Finance Smiths

Personal finance apprentices-in-training

Changes to our robo-advisor accounts

by //

We took the 2nd vaccine jab yesterday afternoon and had some Panadol after that at night as a preventative measure. The side effects are similar to the 1st vaccine jab – sore arm, body feeling warm and tiredness. We are hoping it doesn’t get worse and we start feeling better over the weekend. Anyway, Phase 2A (Heightened Alert) has started and we have rescheduled a few small group gatherings to late August and after. At least the pre-school is still open so our boy gets to go there for half a day to take part in the activities and have fun with his teachers and friends. We just got to find a way to get through this tough period of time.

As of today, we have completely liquidated our OCBC RoboInvest and DBS DigiPortfolio accounts to raise cash for the private property purchase downpayment. These were profitable positions but the fees charged by OCBC and DBS for managing the portfolios digitally were starting to eat into the profits. It was not obvious when the global and local equity markets were on a bull run previously but became more so when the markets have been rather flat. No automatic funds transfers into these accounts for investing also made it difficult for me to have to manually remember to transfer the funds every month. And we still find StashAway to be a superior robo-advisor at this time so we are going back to sticking with the one.

Speaking of StashAway, we recently received an email from them about re-optimising our portfolios. Main reason is to capture growth opportunities globally and to protect our portfolios from rising inflation in the US. This is what they are doing to prepare our portfolios for the new economic conditions:

  • US-based assets will be optimised for an inflationary growth environment – positive inflationary momentum and positive growth momentum.
  • Non-US based assets will be optimised for a disinflationary growth environment – slowing inflationary momentum and positive growth momentum.

We agree with StashAway’s reoptimisation approach and can’t wait to see what the actual changed target asset allocations are. We are hoping not to have to liquidate any part of the StashAway accounts and will try to draw down our overseas cash funds & surrender values of wholelife insurance policies. There’s about 2 months plus left to pull together the remaining cash funds for the private property purchase downpayment and I’m hoping for more favourable conditions to facilitate this.

How much CPF-OA to use for private property

by //

We had steak and wine for dinner tonight as a last hurrah before the Phase 2A (Heightened Alert) restrictions kick in tomorrow. And we are having the 2nd vaccine jab in the afternoon as well so we are preparing to go down for a few days. We are expecting more severe side effects this time around and will just be resting at home as much as we can. Not looking forward to it but at least we start the 2 weeks countdown to the time when we will be considered fully vaccinated. We are hoping for a relaxation of the restrictions around the National Day public holiday for the fully vaccinated but are otherwise mentally preparing ourselves to weather the storm until mid Aug.

As I prepare to raise more cash funds within these 3 months for the purchase completion of my resale condo, I have also been thinking about how much CPF-OA to use for the downpayment and for the monthly housing loan instalment payment. Buying a private property at such a high price involves a large downpayment and I don’t have sufficient cash on hand. I have been asked whether it’s better for me to wait for the property market to fall before making a resale condo purchase. Probably true if I have the luxury of having a big enough place to house my family without having to pay rent. But I don’t and renting is not a long term solution to my family’s need for a home.

I could rent somewhere cheaper or find a way to squeeze my family into my parents-in-law’s house in the meantime to time the property market. But I refuse to compromise on my family’s lifestyle and rather spend the money to maintain it. I have also been asked whether I considered buying newer condos with well-maintained facilities. I’m not touching any new or recent condo launches at the current price level and I don’t think the 3 bedroom apartments are big enough to house my family. I can make do with older facilities and renovate a resale condo to refresh the apartment. But I can’t create more space and change the layout so these are important considerations for me.

Anyway, I plan to wipe out most of my S$120k worth of CPF-OA for the private property purchase to reduce my cash outlay at the start. But keep a small portion of it leftover as a building block. For my monthly housing loan repayments, I plan to pay about S$1k from my CPF-OA each month and keep the few hundred dollars of contributions remaining to stack on top of that building block. The interest accrued on CPF-OA used for private property is a difficult problem to manage. Overusing my CPF-OA means eating into my sale cash proceeds if I ever decide to sell the apartment. Because I have to pay back both the CPF-OA used and interest accrued. I saw that happen to my wife when selling our previous private property. Unless the price has appreciated significantly, chances are I will be left with little sale cash proceeds.

Averaging down on stocks and cryptos

by //

It’s frustrating but Singapore is returning to Phase 2 (Heightened Alert). We managed to squeeze in a few dining-in gatherings over the last week and a half so we did get to catch up with some friends. But it’s a disappointing turn of events to lose that so quickly after just opening up not long ago. I’m not happy about this and we are trying to come to terms with it. Since we can’t go out much for social interaction and gym exercise anyway, we decided to bring forward our 2nd vaccine jab earlier to later this week for my wife & I, and early next week for my helper. Might as well use this time to wait it out at home for the 2 weeks after the 2nd vaccine jab to pass so we can be considered fully vaccinated.

Not surprisingly, the Singapore stock market fell on Mon and will probably continue to do so the rest of this week. The same applies to stock markets globally that are also falling as countries struggle to cope with the Delta variant. I have only been selectively averaging down on some of our Singapore stocks, Chinese tech stocks & ETFs that have dropped more significantly. Though the latter is due to the increased regulatory scrutiny and restrictions by the China government. With my limited cash, I can average down probably up to the point of this market dip becoming a correction. If it becomes a market crash, I will probably run out of cash by then. But only at this point will I start to explore the possibility of opening a margin facility to take on secured loans (by pledging collateral such as stocks) for the purpose of purchasing shares.

As for cryptos, I would say the market correction is becoming a crash and I have been averaging down on my crypto positions. I don’t have enough cash to make big purchases but neither do I have enough conviction to do so. While I still believe in the future of cryptos, this doesn’t translate into me investing large sums of money into it. There still has to be some level of position sizing in accordance with the proportion of each asset class in our investment portfolio. I’m managing it for my family and I can’t afford to take on too much risk for the sake of generating returns. But cryptos are too important to be ignored and I can’t afford to be too risk averse and not generate sufficient returns.