Cory Diary : Cash Flow

Shifting to a Cash Flow Mindset in Money Management

As I shift my mindset to focus on short term cash flow in managing my finances, it becomes clear that understanding cash flow generation as a whole is essential, especially considering that most stocks pay dividends.

This concept is particularly important for those who do not possess significant wealth that can be safely parked in savings without worrying about potential shortfalls. For retirees and many others, being able to cover bills, fees, and expenses is critical, especially as these expenses are expected to grow over time. Therefore, putting every dollar to work and allocating it according to different risk levels seems like an intuitive approach.

Where to Start

To begin, I can gather current expense estimates and draft a plan outlining various income sources to support these expenses. For instance, let’s assume an annual expense of $100,000. To clarify, the table below uses arbitrary numbers for simulation purposes. In this scenario, the total income is 54% buffer on the annual expenses. [ updated error ] 

However, if I increase my estimated expenses to $135,000, the revised table would look like this:

With this adjustment, I now have a buffer of only 14%.

Analyzing Expenses

This analysis provides a valuable guide for managing my expenses. I could refine my calculations by reducing the allocations for retirement and insurance since I typically won’t receive my first payout until age 65. Additionally, insurance policies may need to be surrendered to access funds.

There are various levers to adjust in this financial plan. 

The fundamental idea is to continuously monitor and improve one’s financial situation while also maintaining motivation throughout the process.

If my planning goes exceptionally well, I might even consider including my spouse's expenses or other discretionary costs. If we find ourselves below our target income, we can optimize returns by reallocating savings or exploring other investment opportunities. The initial table heavily relies on equity and property incomes. As we approach age 65, additional pension streams will become available to us. However, there are always other options to consider as we navigate different levels of risk.

Conclusion

Adopting a cash flow mindset allows for better financial planning and resource allocation. By continuously assessing and adjusting our strategies based on our changing circumstances and goals, we can create a more secure financial future. 

Cory Diary

2024-11-25

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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.

Cory Diary : How it happens - Retire Series

Reflections on Parenthood and Financial Planning

When my first daughter was born, we were overjoyed. It was an extraordinary feeling to witness a living being emerge from the love my partner and I shared—something that transformed my life from solitude to family. We were busy, but our finances were manageable. There was still a fire in my belly when it came to work, especially since it was pre-COVID—specifically, the year 2019.

The Decision for a Second Child

We decided to have a second child, Rui. However, this journey was not as smooth sailing as the first. We faced medical complications both before and after her birth, leading to rising medical bills and increased stress in managing our finances. Fortunately, I had been investing in dividends for some time, which, along with our jobs, allowed us to manage our expenses exceeding $130,000 annually.

The Challenge of Time

The hardest challenge we faced was time. Money often became a means to buy time, which we realized was incredibly important. Soon enough, we noticed that Rui's development was lagging behind her peers by one or two years, despite the care she received. We recognized that she would likely need more attention and support before entering primary school.

I hinted to my boss about any potential retrenchment packages, but there was no budget allocated for such initiatives. Eventually, significant organizational changes at the management level created opportunities for layoffs funding this year. Thankfully, I am qualified and given Early Retirement instead, which comes with much larger compensation.

Early Retirement

Over the years, I have simulated various asset and portfolio scenarios to support this decision. I started with achievable lower goals and gradually increased them as I refined our strategy while working and watching our children grow. Despite my previous efforts to calculate the amount needed for retirement, I found that it was never quite enough mentally. One just has to bite the bullet and take it. The rationale is simply that my children are growing up and my age cannot wait. I do not want to miss their growing-up period too.

Now that Rui is four years old and with limited time on our hands, I conducted yet another rough financial analysis based on the proposed early retirement package. Interestingly, I may also qualify for additional pension benefits due to a long overseas assignment. While it’s not a substantial amount, it could help offset local taxes.

Financial Position

Today, I believe with confidence to be a point where I do not need to draw down from my portfolio assuming my expenses stay at the current level including inflation. Same time I've reduced risk levels in the stocks I've chosen and increased my fixed income investments as an emotional buffer. Managing my housing loan effectively has provided leverage without becoming a burden; I've calculated this based on cash flow principles.

A crucial aspect of our financial strategy is that my partner is still working and has her own savings. This gives additional peace of mind. While I cover most family expenses, she manages her basic needs and occasionally contributes financially. This arrangement works well because I want her to build her long-term insurance savings for added emergencies.

