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Showing posts with label CPF. Show all posts
Showing posts with label CPF. Show all posts

DBS, T-bill and CPF. Dragon shatters shield!

Friday, February 16, 2024

Hope everybody is having a great start to the Year of the Dragon!

I am enjoying myself.

Maybe, I am enjoying myself a bit too much.

Too much Chinese New Year goodies.

Sore throat!

Ouch!

My investments are mostly doing well and I am contented.

DBS is making me smile a lot more than usual, of course.

The latest 6 months T-bill had a cut-off yield of 3.66% p.a.

My application using $675K of CPF OA money is probably filled since I placed a competitive bid of 3.5% p.a. like I said I would.

This means I would get paid some $2.5K more than what the CPF OA would have paid me.




Anyway, this is the latest from Budget 2024:

1. Members who are 55 years old and older will longer have a CPF SA from 2025.

2. Money in CPF SA will be transferred to the CPF OA once the newly created RA gets filled to the FRS.

So, CPF SA shielding strategy is down the drain.

Remember, back in 2021, I blogged about how it would probably be a matter of time before CPFB did something about the loophole.

It has finally happened.

See:
No more "shielding" of CPF SA."




It was never intended for the CPF to work that way.

It was a loophole that benefitted the financially more able while the financially less able would never be able to exploit it.

The CPF system is meant to help the masses and not the rich.

I have said this often enough and this latest move is further confirmation.

Those who are financially more able would have to find other ways to put excess funds to work.

We should pull our own weight and not rely on the government too much.

I like the idea that help is targeted and people who need it more should have more help.

Well, that's all for now.

If AK can talk to himself, so can you!

Reference:
A river called "CPF" and the horses.

DBS and CPF miracle! Happiness!

Wednesday, January 31, 2024

I don't usually blog at night but this is so exciting that I just have to talk to myself.

Yesterday, I talked about my 1 year T-bill which I purchased with CPF OA money maturing.

This was the available balance in my CPF IA then:

I also said that I transferred the funds from CPF IA back to CPF OA upon seeing the money credited at 5pm.



This was my CPF OA balance yesterday:





DBS online portal said it would take up to 3 business days for the transfer to be done.

That would mean losing another month of CPF OA interest if the money went back to the CPF OA in February.

It is what it is, I guess.

However, I decided to check my CPF account just now just to see if a miracle took place.

Well, a miracle did happen!

The money is back in my CPF OA which means I would not lose another month of CPF OA interest!





My faith in DBS bank is restored!

Yes, I know.

AK is so shallow.

Bad AK! Bad AK!

I am so happy now.

Losing an extra month of CPF OA interest is a big deal in this instance because the sum is so big.

We are looking at about $1,400 of interest income.

Huat ah!

If AK can be shallow, so can you!

Reference:
CPF account recovery: Thoughts and plan!

CPF account is recovering almost $700K. Thoughts.

Tuesday, January 30, 2024

Regular readers know that I strongly believe in the CPF system.


I believe that it is a good habit to sock away some money consistently.

In other words, I believe in saving money.

We never know what could go wrong in life and having some savings, substantial savings, is really comforting.

Of course, I also say that we should put our money to work.

We don't want to spend our life working for money.

We want our money to work so that we can enjoy our life more.

So, parking our money in the CPF in an environment of lower interest made good sense as it paid much higher interest rates.

However, in an environment of higher interest rates, to be fair, 2.5% p.a. is pretty decent too.

Still, we would like to have higher returns where possible from instruments with the same risk profile.

This was why I bought a 1 year T-bill with CPF OA funds about one year ago.




Well, the T-bill is maturing today and the money is coming back.

I will perform a transfer from CPF IA to CPF OA when it happens.

Unfortunately, it would not make it back into my CPF OA before the end of the month.

So, I will lose 2 months of additional interest from the CPF OA instead of 1 month.

The breakeven cut-off yield for that T-bill is 2.92% p.a.

For those who are interested in finding out the breakeven cut-off yields, here is a link to a blog that does it: https://growbeansprout.com/cpf-t-bill-sgs-bond-interest-rate

Since that 1 year T-bill had a cut-off yield of 3.87% p.a., I received additional interest of more than $6K.

The funds deployed was almost $700K which explains that more meaningful difference.

Better than leaving the funds inside my CPF OA.

