Jul 28, 2024

Cory Diary : An Insight into DBS CIO Hou Wey Fook

I chanced upon an article about DBS Chief Investment Officer Hou Wey Fook. I have noticed him since his appearance in The Woke Salaryman interview. As an engineer who has excelled in finance, his educational background likely provided a solid foundation. I admire his advice and thinking, so I wanted to do a quick comparison for reference.

Hou Wey Fook's Investment Strategy

  1. The Barbell Strategy

    • Income Generators: Assets that generate consistent income, such as Singapore T-bills, government bonds, Singapore REITs (Real Estate Investment Trusts), and Singapore bank stocks for their dividends.
    • Growth Equities: Investments in companies that are innovators, disruptors, enablers, and adapters. These are best-in-class global companies with wide economic moats – competitive advantages that enable them to maintain profit margins and market share in the long term.
  2. Measured Exposure in Gold ETFs

  3. Additional Retirement Income from CPF SA income for retirement.

  4. Well-Diversified Portfolio: Prefers bonds ETFs rather than single bonds.

  5. Income and Growth Allocation: 60% of his portfolio is in assets that generate regular income streams, while the remaining is primarily in growth stocks. It is likely that, closer to retirement, the 60% weightage of income-oriented investments will rise further.

  6. Universal Life Policy: Acts as a mortgage protector, ensuring that in unforeseen circumstances, his wife and children can continue living in the house without the burden of servicing the housing loan.

  7. Drafted Wills: This saves his children from unnecessary emotional stress.

  8. Real Estate and Lifestyle: He bought a landed home 20 years ago and owns a Tesla.




My Portfolio and Comparison

It looks like we have a similar strategy regarding the Barbell approach. Recently, I added Russell ETFs and iBIT. These are small positions, but I hope to grow the Russell ETF smoothly, in addition to the similar growth stocks we have. iBIT is an insurance product that seems to match his measured exposure in Gold ETFs.

He is 61, which is seven years older than I am. However, my growth assets are significantly lower at only 11%. I think my allocation is too conservative on the income side and may not be less risky considering the amount of REITs in the portfolio. This is something I need to address.

Regarding insurance and wills for the family, this is something I need to plan for the mid to long term. I don't think I can do much about owning a landed home as he does.



His top investing tips

Time in the market beats timing the market. Frequent traders often fall prey to anchoring bias, a cognitive bias where investors place excessive emphasis on an initial value, and fail to adjust it adequately as they acquire new information about the company or market conditions.  

Conduct thorough due diligence and invest in securities with strong long-term potential. With comprehensive research, investors are less likely to panic over short-term market volatility and make impulsive decisions that could harm their portfolio.

Start investing early, and limit what you borrow. To borrow the words of physicist Albert Einstein, compound interest is the eighth wonder of the world.


Cory Diary
2024-0728

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Disclaimer: The articles presented in this blog reflect personal opinions and are intended for informational and sharing purposes only. Not responsible of errors. Readers are advised to seek professional guidance when making financial decisions and should take full responsibility for their choices.

Jul 26, 2024

Cory Diary : Ascott Trust Investment Review


Ascott Trust


Ascott Trust just released their result. The DPU reduced about 8% YoY but is only 1% if we exclude forex. The table to explain as follow. Base case 5.4% yield. Include other gains 5.7% yield at price 0.895. Price did not drop much after result which likely priced in somewhat currently.

The business is robust and growing at 11% growth. Compared to Bank which give similar dividend range. Is a good diversification from high bank allocation portfolio. High rate seems like has much lower impact to them as they can adjust their cost better. Their loan currently is not expensive which may not be always will be my assumption.


Debt management looks ok and Well staggered.


Cory Diary
2024-0726

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Disclaimer: The articles presented in this blog reflect personal opinions and are intended for informational and sharing purposes only. Not responsible of errors. Readers are advised to seek professional guidance when making financial decisions and should take full responsibility for their choices.



Jul 8, 2024

Cory Diary : Personal Finance Ratios

Updates on Recent Financial Ratios

Started focusing on financial ratios to better assess personal financial situation and hopefully avoid unnecessary distress. Here’s a summary of the key ratios I'm monitoring:




1. Net Property Value (NPV)/Equity Ratio

67%

This ratio helps in determining how much allocate to equity with acquired property. Typically, we can manage fluctuations in equity over time. However, Property values usually increase locally, and based on this ratio, actions might be needed on either side of the balance.

For a single property, having a larger equity base seems logical to maximize returns and ensure diversification. This helps avoid being property-rich but cash-poor. However, this might not suit everyone, especially those wary of equity investment risks. In our case, the property value has been rising, which positively impacts this ratio.


2. Bond/Equity Ratio

43%

Common in many investment books, this ratio for us, includes Singapore Savings Bonds (SSB), Fixed Deposits (FD), Multiplier, and Treasury Bills (T-Bills) for the bond portion. Working cash is high enough for us to include Fixed Deposits. For us, the 43% includes housing loan emergency funding, which is substantial. This ratio has been decreasing due to increasing capital gains in equity to our surprise as we have invested consistently into T-Bills and SSB.


