An Alternative Approach to CPF

As a citizen, 20% of my pay is credited into my CPF account each month, together with 17% from my employer. Now the CPF is touted by the Government as a retirement tool, with the annuity plan CPF Life which is supposed to give you a monthly payment till you die. This post is not to discuss about the pros and cons of the scheme, which would definitely generate a long debate which would not be conducive to the point I will be discussing below.

As the title says, this post will be about an alternative approach to CPF. What do I mean? As of current rules (which are highly subject to changes though), there are two ways to cash out the monies in your CPF account. Firstly, we have the annuity plan as discussed above, a slow drip of cash meant to supplement (note: not solely depend on) your retirement. The cash amount varies, and will be deducted from your account. If you pass away before the amount is depleted, the leftover monies will be dispersed to your surviving family members. If you pass away after depleting the amount, your family will get nothing. 

Secondly, and more appealing to me, is the cash withdrawal that is allowed upon reaching 55 years old. This allows a one-time withdrawal of $5,000 or whatever sum of money that is above the current minimum sum (standing at $161,000), whichever is higher. Bear in mind that the minimum sum is set to increase year to year, based on some ad hoc metric that is not shared publicly, so the minimum sum that has to be kept aside could be a problem in the cash withdrawal. Singaporeans could also struggle to hit the minimum sum as significant funds from CPF are utilised for housing purposes, which empties your OA, essentially rebooting the savings process. While there are other schemes that make use of CPF monies, housing is likely to be the largest expense that Singaporeans will use their CPF on. We then have the accrued interest problem, where you have to pay back to your CPF account the interest that would have been earned if you hadn't used the funds for your housing. Essentially, paying interest on nothing. 

Some good news though, if you own a property, you could pledge it to the CPF board in order to reduce your minimum sum commitment by half (ie from $161,000 to $80,500), which would help in reducing the burden. This would help to ensure that a considerable windfall can be obtained at age 55.

So what would be my strategy in getting to that windfall? First things first, I have yet to purchase a property, so a certain sum of money will have to be left in the OA, which attracts a 2.5% interest rate. I will likely to be leaving around $50,000 which should be enough to provide for the 20% downpayment (combined with my future wife). Excess monies after that will be shunted into the SA, which attracts an interest of at least 4%. This will allow the monies to accumulate at a faster rate. I will also be looking to make voluntary contributions into my MA, as once the Basic Healthcare Sum ($52,000 as of 2017) is hit, all excess monies will be funnelled into the SA. Do note that funds in the MA get an interest of 4% as well. By doing these, the hope is that half of minimum sum (after pledging the property) will be reached as soon as possible, after which I will make voluntary contributions into my CPF (limited to $12,500 per annum if I'm not wrong), and transferred into SA. What I'm essentially doing then would be to treat my SA as an AAA rated bond with a 4% coupon rate, and maturity date in the year I turn 55.

So there, an alternative approach to CPF.  

TL:DR Two ways of making use of CPF, I will be aiming for the cashout at age 55, by pledging my property and making use of higher interests of SA and OA.

Summary for Jan 2017

So the first month of 2017 has passed us by, and its time for another portfolio review. Nothing's much changed, other than the addition of Singtel into the portfolio (see my analysis and decision making process here). Glad to say that my previous analysis was right, and the share price has risen by about 5% from my entry price.

Without further ado, here's my portfolio update:

Name	Port%	Shares	A.Price	Div (Total)
OCBC Bank (SGD)	19.45%	508	9.46	145.44
First Reit (SGD)	17.54%	3,332	1.24	365.873
SoilbuildBizReit (SGD)	12.65%	4,900	0.67	145.481
SingTel (SGD)	10.95%	700	3.68	6.8
Keppel DC Reit (SGD)	9.19%	1,900	1.04	155
Hock Lian Seng (SGD)	7.23%	4,000	0.39	142
Accordia Golf Tr (SGD)	6.04%	2,200	0.61	139.43
Tai Sin Electric (SGD)	3.17%	2,000	0.33	32
KingsmenCreative (SGD)	2.93%	1,200	0.79	41
Lippo Malls Tr (SGD)	2.89%	1,800	0.34	54.35
AIMSAMP Cap Reit (SGD)	2.73%	500	1.32	50.8
ST Engineering (SGD)	2.70%	200	2.82	30
IREIT Global (SGD)	2.09%	700	0.63	45.79

For now it's unlikely that I will make any moves on the market, but I might start a RSP with POSB, just to have a bit of exposure to the ABF Bond ETF for hedging some of the volatility that I predict with Trump's presidency.