Since I received it as a discount immediately upon the commencement of the T-bill, the interest rate really was higher than 3.87% p.a. compared to a fixed deposit where interest earned is received at the end of the tenure.

I also bought another T-bill with CPF OA funds, leaving only $20K in the CPF OA, and that is maturing in March.

That was a much smaller sum.




Like I said in an earlier blog post, I would place competitive bids using CPF OA funds to buy T-bills.

Non-competitive bids run the risk of getting a cut-off yield that is lower than the breakeven using CPF OA funds.

Since the highest breakeven cut-off yield is 3.33% p.a. which is for 6 months T-bills possibly losing 2 months of additional interest from CPF OA, a sensible competitive bid is 3.5% p.a.

So, that is the plan.

When I turn 55 years old in 2026, after setting aside the Full Retirement Sum in the newly created RA and locking up the Basic Healthcare Sum in the MA, the rest of my CPF savings becomes my emergency fund since I could withdraw the money anytime I want.

That would free up my existing emergency fund which would become part of my war chest.

That would be quite a substantial boost since my current emergency fund is able to cover 24 months of expenses for my parents and myself.

Years of careful planning and patient execution is paying off.

If AK can do it, so can you!

My plan after 3.45% p.a. 1 year T-bill.

Friday, January 26, 2024

Massive disappointment.

Many felt that when the cut-off yield came in at 3.45% for the latest 1 year T-bill auction.

I somehow got the dates messed up and I couldn't take part in the auction.

Regular readers might remember that I bought a 1 year T-bill about a year ago using CPF-OA money.

That cut-off yield was 3.87% p.a. and would mature on 30 January 2024.

So, it would not have matured in time for the recent 1 year T-bill auction.

Somehow, I kept thinking that it would.

Anyway, no loss there.






3.45% p.a.

I would not have gotten the T-bill even if the money came back in time.

I would have placed a competitive bid of 3.5% p.a.

That is minimally acceptable to me when using CPF OA money to buy T-bills.

This is because the breakeven is 3.33% p.a.

This covers the possibility of losing 8 months of CPF OA interest and not just 7 months.

So, at 3.5%, I am only getting 0.17% more than what CPF OA would pay me.

This means that for $100,000, it is a $170 difference.

For $670,000, which is the amount from my last 1 year T-bill with CPF OA money, the difference would have been about $1,140.

Nothing to write home about but still something.




Of course, getting 3.87% the last time, the difference was more significant.

Anything lower than 3.5% p.a., I would just leave the money in the CPF-OA.

Not enough meat for me to be interested.

So, what am I doing with the CPF OA money coming back?

I will try for 6 months T-bill, bidding competitively at 3.5% p.a.

If I don't get it, no big deal.

If AK can talk to himself, so can you.

Reference:
CPF account got hacked!

$3K CPF MA Top Up in 2024 to new BHS.

Friday, January 5, 2024

Like I shared in a recent blog post, the new Basic Healthcare Sum is $71,500 which is an increase of $3,000 from $68,500 in 2023.

This was what my CPF statement looked like at the start of 2024:



After doing the Top Up of $3,000 using PayNow, this is what my statement looks like now:




I decided to do the Top Up earlier than later in the month because I might forget.

Growing old and forgetful.

For those who are not forgetful like me, doing the Top Up a few days before the end of January would mean making a little more in interest income in a savings account.

If AK can do it, so can you!

However, sometimes, it is better to do it your way!

Of course, for those who are still gainfully employed, doing this will also get income tax relief.

It is a win and a win again!

Finally, a question from a reader is worth reproducing here: 
"Just wondering, if I were to also top up my MA to $71,500 in Jan, but as I am still getting monthly CPF contribution, would the top up be refunded without interest as my employer/employee contribution would also flow to MA, or would it go straight to OA/SA?" 

My reply: 
If we are doing voluntary contributions, then, we would have to be mindful of the CPF annual contribution limit. This is because mandatory contributions would count towards that limit. However, when we do Top Ups to our SA and MA, they are independent of that limit.

Reference:
Why top up CPF MA?

Recently published: 
CPF savings, SSBs and T-bills...



CPF savings, SSBs & T-bills in January 2024.

Wednesday, January 3, 2024

Last year, I published a blog post with a very eye catching title regarding my CPF savings.

"More than $1.1m in CPF savings!"

Well, this time, it is a whimper, in comparison, at less than half a million dollars. ;p

So, how much exactly?

