Finance Smiths

Personal finance apprentices-in-training

Employee shares and MIP transactions

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I had a good time at the gathering organized by BIGScribe last week and it was fun meeting the various financial bloggers and writers. I was late to the event and had less time interacting & getting to know the people there as a result. I got held up at work but really should make more of an effort to be there earlier at the next event. Anyway, the topics discussed were varied, interesting and useful when considering just how wide the impact of personal finance can be. I’m looking forward to being more involved and present going forward.

Work has been rather stable for me this week as I try to finish up some outstanding tasks by the end of the year. I reckon next year is going to have some changes in terms of my scope of work as I look to expand beyond my area of regulatory compliance specialization. That’s how I envision myself progressing in my career because I could get stuck doing what I’m specialized in for quite a long time. It wouldn’t be a bad situation to be in but I would prefer to be moving forward.

Change is also in store for my wife next year as she is now one step closer to a promotion she has been working hard for in the past several months. This might come with another base salary increase and would be a fantastic outcome especially when it’s right after her recent remuneration review. She just has to be patient, don’t get her hopes & expectations too high and keep doing what she has been doing. Sometimes, the hardest thing to do is nothing and just wait for the stepping stones to fall into place before you make a move.

As I do my best to support her with her transition into a management role, my belief is that it’s always going to be difficult for both the husband and wife to pursue their careers aggressively together at the same time while trying to build a family. However, it still has to be in tandem, otherwise you will risk one party getting left behind. So we have learned how to adjust the way we progress together.

When my wife takes a high risk to make a big move in her career, I stabilize my job to free up and spend more time supporting her. Likewise, when I am attempting the same move in my career, she stabilizes her end to support me. This way, we don’t run the risk of us losing our jobs at the same time, which would be disastrous. The benefit of being a dual income family is in the way you can slowly navigate your career with lower salary income dependency. Risks are a lot more calculated and measured because there is no need to make the jump for that promotion so quickly.

Actually, I realize I’m drifting off topic from what this post should be about. It’s actually a transaction update on what I did these few days. My wife’s last parcel of employee shares have vested and I sold her entire holdings of employee shares. The net proceeds is about A$5,000, which is higher than I expected, might be due to me not fully accounting for the dividend reinvestments from those employee shares. With this, we no longer hold any Australian listed shares and only have A$ cash holdings. I don’t have any plans to transfer our A$ cash funds back to Singapore and prefer to hold them in Australia. In combination with our Australia PRs, this is our overseas last resort lifeline, where we can restart a new life where necessary if things don’t work out for us in Singapore.

I cannot emphasize enough the importance of backup plans and the margin of safety they can offer. You know how they keep saying the best time to save and earn more money is when you don’t need to. It’s true. The greater the dependency link, the more restricted your options are. Which makes it difficult for you to focus on what you want to do and what you should be doing. We see this happening to the people around us and the problems exacerbate when they have kids. Not a good situation to be in.

With the recent influx of cash,  I have decided to increase the investment amounts of my Monthly Investment Plans (MIPs) in addition to the setting up of my StashAway and Smartly robo-advisor accounts. I have added the following 3 x S$100 monthly investments with Maybank Kim Eng MIP:

  1. Nikko AM STI ETF (SGX: G3B)
  2. Lion Philip S REIT ETF (SGX: CLR)
  3. Phillip SGX APAC REIT ETF S$ (SGX: BYJ)

I know there’s a significant amount of overlap in the ETFs I’m purchasing within Maybank Kim Eng MIP and even with the rest of my portfolio. I have designed it that way for now not so much for holdings diversification but because I don’t like concentrating my holdings with a few ETFs and banks. They are funds with fund managers after all and it would be unwise to think they can’t collapse just because their passive index investment approach allows less room for mismanagement and bad investments.

This increases our total monthly automated investment amount to S$3,400 and provides a stronger investing infrastructure to more efficiently deploy our cash resources. By keeping myself vested in the markets more closely, it’s easier for me to adjust these amounts upwards when there are market dips and crashes or even to identify opportunities for manual utilization of cash funds during such times.

Investments for Dec 2016

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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.

Maybank Kim Eng Monthly Investment Plan of S$500

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It’s mid week and I can feel my working pace slow down. The handover process has already begun and my workload should wind down even more as I transition out of the firm. The bad thing is that time passes slower and it feels longer to get to the end of each day. The good thing is I have more time to review our investments before I hit the ground running in my next role. After increasing my POSB Invest-Saver monthly investment amount in the Nikko AM Singapore STI ETF (G3B) from S$300 to S$400, I had another look at the regular savings plan options.

Although I’m happy to wait for the launch of the Smartly robo-advisor platform to set up an equivalent S$500 regular savings plan in global equity and bond ETFs, I considered starting another regular savings plan. No particular reason other than to transfer more forced savings into forced investments. Our monthly forced savings is at S$4,000 of investment cash and cash on hand now. This will become monthly forced savings of S$2,500 in investment cash & cash on hand and monthly forced investments of S$1,500 in ETFs.

I have to admit that three regular savings plans is not an efficient way to do index investing. I’m better off combining the S$1,500 into one regular savings plan to save costs. The thing is I like the idea of slow accumulation of different ETFs over time based on Dollar Cost Averaging (DCA). I have sufficient cash for Value Cost Averaging (VCA) and dividend investing but they require a certain level of market timing. In my short investing experience, I have come to realise that it will take a long time to develop the required skills, discipline and temperament. This might happen eventually but most probably after making many mistakes.

I’m okay to take my time to learn but the regular savings plans will keep me vested in the markets in the meantime. Higher costs and lower returns is a price I’m willing to pay until I gain the requisite experience. After reviewing the other regular savings plan options, I decided on the Maybank Kim Eng Monthly Investment Plan. Main reason is the extensive list of securities in multiple markets I can invest in. For now, I’m interested in these two securities with the following breakdown of the monthly investment amount of S$500: SPDR Straits Times Index ETF (ES3) – S$400 and SPDR Gold Shares (O87) – S$100.

The orders submitted under the Maybank Kim Eng Monthly Investment Plan should be executed on the 8th of every month as long as it is a business day. If not, on the first business day after the 8th of that month. I just have to make sure there is sufficient cash in the KE Trade Prefunded Account before the 8th for the withdrawal to execute the orders. The Maybank Kim Eng Monthly Investment Plan would be held in my name while the POSB Invest-Saver is held in my wife’s name. If possible, I would like the Smartly robo-advisor platform portfolio to be held in both my wife and my name as a joint account (will be our first one).

My wife and I generally do not like the idea of joint accounts and prefer to keep both of our savings and investments separate in individual accounts. She is okay for me to manage her money but any actions with those funds will require her authorisation. I know I previously wrote about why we chose not to invest in a Gold ETF. However, I did mention at the end of the post that we might invest in the Gold ETF after the size of our ETF & Share portfolio has grown significantly. I’m not saying that has happened. Clearly evident from the small S$100 monthly investment amount in the O87.

However, I do think it’s time to introduce a low correlation asset class exposure to better manage the recent and upcoming volatility. I’m interested to see how this precious metals exposure plays out. Since it’s still an ETF, I don’t think I can count it as a form of alternative investments. I know there are seven common types of alternative investments: Private equity; Direct investments in start-ups and private companies; Venture capital; Real assets; Hedge funds; Fund of funds; Private placement debt. These are for sophisticated investors and I doubt we will ever have enough capital and knowledge to gain access to them. It would make for a great topic to write about though and one can always dream.