Purchase: Singtel

With the approval of the 4th telco, all 3 existing telcos (Singtel, M1, Starhub) took a beating in their share prices. I used to hold some Singtel shares (bought at $3.79) but had sold them at a small profit before Standard Chartered's minimum commission kicked in.

With the fundamentals of Singtel remaining more or less the same as before, the reduced price of $3.66 meant that it was now more attractive as a value play. Was actually looking to buy in a few days ago, but decided to see how the trend was going, before committing today with 700 shares @ $3.66.

So, looking at the fundamentals of Singtel, we have:

1) Business earnings is well diversified geographically, if I'm not wrong Singapore only accounts for approx 11% of their earnings, thus the 4th telco is unlikely to affect the earnings much

2) Profit margin of approx 20%, compare with 15% for Starhub and M1

3) Payout ratio of 75%, meaning there's room for dividends to grow or unchanged even if their results should decline (touch wood!)

4) P/E of 15, which is slightly higher than Starhub and M1 at 13 and 11 respectively, however Singtel's P/B is the lowest at 2.3, with Starhub and M1 coming in at 21 (!!!) and 5 respectively.

In essence, the buying of Singtel represents a value buy, given that I was able to buy in at a lower price than previously. Singtel's fundamentals looks to be far and away more resilient than the other 2 incumbents, and I am quite confident that Mr Market will realise this before long.

2015 vs 2016

Just a short post regarding how much I have as compared to 2015.

2015:

Cash: approx $20,000

Stocks: $15,500

CPF: $42,300

Total: $77,800

2016:

Cash: $38,000

Stocks: $21,000

CPF: $68,200

Total: $127,200

Total net worth increased by approx $50,000 which isn't too bad, considering my low-mid 4 figure income. However, discounting the CPF amount, my cash/stock portfolio, which are a lot more liquid and accessible, increased by $24,000, which I think could do with a bit more increases next year. Especially surprising was that my stock portfolio increased only by $5,500. Will be striving to do better in this aspect next year as the stock market still represents the best chances of leading to a semi-retirement asap. 

Dividends from stocks wise, 2016 got me a total of approx $700 in total, which seems little at less than $2 per day. However, I participated in all DRIP schemes available to me, which would have increased the dividend collected to approx $1000. Will be working hard to increase this to at least $1200 in 2017.

End of Year Summary (Return from a Hiatus)

December's finally upon us, and I'm back after a hiatus. This post will just be a short summary of what movements I've made since my last post (August? Damn I need to work harder at this). For starters, I'm now solely concentrated in STI, having sold my Omega Healthcare stocks for a profit.

Next, I subscribed to Keppel DC Reit's rights issue, managing to snag some excess shares in a quality Reit, as well as a few other minor movements. As promised, the implementation of a minimum commission of $10 by Standard Chartered really curtailed my ability to buy in, plus with negative sentiments in the economy, I'm likely to be increasing my warchest in the coming months, unless something catches my eyes, such as maybe Singtel or Kingsmen Creative (very different set of reasons why I'm watching these two stocks closely lol)

Anyway, here's my consolidated holdings for now.

Name	Port%	Shares	A.Price	Dividend
OCBC Bank (SGD)	21.55%	508	$9.46	$152.56
First Reit (SGD)	19.94%	3,332	$1.24	$320.00
SoilbuildBizReit (SGD)	14.90%	4,900	$0.67	$68.51
Keppel DC Reit (SGD)	10.47%	1,900	$1.04	$101.80
Hock Lian Seng (SGD)	7.22%	4,000	$0.39	$142.00
Accordia Golf Tr (SGD)	6.64%	2,200	$0.61	$139.43
KingsmenCreative (SGD)	3.62%	1,200	$0.79	$41.00
Tai Sin Electric (SGD)	3.56%	2,000	$0.33	$32.00
Lippo Malls Tr (SGD)	3.12%	1,800	$0.34	$54.35
ST Engineering (SGD)	3.05%	200	$2.82	$30.00
AIMSAMP Cap Reit (SGD)	3.04%	500	$1.32	$36.64
IREIT Global (SGD)	2.41%	700	$0.63	$45.79