Here is my CPF pie chart at the end of 2023:






Some readers might say that for the first time in a long time, my CPF savings look "normal." ;p

CPF OA savings less than CPF SA savings.

For people who use most of their CPF OA savings to fund a flat purchase, this is probably normal.

Of course, regular readers of my blog would know that most of the money in my CPF OA went to buying T-bills.

Two T-bills.

A one year T-bill is maturing end of this month.

A six months T-bill is maturing in the middle of March.

So, the money will come back.

I will transfer the money from the CPF IA to the CPF OA when it happens.

Then, if yields stay relatively high, I would probably buy T-bills again.

Of course, with CPF funds, I do competitive bidding.

3.5% p.a. is a reasonably sensible bid to place.

I produced a video on this topic before too and, in case some are interested, here it is:




Hope the video is helpful.

Of course, another reason why my CPF savings did not grow as quickly as before was because I did not do voluntary contributions last year.

The money earmarked for that went to buying Singapore Savings Bonds instead which offered higher than 3% p.a. in 10 year average yield.

For those who didn't know this, here is the link to the blog post:

"SSB: Mission accomplished."

I won't be doing voluntary contributions to my CPF account this year in 2024 either.

Why?

I front loaded the "contributions" last year, buying more Singapore Savings Bonds later in the year.

See this blog post:

"SSB: Missions update!"

All as well.

The latest Singapore Savings Bond is offering only 2.81% p.a. in 10 years average yield.

So, that is an easy skip for me.

In any case, I am in no hurry to buy more Singapore Savings Bonds since whatever I want to buy to replace voluntary contributions to my CPF account in 2024 was filled last year.

If the yield remains low for the rest of the year, I will go back to doing voluntary contributions to my CPF account in 2025.

Easy.

Till the next blog post, mask up and stay safe!

If AK can do it, so can you!

List for 2024! CPF BHS. T-bills. 2023 passive income.

Monday, January 1, 2024

Happy new year!


Brand new month and brand new year!

I have been busy the entire month of December and now I have to plan my January.

I have so much to do in different worlds.

Neverwinter, World of Warships and Black Desert Online.

12 to 14 hours of time spent in virtual worlds.

Of course, I must not forget things I must do in the real world too.

January looks like it is going to be another busy month too.

Oh dear.

I wish I had 25 hours a day instead of 24.

Maybe, 26 or 27 hours would be better.

Yeah, bad AK!

So many things to do in my retirement and so little time.

Anyway, as I am growing forgetful in my old age, this blog will quickly outline the stuff I am going to do when it comes to money matters.

1. Top up my CPF MA to the new BHS.

The new BHS is $71,500 in 2024.

This is up from $68,500 in 2023.

Interest earned in my CPF MA will flow into my CPF OA since my CPF SA has already hit the FRS.

So, I will be able to do a $3,000 top up to my CPF MA this month in January.

I will do it earlier than later just in case I forget later.




2. Blog about my updated CPF balance.

My CPF balance will look very "weak" in 2024.

I published a blog last year where I reacted in "horror" that my CPF account was "hacked!"

The bulk of my CPF OA money is in a 1 year T-bill with a cut-off yield of 3.87% p.a. which is why my CPF OA balance is much lower.

That T-bill is maturing at the end of the month.

So, the money is coming back.

I must remember to transfer the money back into my CPF-OA.

3. 6 months T-bills.

I got both 6 months T-bills offered in the month of December 2023.

The cut-off yields were 3.74% p.a. and 3.73% p.a.

Not too bad.

The plan is to maintain my T-bill ladder in 2024.


The yields are still relatively attractive to me.

So, I have already made a non-competitive bid for the auction taking place on 4th January 2024.

If Mr. Market should go into a depression in 2024, it would be time to dismantle the ladder.




4. 2023 full year passive income.

I have been so busy in December that I have not been keeping up with things on the investment front.

I will have to spend some time looking at numbers to account for my passive income in 2023.

I am expecting a weaker Q4 2023 since UOB and OCBC pay dividends only twice a year in May and August.

Year on year, passive income could come in weaker as the REITs I hold are generating less income for me too.

There will be some income generated by T-bills in the portfolio but that won't move the needle much, I suspect.

Hmm.

I think that is all when it comes to money matters and blogging.

Lots of other stuff I have to do but I shan't clutter this blog post.

OK, maybe just this one thing.

