Finance Smiths

Personal finance apprentices-in-training

3Q2020 portfolio update and investing more

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I just updated our end Sep 2020 net worth numbers and they are looking worse than the previous months. Lowest increase in monthly net worth since the market crash in Mar 2020. Which means that the markets have dipped and this explains why I invested more in the last month. I continued to buy ETFs to increase my diversified position in various local and overseas markets. More importantly, I started buying individual stocks whose share prices have fallen significantly that I reckon can benefit from the eventual economic recovery.

However, I expect this to be a long and arduous economic recovery as countries face difficult choices. Between being aggressive by opening up more to save businesses and jobs vs being more cautious by keeping the lockdown in place longer to preserve lives. This is exactly what it means to be stuck between a rock and a hard place as countries take 1 step forward that could result in them taking 2 steps backward. It has been a challenging time for everyone to varying degrees, some worse than others.

This could explain why markets may plateau from this point onwards without any real trend in an upward or downward direction. My strategy is to buy the dips when they happen by keeping a large cash balance on standby. But don’t over-utilise it in my eagerness to generate higher returns because of the low interest rate environment. It’s tempting to invest more cash now to generate higher returns based on a long-term investment horizon. But I have to be patient and wait for more time to pass before I can assess how deep of a hole we are really in.

This may take until next year for me to gain more certainty on any green shots of economic recovery and better understanding of the long-term impact of what we are going through now. In the meantime, my weekly Dollar-Cost Averaging also continues to increase my position in the market just in case an upward trend gets established without me picking up on it. Just like what happened from 2Q2020 to 3Q2020. It’s not easy to figure out when you are looking at the markets on a daily basis as trends form over time. And I can’t seem to be able to zoom my investing lens in and out well enough to work them out.

Apr 2020 Net Worth Update

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Since it’s a public holiday today, I had time to update the net worth figures for Apr 2020 on our Google Sheet and blog pages. The numbers for every component – assets, liabilities, income and expenses, are looking better than the previous month. Salary & passive income have gone up due to higher dividend income from new investments made in Mar 2020. Expenses have dropped from working and staying at home.

With no big investments made other than the regular investment plans (Dollar Cost Averaging), we had more cash savings and a higher cash balance for the month. A rebound in the stock markets has translated to a rise in our investment portfolio value. The additional CPF contributions from my bonus has been credited this month so retirement funds balance went up as well. Assets have grown because of these factors.

Liabilities have fallen as we continue to pay off our housing loan and we are not applying for the mortgage relief. Even our personal tax liability has gone down because my wife now qualifies for the Working Mother’s Child Relief. We even allocated the Qualifying Child Relief and Parenthood Tax Rebate entirely to her since she has the higher income. As we spend less, our credit card payment due balances are lower too since we are not charging as much to them.

As a result, our net worth for Apr 2020 posed a strong recovery coming off the weak positive performance for Mar 2020. We will take this as a consolation because who knows what can happen next. The situation could deteriorate instead of improve and things can easily take a turn for the worse. We are just glad to see our strategies working. They are simple enough to execute but the key is consistency. And a strong belief in why we have chosen and are sticking with them. Not easy to do when there’s so much advice and noise going around.

If you look at our StocksCafe portfolio, you would see it consists of mostly ETFs and some individual stocks. These ETFs offer exposure to the Singapore, Asia-Pacific, Emerging and Developed Markets. They are held in a combination of manual investments with Stan Chart Online Trading Platform and Robo-Advisors (StashAway and DBS DigiPortfolio). In time, our plan is to sell away the remaining individual stocks and only hold ETFs. We don’t have to think, analyse and evaluate before buying ETFs.

Once we have selected the specific ETFs and financial services, we buy regularly and in large amounts when the market falls are big like what happened last month. When market returns are applied against a strong capital base, ETFs can be an effective means of investing. We don’t have to worry about business fundamentals, structural changes in the economy and competitive pressures now or going forward. But we are still plugged into any form of significant mainstream growth in the local and global economies to benefit from it.

