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Growing passive income: Equities, CPF and bonds.

Tuesday, October 18, 2022

I have been blogging about the passive income generated by my investment portfolio every quarter for many years now.

I have also shared how much interest income my CPF account makes every year.

Some readers asked if my quarterly passive income reports included the interest income from my CPF account?

The answer is "no."

I blog about passive income from my investment portfolio and interest income from my CPF account separately.

If we were to add the two streams of income which is something I have not done before, then, my annual passive income would be a larger amount.

It would be quite easy for anyone who might be interested in knowing what the larger amount might be to find the relevant blogs and add the numbers.

I won't bother doing it because unlike my quarterly passive income reports and my annual CPF interest income reports which share my thought processes as well, I feel that simply putting the two together in a single blog to show a larger number isn't helpful in any way to anyone.

Well, it could generate some interest like some tabloid newspaper article would sensationalize some event but it would have no value otherwise.

A bigger number is simply the logical conclusion and it might even give people the impression that I am bragging.

Anyway, to continue, with interest rates rising, interest income from my savings accounts and fixed deposits will become more meaningful but I am too lazy to start a new series of blogs on interest income generated this way.

I have blogged about the importance of saving money often enough in the past and also why having a meaningful percentage of our portfolio in cash or fixed income isn't a bad thing.

Think emergency fund and war chest.

Think survivability and opportunity in times of distress and if you are new to my blog, I have an "e-book" on this: HERE.

As interest rates have risen significantly, I will be diverting funds from my fixed deposits which are maturing into Singapore T-bills  (i.e. zero coupon bonds issued by the Singapore government) as these have much higher interest rates than fixed deposits of equivalent durations (i.e. 6 months and 12 months.)

Treasury Bills Statistics.
Source: MAS

As these T-bills will be held in my CDP account, the interest income earned will show up in my quarterly passive income reports.

Similarly, as I am diverting funds which I originally earmarked for my CPF account to Singapore Savings Bonds which now offer an average 10 year return of more than 3% per year, the returns will add to my quarterly passive income as these bonds are also held in my CDP account.

These developments will have an impact in the accounting of my passive income in the future but the impact is probably a relatively small one.

The change is still noteworthy especially if I continue to divert funds from existing fixed deposits to T-bills. 

This is more so if funds originally meant for my CPF account is diverted into Singapore Savings Bonds at the same time.

So, what can we expect in a nutshell?

Higher passive income numbers in my quarterly updates and slower growing interest income in my yearly CPF updates, everything else being equal.

If T-bills continue to see increasing yields, I might have to stop being lazy and make a trip to DBS to move funds from my CPF account into T-bills.

They should really allow us to do this on their banking app just like applications for T-bills using cash or SRS money.

Anyway, I am glad fixed income in Singapore is once again a financially more rewarding option for income investors.

It is definitely good news for those of us who are more risk averse.

Cash is not trash at least it isn't if we are referring to the Singapore Dollar.

I want to end the blog by saying that things aren't all doom and gloom for most of us.

We can continue to grow our passive income whether we are preparing for retirement or in retirement as long as we stay financially prudent.


1. CPF or SSB?

For those who are interested in Treasury Bills, this is a good resource by DBS: Apply for T-Bills.


AK71 said...

Hi EX,

DBS has a very good write up on T-bills.

I have hyperlinked it at the end of this blog.

Don't want to reinvent the wheel. ;p

Yv said...


I have also moved most of my FDs to SSBs and TBills in various tranches. Like you, I am also contemplating investing OA funds into TBills, but the current yields are not attractive enough. Not just the hassle of making a physical visit to the Bank, but factoring the opportunity cost and transaction cost of each application, rates have to go up first to be worthwhile for me.

AK71 said...

Hi Yv,

The hassle of having to go visit a bank, joining a queue and filling out a form really demotivates me. -.-"

Yes, I will wait too.

The Fed is expected to hike interest rates every month for the next 3 months.

So, yield on T-bills could go to 4.5% or even higher.

No hurry. :)

Lynn k said...

Hi Ak, would you add more capland china reit at current price? Or would you wait for it to reach 10% in dividend yield ?

Lynn k said...

Hi Ak would you add capland china at current price or wait for it to hit 10% in yield?

