Tag: t_othRisk

Earn/Save/Invest: excel@2 out of 3 #reckless investor

Posted on by tiger40490

 

k_investor_selfEval

A blogpost on FIRE-in-SGP introduced this concept to me: Earn/Save/Invest — you need to excel at 2 out of 3 i.e. doing better than average. Then you could achieve FIRE. I like the simplicity.

Note “excelling” at Save means “strong savings discipline”, with a large cash reserve, similiar to Sg government.

Note: Wise investor is not reckless. Aggressive investor doesn’t always excel at investing.

Beware peer comparison. Some people would be good at all 3, but usually there’s not much we can learn from them !  Specifically, those who Earn well would seldom Save a high percentage, but their absolute Save amount is still substantial. What can a low-earner learn from them? So some peer comparison on Earn/Save/Invest would be counterproductive.

— Earn+Save -> superior brbr
This type includes people who invest very conservatively or keep lots of cash.
If someone good at Earn/Save and invest heavily into SP500, then she probably falls into Earn/Save/Invest triple threat.
— Save+Invest with limited income .. the FIRE theme
How about Save/badInvesting, with a contingency reserve more than 3Y worth of living expenses? This buffer would protect against the investment disappointments. In an disaster, this buffer could save the ship.
— Earn+invest with limited cash reserve .. is the most popular combination. However, it’s important to point out most of us are not going to earn 3 times the median household income, any time soon. (If you earn 2.5 times the median, but save just 10%, then your surplus is 25% of the median income.)

I think my sis might be in this category.

Beware of Earn / lowSaving / aggressiveInvesting. I feel this is quite common. If the aggressive investing is currently profitable, then the individual would tend to increase risk appetite. If in the red, then the low contingency buffer would be a weakness.
— me

  1. I’m A on Save. Not perfect in teaching my kids
  2. I’m B on Earn. Easy to benchmark — You can reference the national income distributions. My biggest hidden strength is career longevity, based on healthy longevity.
  3. I’m C+ on invest, measured by my own standard (leaning towards current income). No universal benchmark here.

C means “decent”, “good enough”; D means “barely enough”; F means Fail.

[21]SDB liquidity #selective cashout: not available]mufu

Posted on by tiger40490

The more I watch the kettle, the more pain.

— On 18 Feb 2022, I spoke to a FSM advisor in depth. I compared SDB to some of my best div stocks and realized that I have different expectations for each asset class:

  • for div stocks, I have much longer holding windows [don’t want to be specific here, but at least 3Y]
  • .. but I expect consistent DYOC. Many dividend superstars have a commitment to that.
  • for SDB, I need liquidity: 1) time-bound dips. I also need 2) shallow dips, which is satisfied by this asset class.

It turned out SDB is failing expectation #1. The macro environment is not so drastically different from the past 30Y, so I blamed the fund managers (across the industry) for poor management.  Now I would blame the SDB asset class for failing my expectations, if the very best fund manager couldn’t deliver. That’s why I compared SDB to div stocks.

Now I think as an asset class, SDB is low-return, small loss, but not always better liquidity. For a fair comparison, FSM advisor reassured me that the dip would remain small (much better than stocks), and NAV recovery would arrive within the timeframe I set for my stocks.

One factor is selective cash-out (introduced in a 2021 mail to XR). FSM Advisor pointed out that most of the SDB issuers are reputable and consistent with coupon payments, but I am unable to see their coupon payout, and I can’t filter out the underwater bonds, and cash out the rest without loss. Selective sell-out would enhance liqudity of the SDB mufu.

Sugg/Plan 1: since there’s a high chance that Shenton SDB will decline further over the next few months, let’s sell $2k and watch the market. (Will maintain the deep-frozen 38k so as to capture the upswing.) If in a few months I see a 1% recovery in this mufu, we will progressively get back in, hoping to capture the upswing in time.

I discussed Sugg 1 with FSM advisor. She said many informed/patient investors would probably hold out for a recovery within 1-2Y (rather than timing the market), so I think it’s not stupid to hold. I told her that I would probably Feel better executing my Plan 1.

As of the call I had $4k invested in Shenton SDB. I did sell half at a price around 1.586. Now price is even lower, vindicating my decision.

— On 20 Dec 2021, I spoke to a lady at Fullerton regarding https://www.fullertonfund.com/fund/fullerton-short-term-interest-rate-fund-c/, followed by a chat with a FSM advisor.

