At the end of every month, Mrs Budget and I will reconcile our monthly expenses and see what are we spending on, and where we can optimise or cut down our expenses.
We subscribe to the believe that every penny saved is a penny earned – sometimes its easier to save S$100, than to earn S$100, both of which results in the same net worth increase.
In March, here’s what Mr Budget spent on.
Expenses
March
Meals
$450.07
Transportation (mrt)
$40.00
Entertainment
$48.40
Groceries / Home
$201.05
Phone Bill
$56.10
Income Tax
$103.05
Hair Cut
$34.00
Digital Subs
$30.56
Malaysia Mortgage 1
$785.47
Malaysia Mortgage 2
$407.21
Singapore Mortgage
$1,215.26
Others
$192.60
Mr Budget’s total expenditure for February is at $3,563.78, a further reduction as compared to last month’s expenditure of $4,868.09.
The bulk of the expenses are mortgages related expenses, and if we remove all of those expenses, the true expenditure will be at S$1155.83. Mortgage related expenses is at S$2407.95, making up to 68% of the monthly expenses.
For Mrs Budget, here’s what she spent on.
Expenses
March
Meals
$154.60
Transportation
$80.00
Family
$600.00
Entertainment
$17.00
Groceries / Home
$201.05
Phone Bill
$25.00
Endowment
$303.97
Insurance
$87.25
Income Tax
$290.97
Shopping
$14.31
Gifts (Wedding Festives)
$170.14
Dog
$231.35
Mrs Budget total expenditure is at $2,175.64, significantly lower than February’s expenditure of S$10,260.33. This amounted to her 6 months low, and reverted back to the normal true monthly expenses.
We dont foresee any big expenditure coming in the next few months, and we will continue to tighten our belts and watch our cash outflow so that we can tide through this uncertain period.
It is probably an understatement to say that 2020 has been a bad start for everyone around the world. Probably more so for investors who have been investing over the past 5 to 10 years preparing for retirement.
Since the start of the year, market has plunged, wiping out 10 – 30% of retirement portfolios around the world.
While many other financial bloggers and us here have shared our take on investing during this period, we wanted to pen down our thoughts on another equally important matter – job preservation.
To us, the most important thing right now is job preservation, and this topic is probably quite understated in Singapore. This is especially important because companies are now cutting cost and freezing hiring during this period of uncertainties.
Decide If You Are The Cost Or Profit Center
Specifically, job preservation means that you have to decide if you are the cost or profit center of the company.
If you are the profit center of the company, you are less likely to take a pay cut or be laid off. Example of profit center is the sales department.
However, if you are the cost center, you are more likely to be affected if there are any cost savings measures in the company. Example of cost centers include customer service, maintenance, accounting, IT, HR and more.
Another thing everyone should do is to make sure that you are irreplaceable, or that it cost more to fire you than to hire your replacement in the long term.
What this means is that you have to demonstrate value to your boss, and be more proactive during this period to see if there is anything you can do more to help your company survive during this period.
Job preservation and mass unemployment is a very real problem, and because it is a lagging indicator, we will only hear about these numbers 2 or 3 months later when the government announce the quarterly unemployment rate.
However, we can use US unemployment data to give us a glimpse of what is to be expected.
Earlier last month, US announced that the number of people claiming for unemployment insurance claim reaches 3.3 million, 400% more than the highest ever recorded in the history of US. There are also no signs that this is slowing down.
Here in Singapore, companies are also earmarked to be closing down, and laying off their staffs to save on costs. The government has also stepped in and government agencies are actively creating temp jobs to ensure that Singaporeans continue to have employment income.
Preserving Cash inflow and Controlling Cash Outflow
Other than job preservation, which takes care of your monthly inflow, one should also look at his or her monthly outflows.
During this difficult period, cash is definitely king – and what we are actively doing is to make sure that we keep our expenses low. Because we are working from home now, we are cooking in more, which translate to slightly more savings.
All of our entertainment, travel and shopping budget are now shifted to zero as we try as much as possible to stay in and tide through this critical period.
Just as companies are taking this time to optimize for their finances, individuals should also take time to optimize their finances too.
For Mrs Budget and myself, we are also expecting dividend cuts from the counters we are holding on. SPH REIT had already announced a 78% reduction in their dividend, and we know that this will probably not be the only REIT to do so.
