Cory Diary : Returns Report on YTD '22 Inflation Theme

Tracker

To start it off doing Annual YTD is kind of short term tracking. Is trying to be nimble for opportunity and not an intention to make change on long term strategy unless we have details otherwise. For example the plan is Dividend Investing with Reits as the Core. However within Reits we have different segments and countries which we may need to juggle or mitigate short term.

Even on allocation itself between Reits, Non-Reits, Growth etc the allocation may need to be re-balance and adjusted over time against wider portfolio such as Bond and CPF including cash. Nothing is permanent in the sense opportunity and situations may arise that we need to act on. Ignoring them is a Strategy of Environment Changing our Portfolio Size therefore I rather be the Change agent.

XIRR YTD Cory -1% , STI Index YTD +2.8%

Performance

As above Chart, the gap of Cory Performance YTD has been closing up. Cory YTD -1% whereas STI Index YTD is at 2.8%. We still have 5 months to go and the world is still on unchartered territory. How the Supply Constrains, Recession, Inflation and War will shape the world by year end is still up in the air. Things could turn drastically down to Boom. 

If we look holistically, the strategy in current format is to fight inflation. Renewing to higher SSB, even going to higher yield bond that has dropped ironically, and expanding into stocks that have pricing power. However Recession is a different ball game altogether with significant hardship on those retrenched. Hopefully we will avoid that.

Inflation

So why is inflation so horrifying ? If I read it correct is the compounding effect. Taking from Worlddata for United States.

During the observation period from 1960 to 2021, the average inflation rate was 3.8% per year. Overall, the price increase was 829.57 %. An item that cost 100 Dollar in 1960 was so charged 929.57 Dollar in the beginning of 2022.

For June 2022, the year-on-year inflation rate was 9.1%.

This includes in particular energy (+41.6%) and food (+12.2%).

Singapore is better for the same period at 324%. On top of that governments are better informed and managed as the world advances economically. If we take the 1st half and 2nd half of the 60 years period, the data is 161% and 57.3% respectively. The later 30 years have been well managed.

To put this in context of the compounded inflation for Singapore,

1961 - 2022 : 324%

1961 - 1991 : 161%

1992 - 2022 : 57.3%

Using 1992-2022 period of 30 years, Purchasing Power reduced by 57.3%. An average of slightly less than 3%, this could be a good number to use in our annual inflation computation guide. 30 years also likely cover a large segment of people retired period.

Cory

2022-0730

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Cory Diary : FCT Q3 2022 After Thoughts

Frasers Centrepoint Trust just reported their result for the 3rd Q. Is a business update and there is no dividend as it is given out on half yearly basis. I wanted to do coverage of the result but after going through it frankly there is not much yet said or explored that is significant to mention.

The business is solid as a rock and well oiled. Providing key services and infrastructure need for Singaporean Lifestyle. And they are probably at the right balance and just have to keep rolling. The Rent looks ok per CBRE Research.

At 5.2% yield this is still much better than CPF or SSB. Obviously, there are risk in Equity and that is where portfolio management comes in to manage them. Taking our head off about stock and just thinking about having this business as yours. With the current business report and the services they provide, do we want to be part owner of it ?

Nice Spread Out of Assets

Like many businesses I owned FCT through stocks and is one worthy slot in my portfolio.

Pls DYODD

Cory

2022-0727

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Cory Diary : Sabana Results 1H22

SABANA INDUSTRIAL REIT’S 1H 2022 result is as Good as it can get in-line with expectation. Being consistent delivering and meeting high yield this makes the Reit quite attractive.

-   DPU was 1.59 cents, 7.4% higher y-o-y. A slight increase if we compare to 2H21.

    Yield of 7.07% annualized at $0.45 Stock Price.

There are items to monitor during this increasing rate cycle and Sabana has them listed as follow.

Capital Management

• Average all-in financing cost of 3.35%, interest coverage ratio at 4.0 times

• Aggregate leverage stood at 33.4%

Interest Exposure

• 75.3% of borrowings are on fixed rates with an average term of 2.4 years

• Every potential 20 bps increase in interest rates may result in $0.15m decrease in

distributable income or 0.5% reduction (equivalent to 0.01 cents) on DPU(1) per annum

If assume further 200 bps rate hike in total this year, that will be 0.1 cents impact to Sabana DPU. Yield will decrease to 6.7% which is still respectable. And this is assuming no further increase in rental income. This piece of info helps as ICR is only 4 times.

Pls DYODD

Cory

2022-0723

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Cory Diary : F.I.R.E - Financial Independence Retire Early

There are many ways to Rome and therefore different people different strokes. Being FIRE and retiring early doesn't mean we cannot do some work we like. It just gives us more options while fulfilling our personal goals.

Current Cory Plan

Layering Strategy is still emotional preferred way for me. Lesser stress and something to do !