This fund holds investment grade (average BBB+) short-duration (2-3 Y average duration) bonds including corp bonds, without HY bonds like those China property corp bonds.  Default risk is low with the underlying bonds.

Q: why the recent drop in NAV?
A: 1) rate hike and 2) China sentiment. The Fullerton lady emphasized that the sell-off in China depressed all market segments, as many investors dump all China corp bonds including investment-grade.

Q: what’s the projected impact due to upcoming rate hikes across the globe?
%%A: a CB announcement would (immediately?) translate to higher market yield i.e. lower NAV, but over time, the return on the fund will hopefully (am not so sure!) recover and catch up with the prevailing higher rate.

Q: based on historical chart, I would say every decline was followed by a reversal within a year. Average annual return is 2-2.5%, so can I assume this time round will be similar? Well, there are only a few historical occurences.
A: managers often hold IG bonds to maturity, and then deploy the repayment to buy new bonds, whose returns are higher during rate rise.  I guess that’s the mechanism of the reversal.

Jolt: However, how soon is that maturity? Average duration across existing bonds is 2Y+ ! So this mechanism won’t kick in within a year 🙁

If this fund can deliver 2%pa return as historically, then it is likely to beat my mtg interest cost. It would qualify as a parking spot for my borrowed dollars.

Jolt: However, the NAV could zigzag till late 2022.  Remember that once I sell #1173 I would have plenty of cash to capture the recovery. Now I think the recovery will not be over so soon. Instead of holding all the way through the recovery, (AA) means “sell now and buy after CompletionS”.

Q: When and how much is the expected mtg rate hike? Remember MBR is under OCBC in-house control.
A: As of Oct 2021, most mortgage brokers and bank executives agreed that the full impact of these global actions on Singapore will only be realized in 2023

Q: How fast and big are the hikes?
A: As of Dec 2021, the anticipated rate hikes (projected 2 to 3 in FY2022) is likely to end shy of 1%, rising at a quicker pace in FY2023 and FY2024, as widely polled by Economist.  The first rate hike may only occur in May 2022, as polled widely.

— Which option is safest? Earmark 42k for liquidation before exercise, to reduce quantum. Grab any chance for ABE over the next months, and liquidate incrementally.

AA) liquidate $42k at a small loss now, so as to reduce my housing loan quantum by $42k.
BB) keep the $42k position in FSM and wait for price recovery. The $42k portion of my housing loan will incur a floating interest rate of (projected) 1~1.5% for 12 months from mid-2022 to mid-2023.

FSM advisor is confident about the validity of AA. FSM advisor said BB is risky because mtg rate will probably go up amidst the “3 rate hikes”, but those SDBs could take a hit immediately and take a long time to recover, so I could end up losing on both sides. If those 42k positions decline while my mtg rate trends up, I would feel bad and have to hold longer. I may end up watching the 42k in pain, expecting it to outrun the mortgage rate.

She also pointed out the China sentiment may not get “resolved” so soon. It could depress the NAV of my 42k SBDs over 2022 or beyond.

— Q: is this oth?  Not oth because I care about loan burden, and monthly burn rate.
— soft close .. this fund includes 6%+ current allocation to cash. Too much cash. Mangers currently won’t accept new cash, and risk diluting future returns. I guess this means they are ready to buy new bonds at higher yield, but can’t find enough of them. If they use the idle cash to buy the current crop of new bonds, they would “buy” low coupon rate and stand to lose as yield rises.

##methods: itemize+subtotal ] exp-recon s/s

Posted on by tiger40490

Methods or techniques?

Favor abbreviations or Chinese words when the cell is overcrowded

In many cases, I need to present a subtotal of itemized amounts. I use several different tabulation methods.  Each method features (or makes do without ) borders, subtotal, table heading, color. Perhaps too many different methods creating cognitive overload, but might be a small daily workout for the brain.

Now I try to minimize tables, and use colors more often. If you must avoid background color and use font color, then light colors are more identifiable.

— Method-simple1:  category of similar items without border or subtotal, with a heading like “~~refunds”
Used in pending amounts
Used in div+interest section

This is similar to simple2, but cleaner because it doesn’t add even more borders  .

