Humbly seeking your advice

[KopiKat]

Hi everyone, I have been here for sometime just reading everyone’s postings and I hope that you guys could offer me some advice on what to do with my portfolio. I am retired (victim of the recent car loan curbs) and hence earning no income but I have my wife, 3 children (aged 19, 18 and 16) and my mother to support.

My investment objectives are (in order of preference):
1. to generate an average of $13,000 per month from my investments annually (including property)
2. to achieve a nominal CAGR of 4% over the next 5 years

Right now my current investment portfolio excluding my main residence includes
a) SGX stocks: 2.3 million – Net yield 3.34% ($76,820)
b) SGD Bonds maturing in 2017: 0.5 million – Net yield 4% ($20,000)
c) SGD Cash (excluding emergency fund): 0.8 million – Net yield 1.1% ($8,800)
d) SGD Property: 2 million – Net yield 2% ($40,000)

This gives me a net income of about $11,700 per month which results in a shortfall of about $1,300 which I am trying to find ways to make up.

I know the obvious answer would be to use the cash I am holding to purchase short to medium term bonds (<7 years) yielding about 3-4% or stocks yielding about 4% (e.g. Singtel) but I am wary that the prices of these 2 assets in particular bonds have risen so much that their risk return trade off is no longer attractive. In addition, I was thinking maybe it would be good to maintain the flexibility to take advantage of corrections in the market (<20%)

I’m actually quite clueless about the stock market and my main source of wealth is actually 2 properties I bought a long long time ago…. 1 of which went en bloc last year. My stock portfolio actually resembles the STI. With high weights in DBS, UOB and Singtel… I have made money but I am very aware that I am just lucky.

I also have a $500,000 loan against my main residence which I took out last year fixed at 1.5% interest for 5 years. Currently hedging this off with the bonds maturing in 2017. Would not cost effective to pay off this loan as I am locked in for the 5 years. Also the cost of holding this loan is only 0.4% pa given that I cash at 1.1% with ANZ.

A humble thanks in advance for any advice offered. Would really appreciate any advice and new insights offered.

I computed your individual returns based on the % Net Gain figures provided and added it above in red. When totalled up, it gives $145,620 or $12,135/mth, higher than your computed $11,700 and closer to your $13,000 target. So, either you have made a mistake in your computations or perhaps, due to rounding error on my side (ie. your Net Yield % had been rounded up by you).

Anyway, if the shortfall is so important, like you yourself mentioned, the most obvious answer is to use the cash to purchase bonds. If risk is your main concern here, check out SGS Bonds ie. Singapore Government ones. The longest term ones are giving a Yield ~2.77% (Coupon 2.75%) and that ought to bring you a lot closer to your $13,000/mth target (will exceed if computed using your above individual Net Yield figures).

In the longer run, since you'd professed to be clueless on the stock market, how about putting it with the professionals? ie. Fund Managers. You'd of course still have to put in effort to find the right one by checking their performance and talking to them. In this forum, there's always d.o.g.

No, I don't know him personally but his posts (since I started participating in forum in 2005) had always been very well researched and supported with solid facts and figures. If he's who I suspect he is (accidentally stumbled on some articles in an online magazine site, with contents and style strikingly resembling his), his CAGR is easily in the 20s (%) since '08 (but always bear in mind past performance is not a guarantee of future ones).

[corydorus]

You are quite humble with such large net worth.

The only comment i have is your SGX stocks of 3.34%. Maybe put more focus on this area since you have such a large exposure here but return is around STI index only. A few percent more in this segment would have bumped your investment significantly in early Q this year.

[davidsim]

Hi everyone, I have been here for sometime just reading everyone’s postings and I hope that you guys could offer me some advice on what to do with my portfolio. I am retired (victim of the recent car loan curbs) and hence earning no income but I have my wife, 3 children (aged 19, 18 and 16) and my mother to support.

