If this market event is a repeat of history, then those with strong holding power who can farm their salary into the financial markets without breaking a sweat will be almost assured a straight path to becoming a millionaire when all this is over.
---
"You don’t need conservatism, caution, risk control, discipline, patience, or selectivity. You need (to have) money and the nerve to spend it." Are you daring enough to make the move, and wait patiently for the recovery to come?
---
I heard many people commenting that they expect the stock market to fall even more or that it will be a long time before stocks can recover from this shock.
These are not amateur investors, these are fairly good and experienced investors, many of whom often preach the mantra "don't time the market", but suddenly they all become market-timers and predictors of the stock markets.
---
Why you should never leverage: now that I have a 100% leveraged portfolio, I have a very real problem. In this market crash, my unrealised losses were dropping at twice the speed of the market. In other words, I was stepping on the gas, while speeding into the abyss.
No amount of fancy charts and complicated tables assuring me that since 1939, the markets always recovered after dropping a single day of 10%, bla bla, every made it in the fog. All I could think of was my portfolio going to zero and getting a margin call from the broker to tell me that I had wiped out my accountThere can’t be a recovery, if there is nothing left in the pot.
---
If you ask me where the market would be 10 years out, which is really the minimum timeframe for anyone in 100% equities, I can tell you with a high degree of confidence that your nest egg will be better off than it looks on paper today.
---
This is data-evidenced: the stock market always recovers and go up over the long term. We are almost -30% from highs in a bear market. That is a very rare event. The COVID-19 virus is very challenging economically, some governments will do better than others, some countries will take longer than others. But none of this changes the fundamentals of the economic or financial system, which is why the stock market always goes up in the long term. Anchor your goals on that.
---
Fast forward to today, my entries are gradually becoming more hesitant and also smaller in size. It’s not because there’s too many things to buy. I am just worried about finishing my precious cash fast and sinking deeper into the red with each coming day.
The reality is not as simple as the theory so kudos to those that made their pots of gold then.
This is like watching a football match and cursing the player when he makes a poor decision. It’s not easy performing good decisions live, in the thick of the action. We are mere mortals.
---
At the extreme moments of fear and greed, the power of the daily price momentum and the mood and passions of ‘the crowd’ are tremendously important psychological influences on you. It takes a strong, self confident, emotionally mature person to stand firm against disdain, mockery, and repudiation when the market itself seems to be absolutely confirming that you are both mad and wrong. Also, be obsessive in making sure your facts are right and that you haven’t missed or misunderstood something.
---
Meanwhile, innovators are still innovating all over the world. People are staying up late working in labs, vaccines are being tested, genes are being sequenced and the current virus will end up beaten and then written up as a very significant chapter in the history books.
But apart from all of this, there is still way more going on out there, which just isn’t making it to the headlines. Engineers and scientists are still inventing things that will drastically improve the future. Solar panels are still streaming out by the trainload and being installed worldwide. Better and better batteries which will eventually displace all fossil fuel use are evolving. The most efficient factories in history are being built. Gene therapies are advancing which will eventually make a mockery of all of our current health conditions. Internet connectivity and education is becoming more widely available and cheaper which is allowing the next generation of brilliant kids to to grow up and learn faster and do more than you or I could have even dreamed. And all this will happen regardless of the course of the current pandemic.
---
Let me repeat. If you can help it. DO. NOT. SELL. PERIOD. Investing during a crash can be scary.
However, the worst thing you can do in a stock market crash like this is to make your paper loss into a real one.
If I was an emotional investor, most likely:
“SH*T!!! I sold right at the bottom! The U.S. stimulus and all the government intervention finally worked! I better get in before it shoots up even more and I miss the rise!”
Then I would have bought it higher than when I sold… as the market begin to come back down again. If I sell, any market movement up will cause me to stress about “Is it the bottom THIS time?” and “What if I will miss the bottom and buy in too late?”
It will become a never-ending cycle of panic buying and selling. Only losers play this game.
Stay invested, save yourself from anxiety and sleepless nights.
---
if you buy now and continue buying with funds that you can afford to keep invested over 10-30 years, you are guaranteed to come out ahead
At the moment everything is on sale. Yes maybe it will be on a deeper sale in a few months. But if you’re still working and investing your income over time, the difference that a few months will make will be insignificant in the long term. What’s important is to be invested and continue adding to your investments.
