monthly updates

What Have We Done This Month Towards Our Financial Goals – April 2020

So April has came and gone now. 33% of 2020 is now over.

For the whole of April, both Mrs Budget and myself had been mostly staying at home due to the circuit breaker.

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: SPH REIT, Centurion, Alphabet
Take Profit: Fu Yu, Accordia Golf Trust, Keppel Infrastructure Trust

Mrs Budget
Position Added: SPH REIT, Centurion, Alphabet 
Take Profit: N/A

This month, we bought into 3 counters, namely SPH REIT, Centurion and Alphabet.

For SPH REIT, we believe that the Reit, which is trading below its NAV, may reward its unit holders in the long run due to several reasons – exposure into students accommodation and SPH is slowly realising that it is morphing into a property player. 

Similarly for Centurion, while it may be in the news now for not so good reasons, the counter is still undervalued, and once COVID is over, the price may go up again due to its defensive accommodation nature.

We previously sold off Centurion and bought back in straight after to lower down our entry price further. We spoke about SPH REIT and Centurion in our previous update 2 weeks ago too.

For Alphabet, we have been eyeing this counter for a while now – the parent company of Google is probably the dominant player in the online advertising space, and with its recent battered down share price, we took a position in Alphabet which we will keep for very very long.

To replenish our war chest further, Mr Budget sold off his holdings in Fu Yu, Accordia Golf Trust, and Keppel Infrastructure Trust. To be honest, the selling off are all speculative play, as we foresee the prices to drop further in the next few months. If the price level fall back to lower than our entry price, we will pick them up again for cold storage. 

So the equity purchase movement this month is really just a recycling of our existing holdings into new counters which are trading at below NAV, and these stock purchases are funded by the selling off of 3 existing share counters.

There were some positions which Mr Budget sold off last month which he deeply regretted now: his positions in Amazon, SE, as well as AXXN – all of which he entered at excellent prices and are all now back to their all time high.

The market is really irrational and are not reacting to all the negative news in the economy, so hopefully the prices will come back down for him to pick them up again.

If it doesnt, it’s a really good lesson for Mr Budget to not let go of winning counters in the future and to just let the winners run. That’s probably one of the many lessons learnt from this market sell down.

The market had also rebounded a fair bit and our positions entered last month (Keppel Pacific Oak +27%, Ascendas India Trust +10%) gave us a decent rebound onto our portfolio value.

Overall, the portfolio of Mr Budget has now broken even, which means everything is at cost to Mr Budget now. What this also means is that we are now back to zero since started investing 2 years ago.

However, we think that the market will continue a slow decline over the next few months, and our view is still that we will see further market correction.

That said, in case we are wrong, we are continuing to invest, cautiously, over the next few months.

Our net worth continue to grow this month, due to contribution from our salary as well as the rebound of stock prices.

Our combined net worth is now at S$650,000, including CPF but excluding our property and mortgage. 

With the various transactions, here’s an update on our war chest:

Mr Budget War ChestS$100,000
Mrs Budget War ChestS$40,000
Mr Budget Home Loan War ChestS$50,000
Mrs Budget Home Loan War ChestS$150,000

As our war chest has been increasing, and our cash position % is getting slightly larger than what we would ideally like, hopefully we are able to deploy our war chest soon. Counters on our watch list:

  1. Ascendas REIT
  2. Keppel DC REIT
  3. IREIT Global
  4. Suntec REIT
  5. SGX
  6. DBS
  7. Mastercard
  8. SEA
  9. Booking
  10. Adobe
  11. Amazon
  12. Square
  13. Facebook
  14. Fu Yu

Stay safe everyone, and happy hunting!

Monthly Tracking

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Funding Societies’ Rising Default Rate Paints Worrying State Of SG Businesses

Few nights ago, Mrs Budget shared something which we thought we should pen our thoughts down.

So over the past few months, Mrs Budget has been cashing out the money payments received from the loans she backed through funding society, a peer to peer loan financing company.