My investment objectives are (in order of preference):
1. to generate an average of $13,000 per month from my investments annually (including property)
2. to achieve a nominal CAGR of 4% over the next 5 years

Right now my current investment portfolio excluding my main residence includes
a) SGX stocks: 2.3 million – Net yield 3.34% ($76,820)
b) SGD Bonds maturing in 2017: 0.5 million – Net yield 4% ($20,000)
c) SGD Cash (excluding emergency fund): 0.8 million – Net yield 1.1% ($8,800)
d) SGD Property: 2 million – Net yield 2% ($40,000)

This gives me a net income of about $11,700 per month which results in a shortfall of about $1,300 which I am trying to find ways to make up.

I know the obvious answer would be to use the cash I am holding to purchase short to medium term bonds (<7 years) yielding about 3-4% or stocks yielding about 4% (e.g. Singtel) but I am wary that the prices of these 2 assets in particular bonds have risen so much that their risk return trade off is no longer attractive. In addition, I was thinking maybe it would be good to maintain the flexibility to take advantage of corrections in the market (<20%)

I’m actually quite clueless about the stock market and my main source of wealth is actually 2 properties I bought a long long time ago…. 1 of which went en bloc last year. My stock portfolio actually resembles the STI. With high weights in DBS, UOB and Singtel… I have made money but I am very aware that I am just lucky.

I also have a $500,000 loan against my main residence which I took out last year fixed at 1.5% interest for 5 years. Currently hedging this off with the bonds maturing in 2017. Would not cost effective to pay off this loan as I am locked in for the 5 years. Also the cost of holding this loan is only 0.4% pa given that I cash at 1.1% with ANZ.

A humble thanks in advance for any advice offered. Would really appreciate any advice and new insights offered.

I computed your individual returns based on the % Net Gain figures provided and added it above in red. When totalled up, it gives $145,620 or $12,135/mth, higher than your computed $11,700 and closer to your $13,000 target. So, either you have made a mistake in your computations or perhaps, due to rounding error on my side (ie. your Net Yield % had been rounded up by you).

Anyway, if the shortfall is so important, like you yourself mentioned, the most obvious answer is to use the cash to purchase bonds. If risk is your main concern here, check out SGS Bonds ie. Singapore Government ones. The longest term ones are giving a Yield ~2.77% (Coupon 2.75%) and that ought to bring you a lot closer to your $13,000/mth target (will exceed if computed using your above individual Net Yield figures).

In the longer run, since you'd professed to be clueless on the stock market, how about putting it with the professionals? ie. Fund Managers. You'd of course still have to put in effort to find the right one by checking their performance and talking to them. In this forum, there's always d.o.g.

No, I don't know him personally but his posts (since I started participating in forum in 2005) had always been very well researched and supported with solid facts and figures. If he's who I suspect he is (accidentally stumbled on some articles in an online magazine site, with contents and style strikingly resembling his), his CAGR is easily in the 20s (%) since '08 (but always bear in mind past performance is not a guarantee of future ones).

Hi Kopikat,

Thanks for pointing out that discrepancy. I will go and recheck my figures. Being $865 short will make me feel a lot better . Perhaps this is the best advice so far. Haha.

The shortfall is not that important to me but I don't want to just 'bear with it' due to my poor investment knowledge as I think it is only responsible of to do my best for my family's sake. I would estimate that in slightly over 4 years time my eldest will be working and that should more than make up for the shortfall. My total estimated shortfall over this period is about $65,000 which I am actually comfortable with.

I guess a more simple question would be to ask "If you were me would you be doing anything different?"

Also thanks for getting me to consider fund managers. Would you happen to have any of your cash invested with them?

[HitandRun]

GG

St****** could be undervalued but no guarantee when value will be unlocked wor.... That is the risk.

---

Davidsim

How long did you take to build up your stock portfolio? (I'm wondering how much experience do you have with stock investing?)

[dzwm87]

In the longer run, since you'd professed to be clueless on the stock market, how about putting it with the professionals? ie. Fund Managers. You'd of course still have to put in effort to find the right one by checking their performance and talking to them. In this forum, there's always d.o.g.

From what his situation is, it seem like davidsim needs a regular flow of income. Not sure whether putting it in a fund will be good since the optimal result is normally achieved after a 3 year lock-in. But I might be wrong. There might be other options available, perhaps a different share class in the fund?

Nonetheless, I will recommend d.o.g. as well. He has a very good research process.

