Wednesday, February 21, 2024

Poof! Goes The CPF SA 'Shielding' Hack

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 enthusiasmMaybe 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...

Tuesday, January 2, 2024

Dividend Warrior's FY2023 Portfolio Update - S$40k Record High Annual Dividends!

Equity Portfolio Cost: S$596, 851

Equity Portfolio Market Value: S$767, 106

Equity Portfolio Unrealised Profit: +S$170, 255 (+28.5%)

Portfolio XIRR (FY2023): +11.3% (inclusive of dividends)

Dividends Collected (FY2023): S$40, 139 (+15.6% yoy)

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! 💪

~ New Year! New Dreams! New Ways! ~

Happy New Year, everyone! 

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Sunday, October 8, 2023

Dividend Warrior's 9M2023 Portfolio Update - Ride Through The High Rate Environment!💪


Equity Portfolio Cost: S$559, 160

Equity Portfolio Market Value: S$704, 902

Equity Portfolio Unrealised Profit: +S$145, 742 (+26.1%)

Portfolio XIRR (9M 2023): -7.6% (inclusive of dividends)

Dividends Collected (9M 2023): S$33, 201 (+18.7% yoy)

Total Cumulative Dividends (2010 - 9M 2023): S$274, 707

Current Cash & Cash Equivalents (SSB/T-bills): S$43, 000

(*All figures are accurate as of 30 September 2023)

Portfolio Actions in Q3 2023:

  • Initiated a position on Sheng Siong at S$1.50
  • Accumulated more UOB at S$27.95

How I Prepare To Ride Through The Storm...

1. Diversify Into Recession-Proof, Cash-Rich Sheng Siong

Q3 2023 had been brutal to REITs as the US Fed signalled higher rates for longer to fight inflation. I foresee REITs' dpu to weaken in the coming quarters. Therefore, it is time to further optimise my portfolio for more sustainable passive income. Actually I already started this recalibration a couple of years back. Distributions from REITs were consistently re-invested into the local banks (DBS, UOB & OCBC), Big Tech & Propnex. These are cash-rich companies with strong balance sheets and business moats. Significantly higher dividend payouts from the banks have helped to mitigate the dip in REITs' dpu. Sheng Siong is my latest candidate. Due to the higher for longer rate environment, I would be pulling back on big REIT buys over the next few quarters. My firepower would switch to accumulating Sheng Siong. I am targeting around 5% allocation for Sheng Siong eventually. Due to sticky high inflation, more families are cooking at home. More value for money. Recent government policies tend to gravitate towards helping low to middle income families with the distribution of CDC vouchers. In 2024, each household will receive $150 CDC vouchers for spending at supermarkets. Sheng Siong should benefit from this assistance package.

2. Build A Bond Ladder with SSB & T-bills

Besides diversifying into recession-proof stocks like Sheng Siong, I am also building up a bond ladder. Starting from October, I would allocate some funds to Singapore Savings Bond and T-bills every month. As long as the yields remain attractive, I would continue to park some of my cash warchest in these fixed income instruments. In the event of a recession next year, I would have sufficient firepower to pounce on any opportunities.

3. Just Hold & Collect CD

In the meantime, I am not throwing the baby out with the bathwater. I would still be holding onto my core REIT positions. No knee-jerk reactions from me. Hold on to those that can weather the high interest rate environment until the end of 2024. For now, all my major REIT positions have below 40% gearing and a well spread out debt maturity profile (avoid REITs that have huge refinancing needs coming up in 2024). It also helps to have a strong reputable sponsor. The average entry prices of my REIT positions are low, so I can afford to hold. Secondly, over the last 14 years, I have collected more than S$270k in dividends which serves as a healthy buffer. Some investors prefer to cash out everything now and avoid REITs totally until US Fed start to cut rates. Well, I have learnt to stop waiting for the perfect conditions and all the stars to align. Market timing is futile. Being all-in or all-out is mentally exhausting. 

Lastly, if you guys are worried about an impending recession, just visit VivoCity and Raffles City on the weekends or even weekdays. The crowd level is simply astonishing. Despite the higher prices at restaurants, business seems good. 

"Successful investing is about managing risk, not avoiding it."

~Benjamin Graham~

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