I shared this screen-shot of the port of Velia in Black Desert Online in my YouTube community tab on Boxing Day.


You can see my ship docked in the extreme right of the picture.

I am working on upgrading it be like the taller and larger ship with the black sails in the center of the picture.

Work in progress and I should be able to get it in a few more days.

Makes me happy thinking about it.

Will be happier once it is done!

That is all for now.

Look out for upcoming blog posts on my CPF savings and 2023 passive income update.

I will be back!

If AK can talk to himself, so can you!

Full Retirement Sum is not enough to retire on!

Thursday, November 9, 2023

It has been quite a while since I tinkered with the CPF website.

I remember how I used to visit the website very often back in the days when I was actively plotting how to make full use of the CPF system.

Anyway, as I close in on 55 years of age, I decided to revisit the CPF website.

That is when I get a Retirement Account set up.

I thought it would be a good idea to check on how much my Full Retirement Sum would be by then.

This was what I found:

Source: CPFB




So, it would be $220,400 for me.

My CPF-SA has more than that right now and it will continue to grow based on interest earned yearly alone.

Therefore, it isn't a worry for me.

This was how it looked at the beginning of the year:



Then, I checked how much I would get when CPF LIFE kicks in for me at age 65.

For this, I used the CPF LIFE estimator: HERE.

I had to tell the AI that I am 55 years old now in order for it to work and then input the FRS for my age group.

It is a fun calculator to use because I was able to use sliders to change the payout age and also the amount of funds involved to see how things would look like.

Anyway, if I just stuck with the FRS of $220,400 and had the payout start automatically at age 70, I would be paid $2,380 monthly.

If I should request for payouts to start at age 65 instead, I would be paid $1,760 monthly.




Back in 2014, I published a popular blog post that has received almost 50,000 pageviews by now.

It was "To retire by age 45, have a plan."

In that blog post, I said that I wanted to retire by age 45 and thought I would be quite comfortable with $2,500 a month in passive income.

I accounted for inflation and by age 65, I would need $5,081 a month in passive income.

I calculated the required monthly passive income till age 75.

If you are interested to see all the numbers at various ages, please go the blog post and I have hyperlinked the title earlier.

So, what is the point I am trying to make?

For me, at least, the Full Retirement Sum is not enough to retire comfortably on.

At age 65, there would be an estimated shortfall of $5,081 - $1,760 = $3,321 a month.




Please don't get me wrong. 

I think that the CPF LIFE is a very good idea because many people are not very good with money and even worse at planning for retirement funding.

So, with CPF LIFE, at least there is some kind of minimum safety net.

However, that is what it is.

A minimum safety net.

In case you are wondering what triggered this blog post, it was a news article on how Singaporeans are falling behind in savings and more can only afford basic expenses.

See article in The Business Times: HERE.

"More Singaporeans can afford only basic spending, don't have enough savings, a survey by OCBC found."

"Most do not have sufficient "emergency funds" or enough savings to meet their families' needs over the next year."




We really want to take action early to help ensure retirement funding adequacy.

During good times, don't become complacent because bad times could hit us when we least expect them to.

Always have a crisis mentality.

It might not be fun but we should do better than those who don't.

If AK can do it, so can you!

Note: Numbers are based on CPF LIFE Standard Plan.

Recently published:
3.75% p.a. cut-off yield for T-bill.

My plan for CPF as SSB 3.32% p.a. oversubscribed.

Saturday, October 28, 2023

I blogged about my interest in buying some Singapore Savings Bond which offered 3.32% p.a. in 10 year average yield.

It seems that many more people have the same idea.

The results are out.

The SSB was oversubscribed.

Fortunately, for smaller applications like mine, we had 100% of our applications filled.







This SSB partially replaces planned voluntary contributions to my CPF account in 2024, the year I turn 54 years of age.

If this continues, it looks like I won't be making further voluntary contributions to my CPF account.

The plan was, of course, to continue making voluntary contributions till I turn 55.

With interest rates being so low for so long, the plan was to continue making voluntary contributions to my CPF account even after I turn 55.

The idea was to use the CPF as a high interest rate savings account beyond age 55.

However, with interest rates likely to stay higher for longer now, that plan has become less attractive.

Some might even say the plan is now obsolete.




I could get higher interest rates simply by putting money in fixed deposits, for example.

The only drawback of the SSB is that it does not compound interest earned.

Still, at my age, with the resources that I have and the kind of financial obligations that I have, I think that is almost a non-issue.