- CPF ( RA = FRS at age 55 )

- SSB ( Max )

- Multipliers ( Max )

- Equity Dividends ( sizeable portfolio more than 1M )

- Equity Growth

- Rental Income

Plan B

For above not everything will be perfect and if specific goal failed or changed, there needs to be adjustment aka modification below depending on needs.

Modification 1 : Part time work maybe 500 to 1k monthly

- This is low hanging fruit if we just miss a little monthly income to supplement. It can be from hobby.

Modification 2 : Down grade Apartment to Studio or 3 rm

- Downgrade of lifestyle but still acceptable to lower expense and boost additional cash

Modification 3 : Hit/maintain Senior Position in current work that requires experience than time

- Significant Compensation and likely have Ample Lifestyle

Flexibility

Currently prefer just Modification 3 as option upon age 55. The reason simply of my expertise in my current work and strong compensation renumeration on efficiency return of income. Time is precious. Obviously it can provides uplift in living standard to family.

There are other options such as renting out rooms, lowering expenses, migration, 1M65 etc. This is not preferred personally but it can be good for others depending on their situation.

Cory

2022-0722

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Cory Diary : Investment Portfolio Allocation - Fighting Inflation

In this Portfolio Report, the focus is on the ability to generate more recurring income from dividends and interests when the market is at cheap. There is a fight in current saving to remain in Cash or CPF, Multipliers, SSB and Equity to grow the returns. Is like all cylinders firing at different fire power with varying safety levels.

Portfolio

From below chart, the "Bond" components constitutes about 28.6 % providing 2.5% to 4% interest returns. Growth stock which has little or no dividend, about 7.7%. Likely the limit I would inject for my age. So whether it can grow will be left to the business and the market. That's leave about 2/3 of the allocation to generate higher risk dividend income through Equity. Higher risk do not mean High risk especially when we are comparing to likes of SSB, CPF and Multiplier.

Note :  Net Investment Property and Saving Insurance excluded.

CPF

Personally two more max top before hitting 55 where SA allocation is max percentage wise. CPF is attractive for people near age 55 as we can withdraw OA and SA after FRS deducted. Currently there are no change in CPF Interests while everything else getting cheaper. So there are no rush to top-up till end of next year instead of Jan'23. This is assuming we can getting much better returns from the market.

SSB

Re-Investing SSB to higher rate bond is generally preferred over company bond basically because it is Capital Intact and with increasing rate. We can also re-channeled to Stock Market if there are big market crash. Exception applies. With increasing rate possibility, New Perpetual Share or Bond could suffers pricing loss and this is assuming the company fundamental do not affects the redeem later on. Only SSB allows investor to redeem as need with 1 month lead time without capital loss.

Multiplier

DBS Multiplier likely the first to use for War Chest after saving cash has been used up. Is also a good place to park cash that rivals SSB and CPF (after 55 excess of FRS). Better than SSB, it has no lead time and suffers no capital loss. The current Max of 100k is 2.5% on average.

Like CPF and SSB, Multiplier is part of the layers that provide emotional support as a safety nets when times are bad for people working towards higher risk products in financial goals.

Cash Injection Pace

At high inflation rate environment holding cash, the cost is high even though Cash is King right now. Continue buying Bit Size into investment products such as Reits and Bank as they stay low with time. We are buying cheaper in Inflationary environment. What a steal !

The hope is still waiting for better opportunity of a market crash on value segment so that we can inject much larger. This is not to say there will be crash but a reserve to have such. Keeping in mind reserves also needed for possible rights issue at huge discount.

Cory

2022-0718

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Cory Diary : How much is Enough in CPF ?

With the Popularity of 1M65 movement where we become CPF Millionaires by Age 65, people starts to realize that it can go much higher if one top-up their CPF to Max in their early years. Then this beg the question is how much is really enough before we forego our current living and outside CPF returns.

Don't get me wrong. CPF returns and Capital are kind of "Protected". The risk is vastly different from Equity or Private Bond Markets of varying Risks. However, to get 2.5% to 4% returns, the amount may not be sufficient for a lifestyle retirements that one's wish to have unless the capital is significantly more and if that is the case, you are rich anyway to manage it up to 2M65 or 4M65 in a low return environment, does not really matter because of the huge capital base.

To put into perspective, for a person who invest in 4% vs 8%, after 20 years the gap can be $2.4M !

We need to be rich enough to forego.

To add to this into another perspective, inflation is another killer. 1M today is very different from 1M in 20 years time.

Lastly, the risk is different and the gap of $2.4M is not free to take. One could also lose a big chunk of their investment in risky asset and perform much worst than CPF returns. It maybe better not to do anything or much outside CPF too. The answer probably lies between but where we can be ?