Sitting out and never jumping in is the biggest risk you can take. If you’re still nervous, you can read the story about the world’s worst market timer again.
---
Regardless of what the Oracle ends up buying, Buffett can’t time the bottom any better than you or I. He’s made plenty of opportune investments over the years but that doesn’t mean his success hinges on nailing the absolute nadir of the market.
It’s easy to become obsessed with predicting the bottom during a market crash. Positive outcomes during down markets have more to do with your time horizon as an investor than your ability to call the bottom.
When the stock market took a nosedive in the 1960s, one of Buffett’s clients called to warn him that stocks would surely fall further. Buffett responded with two questions:
- If you knew in February that the Dow was going to 865 in May, why didn’t you let me know it then?
- And if you didn’t know what was going to happen during the ensuing three months back in February, how do you know in May?
---
It is somewhat laughable to suggest that the current situation will derail the FIRE movement, like what I’ve seen on Twitter-land.
In all honesty, the FIRE community is the best-positioned people on Earth who can weather this storm. We have what it takes to rein in expenses. To craft multiple sources of income. To protect our assets. The resources to ration with. The will to survive with the bare minimum. The mind to plan for emergencies. The perseverance to hunker down for the cold winter.
Not too far in the future, people would be writing about running a Covid simulation against your portfolio to see if it will survive, like it is “normal thing” to do. The FIRE community will be even more resilient than it ever was when this episode is over.
Saturday, March 28, 2020
Thursday, March 19, 2020
2008 Panic Selldown
Current panic sell off is quite similar to 2008 GFC. Investors are fearful that Reit may not able to refinance. In my opinion, Interest Cover ratio > 4X and low gearing are very important. Read on...
An exerpt from Bobby Jayararam REIT. book....
Panic sell-down (2008-early 2009).
By late 2007, the sub-prime crisis in the United States had started and tremors were being felt across the world. The capital markets where companies go to raise financing were frozen as no one wanted to lend; everyone’s focus was on conserving cash. Enough has been written about this financial crisis and I will not spend time rehashing all the events. What is important though is to understand that the financial panic had a particularly strong effect on leveraged investments such as REITs. Let us understand why.
The lifeblood of a REIT is the ability to produce financing at reasonable cost. Hence, any turbulence in the credit market will have a strong impact on the financing ability of REITs and in a worst case scenario (if the liquidation value of its properties is unable to cover the loan cost) may lead to bankruptcy.
Singapore REITs had also made heavy use of CMBS loans during the boom period from 2005 to 2007.
This market virtually shut down during the crisis, and the REITs had to approach banks to refinance the maturing CMBS loans.
Other than the financing issue, the financial crisis was gradually starting to affect the real economy and lead to a full-blown recession. People were starting to spend less, companies were downsizing and manufacturers were slowing production. All of this directly affected the business of REITs. If customers shop less in a mall, the shops will have difficulty paying their rentals and retail REITs such CMT and FCT would face an increase in bad debts when tenants are not able to pay their rentals on time. If companies downsize heavily, there will be fewer tenants for office space and office REITs such as CCT will face high vacancy rates.
To sum up, REITs were facing the perfect storm. They were confronted with the risk of not being able to refinance their loans on maturity plus the likelihood of slowing revenues from their properties which would put at risk the REITs’ ability to service their debts and pay dividends t unit holders. There were no precedents for such market conditions and panicky investors were starting to question the fundamental business model of REITs and whether they would survive the crisis.
By early 2009, the market was pricing in a bankruptcy for many REITs and investors were taking action by hitting the “sell” button hard! The “great Singapore REIT sale” had begun with many excellent REITs selling at double-digit yields (the lower the share price, the higher the yield).
The sale was, however, short-lived. By mid-2009, instead of the bankruptcies bad debts and fire sales of assets predicted by doomsayers, the REITs actually mounted a fierce rally! S-REITs proved much more resilient than was initially thought. During the crisis, not a single major S-REIT suspended it dividend payments (SaizenREIT, a Japan-focused REIT did temporarily suspend its dividend payments). There were no forced liquidations or bankruptcies rather. Why?