By keeping investing simple and easy enough for us to execute regularly, we don’t waste any more time wondering what more we can do with it. We spend that time saved on protecting and increasing our core source of income – salaries from our jobs. We are much more focused on improving this daily aspect of our lives then anything else. Work takes up 10 hours of our day when we have to travel into the office. It takes up 8 hours when we get to work from home. If we don’t improve our working conditions, it doesn’t matter what we do outside to make up for it. It will never be enough. Which is why our most important objective from this crisis is to ensure we transform the way we work in our banking corporate jobs. And we have to keep pushing for it.

First full week of us working from home

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We are coming to the end of the 2nd week since the start of the circuit breaker measures in Singapore on Tues 7 Apr. I went into the office on Mon 13 Apr morning to fix the last of my work laptop issues. And commenced working from home in the afternoon onwards. So this is the first full week of my wife and I working from home together.

It has been quite the experience as we had to set up separate work stations in the living and dining areas of our small 2 bedroom apartment. With the baby and helper moving around, all of us interacting at such close proximity every day is bound to cause friction. The first few days were tough for so many reasons.

My wife is trying to catch up on months of BAU work stuff and pivoting her job scope into a less demanding role in project. This requires multiple conference calls with colleagues and attempting it with a work from home arrangement for the entire office locally and overseas has been challenging. It has added a lot more stress and pressure on her, which made it difficult for her to spend quality time with the baby.

Or just being there to take care of him in general. Something my wife feels guilty about as she grapples with the challenges of being a working mum. This is already not as bad as if she had to go into the office and more time is used on transport and meetings. Her aim for next week is to keep catching up with her colleagues and learn more about the new job scope. While better managing the time split better work and family so she doesn’t get overwhelmed by having to constantly deal with conflicting priorities. The situation should improve for her over time.

The transition to working from home has been smoother for me. Mostly because I’m not the one coming back from maternity leave. It’s just a matter of pushing back new initiatives and focusing on BAU work stuff. The upside for me is having more time to spend with the baby now that I’m at home a lot more. I get to do some of the morning baths, feedings and playtime with him. While it’s the reverse for my wife as she has less time for that with work occupying more of her day. So it’s time for me to step up and support her now more than ever as I’m actually at home in the day.

It’s a work in progress as we both have to adjust individually and together in this new work from home environment. Because we think the circuit breaker measures in Singapore are going to be extended until the end of May. And the work from home arrangement might last until Jun. But it still beats going into the office for now. Though we think the optimal state is a blend of work from office and home. This is our ultimate objective we are looking to achieve going forward with our jobs.

As for investments, the equity markets have rebounded and I’m staying on the sidelines for now. I had already invested S$150,000 into ETFs, robo-advisors and individual stocks during the market falls so I don’t have as much fear of missing out. My Dollar-Cost Averaging into ETFs and robo-advisors of more than S$1,000 every week is increasing my positions in the equity markets so I stay invested. But all manual lump sum investing have come to a complete stop. As I wait to assess the extent of economic damage done and how deep of a recession we are in from the fallout of Covid-19. More data is needed and only time will tell.

This pause in investing actions has also given us time to reassess our asset allocation in such unpredictable times. Our total asset is reaching S$1.45m and its composition is looking healthier now since we were too cash heavy previously.

  • Cash (Investing, Spending and Emergency) – 35%
  • Investments (ETFs, Robo-Advisors, Individual Stocks & Bonds and Insurance) – 35%
  • Retirement Funds (CPF and Superannuation) – 30%

Our liabilities will keep going down as we plan to continue paying our monthly housing loan and income tax instalments. We don’t intend to apply for the associated Covid-19 relief measures because they are not meant for us. We haven’t been as badly impacted as others in most aspects of our lives. Still being employed means we have enough monthly cashflow to pay off our big mortgage and high expenses for now.

Our net worth is approaching S$900,000 but the rate of increase has slowed down. We still have a long way more to go with the Covid-19 fallout so we are just satisfied with any kind of monthly progress. It can get a lot worse so we are just hunkering down in our bunker at home and weathering the ongoing medical, economic and financial storm caused by Covid-19. Stay safe everyone, take care of yourselves and let’s look forward to better times ahead.