Sunday, October 16, 2016

Can A Singaporean Survive On This Portfolio?

I have a friend (Let's call him Mr Cat). Mr Cat is in his early thirties, contemplating about quitting his job and living on his portfolio. I told him that his dream is not possible unless his portfolio is generating cash flow of at least $2k per month. Mr Cat then showed me his current portfolio, which is rather impressive if I do say so myself. Mr Cat is single without the need to support his parents. He lives in a fully-paid 4-room HDB flat left behind by his late mother. His savings are meagre though.

Updated on 19 May 2017

A Police report was filed against Felix Leong Bao Jie


Createwealth8888 said...

In addition, rent out two spare rooms. He becomes full-time investor and landlord.

CompoundingDividend xDividend said...

Depending on Mr Cat itself..
If his monthly expenses is at least 20% less than his monthly total dividend income, then Yes, he can retire now..

Dividend Warrior said...

Hi CW8888,

I have similar thoughts too. But if he does not want to rent out the rooms, can he still survive solely on his portfolio? I doubt so.

Dividend Warrior said...

Hi CompoundingDxD,

Yup. Technically, as long as his expenses less than dividend income, he can afford to retire. However, we have to take inflation into account. With no salary and little savings plus he has to use the bulk of his dividends for daily expenses, his passive income stream will not keep up with inflation.

Bruce said...

An interesting topic,

I'll have a question from the other side of the table to ask, a family of 3(a couple with a school going child), what is the minimum portfolio amount needed, assuming investing into a basket of SG counters, in order to survive in Singapore?

Tacomob said...

No, certainly not. There is zero diversification across asset classes and (even worse) geographies. All eggs are in one single basket called Singapore. Don't be so home biased, please. The demographics for Singapore do not look too good for long-term solid GDP-growth.

Bruce said...

Andy, then how do you allocate the assets geographically?

King Yoland said...

Hi Tacomob,

Lots of companies in singapore have vested interests elsewhere in the world. For eg, st eng singpost singtel ocbc are local companies which have gone global. Other companies eg ireit are listed in singapore but have assets solely out of singapore.
So how can we say that all eggs are in a single basket called singapore?
Demographics for singapore do not look good, but are they looking a lot better in the big nations eg USA and China say in 20 years time?
And if Singapore truly do not look good, where do you think we should be looking at?

Could you kindly comment?

Tacomob said...

Hi King Yoland, hi Bruce,

Let me attempt to answer both of your questions in one reply.

Having some stocks in your portfolio whose businesses are regional and mainly derived from outside Singapore is not real diversification. Would you agree that their stock prices would be closer correlated to the sentiment of the local stock market they are listed in, rather than to the sum of the sentiments of all the regional stock markets they have business in?

And on top of that earning your living in Singapore and probably having a property in Singapore adds even more eggs to the same basket.

No, USA and China certainly do not look much better. But what about Indonesia, India, Vietnam and Africa. Don't know enough about their listed companies? Just buy (regularly) country ETFs for example via an US broker (the US market is the most liquid one for ETFs).

Another asset class for diversification is Gold and Silver (physically and in my possession). It is an ideal asset class for making a portion of my life savings immune from political antics and currency emergencies.

And where are small caps or bonds in Dividend Warriors's portfolio? What about alternative asset classes that are additionally diversified in strategy eg private equity in a startup?

To me real diversification means building an "all weather portfolio" and the assets to collect in such a portfolio are the ones that offer diversification of asset class or some diversification of strategy. The ideal diversifier is one that can offer both.

Personally, when I'm in doubt, I always remind myself that I am an investor, not an entrepreneur. There's no need for me to put all my eggs in one basket.

Eugene Yue said...

Hi Tacomob,

How would you make changes to Mr Cat's portfolio in this case with his existing portfolio?

Tacomob said...

Hi Eugene,
I am not a trained financial advisor. So please do take my ideas with a pinch of - or better a shovel of salt.
If Cat has fresh spare cash to deploy, he should put it into "real diversified" asset classes.
If he has no fresh cash to deploy, he might want to reduce his exposure in areas of high weightage like those more than 33% of his portfolio in Singapore banks (who are quite closely correlated) and put the freed up cash into see above.


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