In my last blog, I wrote “My game plan for 2019 is to continue to grow my index portfolio, collect dividends and maintain a 5% yield portfolio, subscribe SSB to the new max and increase average views per month in my blog further.”
And I received several questions after that requesting me to elaborate why I chose them. I thought it would be useful to share my thoughts openly (and hopefully trigger yours) … hence, this blog.
Let me do the easier one first:
(1) Subscribe SSB to the new max
In my opinion, SSB is the best investment tool for Singaporeans today.
- It is risk free as it is backed by our AAA rated Singapore government.
- It is flexible as you can withdraw it anytime and still earn interest to the date of withdrawal.
- And guess what, it even has a higher interest rate than Fixed Deposit. It beats the FD hands down anytime.
- With so much volatility and uncertainty in the market, it is prudent to keep a significant portion of your assets in cash to jump on any unexpected opportunity and in case of any emergency
- Our government just up and doubled the limit from 100k to 200k and open it for SRS investment.
Simply great! => First thing I will do 🙂
(2) Grow my index portfolio
Over the years, I have learned that it is difficult to beat the market. If I have cashed out everything and invested in STI ETF at the start of the year, I would have a smaller loss. I lost 15% in capital value compared to STI ETF’s 11% (excluding dividend). If I include the dividends, then the loss is comparable. I took greater risk (shares margin financing, high yields, aka high risk, stocks) to gain a higher dividend yield of ~ 7%. STI ETF’s dividend for 2018 was 3.2%.
The comparison would be magnified if I assumed a scenario that I invested 50% in STI ETF and 50% in ABF SG Bond ETF. Unlike most ETFs, the latter actually made a positive return this year, despite the rise in interest rate. It is the best performing index ETF in my portfolio.
If I do the 50/50 split, the loss for the year will be reduced to 5% (excluding dividend) and 2% (including dividend). This shows the benefits of diversification between equity and bonds, which is particularly useful in a depressed market.
The other benefit of regular investments in index ETFs is that you will average down the cost when the market goes down and ride with the market as it goes up. All these can happen without you putting in a lot of efforts and time to do research.
My regular monthly investment will continue and I think of even stepping up the quantum. From time-to-time, maybe every 3-6 months, I may also top up to re-balance my index portfolio. For those who are not familiar with my index portfolio, my aspired ratio of bond/equity/gold/reit ETFs is 35%:35%:5%:25%.
(3) Maintain a 5% yield portfolio from Dividends
The footsteps of retirement is coming near by nature of increasing age. At a point in time, I believe the company will think it is better to lay me off and get a younger person (lower pay) with a higher capacity for greater stuff to take over. It does not mean that I am not competent or not hard working but it is the reality of life in the modern working world that I have to accept. I would count myself fortunate if I get a package on departure. There are many other reasons that we may be forced to retire and we will be staring at a loss of active income.
Here comes the importance of having a sustainable passive income. If we don’t want a significant deterioration in our quality of living after retirement, we need to make sure that our monthly passive income is as close as possible to our active income.
I believe dividends is a great form of passive income. As many of you know, I aim for a 5% yield. I feel that anything lower than 5% means that my capital outlay will be a lot and I may not be able to accumulate it by the time I retire and a yield higher than 5% means that I am taking on too much risks.
I think 5% is a sweet spot. Hence, I will spend efforts to nurture and cultivate a portfolio that can give me a 5% yield sustainably. By the way, my Index portfolio has not been able to provide a 5% yield to me, so I need to maintain an Income and a Growth portfolio to help me reach that.
(4) Increase Average views per month in my Blog further
I hope my blog will benefit people who are starting on your investment journey. I have made a lot of mistakes in the past and will continue to make mistakes as I take risks to invest. I hope by sharing those lessons learned, it will help people to avoid making those mistakes and will start their journey on a better footing. One way of knowing that my blog is adding value to you is that it attracts a bigger reading crowd each time and I have more regular subscribers. That will be the best motivation for me to persist in doing this.
Have a great 2019 folks! Happy New Year!