Tag: t_NNIA

passive or activeMgmt income

Jill’s HY/PE #aka private equity

Posted on by tiger40490

This is like a private HY bond without secondary market. My rationale on this investment:

  1. Good: low exposure/commitment, so my absolute risk is limited
  2. Good: contractual payout date and amount, with penalty on delays — sign of confidence, cf my properties and FSM
  3. Good: 2Y only. Excellent liquidity. Comparable to the average exit time frame on FSM
  4. Good: hedge against property and stock markets.
    1. diversification. Low correlation with stock markets
  5. Good: absolute return is very high against theoretically zero price uncertainty.
  6. Good: half-yearly payout, better than all my previous investments.
  7. ——- other advantages not ranked ——-
  8. Good: Based in Singapore cf my overseas properties
  9. Good: passive income, cf FSM
  10. Good: apparently many big investors are taking the same risk with this small company
  11. Good: return doesn’t come with an embedded option like many banks products do

What’s the implied probability of default? Assuming exactly two outcomes : either a 33% or -19% return. Assuming I’m willing to accept 7% return [1] over 2Y. The probability is 50/50.

[1] I was willing to accept 4% return with very poor liquidity, so 3.5% over 2Y is acceptable

Based on these advantages, I’m willing to risk my 10k. What are the risks?

  • risk: small, bold company, with some track record
  • risk: this small shop is borrowing my money at 15% interest!
  • risk: the contract is backed not by a big name, though a big name usually comes with poor liquidity, embedded option or much lower return.

[17]semi-retired thanks2rental yield #R.xia

Posted on by tiger40490

More than one casual friend (Philip and a Prudential road show manager) recently remarked that I looked like semi-retired. They said that for different reasons actually, but one common factor is what I told each person about property investments.

Sometimes, it feels too tiring trying to maintain this salary. Therefore rental yield is the relief I have always dreamed of. Grandparents’ Beijing home can’t rent out (rental would be something like RMB 10k/m), but I hope all my other properties can generate S$5k/m

You said your neighbor collected 7Y of rental income (total 200k?) but used it all to restore the home. Now I feel these numbers are questionable — The damage caused by the Mexican tenant was perhaps less than (say 70% of) the total rental income. Perhaps your neighbor decided to spend the rental income on renovation. Renovation is more than restoration! Some people say “I have to spend all this extra income just to restore …” as a way of self-justification.

( Compare my sister, who used to spend her year-end bonus within weeks …)

So I don’t know if your neighbor actually need to spend 7Y worth of rental income just to restore a house. I think in most cases rental yield exceeds the cost of restore. My cost of restore was below $500 after renting out my flat for 3Y.

Anyway I have lost my appetite for stocks and bonds. In one investment account (FSM), I earned about S$22k (+/-2k) profit till Mar 2017, over 4 to 5 years. I invested very roughly S$100k (50k to 150k excluding money market). Low but positive return! I’m fine with that, because in this account liquidity was my priority. I put relatively small amounts into risky markets. Low risk, low return. For example,

  • very roughly $5k within that portfolio was invested in U.S. stocks. It generated roughly 50% return, better than the rest of the portfolio.
  • my big US high-yield investment (S$50k – 80k) generated very low net return perhaps 0 to 3% over 4Y
  • Some small amounts ($100 – $500) generated roughly 10% return

Around 2013/2014 I did email you about my goal to generate higher profit (like S$2k/month) from my stocks/bonds investment. I know it Didn’t work out but not sure why. I think the dividends can be relatively steady but the NAV  has been unsteady.

Now I feel in Cambodia, Manila and Singapore, property is a superior asset class for both passive income and capital appreciation. Perhaps that’s one reason I look semi-retired.

[Feb17]nonwork income: how much is enough2let me pick low-stress job

Posted on by tiger40490

I used to say “IF I have this much passive income, I would have the option to quit a stressful job like this, and take on some job I enjoy.” A job like my ICE c++ project?

Q: how much monthly passive income is enough? How about an income enough to cover all my tax-like expenses including rental?

A: in Singapore, I feel S$(5->6)k could be enough.

A: in U.S. burn rate is much higher, so no end in sight.

@65won’t need nonwork income or lump sum payout!? #CPF

Posted on by tiger40490

See also multiple blogposts on windfall^current_Income

Most people are unprepared for their cash flow in retirement… are they?  Today I will challenge this conventional wisdom.

https://tanbinvest.dreamhosters.com/2017/02/06/cashflow-during-retirement/ has more details on income and expenses during my semi-retirement.

Not sure about wife’s opinion, but we will have monthly passive income at least 3k/m, possibly 5k/m, inflation-proof. Likely more than enough.

Kids are already grown-up and houses paid up by that time.

Lump sum payout at that age is probably not needed.  My dad upgraded his home at age 74. If I need any lump sum after 65, I could downgrade my home.

I heard that many insurance customers at this age don’t know what to do with the lump sum payout. For most people (myself included) that would be a real temptation to /splurge/.

Instead, I feel it’s better to receive the payout when I need it most — before retirement, like age 45. Consider the SAIL plan, which pays out all the asset value during the 20Y payout phase, so terminal surrender value is $0. I now feel this is better than the annuity products since the payout rate is higher and wait is shorter.