The most important factor was simply the quality of the assets. Many REITs had high-quality properties in good locations that had a proven ability to generate cash through good and bad times. Mall, office and industrial tenants had experienced several booms and bust cycles and knew the right measured to take to weather the crisis. The REITs were also highly proactive in supporting their tenants with appropriate marketing efforts. As a result, no tenant defaulted on rentals, nor were there high vacancy rates or premature lease cancellations.
Secondly, the REITs had acted swiftly to shore up their balance sheets and reduce gearing. This was done through raising equity via right issues and bank loans. Many investors were not happy with the dilutive nature of some of these issues but immediate disaster was averted.
The market had also underestimated the ability of the REITs to refinance their loans at reasonable interest rates during the crisis. CCT and CDL, two REITs heavily exposed to the deteriorating economic conditions, refinanced $580 million and $350 million on reasonable terms in the first quarter of 2009, during the depths of the financial crisis. The banks appreciated the resilient earnings power of the REITs’ assets and the strong sponsors of these REITs provided additional assurance.
All of the above meant that while many REITs lost more than 70% of their market value during the sell-down, their businesses were running pretty much as usual. Occupancies were stable and tenants were paying their rentals on time. Hospitality REITs such as CDL suffered from temporary reduced tourist arrivals but had no issues servicing their debt (they generated enough cash from their businesses to make interest payments to the banks or bond holders). Most importantly for investors, all REITs continued to pay dividends on time.
This indeed speaks to the strength of the assets of most REITs. Other than having to undertake dilutive right issues, the REITs came through the severe crisis in fairly good condition. Their share prices had been hit, but not their operating earnings and ability to pay dividends. Investors should do well to remember this.
There is no denying that the crisis was a great learning experience for both investors and the REITs.
Investors that were banking on the stability of REITs versus other equities were shocked to see REITs fall even harder than the rest of the market. Between June 2007 and December 2008, the REITs index fell more than 66%, as opposed to a 50% drop in the STI. A major reason for the severe fall was that in 2007, many REITs had simply become too overvalued (as described in the 2002-2007 bull cycles). Investors also learned to differentiate between different REITs and were awakened to the 21
important of resilient assets, financially strong sponsors and competent REIT managers.
It is hoped that they also learned not to panic in the next crisis. Despite the sharp share price drops, investors who had held on to good REITs and did sell during the crisis sailed through just fine as they collected dividends throughout the crisis period.
Meanwhile, the REIT managers learned their own lessons about leverage, the excessive use of short-term financing and the need to have diverse sources of funding. Once more they were reminded of the need to exercise restraint in a booming property market and not overpay for acquisitions and extrapolate current rentals into the future.
An exerpt from Bobby Jayararam REIT. book....
Panic sell-down (2008-early 2009).
By late 2007, the sub-prime crisis in the United States had started and tremors were being felt across the world. The capital markets where companies go to raise financing were frozen as no one wanted to lend; everyone’s focus was on conserving cash. Enough has been written about this financial crisis and I will not spend time rehashing all the events. What is important though is to understand that the financial panic had a particularly strong effect on leveraged investments such as REITs. Let us understand why.
The lifeblood of a REIT is the ability to produce financing at reasonable cost. Hence, any turbulence in the credit market will have a strong impact on the financing ability of REITs and in a worst case scenario (if the liquidation value of its properties is unable to cover the loan cost) may lead to bankruptcy.
Singapore REITs had also made heavy use of CMBS loans during the boom period from 2005 to 2007.
This market virtually shut down during the crisis, and the REITs had to approach banks to refinance the maturing CMBS loans.
Other than the financing issue, the financial crisis was gradually starting to affect the real economy and lead to a full-blown recession. People were starting to spend less, companies were downsizing and manufacturers were slowing production. All of this directly affected the business of REITs. If customers shop less in a mall, the shops will have difficulty paying their rentals and retail REITs such CMT and FCT would face an increase in bad debts when tenants are not able to pay their rentals on time. If companies downsize heavily, there will be fewer tenants for office space and office REITs such as CCT will face high vacancy rates.
