Contributing to a new war-chest - SRS

There were several blogs discussions on Supplementary Retirement Scheme (SRS). For example, Seedly have good articles to summarise the pros and cons of SRS. In this article, my focus will be on my personal experiences and considerations.  

My wife and I opened our SRS accounts last year with $1 top-up. There were discussions that this could “lock-in” the statutory retirement age at 62 years old which is the current prevailing age. The “statutory retirement age” is dependent on the gov policy and this age could change in future. The exact wordings on the IRAS website are as follow:

Beyond the rhetoric of retirement savings, the key benefit to me is to reduce the amount of tax that I need to pay next year! I had performed relatively well in my job this year and this was reflected in my bonus 😄 Having already done my CPF SA cash top-ups as well as donated to charity organisations, I was still exploring to reduce my tax payable further. This was how SRS become an option.

Besides simply throwing money into SRS, it is important to have an exit strategy. This is to protect the capital in case of premature withdrawal. This spurred me to consider the 5% penalty for premature withdrawal AND that 100% of the withdrawal sum will be taxed. In addition, the withdrawal sum will stack with the total income received (e.g. from my salary) for that year.

My ultimate decision is to pick a stock with potential to increase beyond 5%, so that it could minimally cover the penalty frees. My top-up amount would be dependent on the stock purchase price. 

A few months back, I bought into OCBC at around $10.68. The target sell price is at least $11.30. Alternatively I will plan to hold the stock for 2 years to allow the annual dividends of 3.2-3.8%  to cover the penalty fees.

Hopefully, this will enable my SRS to become another war-chest to invest in opportunities when they arise.

Cheers!

GoHuat

Market Watch – Optimism and Money Avalanche?

Three news caught my attention over the past few weeks.

Firstly, there was growing optimism from the trade war after US and China offered concessions to exempt some trades from tariffs. All eyes will be on the outcome of their Oct 19 meeting.

Secondly, many global central banks (Source), notably European Central Bank (ECB) this week, had decided to turn on the stimulus taps. The ECB planned to cut interest rates to -0.5%, start printing money again and buy €20M in bonds and other financial assets per month starting in Nov 2019. Looks like there would be an avalanche of liquidity flooding the market. 

Lastly, there are market expectations for FED to reduce interest rates further, especially after their meeting next week.

While the STI has risen, the volume and price increase was somewhat tamer than expected. It is likely that many investors were still assessing the market direction before deciding what to do next.

In my opinion, the Oct meeting would likely not have a firm resolution to end the trade war. But there is definitely a good chance for some positive announcements as the trade war have hurt both countries. It is also in both sides’ interest to end the year on a more positive note. I also believed that the avalanche of liquidity could artificially inject a bullish effect into the market.

I am looking into the charts of STI and DBS as market benchmarks. For STI chart, the market seems to be going slightly downtrend or sideways. For DBS chart, there is a good chance of a wedge forming, that could lead to a potential upward breakout.

In my previous post, I shared about the start of my technical analysis journey. Though I have realised gains from trades in DBS and SATS, have noted many areas of improvement after my self-reflection. To this, I look forward to making better trades next time. 😊

GoHuat

Related Post

1.       How am I starting on my Technical Analysis journey?

How am I starting on my Technical Analysis journey?

My core investment skills come from fundamental analysis. TA is relatively different and requires me to develop different skillsets. For past few months, I have been working hard to improve my Technical Analysis and trading skillsets.

Recently bought a book: “Trading: Technical Analysis Masterclass” (This is an affiliate link. See disclosure below) by Rolf Schlotmann / Moritz Czubatinski, which provides good and clear explanation of the basics. Have personally found this book to be really useful and will recommend new traders to take a look.

So how am I starting my TA journey? I first set aside a sum of money for short-term trading:

(1)   Near-term and daily needs in high deposit bank accounts

(2)  Emergency funds in short-term fixed deposits

(3)  Stocks

(4) Investment Warchest in Singapore Savings Bonds and high deposit bank accounts.

(5)  Currency

(6) Short-term trading – NEW!