From this standpoint, it’s unwise to lock away 50k now to produce a deferred payout at 65 :

  • After 65 I probably don’t need that payout
  • From now till the payout age, I don’t have access to this 50k

This is a commitment-phobic view, but also a liquidity-focused view. It casts doubt on any annuity products like

  1. Allianz IncomeProtector — Allianz IncomeProtector
  2. Tri-generation VIP from Tokyo Marine

##[17] SGD cashflow]semi-retirement phase #Fuller

Posted on by tiger40490

Update:

Tanko pointed out $3k/M is sufficient until tested by a cashflow event. He feels real life is more unpredictable, so for many retired couples the uneventful phase may not last long. If you want to weather the storm, you may need a $3M contingency reserve .. something 99% of us don’t have.

This was exactly my attitude expressed in numerous emails until 2018. My attitude (tanko?) was like “even though I have recorded evidence of a 4k family burn rate for the past X years, I still need to prepare 10k/M”in my old age, I still want (not “need”) a salary.

See also https://tanbinvest.dreamhosters.com/2014/12/08/retirement-planning-ideas-le2-tanko/ and other posts in the same blog.

See also passive income generators

When asked by financial planners such as at a Prudential road show, I have estimated that for my wife and me combined, the retirement monthly burn rate is very roughly S$3k in today’s dollars,

  • including regular clinic visits
  • excluding major medical
  • excluding overseas trips
  • excluding rental or mtg expenses, hopefully $0

At s$3k, my wealth (by Fuller’s definition) is rather high. No need to work any more. The EarlyRetirementExtreme author estimated 100Y of wealth for himself.

Looking at my recent burn rate (which I track carefully), 3k is a realistic forecast of our retirement burn rate. I understand my own burn rate very well. This is the part of my financial planning I understand best, which is still rather imperfect.

Living alone in the U.S. I spent below $1k/month excluding rent and flights. When self-employed as a bachelor, I was earning $2k/month and had no cash flow problem at all.

My Zofia and I could move back to MYS/SG when retired. Below are some of the positive/negative cash flows during my semi-retirement years:

^ kids contributing a bit of allowance, if any
^ part time salary —  Note my target retirement age from Full Time job is 75.
^ low risk investment dividend, such as insurance
^^ rental income minus property maintenance cost.
* I would advocate lease spread — rent a cheaper/smaller place and rent out our home.
^^^ CPF Life would start paying at 67 or 70
…. see figures in 3 ffree scenarios: cashflow figures
▼flights to see family
▼Major medical? Rely on medi-shield?
▼other medical expenses not covered by medi-shield. Other insurance can help. It’s naive to assume that medical would be 80% of the burn rate.
▼old age related expenses? Ask grandparents
▼▼ utilities including daily transportation
▼▼ food

Repeated “^” means higher predictability.

If we stay in JB or Thailand and visit Singapore when needed, then the savings/gains would include (look at the tax-like expenses)
+ cheaper food
+ lease spread
+ routine medical is cheaper
+ cheaper utilities including daily transportation

— support grandma? My NNIA is sufficient for CRBR, but not sufficient to support my aging parents. I think this type of “support” is a luxury comparable to branded degree for my kids. There is one difference — my aging parents have their pension income and nest egg.

passive income^inactive management(property

Posted on by tiger40490

Completely passive income is too strict a requirement and realistic only for the wealthy. A minimal amount of /legwork/ is usually unavoidable and acceptable to the retail investors:

  • cross-border fund transfer
  • tax filing
  • currency conversion
  • monitor a stock position in order to receive dividends.
  • /keeping tabs/ of passive income accounting

Now, one level above these effort, some inactive management effort may be required, but some laid-back investors will refuse to put in such simple efforts like:

  • maintaining the relationship with the local agent. Is she reliable and diligent?
  • property maintenance
  • monitor market trends, make long term, gradual adjustments to fend off competition and stay relevant. Gradual adjustment is less stressful.
  • Avichal suggested another form of inactive management —

Form a partnership with a trusted local agent and run it like a business. Perhaps like airbnb. He feels such a business could grow.

Perhaps you could find gainful employment to keep yourself engaged and helpful to your customers and other people. Better than passively collecting rent.

##nonwork income: rarely has capital appreciation except prop

Posted on by tiger40490

I know only a few reliable passive income generators. Capital appreciation + reliable and high dividend yield without active management …. a rare combination. My BridgeRetail and #4-116 are considered bargains.

  • All other properties can become vacant or rundown. All need active management
  • As Avichal pointed out, a bit of inactive management could enhance the return.
  • Most high dividend funds have no consistent and high dividend like HY bond funds
  • Unlike the property market investments, annuity products are lifetime commitments. Once you put in the money you can’t easily take out any amount without loss of the lifetime benefits.
  • As discussed with Raymond, airbnb model requires a lot of active management and legwork. Not passive income 🙁
Income Years Nett rate (not annualized credit? active mgmt? capital appreciation liquidity inflation protect
10Y 7% listed developer none. very Rare 🙂 big potential 🙂 can sell good Cambodia shops
for life:) 8-9% after 10Y wait trusted to take care of my family 🙂 none erosion 🙁 worst worst – super
long term		 CPF Life
for life:) 7-10% big insurer none erosion 🙁 worst worst Allianz income protector
5-20Y -1% to 7% 🙁 factored into price 🙂 none could drop:( excellent mixed HY bond fund
many no guarantee 5-6% gross no issue needed reliable 🙁 can sell good HDB flat
many no guarantee 5~7% no issue needed 🙁 big potential 🙂 can cell good BGC