Financial goal calculation is a moving target to start with. For instance, I initially targeted an annual investment income of $48,000 in my early years and later pushed that goal up to $60,000 or more in stages. To expedite this timeline, I implemented a plan for drawing down from the portfolio while also maximizing contributions from CPF (Central Provident Fund), pensions, and fixed income investments. 

Recent increases in rental income have also contributed positively. Although not all strategies were easily implemented or successful, starting early with saving and compounding made a significant difference. As we finetune the plan, we also make the bar higher when possible such as allowance for larger expenses or add inflation buffer. ( link on calculation )

Supporting Family

While it may be a taboo subject for some, I think it is important to share this as it can also be part of the critical equation when it comes to retirement. We do not hope to leave anyone behind. I have always contributed significantly to supporting my parents since my single days—a practice that continues today which I have refused to cut so far.

Fortunately, if necessary, I could reduce this support without significantly impacting their well-being; however, this would be a last resort as they are now advanced in age. There are not many years I am allowed to provide them.

Cory Diary

2024-11-16

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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.

Cory Diary : Portfolio Management Update

Democrats have suffered a shocking defeat. The concerns I have heard include illegal immigration taking away low-income jobs and depressing local wages, the unfairness faced by legal immigrants who waited in line, and the increasing number of Americans on food stamps in modern America. Many of them probably live worse than those in many developing countries. The numbers are staggering in modern America. Thoughts they should do better with Democrats for the past 8 years but it doesn't seem so.

It looks like Donald Trump has a significant amount of work to do to address this segment of the population. He has his hands full and will likely be quite stringent on foreign policies due to mounting national debt While keeping American employed. The well known concerns today are Inflation Increase which will impact Interest rates.

With this knowledge, we will continue to pursue allocation in the U.S. of strong global businesses to capture some growth for our portfolio. With limited knowledge of the U.S. stock market, I will continue to focus on just a few obvious key stocks that have a strong moat and are large corporations in the S&P500. The recent uptick has put all U.S. stocks in the blue finally ( Picture 1 ). This could easily turn red, but the current expectation is that it will grow more blue until year-end. How blue? No idea.

Pciture 1 : US Stocks P/L YTD

On the local front, banks continue to report strong results unabated despite lower net interest margins (NIM). Net interest income (NII) and other earnings continue to drive profitability across all banks. There are no clear signs of weakening. As our allocation is quite significant, I have done another round of rebalancing, reducing bank allocation back to 40% on this recent run-up. REITs encountered a steep dive in price, and this is where most of the raised funds went.

There are multiple adjustments that I will not mention here. Picture 2 is the current allocation.

Picture 2

With current high allocation in FCT, decided to add another counter CICT for more dividends and diversification. Delisted the investment account counter from the chart to make space for it. Adding another low growth REIT stock is defensive move.

Currently Equity Portfolio YTD performance as follow ( Picture 3 ).

Picture 3

The STI did better when we include their dividends, but I am happy with what I currently have always if the result is always that. The banks may still have some runway as they are above 5% yield. DBS's share buyback will likely mitigate on reduced dividend distribution fatigue in the future. So while they are going to buy at a higher price, this process makes the dividend even more sustainable. The price-to-book (P/B) ratio will theoretically go up if net tangible assets (NTA) remain stable; however, I doubt it will be much, if at all. The focus on banks remains on yield and payout ratio sustainability. 

In conclusion, the recent developments in the political and economic landscape underscore the importance of a well-considered investment strategy. As I navigate uncertainties, my focus remains on building a resilient portfolio that prioritizes stability and growth. By strategically reallocating assets, emphasizing strong businesses with competitive advantages, and diversifying my holdings, I aim to safeguard my investments while pursuing opportunities for returns. Ultimately, these decisions are driven by my commitment to achieving peace of mind for myself,  ensuring that I am well-positioned to adapt to changing market conditions and capitalize on future growth prospects.

Cory Diary

2024-11-09

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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.

Cory Diary : Review Sheng Siong Business Update

Before I started the review, I trimmed my position to right-size the allocation after the recent run-up prior to the Business Update. Personally, I maintain a sizable position in Sheng Siong to receive reasonable dividends and provide an added buffer for the stability of my portfolio. I still hold a sufficiently large position today.