If you are unfamiliar with funding society, basically you can go onto the platform, look at profiles of companies who are asking for loans, and decide if you want to loan and help the companies out.

As these companies are usually rejected by bank loans due to higher risk, the interest on these loans can go up to between 10 – 20%.

Both Mr and Mrs Budget has been putting a small amount of money backing SMEs in Singapore, probably about S$5,000 total each.

For Mrs Budget, she shared that during the past few weeks, she has seen a lot of loan defaults on Funding Society, and that her capital is now mostly turning into a loss position, with only small chance of recovery.

What it means is that, Mrs Budget will most likely lose up to S$3,000 from funding society due to a non recoverable loan default!

For Mr Budget, he is still quite fortunate as his loans are quite diversified across many companies,. With his loan exposure per company set at S$200 max per company, the default rate is still quite manageable.

However, since February, Mr Budget has already disabled the auto-invest function under Funding Society and is now only collecting all the disbursed loans.

What he also noticed is that, the defaulting companies are skyrocketing since he last checked! Hopefully there will be lesser defaulting and non recoverable loans.

We also saw similar reviews on Seedly where a lot of retail investors have been saying that they are now sitting on capital losses although they have been investing for a while now.

Most of the investors on Funding Societies shared the same situation: investing over 2 to 3 years, from net gain to now net loss.

And all of this started in the past few months.

“Well, I would like to share my experience with this platform & anyone who is investing in P2P lending. In the span of the last 2.5 years, I invested around 100000 SGD on which I made around 4K SGD as profit after all the fees after 2.5 years. I thought I was making some real profits, however soon my dreams got shattered when almost 5-6 of my loans got default & resulting in loss of around 9k SG. There you go my 4k profit changes into 5k loss from my own pocket. Now forget about interest or profit I couldn’t able to protect my principle.”

To be fair, I don’t think its entirely Funding Societies’ problem. When times are good and when people earned up to 10% a year in the early days, no one complains. And now when companies start to belly up, then people complain.

Returns on investment for loans are also decreasing year on year

Increasingly, I think more of these businesses are going to face more problems with cash flow, which will lead to loan defaults, and closure of businesses. Closure of businesses will then lead to unemployment, and then leading to individual cash flow problems.

This gives an early indication of the state of businesses in Singapore, and I think we are going to hear more from mainstream news soon.

Funding Societies or P2P loans are secondary market which provides liquidity for businesses – and with default rates ballooning up, this is yet another clear sign and indication that things will get worse.

For investors thinking of investing in high risk investment vehicles, this is definitely not a good time right now. For the amount of risk for platforms like Funding Societies, they will probably need to return 20-40%, as compared to a 3.35% – 23.87% return on investment based on 2019 figures.

Also Read: Our Thoughts On The Very Irrational Market Behaviour

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Our Thoughts On The Very Irrational Market Behaviour

It’s been more than a week since Mr and Mrs Budget wrote something here.

To be honest, we want to write more but have been running out of topic to write. So if there is anything you’d like us to share more about, please feel free to drop them in the comments below. We love hearing from our readers.

So today we wanted to share an observation that we made over the past few days.

It seems as though market has reentered the bull market again, where it has gained 20% since the low just 3 weeks ago. Every other day market seems to be rallying. Stock prices continued to charge upwards as if nothing happens.

This has definitely triggered a lot of FOMO feeling amongst investors, Mr and Mrs Budget included.

To overcome the FOMO in us, we have to resort to discussing and reassuring to each other than this cannot be a V share recovery. And it seems as though this is more of a very irrational investing behavior as opposed to keeping up with what is happening on the grounds.

COVID-19 No Signs Of Slow Down Yet

First of all, there is still no signs of a successful development of a vaccine towards the covid 19 virus.

Everyday there are more new cases globally and the graph is still an upward sloping graph. While the daily new cases globally seems to be tapering off, but I think there are still under reported cases globally.

Daily new cases seemed to be plateauing

If consumer confidence are not restored, how can share price increase to pre covid 19 pricing?