This is just me talking to myself, of course.

We have to do what makes sense for us.

If AK can do it, so can you!

Topping up my CPF Medisave Account. Again?

Monday, October 23, 2023

So, I did a top up to my CPF Medisave Account. 

Wait a minute.

Didn't AK say his CPF MA already hit the Basic Healthcare Sum which means no top up is allowed?

Yes, I did.

However, NTUC Income does a deduction yearly to pay for my private shield plan.

I try to remember to top up my CPF MA whenever this happens.

Still, I would forget sometimes.

The CPF MA pays 4% p.a.

Risk free and volatility free, it is too good to miss.






Don't have to do the top up immediately.

Just have to do the top up a few days before the end of the month since CPF only considers the lowest balance in the month when calculating interest to be paid for the month.

Of course, by doing this, it ensures we earn more interest in the CPF MA. 

And interest earned in the CPF MA will overflow into the SA in the new year for those who have yet to hit the Full Retirement Sum.

The CPF SA also pays 4% p.a.

This will help grow our CPF savings faster.

Oops. I should have said 4.04% p.a.

Huat ah!

I am looking forward to topping up my CPF MA again in the new year if they increase the Basic Healthcare Sum.

This is probably going to be $3,000 or so, if it happens.




Don't look down on 4% or 4.04% p.a.

Even if we have yet to hit the Basic Healthcare Sum, with $50,000 in the CPF MA, we are still getting $2,000 in interest income per year, for example.

That would be enough to pay for most people's  yearly medical insurance policies.

Of course, I first blogged about this in 2013, and I have talked to myself about this from time to time since then.

If AK can do it, so can you!

References:
1. Do you want free medical insurance?
2. Free medical insurance in our old age?

Layers of financial protection that matter.

Sunday, September 24, 2023

I produced a couple of videos on the CPF MA recently.

I was wondering if I should do it because people are less interested in the CPF these days.

Also, many people think CPF MA is money trapped while CPF SA is money they would get to use in retirement.

I went ahead and did it anyway because I wanted to remind myself of the importance of the CPF MA.

As expected, only a small number of viewers were interested in the videos.

However, they did get some interesting comments.

Someone asked me why didn't I talk about Careshield or Eldershield in the videos.

Well, I really don't care much for Careshield and I only got Eldershield because a friend convinced me that I would be doing my part to bring down the cost of the group insurance by taking part.

AK likes helping if it is not too costly.




I don't need Eldershield and I have blogged about this before.

Why?

Regular readers might remember that I blogged about how passive income is the best insurance in life.

Meaningful passive income.

After so many years, I believe that my passive income stream has become a river.

I should have no trouble with meeting day to day expenses even if I should become physically challenged.

However, I do worry about big financial bombs.




A constant stream of passive income is good at dealing with day to day expenses.

It isn't going to be able to cope with atomic bomb events.

This is why I keep an emergency fund.

A large emergency fund.

This is why I supplement Medishield Life with Incomeshield.

I shield myself from huge medical bills which could one shot my bank account.

When working on the blueprint for retirement adequacy, I was very much aware of my limitations.

Some things we need and some things we don't.

Must be judicious.

I want to be sure to have layers of financial protection which matter, and not anything superfluous or unnecessary through being more than enough.

If AK can do it, so can you!

How to transfer from CPF-IA to CPF-OA? Must buy T-bill?

Monday, September 11, 2023

In my last blog post, I made a passing mention about a 6 month T-bill which I bought using money in my CPF-OA maturing in the same week.

I made a request to transfer the money back to my CPF-OA when I saw the funds sitting in my CPF-IA a day later.

It was all rather easy with DBS online banking.

I simply logged in and went to the "Invest" tab and selected "More investment services."

Then, I chose "Refund to CPF Board."

Clicked on "Refund Full Amount", and it was basically done after clicking "Next" and "Submit."




Today, I checked my CPF account and found that the funds are back in my CPF-OA.

Now, I am wondering whether I should buy another 6 months T-bill with the money.

To be quite honest, I am not as enthusiastic as before because the cut-off yield has reduced so much since the start of the year for 6 months T-bills.

In January, it was as high as 4.2% p.a.

The T-bill that matured last week had a cut-off yield of 3.93% p.a.

I am hazarding a guess that the cut-off yield for this week's auction is probably going to be around 3.7% p.a. or similar to what we got in the last auction.