This is a sum that could potentially become my “school fees”. Before each trade, I worked out a plan and identified the potential upside/downside % as well as the entry, exit and cut-loss prices. I also used indicators such as Candlestick, RSI and MACD to guide me.

While the general trend of overall stock market trend seemed bearish, I spotted potential uptrend opportunities for OCBC, DBS, Hong Kong Land, SATS Limited. Hence, I took the calculated risk to buy in and am currently monitoring the charts closely. Have earned a small profit from trading STI ETF. Not a bad start, I guess? Will share some charts and analysis in my future posts. 😊

Disclosure: The link for "Trading: Technical Analysis Masterclass" is an affiliate link. At no additional cost to you, I will earn a commission if you click through and make a purchase.

GoHuat

An Inflection Point in your Investment Journey?

At the start of our investment journey, we tend to get really enthusiastic. This motivation is useful in helping us learn basic concepts quickly. This is the point in which 80% of the knowledge can be learnt in 20% of the time – A common 80/20 rule.

As we repeat the same investment approach over and over again, our learning starts to “stall”. It is human to want to shift our attention to other investment approaches in order to get back the “ growth excitement”.

What many failed to realise is that after the “stall”, there will be an inflection point that will drive our learning curve back up again. This would also enable us to gain deep proficiency. 

This was well summarised by the “Bipolar Learning Graph” from Timothy Ferris in “The 4-Hour Chef” (This is an affiliate link. See disclosure below.). It was interesting how Tim explains the use of Warren Buffett's margin of safety concept to design "bullet-proof recipes" as well as his methodologies to learning anything.

I firmly believed in staying FOCUS before and during the "stall" in order to break out and gain deep proficiency in our investment skills. 

Focus has been crucial throughout my life. During secondary school, I was initially ranked last among my cohort for chess. Even though I set the record for losing the most number of consecutive matches, I persevered to improve my skills. This enabled me to become the best player within 2 years. I went on to repeat the same formula in other aspects of my life.

Our family finance journey is right before the inflection point now. In my earlier post, we shared our goal of achieving family finance freedom. Besides our family finance habits, we are sticking closely to our investment approaches that have helped to achieve fairly reasonable gains while building up new skills sets. Boring yes, but focus we must :) 

GoHuat

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1.       Link to Amazon for The 4-Hour Chef
2.       A definition of success by a Millennial Family

3.      Our 7 Simple Family Finance Habits

4.      Can investment help us to keep our emotions in check? Yes it can!

Disclosure: The link for "The 4-Hour Chef " is an affiliate link. At no additional cost to you, I will earn a commission if you click through and make a purchase. 

Our 7 Simple Family Finance Habits

This is a continuation from my last post. My family follows 7 simple habits to improve our family finances. Most can be easily achieved and have helped us over the years.

Habit 1: Always check our receipts

My wife has a habit to check our receipts after paying at supermarket and restaurants. Several times, we discovered errors and promptly asked for a review in the payment. We should never pay extra for something that we should not. Do remember to check your receipts on the spot rather than doing it back home!

Habit 2: Only buy what we need

It is easy to be distracted by “special discounts” or “Buy 3 get 1 free” when you don’t really need the item or the bulk. Interestingly, there are times when “special discounts” are indeed special as they are pricier than the price from another store. Buying in bulk at times can be more expensive than buying individually from another store. No matter what, it is best to only buy what we need rather than choke up your house with more clutter.

Habit 3: Compare prices

A simple price comparison between nearby similar stores could save us some money. We had the habit of checking prices from both Watsons and Guardian, or between departmental stores before buying what we need. The price difference for similar items can be much more than we think.

Habit 4: Use discounts and cashbacks

Store discounts, Credit card miles/cashback, GrabPay discounts, Shopback cashback? Nowadays, there are many discounts and cashbacks which we can easily leverage on. Simply pay with credit card to gain miles/cashbacks or automatically gain cash back when you use a registered credit card at Shopback’s merchants. Why resist bringing in some cash back into your pocket!

Habit 5: Pay our bills promptly

Not paying our bills promptly will result in additional interest payment which will really burn our pocket bigger every month. We always aim to pay up our bills in advance at times before the statement comes in.

