Finance Smiths

Personal finance apprentices-in-training

What we want to achieve with Finance Smiths

by //

New self-hosted WordPress blog, domain and direction

If you haven’t noticed, this blog has been moved from Blogger to a self-hosted WordPress platform. After about a year of writing and wanting to continue with this personal interest & hobby of mine, I decided to spend some money on it. Have my own domain name and improve the design of the blog. I went with HostGator as my web host, Genesis Framework and Child Theme for the WordPress blog. There’s plenty of online material that guided me through the entire process of setting up the self-hosted WordPress blog and shifting my posts across from Blogger.

It was a slow process (about 2 weeks) to get to this stage as I was busy with work and personal commitments, hence the lack of new posts. But I’m happy to finally start writing again!  It also gave me time to think about the direction I want to head in with the blog for this year. In 2016, I was almost always writing from the perspective of my wife and I taking into account our personal circumstances. Not the best way to draw or even help readers since they might not identify with our situation. But people still bothered to read my posts and follow what I had to say.

Now that I have a more long-term perspective on this blog, I intend to improve my writing style so that readers can actually benefit from the content. It should take into account a wider range of circumstances, drawing from our current & past experiences, what we should have done, and from the experiences of others. It should also touch on more topics and I’m hoping these efforts translate into longer & better structured posts. But I know I have to change as well and to be able to do it – I should be more open to collaborations, communicate with readers & other bloggers and attend more events. You will notice I am terrible at replying emails & comments last year but I’m aiming to get better at it this year.

It’s one of the main reasons I changed the blog name from The Finance Smith to Finance Smiths. A reminder that I’m no longer writing for myself and I should consider others that are taking the time to read these posts. It’s the only way forward for the blog to become more sustainable, interesting and with the ability to evolve over a long period of time. This is my personal goal for the blog in 2017 and I shall evaluate my performance in this area at the end of the year. I can already see the challenges ahead with our ever increasing work and personal commitments but I will try hard to work towards and achieve it.

My wife’s ETF portfolio

As my first step, I know I haven’t been clear about the ETF portfolio that is being built for my wife. I have mentioned before that a ETF portfolio suits an investor that prefers to automate his/her monthly investments with minimal manual purchases, has a wide range of savings available each month to invest (from a little to a lot), does not like to do regular research in relation to equity & bond markets or monitor the financial news often.

My wife is like that in many ways and it’s not a bad thing. The important thing is to build an investment portfolio with an approach that suits her. Besides, it’s not that my wife is not interested in making money and what it can do for her, it’s just that she is not as interested in investing. This is why I have always believed my wife makes for the ideal ETF investor. Consistency in application, does not like switching investment approaches, no temptation to buy individual stocks, ever growing portfolio from the cash injections and minimal monitoring.

It’s probably not surprising but I have readers that are interested in the constituents of this ETF portfolio, how it’s being built, the rate it’s growing and the dividends received. I have to admit that even though my portfolio includes ETFs, it’s overweight on individual stocks and the ETFs overlap with each other. However, we were able to apply a simpler, clearer and more disciplined approach to my wife’s ETF portfolio. I guess it’s time to provide more specifics and a better context to what I’m talking about. As such, I have included a snapshot of my wife’s ETF portfolio in the Portfolio page of the blog.

ETF Portfolio Makeup

These are the constituents of the portfolio and the number of units, total market value, proportion and type are also tracked in the snapshot:

  • Nikko AM STI ETF (G3B on SGX) – Automatic monthly purchase via POSB Invest Saver and OCBC Blue Chip Investment Plan
  • SPDR STI ETF (ES3 on SGX) – Manual purchase via Stan Chart Online Trading Platform
  • Phillip SGX APAC REIT ETF S$ (BYJ on SGX) – Manual purchase via Stan Chart Online Trading Platform
  • Vanguard FTSE All-World High Dividend Yield UCITS ETF (VHYD on LSE) – Manual purchase via Stan Chart Online Trading Platform
  • ABF Singapore Bond Index Fund (A35 on SGX) – Automatic monthly purchase via POSB Invest Saver

Although my wife’s ETF portfolio is cleaner and better organised than mine, there continues to be overlaps in the holdings of the ETFs. The most obvious one is between Nikko AM STI ETF and SPDR STI ETF. Main reason for this duplication of the Singapore Equity ETFs is due to the application of Dollar Cost Averaging (DCA) on the Nikko AM STI ETF and Value Cost Averaging (VCA) on the SPDR STI ETF. I have explained the differences between DCA and VCA on this blog before. Essentially, VCA has more of a market timing element to it as the monthly investment amounts can differ (greater when markets are going down and lesser when markets are going up).

