May 2020
April 2020
Saturday, 20 June 2020
Sunday, 24 May 2020
Update on May transactions
As usual, this is the time for a monthly update in regards to my investment portfolio. For non-transaction related updates, they are as follows;
1) I have decided to put off another $1000 lump investment at least till the month of June when the full economic impact of the COVID-19 will be felt.
2) I will be posting another blog on how I managed my funds whenever there is a salary *ahem* allowance credit to my account.
3) The portfolio tracker to track my overall ETFs investment portfolio has been created but requires further testing to check for errors. So do look forward to it once the testing is done
For transaction related updates, here it is.
As always take care and stay healthy during this period everyone :)
Tuesday, 12 May 2020
Singapore Savings Bonds for June
In the past, there was not many good financial bond products offered to the common man. Almost all of the government and corporate requires a minimum investment of $250,000 and above which is quite captial intensive for the retail investors. However, in 2015, it all changed when the SG government started introducing Singapore Saving Bonds(SSB).
What is Singapore Savings Bonds?
SSB is a 10-year bond program where the SG government borrows money from you, pays you coupons/interests at regular intervals and returns the money once the bond duration has been reached. In this program, SSBs are issued monthly until 2020 and an individual can sign up to $50,000 per issuance, $200,000 for the entire program. If you decide to invest, you can at a minimum of $500 and increase the amount in multiples of $500.
What makes SSB special as compared to the rest?
Firstly, SSB has this neat feature called "step up coupons" where the interest rate on your bond continues to increase each passing year. The SSB interest rate for each year is referenced to the interest rate yield on SGS bond respectively (first year interest rate is pegged to the 1 year SGS bond, second year for 2 years SGS bonds all the way till the 10th). Furthermore, SSB allows redemption at any point through the program without any penalty which is great as it makes itself very liquid. In regards to the "step-up coupons", it incentivised investors to keep the bonds till the redemption year but otherwise there's no punishments if you redeem it early. Lastly, it also capital guaranteed which means you will not lose your principal amount as the borrower of your money is the Singapore government who has a triple AAA credit rating and extremely low chance of defaulting.
What I plan to do with SSB and other bonds in my blog?
As companies try to make bond more accessible to the general public, I will do my upmost best to give my personal take on any new bonds that will be arriving to the market. When the new bond arrives, I will be comparing them to existing bonds and other similar risk level assets available on the market. Also if it is a series of bonds like SSB then I will post an introduction to that bond with a review of the first issuance and subsequently just the review alone with the link to the introduction post. Lastly, a star rating system will also be created to rate the new bonds as an illustration to my preferences.
Singapore Saving Bonds for May
So, according to the table, if you were to placed $1000 for this month issuance and held for the next 10 years, you will receive $105 for each year.
In my view, I would highly not recommend placing money in SSB right now because of mainly 2 reasons;
1) The low interest rate offered
Although an interest rate of 0.57% is higher as compared to the interest rate offered for fixed deposit, it's relatively minuscule as compared to other financial instruments that offers higher returns with similar risks such as Standard Chartered Jumpstart account at 2%, Singlife at 2.5% (without any salary commitment) or even the various programs offered by the banks like DBS Multiplier (requires salary commitments).
2) Inability to sell in the SGX market
One small disadvantage of the SSB is, unlike its SGS bonds counterparts, you will not able to sell this on secondary market in the SGX. Hence, if the MAS decides to lower interest rate further, you will not be able to sell your SSBs at a premium if you decide to use this instrument for short-term gains.
Overall, as of now, this month SSB does not serve any purpose in the long-term or in the short term due to its measly coupon rate and being a personal saving bond and unable to sell in SGX. I will be giving this issuance a 2 star rating as it has only the benefit of capital guaranteed going for it.
*This is my personal opinion, please do your own due diligence to fact check and form an opinion of your own*
Friday, 24 April 2020
Updates on April transactions and portfolio
As said in the first post, it's almost near the end of April so I will be giving you guys an update on the holdings and transactions made on my portfolio.
In the next few months, I will be tracking the COVID-19 situation and decide whether to dump another $1000 into G3B into POSB-IS. Secondly, around the month June, I will be opening a Standard Chartered online trading account which will be used for purpose of buying VWRA. Lastly, I am also creating a portfolio tracker for overseas ETFs and stocks which includes the total annual return, FX and brokerage fees, so do look forward to that :).