To sum up, REITs were facing the perfect storm. They were confronted with the risk of not being able to refinance their loans on maturity plus the likelihood of slowing revenues from their properties which would put at risk the REITs’ ability to service their debts and pay dividends t unit holders. There were no precedents for such market conditions and panicky investors were starting to question the fundamental business model of REITs and whether they would survive the crisis.
By early 2009, the market was pricing in a bankruptcy for many REITs and investors were taking action by hitting the “sell” button hard! The “great Singapore REIT sale” had begun with many excellent REITs selling at double-digit yields (the lower the share price, the higher the yield).
The sale was, however, short-lived. By mid-2009, instead of the bankruptcies bad debts and fire sales of assets predicted by doomsayers, the REITs actually mounted a fierce rally! S-REITs proved much more resilient than was initially thought. During the crisis, not a single major S-REIT suspended it dividend payments (SaizenREIT, a Japan-focused REIT did temporarily suspend its dividend payments). There were no forced liquidations or bankruptcies rather. Why?
The most important factor was simply the quality of the assets. Many REITs had high-quality properties in good locations that had a proven ability to generate cash through good and bad times. Mall, office and industrial tenants had experienced several booms and bust cycles and knew the right measured to take to weather the crisis. The REITs were also highly proactive in supporting their tenants with appropriate marketing efforts. As a result, no tenant defaulted on rentals, nor were there high vacancy rates or premature lease cancellations.
Secondly, the REITs had acted swiftly to shore up their balance sheets and reduce gearing. This was done through raising equity via right issues and bank loans. Many investors were not happy with the dilutive nature of some of these issues but immediate disaster was averted.
The market had also underestimated the ability of the REITs to refinance their loans at reasonable interest rates during the crisis. CCT and CDL, two REITs heavily exposed to the deteriorating economic conditions, refinanced $580 million and $350 million on reasonable terms in the first quarter of 2009, during the depths of the financial crisis. The banks appreciated the resilient earnings power of the REITs’ assets and the strong sponsors of these REITs provided additional assurance.
All of the above meant that while many REITs lost more than 70% of their market value during the sell-down, their businesses were running pretty much as usual. Occupancies were stable and tenants were paying their rentals on time. Hospitality REITs such as CDL suffered from temporary reduced tourist arrivals but had no issues servicing their debt (they generated enough cash from their businesses to make interest payments to the banks or bond holders). Most importantly for investors, all REITs continued to pay dividends on time.
This indeed speaks to the strength of the assets of most REITs. Other than having to undertake dilutive right issues, the REITs came through the severe crisis in fairly good condition. Their share prices had been hit, but not their operating earnings and ability to pay dividends. Investors should do well to remember this.
There is no denying that the crisis was a great learning experience for both investors and the REITs.
Investors that were banking on the stability of REITs versus other equities were shocked to see REITs fall even harder than the rest of the market. Between June 2007 and December 2008, the REITs index fell more than 66%, as opposed to a 50% drop in the STI. A major reason for the severe fall was that in 2007, many REITs had simply become too overvalued (as described in the 2002-2007 bull cycles). Investors also learned to differentiate between different REITs and were awakened to the 21
important of resilient assets, financially strong sponsors and competent REIT managers.
It is hoped that they also learned not to panic in the next crisis. Despite the sharp share price drops, investors who had held on to good REITs and did sell during the crisis sailed through just fine as they collected dividends throughout the crisis period.
Meanwhile, the REIT managers learned their own lessons about leverage, the excessive use of short-term financing and the need to have diverse sources of funding. Once more they were reminded of the need to exercise restraint in a booming property market and not overpay for acquisitions and extrapolate current rentals into the future.
Monday, March 09, 2020
Black Monday
This post is to commenerate the largest single-day drop in portfolio of my investing journey so far, and the largest absolute number single-day decline (-178 pts) in the STI history.
Even though I went through the oil crisis of 2015, my portfolio was relatively small back then. Like maybe 50k. A 20% drop back then was a mere $10k, nothing more than a couple of months of salary.
Not today. My stocks portfolio have since grown immensely and the daily swings are simply insane (plus minus $5k daily). This is really my first bear market, the first real test of my nerves.
A test of whether I have the stomach to stick to my investing principles and every long-term investing knowledge I have learnt. Every investing article, every warren buffet advice, every financial principle - it is useless if I do not execute them and capitulate like the herd. There is no use "fighting war on paper".
