Finance Smiths

Personal finance apprentices-in-training

Wife sets up StashAway Singapore robo-advisor account

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Things have been quiet lately on my blog because there hasn’t been any major updates. I have recovered from my recent bout of illness, which took longer than I thought and was not a pleasant experience. I’m trying to make changes to our living habits by sleeping, resting, exercising more and improving our diets by eating healthier and home-cooked food. Let’s hope this pays off and I recover faster the next time.

Anyway, it’s time for some exciting news. My wife received the sign-up notification email from StashAway Singapore that she can now set up her robo-advisor account with them. The main reason for my wife going with StashAway Singapore instead of Smartly Singapore is due to the lower fees as the investment amounts increase to significant levels. We should be building up her robo-advisor account more quickly than mine since most of our current Monthly Investment Plans (MIPs) are using my bank accounts. Hence, it’s critical that the fees she pay are lower for large investment amounts.

I know the portfolio/asset allocation framework is different between StashAway Singapore and Smartly Singapore. Since we can’t accurately compare the returns from these different portfolio/asset allocation frameworks at this stage, we have to go with the pricing structure as the main point of consideration. After all, the plan is for my wife to go with one robo-advisor (StashAway Singapore) and for me to go with the other robo-advisor (Smartly Singapore). As we work out which portfolio/asset allocation framework is superior over time or if the pricing structures change, we might amend our funds allocation accordingly.

Since I am still waiting for my sign-up notification email from Smartly Singapore, I might write about my wife’s experience setting up her robo-advisor account with StashAway Singapore. The onboarding process was smooth and we found the additional questions on our income, expenses, net worth and investment aims useful in the goal-setting and risk allocation of the portfolio. For my wife’s account, she went with a very aggressive General Investing portfolio. It has a higher proportion of growth Exchange Traded Funds (ETFs) compared to protective ETFs.

The asset allocations of this very aggressive General Investing portfolio in relation to the various growth and protective ETFs are interesting, especially those listed on the New York Stock Exchange (NYSE). Given that the holdings of our current foreign ETFs listed on the London Stock Exchange (LSE) do not overlap much with that in the robo-advisor account with StashAway Singapore, it’s a good start.

We have taken a conservative approach and only made a one-time funds transfer of S$100 into the account. Just to test out when and how this cash amount is invested. After we gain a better understanding of the logistics, we should commence monthly funds transfers into the account to automate the investment process. Will provide more updates as we get more advanced in our knowledge of the account.

Net worth and passive income for June 2017

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I was unwell this weekend. Started developing a cold and cough on Fri before it got worse on Sat. Feeling better now on Sun after sleeping in for the past 2 days. Going for a more straightforward post about our net worth and passive income for June 2017 since I am still recovering.

Cash and Net Worth

If you looked at my expense blogpage, our cash savings for June 2017 is S$5,467 and the savings rate is 29.99%. It’s our worst performing month for the year. But what isn’t going to make sense is that our net worth went up by S$19,127 (i.e. +8.60%), which is our best performing month of the year. Much of this increase is attributed to our cash holdings rising.

I should explain this anomaly in more detail. Every month, I only add S$5,000 to our cash holdings in the Google Sheet regardless of what our savings rate is. This works because we usually save more than S$5,000 in cash each month and I’m too lazy to add the exact amount to our cash holdings. What happens is that every few months, I will restate the cash holdings figure in the Google Sheet to improve its accuracy.

I did this for June 2017 and our cash holdings in the Google Sheet went up by a lot more than the actual cash savings for the month. There should be a better way to do this but it will require more regular checking and updating of our cash holdings in the Google Sheet. And my preference is to keep it simple with less monitoring required.

Investments, Mortgage and Retirement

Watching our ETF and Stock portfolio go up slowly and mortgage balance go down even more slowly can be frustrating. I know progress takes time and I have to resist the temptation to speed things up by being reckless and taking unnecessary risks. Sometimes, I catch myself wondering whether we should have bought a less expensive apartment so we don’t have such a large mortgage balance. But then I think about all the benefits and advantages we have by living relatively close to my parents-in-law and that feeling of regret goes away. You can’t have everything your way in this world. Win some, lose some.

From my previous post about the drop in our monthly housing loan instalment, you should know we pay S$1,000 of this instalment from our CPF Ordinary Accounts. Given that our combined monthly employer and employee CPF Ordinary Accounts contributions come up to about S$2,600 every month, what happens to the remaining S$1,600? We don’t do anything with it and just leave it as our housing loan Emergency Fund.

