Mr Budget came across an interesting study today and thought it might be interesting to all too.
According to the study, the more frequently you check on your investments, the worse it will likely seem they are performing.
So the more frequently you monitor, the less likely you are to be investing correctly for the long term.
Wow.
So apparently, the logic goes: the more you look at your portfolio, the more likely you will see a loss since you last looked, and the more you perceive investing to be “risky”. This is a phenomenon known as myopic loss aversion.
On top of that, the more you look at your portfolio too, there will be more opportunities or circumstances to buy or sell your positions. This is likely to cause short-sighted decisions and could hurt your investment performance, often resulting in a lesser return as compared to someone who is holding their positions long term.
Investors who got the most frequent feedback from their portfolio (and thus the most information) took the least risk and earned the least money.
New York online investment firm Betterment shared some insights as to who among their users are more likely to actively monitor their portfolio:
The more you log in, the more likely you will observe a loss.
Of course, the company also shared some interesting insights they observe from their users:
Male tend to log in to monitor their net worth more often
The younger audience tend to log in to monitor their net worth more often
Audience with lower net worth monitor their net worth more often
You are 21% more likely to monitor your net worth if you are using the mobile app
Coming from a personal experience, Mr Budget can attest 100% to this. Mr Budget is addicted to monitoring the returns of his portfolio and everyday he would look at his stocks share price via the Yahoo Finance mobile app. If you don’t call that addiction, I don’t know what else you can call that.
And it’s logical to follow the thought process behind what Betterment shared, that one is more likely to react emotionally than rationally if he looks at his portfolio very often.
This is probably a reminder to Mr Budget that one should not monitor the portfolio that regularly. Definitely not every single day.
According to Betterment, if you are checking your portfolio more than once per quarter, you are already doing it too much!
Have a good weekend everyone!
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Earlier today, Mr Budget executed three trades in his Singapore portfolio, and I thought to document down the various reasons why.
Frasers Logistics And Industrial Trust
First, Mr Budget sold off Frasers Logistics and Industrial Trust.
Mr Budget holds a relatively small position in FLT and over the past one and a half year holding it, I recorded a 25% increase in gain including the dividend.
As the position is small, the profits were less than S$1000.
FLT is a strong and stable counter, with properties mainly in Australia.
Their financials looked ok and has been increasing steadily. However, while the company recorded an increase in DPU, when translated the gain from SGD to AUD, the DPU actually dropped. Because of the worsening of the currency, the saw a declined in DPU in terms of SGD terms.
AUD vs SGD Forex Rate over the past 5 yearsSource: FLT Annual ReportFLT share price on 7th November 2019
However, the share price has rallied much this year, and is now trading at a premium.
I think the market is pricing in all the plans the management has made (Frasers is a strong sponsor with good track record). Because of the worsening of the currency (external market force), I foresee that the REIT will have a challenging time keeping up with the numbers.
Other financial bloggers have also exited their position:
Kyith from Investment Moats – Partial exit on 2019-05-03 and then 2019-07-12 (still holding to 33000 units)
Fifth Person – Exit full position few months back
DBS Treasures also reported a TP at S$1.27 before revising the TP to S$1.4 today.
With all the bad signals, I took profit on the position so that capital can be deployed on other opportunities.
Asian Pay TV
Asian Pay TV is a counter that I bought without much research when the price came down after the trust announced a cut in dividend.
I believe that the market oversold the counter and hence I jumped on the ship. You can say that we took a small gamble position on this and it didn’t pay off much.
I have been waiting for an opportunity to offload this seeing that the price doesn’t move much.
Although the management has good plans to rejuvenate the business, with insider stock buying giving off good confidence, I realised that I am not very excited about the space that the business is in. It’s a sunset industry and I don’t think we will see a huge business turnaround.
Mr Budget sold off the position at break even point, and only made his gains from the dividend, translating to about 5-6% in gain in one and a half year.
As the year end approaches, its a good time to tidy up the portfolio and clean up some messy early day trades I bought.
Lendlease Global Commercial REIT
Finally, with the proceeds from FLT and APTT, Mr Budget picked up Lendlease REIT.
Mrs Budget has a sizeable position in Lendlease already, and Mr Budget decide to add onto this position as it might be a long term multi bagger.
Lendlease is notably the REIT behind 313 Somerset, and with a strong sponsor, there are future opportunities for the sponsor to inject more properties into the REIT.