Take care and stay healthy, everyone!
Thursday, 16 April 2020
Why I don't prefer using any form of roboadvisors as a long-term investment
In this post, I will be giving my personal opinions on the robo-advisor industry in Singapore and why I don't recommend most of the robo-advisors for long-term investors.
What is a robo-advisor?
Robo-advisor, to put it simply, is a digital platform that provide you an investment portfolio that is automated (requires no human supervision) and use advanced algorithms (patterns) to adjust your holdings in that portfolio. The investment portfolio is created by asking a series of questions in regards to your financial positions and how high is your risk tolerance.
In 2016, Stashaway - the first licensed wealth management company - that managed to introduce Singaporeans to the concept of robo-advisor. Soon, many companies, ranging from startups to existing financial conglomerates, started to join in the bandwagon to offer retail investors wide range of robo-advisor products that invest in various asset classes and boast its unique algorithms.
Currently, the popularity of robo-advisors have increased significantly among Singaporeans and even a number of my NSFs colleagues have plans to use robo-advisors till they retire. At this point, if I were in the conversation, I would have advised them not to do so.
Why are robo-advisors not recommended for long-term investors?
One of the biggest point that is stuck to my head is the fees incurred by using these roboadvisors.
Although most of the fees as shown here are quite low in relative to other brokerages such DBS-Invest saver of 0.85%, we have to take note that these fees apply to your total investments value instead of per transaction value which I feel will be an issue in the long run.
Why is this an issue?
To put it in a Singaporean analogy, imagine you are buying a plate of chicken rice (asset) at a hawker store and it costs $3 (platform fees) . You pay the $3 and you get the chicken rice. The next day, you decide to buy another plate of chicken rice, obviously it should only cost $3 but the owner charged $6 instead. Why? Cause the owner charged you $3 for this plate and another $3 for the plate you ate yesterday. Now you can argue with the store owner that this is completely ridiculous but this is how the robo-advisors are charging their usage of platforms.
This bar graph is comparing 2 funds and their fees over the span of 30 years. We are going to assume that both funds are contributed at a rate of $100 per month and have the same annualized returns of 10%. (Can't really compare long-term annualized returns since robo-advisor only debut in 2016)
Fund 1 (Your fund) :
Management fees: 0.5% p.a of total investment value
Contribution fees: 0%
Fund 2 (Alternative fund) :
Management fees: 0%
Contribution fees: 1.5% per transacted value = 1% commission + 0.5% FX conversion fee
As you can see, the management fee on total investment value alone has eaten up almost $18,000 more as compared to a transaction fee per transaction value. Even let say we add on re-balancing fees onto the alternative fund and re-balance 2 times every year, it will only amount to a maximum $3,000 for 30 years (a highly rounded up figure of course) which leaves around $15,000. (Do note I did not include FX conversion fees in robo-advisor fund so that's a plus for them.) Hence, although the fees may be low in the short-term, in the long term these kind of fees can eat up a good chunk of your return.
Of course, since robo-advisor only came around in 2016, it will quite harsh for me to just say because of fees alone to avoid robo-advisors completely. Who knows maybe it will be able to outperform other index funds such as IWDA and VWRA consistently over the long-term and justify the stacking of fees. However, as being a result-orientated individual unless I am able to see the evidences of over performance, I will have to be conservative and assume that robo-advisors perform only on par with other index funds out there. As of now, I will continue to keep track on the returns from the robo-advisors and will create another post to update you guys if there's new data.
Lastly, I welcome anyone to leave comments below whether this is really a big issue (It is to me), have a discussion in regards to robo-advisors or even critic about my stance. I will answer them as soon as possible.
Sunday, 5 April 2020
Elaborating on my investment approach
As promised from my first post, I will be explaining my investment strategy so that you guys will not get lost whenever I post a new transaction or make certain modifications to my portfolio.
I also have a feeling that my approach would be one of the simpler ones among the different strategies posted by different blogs and perhaps you can consider it as well.
So, without further ado, let's get started!
Firstly, my investment approach is a semi-active/passive one. In regards to being passive, there will be a method to decide how much of the portfolio will be allocated to stocks and bonds. The method is the 110 - age method where after deduction, the resulting number will percentage of the capital to be allocated to stocks and by deducting that number with 100 "[(100-(110-age)]" will derive the percentage for bonds. This percentage allocation will slowly change as I age with more of the portfolio invested in bonds instead of stocks which I think is very logical as we get older, we do not have as much time as we had when we were young to tie through a crisis if it does happen. (Imagine your portfolio tanking 30% when you're about to retire, yikes!)