The portfolio is currently doing quite well, beating the STI quite easily. In fact, other than OCBC and Kingsmen, both of which I entered too early due to the fear of missing out on their Ex-dividend date, most of the other holdings are in the green. Do keep in mind that this takes into account the dividends that I've collected through the months though. This more or less assures me that my way of investing is working for me right now, and probably with a few slight tweaks, should be able to get me to where I want soon.

Time-weighted Returns (including Dividends)

Year	Portfolio	ES3
2014	9.09%	1.79%
2015	0.02%	-10.95%
2016	30.48%	3.08%
Overall	42.38%	-6.56%

Will probably be posting the details of my financial status (figures, plans etc) soon, but on a whole I'm pretty happy about how my financials are right now, increasing my net worth steadily. In fact, after factoring my CPF monies (which I don't think I should but hey its my assets still), I have graduated from the 5-figure class as of 2016!!!! 

Thank you to all the readers out there, I promise I will post more things in future :)

Portfolio update July 2016

Been a bit busy this month, so here's my belated update. Due to the start of Standard Chartered's minimum commission in August, I had to sell off some of my smaller holdings and used the proceeds to consolidate some of my more solid investments.

Sold off Singtel for some gains, reason being it was getting too expensive for me to consolidate, didn't see the point in waiting to sell it with the $10 commission. Same goes for my BP and Berkshire Hathaway shares.

Stock Name	Units	Cost	Cost (Per Unit)	Dividends Collected
First REIT	3301	$4,128.07	1.251	$225.25
Keppel DC REIT	1000	$937.00	0.937	$68.40
Saizen REIT	2000	$1,724.21	0.862	$2,201.60
iReit	700	$441.61	0.631	$23.53
LMIRT	1800	$614.07	0.341	$23.57
Hock Lian Seng	4000	$1,557.11	0.389	$142.00
OCBC	508	$4,806.69	9.462	$61.12
Tai Sin Electric	2000	$651.51	0.326	$0.00
KingsMen Creative	1200	$950.00	0.792	$29.00
Accordia Golf Trust	2200	$1,339.23	0.609	$85.53
AIMS AMP Industrial REIT	500	$659.65	1.319	$23.30
ST Engg	200	$563.35	2.817	$20.00

Bought:

300 shares iREIT
1000 shares Hock Lian Seng

Sold:

100 shares Singtel

Stock Name	Units	Cost /USD	Cost (Per Unit) / USD	Dividends Collected
Omega Healthcare Reit	33	$1,112.68	33.718	$4.80

Bought:

20 shares OHI

Sold:

2 shares Berksire Hathaway
3 shares BP

SCB Minimum Trading Fee: Change in Investment Strategy?

As many of you might know, Standard Chartered's online platform has ended their no minimum trading fees, and as of yesterday, will now be charging a minimum of $10 per trade (unless you're one of their priority banking customers).

As someone who has almost exclusively taken advantage of their low trading fees, this is a huge blow, and likely to change my investment strategies significantly.

The lack of a minimum trading fee meant that I was able to 'test drive' many of my stock choices at a very low price, as can be seen with my small pockets of holdings in ST Engineering, Singtel etc. This enabled me to take low risks, and I was able to get out of several bad trades with little losses. Conversely though, this meant that winning trades got me little profit as well, but at least it proves that I was on the right track.

Now though, given that the maximum fee I can tolerate is approximately 1%, all trades I make will have to be a minimum of $1,000, a not-so-small outlay considering the size of my current portfolio. End result would be of less activity in the market, since I would need time to save up the requisite amount, and also, investments using a Regular Savings Plan are now looking more attractive. I'm now seriously considering placing money with OCBC's blue chip investment plans, maybe $500 per month (since the minimum transaction fee is $5) into the STI ETF.

What do you guys think?