I will not touch about the fundamentals of the REIT as I am not an expert (there are many other financial bloggers who wrote great analysis on the REIT along with the risks), but will share some signals that gave me the confidence to jump on the ship.
Signal 1: Earlier last month on 14th October, Temasek announced that they are adding on their position on the REIT, from 4.98% to 5.01%.
Signal 2: Earlier yesterday too on the 6th November, BlackRock also announced that they have taken more positions on Lendlease, now holding 5.01% of the REIT.
Temasek is probably the largest fund in Singapore, and BlackRock is the 8th largest fund in the world, and they probably know more than I do. The fact that they are adding onto their position probably means that they agree that the REIT will only continue to go up.
With this addition, Lendlease will form the core position in Mr Budget’s Singapore portfolio – 10% of Singapore’s equities, or about 2.6% of Mr Budget’s overall net worth.
In my earlier post, I did mentioned that I won’t be making any investments soon, but it seems that I’ve decided to do an annual portfolio clean up. The net cash flow from these is zero hence I’m still happy with the % cash in my net worth.
So here’s hoping that Lendlease will continue to HUATS all the way!
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With the end of the year coming, Mr Budget tend to reflect towards what has happened over the year and see if there are any aspects in life which we can improve on.
Of course, it is still a bit early for that as we have 2 more months before the end of the year.
But we thought it is important to sit down and discuss some of the more important things for Mrs Budget and myself, seeing that we were recently legally married and our wedding will be happening early next year.
1. How Do We Manage Our Money
Mid way into our relationship before we became Mr and Mrs Budget, I remember that one night when the Mrs and myself sat in the car and spoke the first time about our finances.
Personal finance is a taboo topic among all asian families and is a hard topic to broach. In view of our relationship getting more serious with talks of marriage and proposal, Mr Budget took a leap of faith and “showhand-ed” his finances to Mrs Budget.
Basically, Mr Budget brought his laptop and opened up his spreadsheet which tracks all his assets and liabilities, along with monthly expenses, and showed it to Mrs Budget.
Because Mr Budget didn’t grow up in a family with good financial habits, it is important for him to make sure that his other half do not have bad financial habits. Mr Budget also needs to ensure that the relationship is built on full financial transparency so that we can truly make the best joint decisions.
To his joy, Mrs Budget also slowly opened up her personal finances to Mr Budget and now has her own finance spreadsheet too. Mrs Budget was intrigued at the detail (though not as detailed as other financial bloggers out there) of Mr Budget’s tracking and became an active money manager convert.
Mr Budget also always counts himself a very lucky man because Mrs Budget is a capable woman with no liabilities and has no bad financial habits or vices (such as splurging on clothings or luxury items).
We adopt a separate / individual net worth tracking method, where we will personally manage our own money and make any investment decisions since we are both adults, although Mr Budget will mostly be the one giving advises.
Every month, we will contribute a token S$1000 each into our joint account for household expenditure, as well as savings for our future kids fund.
This method works well for both the Mrs and myself and we are happy to keep it that way.
Another big topic that we discuss about was our expectation towards our wedding.
We learn from other couples from our immediate social circle that after their wedding, they won’t usually think about what they did not do, but they would always discuss what they could have done without.
And both Mrs Budget and myself subscribe to that too – we know that during the wedding, most of the guest will be Mrs Budget’s family, and our close friends. We agree that we won’t be spending on unnecessary items on the wedding, and that the savings from the wedding can be used for other more meaningful experiences.
Because of that too, we’ve decided to go with a lunch wedding, which is cheaper, and do away with wedding photography, flashy expensive wedding gown packages, expensive diamond ring or expensive bridesmaids and brothers outfit.
Our wedding venue
At the end of the day, we truly believe that our immediate family and close friends will be truly happy for us, and that we don’t have to prove anything to anyone. 🙂 In Chinese, we know that we 心底扎实就好了。
After our wedding in January, we will probably be sharing how much we have spent so do keep a look out for that.
3. Are We Ready For Kids
This is probably the conversation that the Mrs and myself have not spoken about yet.
Financially, Mr Budget has not done up the “kids expenditure and cost projection” spreadsheet, and because of that, there are no basis for us to base our decisions upon.
I know we will never be 100% ready financially, because there are so many variables that we need to account for – child care, child education, child expenses, and everything child related.