In similar vein, we also expected banks to cut the interest rates of high yield account, which all the 3 local banks have announced the past 2 days.
With the reduction of interest rates and dividend, that will reduce our monthly inflow, which means our outflow will have to be reduced too.
PM Lee and Minister Lawrence Wong has also shared in two different occasions that this will be a long drawn out battle, and will last at least another 6 months.
Times are bad folks. Please save up for rainy days.
Here at Mr and Mrs Budget, we will continue to update you on:
What we are doing financially to cope with the slowdown in economy
Updates on our portfolio and what we are buying and selling
Important things to take note of during this COVID 19 situation
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Frequent followers of Mr and Mrs Budget will know that Mr Budget had started a regular savings plan with Syfe, a relatively new roboadvisor in Singapore.
The main reason why Mr Budget decided to go for Roboadvisor is because he is looking for a more affordable way to invest in multiple baskets of ETFs to get more diversification.
Another reason is that, Mr Budget views roboadvisors as the professionally managed portion of his portfolio since he does not have any financial advisor.
As Roboadvisor firms have professionals looking at the funds daily, I’d think the results won’t be that bad as compared to our own DIY portfolios.
Since February, both Mr and Mrs Budget has combined our Syfe accounts together so that our returns (or losses) will be compounded.
So here’s Mr and Mrs Budget’s monthly Syfe portfolio summary.
March 2020
Global Equity Portfolio Total invested: S$5532.12 Total Contribution this month: S$1000 Current Value: S$4918.86 Portfolio Return: -11.09% Downside Risk: 25%
REIT Portfolio Total invested: S$4650.00 Total Contribution this month: S$1500 Current Value: S$4333.10 Portfolio Return: -6.82% Current Dividend Yield: 4.57%
So far both the portfolio registered a negative return due to the market crash in the past 4 weeks. Since investing in Syfe in January, the returns has continued to register a downward returns due to bad market condition.
We are not too concerned as we will continue to put in regular contribution to Syfe monthly, and hopefully 5 to 10 years later we will be able to see the returns.
Will Syfe give us a good return, better than what CPF SA is giving us? Only time will tell. 🙂
You might be interested in previous months update too:
Global Equity: January 2020: S$2009.00 (-0.25%) February 2020: S$4248.60 (-6%) March 2020: S$4918.86 (-11.09%)
REIT+ February 2020: S$3075.90 (-2.35%) March 2020: S$4333.10 (-6.82%)
Looking to invest via Syfe? You can use our referral code: SRP6X8B8Y when you create an account.
We would both get $10 to $100 depending on your first deposit amount, and you’d receive your bonus within 5 business days.
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So March and 2020 first quarter has came and gone now. And March has been yet another a roller coaster month because of the whole virus situation.
While everyone else is doing a monthly portfolio update, we thought it is more meaningful to document what we have done this month towards our financial goals.
Mr Budget Position Added: AIMS AMP, Ascendas India Trust, Keppel Pacific OAK, CMT, Syfe Global Equities, Syfe REIT+ Take Profit: Ascendas, Centurion, Amazon, Axon, SEA
Mrs Budget Position Added: AIMS AMP, Ascendas India Trust, Keppel Pacific OAK, CMT, Syfe Global Equities, Syfe REIT+ Take Profit: Ascendas, Netlink Trust
There were a fair bit of transactions this month, and mostly they can be classified into:
Selling some of our recently added positions to take profit and avoid losses
Buying to remain vested in market as well as adding counters which are below NAV and are oversold.
For Mr Budget and Mrs Budget, we took profit off Ascendas which we bought in November last year, and still manage to clock in a 10% gain before the counter plunged to below our entry price.
We may initiate a position to buy Ascendas again when the price drops further.
To accumulate more cash, Mr Budget also sold off more than half of his US equities, as well as his stake in Centurion before it dived lower than his entry price.
Similarly, Mrs Budget also took profit on her Netlink Trust holdings.
With the proceeds from the sales of shares, we rotated those capital into the following counters:
AIMS AMP – dropped to a 8 years low, with a price/nav of 0.77 and 45% upside. There was insider buying too when share plunged.