We like the flexibility of the CPF and being able to use the Ordinary Account funds for housing is a big plus point. Having a safe, secure and evergrowing housing loan Emergency Fund in the form of the CPF Ordinary Account works well for salaried employees like us. Our CPF Retirement Accounts are also coming along nicely. As long as interest rates on the CPF Ordinary Account and Retirement Account balances can be maintained or even increased, our retirement funds should be sufficient provided we don’t get retrenched.

Dividend and Interest Income

We didn’t receive much dividends for the month of June 2017. Just from the 3 companies below.

  1. Kingsmen Creative (SGX:5MZ) – S$32
  2. Silverlake Axis (SGX:5CP) – S$21
  3. Raffles Medical (SGX:BSL) – S$36

Total dividend income for June 2017 – S$89

Interest income has gone up since we sold a significant portion of our investments and increased our cash holdings. I should highlight that a part of this interest income is spending driven i.e. meeting the minimum spending threshold on our credit cards tied to the high interest bank accounts. Once we start to reduce our spending, it might cause a drop in our interest income. Convoluted stuff I know.

  1. NAB and ANZ AUS bank accounts – S$160
  2. UOB One SG bank accounts – S$200
  3. OCBC 360 SG bank account – S$120
  4. Stan Chart Esaver Promotion SG bank account – S$130
  5. Other bank accounts – S$11

Total interest income for June 2017 – S$621

Average Monthly Passive Income for 2017

This figure is starting to cross S$1,000 earlier in the year and staying above it more consistently. But I expect the progress towards S$1,500 to be slow with my investment portfolio restructuring efforts hindering it. When we eventually start our robe-advisor portfolios with Smartly and StashAway, we might re-invest the dividends/distributions instead of receiving them as cash.

As we continue to focus on ETF investing, whereby the dividend yields are lower, it means that we might not be able to rely purely on the dividend income derived from such an investment portfolio. We would have to draw down on the capital base of our portfolio for this early retirement model to be sustainable. Should have known this was the case as we moved away from dividend stock investing and lowered the dividend yield on our portfolio. Just got to keep learning!

Drop in my housing loan interest rate and instalment

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I just received a notification letter from my bank recently about the change in my housing loan interest rate, which is calculated in my case as 3-mth SOR + 1%. You can refer to this MoneySmart article about the difference between SIBOR and SOR. It also shows the SIBOR vs SOR historical chart, which I have included here for the fun of it.

I follow the 3-mth SOR orange line closely simply because it directly affects my housing loan interest rate. And my monthly housing loan instalment payment happens to be my biggest expense every month. Sometimes, I compare it to the 3-mth SIBOR blue line just to see whether it would have been better to go for a SIBOR based housing loan.

Turns out the 3-mth SOR orange line has been staying below the 3-mth SIBOR blue line so far for longer periods of time than having been above it. This is from 2011 and 2017 i.e. the 6 years I have had the housing loan. The most recent adjustment this month in Jun 2017 is from 1.90685% to 1.73565%, which lowers my monthly instalment from S$3,237.60 to S$3,187.02. About S$50 less.

The next adjustment should be 3 months later and I reckon it’s more likely to go up than down. Oh well, one can hope. Look at what happened between Sep 2015 to Mar 2016. The 3-mth SOR orange line went up sharply above 1% and stayed there for a few months. I don’t like spikes in my housing loan interest rate and monthly instalment payment. Reason being we pay S$1,000 of the monthly housing loan instalment payment from our CPF Ordinary Accounts and the remaining amount in cash.

Sudden increases in the 3-mth SOR can impact my monthly cashflow negatively. Of course, I know it’s a matter of time before the 3-mth SOR trends towards a more normal rate of about 3%. The longer this takes to happen, the more ready I am for its effects as I have more time to prepare.

I got inspired after reading this post by Mr Money Mustache – Great News: There’s Another Recession Coming. It describes the recession cycle well and how you can prepare to take advantage of the next recession in layman terms for easier understanding. Of course, it’s much more difficult to do than to read. If you look at his list of fair weather preparations, we have only been meeting half of them.

I don’t like going through a recession. It’s tough to get a read on how severe it can get and even tougher to plan & execute your investing actions accordingly. You usually end up pulling the trigger too early or waiting until it becomes too late. I believe the key for salaried employees like us is to do everything we can to avoid getting retrenched during the recession.

As long as we don’t lose our jobs and stay mentally & physically health, we have the opportunity to navigate the recession successfully and build wealth. The moment either or both of us gets retrenched, I doubt that’s going to work. But who knows. Anything can happen.