Cory Diary : Net Worth Allocation

Millionaire

In 2023, achieving millionaire status in Singapore after 20 years in the workforce is not an unattainable feat for those with reasonably good jobs and savings. The compounding effects of CPF and Property appreciation have made it easier to reach this milestone. However, missing out on either of these can have a significant impact on one's finances.

For those who have not yet reached millionaire net worth, this could be due to personal or family commitments. However, it is important to note that a million dollars today is not the same as 20 years ago. Assuming a typical job that allows for annual savings of $24k, a 3% annual increase with no investment or a 4.5% return on investment can make a significant difference over 20 years.

Below table tells you the differences in total after 20 years. 

Managing Risks

Investing in something that provides a 4.5% return, such as CPF SA at 4%, is a good base as the capital is protected. Reits, stocks, properties, SSB, and FDs are also options, but it is crucial to ensure that the principal is not compromised and to understand the cost of capital if investing outside of CPF.

Recent research on millionaires shows that equity is not the primary path to wealth. Cash, bonds, property, and business also play a significant role. As a salaried worker, it may not be possible to have a business, so it is essential to allocate net worth across different categories. The chart below shows a typical allocation for net worth, but it is important to note that movement between categories over time is necessary to arrive at this point.

Overall, achieving millionaire net worth is achievable with discipline and smart investment choices. Building a diverse portfolio and allocating net worth appropriately can help achieve financial goals and provide peace of mind in the long run.

Net Worth Allocation

Below is chart that I am tracking into. As a typical salaried worker I do not have business. There is minimal buffers in my computation so no sandbagging. What we don't see is the movement overtime between the categories to arrive at this point. For example one could have sold a property and realised large amount of cash previously. So read it as current status on allocation.

Chart allocation of Net Worth

Broadly speaking, this looks quite similar to peace of mind plan. I would like higher value in property allocation and this take it's own time to materialize as in possible property appreciates while other categories reduces through expenses when we step into retirement mode.

Cory

2023-03-29

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Cory Diary : Navigating Risks in a Volatile Market - Equity Portfolio

Banking Crisis

After a brief hiatus from my blog, I'm back to writing about my equity portfolio and recent market events. With the collapse of several banks, regulators are enforcing quick resolutions to avoid contingencies. The Federal Reserve has been clear about the risks involved, yet some banks like SVB continue to take risks, leading to poor risk management and the risk of losing Other People's Money (OPM) for the sake of performance.

The Middle Class

In the past, high-risk investments like those seen in Lehman Brothers in 2008 were a major concern. But today, even low-risk treasury investments can lead to failure if investors become complacent. The recent US rate path to fight inflation shows why the Fed is determined to bring down inflation rates, as basic necessities are becoming increasingly unaffordable for the poor. The middle class is also at risk, as a 9% annual inflation rate could result in a loss of $90k in purchasing power for someone with a net worth of $1 million, which could vaporize a lifetime of savings.

The next inflation report theoretically we could see another reduction. See above Inflation rate chart and we can understand why. The previous year on month has a spike. Again is all about meeting expectation.

Equity Portfolio

To balance my largely REIT-focused portfolio, I've had to increase my bank stake despite the rising rates and high PB ratios. I chose DBS Bank as a long-term performer in the STI Index, with sustainable and conservative returns. On the other hand, my experience with Prime REIT has been disappointing, with poor returns despite management's trying to paint a different picture. After learning my lesson with small-sized positions, I decided to clear off my tiny position in the REIT.

I've also been doing some trading with Mapletree Logistics REIT and have now completed my Mapletree collection with a slightly larger stake. While HK's future looks uncertain and US DCs and rates aren't favorable, I still have sizable positions in Mapletree Pan Asia Commercial Trust and Mapletree Industrial Trust, as they are better off than many others.

Overall, with the recent banking crisis and inflation risks, it's important to stay vigilant and invest wisely in a balanced portfolio to avoid losing hard-earned savings.

Cory

2023-03-25

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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.