Weak Business Fundamentals Not Announced Yet

COVID outbreak and the lack of vaccine aside, business fundamentals are still giving out waves and waves of bad news. AGMs of companies are pushed back, and companies like Lendlease are announcing revisions to their projected dividend.

Other than that, what we have heard from F&B owners is that traffic and business has plunged by more 80% during this circuit breaker period where everyone is required to stay at home. Streets are all quiet and people are not spending any money at all.

Empty Orchard Road

With companies increasingly going out of business, this means unemployment will increase as a result of that.

All the signs on the ground are pointing to negative signs – how can this be a V shape recovery? PM Lee also mentioned that this will not be a V or U shape recovery.

“It is going to last quite a long time: it is not a V-shaped down dip, it is not a U-shaped dip.” – Lee Hsien Loong

Bad Economic Projection Globally

If you have been following the news, there are certain big headlines recently that should warrant some worries from the financial market, but yet the market is rallying every other day.

According to International Monetary Fund chief Kristalina Georgieva, the outlook for global growth was negative and the IMF now expected “a recession at least as bad as during the global financial crisis or worse.” This was back 3 weeks ago.

Let’s take a look at the chart above – if you look at the past 2 major financial crisis – the Financial Crisis in 2008 as well as the dot com bubble in 2000, the peak to bottom is more spread out and takes longer.

Comparing that to COVID 19 where the impact should theoretically be a lot worse than the previous crisis, the chart clearly shows that we are still at the beginning of the crisis.

Even during the 2009 financial crisis or the SARS crisis, people are surely still spending, unlike now where the whole of Singapore is under a “lockdown”.

The latest world economic outlook published by IMF also paints a similarly bad picture where global economies is set witness one of the worse economic contraction in history.

So we need to reassure ourselves again and again that after looking at the recent bull run up, the worse is yet to come. How can this be a V shape recovery and how long more can we expect the prices to go up?

For those who are almost 100% vested – surely it doesn’t make any logical sense for prices to recover back to 3 months ago with all that has happened?

How can the market price behave as though nothing is happening outside in the real world, and that we can just “discount” the impact of the COVID 19?

This reminded me of the feeling when bitcoin prices are hitting its all time high every single day about 2 years back. Everyday the prices are just going higher and higher, until everything starts falling apart.

Giving Into FOMO

Of course, while it is easy for us to rationalize all of this, but we are all but weak humans filled with greed.

To avoid missing out in case we are wrong, and caving into our FOMO-ness, we made 2 more counter purchases over the last few days:

  1. SPH REIT – Trading at below NAV and may go into the student accomodation business, with a 45% upside.
  2. Centurion – Trading at below NAV (0.54). Been holding onto Centurion, exited it few weeks ago, and reentered again at a lower price, with a 47% upside.

What we have been buying is into companies which fulfill these requirements:

  1. Below their NAV – great businesses which are undervalued now
  2. Has a good sponsor – wont close down
  3. At least 40% upside to previous high

If the prices plunge further, we are more than happy to average down on the counters we picked up over the past 2 weeks.

With the two new entries onto our portfolio, here’s an update to our war chest:

Mr Budget War ChestS$70,000
Mrs Budget War ChestS$30,000
Mr Budget Home Loan War ChestS$50,000
Mrs Budget Home Loan War ChestS$150,000

Our home equity loan has still not come in yet so hopefully that will be in soon for us to do our cash allocation strategy.

Through it all, we need to constantly remind ourselves that, this is most probably not a V shape recovery, and it is very irrational to expect prices to keep going up.

So if you are feeling FOMO – it’s a normal feeling and you are not alone, but please dont let irrationality takes over.

If you have to take some action, like us, please only buy in small batches and only on counters which will not crash too badly if there’s another upcoming crash. Don’t go 100% vested now. Currently, counting our incoming home equity loan, we are probably only using 20% of our available war chest.

Stay safe folks! 🙂

Also do let us know what topics you’d like us to cover or if you have any questions to ask us.