For a sum of $50,000, we are looking at an additional interest income of less than $200 compared to what the CPF-OA would pay for a 7 months period.

Nothing to write home about.




Anyway, with CPF-OA money, I will not go the path of non-competitive bids just in case the unthinkable happens.

I will put in a competitive bid of 3.5% p.a. because I don't think I am interested in anything lower than that.

If the cut-off yield should come in at 3.5% p.a., the difference in interest income is going to be less than $120.

The cut-off yields for 6 months T-bills are declining but the CPF-OA still pays 2.5% p.a.

So, the difference is shrinking and it is really not a big deal.




There is quite a bit of talk in social media that we should all use our CPF-OA money to buy T-bills.

To be honest, unless the sum of money is relatively large, it isn't anything to worry about.

If we do not have a large amount of money sitting in our CPF-OA, we really are not missing out on any meaningful passive income.

I think some people would say don't sweat the small stuff.

Of course, I am just talking to myself.

If AK can talk to himself, so can you!

3.16% p.a. SSB, T-bills, CPF, fixed deposits! My plan!

Wednesday, September 6, 2023

I have been doing yearly voluntary contributions (VC) to my CPF account even though I retired from work 8 years ago.

I simply took some of the passive income I got from my investments and maxed out the yearly VC.

However, I did not do VC this year and I won't be doing VC next year either although the original plan was to do this until I hit 55 years of age.

Why?

I treat the CPF as the risk free and volatility free investment grade bond component of my portfolio.

So, I don't use it to invest in equities or to buy properties, for that matter.

This is my ultimate safety net for if everything else goes horribly wrong.




However, I did use the CPF OA funds to buy T-bills as they belong to the same basket of investments.

Risk free and volatility free.

So, I bought T-bills which paid more than the 2.5% p.a. paid by CPF OA in the last one year or so.

In fact, I have a T-bill bought with CPF OA funds maturing this week.

Must remember to transfer the money from CPF IA back into the CPF OA.

The Singapore Savings Bond (SSB) is another risk free and volatility free investment available to me.

In an earlier blog, I said that if the SSB is able to offer a higher than 3% p.a. coupon, I would buy SSB instead of doing VC to my CPF account.

This is because the average yield for VC I do is about 3% per annum.

Take note that this is for my age bracket and also the fact that my MA has already hit the Basic Healthcare Sum which means my VC goes only to my OA and SA.

I have already bought SSBs using funds which would otherwise have been used to do VC to my CPF account this year and in the next year.

That means no VC to my CPF account in my 52nd and 53rd year on planet Earth.






Now, with the latest SSB offering a 3.16% p.a 10 year average yield, I am thinking of "borrowing" money to buy some.

Borrowing?

Has AK gone to the dark side?

Well, if I were to buy this SSB, I would be using funds which would otherwise have been used to do VC to my CPF account in 2025!

That is 2 years away!

That would be the year I turn 54 years old.

As I have locked up quite a bit of cash in 8 months fixed deposits back in January when OCBC was offering 4.08% p.a. interest, I will have the funds to do this.




Some might think that continuing to do VC to my CPF account is a better idea as I could use the CPF OA funds to buy T-bills in the meantime.

Well,  if interest rates are really going down sometime in 2024 or 2025, reinvestment risk is very real for short term fixed income instruments like T-bills and fixed deposits.

So, locking in a higher 10 year average yield now doesn't seem like a horrible idea.

Buying $38,000 of SSBs yearly might seem excessive to some but, for me, it really is just moving money meant for my CPF account.

It is something in my yearly budget.

What might be considered "excessive" is "borrowing" funds from next year which would have been earmarked for CPF VC in 2025 to buy the SSB now.

I might just do it.

Reference:
CPF or SSB?

68% expects downturn! CPF POFMA! Distressed REITs!

Tuesday, August 22, 2023

I have three things to say.


Since I am lazy, might as well put them all in one blog post.

1. Two thirds of Singaporean consumers expect an economic downturn.

There is plenty that is not well in the world and this is probably not unexpected.

However, if we end up just feeling worried about how life could get tougher, then, that is a waste of energy.

I would shore up my cash position even more aggressively.

Make sure I have an adequate emergency fund.

Fill up my war chest and be prepared to buy from Mr. Market when he feels depressed.