This could be the once-in-lifetime opportunity to buy stocks for very cheap, and I count my blessings that I still have a substantial cash warchest to average down.
People who kept saying that cash is 'wasteful' and 'low returns' have come face to face with a bear before. The "psychological defence" it provides is invaluable and cannot be measured in dollars alone.
People who kept saying that cash is 'wasteful' and 'low returns' have come face to face with a bear before. The "psychological defence" it provides is invaluable and cannot be measured in dollars alone.
Here's what I have to constantly remind myself:
For my various speculative stocks, there is nothing I can do now. I guess it is a lesson learnt and I might just have to write them off if they don't rebound after the crisis.
For most of my holdings I am very sure they are excellent, solid companies. Why do I care if they crash 10, 20 or 30% today?
I am not selling . I am looking to buy and hold good companies for the next 20 years.
I am STAYING THE COURSE
“Bear Markets: When stocks are in a Bear Market (U.S., International, or both), you will be strongly tempted to sell at least a portion of your stock funds. DON’T DO IT. This is the time when stocks are on sale at lower prices. Sticking with your allocation means you likely will be buying low and selling higher when you rebalance – the opposite direction of the herd. Rebalance by adding to your stock funds until you have again met your desired asset allocation. This is the most difficult (but most important) thing you can do in a Bear Market.”
So...
How much did I lose in ONE SINGLE DAY?
$13,500
Sunday, March 01, 2020
Year In Review 2019 - Annual Financial Report
Presenting 2019 Annual Financial Report! (Yes, it's late and Wuhan virus is now wrecking havoc! Neverthless, we are sticking to what to know as of early Jan)
Key Highlights & Notes From CEO
"Work Hard Now, So We Don't Have To Work Hard All Our Lives"
"When you save for the future, you actually allow yourself to live in the moment.
Most people get this completely backwards. They live in the moment, which kills their ability to save for the future (aka YOLO). My plan is to flip that script. By sacrificing a few years when I'm younger, I am building a financial foundation that will last a lifetime."
This year marks the 3rd into the new job and it could be a good time to move on. We broke some significant financial milestone this time:
Financial Milestone (2019)
1. Passive income enough to cover all basic recurring expenses
2. CPF Met the Full Retirement Sum of 2019
Achievements (2019)
1. Total net asset value grew 21% despite topping up $7000 to CPF-SA
2. Annual saving rate of 78.9% (80.8% in 2018, 80.5% in 2017, 78.2% in 2016)
3. Safety passive income now cover 65% of our recurring expenses
4. Portfolio market value grew 20% (inclusive of capital injection and gains)
5. Portfolio XIRR for 2019 at 14.23%
6. By Pay-Date, distributed over $8300 worth of dividends ($7800 in 2018, $4900 in 2017)
-------------------------------------------------------------------------------------------------------------------------
Income Statement (2019)
Total income was merely 2% higher due to the huge bonus cuts.
Passive income growth was only 7% after selling M1 and Capitamall, and most new dividend stocks were brought later in the year. We also suffered from saving account interest cuts among the various banks.
Expenses were about $3000 higher with the signicant ones being:
1. Higher income taxes
2. Genting Dream Cruise vacation in Feb
3. Taiwan trip in Apr
4. Takeover of all insurance policies
6. Birthday angbao to parents (Same as last year)
5. Samsung Galaxy Note 10
-------------------------------------------------------------------------------------------------------------------------
Balance Sheet (2019)
Survival Burn Rate = Recurring expenses needed for essential survival
LEAN FI Rate = All expenses needed to maintain our current lifestyle
FI Rate = Lifestyle with built-in buffer that we want to achieve in Financial Independence
While the red-line grew significantly, yellow and green line remained flat thanks to much higher discretionary spending.
Our goal remain the same - to exceed 25 years for the yellow line by year 2021.
-------------------------------------------------------------------------------------------------------------------------
Recurring Expenses Breakdown
Categorical expenditures remained pretty much the same as every year. Top expenditures were the essentials - food, travel (transport) and utilities (internet and phone).
Random discovery time!