Margin

Sheng Siong's gross margin has been steadily increasing, now exceeding 31.3%. The net margin is at 10.8%, which has also seen an increase. Basic EPS reached 2.6 cents last quarter. Trading at $1.60, this translates to a 6.5% earnings yield on an annualized basis, although this may be slightly lower in practice due to the earnings cycle. However, I suspect some of this could be cashless and might enjoy a premium if they decide to sell their properties. I could be wrong about this, but it won't significantly affect my outlook as I consider it a bonus.

Currently, the annualized dividend yield is about 4%. Compared to alternative investments, this is not particularly impressive since higher earnings and dividends can be found elsewhere, albeit with much higher risk. Therefore, my allocation is always managed to outperform fixed deposits or T-Bills. Since these are not capital-protected investments, there is inherent risk that must be sized appropriately for my situation.

China

On the China front, they reported a minor loss, which I find interesting. In the near term, I do not expect much of an earnings catalyst from that region. Conducting business there is likely challenging for supermarkets, and if the market turns unfavorable, it could be quite detrimental. This is something to monitor closely.

Lease back and final thought

Another point to note is the separate acquisition announcement and leaseback by DFI, which could provide a regular boost to income. Sheng Siong is one of the few rare companies in the SGX market where I can sleep well and earn something; however, we cannot become complacent.

Cory Diary

2024-11-02

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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.

Cory Diary : Review Mapletree Industrial Reit

MIT Report 2Q & 1HFY24/25 just came out. It has been with me since Year 2018. My expectation is around flat performance. It is one of the REITs which I just need to do a quick glance through and then go away after in 5 or 10 mins. That's for me, so please DYODD.

MIT is one of the largest REIT positions I have and one of the few I continue to add this year. I blogged that most REITs are in a monitoring or re-balancing situation till next year due to rising loan costs despite rate cuts. This has to do with the lagging contract renewals while higher loan rates are still in the process of catching up relative to previous agreements years ago.

Picture 1 :DPU Checks

One of the most obvious things to check is DPU. YoY (or for MIT's current report presented HOH) and QoQ. Looks well so far. Do note QoQ is lower by -1.7%, which is not in the highlight. So it kind of fits into my expectation.

The second thing to check is the DPU trend. When I invest in REITs, the key is sustainability of DPU and being able to sleep well. This means the REIT's operation is safe or stable, as this forms our cash flow needs. We can see how high rates have affected MIT in recent years; however, overall it is still relatively good. There aren't fundamental changes in their business.

Picture 2 : DPU Trend

The third thing to look at is loan management in Picture 3. This is one of the cores of REIT management. Screw this up, and we can be in a lot of trouble. Stats look good and have stabilized somewhat. We still have to continue to monitor future reports; however, chances are the impact will be small from Picture 4. Do note that even though rate cuts have started, the latest loan cost renewal could be higher than their previous contract.

Picture 3 : Loan Management

Picture 4 : Loan Impact

The fourth aspect is REIT-specific. MIT has large USD exposure, and they have lots of DCs, not just industrial properties. This is something to be aware of when you invest in this REIT. The recent move on Japan acquisition seems good to bring loan costs down.

Lastly, I checked the rental revision. Usually, this is in stages since only a portion of the REIT is up for contract renewal. In this case, the Hi-Tech segment seems to have quite a large drop in rental rates for new leases. Last Q presents quite a different picture between renewal and new leases. It doesn't give the full picture, but it does help to be aware of possible situations to watch in future reporting. (update is probably due to exception situation)

Summary

Overall, the REIT looks well-managed and stable. There are only a few REITs that can do that well in today's environment that fits into the dividend investment concept with reasonable levels of capital protection.

The focus on rental retention could also mean less confidence in the marketplace. So whatever I have now, which I am pleased to ride with this good report, will hold for the long term but not more additions due to portfolio-level views and coming personal allocation.

Cory Diary

2024-10-31

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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.

Cory Diary : Year 2025 Strategy

With just three months left in the year, it's an exciting time to watch how our portfolio might perform as we approach the final stretch. It's also a good time to reflect and consider adjustments to our investments for the new year.

Earlier, I mentioned shifting part of our allocation towards the U.S. market. Increasing that exposure significantly will depend on higher returns from the U.S. market, which could provide the buffers we need after careful consideration. If those returns don’t materialize, this roughly 10% allocation may remains through 2025, as the plan is to rely mainly on internal growth.