But it is nonetheless an important topic to discuss with your other half, and of course, make plans together for it.
For us, we are clear that we want to spend at least 1 year between the both of us after wedding, before we try to have our kids. This is also reflected in our life goals.
Finally, one of the things I always touch upon is this – how can we ensure that we can grow old comfortably.
I think it is very important to work as a team, and that we find each other’s blind spot in our respective personal finance and see how we can optimise for each other.
Some of the stuffs that we consistently do is:
Keep a lookout for dividend paying equities and reits
Which is why Mr Budget is glad that Mrs Budget is actively tracking her personal finance matters.
What this means is that, every month, the Mrs and myself sit in front of our spreadsheet together, and we reconcile the figures together – very similar as a parent checking their kid’s report card.
Every year, we will also have our projected figures, and we will compare our actual figures against the projected number and see how we are faring. With these numbers, only then can we have meaningful discussions about what we can do as we age and grow old together.
Are there any other conversations that we should be having? 🙂
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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 October, here’s what Mr Budget spent on.
Meals
$556.04
Transportation
$85.00
Entertainment
$198.00
Groceries / Home
$778.8
Shopping / Cloths
$61.00
Phone Bill
$56.10
Insurance
$1,635.16
Income Tax
$103.05
Hair Cut
$34.00
Digital Subs
$30.56
Malaysia Mortgage 1
$880.13
Malaysia Mortgage 2
$123.38
Singapore Mortgage
$985.74
Travel
$141.00
Others
$5,319.00
My total expenses this month is at S$10916.52, a high side from my normal benchmark. This consist of S$3848.13 of fixed expenses and $7,068.39 of variable expenses.
The variable expenses is slightly high because of the renewal of my annual term insurance, a one of wedding expense of S$5,000, a one off angpao S$500 to my mum for travel expenses, a one off home projector purchase of S$128.
What I also realised is that my dining cost is slightly on the high side this month, due to over reliance on Grabfood. Making a mental note to reduce dining expenditure for the next few months.
Mortgage payment also makes up almost S$2000 of my monthly expenses, and will only continue to increase the next few years. With one of the condo almost done in the next few months, will need to see if we can start finding tenant or sell off the property so that we can reduce some cash flow stress.
For Mrs Budget, here’s what she spent on.
Meals
$205.10
Transportation
$104.50
Family
$600.00
Entertainment
$105.93
Groceries / Home
$778.83
Phone Bill
$39.71
Endowment
$303.97
Insurance
$87.25
Shopping
$2.40
Gifts (Wedding Festives)
$70.00
Mrs Budget’s total expenditure is $2,303.11, out of which $1,340.53 is fixed expenses. Other than the monthly contribution to the family and endowment plan, Mrs Budget’s spending is well within our satisfaction.
What is not in our satisfaction is the high expenses of Mr Budget – hopefully we can reduce the dining expenditure, entertainment expenditure, home groceries, as well as restructuring one of the Malaysia condo mortgage – either through selling off, or renting it out after TOP in a few months.
Will see how it goes. 🙂
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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: Hong Kong Land, Centurion, AIMS AMP (SG Equity) Cut loss: Beyond Meat (US Equity)
Mrs Budget Position Added: Lendlease (SG Equity) Take Profit: Facebook (US Equity)
Basically adding on to dividend generating counters as well as cutting loss on non dividend generating counter, relating to what I have mentioned in my previous article.
In terms of overall net worth, Mr Budget is still pretty much in the same position as the month before due to the cut loss position on Beyond Meat, as well as forking out a chunk of money to be used as Ping Jing for the upcoming Guo Da Li. Most of this offsets the gains in his SG portfolio as well as gains from the monthly salary.
Here’s a graphical representation of what we have done this month towards our financial goals:
For the next few months, I don’t foresee myself to be adding into any investments, as Mr Budget will have to fork out additional money for the renovation of his overseas condo in Malaysia, to be used to provide rental income as well as short to mid term investment.
If there are opportunities to sell off the condo, Mr Budget might consider doing so as the monthly mortgage for the condo might be slightly stressful. Will probably talk about my overseas properties in the future.
So what have we done this month towards our financial goals?
Mr Budget added on S$12,000 worth of positions onto dividend generating assets.
Mrs Budget added on S$8,000 worth of positions onto dividend generating asset.