AK71 said...

Hi Lynn k,

Although my strategy now is mainly to add to my investment in banking stocks, I am also keeping an eye on some REITs which are being priced as if they are junk bonds.

Capitaland China Trust might be interesting as it is trading at 9.1% distribution yield now but its financials are weaker when compared to IREIT Global and a big portion of its loans are offshore loans.

With the Yuan weakening, without a strong natural currency hedge, I wonder what impact this would have on its gearing level as property valuations could decline in Singapore $ terms?

Capitaland China Trust's gearing is at almost 38% if I remember correctly and this isn't exactly low.

The Yuan could stay weak for longer with the Chinese government bent on stimulating their economy and this is unlike the Euro which could strengthen as the ECB increases interest rate to fight inflation.

The zero COVID policy in China seems to be sticky and this is worrisome.

I am willing to hold on to what I have but to add more, given my concerns, a higher distribution yield might convince me to add but I don't know if 10% is enough now.

Well, maybe, a nibble.

DBS, OCBC and UOB at 40% of portfolio.

Airman said...

Hi! AK,

Is it wise to continue adding UOB & OCBC shares as they are near the 52 week lows?

What do you think contribute to their decline in share prices recently?


AK71 said...

Hi Airman,

I don't know if it is wise to do so. ;p

I do know that I am getting fairly good value for money as OCBC is trading at or below book value and UOB is trading at slightly above book value.

Dividend yield is pretty good at around 4.5% to 4.8% with a payout ratio of only about 50%.

Mr. Market has his mood swings and only he knows why share prices decline. ;p

C said...

Dear AK Shifu,

Excited to read your other blog on T-bills giving 4.19% and still growing !

I wonder if using CPF OA to buy T-bills, is it limit to 35% of OA amount like limit for buying stocks ?

Also with $2 per T-bills transaction, perhaps I am thinking more worthwhile to buy at least $20,000 per transaction ? Per month? Since I have quite a bit of OA funds to deploy.

If T-bills were to offer 4.5% or higher, may be consider to deploy my CPF SA.

Useful to hear you talk to yourself. Thank you. :)

AK71 said...

Hi C,

Yes, at this rate, I might have to shift my OA money to T-bills too but it is a bit of a hassle having to visit the bank, join the queue and fill out forms.

If I do it, I will definitely be applying for a larger amount not because of the fee but because of the hassle.

I am not too keen on visiting the bank every month.

Apart from the first 20K of OA money being untouchable, I don't think there is a limit like for the purchase of stocks.

There is a chance that we might see CPF SA interest rate going higher in future as the plan is to benchmark against the 10 year Singapore government bonds, if I am not mistaken.

Will have to wait and see.

Yv said...

Hi C, Other than the 2dollar transaction fees, there's also an additional 2 dollars per holding/ counter imposed by the agent bank. Plus the hassle of queuing each time, may not be worth it to apply smallish amounts

AK71 said...

Hi Yv,

Greedy banks. Terrible.

It is really the thought of being in a queue to perform banking transactions that really disincentivizes me to do it.

So used to doing everything online.

If T-bills exceed 5% in yield, however, I might just do it.

C said...

Hi Ak Shifu and Yv

1) True, considering both hassle of making trips to bank and transaction fee, it makes more sense to apply for a larger quantum, except the first $20k in OA is untouchable.

2) Just as a example- if someone has $300k in OA, perhaps better to apply in tranches of $50k when T-bills hit 5% so as to hedge against rising interest environment, in case it keeps rising to 5.5% (being hopeful here)

Wonder if my thinking makes sense ?

AK71 said...

Hi C,

That sounds like a bond laddering strategy which really cannot go wrong. :D

I am just too lazy to make multiple trips to the bank.

I would probably just apply with one large lump sum and not look at it until it matures in case I get buyer's remorse. LOL. ;p

S A said...

Hi AK, do you have any holding in FCT? Do u think this is worth at current price weakness?

AK71 said...

Hi S A,

No interest in FCT.

With risk free rate rising quickly, a sub 6% distribution yield doesn't look attractive enough to me.

Having said this, to be fair, its numbers look pretty healthy compared to Suntec REIT, for example.

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