CPF portfolio update

Here's a partial update of my CPF Portfolio invested using OA funds as at 2017-10-19:

Aberdeen SP Thailand Eq SGD	$3,621.570	7.03%
First State Regional China	$3,012.709	8.23%
PineBridge Singapore Bond	$1,415.751	1.02%

All three of them can be considered as indexes of their respective markets. I think major indices around the world are rising in tandem.

The portfolio is small now but the yield is already 7-8% (after the fees) since I started a few months ago. I'm approaching cautiously as it doesn't smell right for the market to keep on rising for so long when we're nearing a potential downturn based on the 10-year crash cycle.

I will stop the PineBridge fund RSP as the yield is really low in a raging bull market.

I chose the unit trusts based on their stellar past performance.

I use POEMS Unit Trust Regular Savings Plan which offers one of the lowest fees.

How to calculate savings interest

I'm sure many people out there don't know how the interest is calculated. They are contented so long they see the amount is roughly correct.

Below is taken from the UOB website as at 2017-10-18:

Many may be fooled by the 3.33% p.a. rate at first sight as the actual effective rate is only 2.43% p.a. if you fulfil the spending and crediting criteria.

Effective rate for 50k = (10k * 1.5% + 20k * 2% + 20k * 3.33%) / 50k = 2.43% which is shown in the fine print at the bottom of the page.

How to calculate the monthly interest?

Monthly interest = Effective interest rate * savings amount * (N / Y) where N is the number of days in the month. Y is the number of days in the year.

There may be some rounding differences.

The savings amount may be the daily average balance in the month depending on the definition used by the bank.

Maximising cash interest rates

My cash savings are deposited in high-yield accounts, and by that I mean the interest rates are significantly more than the pathetic 0.1% base rate and the 1.x% fixed-deposit rate.

All my cash savings are earning at least 1% interest p.a. with most of them at least 2% p.a.

This is how I do it:

1. UOB One Account:
• I currently max this out with $50k at 2.4% p.a. interest rate by spending $500 on the One Card and making 3 GIRO transactions monthly.
• One tip is to charge whatever you can to the credit card but be mindful of certain exclusions such as interest-free instalments, ezlink top-ups, etc.
2. Maybank SaveUp:
• I max this out with $60k  at 3.0% p.a. interest rate by depositing my salary, paying for my One Card through GIRO, and investing the bare requirement of $300 in unit trusts monthly.  I am compelled to invest in unit trusts as I don't fulfil any other criteria.
3. CIMB FastSaver:
• The remaining funds is deposited here to earn 1% p.a. (up to $50k).
4. Singapore Savings Bond:
• This is a good alternative to CIMB FastSaver as it is highly liquid (redeemable without any penalty within a month), has an annual yield of 1-2.x%, and ultra-safe (backed by the Singapore Government). 

All my cash is pretty much protected by SDIC and the Singapore Government. 

One way to hit the credit card min spending is to consolidate expenses into one credit card and use it to pay for bills such as:

1. Telco bills
2. Utilities
3. Use CardUp to convert GIRO payments to credit card payments for a small fee of 2.x%
4. HDB season parking
5. Petrol
6. Town council fee
7. Insurance (certain types only)
8. and more...

However, do also check the credit card terms and conditions to ensure the payment type can be counted towards the min spend. 

Early Retirement

I just came across this blog http://earlyretirementsg.weebly.com/ (and many others) and am glad to find fellow Singaporeans who are embarking on the same mission as me.

I aim to retire by 35. Currently I am 30. Still 5 more years to go :(

Based on current income trajectory, my net worth would be 1 million by then (not including my significant other half's), the majority of which I would probably invest in stocks earning myself at least 5% dividends overall. That would give me a passive income of about $20-50k annually depending on the actual performance of the stocks and how much I actually put in.

This amount should be able to cover my annual expenses adequately based on a comfy lifestyle.

Why retire early?

I guess this is due to my lazy yet greedy nature. I think most people want to be rich yet they are not that motivated, crazy nor hungry enough to work for it. 

By the way, having experienced much shit and politics in my corporate job for 5 years now.. I know it is certainly not easy to achieve wealth, let alone striving out on your own doing business. 

