Finance Smiths

Personal finance apprentices-in-training

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.

Increase POSB Invest-Saver to S$400

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The weekend is over. It was a great one but I now have to go through another week of work to get to the next weekend. Fascinating how time seems to slow to a crawl when you are sitting at your desk in the office on Mon morning looking at your laptop screen. Anyway, I have been thinking about my previous posts on how we index invest every month and relevant FinTech startups for us. As much as I would like to integrate the Smartly robo-advisor platform into my ETF portfolio, it still has not been launched to date.

I understand it’s a regulatory compliance issue and the Monetary Authority of Singapore (MAS) really should be moving faster on this. All that talk by the Singapore Government about encouraging the FinTech industry but regulations seem to be the main cause of delays again and again. It’s frustrating as an investor in Singapore not to have access to a robo-advisor platform when it has been proven to be such a fantastic wealth-building tool in US and Canada. Even worse when there is actually a product ready-for-launch and you are just waiting to access it. Can’t imagine what it’s like for the Smartly team.

However, I realised I have to be more efficient at deploying our investment cash. It’s one thing to let our cash on hand build up as a buffer for emergencies & expenses but another to do that with our investment cash. Unless I am predicting a market crash in the near term (which I am not), that’s just poor asset allocation on my part. Hence, I have decided to increase the monthly investment amount of our POSB Invest-Saver in the Nikko AM Singapore STI ETF (G3B) from S$300 to S$400. In addition to the S$100 monthly investment in the ABF Singapore Bond Index Fund (A35), the total amount of S$500 is the most cost effective level before I have to start exploring other regular savings plan options.

There’s a useful MoneySmart article that compares the various regular savings plan options (POSB vs OCBC vs POEMS vs Maybank Kim Eng). Have a read and you can understand why I’m reluctant to invest more than S$500 in the POSB Invest-Saver when there are cheaper regular savings plan options. I know the increase of S$100 is not much but it will help to soak up some of the investment cash. Instead of starting another regular savings plan, I have allocated a monthly investment amount of S$500 for the Smartly robo-advisor platform.

The POSB Invest-Saver as a regular savings plan that offer exposure to the Singapore equity and bond markets will suffice. My objective is to set up the Smartly robo-advisor platform as a regular savings plan that offer equivalent exposure to the global equity and bond markets. I hope the Smartly product is launched soon. As my wife and I get busier with work, especially after my job change, I would like to automate more of our investment processes.

FYI, we have been spending time with our friends and their kids over some weekends. It’s been a good experience and precursor to what it would be like when we have kids of our own. But I have also noticed how little time the parents have to themselves in each day. It’s more important to spend that time with each other to continue developing the relationship than on investment research and analysis. Going forward, It will definitely help to have more of our investment processes automated so less actions are required on our part. Time to wait and see how this works out.

Changing jobs

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I have held back from writing about this recent development in my professional life because it’s quite personal and I wasn’t sure how useful it would be on this blog. But I figured a change in jobs is a significant event because it can have an immediate and long-term impact on your salary income. Which makes this a personal finance topic.

Newsflash: I will be resigning from my current position in an accounting firm and taking up a new position in a bank. This means I’m finally joining my wife in the banking industry, which is something I never imagined doing.

I have always believed in employment risk diversification to reduce the possibility of both my wife and I being retrenched at the same time. Working in different fields and industries is a good way to achieve that. Protecting at least one source of salary income is a high priority for us to be able to navigate an economic downturn and recession.

So why have I gone against my risk diversification philosophy? I have considered all these factors that led to my decision and figured it would be a good reference point to check back on after working in my new job. Just to see how they played out.

1. Is the salary income higher?

I always knew salary incomes in the accounting industry are lower than those in the banking industry. And I could justify that by convincing myself that my technical skills and knowledge will increase at a faster pace. At some point in time, I will be able to catch up on the gap in the salary income and make up for it. Besides, I figured there was more room and scope for professional development in an accounting firm.

I have come to realise that this is not entirely true. I can say this because my wife and I entered into the banking and accounting industries respectively with similar academic qualifications, achieved the same professional qualifications and our career paths have diverted.

It’s true that I picked up compliance and advisory technical skills and knowledge in an accounting firm. But my wife has also picked up specialist skills and knowledge in a bank. Neither is less valuable than the other. However, a lower starting salary and slower increase in salary due to a fixed promotion ladder has resulted in an ever increasing gap with my wife’s salary.

I’m happy to have a wife that out earns me and I don’t understand why society views it as an issue to be discussed. I could go on and on about the benefits of a higher earning wife but that’s not the point of this post. What’s important is that I start pulling my weight to address this salary gap. Not just for my wife but for myself as well.

I agree that money should not be the most important factor in a job. But it is one of the main employee motivation factors for me. The fact that I can be paid 15% more by making a lateral move from an accounting firm to a bank makes me wonder how much my lost earnings are from not having done so earlier.

2. What about the current job crisis in the banking industry?

This is a good question posed by my colleagues. Why move to the banking industry that is currently going through a job crisis with increasing retrenchment statistics? The problem for me is revenues are already declining in my current team and will eventually cause a restructure. I might as well deal with that problem now and move to an external role with demand for my skills and knowledge.

This actually answers the question above. It depends on which area of the bank I am moving to. If that division is in decline, I am going to run into the same issues eventually. However, if it’s in a growing area such as regulatory compliance, there’s potential for longer-term application of my expertise.

3. Would my professional development plateau?

I will admit that my professional development might stagnate. But it’s very much up to me to decide whether that happens. The work environment in an accounting firm pushes you to learn but you have to push yourself to learn in a bank. It’s easy to keep doing what you are doing and not pick up new skills and knowledge.

In short, there will be a greater learning inertia at a bank but I have to be active in overcoming it. Besides, failing to do will probably result in retrenchment so I might as well give it my all.

4. How does this fit into my personal finance goals?

One of my biggest weaknesses personally and professionally is that I get bored with what I’m doing quickly. This translates into me starting something and never finishing it properly. As you can imagine, doing that in your career can have disastrous consequences.

I have done my best to alleviate this by working in different aspects of the same field to keep myself interested in the job. But all these moving and jumping around in my job history will cost me in the long run for my career. Something my colleagues have made sure to point out to me.

This is what I have to say. Screw it. I only have one life and I’m going to learn as much as I can about as many things as I can until I find something that really fires me up. Actually, I might already have.

As a couple, our ability to generate salary income has contributed greatly to the growth in our asset portfolio. However, lifestyle inflation has eaten into our net worth by resulting in a large amount of liabilities.

The more I manage our personal finances on the assets, liabilities, income and expenses, the more I realise there’s so much that I don’t know. This is the case even when I am interested in learning about it. I can only imagine how much steeper the curve is for people who are not interested but still want to improve their personal finances.

I have to believe that what I learn and earn from my jobs will eventually result in me being able to contribute to improving the general personal finance management and education level of people in one form or another. This might result in me not having a traditional career path but I reckon it’s something worth striving for.