Started this Mr and Mrs Budget website – articulating our thoughts into words gives us clarity on our financial plans, and hopefully open up new opportunities to us in the future.
Booked our honeymoon trip to Japan using miles! This will be our first ever business class experience. 🙂
How have your month been?
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According to Mr Wonderful, one of the sharks of Shark Tank, he follows a few investing rules:
If a company has no cash-flow, don’t invest! A company without cash-flow is valueless and nothing more than a speculation.
Never buy a stock that doesn’t pay a dividend
He adds on further by explaining his investing rule with proper stats: “Over the last 40 years, 71% of the stock market’s return came from dividends, not capital appreciation”
“Don’t wait for the stock price to go up, get a check every other month and take your share of profits. I’ll never own a stock that doesn’t pay a dividend,” ~ Mr. Wonderful.
I think this is a very good yard stick that I will be using to guide my purchase decisions in the future. I also read somewhere that companies who have a dividend policy are more savvy in terms of capital allocation and capital utilisation, as compared to companies without a dividend policy.
Strong companies will always give a share of the profits back to the shareholders. Companies that produce dividends on the other hand, have to ensure that their cash flow is strong enough on a regular basis to make the dividend payout and thus are managed differently.
This is also reflected in REITs – all of which have dividend policies and their prices have been increasing over the past decades.
Another reason why this is a good investment barometer is that, when the cash of the company starts running short, dividends are among the first expenditures to get cut. That will serve as a good indicator of how the company is performing in terms of capital utilisation.
What this means is that, for growth stocks without dividend policies, Mr Budget will have to be more mindful about deploying our investment capital into them.
volatility is the enemy, so stick with less volatile large caps and dividend payers
Take your age, and put that percent of your wealth into bonds
This is a good reminder as Mr Budget just liquidated Beyond Meats, a counter which I bought few months back and suffered a 60% capital lost.
The counter was bought without proper analysis at the fear of missing out, and subsequently caused a 60% capital lost.
The Mrs asked me why did i not hold onto it – but what i didnt tell her is that, for me to recover my position and break even, the counter would have to go up by 120%, a highly unlikely case given the increased competition and the wearing off of the novelty.
Hence, it’s better for me to just cut loss (one of my biggest lost position) and to see if I can deploy the cash into something else.
And this time, into a dividend paying counter.
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Both Mrs Budget and myself counts ourselves as relatively lucky. As compared to most of our peers, we have the option to plan for our early retirement, and have the means to work towards that.
We count ourselves lucky too as we are aligned in terms of how we view money, and our aspiration towards building a comfortable future together.
For myself, being financially independent means that I will have the option to do meaningful work, work that I enjoy. For the Mrs, that means having an option to leave her current comfortable but mundane job and probably spend time with our family and live a carefree life.
I always ask Mrs, that we should spend more time talking about the kind of lifestyle we want. As much as we are actively managing our finances and have a clear goal, I have to admit that we don’t have a clear idea of what we want to do after we reach our financial goals.
Are we going to call it quits and just travel around the world?
Will that make us happy?
Probably.
But for how long?
I envision that we will probably take a year long break to do the round the world trip with our miles accumulated, and that I will probably be bored and slightly lost after that.
There are a few (couple) bloggers in Singapore who have retired early, and here are what they have been up to:
Sipping Coconuts – couple retired by age 34, travelling around the world now
Der Shing and wife – retired before 40 for selling off company, angel investing now as their meaningful full time job
There are various articles around the world which revealed that many who had the opportunity to retire early (less than 40 years old), after quitting their jobs, had been facing with a loss of identity and saw their social circle shrunk, mostly because their peers are all still working.
Because of that, while we plan for our financial independence, I don’t think Mrs and myself will be able to retire 100%. Doing meaningful work and working alongside smart people is still something that I enjoy a lot, and will be something I will be pursuing should we manage to hit our financial goals.
For now, we have enough miles to do a round the world trip, which we plan to do so hopefully in the next 2 years before we try to have our first baby. 🙂
However, after we hit our financial goals, which is to have a joint net worth of over S$2,000,000 by 2027, we will most likely explore some form of meaningful work so that we won’t be lost sheeps. By 2027, the Mrs will be 36 years old and I will be 39 years old!
And we have 8 years to figure out what we want to do when the day comes.
