Finance Smiths

Personal finance apprentices-in-training

2nd rebalancing of DBS DigiPortfolio

by //

I was on leave last week and it’s nice to take a break from work. I was able to help out more around the apartment with household chores, taking care of the baby and running of errands. My wife was working from home but will join me on leave next week. We had a busy morning today taking the baby for his polyclinic health check-up visit and having lunch after that. She went out again in the afternoon to exercise and catch up with a friend for coffee.

Good thing is that the baby has been asleep for almost 2 hours so the helper and I can have some peace and quiet at home. I took a nap, woke up to have a snack and try writing a post before the baby wakes up. We are going over to my parents-in-law’s place for dinner so it’s going to get busy again later. I’m glad my wife has some alone time to herself to do what she wants and she needs it to keep going. It’s a tough time for her at work and it can be difficult to rest, recharge and clear her head at home with the baby being so active and wanting attention from all of us.

Anyway, my wife’s DBS DigiPortfolio is undergoing a 2nd rebalancing exercise, just 3 months after the 1st rebalancing exercise. I wonder whether rebalancing every quarter is too frequent or perhaps it’s a function of investing during volatile times. Based on the commentary provided and actions taken, some of the bond ETF holdings has been sold off with the proceeds reinvested into the equity ETFs in her DBS DigiPortfolio. I can understand the reason for this, which is to tap into the growth from economies re-opening. Given how the virus crisis seems to be stabilising (at least not getting worse significantly), this move could pay off eventually.

In any case, I’m not a big fan of holding too much bond ETFs in our portfolio because we are only in our early to mid 30s and don’t plan to retire anytime soon. It’s better to have more equity ETFs in our portfolio to benefit from economic growth while we are still productive and income earning. We don’t mind having bond and gold ETFs holdings in our portfolio during volatile times as a hedge but would like to see rebalancing events happen to reposition it for growth once there’s more certainty with the economic recovery.

Even if our retrenchment risk increases during this time, we already hedge it by building up our cash balances. This acts as a buffer to tide us over until we find our next job. We don’t need the investment portfolio to take a conservative approach because we will lose out on potential gains in the markets. It would be interesting to see whether StashAway performs another re-optimisation exercise now after their last one 3 months ago as well. We still prefer StashAway over DBS DigiPortfolio but will maintain both due to their different investing strategies employed. But we continue to invest much more of our cash funds into StashAway as it is our robo advisor of choice.

With the ongoing major restructuring at my wife’s workplace and the possibility that she might not have a job at her bank at the end of it, we have been rather reflective lately on our careers so far. Perhaps more so for her as she has been working at the same bank (just in different locations) since graduating 10 years ago. There has been many ups and downs with her fair share of good and bad managers. But the bank has treated her well on balance and the concern is that she might not be able to find an equivalent job with a similar workplace environment elsewhere.

My career experience hasn’t been as positive so I have been forced to be more adaptable and resourceful as I move jobs to escape toxic work environments. Whereas she had the luxury of being comfortable in her choices of jobs and workplaces. As a result, she is less adaptable and resourceful when it comes to external job search. It’s just not a skill she had to develop but this has become a problem for her now. While my wife’s professional network internally is extensive from the years of service, it’s a lot more limited externally.

She has not developed the necessary connections with recruiters and at other banks to facilitate an external job move. To be honest, I rather she learns this life lesson now than later when we are older and less flexible in our learning mindsets. It’s always better to skill up in a time when you don’t have to because it would be too late by the time you have to. I have been reminding her about this for a while now but I understand it’s not easy to get out of her comfort zone. This time round, she might not have a choice as life often forces our hand when we take too long to make a decision. I wonder how she will navigate and what she will take away from this.

Rebalancing for the month

by //

It’s a public holiday today and we are enjoying a much needed break from work. Especially for my wife, who had to deal with the fallout of the major restructuring announcement and a project deliverable in the last 2 weeks. This has been tough for her but it looks to be a long drawn-out battle of strategy, wits and negotiation. So she must rest when possible, ensure that job deliverables are still being met, while working on securing something internally at the bank for herself in the short to medium term.

Anyway, both of us are also clearing our work to get ready to go on leave for 1 to 2 weeks. We can’t travel anywhere internationally but should go out as a family to engage in domestic tourism here in Singapore. As long as we are not staying at home because we have been doing a lot of that in the past few months. It looks like we should still be working from home for now and this arrangement allows us to spend more time with the baby. He’s coming to 9 months old and is fortunate to have so much time with his parents every day.

Especially with me as a father because I wasn’t expecting to be there for him this much. Since I have been working from home, I didn’t see the need to take any leave during this period of time. As a result, I have built up a significant number of leave days for this year. I plan to use a bit every week from Sep to give myself shorter work weeks, encash some of them and carry forward the remaining to next year. When I eventually have to go back to the office, these leave days should come in handy then.