Habit 6: Bring own water bottle instead of order drinks

We developed the habit of bringing our own water bottle along. Drinking plain water keeps us well-hydrated and helps us to reduce the excessive sugar intake from soft drinks. Each drink cost around S$1.50-2 (US$1.10-1.50) and we could easily save around S$90 (US$66) a month per pax.

Habit 7: Stay healthy

Falling sick costs money and time. Better to stay healthy by eating right, sleeping well, exercise regularly. We make sure our breakfast is simple and nutritious – oats, wholemeal bread, 8hrs of sleep, regular jogging, etc.

Having good financial habits enabled our family to build up more cash over time. We can use the cash in many meaningful ways including spending time with family on a good holiday! What are some of your interesting family finance habits? Feel free to share!

GoHuat

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1.       Is there a definition of success by Millennial Family?

Happy 54th Birthday Singapore!!

Source: https://www.visitsingapore.com/

To live in Singapore is the greatest blessing for my family. There are many things for us to be appreciative of. We have a green and safe country as well as the ingredients for basic family needs such as clean water, 3 daily meals, a roof over our head, medical, etc.

We had the opportunity to stay in overseas over extended periods. The experiences are humbling and opened our eyes to the differences between cultures. Singapore remains the only country in our heart. 

Admittedly, there are areas to strive for improvements e.g. many bemoan the high cost of living and intense work conditions, elderlies working in unpleasant jobs despite their age, etc. We got to remind ourselves not to take our present success for granted. Stay humble, be willing to learn and strive to improve.

On this day, Family-Finance-Savvy wishes our country Happy Birthday. Sharing this year’s national day theme song:

Source: YouTube

GoHuat

Market Watch 2019 – SG Banks

In our previous post, we shared our plans to diversify our investment portfolio. Since then, my wife and I sold half of our OCBC shares at $11.50 and CPFIS’s STI ETF at around $3.41 to build up investment war-chest as well as protect overall profits in our CPF portfolio.

We kept a constant look out for trigger news e.g SG banks’ Q3 financial results this week, to gather information to help us assess the general impact from the trade war climate. Key points from CEOs of the three banks: 

DBS CEO - Source: Business Times

OCBC CEO - Source: Business Times

UOB CEO - Source: Business Times

To us, it is important to understand how the banks position themselves. We are keen on their strategy to support new business models and shifts in supply chain e.g. market positioning, shift in loan strategy, etc. Overall, we remained positive on the prospects in the Greater China and ASEAN market. To this end, my view is that OCBC and UOB are better positioned.

OCBC have strong exposure in Greater China, Malaysia and Indonesia. There were reports on their plans to increase stakes in Bank of Ningbo. If this materialises, OCBC’s deeper presence in Greater China could open up more opportunities to the wider Chinese market and position them well for China’s One Belt One Road initiative.

UOB have a good presence in Thailand and broad network in Malaysia, Indonesia and China. After setting up their digital bank in Thailand, there were reports of UOB considering to launch digital bank in Vietnam or Indonesia too. Both countries possess abundant opportunities. They are likely to come from the shift in supply chain from China to Vietnam, as well as from Indonesia's plans to shift their Capital which would require significant amount of infrastructure loans and investments. 

Trump’s tariff hike on Chinese imports had came in rather abruptly and have caused a stir to the stock market.

This looks like a buying opportunity... and our war-chest stands ready to fire.

GoHuat

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1.       Signs of market downturn coming?

A risk mitigation framework to design our family emergency funds

This is a continuation from my previous post. What is the purpose for an emergency fund? Emergency funds is to help our family weather through urgent and sudden financial needs. The biggest challenge is to estimate how much we need as it is difficult to anticipate what it needs to be used for. We should put in time to think through our emergency funds as it will reduce our investment war-chest to achieve better returns.