3. Pension/Net Worth Ratio

15%

This ratio measures dependency on pension funds as a safety net for managing our lifestyle. It also indicates available funding for investment. We prefer not to allocate beyond required contributions from work, focusing instead on the necessary safety net amount. This ratio can also be applied to equity or property instead of net worth. We aim to understand how much we invest in higher-risk assets. For us, meeting the Full Retirement Sum (FRS) is sufficient, though some might prefer a higher amount for added security.


4. Loan/Reserve Fund Ratio

145%

This ratio considers funds reserved for housing loans that don’t affect our emergency funds. These reserve funds can partially serve as a war chest. Our 145% ratio indicates the reserve fund cannot fully cover the outstanding loan but good enough to last us to get things in order.

In essence, Reserve fund need to be safely invested and so it could be a liability if we are confident to get much more than typical guaranteed investments. So it becomes our Bond fund.

Is a little tricky what is the idea ratio be. Defintely we want to have enough runway when there is need to unwind. But we also hope it can last as long as possible till say our cashflow can handle the monthly instalement. So this can be quite different between individuals.

As I want to retire early if possible, the goal certainly will be full reserve coverage of the loan. However, I am comfortable to handle loan as long is sustainable to drive more returns. Full coverage also mean other variable ratios may go out of whack. Which means larger networth needed or we have to pay down the loan to somewhere.

Current loan at 1.5% Fixed is a steal. It won't be in the next renewal.



5. Emergency Fund/Annual Expenses Ratio

162%

I recently calculated our annual expenses and multiplied them by 1.15 to include additional support from my partner, and we have about 19.5 months of buffer when the ratio is computed.

This buffer excludes SSB, Multiplier, and T-Bills. Includes working cash, as we don’t have a dedicated account for emergency fund. Funds are spread across various cash and fixed deposit accounts.


6. Cash Flow / Annual Expenses Ratio

122%

Cash flow is obtained from investment, income, rental support, fixed returns etc. With this number, theoretically Networth should climb consistently as long we keep working and investment not badly affected. However, this value likely varied annually as portfolio size gets bigger whereas salaried income is at much slow pace.



Actions

The Ratio that may need to watch is Loan/Reserve Ratio. Not that the reserve amount could not cover the loan but cash flow ratio needs to manage like any other business.

The whole idea of the loan is to drive or leverage for more returns elsewhere. So if they are fully locked in reserve to minimise the loan risk, then we need to ensure they have sufficient returns. 

The easy way out is not to retire voluntarily. Each month income is a boost to the reserve.


Cory Diary
2024-0708

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Disclaimer: The articles presented in this blog reflect personal opinions and are intended for informational and sharing purposes only. Not responsible of errors. Readers are advised to seek professional guidance when making financial decisions and should take full responsibility for their choices.

Jul 5, 2024

Cory Diary : Family Expenses 1H24

Have done a few blog on Expenses. Another half year has passed, and I am excited to table another review on how we progress in escalating expense containment. We have some discussion on why out expenses keep growing and it will good on how we progress after 6 months.




As table shown, it appears we have managed to stop the problem. 1% expense increase for 1H24 compared to 2H23. This is on the back of additional Travel and Private Tuition Fee.

There is a special bill exception that we allocated to 2H23 and 1H24 instead of amortizing across say 5 years. Even if this is considered in the last two halves, the expenses look ok.

Can safely say our expense range between $9.6k to 10.6k range. Do note as in previous article, partner supported probably additional 15% expense. This work out to 132k annual expense. Interestingly we do not feel we have lavish lifestyle.

With this expense amount, we can work out passive income, investment return, rental support etc to ensure we can manage our financials.



Cory Diary
2024-0705

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Disclaimer: The articles presented in this blog reflect personal opinions and are intended for informational and sharing purposes only. Not responsible of errors. Readers are advised to seek professional guidance when making financial decisions and should take full responsibility for their choices.


Jul 4, 2024

Cory Diary : Portfolio Re-Balance and Result

From time to time, we may need to re-balance for the better or worst. There are people who swear we should do nothing but bear that in mind that doing nothing is a deliberate action too as is solely tied to one expertise. How often we trade depends on our capacity, knowledge, cost and likely emotional state.

The hardest to master is managing our emotional state so personal preference is to keep it at the most stablised level aka "Sleep Well Test". This could mean more re-balancing effort and regular monitoring of reports to contain unexpected risk level increase.



So what are the changes so far for 1H24 Portfolio ?

Deleted : Venture, Google, UOB (add/del), SABANA, UTD HAMPSHIRE
Added : iFast, TheHourGlass, Nvidia, OCBC

DBS/OCBC are the key profit drivers in-addition to dividend. Their large allocation shielded the portfolio. US Market is in net profit ytd. Reits are still in special care. A few of them such as iReit and Elite see large reduction in capital.

Currently,

Equity Portfolio XIRR YTD +4.5%
Investment Account Cash 7.4%

In-Progress,

US Market expansion, Nvda etc
Reit on-hold mainly otherthan special exceptions
SG Non-Bank opportunity




Cory Diary
2024-0704

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Disclaimer: The articles presented in this blog reflect personal opinions and are intended for informational and sharing purposes only. Not responsible of errors. Readers are advised to seek professional guidance when making financial decisions and should take full responsibility for their choices.