Secondly, I will be contributing a certain amount on a monthly basis. Subsequently, on May and November, I will be doing a bi-annual re-balancing exercise where I will re-balance my portfolio to the desired allocation as indicated in "My Portfolio" post.
Until now, all the mechanisms in place are purely passive. For the active aspect of the portfolio, I will be integrating tactical asset allocation strategy into my investment approach. Tactical asset allocation(TTA) strategy is an investment style where the allocation of the selected asset classes are adjusted and balanced as according to market environment conditions which can potentially maximize returns, keep market risk to a minimum as compared to an index.
The difference between a TTA portfolio and a normal index investing is that a TTA adjusts its allocation percentage and re-balances according to the new allocation while a normal index investing just re-balance to a planned allocation at a specific set time and repeat this throughout the entire investment journey.
In order for my portfolio to change to a new allocation, the minimum criteria is that the profits earned from the whole process must exceed the cost incurred by readjustment when my portfolio reverts to it old allocation.
For example,
*The same can be applied if stocks are the segment being over weighted*
These are 3 counters that I will be buying on a monthly basis ;
Stock indexes;
1) Vanguard FTSE All-World UCITS ETF (USD) Accumulating (Stock ticker: VWRA)
This is a passive management fund that tracks the performance of the FTSE All-World Index by acquiring physical shares and its holding will have a similar composition to the index. It is also an accumulating fund so all dividends will be reinvested into the fund. The index holdings are mainly made up of large and mid-cap company in developed and emerging markets (basically the index is made up of the whole world)
Link to the fund's website: https://americas.vanguard.com/institutional/mvc/detail/etf/overview?portId=9679&assetCode=EQUITY##overview
2) Nikko AM Singapore STI ETF (SGD) (Stock ticker: G3B)
Similar to VWRA, this is an exchange traded fund that aims to track the performance of the Straits Times Index (STI) by mimicking the holdings present in the index. It is a distributing fund and as such I will have to manually reinvest the dividends back into fund through POSB Invest-Saver.
To elaborate, the Straits Times Index that comprises the top 30 companies ranked by market capitalisation listed on the Singapore Exchange (FYI, not really diversified since almost half the weight of the index is from the financial sector.)
Link to fund's website: https://www.nikkoam.com.sg/etf/sti
Bond index;
3) Nikko AM SGD Investment Grade Corporate Bond ETF (Stock ticker: MBH)
This represents the bond sector of my portfolio which is the first fund to offer retail investors easy access to Singapore dollar-denominated, investment grade bonds. The aim of the fund is to replicate the performance of iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index. Consequently, its holding consists of some foreign corporate entities (ANZ & Westpac banking) and a good portion occupied by Singapore government statutory boards and corporation such as HDB, PUB and Capitaland. Overall, some may argue against choosing this fund as some holdings in the fund are unrated but I believe that with the involvement of public entities like HDB and only having large cap companies in its portfolio is sufficient enough to diversify the risk of impact when 1 company in the fund fails.
At worst case scenario, I can shift my bond holding in my portfolio to ABF Singapore Bond Index Fund (Stock ticker: A35) where the fund only consists of Singapore government companies and Singapore government securities bonds (AAA rated by S&P).
(Furthermore, we can utilize the situation of COVID-19 as a stress test for the MBH fund and see how much impact it will receive throughout this crisis.)
Link to MBH fund's website: https://www.nikkoam.com.sg/etf/sgd-investment-grade-corp-bond
Link to A35 fund's website: https://www.nikkoam.com.sg/etf/abf
I also have a feeling that my approach would be one of the simpler ones among the different strategies posted by different blogs and perhaps you can consider it as well.
So, without further ado, let's get started!
Firstly, my investment approach is a semi-active/passive one. In regards to being passive, there will be a method to decide how much of the portfolio will be allocated to stocks and bonds. The method is the 110 - age method where after deduction, the resulting number will percentage of the capital to be allocated to stocks and by deducting that number with 100 "[(100-(110-age)]" will derive the percentage for bonds. This percentage allocation will slowly change as I age with more of the portfolio invested in bonds instead of stocks which I think is very logical as we get older, we do not have as much time as we had when we were young to tie through a crisis if it does happen. (Imagine your portfolio tanking 30% when you're about to retire, yikes!)