Also I realised a 9-to-6 regime is certainly not for me. Everyday to the office feels like a chore over and over again -- doing the same uninteresting shit over and over .. I think I'd rather stay at home, do nothing and drink beer all day long. 

How much do you need to survive in Singapore?

This is just a thought experiment to determine roughly how much is required per month to survive in Singapore for a young working adult with 3 proper meals, shelter over head and basic health insurance. I'm doing this exercise so I can compare my expenditure to this hypothetical example.

I just guesstimate some of the costs below as I think it should be pretty accurate based on my past experiences and I'm too lazy to do research.

1. Meals: 
• Breakfast: Say you buy a jar of jam and loaf of bread which last you for a week ($5 in total). So that's about $0.70 for a breakfast. Let's round it up to $1. With a cup of home-made or hawker coffee, it will be another $1 so total $2. 
• Lunch: Economical rice at a hawker centre ($3).
• Dinner: Again, economical rice or equivalent (for god's sake).. $3. 
• In a month, that's $8 times 30 days = $240 per month (and this is without buying any drinks!)
2. Shelter (or parents' allowance):
• Rent a small room for $500 with utilities and WiFi included (but no air-con). I think it can even be cheaper if you stay in a remote location such as Woodlands or Jurong. 
• -Or- Live with parents either for free or give them some allowance. 
3. Transport:
• $100 for ez-link per month (based on my expenditure before I bought a car).
• No private transport.
4. Healthcare:
• Referring to the premium table here, the Medishield Life premium is only $6 monthly for a young adult in the lower-middle income group. 
• I also assume here you get illnesses and ailments such as headaches, fever,  and cold occasionally, so another $5 per month on average to buy pills (DIY cure). 
• Dental checkup every 6 months: For a typical polyclinic visit, it costs $45 so that's ~$8 per month.
• $10 haircut in one of those express shops every 2 months, so that's $5 per month.
5. Phone plan:
• I will just include this since in this modern age, almost everyone needs a smartphone in a developed country. How can you not own one when the workers and aunties own one each?
• Say $20 for a SIM-only plan with 3 GB data.
6. Gadgets:
• Say you need a laptop and mobile phone and you can only use them for 4 years max. 
• Assume $2000 per 4 years so that's about $42 per month. 
7. Clothes:
• Say you spend $120 a year on clothes on average so that's $10 per month amortised. You'd need at least some decent clothes in this judgmental and superficial world, especially in certain industries. 
8. Entertainment:
• Assume all the entertainment is derived from your mobile phone and laptop.
9. Groceries and necessities:
• Assume $5 per month for shampoo, toothpaste, etc. (amortised)

So in total you'd need $941 per month for a really frugal and financially disciplined lifestyle! Wow! I thought it'd be even lower.

One can probably even reduce this further by cooking meals yourself, DIY haircut, etc.

Mine is 250-300% of this inclusive of owning a car. 

Additional things to sweeten your life that were left out above:

1. Vacations
2. Better entertainment such as movies
3. Occasional splurges on food and transport

How do YOU compare to this?

Do you need a Will?

For ordinary folks like us with few assets, a will is not necessary.

Many would say having a will is beneficial for making allocating assets easy in the event of a sudden death.

However, how likely it is for one to encounter a sudden death?

Using my late father as an example, he only had shares in the CDP, money in bank accounts and of course, in the CPF as well.

He made a will back in 1994 and a nomination for CPF. His bank accounts and HDB flat are jointly owned by him and my mum. So when he passed away, we only had to apply for a Grant of Probate to claim his shares in the CDP (even this can be avoided).

I would suggest saving the money for making a will ($100-$200) and making everything jointly owned and nominated if possible. Further, CPF monies are not covered by wills.

Exceptions:

1. you cannot provide a nomination for CDP shares and one way is to transfer when the person is still alive. When the person is gone, you'd need to apply for a Grant of Probate (if there's a will) or a Grant of Administration with the engagement of a lawyer, which costs $1200-$2000. It'd be cheaper if you do it yourself although the process can be quite daunting for most people like us. Yet another alternative is to go through the Public Trustee but it charges fees for doing so. 

What do you think?