Cory Diary : Singapore Market 400 points climb - 人算不如天算: Man Proposes but God Disposes

Man Proposes but God Disposes

When I post on 31st Oct, on Wash my cards, basically as I said " The goal is to protect capital, maximise dividend, risk adjusted." The market looks like going for another deep dive like in March 2020. Therefore the learning will be how to mitigate the situation. The main change is  removal of STI ETF due to expected lower yield coming distribution because of banking segment dividends have been restrained.  And a few counters. However most the portfolio I was prepared to go with the swing and considering the amount of cash raised that can be quickly put to pick Durians. LOL

On exactly the next week trading day, STI ETF starts it maiden climb. Roughly 400 points !

In Cory Portfolio, the swing is $88K from negative loss to positive returns. What-if STI has stayed in the game ? About $11k additional gains. However during this period , I have put some of cash  into Vicom and a few counter changes which help to alleviate few K returns. So in total the mitigation cost me probably 6 to 8K of returns. I would have hit a few more if manage to buy SPH in time which I was about to prior yesterday .... omg ... the rise is crazy ... to my frustration.

So here we are with higher yield dividend portfolio but slightly lesser net returns from past 3 weeks. What notably is the STI pace may not be always align with the banks so is broad based economy that the market was pushed higher into. This is rare in recent times and I am not sure it that a new direction which big money is buying into a broad index concept. Nevertheless the gap is now much smaller in the range of 15% against Cory Portfolio. I am still happy as I rather to be in positive than winning STI huge but with negative returns.

Singapore broad economy is still weak while Japan and HK go into another Covid spins. So a pull back is possibility from the capital flow injection which is blunt imo. Nevertheless I will rather take a 3% Positive returns anytime for the portfolio. Staying vested in market in sizeable manners help me this time again though I still find it could have been better to me ......

Cheers

Cory

2020-1121

Cory Diary : CPF Life - FRS or ERS

Some period ago I have decided Basic Plan is the way to go considering my age and investment portfolio I have that choosing moderation will be preferred. What I did not mentioned is should I default FRS or go for ERS. And in this article we will try to find out.

" For members who turn 55 in 2020, their Basic Retirement Sum (BRS), Full Retirement Sum (FRS) and Enhanced Retirement Sum (ERS) are $90,500, $181,000 and $271,500  respectively."

To hit ERS, I need additional $90,500. So basically multiples 1.5x of FRS.  Let's use FRS to see the returns.

Current FRS = $181, 000

Current Basic Plan : $1,272 - $1,404 starting at Age 65

Take note the Basic Plan payout is based on below notes form CPF through CPF Life Estimator Calculator.

"The monthly payouts, total payout received, and bequest amounts shown are estimated based on the Retirement Account balance provided, current CPF interest rates, and current mortality assumptions. They may differ from the actual figures. The displayed ranges are based on interest rates between 3.75% and 4.25%, and do not represent the lower and upper limits of the payouts"

Let's say lifespan of 80. (updated chart to correct year error)

Counted slightly more using 1st Jan for Bequest. Roughly XIRR of 4.4 %. Is that of any surprise to you all ? Do note that for worst case is 4%.

One thing to add, if you manage to live to Age 99, XIRR will be 4.9% which is investment returns equivalent of 4.9% for best case.

Should I go ERS ? Maybe I can do Top-Up after 55 to decide. CPF is more like a reasonable good safe harbor in case I become senile.... :)

Again DYODD as we explore the journey.

Cory

2020-1117

Cory Diary : Rental Income - Why I have to invest in property

Scenario of Rental Income

Property Price : $1,140,000

Monthly Rental : $3300

Yield at Cost : 3.47 %

Annual Net Income

After considering below

1. Condo maintenance cost : 400 monthly

2. Rental Agent fee = 0.5 month annual.

Monthly Net income  : $3300 - 400 - (0.5 month / 12) = $2763

However, usually people borrow quite an amount to finance the purchase. So there is leverage in play. And this is where Math becomes complex.

3.. How much you leverage

4. Stamp Duty & Fees : 2.72% one time

5. Interest Cost.

 

Let's assume item 4 in build into the condo valuation. Basically ignore.

Leverage resulting I need to pay $606 of interests portion monthly

Monthly Net income  : $3300 - 400 - (0.5 month / 12) - 606= $2157

Implied, Annual Net Income = $25, 884

YIELD

Now, let's talk about Yield. Yield at Cost based on net income : 2.3 %.  This Math sucks right ?

One thing to note. Property valuation can change with time. If property valuation increase 35% after 10 Years. The capital returns are  then plough  back into the monthly income in simplify manner.

Yield at today valuation approximately 4%. Basically doubled. And that's before property tax, tenant issues, empty months, .... alamak. Still no good enough.

However let's assume 33.3% of the property is my money injected. The rest are borrowed.

At current valuation yield will be 6.9%, or 12% if price increase by 30% 10 years later.

This are all rough estimation. Should I just stick with Reits or it can be another form of diversification that we cannot afford to miss as I like the Maths now.

Rental Income Tax (updated from feedback)

Depending on one tax status. Can varies widely between a retired and a director level salary income tax.

Please DYODD.

Cory

2020-1115