Ascendas India Trust – dropped to 1 year low, with a price yield of 8.21% and a 54% upside. Our first exposure to the India market.
Keppel Pacific OAK – dropped to all time low, with a price/nav of 0.61 and a 80% upside.
Capitalmall Trust – dropped to a 8 years low, with a price/nav of 0.84 and a 55% upside. Finally manage to get this REIT.
Overall, we recycled our invested capital into new REITs with better prices, and this month our investing activity is still net capital outlay for our Singapore equities.
We also continued our monthly Syfe DCA contribution.
Here’s a graphical representation of what we have done this month towards our financial goals:
While our portfolio went down by a lot, it is cushioned by our employment income as well as constant CPF contribution. Mrs Budget also received her performance bonus which help lifted her net worth up.
Our joint net worth is at around S$590,000 now, almost hitting S$600,000, excluding our properties and mortgages but including our CPF.
In our previous updates, we shared that cash is king and that we will be accumulating cash.
Hence we are treating our stock purchase this month as our first deployment of our war chest during this COVID 19 outbreak.
Phases
Mr Budget
Mrs Budget
Deployment Signals
1A
S$20,000
S$20,000
Singapore market STI -20% 2400 – Deployed
1B
S$20,000
S$20,000
US NASDAQ -25% 6750
2A
S$30,000
S$30,000
Singapore market STI -20% 2000
2B
S$30,000
S$50,000
US NASDAQ -25% 5400
3A
S$50,000
S$120,000
Singapore market STI -20% 1600
3B
S$30,000
S$70,000
US NASDAQ -25% 4000
Current: STI 2440 NASDAQ 7500
We have done 1A last week, and will monitor the US market for phase 1B.
Phase 1 is funded by our existing capital in the market. Phase 2 will be funded by our current cash in bank. Phase 3 will be funded via a combination of home equity loan as well as credit card cash advance.
Assuming we do hit phase 3, here are some of the counters we will be accumulating:
Ascendas REIT
Keppel DC REIT
Comfort Delgro
CRCT
Suntec REIT
Centurion
SGX
DBS
Mastercard
SEA
Booking
Google
Adobe
Amazon
Square
Facebook
Hopefully we will be able to scoop up these counters at good price and they will reward us in the future.
It seems like the mood everywhere is very sombre now.
The vibe we are getting is that, everyone is bunkered up and staying at home. Social activities are limited to friends meeting at home. For out of home activities, it is mostly limited to supply runs as opposed to leisure activities.
We wanted to share a bit more thoughts about the current situation of the economy.
Our thoughts are a bit all over the place now and hopefully documenting it down will help us focus our thoughts, and subsequently give us more resolve in either deploying our cash now or holding on a bit longer.
Has The Market Sufficiently Price In The Demand Shock?
Speaking to some of our friends who have been investing too, the overall consensus is that the current market correction rewrote how we should be investing.
Without knowing what the “new normal” is, it is hard to “price” equities now.
Source: Zero Hedge
The situation that we are dealing with is a demand shock, where people are no longer spending money. The image above illustrates this perfectly – everyone is adopting a “wait and see” behaviour.
Has the demand shock been priced in? Exactly how do we price this and how much of a discount should we apply to the current stock price level?
Finding A New Normal
While we have a shopping list of REITs that we are eyeing, but the truth is that, our entry prices are all over the place, the entry prices have been triggered a few times.
Even if there is a clear entry price strategy with sufficient margin of safety, taking into account the discount towards the NAV, we still don’t feel confident to enter into any trades.
We let emotions get to the better part of us, because we are trying to navigate uncharted grounds and a new normal here.
We also think that working class and small business owners will suffer the most in this current situation.
We are already hearing Facebook posts sharing from small F&B owners where their 2020 plans are all thrown out of the window – a sharp contrast from a hopeful start to 2020 to now a devastating state of struggling for survival every single day.
A Lot Needs To Go Right For Economy To Rebound
In order for the economy to rebound and things to go back to normal, a lot of things need to go right:
Virus needs to be contained, and this means that a vaccine should be successfully tested and developed.
The economy should not have taken too much a hit before the virus is contained
Consumer needs to feel safe and ready to go about their previous consumption pattern
Consumer should not have taken too much a hit before resuming their consumption pattern
Global trade and travel demand needs to be restored
There is a lot of “if and only if” situation for the economy to go back on track.