Cory

2022-0714

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Cory Diary : Net Worth Progress - Diversification of Assets Classes

Many have not seen or remember a period of high inflation before. There is not much experience. Our thinking shaped our recent memory or impactful personal event which formed our perception. People who are old enough as me may remember a time where we have 5% Fixed Deposits. I guess there is time for everything, just when ! We are far from the severity we seen in 1980s or 2008 of most recent.

Interestingly, the harder Fed tackle the inflation problem, the stock market seems to react better as this mean the issue will go away faster and not drawn out. What is surprising is that the employment figure still stays good. Hopefully they don't over-do it to bring down the inflation too fast. The economic heart may stop and enter into cardiac arrest.

Looking into Net Worth Portfolio of different asset class, not much has changed in recent months. How to read this chart is to lookout for the word "Stack". This mean it includes other asset class line below it.

For example blue line property stack includes non-productive assets such as cash represented by the green line..

Overall Net Worth

Overall Net worth is tracking back up due to Liquid Asset, Pension and Property Valuation. YTD -0.x%. Specifically investment property because I was expecting a double whammy falling like stocks instead the valuation went up slightly from recent dozen transactions of the market in the condo.

Home Loan Package

With the recent spiking of home loan package, fortunate to lock fixed 1.5% years ago for peace of mind reason. And this exactly happened as we have to pay more from floating package. Nevertheless, once inflation is controlled it may comes down quickly too as historically for the past 40 years rates are on downtrend.

Equity

Equity stack has been reduced due to negative return ytd and because some amount of stocks sold was used to build up CPF and DBS Multipliers.  Right now the portfolio is moving to a state of equilibrium again. The positivity is that Potential dividends moving toward $69k annual same time from constant injections on Bank and Reits Stocks.

NPA

Finally, the Non-Productive Assets (NPA) are trending up slightly. Will be buying back some SSBs in stages as time goes. The hope is still to utilize them into Bank or Reits if there are severe correction.

With current expenses, still couldn't retire .... unfortunately.

Cory

2022-0710

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Cory Diary : SSB Application and Strategy

For people who are still New to this. SSB is called Singapore Savings Bonds. This is not Treasury or Singapore Bond. Is issued by Singapore Government monthly and will last for 10 years. The total amount of all issues that we can buy is currently limited to $200k.

If we look up in DBS Bank Internet website as an example, we go to the investment applications.

And you select Singapore Savings Bonds.

And then select the issue available.

This issue is attractive for me as I sold some last month to be ready for possible market crash. It doesn't happen or yet. So I am buying back some each month as time goes.

Secondly, the rate for the newer issue is much better. Average 3%.

Thirdly, I can sell and buy anytime. Max 1 month lead time. $2 fee.

Hopes this help for those who are New to this.

Cory

2022-0709

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Cory Diary : Building Up Passive Returns - Income Streams

Equity Portfolio ( link )

The market has been on bad patches in recent months or years depending on the make-up of one portfolio. Not sure about investors but personally this can be one of the best time to re-balance, strengthen and build up a dividend portfolio.

One of the weakness in the portfolio is the persistent under representation of Finance stocks. Therefore, has been buying into DBS stock which provide good dividends. Size wise still not there yet due to concern with digital banking competition. Nevertheless, need to have enough investment into this area.

What best is to be able to buy with current yield reaching 4.9%. Price can get lower and recession might comes knocking. USA side there is speculation that we are in recession already. Currently preference is to go in slowly.

Competing against budget for Bank is the need to also buy Reits on the cheap which produces good yield. Need to constant inject in this area too.

Singapore Saving Bond, Multipliers, Pension and Private Bond

Have not been utilizing fully the CPF scheme. Only did top up in recent years with the elimination of company bonds. This money tied down long term so we can't touch it till later or 65 mainly for FRS amount.

With Rising Rate, the interest rates of CPF is falling behind. Decided to try some Astrea bond which is becoming more attractive as the price falls. There is capital risk so starting small. Nothing is permanent I guess.

SSB is also getting more interesting. Multipliers can be switched out any time. The idea is that as the equity portfolio grows bigger, the reserve in SSB and Multiplier can be managed down. Rich get richer rings here ?

Property Investment

Unlike Reit, property investment requires large sum of money even with leverage. The potential rental income is quite attractive. However one has to make sure the rental income keeps coming in which can be easily 50% of equity dividends received. For long term diversification, property is nice to have. Have to watch the loan payment consistently and making sure there is cash reserve in SSB for sufficient run way if one get retrenched and out of market permanently.

In Summary

Returns excluding salary works out to cover a big portion of Life Style Creep expenses. There is still a gap to close. Need to look around on making remaining cash works harder while smothering down the expenses (cost). 

Cory

2022-0705

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Articles in this Blog is personal take and sharing purposes only. Reader should seek their own professional help when making financial decision and be responsible for their decision.