Creating a Bond Ladder

I am creating a bond ladder.

The aim is to create a perpetual (as long as possible) revenue stream every month. 

Here's how it is going to work. 

I plan to buy 6 months time deposits or 6 months T-Bills, one at a time, once every month. 

At the end of 6 months, the first time-deposit/bond will mature, and I collect the interest. At the same time, I put the capital back into another 6 months time deposit/TBill. 

Conceptually it looks like this:

And it continues as long as the interest rates are above 3.5%.

I have already set up the first 3 tranches.

The first 2 tranches were set up using StashAway Simple Guaranteed, at the interest rate of 3.5% p.a.

The third tranche was set up using 6-month TBill, at the interest rate of 3.73% p.a.

So why did I use Stashaway Simple Guaranteed when TBills offer higher interest rates? No particular reason, but when I saw 3.5% in Stashway Simple Guaranteed, I thought it was good and I put money in - the process was easy and straightforward. Later I thought since TBills offer slightly higher interest rates, I should switch to TBills instead. 

So from now on, I will be able to earn $175-$184 every month, as long as interest rates stay above 3.5% p.a.

If you have spare cash, set up your own Bond Ladder today!

Any flaws with this method? Comment below. 

Ultimate Guide to Financial Independence, Retire Early (FIRE)

In an era where the traditional retirement age seems to be pushing later and later, a movement is gaining momentum, advocating for financial independence and early retirement. It's called FIRE, and if you've been curious about what it entails, this comprehensive guide is here to light the way.

What is Financial Independence, Retire Early (FIRE)?

In Singapore, the traditional retirement age stands at 62. However, there's a rising trend among millennials who wish to retire as early as their 40s or even before 35. Historically, people saved patiently to achieve financial independence in their later years. Nowadays, a significant number are rushing towards early retirement, driven by the aspiration to live life on their own terms. This trend has given rise to the FIRE (Financial Independence, Retire Early) movement.

FIRE advocates aim to save a staggering 70% or more of their full-time income. The ultimate goal is to save 25 times one's annual expenses and limit annual withdrawals to 4% for living costs. Practicing FIRE demands rigorous planning, stringent frugality, and wise investing. While some extreme adherents cut out all luxuries, including dining out, more moderate followers simply want to amass enough savings to maintain their current lifestyle without the regular 9 to 6 job.

The growing traction of FIRE is attributed to two main factors. First, financial insecurity is rising in Singapore due to inflation and stagnant growth, leading many, especially the younger generation, to prioritize financial stability over milestones like marriage or home ownership. Second, job disillusionment is rampant among millennials. Studies indicate low workplace engagement both in the US and Singapore, with millennials particularly feeling disconnected.

For FIRE, the goal isn't necessarily to never work again but to have the freedom and flexibility to choose how you spend your time, without being tied down by financial constraints.

In short, FIRE is about having options. 

What is your 'FIRE' number?

The FIRE number is essentially the amount of money you need to have saved and invested to live off the returns without ever touching the principal amount. Determining your FIRE number is a crucial step in the journey. This number varies based on your personal living expenses, desired lifestyle, and the rate of return on your investments.

To calculate your FIRE number, consider the annual expenses you expect to have in retirement. Using the 4% rule (a common guideline in the FIRE community), multiply your yearly expenses by 25. For example, if you expect to need $40,000 a year to live comfortably, your FIRE number would be $1 million. 

Note that this $40,000 is mean to be increased along with the inflation rate. As an example, if the inflation rate is 2%, in the second year you will withdraw 1.02*40000 = 40,800.

The number 25 is simply calculated by taking 1 divided by 4%. If your withdrawal rate is dropped to 3%, then you need to save up to 1/3% = 33 times your annual expenses. 

Types of FIRE

There isn't a one-size-fits-all approach to FIRE. Over time, enthusiasts have identified different flavors of FIRE to suit varied lifestyles and goals:

Lean FIRE: This is for individuals who prioritize retiring as soon as possible and are willing to live a minimalist lifestyle to achieve it. They aim for a lower savings amount and are frugal both before and after retirement.

Fat FIRE: On the opposite end, Fat FIRE enthusiasts aim for a more luxurious lifestyle in retirement. They save and invest more, targeting a higher FIRE number to support more lavish expenses.

Barista FIRE: This is a middle-ground approach where individuals achieve financial independence but choose to work part-time jobs (like a barista) to cover some expenses and maintain social connections.

Coast FIRE: In this approach, individuals save enough early on, then simply let their investments grow without adding more funds, coasting into retirement without the pressure of aggressive saving.

I believe I practice Lean FIRE, though I will say it is a mild form.

Pros of FIRE

FIRE offers millennials an escape from jobs they never truly enjoyed. With sufficient savings, FIRE followers can chase their passions, opt for less stressful jobs, or leave a once-dreamt job that turned constraining. It encourages people to rethink their careers, emphasizing the pursuit of a true "calling" over mere monetary exchange.