Secondly, I will be contributing a certain amount on a monthly basis. Subsequently, on May and November, I will be doing a bi-annual re-balancing exercise where I will re-balance my portfolio to the desired allocation as indicated in "My Portfolio" post.
Until now, all the mechanisms in place are purely passive. For the active aspect of the portfolio, I will be integrating tactical asset allocation strategy into my investment approach. Tactical asset allocation(TTA) strategy is an investment style where the allocation of the selected asset classes are adjusted and balanced as according to market environment conditions which can potentially maximize returns, keep market risk to a minimum as compared to an index.
The difference between a TTA portfolio and a normal index investing is that a TTA adjusts its allocation percentage and re-balances according to the new allocation while a normal index investing just re-balance to a planned allocation at a specific set time and repeat this throughout the entire investment journey.
In order for my portfolio to change to a new allocation, the minimum criteria is that the profits earned from the whole process must exceed the cost incurred by readjustment when my portfolio reverts to it old allocation.
For example,
*The same can be applied if stocks are the segment being over weighted*
These are 3 counters that I will be buying on a monthly basis ;
Stock indexes;
1) Vanguard FTSE All-World UCITS ETF (USD) Accumulating (Stock ticker: VWRA)
This is a passive management fund that tracks the performance of the FTSE All-World Index by acquiring physical shares and its holding will have a similar composition to the index. It is also an accumulating fund so all dividends will be reinvested into the fund. The index holdings are mainly made up of large and mid-cap company in developed and emerging markets (basically the index is made up of the whole world)
Link to the fund's website: https://americas.vanguard.com/institutional/mvc/detail/etf/overview?portId=9679&assetCode=EQUITY##overview
2) Nikko AM Singapore STI ETF (SGD) (Stock ticker: G3B)
Similar to VWRA, this is an exchange traded fund that aims to track the performance of the Straits Times Index (STI) by mimicking the holdings present in the index. It is a distributing fund and as such I will have to manually reinvest the dividends back into fund through POSB Invest-Saver.
To elaborate, the Straits Times Index that comprises the top 30 companies ranked by market capitalisation listed on the Singapore Exchange (FYI, not really diversified since almost half the weight of the index is from the financial sector.)
Link to fund's website: https://www.nikkoam.com.sg/etf/sti
Bond index;
3) Nikko AM SGD Investment Grade Corporate Bond ETF (Stock ticker: MBH)
This represents the bond sector of my portfolio which is the first fund to offer retail investors easy access to Singapore dollar-denominated, investment grade bonds. The aim of the fund is to replicate the performance of iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index. Consequently, its holding consists of some foreign corporate entities (ANZ & Westpac banking) and a good portion occupied by Singapore government statutory boards and corporation such as HDB, PUB and Capitaland. Overall, some may argue against choosing this fund as some holdings in the fund are unrated but I believe that with the involvement of public entities like HDB and only having large cap companies in its portfolio is sufficient enough to diversify the risk of impact when 1 company in the fund fails.
At worst case scenario, I can shift my bond holding in my portfolio to ABF Singapore Bond Index Fund (Stock ticker: A35) where the fund only consists of Singapore government companies and Singapore government securities bonds (AAA rated by S&P).
(Furthermore, we can utilize the situation of COVID-19 as a stress test for the MBH fund and see how much impact it will receive throughout this crisis.)
Link to MBH fund's website: https://www.nikkoam.com.sg/etf/sgd-investment-grade-corp-bond
Link to A35 fund's website: https://www.nikkoam.com.sg/etf/abf
Friday, 3 April 2020
My Portfolio
*Updated as at 25th May 2020*
Current portfolio:
*Note: This is not inclusive of emergency funds, social security (CPF) or insurance policies.
Thursday, 2 April 2020
An introduction to my blog and first series of posts
Hi to all readers!
Firstly, I would like to welcome you on-board as we begin on the first of the many series of posts that I will be doing.
For a simple introduction, my name is Timothy Lee. I'm in amidst of serving my second year in national service (Age:21) and will be enrolling to a Singapore university as an biochemistry undergraduate once my service is done. My plans for this blog are to mainly act as a journal to record my financial journey and to contribute any knowledge, to the best of my abilities, regarding personal finance, investing and government policies affecting personal finance.