Allocation of U.S. equities will be somewhat like a "peanut butter spread" across strong businesses, with varying weightings on a few. It's quite hard to predict which will perform best, but over time, the earning power of each should drive them forward. Minimum expectation is that these investments earning should outperform local banks. The risk lies in macroeconomic factors where the entire market could be driven down.

REITs and banks will continue to dominate the portfolio. Depending on market conditions, fresh funding may either stay invested or be redirected toward fixed-income instruments like T-bills. Another alternative could be reducing loan exposure.

For local portfolio adjustments, the focus will be on gradually weeding out underperforming companies, regardless of whether they are currently profitable. This will happen as opportunities arise. Releasing capital from these positions will allow reallocation to higher-yielding stocks, aiming to boost dividends, which are expected to remain flat for 2024 unless we take action. We have to be careful not to increase holdings just for the sake of it. Considerations include whether the price is running ahead of itself, yield returns, future expectations, and cash flow situations.

Here is a snapshot of current equity portfolio. The return of Microsoft (MSFT) to support the peanut butter strategy plan.

New Funding

Our goal remains to optimize and grow the dividend stream, even with a significant portion of funds tied up in T-bills, Singapore Savings Bonds (SSBs), and multiplier accounts that we try not to touch. The big catalyst is the boost of funding from retirement payments. There are a few options to consider, and the final plan may be a combination of these:

Pay Off Housing Loan: This can be reserved in case re-pricing does not work out. Ideally, we would continue to extend the loan so that we can use the money for investments with higher returns. For this reserve to work in the future, we probably need to park the funds in capital-protected instruments until utilized. The downside of this plan is potentially losing the key funds that can help generate significant income.

U.S. Equity Boost: U.S. market valuations seem relatively rich. There is reluctance to further increase exposure, as the "peanut butter strategy" has been completed. I would prefer to invest after a market correction for a margin of safety if we are to tap into these funds. Another concern is the lack of dividend play in this segment while we wait. The only situation where I would consider adding is if there is a rebalancing of the existing portfolio allocation towards weaker stocks.

Increase REITs Allocation: Earnings-wise, REITs are still not able to match the banks. While there is a lowering of Net Interest Margins (NIM) for the banks, there will be a lag in the implementation of lower loan costs for the REITs. Most of them won't see significant cost reductions, if any at all. The timing is not right for this yet, and there is a warchest of funding if needed.

Increase Banks Allocation: Currently, the portfolio has significant exposure to banks already. The appetite to further increase this segment may not be good as interest rates have started lowering. There is a limit to how much we can increase, and it may not work for the fund. If there is a major correction, it may be helpful to tap some of the funds, but this also means existing profitability will be impacted.

Fixed Returns: Current fixed returns are coming down; however, they are still relatively high. This option can also be considered an expanded warchest—a safer option with sufficient income. It's a good reserve to support major emergencies, such as paying down the home loan if forced to. There is a time factor in this for the housing loan. It appears that a large segment will probably be allocated here for opportunities or needs.

No Chinese stocks yet. Sleep well.

Cory Diary

2024-10-10

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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.

Cory Diary : Asset Allocation 2024

Asset Allocation Evolution

Asset allocation is a deeply personal process, shaped by changing circumstances and needs. It often reflects a combination of factors that influence the way we structure our finances. My current setup is no exception, and as time goes on, I anticipate shifting towards a more streamlined approach that better aligns with my evolving goals.

Idle Cash

Currently, idle cash makes up 2% of my portfolio, spread across multiple accounts. Managing these funds has become increasingly complex, and while I could reduce the number of accounts without impacting my overall strategy, I’m mindful not to add more, as it requires more time and effort to manage.

I primarily use two accounts: one for salary and daily expenses, and another to consolidate investments, insurance, and loan payments.

Simplification

As I age, simplifying my asset allocation is a priority. For example, I’ve been considering releasing the 4% allocation I currently have in life and savings insurance. This doesn’t mean I’ll go without insurance. One of the policies is linked to a rarely used savings account, which I’m also considering cutting.

With my recent retirement, my pension allocation will be dissolved and redistributed. However, I’m still contemplating how best to reallocate those funds.

Cory Diary

2024-10-05

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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.

Cory Diary : Retirement Reflections: A New Chapter

Retirement Reflections: A New Chapter

After 28 years in the workforce, I’ve finally stepped into retirement at the age of 54. Interestingly, I didn’t feel a big emotional release on the day I left, which surprised me at first. But looking back, I realize it’s because this decision had been in the works for some time.