First is to really ask when and what do we urgently need the money for? We assessed that key family emergencies might include:

·    Sudden loss of job income which affects payment of monthly expenses such as utilities, phone bills, food, transportation costs

·       Emergency medical treatment among family members

·       Unexpected home repairs

·       Replacement of household items that broke down suddenly

·       Unexpected car repairs

Adopting a simple framework to assess our family’s risks and come up with risk mitigation measures:

Emergency	Impact to Family	Likelihood of Occurrence	Risks	Risk Mitigation Measures
Sudden loss of job income	High	Medium	Medium	Create secondary income stream to minimally support basic monthly household expenses. Set aside 6 months of household expenses.
Emergency medical treatment	High	Low	Medium	Set aside for immediate, urgent medical treatment in case insurance unavailable.
Unexpected home repairs	Low	Medium	Low	Set aside home repair budget that sufficient to replace 2 critical household items

Risk Mitigation Matrix

High-High-High, H-M-M, H-L-M

Medium-High-Medium, M-M-M, M-L-L

Low-High-Medium, L-M-L, L-L-L

The higher the risk, the higher the priority for emergency fund allocation. We decided to set aside around 12 months household income based on past household annual expenses and to address our risk mitigation measures above. For medical risks, we planned using MOH’s historical bill and report.

My wife and I had aimed for 1 of us to be capable of supporting our annual family expenses entirely. In this way, there will be less pressure if either one decides to take a long-term break from our career. With this aim, we kept watch of our family expenses instead of allowing it to rise in tandem with our salary increase. To us, most importantly is to achieve family happiness by spending quality time together. Recall our earlier post, the key for happy family financial relationship is really to listen more, understand better, involve each other.

Hope you enjoyed this post!

GoHuat

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1.      Is there a definition of success by Millennial Family?

2.     3 Tips to build a Happy Family Finance Relationship

A Definition of Success by a Millennial Family

I came across several posts that discussed how millennial define success including today's report on Business Times: https://www.businesstimes.com.sg/brunch/young-and-not-so-upwardly-mobile

This inspired me to think through my family's definition of success, and that is to achieve family financial freedom. 

Money is required for basic daily needs such as paying for our meals, as well as electrical, water, gas bills. To support these needs, we have to work very hard to earn our paycheck. Gradually work becomes a priority and later on, we regretted  not spending enough time with our family.

Financial freedom offers a choice to escape this rat race and allow us to focus on things that we believe should be our priorities. Many people might think that financial freedom requires a lot of money.

But... is it true that financial freedom equate to being wealthy? Need not be!

It simply means having constant cash inflow that can comfortably cover our expenditure. Hence if your monthly family expenditure is low, you would require lesser cash inflow to achieve financial freedom.

So how does our family plan to achieve this? Through 3 steps:

1^st is to follow good family financial habits. Will elaborate more in our subsequent blog post.

2^nd is to maintain family lifestyle spending even as salaries grew each year. This can also help mitigate some family financial risks. Again, will share more soon.

3^rd is to generate more passive cash inflow through investment e.g stocks, fixed deposit, etc. There are many choices and considerations e.g. market outlook, inflation etc. So we should adopt an approach that best fit our investment needs, profile and goals. It is important to do the math and assess the length of time needed to realistically achieve your goals, level of investment risks versus its reward and your risk mitigation measures. 

Hope you enjoyed this post. Would be keen to find out what is your family's definition of success. Feel free to share!

GoHuat

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1.      How have our financial perspective changed over the years?

Enjoying our Gains with a Heart

Amidst the fast pace of living and demand for cash, our family saw the importance of taking time off to count our blessings. 

There are many things that we can be grateful about. This can be as plain as having a roof to stay in, having 3 full meals to eat, clothes to wear, harmonious family relationship with our families and siblings. These are some areas that we tend to take them for granted and only realise it on hind-sight.

My wife and I believed in giving back to society including quarterly blood donation, monthly cash donations, etc. We had considered volunteering but have yet to find a suitable cause and will keep looking for one. 

We had achieved some gains in our investments and work performance bonus . Hence decided to contribute some token to charity. We then spent some time to screen through the charity organisations before making our choice. Though our token is not that significant, we hoped that it could still benefit those who really needs it. May those who receive it be well and happy! 

Enjoying our gains with a heart 😊

GoHuat