Finance Smiths

Personal finance apprentices-in-training

Shifting my asset allocation towards growth

by //

I just updated our 30 Sep 2017 numbers and these are the percentage increases of our assets and net worth:

  1. Cash: +0.52%
  2. Investments: +2.92%
  3. Retirement & Medical: +1.15%

Net Worth: +5.07%

It was a significant month for us in terms of investments as we started our monthly Dollar Cost Averaging (DCA) of the Vanguard UK-listed ETFs. In addition to the automated banking monthly investment plans and robo-advisor accounts contributions, we are gradually starting to push more cash funds into the markets.

The decision was made to be more aggressive with our investments after reviewing the asset allocation percentages. Despite the fact that we are both relatively young, working in full-time jobs and drawing salary income, we are too conservative with our cash utilisation.

Being overweight in cash as a position is one thing. Having close to half the portfolio in cash just means we haven’t been managing our asset allocation percentages well. This is our attempt to rebalance them more effectively by leaning towards the equities component. It should take us about a year to change it to a growth portfolio.

We are entering the last quarter of the year 2017 and this is the time where we start to get ready for our annual performance reviews at work. We look back at our achievements, failures and determine the areas of improvement for career progression. It is also a good time to think about how we want to position ourselves for the new year 2018.

We have managed to survive our respective divisional restructuring so far but the job and economic environment continues to be uncertain. We don’t have a clear path forward but at least we know we are not moving backwards. With the risk of retrenchment coming back down to more manageable levels, we can afford to reduce our cash buffer against job loss.

It’s easy to get bogged down with work, daily life and lose sight of the big picture. Asset portfolio management is an essential skill we need to build up because it sets out the high level goals that we are trying to achieve. From there, we build the roadmap and pay attention to the detail.

Even though we should keep ourselves focused on the tasks, we have to keep aligning the actions taken with the overall objectives. It’s a delicate balancing act between being a big picture thinker and detail oriented. We just got to keep juggling between the two to make this work.

Investments for July 2017

by //

Automated Investing for July 2017

Maybank Kim Eng Monthly Investment Plan (Maybank KE MIP)

  • Buy 29 units of SPDR STI ETF (ES3 on SGX) at S$3.29 per unit on 10 July 2017
  • Buy 90 units of Nikko AM REIT ETF (CFA on SGX) at S$1.065 per unit on 10 July 2017
  • Transaction costs of S$2

POSB Invest-Saver

  • Buy 30 units of Nikko AM STI ETF (G3B on SGX) at S$3.39 per unit on 18 July 2017
  • Buy 85 units of ABF SG Bond ETF (A35 on SGX) at S$1.168 per unit on 18 July 2017
  • Transaction cost of S$1.50

OCBC Blue Chip Investment Plan

  • Buy 439 units of Nikko AM STI ETF (G3B on SGX) at S$3.40 per unit on 24 July 2017
  • Transaction cost of S$5

Total invested amount in ETFs of about S$1,900 using Automated Investing for July 2017 with transaction costs of S$8.50.

Manual Investing

Nil for July 2017.

Robo-Advisor Investing

StashAway

  • Funds transfer of S$200 invested in US-listed ETFs excluding annual fees based on total S$ investment

Smartly

  • Funds transfer of S$200 invested in US-listed ETFs excluding annual fees based on total S$ investment

Wife sets up Smartly Singapore robo-advisor account

by //

Smartly Singapore responded to our query emails and sent us the sign-up notification email with the referral code. Good job with this and appreciate the follow-up! Previously, I mentioned that I will be setting up the Smartly robo-advisor account since my wife set up the StashAway Singapore robo-advisor account. But I changed my mind after realizing the bulk of the Monthly Investment Plans (MIPs) with the various banks is in my name. It’s essential that my wife holds more investments in her own name and we decided to let her set up the Smartly account as well.

The Smartly onboarding process was smooth and the interface was simple & easy to use. The current 4 x S$100 transfers in a month for my wife’s StashAway account are on the 1st, 8th, 15th and 25th of every month. For July 2017, S$200 has already been transferred into her StashAway account: one-time transfer of S$100 and regular transfer of S$100 on 25 July 2017. To mirror the setup for my wife’s Smartly account, we are doing 2 x one-time transfer of S$100 (i.e. total of S$200) into the account by this week. We also set up 4 x S$100 transfers in a month for my wife’s Smartly account on the 4th, 11th, 18th and 28th of every month.

The direct competition between StashAway and Smartly is on! They both have similar starting funds and funds transfer dates & amounts. If possible, we intend to support both robo-advisors in the long-term and have no problem parking even more funds with them. This should be the case even if one outperforms the other because the ETFs they invest in for the portfolios my wife have seem to be somewhat different. These are the holdings of her Smartly account:

  1. Emerging market bonds
  2. US small cap value stocks
  3. US total stock market
  4. US large cap value stocks
  5. Gold
  6. Inflation protected bonds

What I like about both robo-advisors is that their ETF holdings don’t overlap much with our own manual ETF holdings. This diversification would allow us to build our manual ETF holdings and increase our exposure to other equity markets. Without worrying about what we are also doing with our robo-advisor accounts.

With the last piece of the puzzle in place, this is our monthly automated investments setup:

  1. POSB Invest-Saver: S$200
  2. Maybank MIP: S$200
  3. OCBC BCIP: S$1,500
  4. StashAway: S$400
  5. Smartly: S$400

The total monthly cash funds invested automatically is S$2,700, which works in the current bull market environment. It’s also important to identify the points of increase in a bear market environment i.e. which MIP or robo-advisor to increase the monthly investment amount and by how much.

This is our intended action plan in a minor bear market:

  1. Increase monthly OCBC BCIP investment from S$1,500 to S$1,700
  2. Increase monthly StashAway investment from S$400 to S$600
  3. Increase monthly Smartly investment from S$400 to S$600

Total monthly invested amount goes up by S$600 to S$3,300.

This is our intended action plan in a major bear market:

  1. Increase monthly OCBC BCIP investment from S$1,500 to S$2,000
  2. Increase monthly StashAway investment from S$400 to S$800
  3. Increase monthly Smartly investment from S$400 to S$800

Total monthly invested amount goes up by S$1,300 to S$4,000.

These steps will be taken on top of our own manual ETF investments during mini and major bear markets. No point planning to make big increases because it would be difficult enough to make those small increases. By staggering the small increases, we are more likely to stick to the action plan in a tough market environment. Otherwise, we will be too afraid to make any significant changes to our automated monthly investments. Besides, nobody knows when and how the next crisis will happen that causes the bear market, much less the severity of it.

Our asset portfolio is finally up and running with the triggers and plans in place. More importantly, it’s growing every month with regular cash injections into our savings and ETF portfolios. Of course, this is contingent on us not losing our jobs. But we can now focus better on addressing the higher retrenchment risk without having to worry much about our savings and investments. We can also look to reduce our high expenses but still spend on fun items such as travel, dining and entertainment. Limit the number of focus areas & decision-making points and we just might achieve better results.