We are just past mid-week and it’s nice that we are officially out of circuit breaker and in the Phase 1 exit. We went for a walk in the evening with the baby and it felt good knowing the lockdown restrictions are finally starting to be lifted. We should be visiting our families with the baby this weekend since they have not seen him for the past 2 months. And my wife is also having her long overdue hairdressing appointment. Small steps forward but it’s better than nothing.

Work is going better this week compared to last week. It ebbs and flows with good days and bad days. But being able to stay at home with the baby does help to make the bad days better. Another restructure is coming up at my wife’s bank in the next few months so it would be interesting to see what happens then. Everyone just wants to protect their jobs in a recession so people are understandably tense and nervous. There’s already lots of conversations happening as staff jostle to stay relevant, show they are busy with work so their jobs don’t get cut. Guess we will find out in time.

As I was updating our net worth Google Sheet, a noticeable trend is a drop in our monthly interest income. This is due to banks cutting interest rates on their savings accounts. Given that we hold our cash balance in a number of higher interest savings accounts (DBS Multiplier, OCBC 360, UOB One and CIMB FastSaver), all of them have reduced interest rates on the deposits held in them. We used to receive more than $1,000 of interest income every month and it has since gone below $1,000. We expected this but it still stings to see it happen.

We have benefited from the recent market rally (set to enter bull market), having made a big lump sum investment in Mar 2020 during the bear market. We stayed disciplined and continued to invest as the markets fell then. We used up 30% of our warchest before the markets rebounded from end Mar 2020. Since then, we have made no further lump sum investments as our increased weekly Dollar-Cost Averaging kicked in to ensure we don’t miss out on a sustained market rally. Which seems to be the case 2 months later in Jun 2020 now that countries and businesses are starting to open up for economic activity again.

Things can still take a turn for the worst if a 2nd wave hits. While it is definitely a possibility to consider, it’s too early for us to take a higher risk position on this. We didn’t miss out on the market fall in Mar 2020 as we doubled the size of our investment portfolio then. We don’t regret not investing more because we stuck to our strategy and the drop in price levels only triggered a use of up to 30% of our warchest. Anything more would have required us changing our strategy midway or breaking the investment limit rules we have set for ourselves.

The market panic was a test of our resolve and what we have learnt about ourselves when it comes to investing. Mainly that we are not good at investing and we have to keep it simple for ourselves so we don’t screw it up. And don’t overthink it. Have the investment action triggers ready at the preset pricing levels and just keep firing big enough bullets each time round to make it count. But always make sure we have spare rounds remaining because we never want to be left with an empty chamber.

Which is why we are not chasing this market rally. We don’t see this as an opportunity to use up our remaining warchest even if the interest income on cash is dropping. In the event that a 2nd wave does not happen and the economic recovery is V-shaped, we would benefit from the flow-on positive impact on our jobs. Because it would mean normal promotions, salary increases and bonuses are back on the table that we can work hard towards. It doesn’t even matter much how high my investment portfolio value is increasing because I’m still building it up anyway.

It’s what happens otherwise that worries me. A prolonged recession with a slow economic recovery that negatively impacts both our job prospects and investment portfolio value. Without a large cash buffer to hedge against this risk, we may be forced into liquidating our investment positions at low price levels to sustain our family household finances. That would be disastrous as it could undo years of work, saving and investing. All because we chased after higher returns in such an uncertain time. Any tail risk with the potential to wipe us out should be hedged against seriously. It’s why we buy medical and life insurance.

We are slow and steady when it comes to investments because we don’t know how to be anything else. We just have to be patient and give it time. So we focus on crafting the comfortable life we want for ourselves. We keep trying to navigate our careers to get into jobs with decent pay, stable hours, colleagues that we get along with and interesting enough scope of work to keep us occupied. We maintain separate and combined professional and personal social circles. We spend time by ourselves, as a couple and together with the baby as a family. It’s a perpetual work-in-progress because we will never fully get what we want from each area. Which is how we motivate ourselves to keep moving forward and striving to improve our lives.

Circuit breaker is ending and we are moving into Phase 1 exit soon. The main change for us is the family visits & hairdressing appointments and we are looking forward to that. Everything else is likely to remain the same for us. We would still be working from home and buying even more groceries to cook at home. We only order takeaway food for pick-up/delivery about once or twice a week. It’s interesting how our dining habits have changed and it might stay this way even in Phase 2 exit. Still too much trouble to head out and dine in cafes/restaurants then.

Work picked up this week as we get into the swing of things and more staff are preparing to go back to the office. We plan to keep working from home for Phase 1 and 2 exits and might only start going into the office part of the week during Phase 3 exit. We have discussed this work from home/office arrangement with our managers and they are okay with it. As long as we get the job done, they don’t really care where we do it from. Which means we continue to be able to spend more time with our 7 month old baby at home. This has been the biggest win for us so far and we hang on to it as motivation to look beyond and push through the difficult times of being stuck at home during circuit breaker and Phase 1 exit.

As for our investment portfolio, the value has been going up with the rebounding markets and our automated Dollar-Cost Averaging of $1,250 every week. After our big lump sum manual investing of $200,000 in Mar, we haven’t made much additional manual investments since then. We increased the automatic investments since Mar for the Dollar-Cost Averaging to be more effective in down markets. These actions have corrected our previously cash overweight asset portfolio into a more evenly distributed one. Currently, the asset allocation is Cash – 35%, Investments – 35% and Retirement Funds – 30%.

We are surprised at how much the markets have rebounded in these 2 months. The financial markets have recovered much faster than the real economy and this disconnect is interesting to say the least. We wonder whether the financial markets are too forward looking and projecting too quick a recovery. There’s so much commentary on this and valid points have been raised on both sides of the argument. It just depends on your personal bias and view as to how you would position your asset portfolio as a result.

We try to tune the noise out and focus on what we know. We work in retail banks and as the biggest segment of the financial intermediary industry, we are connected to the most parts of the real economy. Just because of how extensive the business lines are. We had internal briefings on the economic outlooks from different perspectives at bank, division and department wide levels and one thing is clear. Nobody is sure about anything. Just like us, banks are flying blind and uncertain about how to navigate this crisis and its aftermath. So they take mitigating actions by managing their costs downwards, raising provisions and protecting revenue. Essentially, it’s all about risk management until there’s more certainty.

We apply the same approach as well. Our spending has gone down and we have taken this opportunity to lower our living expenses generally. The trigger we needed to make structural changes to our life so we spend less. We are doing everything we can to hang on to our jobs to keep the monthly salary income coming in. We know our jobs are value-adding and stable but the key is to stay ahead of any developments on restructuring and retrenchment. That requires us to keep ourselves connected to the right people and decision makers. Getting caught out now unexpectedly would be bad for us.

Lastly, we are rebuilding our cash position by not manually investing more of our salary income above our automated Dollar-Cost Averaging every week. This has been happening for the past 2 months and our cash balance is slowly recovering. We are okay to lose out on potential higher returns if we had invested more of our cash now. Because it’s the tail risk we are worried about. We earn and invest enough to be comfortable with the returns we have now. We don’t need to chase higher returns in a time when the tail risk of us being wiped out has increased. No matter how small the probability is. Managing our risk to hedge against economic uncertainty is a continual process and this looks to be in place until the end of this year.