After the Budget 2024 announcement recently, the local 'Pro-CPF 1M65' community immediately went into meltdown mode. CPF-rich members were bemoaning the removal of the CPF SA shielding hack. Here is my personal quick take on this issue. Perhaps some lessons to be learnt.
Unlike other bloggers or influencers out there, I never ever talk about CPF shielding because it is a loophole in the system. Its removal is very much expected. It is called a ‘loophole’. Loopholes are meant to be closed eventually. When shielding was heavily promoted in the mainstream media in recent years, I knew it is only a matter of time before it is removed. To be honest, I am surprised the government allowed it to go on for so long. The lesson here is not to plan your retirement heavily on a loophole.
Do not put all your eggs in one basket. It is always prudent to build multiple income streams in our retirement plan. For me, I build my retirement nest egg like a pyramid or a soccer team. Things in life can change fast. Policies can change overnight. Having multiple passive income sources would prepare us to better adapt to changes. The only constant in life is change. Learn to roll with the punches and navigate through the changes.
Never over-commit to a single retirement instrument. Similar to building a title-winning team. Some clubs go all-in and spent their entire transfer budget on a star striker, but unfortunately he suffers a serious injury and the club’s season goes down the drain. I treat CPF as my ‘goalkeeper’ but I am not spending my entire summer transfer funds on him.
Lastly, is sharing really caring? In local slang, we say "Limpei found a good lobang! Mai Gong Bo Jio!" I understand the feeling of uncovering a loophole can be exhilarating. You might even feel like a genius, but maybe it is better to curb that enthusiasm. Maybe next time when we discover a loophole somewhere in the system, let's not get overly excited and go running to produce tonnes of social media content on said loophole before blasting it all over the internet. Food for thought...
Total Cumulative Dividends (2010 - 2023): S$281, 645
Current Cash & Cash Equivalents (SSB/T-bills): S$37, 000
(*All figures are accurate as of 29 December 2023)
Portfolio Actions in Q4 2023:
Accumulated more Sheng Siong at S$1.54 and S$1.56
Accumulated more DBS at S$31.80 and S$32.60
2023 - Weathering The High Inflation Narrative
There is a saying that a bull market climbs a wall of worries. Despite various market worries, the 'Magnificent 7' US tech names kept trudging higher. Throughout a large part of 2023, the US tech positions I held (Microsoft, AMD, Nvidia & Alphabet) ran up alot on the AI hype while my S-REIT positions continued trending down month after month. Since the tech positions form an insignificant 2% of my overall portfolio, my itchy fingers decided to take profits and rotate the funds into accumulating more blue-chip REITs. I believe inflation would eventually normalise and the US Fed would signal a rate pivot. Currently, Apple and Tesla remain in my portfolio. On hindsight, I should have just let my winners run. Luckily, the late year-end rally in REITs kinda justified my rebalancing. Another lesson learnt. So yeah, besides allocating $30k to SSB in October and November, 2023 basically turned out to be a year of relentless accumulation of quality S-REITs and banks.
Nobody Knows Anything! Stop waiting for the stars to align!
At the risk of sounding like a broken record by now, I can't help but repeat myself in saying this. Time in market is better than timing the market. There is always something to worry about. Throughout the entirety of 2023, numerous experts, gurus and even self-proclaimed Masters out there were predicting an imminent recession for the US. Small US banks like Silicon Valley Bank & Signature Bank collapsed in days due to bank runs. The once-mighty Swiss banking giant, Credit Suisse, collapsed over one weekend. Central banks around the world kept hiking rates due to sticky inflation. Armed conflicts raging on in Ukraine and Gaza strip. Thanks to all these terrifying global events, finance Youtubers had a field day creating tonnes of fear-mongering videos with scary clickbait thumbnails, talking about economic armageddon. Why? For the views of course! For some morbid reason, humans love doomsday stories.
Oh, and the thing about inflation is that it measures the magnitude of increase in prices. After speaking to people around me this year, I found out a lot of them misunderstood ‘inflation’. It is the pace of change in prices. Prices staying high doesn’t mean inflation is high. It’s about year-on-year comparison. The inflation spike and peak is behind us. As a result, this surprise year-end rally caught almost everyone off guard. By sitting out of the market, we risk missing out on the best days. By the time you withdraw capital from fixed income instruments, the market has already run up substantially. So once again, it has been proven that nobody truly knows what will happen to the economy. Not Warren Buffett, not Jerome Powell. A simple plan rigorously executed now is better than a perfect plan executed much later. Some people think if they wait long enough, the stars will align and the perfect buying opportunity will emerge. Timing the market bottom is a fool's game. Don't cling onto perfection. There is no perfect moment to invest. Say goodbye to perfection.
Achieved Record High Annual Dividends and Portfolio Value
In my previous post, I mentioned that I would ignore the 'noises' and ride out the storm as per my modus operandi. Lo and behold! My consistent accumulation of REITs throughout the rate hike cycle has been rewarded. Patience is bitter, but its fruit is sweet. Patience is power. Singapore REITs staged a fierce rally over the Christmas festive period, helping to boost my portfolio XIRR into positive territory. I got to enjoy both capital appreciation as well as dividend income growth. Right now, investors are scrambling to rebalance and reposition their portfolio for the rate cut cycle in 2024. Well, I already planted the seeds back in 2022 and 1H2023.
If I would to sum up the year 2023 with regards to the investment industry, it is that nobody knows anything. Just stay the course. Resist messing around with a winning formula. Let the compounding effect picks up pace. Once the snowball starts going, it goes! Our portfolio is like a bar of soap. The more we touch it, the less we have. Avoid over-tinkering. Just leave it alone and go live your life, which brings me to my next point.
Creating A Lifetime Of Vacations
The highlight of 2023 has to be my first ever trip to Bangkok, Thailand! Beautiful city, friendly people and tasty local food. Truly the Land of Smiles! A return visit is definitely on the cards in 2024. Also planning a trip to Tokyo, Japan this year. That's the beauty of dividend investing. My overseas trips can be 'sponsored' by my dividend income stream, thus creating a lifetime of vacations. Power of CD! 💪
