With a few business hours to go before we close 2017 and welcome 2018 investment year, I don’t expect any drastic change in investment values. With a bit of time on my side today as I am on leave, it would be timely to do a bit of reflection on my investment journey … frankly one sentence sums it all …
“Boy, it was simply a wonderful learning year!”.
The excitement was not so much from the angle of investment returns but rather all the new things that I started this year and the new experience, learning and friends that I got that truly excited me. The latter are priceless!
First Reflection – Beating the market is very tough; investing in index funds will help
Just a simple first reflection to kick it off … my portfolio didn’t beat the STI market. As announced by SGX as at 18 Dec 2017, (see details via this link) STI gained 542 points in 2017, a 18.8% jump compared to the 31 Dec 2016 of 2881. If we add 3.4% dividend yield into the calculations, by investing in STI index alone, one would have gained 22.2% in total. That was a tall order to match.
Despite all the time spent researching, monitoring and timing the purchases and sales, my return still under-performed STI. Beating the market is difficult and that was also Warren Buffett’s advice to retail investors. (see details via this link)
I will not be selling everything and dumping every dollar into STI index as yet. However, it was a useful lesson. I am now even more committed to maintain my monthly purchase of index funds and continue to build up my index fund portfolio (more via this link). Although it has grown 30% in value from those monthly purchases and some small gains and dividends, it is still only 10% of my active portfolios But I foresee that it will grow to be more substantial in the years to come.
Second Reflection – Through systematic tracking and regular review, I aligned my portfolio closer to my investment objectives
This is also the first year that I am more serious in tracking and monitoring my investments. While I did track them in the past, I was more structured and systematic now. But it also meant more efforts on my part. Was it worth it? I think so. I now know my Ins and Outs of my investments a lot better. One of the key insights that I got when I did my periodic reviews was that I still retain streaks of a trading mindsets. Nothing wrong with that but if I want to build an income portfolio that can provide stable and sustainable passive income for my retirement, I better evolve my mindset. On hindsight, if I have not traded them, my returns this year will be higher and I will be slightly closer to my dream of having sustainable income.
To help me do so, I craved out stocks that I think have strong balance sheets, generally able to compete effectively in their respective businesses and possess net free cash flow and thus, able to distribute dividends regularly and maintain their yields.
I put them into a separate “income” portfolio and resolved not to trade them unless market conditions change drastically or their company fundamental deteriorate significantly. (more via this link) I must say since I made that decision a few months, I have not sold any of them 😊. Hopefully this brings me one step closer to my financial freedom days.
Third Reflection – I am not alone on this pursuit of financial freedom
The drastic restructuring in our company and loss of several long serving colleagues compelled a few of us to seriously look at our financial plans, develop what-if scenarios when we lose our jobs and accelerate our dreams of achieving financial freedom. All of us acknowledged that we were a long way from that but this should not stop us of working towards it.
Suddenly, I realized I am not alone on this journey.
Pooling our knowledge together, we may be able to help one another achieve our dreams earlier. Nowadays, we meet once a month for lunch and during which we just talk nothing but our investments decisions and share or debate our analysis of a particular market trend or company. This is great and refreshing.
By the way, born of this was this blog – which by itself was a great learning journey for me personally.
In the virtual local financing blogging world, I also get to know more like minded friends. It is simply great to have these friends who share the same interests and will take efforts to share their thoughts and views with me. Moreover, I got closer to the local financial blogging circle and learned a lot more from reading their blogs and interacting with them. I hope I will be able to establish an even closer relationship with them in the coming year.
I was also able to end the year with 26 loyal subscribers to my blog. Thank you so much! The journey is more pleasurable and motivating when I have company like you.
Fourth Reflection – Use CPF to help realise my retirement dream
I learned a lot more about the various schemes and accounts of CPF this year and realized that it can be a very useful way to help realise my retirement dream.
For a change, I do not see it as place that my money “got” locked in and desperately want to take the money out via housing loan, investments etc. In fact, I made voluntary contributions to my accounts and did small refunds to my housing loan. I also contributed to my parents’ and sons’ accounts.
Part of it was the realization that the 4% RISK FREE interest is actually not easy to achieve in a long run and it comes in especially helpful to build a retirement fund when we consider the interest compounding effect. Another was the opportunity cost of using my CPF fund for loans and investment. I realised that I end up paying the 2.5%/4.0% interests. So, net-net, my gain is actually limited. I might as well let the government pays the interest.
Last but not least, 55 years old doesn’t seem that far away anymore. Hence, it is better to keep a bigger sum in CPF to earn the compounded interest then to experiment it with other “non-risk free” investments. (more via this link)
I think I will stop here. While there are still many learning and reflections that I got this year, I don’t want to bore you further. I may pick and choose some to discuss in the coming weeks.
I hope you find these reflections useful for you too.
Happy to discuss if you like – eagerly awaits your comments and I will get back to you ASAP.
Wishing everyone a great long weekend and a safe, prosperous and happy New Year!