There is minimal overlap in the holdings between these Singapore Equity ETFs, Phillip SGX APAC REIT ETF S$ and Vanguard FTSE All-World High Dividend Yield UCITS ETF. The less overlaps in the holdings of the ETFs, the better the risk diversification and the more diverse the markets distribution of your portfolio. Of course, this depends on the ETFs you have selected for your portfolio, the amount of automatic & manual purchases you intend to make and the investing platform you use. When robo-advisors such as Smartly become more prevalent in Singapore, you will find that all of the considerations above and the investing approach can change. In any case, we should be setting up a robo-advisor ETF portfolio for my wife when it’s available in case you are wondering why her portfolio is smaller compared to mine. We are still waiting for Smartly to launch and expect my wife’s portfolio to grow significantly after that.

I considered including the purchases (number of units and prices), average costs, dividends and profit & loss information as separate columns in the ETF portfolio snapshot. However, I decided against it since I am already posting about our monthly purchases and dividends received for the relevant ETFs and individual stocks. No point cluttering the blog Portfolio page with so much information and it’s more important that I’m tracking them on Google Sheets and SGXCafe instead. As a side note for future posts, I might explore how to select, build and track an ETF portfolio in Singapore in more detail so you can refer to these actionable steps for assistance.

Investments for Dec 2016

by //

I originally had this post titled “Purchases for Dec 2016”. But it sounded like the post is about consumer items that I purchased for the month of Dec 2016. Of which there were many considering the Christmas celebrations, dinners and gift exchanges. Happy and fun times!

Anyway, I changed the title to “Investments for Dec 2016”, just to make it sound more official and related to the financial assets purchased for the month of Dec 2016. As a follow up to my previous post on dividend income received in Dec 2016, I have also decided to reveal both my automatic and manual investments each month.

Automatic

POSB Invest-Saver

ABF Singapore Bond Index Fund (A35): 86 shares at S$1.145 per share

Nikko AM STI ETF (G3B): 32 shares at S$3.05 per share

Maybank Kim Eng Monthly Investment Plan

SPDR STI ETF (ES3): 97 shares at S$3 per share

OCBC Blue Chip Investment Plan

Nikko AM STI ETF (G3B): 498 shares at S$3 per share

Manual

Nil

Going forward from Jan 2017, S$1,800 will be auto-invested across three investment plans each month with a total fee of S$8. The aim is to keep the transaction cost to 1% or less of the investment amount each month.

1% commission charges and updates

by //

Biggest news of this week is that Trump will be the next president of US. I didn’t take any positions before or after the polling day. The markets are especially volatile and my portfolio & investing strategy are designed to try and navigate times like these more calmly. Sometimes by staying out and doing nothing. I have just been fine-tuning the auto-purchases of the ETFs in the Monthly Investment Plans (MIPs). As it turns out, the auto-purchase of 1 share of the SPDR Gold Shares (O87) under the Maybank KE MIP did not happen again for the month of Nov 2016.

 Decided to stop this component of the Maybank KE MIP but only continue with the one for the auto-purchase of the SPDR Straits Times Index ETF (ES3). Made other changes such that these are the current auto-purchase constituents of the MIPs:
  • S$300 – ES3
  • S$600 – Nikko AM Singapore STI ETF (G3B)
  • S$100 – ABF Singapore Bond Index Fund (A35)

Which means that S$1,000 is auto-invested every month via the MIPs into local ETFs. Some in the first half of the month and the rest in the second half of the month. Purchase commission charges are at 1% of the invested amount i.e. I pay S$10 as fees every month for the MIPs.

I have to admit that this is high but acceptable to me when it comes to my dollar cost averaging strategy. Reason is simple – I expect to pay more when someone is doing the work for me. For the value cost averaging and dividend investing components of my strategy, I invest larger amounts and the commission charges drop to less than 0.50%.

I know I have to lower my transaction costs but I’m already doing that for the most part. The S$10 is not significant to me. I have already reduced our general spending slightly every month to make up for this S$10 so the net effect is zero. What’s important to me is the fact that I’m automatically diverting S$1,000 of my cash savings into Singapore ETF investments every month. In fact, when Smartly launches, I plan to divert another S$1,000 of my cash savings for the robo-advisor to allocate into an aggressive risk profile portfolio of overseas ETF investments every month.

Again at 1% annual fees initially before decreasing to 0.7% when the asset balance exceeds S$10,000. It could go down further to 0.5% if I decide to keep at it for several years. You see how the robo-advisor fee structure mirrors the transaction costs in my own portfolio?

It only starts to drop the more funds I can commit and the more experienced I become over time. This works for me as my preference is to spread out my investment cash through market cycles. It’s a slow and steady investing approach but the portfolio & strategy should weather market volatility and crashes more effectively.

Quick updates for the month of Nov 2016 so far:

  • My wife received her annual performance bonus letter and the amount is okay considering how tough the market conditions were for the past year. Not forgetting how bad the impact on the profits of her bank is due to that.
  • We will allocate the bonus when received into savings, spending and investments accordingly but I will not be reflecting the full amount on this blog.
  • Averaged down on REIT ETF, Starhub and Vicom this week.
  • Auto-purchases of G3B and A35 coming up in the next 2 weeks.