In short, the pros of FIRE are:

Flexibility: Achieving FIRE allows you to decide how you spend your time, whether that's traveling, pursuing hobbies, or even starting a passion project.

Less Financial Stress: With a substantial nest egg, financial worries often diminish, leading to better mental well-being.

Opportunity to Re-invent: With the need for a 9-5 removed, you can explore new careers, learn, and grow in different directions.

Cons of FIRE

However, FIRE isn't flawless. Some practitioners, despite achieving financial independence, remain anxious about money. Others feel trapped in high-paying jobs that hinder their financial aims. An overarching sentiment is that over-frugality can sap life's pleasures. While financial prudence is commendable, moments like splurging on memorable vacations or treating oneself occasionally can enrich life in immeasurable ways.

In short, the cons of FIRE are:

Sacrifices: To save aggressively, you might need to forgo certain luxuries or experiences in the present.

Market Dependency: Your financial health becomes closely tied to market performance. Downturns can be stressful, especially if they impact your FIRE number.

Social Implications: Early retirement can sometimes lead to feelings of isolation or disconnect from peers who are still in the traditional workforce.

Is FIRE for you? Personally, I found pursuing FIRE to be worthwhile and enriching. There is nothing wrong with living frugally. 

You may want to check out more articles below:

Investing for retirement

How to FIRE movement goes beyond extreme sacrifice

By wanting to retire early, millenials are subverting conventional ideas of work and finances

Level-Up my Investment Kung-Fu with Guru Ng Kok Song

Singapore is holding its Presidential Elections on 1 Sep 2023, and a few presidential candidates have popped up. 

The contenders are Mr. Ng Kok Song (former Chief Investment Officer of GIC), Mr. Tharman Shanmugaratnam (former Deputy Prime Minister of Singapore), Mr. George Goh (Entrepreneur, CEO Harvey Norman Ossia), and Mr. Tan Kin Lian (former NTUC Income CEO).  

Who will win the race is still unclear. However, out of the 4, I will think Mr. Ng Kok Song, former GIC Chief Investment Officer, is the most interesting one, offering a breath of fresh air. 

I have watched a number of his interviews and am impressed by his clarity of thought and his eloquence. He is able to explain complicated things in simple terms. I learned a lot by listening to him speak. 

Truly, he is the closest we have to a Warren Buffett in Singapore. 

Below are some of his sharings which I feel are good learnings.

How to become a good investor

1. Take a long-term investment horizon e.g. GIC takes a 20-year rolling average, for individuals he recommends a 40-year horizon

2. Know what is your risk capacity - don't invest with money you cannot afford to lose. Must be prepared with a mark-to-market loss ie. need holding power.

3. Have realistic expectations of rate of return - e.g. SP500 returns a nominal rate of return of 7-8%. If inflation is 2%, then real returns are 5-6%. Don't expect 12% returns. Note that 5-6% returns are nothing to scoff at - 5-6% returns compound over time to deliver big returns. 

4. Minimize transaction costs - don't erode your compounding power with 1-2% transaction costs. Don't jump in and out of the market. Invest steadily in low-cost index funds. 

What does GIC Invest In 

Stocks - both developed and emerging markets

Bonds

Private equity

Real estate

Infrastructure

Why are our national reserves important

1. For use in times of war to liberate/rebuild the country

2. Financial crises such as recession, covid to save jobs

3. Backing behind the strength of the Singapore dollar - important because it helps us bring down the cost of living especially in times of inflation - this is related to financial defense

Views on SP500

The American stock market is now 70% of the global market cap, but the American economy is only over 20% of the global economy. This is a sign that it is at an inflated level, pushed up by tech stocks and recently by AI and ML stocks. 

So need to avoid overconcentration on SP500. Suggest to buy MSCI World Index to achieve diversification.

Views on Market

Investing is to anticipate changes in what is already discounted in the market. 

There are 4 key variables in investing you need to watch out for:

1. Economic growth or growth in EPS

2. Inflation - a rise in inflation is bad for stocks or bonds

3. Risk premium - are people more risk on or risk off

4. Interest rate - high the level of interest rates are bad for stocks

Take for example China - there is a lot of pessimism in China now due to Ageing population, and the US challenges in the tech sector. But sometimes people can get over pessimistic. Inflation is low in China. Risk premium in China - people are scared. Americans are reluctant to invest in China because of career risk. For China, it could get worse or it could get better. Across the world, interest rates are more or less set by the US market. In the bond market, people are expecting interest rates to fall. This is because the 10-year interest rate is at 4.5%, but the short-term interest rate is higher at around 5% - this is the inverted yield curve. 

The Formula for Keeping Healthy

SHIELD acronym:

S - sleep

H - how to handle stress: Meditate

I - interaction/relationship/friends

E - exercise

L - learn

D - diet. Low carb/low sugar, plenty of fruits and vegetables

You can watch the entire Youtube video here: https://www.youtube.com/watch?v=coikUfKFH2M

Has There Ever Been a Property Crash in Singapore?

I was having lunch with my colleagues a while back and we were talking about property in Singapore. One of my colleagues claimed there was no crash in Singapore property prices before. 

