Aug 19, 2018

Cory Diary : Managing Risk and Goal update 2018-0819

Every investment has risk. In a theoretical situation if we lose a portion of our money into a few risky bonds or shares, we just need one to fail and there are good chance we will retard our financial freedom by years. If we could lose a large portion, then it maybe better not to do anything as this could severely impact our financial situation. Why ?

Currently Singapore Saving Bond is about 2.4% long term guaranteed for 100k limit, Bank deposits range 1% and CPF about 2.6% - 5% for now with specific restriction and benefit applies. Depending on investment size, combination of it may apply. But I could see that for relatively safe returns are about 3% for retirement size fund. This return is not enough for retirement and could only supplement in my opinion. Why ?

For a million dollar investment size that's about $30k annually or about $2.5k monthly excluding inflation. This may not fit my lifestyle as I feel there is no point in surviving on basic or bare minimum. And for a family, this may not be ideal as this could reduce options in what we can do with life. 

So I decided to come out with 3 scenarios below and conclude what I need. Do note that while doing this exercise, 0.5% difference matters.

Scenario #1: $1M capital, Expense $2,500, 3% returns, 2% Inflation and Capital draw down
Allowance of $2,500 with 2% increment annually. At Age 48, this method will last me for 42 years. And my capital used up at  89 year of age. Is a draw down in investment capital. The problem with this is that I could survive beyond 89. Secondly, I still have to ensure 3% annual return on average. And will not be enough for a family. Neither is there enough buffer for investment fluctuation nor better lifestyle.

Scenario #2: $1M capital, Expense $4,000, 6.8% returns, 2.5% Inflation and Capital draw down
Allowance of $4,000 with 2.5% increment annually. At Age 48, this method will last me beyond 100 after with some bonus years to go. I have increase the expense by 0.5% for buffer. The problem with this is the ability to achieve 6.8% return on average with 100% confidence. Even then, the income is average for a small family. Is alright if the kids are grown up though.

Scenario #3: $1,350k capital, Expense $5,000, 5.2% returns, 2.5% Inflation and Capital draw down
Increased allowance of $5,000 with 2.5% increment annually. At Age 48, this method will last me till 98. I am happy with this variables.  More room for flexibility in income and expense variations. To be clear this scenario is retirement without saving needed.

Cory Analysis

To draw this further, I could ask for 1% growth in underlying portfolio.This will retard investment capital reduction. Now, for $1.35M investment size, returns can be lowered to 5.2%. The next question will be what investments will allow me to support the draw down and to secure $5K monthly expense ? One thing for sure, I do not need to take too high risk to achieve financial freedom but how to protect my investment to obtain desires.

Once the above Portfolio is achieved, every month salary is technically bonus to my financial freedom. Goal has become clearer. Obviously, real world do not work in straight forward manner so is good to have buffers and lengthen our retirement age.



Aug 6, 2018

Cory Diary : Cruising Mode - Portfolio

It has been a month since my last update on portfolio performance. I am excited to report it because it comes a long way of recovery against STI. More like STI dancing around me. Why ?

At this point in time, for STI to catch up there will be few scenarios. One potential is DBS comes backup. With my greater exposure in STI Index plus having WFC, and OCBC. I would be happy it does.

The other is O&G recovery. I have no good feel of this industry. The only buy I would seriously consider is Keppel which is in one of my potential list. 

Thirdly, I screw up. 24 counters currently. Max 10%. Often I am tempted to move pass my own barrier. And there are't any local tech stocks. ops.


Aug 4, 2018

Cory Diary : Dividend Report 2018-0804

About 3/4 of Reit counters in SGX have been announced. Reits held up well so far with DPU increase.