— Method-simple2: 2-column table without heading, without subtotal
Used in cCard balances

This is similar to simple1, but space-efficient because it doesn’t add heading rows

— Method-special1: Subtotal is an estimate and comment, not updated automatically
Used in FSM section

— Method-special2: Subtotal cell is placed far away.. takes some getting-used-to.
Used in outflow colored sections

  • One colored section for outing ePayments
  • One colored section for tax-like ePayments
  • One colored section for transfers to family members

— Method-special3: Itemized amounts are textual comments of the format “$123 fruits”, not added up by s/s
Used in banknotes section

ETF invest`=far simpler than stock-pick`#Dahlan

Posted on by tiger40490

k_ETF_assetClass

I told my young colleague Dahlan that “ETF investing is much simpler than stock trading”.

  • no analyst research or rating
  • no need to identify defensive stocks or stable cash cows
  • no worry about buying at the peak
  • no worry about buying in a volatile time
  • no dividend safety concern
  • no dividend trec to check
  • no special dividend
  • no stock splits or buyback
  • no dividend cut surprises … as ETF dividend is always fluctuating.
  • no surprise about dividend processing
  • no surprise about tax withholding in Canada dividend
  • no surprise about low liquidity in pink sheets
  • no pre-clearance required for most ETFs

— learning as a recreation .. is a major advantage of MOETF.  Simpler implies less learning.
We learn and grow wiser mostly from mistakes and losses.

What if your stock pick doesn’t really lose money but trails the index and most index-tracing ETFs? I guess you too learn something.

You also learn something if your pick beats the index.

I feel the more names you pick, the faster you learn. You also learn by selling, but I practice buy-n-forget

My comment to Dahlan has a hidden meaning “Similar to a bigger board game, Stock picking is more fun more anti-aging, more recreational.”

WMT/TGT: car-dependency livelihood@@

Posted on by tiger40490

k_X_car_dependency

If you are used to car dependency and now I ask you to imagine a life without private car (but with car sharing, occasionally car rental etc…) you will think of many challenges. One of them is the lost convenience of Walmart, or Target. These are two of the several superstores that I have used. Look at the alternative solutions — they provide for most of the situations including some special situations.

Therefore, car-free living in a city underserved by Walmart may sound like a livelihood issue, but it is not really. I lived in East Orange, Porter Square, Boston, Brooklyn for years without any of these superstores nearby.

— alternative: similar stores on my commute and on our Chinese grocery shopping trips .. These trips are likely to pass by several shopping districts.

— alternative: smaller stores within biking distance
The superstores are sometimes located beyond my bike access in some suburban cities. I seldom choose to live in those rural cities. If I do, then there are always smaller (still sizeable) stores near my home, though price could be slightly higher.

I can go to nearby shops and big stores for most of my needs, and reduce Walmart trip to one weekend per month.

— alternative: planning for scheduled trips .. in https://tanbinvest.dreamhosters.com/wp-admin/post.php?post=21798&action=edit one American author said “I have started making this trip once a month. During the month I will make a list so that I will remember what I need”

— alternative: online shopping … can be cheaper and simpler. I just don’t know when I would start using it. I did go online to buy laptops, pills, baby powder, chia, batteries…. Good return policy.

— price tag .. Walmart is known for low price. Target is slightly higher but still affordable. The big warehouse stores [BJ’s / Costco / Sam’s ] are even cheaper.  So without a car, is our burn rate going to be higher? No.

  • reason 1: we save on car related costs.
  • reason : In fact, in the U.S. mass-produced goods are very economical and competitively priced compared to human service including restaurants, repairs, lawyers,,,
  • reason : online price is even lower most of the time.

(hidden)factors]household saving rate as reported

Posted on by tiger40490

https://www.dbs.com.sg/personal/nav/are-you-saving-enough.page?pid=sg-dbs-pweb-nav-featured-cardtile-others-are-you-saving-enough claims that the average Singaporean household in the survey saved 55% of the total income including employer CPF contribution + nonwork income reported on tax forms. This figure is highly questionable.