Ever since I was 12, I started to save and began my first investment when I was 19 prior to my enlistment. During my national service, I aimed to become a better investor and started reading up on investment-related books, visited forums and explored many different personal finance blogs similar to my own. Thanks to "Shiny Things" forum and the book "The little book of common sense investing" by the late John C. Bogle, I have decided to adopt an index/ ETF investing as my investment approach but with tactical asset allocation added into the mix as of this date.
My financial goal would be to have an investment portfolio that is large enough to generate sufficient passive income to fund my living expenses. With this goal, it always drive me to better equip myself with more financial knowledge as a retail investor and pick up more efficient habits that will improve my life as I move through this journey. I would also hope that I will able to pass on these knowledge to everyone and future generations to come as a contributing member to society.
(How this blog is going to flow)
As I looked through other personal finance blogs, I realized that a good number of authors (with strong financial background) are trading quite frequently with numerous positions set up in many individual companies. This made me curious which investment approaches are more suitable (perhaps even better) for the working class people. This gave me an idea that I could compare the returns of my investment portfolio against the portfolio on their end.
(As a disclaimer, I am definitely not indicating that my investment approach is superior to them and probably some will do better than me, I just think that it will be fun to have some peer results to base my portfolio on.)
Hence, other than the blog just being a knowledge hub, it will also be a financial tracker as I will be writing down all of my assets value, positions I'm taking and my portfolio performance (probably every month). I will also continue to look out for new personal finance blogs and if there's any new additions/modifications to the blog will be indicated beforehand .
If at any point you're inspired to start to your own financial journey to freedom, I would say that there are mountains to climb but have no fear and take that first step! It will be hard but it will train you to be more mature, discipline and have a edge over your peers. As I always say to myself :" The easiest way to live your life may not the best one out there."
If you ever need any help, please feel free to contact me @timothyleeblog@gmail.com .I would be most willing to help you to the best of my ability.
Let's begin this journey everyone!
Firstly, I would like to welcome you on-board as we begin on the first of the many series of posts that I will be doing.
For a simple introduction, my name is Timothy Lee. I'm in amidst of serving my second year in national service (Age:21) and will be enrolling to a Singapore university as an biochemistry undergraduate once my service is done. My plans for this blog are to mainly act as a journal to record my financial journey and to contribute any knowledge, to the best of my abilities, regarding personal finance, investing and government policies affecting personal finance.
Ever since I was 12, I started to save and began my first investment when I was 19 prior to my enlistment. During my national service, I aimed to become a better investor and started reading up on investment-related books, visited forums and explored many different personal finance blogs similar to my own. Thanks to "Shiny Things" forum and the book "The little book of common sense investing" by the late John C. Bogle, I have decided to adopt an index/ ETF investing as my investment approach but with tactical asset allocation added into the mix as of this date.
My financial goal would be to have an investment portfolio that is large enough to generate sufficient passive income to fund my living expenses. With this goal, it always drive me to better equip myself with more financial knowledge as a retail investor and pick up more efficient habits that will improve my life as I move through this journey. I would also hope that I will able to pass on these knowledge to everyone and future generations to come as a contributing member to society.
(How this blog is going to flow)
As I looked through other personal finance blogs, I realized that a good number of authors (with strong financial background) are trading quite frequently with numerous positions set up in many individual companies. This made me curious which investment approaches are more suitable (perhaps even better) for the working class people. This gave me an idea that I could compare the returns of my investment portfolio against the portfolio on their end.
(As a disclaimer, I am definitely not indicating that my investment approach is superior to them and probably some will do better than me, I just think that it will be fun to have some peer results to base my portfolio on.)
Hence, other than the blog just being a knowledge hub, it will also be a financial tracker as I will be writing down all of my assets value, positions I'm taking and my portfolio performance (probably every month). I will also continue to look out for new personal finance blogs and if there's any new additions/modifications to the blog will be indicated beforehand .
If at any point you're inspired to start to your own financial journey to freedom, I would say that there are mountains to climb but have no fear and take that first step! It will be hard but it will train you to be more mature, discipline and have a edge over your peers. As I always say to myself :" The easiest way to live your life may not the best one out there."
If you ever need any help, please feel free to contact me @timothyleeblog@gmail.com .I would be most willing to help you to the best of my ability.
Let's begin this journey everyone!
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