still transferring funds into it and getting used to the system interface. I can’t wait to set up my Smartly Singapore robo-advisor account and compare the both of them.