Instead, the economic signs that we are seeing now:
More job cutting measures
Airlines shut down (SIA)
More countries on lockdown (India, UK, Australia, Thailand, Malaysia)
Global travel demand is zero
Businesses are encourage to work remotely
What we expect to happen next:
Credit card defaults
Mortgage defaults
Companies needing loans for operating cost
Earlier today, the STI Index rebounded a 5.76%, a much needed good news for all investors.
However, is that the mark of a rebound?
While some level of FOMO might be toying with us, when we sit down and look at the signs around us as mentioned above, I think we’ve decided to let this play out just a bit more.
For some more context, in 2008, STI dropped more than 50%. So far, the STI has only dropped 30%. A lot of people shared that this crisis felt different and worse than the one in 2008 – so to think that the rebound today is a recovery is really quite a stretch.
While the US government (and soon the Singapore government) had announced more quantitative easing and economic stimulus package, I really think that it may do more harm than good if it is overdone (like in the case of US).
The problem right now is, even if the government is giving free money for everyone to spend, this might not necessarily lead to the desired spending.
Instead, it might lead to more unspent money in the “system”, and when the money equilibrium is achieved, will lead to hyperinflation and cash will become worthless.
There is a very real possibility that this will happen in the US, and the effect of that will trickle down to Singapore’s economy.
Knowing this, we really need to rethink about our financial goals and to see how we can safeguard ourselves and minimise any potential impact of that.
The truth is, there is no right answer to this, and we are just about as clueless on this as we are on the near future of the economy.
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One of the biggest dilemma that we are facing now is, when should be deploy our capital back into the market.
The sensible response to that is, keep DCA-ing now because one can never successfully time the market. That’s especially true because who are we if professionals themselves can’t time the market correctly.
Our cash in hand is limited because we have been constantly investing throughout the past one year. Our equity portfolio is now at -20% and we expect the position to drop slightly further when companies announce their earnings in the next two quarters.
In reality, all of us are part gamblers and it is challenging to continue to DCA downwards, especially when we are now presented with a once in a lifetime opportunity to accumulate stocks at great value.
So instead of buying down and accumulate stocks this few months, we will be looking out at these signs before we start deploying our cash.
Recovery of global travel demand
The global and local economy is powered by production and productivity. Both of these is in turned catalysed by the workforce.
If human interaction is still low, productivity and production will decrease, leading to decline in economy and eventually leading to recession.
So the question then is how do we get a barometer to the “recovery of human interaction”. The answer to that – the global travel demand.
Empty planes now
If global travel demand is restored, people will start to travel for trade meetings, conferences, or even travelling for leisure which will boost local economy.
All these will increase local spending, which are all great news for companies globally.
The slight good news is that, China has announced that shopping malls are starting to buzz again.
Unemployment rate will go up, housing mortgage default rate will increase
Another ripple effect of the virus is that, companies have freezed hiring.
I think companies which are faced with big cash flow problem will start to cut their manpower cost at part of cost cutting measures. This will lead to an increase in unemployment rate.
Unemployment rate is bad news – this means that housing mortgage default rate might increase.
Once we see the recovery of the default rate, I think we may potentially be looking at the recovery of the local economy.
Of course, this is one of the last lagging indicator for the recovering economy, so we will be looking to deploy our cash when the housing mortgage default rate starts to hit the news.
Constant Battle Between Buying Now And Waiting
For now, Mrs Budget and myself are prepping up our war chest by seeing exactly how much we can invest, where can we get more cash, and we have drawn up a shopping list once we see some signs of recovery.
We may deploy 10-20% of our war chest soon because some prices of REITs are just unbelievably attractive, and warrants strong margin of safety.
However, we are also mindful that any bounce back now is just a dead cat bounce because we really haven’t seen the worst from the virus globally. Countries have not seen the tapering off of the virus yet, and it is really too early to access the impact of the virus to their business.
To give a better context, the stock market crash only started less than a month ago!
Companies will still have to announce their actual earnings, and we have not hear anything from the government in terms of the second economy stimulus package.
Also what if Singapore implement a full shut down since everyday cases are going up? Then the price all local retail and commercial REITs will take another dive.