I think back to almost 30 years ago when I graduated from university. That moment felt like a huge release from the pressure of exams and academic stress, even though I was always involved in extracurricular activities while staying in the university hostel. I still remember having nightmares for years after, dreaming that I was late for exams, only to wake up relieved to find myself in the working world.

Retirement feels different. It’s not just an ending but also a beginning. I’ve spent the last five years, largely due to COVID, building up buffers to ensure a robust retirement and family lifestyle. And although 54 isn’t that old compared to most people, it feels like the perfect time for me. I’m ready to invest more time in my kids and focus on what truly matters. The coming months will be full of activities centered around family, which I’m excited to embrace fully.

Interestingly, when I announced my departure, just two days before my last day of work, my team was completely shocked. It wasn’t something I had kept secret, but rather a decision that I’d been planning for weeks. I’ve received so many kind words and positive comments from colleagues, which has been encouraging. Given my macro management style, it’s no surprise that the company’s feedback system has been so effective in fostering a positive environment.

Now, I’m looking forward to diving into new experiences. I want to stay active and engaged, possibly even exploring passion projects that I never had time for before. There’s something liberating about having time again—not just for myself but for my family. The next chapter feels full of possibility, and I’m ready for whatever it brings.

Cory Diary

2024-0928

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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.

Cory Diary : De-Cluttering our lifes

Declutter

Blog Articles

Did a clean up last week on my blog articles. Basically I deleted most of the dividend tracking posts. Reason i did that is because I feel is for the moment in time and when is over, a new article update will come for us to see the dividend increasing trend again. So kind of de-clutter.

Aquarium

A hobbyist in corydoras for decades. Decided to dried up my tank finally as family consume more of my time in-addition to others. There are at least 4 boxes of aquarium equipments left behinds in addition to few tanks. I guess more spaces too be available soon.

Office Cube

Is amazing how much stuffs i kept in the office. There is a disney doll which i never have a chance to give to my toddlers to play. A docking station decade old. An Intuit tablet for professional drawing which I happily give away. A company sleeveless jacket that has been buried for 5 years probably. Two desktop keyboards that could not remembered when i last use. Many others. All Cleared.

Large Baby Stroller

It has been with us for 5 years and occupy a large corner of the doorway. Is quite bulky and not easy to wield. The price aren't cheap but got it in a rush as i remembered. With our 2nd Child not needed it anymore, time to go. Lightning speed.

Pictures

Over the decades I have like "Tons" of photo that gave a lot of memories. They are acattered everywhere in different storages and devices. In all form of archiving methodlogy. Have all them dumped into my notebook, sorted them out be time order for family, categories of events and friends. There are probably 25% sorting to go which is too tedious to manage them singlely. This will be after i retired. They are all backup into different thumbrives storages which are quite cheap to get at today price.

So I've been doing a thorough decluttering across multiple aspects of my life, from blog articles to personal belongings and hobbies. Streamlining everything can be quite refreshing!

Here's a summary of what I've achieved:

1. Blog Articles: Cleaned up my blog by deleting outdated dividend tracking posts, making room for more relevant updates.

2. Aquarium: After years as a corydoras enthusiast, I decided to put aquarium hobby on hold to focus more on family and other responsibilities.

3. Office Cube: Cleared out a significant amount of accumulated items, like outdated technology and office supplies, creating a more organized and minimalist workspace.

4. Large Baby Stroller: Letting go of a bulky stroller that’s no longer needed with our children growing up.

5. Pictures: A big effort to organize decades of photos across various storage devices, though I am leaving the rest for a future project.

I am clearly making space in both physical and digital life, leaving more room for what matters to me, especially investing. Keep up the momentum!

Cory Diary

2024-0914

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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.

Cory Diary : Rising Tide Lifts All Boats

With the recent revivals of Reit how do strong reits compare with each other. This is especialy cloudy when most reits do rise in tandem. One way to look at it is on recent Rate Cut Plan events caused by Interest Rate hikes few years back using TA.

The period of back up 2 year will be a good gauging point to study. For the exercise of this, we use FCT, CICT, Ascendas, MIT and ParkwayLife Reits.