1. Lottery spending was around $250 (Almost $100 lesser than 2018). Won 1 single Group 6 of $10.
2. I ate fast food 60 times (64 in 2018, 70 in 2017, 81 in 2016), counting only lunch, dinner, supper. Managed to meet my goal (right on the mark!) of cutting down fast food. I think this is as far as I can go for now.
3. I brought 48 (22 in 2018, 11 in 2017, 31 in 2016) cups of Bubble Tea this year, much more than previous years. This is due to... influences from BBT loving colleague. Haha.
4. I brought 17 cups of Cafe drinks (4 last year), similar to reasons above.
5. Visited restaurants 37 times (32 in 2018, 20 in 2017). My most expensive single trip restaurant is $37.
6. Only 5 KTV (10 in 2018) sessions for the entire 2019! (Excluding JB trips)
7. 13 Taxi/Grab trips this year, spending less than $150.
-------------------------------------------------------------------------------------------------------------------------
Portfolio Performance
An exceptional year where we beat the index handily.
This year, we injected almost $40,000 into the stock market (STI, Sembcorp Industries, Eagle, F&N, Capitmall Trust and Accordia Golf Trust).
Our biggest losses remains Kimly and Sembcorp Industries, offset by the insane REIT rally.
Excluding the STI, we have a healthy and diversified portfolio of 12 holdings (up from 11 last year and 10 in 2017).
-------------------------------------------------------------------------------------------------------------------------
Review of 2018 Goals
Missed our goal of hitting $10,000 dividends due to the insane market rally (no chance to buy the good REITs at all!)
Outlook For 2020
We will continue our core strategy of building up a divesified income portfolio backed by index foundation. We are more than 10 year into the bull-run and the music got to stop one day.
Once again, our ammunition have replenished entirely after December, and would fatten even more in March. Hopefully we have opportunities to deploy them before the dividends season come in Q2.
We will be bring forward last year goal to exceed $10,000 worth of dividends - hopefully we get some Great Singapore Sale.
There is a good chance of a income source switch which would definitely have impact on revenue. For now, we would let nature take its course.
Long Term Goals
Our long term roadmap remains the same - And this year marks the year we intend to diversify into more global markets. Although I am personally confident in Singapore, I still could not risk placing all our money in 1 basket. What if we experience a lost decade like Japan?
- Open Interactive Brokers Account (Start with DCA and within 2 years grow it to more than $100K USD when we can enjoy $10 platform fee waiver)
- Indexing World ETF via IWDA + EIMI (Can it drop below $50?). Both ETFs automatically reinvest dividends (i.e accumulating units).
- Indexing for China via Heng Seng Index (HK 2800). China growth in the next 20 years should be immense.
- Local portfolio reached substantial size to start lending shares for extra income
5 Year Masterplan:
Year 2020: Start diversifying into global markets.
Year 2021: Reach "25 Years Expense" Networth.
Year 2022: Eligibility to buy HDB.
Year 2023: Passive income completely cover all-expenses. Save 100% of salary annually.
Year 2025: Financial Independence.
Key Highlights & Notes From CEO
"Work Hard Now, So We Don't Have To Work Hard All Our Lives"
"When you save for the future, you actually allow yourself to live in the moment.
Most people get this completely backwards. They live in the moment, which kills their ability to save for the future (aka YOLO). My plan is to flip that script. By sacrificing a few years when I'm younger, I am building a financial foundation that will last a lifetime."
This year marks the 3rd into the new job and it could be a good time to move on. We broke some significant financial milestone this time:
Financial Milestone (2019)
1. Passive income enough to cover all basic recurring expenses
2. CPF Met the Full Retirement Sum of 2019
1. Total net asset value grew 21% despite topping up $7000 to CPF-SA
2. Annual saving rate of 78.9% (80.8% in 2018, 80.5% in 2017, 78.2% in 2016)
3. Safety passive income now cover 65% of our recurring expenses
4. Portfolio market value grew 20% (inclusive of capital injection and gains)
5. Portfolio XIRR for 2019 at 14.23%
6. By Pay-Date, distributed over $8300 worth of dividends ($7800 in 2018, $4900 in 2017)
-------------------------------------------------------------------------------------------------------------------------
Income Statement (2019)
Total income was merely 2% higher due to the huge bonus cuts.