— Issue: What’s the average Singaporean? I guess the authors meant that average household expenditure is $X and average household income is $Y, so 100%-(X/Y) gives 55%. This doesn’t mean a typical household saves 55%.  If we tabulate the savings rate of 1000 households, we get a distribution (bell curve histogram). Given this histogram,

( issue: ) is it valid to find a population average? I can only speculate

  • low-income households save less (in general but not always),
  • younger households save more for housing and raising family,
  • pre-retirement households may save more as their grown-up children have left
  • retiree households may have negative savings rate or possibly excluded from the calc

It’s questionable to compute aggregate statistics across any two distinct categories.
— Issue: most Singaporeans in the survey would have 30%+ of monthly income locked into CPF (compulsory savings scheme)

I would guess the alternative statistic of “savings rate as percentage of take-home salary” is much lower among Singaporean families with kids. The median might be 10-20%
— Issue: is mortgage payments considered savings or an amount spent? For the P+I,

  • I feel the interest portion is definitely an expenditure.
  • The principle portion is more like investment (savings)

— issue: is rental and dividend income captured as income? I would doubt it.

In conclusion, it’s hard to have any confidence in these numbers. My target is Brbr, focusing on non-investment expenditure.

investment”system”[def] of an investor

Posted on by tiger40490

Like “web2.0”, I often use the vague word “system” as a collective to include a diverse range of distinct or indistinguishable items:

  • investment habits .. often without reason
  • investment biases .. accurate description of human nature
  • investment strategy/methodology? too grandiose
  • investment approach? too high-level, too vague
  • investment principles? too grandiose
  • investment attitude/perspective
  • investment objective/priorities
  • investment preferences

##[19] G11 progress]PFF plann

Posted on by tiger40490
  • MOETF with firewall, 3Y BnF, 3min due diligence
  • exp recon process improvement

No oth please.. I feel proud of my independent thinking and progress. I feel these items are remarkable and visible signs of progress. New and better ideas for the next 1~30Y.

I guess many of my U.S. and Singapore peers don’t have such a /progressive/, continuously refined financial plan.

Even though some of them (YW.Chen, Shuo, Ash.S,…) have multiple properties; some (Venkat?) more successful with U.S. equities, I feel most of them follow the bandwagon with fewer bold departures.

  1. [aU] bold decision to stay rented on lease spread, without U.S. home ownership — lower cash flow burden than buying 700k. 700k is like Ivy League plan among the Chinese immigrants.
  2. [AU] bold decision on college fund — discussed with grandpa, Kyle etc , and more convinced than ever to avoid the rat race to branded colleges … insider.
  3. [AU] bold decision to accept average school districts and focus on conducive learning environment instead of test scores
  4. [u] surprise discovery of current income /vis-a-vis/ windfall far out
    1. analyzed three ffree scenarios, based on my detailed burn rate record
  5. deeper conviction and belief in U.S. equities, /vis-a-vis/ other regions
  6. surprise discovery of SG elderly healthcare as more efficient and accessible than feared. No driving required as in U.S.
  7. [a] incisive researched on U.S. burn rate and figured out it’s much higher than SG due to Melvin3
  8. [u] more firm than ever before on my bold decision to work till my last day
  9. bold decision to include 43R model in my default plan, rather than the conventional 2FH model
  10. [AU] singled out Bayonne and South Edison as my bold yet viable choices

Above are progresses made since mid 2018. Below are Earlier progresses, roughly ranked by importance :

  1. bold investment in a 3rd shop unit, despite the concentration risk and lower NRY guarantee than before.
  2. bold decision to choose lower CPF-LIFE payout, since I don’t need the higher monthly payout or bequest.  This decision has implication on my savings rate now.
  3. [u] tried out dividend stock investing on Robinhood
  4. [au] bold idea of sending kids to Singapore universities, avoiding the mad rat race
  5. bold idea on MYS retirement — need more evidence and research
  6. [u] bold decision to stay as contractor
  7. [u] tracked family burn rate for years
  8. [a] passive income added up
  9. [u] bold and unconventional decision to favor walkable locations, to reduce car dependency
  10. new plan on HDB jumbo unit
  11. [a/A=high leverage i.e. high impact at low effort, low distraction, low laser dispersion]
  12. [u/U=unconventional among my Chinese peers. Back bone required]

bold investor #peer comparison

Posted on by tiger40490

I feel adventurous in many of my investment decisions. In contrast, out of 100 people in my age group, majority probably invest in standard products like 401k, REITs, ETF/mutual funds, CD, or stock markets.

  • SEA rental properties
  • German high-yield PE
  • Brazil high-yield PE
  • AsiaProperty high-yield PE
  • Energy12 PE

Do these decisions make me a risk-seeking investor? I think so.

— I need excess liquidity; I don’t need every dollar working hard for me. (See https://tanbinvest.dreamhosters.com/24246/make-your-money-work-hard4u/) This makes me a risk-averse investor.