How wrong he was!

Refer to the chart below, there were at least 3 property declines in relatively recent times.

1998 Asian Financial Crisis

Drop of 46%

Decline lasted around 3 years

2008 The Great Recession

Drop of 27%

Decline lasted around 1 year

2013 Cooling Measures

This is the introduction of TDSR, imposing ABSD on Singaporeans purchasing their 2nd property etc. 

Drop of 10%

Decline lasted around 5 years

Meanwhile, private home prices fell by 0.4% in Q2 2023, following a 3.3% gain in Q1 2023. This is the first fall in the last 3 years. 

URA also said price momentum is easing across all market segments. 

This fall in prices comes after several rounds of property cooling measures since Dec 2021, including an increase of additional buyer's stamp duty (ABSD) in Apr 2023 (from 30% to a whopping 60% foreigners, from 17% to 20% for Singaporeans buying second property). 

Meanwhile, SIBOR rates have reached highs since Dec 2022. No doubt the high-interest rates will put off some folks wanting to purchase property using loans. 

It may take a few more months before the full effects of the cooling measures can be observed. 

No doubt property prices will decline again. Until then, prepare ammo. 

References

Singapore Housing Index Chart

Singapore Property Cooling Measures

Singapore Private Home Prices Fall Q2 2023

Singapore SIBOR Rate Chart

Home Buyers Undaunted by Cooling Measures

What do you seek in life? Is FIRE enough?

I came across this news about our local celebrity Felicia Chin:

https://sg.yahoo.com/style/felicia-chin-study-meaning-work-singapore-074702386.html

In the article, she shared that she left to study because she "couldn't find meaning in her work".

She explained that she felt like a fraud as an actress and had nothing more to contribute. That's when she left for studies and find a bit of herself.

I can empathize with her. We all seek to move higher, and not remain stagnant on the spot. 

"May you find what you seek"

This brings to mind another video that came to my feed from George Yeo.

In the video, he explained that he visited the Grand Ayatollah of Iran. In his parting words, he said to Mr. Yeo: "May you find what you seek". Mr. Yeo has these words in his mind from then on. The question then is: so what do you seek?

Mr. Yeo then went on to talk about parents with Down syndrome kids, where he was surprised by a remark made by one of his staff that Down syndrome kids can be very 'loving'. He then went on to say that we should help them because "if we enhance others, we enhance ourselves at the same time". 

He ended with these words:

We seek meaning. We seek fulfillment. It is an inward journey. But that inward journey in the end has to be expressed in our relationship with other people. With our parents, with our siblings, with relatives, our teachers, our friends, with strangers, with those with whom we are divided politically, religiously, or ideologically. 

I resonate with these words.

So what do we seek? We seek meaning.  

You can find the video here:

https://www.tiktok.com/@mothershipsg/video/7241753087625448711

Dividends for Jul 2023 [Financial Independence]

Here are my dividends for Jul 2023:

So I collected $1,179.34 in dividends for Jun 2023.

 
In case you are wondering, some stocks are repeated because I have 2 brokerage accounts.

Here are my monthly dividends over the last 5 years:

There's a boost to my dividends this month due to dividends from BCIP STI ETF.

Here are the dividends I collected every year until the current day:

Additionally, I share also the interest I received from the various banks this month:

So I collected $345.32 in interest payments this month. Still tuning this. 

Onwards!

Wrapping up my Second Month of FIRE: No Time to be Bored

Have you heard of people getting bored after they retired, with nothing to do?  

Perhaps I had scheduled too much stuff. In fact, I feel I don't have enough time to finish the things I want to do!

Here are some of the stuff I ate, and places I went to:

Eating

This is famous, right?

Not too bad...

Chin Mee Chin - iconic.

Heng Long Teochew Porridge - this is good!

Fun

Springleaf Nature Park - always wanted to go.

I also did a day of volunteer work for Racial Harmony Day at my kid's primary school. Hopefully, I can do one day of volunteer work a month.

Exercise

On the fitness side, I definitely walked more than in my previous desk-bound job. 

Expenses

I busted some of my expenses this month. Hardly surprising I guess, since you got to spend to have fun...

Eating Out Target: $650

Eating Out Actual: $547.12

Household Target: $600

Household Actual: $791.80 (Signed up for a parenting course - I think its a necessary expense)

Travel Target: $100

Travel Actual: $61.80

Entertainment Target: $50

Entertainment Actual: $23

Personal Target: $100

Personal Actual: $200.47 (Bought new shoes and vitamins to keep me healthy...)

Separately, I started doing food delivery again. I achieve a few objectives by doing food delivery:

• Exercise
• Earn kopi money
• Collect steps on my national steps tracker, which I can eventually use to redeem Sheng Shiong vouchers
• Collect steps on my AIA Vitality app, which I can eventually use to redeem Cold Storage vouchers
• I tend to get some groceries along the way back 

On to my third month of FIRE!

Do you have any questions about my FIRE journey or about my 'retirement'? Please ask below.