Passive income growth was only 7% after selling M1 and Capitamall, and most new dividend stocks were brought later in the year. We also suffered from saving account interest cuts among the various banks.
Expenses were about $3000 higher with the signicant ones being:
1. Higher income taxes
2. Genting Dream Cruise vacation in Feb
3. Taiwan trip in Apr
4. Takeover of all insurance policies
6. Birthday angbao to parents (Same as last year)
5. Samsung Galaxy Note 10
Balance Sheet (2019)
Survival Burn Rate = Recurring expenses needed for essential survival
LEAN FI Rate = All expenses needed to maintain our current lifestyle
FI Rate = Lifestyle with built-in buffer that we want to achieve in Financial Independence
While the red-line grew significantly, yellow and green line remained flat thanks to much higher discretionary spending.
Our goal remain the same - to exceed 25 years for the yellow line by year 2021.
Recurring Expenses Breakdown
Categorical expenditures remained pretty much the same as every year. Top expenditures were the essentials - food, travel (transport) and utilities (internet and phone).
1. Lottery spending was around $250 (Almost $100 lesser than 2018). Won 1 single Group 6 of $10.
2. I ate fast food 60 times (64 in 2018, 70 in 2017, 81 in 2016), counting only lunch, dinner, supper. Managed to meet my goal (right on the mark!) of cutting down fast food. I think this is as far as I can go for now.
3. I brought 48 (22 in 2018, 11 in 2017, 31 in 2016) cups of Bubble Tea this year, much more than previous years. This is due to... influences from BBT loving colleague. Haha.
4. I brought 17 cups of Cafe drinks (4 last year), similar to reasons above.
5. Visited restaurants 37 times (32 in 2018, 20 in 2017). My most expensive single trip restaurant is $37.
6. Only 5 KTV (10 in 2018) sessions for the entire 2019! (Excluding JB trips)
-------------------------------------------------------------------------------------------------------------------------
An exceptional year where we beat the index handily.
This year, we injected almost $40,000 into the stock market (STI, Sembcorp Industries, Eagle, F&N, Capitmall Trust and Accordia Golf Trust).
| Year | Portfolio | ES3 |
|---|---|---|
| 2014 | -2.94% | 7.00% |
| 2015 | -8.17% | -10.95% |
| 2016 | 11.97% | 2.69% |
| 2017 | 22.00% | 20.68% |
| 2018 | -10.40% | -7.43% |
| 2019 | 14.01% | 8.78% |
Excluding the STI, we have a healthy and diversified portfolio of 12 holdings (up from 11 last year and 10 in 2017).
Review of 2018 Goals
Missed our goal of hitting $10,000 dividends due to the insane market rally (no chance to buy the good REITs at all!)
Outlook For 2020
We will continue our core strategy of building up a divesified income portfolio backed by index foundation. We are more than 10 year into the bull-run and the music got to stop one day.
Once again, our ammunition have replenished entirely after December, and would fatten even more in March. Hopefully we have opportunities to deploy them before the dividends season come in Q2.
We will be bring forward last year goal to exceed $10,000 worth of dividends - hopefully we get some Great Singapore Sale.
There is a good chance of a income source switch which would definitely have impact on revenue. For now, we would let nature take its course.
Long Term Goals
Our long term roadmap remains the same - And this year marks the year we intend to diversify into more global markets. Although I am personally confident in Singapore, I still could not risk placing all our money in 1 basket. What if we experience a lost decade like Japan?
- Open Interactive Brokers Account (Start with DCA and within 2 years grow it to more than $100K USD when we can enjoy $10 platform fee waiver)
- Indexing World ETF via IWDA + EIMI (Can it drop below $50?). Both ETFs automatically reinvest dividends (i.e accumulating units).
- Indexing for China via Heng Seng Index (HK 2800). China growth in the next 20 years should be immense.
- Local portfolio reached substantial size to start lending shares for extra income
5 Year Masterplan:
Year 2020: Start diversifying into global markets.
Year 2021: Reach "25 Years Expense" Networth.
Year 2022: Eligibility to buy HDB.
Year 2023: Passive income completely cover all-expenses. Save 100% of salary annually.
Year 2025: Financial Independence.
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