Since we still have our jobs for now, our salary income allows us to continue with our weekly investment plans. We have also started manually Dollar-Cost Averaging (DCA) into S&P 500 and World ETFs every other week to keep increasing our investment positions in the markets. Took a while to set this up because prices have gone up significantly in the last month. But we decided to just go ahead with a basic level of manual DCA and adjust the investing amounts accordingly depending on how the economic situation develops.

With the shares of local banks falling due to the announcement by MAS asking them to cap dividends this year in light of the economic uncertainty, we took the opportunity to invest in local bank stocks and SG ETF. As we haven’t been manually investing much since Mar, there has been a cash build-up with our savings going up and expenses going down. Banks have also cut the interest rates on their savings accounts. Which has translated into higher opportunity costs of holding cash for us. When the interest rates used to be higher, the opportunity costs were lower as we held more cash to wait for market falls to invest. Doing the same thing now no longer works as well with the lower interest rates on cash dragging the asset portfolio returns down.

We have changed this strategy to deploy our cash more readily every month when there’s price weakness in the markets. This rebalances the proportion split between cash and investments in our asset portfolio more frequently to keep the allocation healthy. We will always look to maintain a large cash balance because of the financial buffers it provide. But the key is to keep the cash holding percentage of our asset portfolio consistent and not let it go up. This means that the cash balance amount is still increasing but in proportion with the rest of the components of our asset portfolio. It’s a balanced asset allocation approach and works well to navigate such uncertain economic times.

Considering voluntary redundancy payouts

by //

My wife is busy today with a project deliverable but it’s obvious the major restructuring announcement at her workplace last week has taken its toll on the morale of her team. She met up with her colleagues over the weekend and it was the main topic of conversation. Everyone is looking at the new organisation structure charts and descriptions of roles (a lot fewer than before especially in Singapore). So as to work out a strategy on which jobs to apply for that give them the highest chance of landing one. Even if my wife can keep a job, she gets stuck with additional workload overflowing from the eventual lower headcount at the bank.

This led to another consideration that came up for discussion in any restructuring exercise that could lead to job losses. Which is the issue of whether my wife should just go for the voluntary redundancy payout if it is offered. It’s important to highlight the difference between a restructuring and retrenchment exercise. The former is more about achieving change with redeployment of staff while letting go of some employees. The latter is more about just cutting jobs. In a restructuring exercise, the bank looks to redeploy you in another job (even if it’s a bad one) so it can avoid offering you the voluntary redundancy payout (though this might be offered to you at the end if you are not redeployed). In a retrenchment exercise, the bank offers the redundancy payout to you upfront since you are losing your job.

I had a discussion with my wife over the weekend and she decided it’s too risky to go for the voluntary redundancy payout option. While she has worked at the bank for about 10 years and could get a decent amount based on her last drawn salary, we don’t need that payout to sustain ourselves financially if she’s unemployed. Because I still have a job and my salary is enough to cover the household expenses and more. We might not be able to invest much into the markets anymore but it would be more about sustaining the family through her unemployment than anything else. What we are more concerned about is the negative impact to her career if she loses her job now in the current economic climate and at this time in her life.

It is unlikely my wife can get an equivalent permanent role elsewhere internally at her bank or elsewhere. This could take a long time and the employment gap would hurt her career prospects. Especially if we are thinking about having another kid. No employer is going to hire someone who will be going on maternity leave months after she joins. The end result would be an even longer employment gap that could destroy her career. To prevent this, she could take up contract roles to tide her over but risk being stuck in contract roles for a while.

This happened to a contractor in her team and it’s been years since she held her last permanent job at another bank. It was a retrenchment exercise that caused the contractor’s job loss then and she didn’t think her career would be just about contract roles after that. Once you get stuck in one, it’s difficult to get change employers’ perceptions of you to get out. In a contract role, the permanent staff don’t teach you as much or assign long-term higher-value work to you. Simply because they have no idea how long you will be around and whether you are worth their time and effort to train. The corporate world is an unforgiving one and basic mistakes could cost you a career if you are not careful enough to avoid or learn from them.

It’s understandable why the morale of my wife, her team, managers and colleagues is low. They had a good run in the last few years but it’s just not possible for the bank to remain profitable and keep staff employed without making significant structural changes and cost reductions. It’s about surviving this crisis and waiting for better times to come. Her bank still remains a good place to work at and they have showed compassion and empathy in the way they handled the restructuring. They are taking on feedback from staff and giving enough lead time for people to know what to expect and react if necessary. No one likes sudden and unexpected job losses (it’s the worst).

There’s not much I can do except to provide as much reassurance as possible that our family will be fine financially even if she loses her job. She supported me greatly when I was suffering badly in the toxic work environment of my previous job. And surviving that led me to the better job I have today. It’s my turn to support her through what I think will be a defining moment in her career. We are on the way to our mid-30s and experiences like that would set the stage for which directions our careers will take. For better or worse.