Hence we are constantly battling between: “Wa damn cheap now! Buy buy!” versus all the reasons we laid out earlier in this article – that the ripple effect is not fully internalised yet.
Our logic is that, if it’s a clear sign that in the next few months it will be a downward slope, why do we DCA now?
On theory and paper it is easy to follow through with DCA-ing, but in reality, we find it a bit challenging – at least for the next 1 – 2 months.
Adding this here for memory sake – on 16 March, only 2 counters were green.
Because of the sudden market crash, we will be viewing our existing portfolio which is in the red now (as with everyone’s portfolio who have been investing in the past 5 years) as a cold storage. Wont be cutting loss and we will just wait for the recovery of the portfolio.
For the existing portfolio, we manage to sell about 20-30% before the mega plunge to take profit, but overall we are probably down by 20-30% in terms of portfolio value. We expect a further 10% drawdown from that.
This market crash is also a good time for us to reset and relook into our portfolio strategy – because our current portfolio are a bit of a rojak now due to a combination of various reasons.
Our first few stocks were bought as far as 2 years ago, and it’s based on the “attractiveness” and value of the counter at that point. We then added new counters along the way as new “attractive” counters came by, and hence, it’s rojak now.
With the market crash, this presents a good time to reset our portfolio mix, and sort them according to fair allocation to different sectors.
Hence our priority shopping list during this great REIT Singapore sale will be based on adding exposure to sectors and countries we were previously underexposed, for example:
Data Centre – Keppel DC REIT
India – Ascendas India Trust
Transport – Comfort Delgro
Will probably be sharing our shopping list soon along with updating our portfolio and net worth impact from the market crash.
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So the market dived another 8-10% or so yesterday.
Every retail investors is probably mass selling and taking profit off their positions now.
There were reports that trading firms are overwhelmed and true enough, when I log into Vickers, I couldn’t even connect to my account. This truly is a once is a decade / life time event.
I wouldn’t lie, when the market crashed, it has been emotionally testing – its painful to refresh my app to see the market prices.
So earlier today, I went ahead to do a quick number crunching to see the impact of a further 20% drop of my equities towards my retirement / S$1M goal projection.
Here’s a look at the previous projection with the following assumptions:
US Equity – Monthly Contribution with an overall portfolio growth rate of 8%
SG Equity – Monthly Contribution with an overall portfolio growth rate of 5%
Syfe – Monthly DCA with an overall portfolio growth rate of 5%
Annual EPF and CPF contribution at current level.
According to the earlier projection, excluding our properties and mortgage, we should
Hit a net worth (Equities, Cash, CPF) of S$1M at end 37 years old, or in December 2025.
Hit a liquid net worth (Equities, Cash) of S$1M at 42 years old, December 2029.
However, as the market plunged this week, we now have to add new numbers into our projection model. What we did was:
Update our projected 2020 numbers by entering current portfolio number
Add a further 20% drawdown to all our current equities position
Stop our US, SG, and Syfe Investment contribution for this year
Based on the 3 new parameters, here’s the updated impact towards the 1M goal.
Based on the table, just by adding a further 20% drawdown on our equity position and stopping our investment this year, our S$1M net worth (ex property and mortgage) goal is pushed back from December 2025 37 years old to December 2026 38 Years old.
If we exclude CPF (liquid net worth), the impact is even bigger: our S$1M goal is pushed back from December 2029 42 Years old to December 2032 45 years old, a good 3 years goal push back!
Which means now, if everything stay constant, I have to work for another 3 years just because the market crashed.
Of course, while this is bad news, we also acknowledge that the growth rate once the market recovers will hopefully be able to counteract the current decline in our portfolio and hence move our current target back on track.
This exercise paints a good picture for us to see the impact of the current equity drawdown on our portfolio, and to really reassess our portfolio resilience.
Currently our cash level is the highest it has been since the past 2 years as we manage to sell some stocks before the second wave of crash. Hence we will be accumulating our war chest and deploy them when situation show more signs of stabilisation.
I feel like there will be a further 20-30% drawdown in the market because we have yet to see the domino effect of the global virus situation – ie the housing and credit crisis.
So things will probably get worse, as we also have a significant exposure in properties.