FCT, CICT and Ascendas are in Positive returns 2% ~5%. Mapletree Ind (MIT) slights negative which if we include dividends which will be good plus. Interestingly, Parkwaylife Reit has -19.25% capital loss. It also has one of the lowest yield which may not help reduce the losses much.

Something to think about Rising Tide Lifts All Boats when they start to recede.

Cory Diary

2024-0907

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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.

Cory Diary : Portfolio Equity allocation updates

Here's a quick update on what i did so far recently.

Sold a small chunk of DBS. Taking profits. This shares were acquired during the recent correction of Yen Crisis. Free money must take else lightning may strike. LOL. The rationale is quite simple. 6% yield on one of the world safest bank is not hard to pick. Even if there is a reduction in NIM this not going to hit the dividend largely because the payout ratio is only slightly more than 50% of earning unless management really want to. What makes it even more attactive is the NII which is still growing.

One of the learning I picked up is if the position is for trading, we need to treat them so too when is time to sell. And this is what I did exactly for recent share sales. And my allocation for DBS on my equity portfolio reduced from 28.8% to 27.6%. Good move right ? Well, wrong. Reason being I am expecting new large fund inflow (hopefully) coming in next month. And if i am to deploy them, i could be buying back those shares I just sold.... Well, we human can't be perfect. We can learn to try to ... end of story.

That's all i did mainly. Ah yes, i did bought back alphabats at higher price. darn. The plan is to have kind of peanut butter spread on a small group of selected US Tech stocks. So I may buy back Msft when market allows. Trying to minimise my transaction as this group of shares are in cash management account that don't go easy on trading fees.

Finally, what's the score so far ytd ? Meaning, from closing value on the last day of trading last year till today.

August has been kind to my portfolio. Hopes this end well for everyone by year end.

Cory Diary

2024-0901

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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.

Cory Diary : Strategy for 2025

My hope is to have US Portfolio build up with some profit buffers before year ended and as synergy with my local income stocks. There is no targeted size for the US segment just that the stocks needed to be deployed and then allocation build or adjust in Year 2025. There is a dependency on how the macro market affects my available funds and stability of local portfolio to allow me to grow US Market fruitfully. Recent Yen Carry Trade Crisis nearly de-rail the plan this few weeks. However, the fast recovery put the invested fund into life time new investment high today. On a side note, USD weakened a few percentage points for the period which mean fund exchanged is down even before we trade in SGD term.

STI P/L YTD excludes dividend

With 4 months to go before the year ended, an impending rate cut, chances are we may see another ride up. This will put the portfolio in good footing in Year 2025 starts. Few things to watch is the over-exposure in local banks which i decided to reduce some of my trading positions for cash. Roughly 10% reduced. Is still quite sizeable and there is a small hit on final year record dividend hope as we are getting 5.8% ~ 6% yield from banks currently. There are no strong Reits of that range that i could deploy to mitigate the hit that I am willing to allocate increase size.

Currently, RMB is trading at low against Sing Dollar. There are stocks over there in HK that I can get greater than 7% yield with the on-going housing crisis and tension with US. One of such stock is Ping-An Insurance which just announced good result. This will be classic play opportunity. After second thought, decided not to proceed for now due to lack of familiarity. So my initials to enter Chinese market ends before it starts. With my last counter MLT has sufficient Chinese exposure ending badly which I cut quickly, most other counters have small exposure if any. China is becoming uninvestible.

Larger Cash buffer is not a bad option as market may flip with whim like what we see with recent Yen Crisis. This also tell me the shakiness or fragility of the financial system or economy which requires Fed to stabilise with cutting rate. Maybe a toppish sympton ? Maybe unchartered terriory ? whatever the case, emotionally we need to be ready. And the best way is to ensure our portoflio are.

In Summary,

Current

1. Complete build a portfolio of US Stocks

2. Risk-Adjust Income Portfolio

3. Strengthen Investment Cash Availability ( Not Warchest )

4. Maintain Dividend achieved in 2023 or more

Year 2025

1. Adjust US Portfolio allocation in measured pace

2. Continue Risk-Adjust Income Portfolio

3. Maintain Dividend achieved in 2024 or more

Simple Goals

Cory Diary

2024-0824

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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.

Cory Diary : Yen Carry Trade Crisis P2

Here's the Cory Equity Performance Chart on mainly still invested during the Yen Carry Trade crisis. This chart is for fun and educational purposes only.