[Gaudente]

Would really appreciate any advice and new insights offered.

you have a net worth of 5 millions and ask us for advice ?
I would prefer to ask you how to reach such a net worth

[davidsim]

GG

St****** could be undervalued but no guarantee when value will be unlocked wor.... That is the risk.

---

Davidsim

How long did you take to build up your stock portfolio? (I'm wondering how much experience do you have with stock investing?)

It took me a year. I used to have 2 investment properties but one of them was
En blocked so I used the cash proceeds to invest in stocks periodically over the past year. I do not have much stock investment experience and have kept to household names like DBS, UOB and Singtel.

I would also like to say I am open to keeping my portfolio status quo if anyone thinks it is the best course of action for me. My eldest child should be working in slightly over 4 years and the total cash deficit I would incur over this period is about $65,000.

[doubl3mint]

hi davidsim, thanks for sharing your situation. i enjoy case studies like these to practice and discuss optimization strategies.

from the replies of most of the buddies in this thread, i think quite a few have similar thoughts on your situation.


if i were in your shoes, considering age, responsibilities and knowledge, i would:

a) first look to getting a better return on the cash holdings, which appear to be quite a sizeable amount.

b) look to sell off the investment property for a good price with the run up in prices, and reinvest it in a suitable instrument for your risk profile

c) consider an annuity instrument for a perpetual income stream. personally i feel it takes some stress off money management.


with that in mind, some of the obstacles you face would be:

a) yield compression globally as investors come out in force, as you have aptly noted

b) lack of in-depth knowledge of the markets

c) a shorter time horizon as you are retired with a family to feed and it would be unwise to take too much risk with your money

d) the availability of a low-cost annuity instrument to provide reasonable returns


to overcome this, patience is key.

i believe many of us have cash waiting to be deployed but it is my opinion that the margin of safety in the markets (bonds especially) is generally insufficient.

on an ongoing basis, i am looking for pockets of mispricing, but with the ongoing rally it is becoming an uphill task.

be careful when looking at bonds because the asset class has been enjoying an insane run up over many many years.

until then, i will have to put up with inflation eating into my cash portfolio, which is better than entering the market and getting negative returns over the longer term.



knowledge is power. while you wait, i recommend you read up on how to invest, so you can make informed decisions with your hard earned money.

the buddies here have recommended some titles, which are freely available on the national library website and can be read on your computer or smartphone.

check out the various annuity offerings, private and public, and compare them across the board.

for myself, i find that placing a portion of my portfolio combination of cpf life and ntuc's classic annuity to be suitable. (disclaimer: not a recommendation, no vested interest, just sharing my thoughts)


on the back of an envelope, my portfolio at 57 would look something like:

40% diversified stocks (quality, dividend paying ones only)
30% fixed income instruments
20% annuities
10% cash

for income of 4% and up.

however, that is a textbook portfolio. if i started off today with 100% cash, i would hold off buying any fixed income and slowly enter equities.

fixed income would come only after interest rates revert to normal (this could take a while), and the bond bull run ends.

i would also hold only half of equities in individual stocks, with the remaining half in physically replicated index etfs that pay out dividends.


ultimately, i believe no one else will care more about your money than yourself.

keep your mind and body active, i have experienced first hand how people i know start to deteriorate after retirement. investing is a good way to avoid that. reading articles and attending AGMs all year round is one way, haha.

good luck, and enjoy your retirement and investment journey!

[pianist]

when a person ( i believe there are many more) like davidsim tries to scoop penny counters discussed aplenty in this forum, just be ready to hold tight and enjoy the upswing ride...

these are the elderly generation that rode on the generous govt policy of the past. the economy is now mature, job opportunity does not seems exciting for the younger generation, flipflop property chance seems like over

hee..just kidding

[Temperament]

[/quote]

I do not have much stock investment experience and have kept to household names like DBS, UOB and Singtel.

i think there is nothing wrong with this way of investing. in fact i had attended one share investing talk, the lecturer thinks SGX market is too dangerous to invest otherwise because he thinks SGX is a "village's" market. (Too small & therefore most probably can be "manipulated").