Also Read: What Have We Done This Month Towards Our Financial Goals – March 2020

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March 2020 Monthly Expenses Update

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.

Transportation (mrt)$40.00
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

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.

Groceries / Home$201.05
Phone Bill$25.00
Income Tax$290.97
Gifts (Wedding Festives)$170.14

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.

How has March been like for you?

October 2019 Monthly Expenses Update
November 2019 Monthly Expenses Update
December 2019 Monthly Expenses Update
January 2020 Monthly Expenses Update
February 2020 Monthly Expenses Update

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The Most Important Thing Right Now Is Job Preservation

Quarter 1 of 2020 is now over.

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:

  1. What we are doing financially to cope with the slowdown in economy
  2. Updates on our portfolio and what we are buying and selling
  3. Important things to take note of during this COVID 19 situation

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Syfe Portfolio Update – March 2020

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%)

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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monthly updates

What Have We Done This Month Towards Our Financial Goals – March 2020

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:

  1. Selling some of our recently added positions to take profit and avoid losses
  2. 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:

  1. 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.
  2. 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.
  3. Keppel Pacific OAK – dropped to all time low, with a price/nav of 0.61 and a 80% upside. 
  4. 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. 

PhasesMr BudgetMrs BudgetDeployment Signals
1AS$20,000S$20,000Singapore market STI -20% 2400 – Deployed
1BS$20,000S$20,000US NASDAQ -25% 6750
2AS$30,000S$30,000Singapore market STI -20% 2000
2BS$30,000S$50,000US NASDAQ -25% 5400
3AS$50,000S$120,000Singapore market STI -20% 1600
3BS$30,000S$70,000US 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:

  1. Ascendas REIT
  2. Keppel DC REIT
  3. Comfort Delgro
  4. CRCT
  5. Suntec REIT
  6. Centurion
  7. SGX
  8. DBS
  9. Mastercard
  10. SEA
  11. Booking
  12. Google
  13. Adobe
  14. Amazon
  15. Square
  16. Facebook

Hopefully we will be able to scoop up these counters at good price and they will reward us in the future. 

Stay safe everyone, and happy hunting!

Monthly Tracking

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Why The STI 5.8% Rebound Today Is Probably A Dead Cat Bounce

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:

  1. Virus needs to be contained, and this means that a vaccine should be successfully tested and developed.
  2. The economy should not have taken too much a hit before the virus is contained
  3. Consumer needs to feel safe and ready to go about their previous consumption pattern
  4. Consumer should not have taken too much a hit before resuming their consumption pattern
  5. 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:

  1. More job cutting measures
  2. Airlines shut down (SIA)
  3. More countries on lockdown (India, UK, Australia, Thailand, Malaysia)
  4. Global travel demand is zero
  5. Businesses are encourage to work remotely

What we expect to happen next:

  1. Credit card defaults
  2. Mortgage defaults
  3. 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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The Market Crash – The Economic Signs We Are Looking For And When We Will Deploy Our Cash

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:

  1. Data Centre – Keppel DC REIT
  2. India – Ascendas India Trust
  3. 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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The Current Market Crash Pushed Our Retirement Goal Back By 3 Years, And It Might Get Worse

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:

  1. US Equity – Monthly Contribution with an overall portfolio growth rate of 8%
  2. SG Equity – Monthly Contribution with an overall portfolio growth rate of 5%
  3. Syfe – Monthly DCA with an overall portfolio growth rate of 5%
  4. Annual EPF and CPF contribution at current level.

According to the earlier projection, excluding our properties and mortgage, we should

  1. Hit a net worth (Equities, Cash, CPF) of S$1M at end 37 years old, or in December 2025
  2. 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:

  1. Update our projected 2020 numbers by entering current portfolio number
  2. Add a further 20% drawdown to all our current equities position
  3. 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.

You can also read about our horrible experience not being able to sell our stock via DBS Vickers: Earlier Today I Experienced Every Investor’s Worst Nightmare – Unable To Sell My Stock

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