I have blogged about such topics many times before and many blog posts are consolidated in this one blog post:





2. Fake news on CPF!

A Tik Toker has been spreading fake news about the Singapore election system and the CPF system.

POFMA has been served to him twice.

Yet, he is stubbornly sticking to his views.

If he is looking for fame, this isn't the way not only because he harms himself and possibly his family.

He is also harming ignorant Singaporeans who watch his clips and believe what he says.

I like to help people but some people are beyond help.

Like what I said before in this blog post:








3. I made a lot of money buying distressed REITs before.

I recently published a new video on how Manulife US REIT could possibly be an opportunity to make a lot of money.

It reminds me of the time when I bought Saizen REIT and AIMS APAC REIT when they were in distress donkey years ago.

If you are not subscribed to my YouTube channel, here is the link to the video.


Be prudent, patient and pragmatic!

If AK can do it, so can you!

Fixed income strategy: SSBs or T-bills? My plan.

Saturday, March 25, 2023

I know I said I was going to take a break from blogging until end of the month before I blog about my passive income for 1Q 2023. 

However, my OCD grabbed me again, and this is an update on what I am doing in the fixed income space.  

Yields fell along the entire yield curve with the Fed's 0.25% interest rate hike decision recently.

It was lower than the 0.5% which Mr. Market thought the Fed would implement before the banking crisis unfolded earlier this month.

The Fed chose to defend financial stability with a smaller interest rate hike than to fight inflation with a bigger rate hike.

Mr. Market interpreted that decision by the Fed as relatively dovish. 

Apparently, Mr. Market is pricing in interest rate cuts to happen before the year ends.

This is despite Jerome Powell's statement that there would be no interest rate cut this year.

Well, Mr. Market's argument seems to be that if the U.S. economy goes into a recession later in the year, the Fed would have to cut interest rate.

Who is going to blink first?

Mr. Market or Mr. Powell?

Your guess is as good as mine.




The 6 months T-bill auction here in mid March saw cut-off yield declining to 3.65% p.a. from the 3.98% p.a. we saw in the early March auction.

So, what are my thoughts?

I am also expecting the U.S. economy to weaken and possibly go into recession before the end of the year.

In such an instance, yields are more than likely to decline.

So, if I can get some longer duration bonds with relatively attractive yields now, I think I should do it.

Instead of putting in a bid for the 6 months T-bill auction happening at the end of March with some incoming dividends, I have increased the size of my application for Singapore Savings Bond.

The Singapore Savings Bond offered in the month of March has a 3.15% p.a. 10 year average yield which is higher than the 3% p.a. average interest rate from the CPF for my age.

I am really not increasing allocation to fixed income here but diverting some funds which otherwise would have been earmarked for CPF voluntary contribution in 2024.




To reiterate, if Mr. Market is right and if the Fed is close to the end of their tightening cycle in the USA, then, there is more downside risk for yields, which are already on their way down. 

In such a situation, if we want to have some fixed income exposure, we might want to lock in higher yields in longer duration risk free and volatility free Singapore Savings Bonds while they are still available.

This is especially if I could get a higher return than what the CPF offers me.

Even with a lower yield, I am aware that the 6 months T-bill would probably give a higher than 3.15% p.a. cut-off yield.

However, given the outlook, my desire to lock in a higher yield for a longer duration outweighs my desire for a higher yield in the short term in this instance.

There is also reinvestment risk with the 6 months T-bill as yields could be substantially lower 6 months later if Mr. Market is right.




Having said this, I would most probably resume bidding for 6 months T-bill in April, especially if the 10 year average yield for Singapore Savings Bond falls below 3% p.a. 

This is a reasonable expectation with yields softening at all points on the yield curve.

6 months T-bill is still a viable option for excess cash which we would like to put to work in the short term.

However, if the 10 year average yield of Singapore Savings Bond were to fall below 3% p.a., I would be better off doing voluntary contribution to my CPF account for exposure to longer duration bonds.

It is good to know that, in case yields continue to decline, voluntary contribution to CPF remains a viable option for someone like me who wants to maintain a meaningful exposure to fixed income in his investment portfolio.

There is no hurry to do voluntary contribution to CPF since we are many months away from the end of the year.




Will see what the Singapore Savings Bonds offer in the next few months.

What I do in April in the fixed income space will depend on the what the Singapore Savings Bond offers.

If you are also interested in this month's Singapore Savings Bond offer, remember to apply by 28 March 2023.

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