CPF - OA to SA Transfer

After much deliberation, I finally decided to do it.

It's one that decision that I cracked my brains over back in January, but I think it's time I take the first step. What prompted the change of mind?

1. The market rebounded and I didn't even invest my cash, much less CPF-OA. Timing the market is harder than you think, and it's definitely not guaranteed that I am comfortable using OA to beat 2.5%.

2. I realized my CPF-SA is accumulating very slowly from Mandatory Contribution. At this rate, It is going to take forever to reach $161K, or whatever the FRS in the future.

3. Do you know you enjoy an extra 1% interest on your first $60K, but only $20K can come from OA? That means if I do the transfer, I earn a whole extra 2.5%.

4. Barring unforeseen circumstances, I probably won't be getting a flat for another 5 years. That means another full 5 years of OA accumulation.

5. I do admit I am strongly influenced by AK and several other bloggers. These guys are getting $6K-$10K in interest every year. (Some of them maxed out SA as early as 32 years old) The government is literally helping them fulfill the growing "minimum sum".

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By transferring this $20K, I would accelerate my SA account at a much faster rate.

In the first year, I would earn an extra $500+ in interest.

For 10 years, I would get an extra $6.4K.

For 20 years, an extra $15K.

By the time I'm 55, this $20K would bring me more than $20K in additional interest. That means an additional $20K towards fulfilling the FRS.

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Of course, I am well-aware of the risks. The most important ones are:

1. Less buffer for housing. I have plans to fully pay my flat with cash and minimize the usage of CPF. Still, it is definitely important to leave buffer - which explains why I'm not transferring more.

2. Political risk. Who knows how the withdrawal rules, schemes and interest rates may change in the future?

3. Possible opportunity cost if I ever want to purchase a 2nd property, and unable to withdraw until 55.

In a way, this move is a strong contrast with FIRE. With less OA, it means I have to fork out more cash for housing, and thus weaken my FIRE goals.

It's looking at a time much further in the future. I want to balance my goal of early financial independence, and also start steering the 'old age' ship in the right direction.

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Overall, I think I'm taking a prudent and balanced approach - using an amount that isn't exorbitant and I am confident of covering.

The last thing you want to worried about when you're old and sick is money. I think what I am doing is taking a small portion of early financial freedom and channeling it into greater old age security.

Letter To Shareholders (3) - Performance Review 2016Q2

Welcome to the 3rd issue of ZZ Holdings Shareholders Letter.

Performance Highlights
Despite the surprising Brexit event, the markets were unfazed and our portfolio made gains of 5.7% in Q2, compared to the STI which was up a mere 0.7% (a large potion was thanks to CMP divestment). With this recovery, our overall portfolio is now almost in the green.

In 2nd quarter, we paid out a record dividend of over $1300 - highest amount ever since inception. Who says financial freedom is a dream?

Operating Highlights
Income for the quarter were up slightly (about 5% more), largely due to an increase in passive income and dividends.

Expenses skyrocketed in May due to a critical mismanagement event. The board unreservedly apologize to the shareholders for this loss. Other major contributors includes Mayday Concert ($290) and multiple unexpected costs such as SSD Replacement ($250), IEM Cable Replacement ($70) & 2 Dental Visits ($100 after subsidies).

Overall, expenses for the quarter were up 65% compared to last year. Moving forward, we foresee the possibility of a phone replacement, and to a lesser extent some computer components, as potential major expenses in the 2nd half of the year.

Takeover of China Merchant Pacific (CMP)
We divested CMP at the takeover price of $1.02, over 20% premium over the trading range of 80c and 85c. This was entirely pure luck.

Regardless, the company made over $1500 from this unexpected takeover. While we are pleased, do keep in mind that this is an one-time income. At the same time, the company lost a dividend cash-cow and we will look to redirect the monies into other companies.

Financial Statistics (SGXCafe)
We setup account at SGXCafe to further analyze our portfolio. Base on our current holdings, here are some statistics:

Beta - Surprisingly, our portfolio is less volatile than the STI, standing at 0.71.

Value at Risk - We are 99% confident that we will not lose more than 9% of our portfolio.

Expected Shortfall - How bad can things get when terrible things happen? Put another way, in 1% of the time, how much drawdown do we expect? We stands at -17%.

Financial Accounts Changes & Outlook
SIBOR rate retracts slightly to around 0.75%. Our Maxigain account will start accumulating 0.4% bonus interest in July and should start surpassing CIMB starsaver very soon. Going forward, we would look to transfer any long-term cash into this account.

In other news, SCB announced the removal of its minimum commission scheme. Our audit team also discovered that CIMB Cash Upfront custodian account charges $3 for dividend processing. Given this, we are no longer interested in performing any transactions using these accounts.

We eagerly anticipate the following events in the 2nd half of 2016:

1. Smartly, a robo-financial advisor who is gearing for launch.
2. 8 Securities, a potential alternative for much lower brokerage fees.
3. Singapore first ETF REIT

Outlook
With the divestment of ST engineering and CMP, our cash holdings are getting too high for our liking. While we would love to get more equities, the strong rally is not favoring it.

We look forward to growing our revenue and re-balancing our portfolio in the upcoming quarter.