Market is spooky and volatile. As Fed will likely do a first cut soon, the market will survive this year. However, unlike past cuts, they aren't in a situation to save the economy. So successive cut in short time may not be one. This time can be different but cutting consistently long term still rhyme.

Banks could well benefitted significantly and Reits will take longer to recover due to high rate cost staying high. Things may turn differently. Able to manage emotion has never been important as before.

Cory Diary

2024-0817

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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.

Cory Diary : Yen Carry Trade Crisis

The recent Carry Trade Crisis is a wake up call on how vulnerable our market is. It also reminded us we can't time it but will happen when it accidentally got triggered. The mosre important thing to me is what did I do considering I just recent expanded my US segment to 10% of Equity Portoflio.

My Nvidia position went negative together with recent addition in iBit and Tom Lee's favourite Russell 2000. Amazon took a beating as well but as most of the shares were acquired much earlier the impact today seems mute for recent days recovery. I sold off Msft to lock-in profit so as to mitigate the portfolio and now I have excess USD to content with. As the overall US positions are relatively small the impact is not enough to put a dent to the portfolio.

What really hit harder is when SG Bank stocks are sold down as well. This drives the DBS yield to more than 6.5% range which i deem too attractive not to collect more bank stocks. Yes more .... .  It doesn't makes a lot of sense unless people are forced to sell. Probably many people do carry trades to buy local banks or on margin long. See below allocation.

However, it doesn't trigger my warchest yet and the market starts to recover after Japanese authority reassures the market they aren't Alan Greenspan. This guy has a sadist strategy that market has to bust before boom at national level.

What I sorely missed in this sell down is to buy more Meta. Otherwise I think we are good to hold on most of the portfolio. Do I miss Microsoft. Probably not yet. Will we see a V-Shaped Recovery ? hmmm

Cory Diary

2024-0815

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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.

Cory Diary : Retirement Equity Portfolio Size

In my Quest for FIRE, the journey has not been easy but fruitful. Why do i say that is because FIRE aren't the Life Goal. Is the Experience that is key. While is commonly felt Experience got to do with going on holiday, this aren't what I meant. Is too narrow.

Life experience is about family, learning, building, helping, gaming, vacationing etc and FIRE helps to facilitate that. Example the pain and achievement going through NS combat vacation or simply as getting a driver license. Not everyone can go through the same experiences. Some have their own preferences. 

Having work for more than 25 years, thought is time to try and focus on many other stuffs. Formulated ones and those not. One of the hardest thing to let go is that of salary which will be quite sizeable by now and hard to let go mentally. The middle ground maybe trying to reach work life balance. Maybe tilted more away from work on the expense of promotion and increment.

Nevertheless, i thought is time to do another exercise on - Do we have Enough to Retire ?

The angle we will do is to pre-determine the expense and then verify with corresponding Equity Portfolio Size. For a dividend income portfolio, estimating the annual dividend maybe easier. For a growth portfolio, then we need to estimate the growth. For our case, will be both since my portoflio is mixed and probably we can pro-rated them accordingly.

The scenario will be expense is 9k monthly with 3% inflation. Taking into many factors into consideration like age, loan, non-equity income etc we can determine the portfolio size than can last by adjusting the size to our liking for our age to last.

The assumption is non-equity income size is more or less fixed by my age to support basic needs. Expanding this segment on low return can be wasteful unless warchest which can lowered your portfolio amount. There maybe situation where people can live more on non-equity income such as rental. In that case, adjust the Non-Equity side accordingly.

Below a sample computation. Select the picture for clearer view. 1M Starting Portfolio size to support 9k monthly expenses at 3% inflation can last till age 96 for me. There is drawdown of Equity portfolio to zero. There will be some inheritance from some non-equity allocation and property after. Not that bad.

The parameters can be changed to suit ones condition. I tabled few permutations to see how this go.

The finding is quite interesting which I am so keen to share so that people can avoid the danger.

Scenario A and B, just 0.5% inflation difference can set you back 7 years of retirement.

Scenario A and C, for 200k more, you likely have excess after your last breath despite drawdown.

Scenario E, a situation where your children will love you deep deep. Portfolio is divergence. There is no drawdown and probably grow beyond your dream hopefully.

Scenario F, if expense go out of hand and inflation increases too. Portfolio can only last 28 years despite larger 1.5M Portfolio size. The danger of Lean Fire is obvious.

Cory Diary

2024-0805

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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.

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.

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.

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.

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.