Changes to portfolio in February 2023 (so far.)

In February, I bought T-bills again although in smaller sums compared to January.

I had thought I would not be buying any T-bills in the month of February. 

Why?

I blame the fixed deposit promotions from DBS and OCBC.

Their promotional interest rates of 3.9% p.a. and 4.08% p.a. drained whatever excess cash I had.

Alamak!

All money locked up?

How like that?

Readers who have been following my blogs for many years would have an inkling that AK would never allow something like that to happen.

It was mostly money which was locked up before getting locked up again but with higher returns.

People cannot say cash is trash anymore.

Even Ray Dalio says that cash is no longer trash and, on hindsight, it was better to hold cash than many assets in 2022.

After placing those fixed deposits with DBS and OCBC in February, what cash I had left was mostly in my float which I didn't want to lock up.

That meant no T-bills.

However, I found some money at home and in excess of $10K too.

I thought of putting that money which was playing truant at home to work in a CIMB fixed deposit.

Why CIMB?

CIMB only required a minimum sum of $10K for their promotional interest rate of 4.2% per annum for a 12 months or 18 months tenor.

Unfortunately, that promotion ended in January and they only offered 3.5% p.a. in February.

$10K was too small a sum for DBS or OCBC as they required a minimum sum of $20K.

Who said building wealth was easy?

New YouTube video on wealth building by AK Production House here:

So, I split the money in half and put in non-competitive bids for the two auctions happening in February for 6 months T-bills instead. 

T-bills only require a minimum sum of $1K, after all.

Why split the money in half and not get all the T-bills in a single auction?

Well?

I didn't know what the yields would be like.

So, it was a simple case of not putting all the eggs in one basket.

I know the amount of money involved this time was relatively small but it was still a good practice.

I am also willing to do it because the application process was very easy using the DBS phone app.

The two 6 months T-bills auctions gave me cut-off yields of 3.88% p.a. and 3.93% p.a. in the month of February.

When I blogged about this plan at the start of the month, I said that I would be quite happy to get a yield of 3.9% p.a.

So, mission accomplished.

Yes, I keep reminding myself that socking away money isn't a bad thing especially when it has become a lot more rewarding to do so in recent months.

This goes in tandem with keeping our needs simple and our wants few.

This was brought up in another new video by AK Production House here:

In equities, I decided to let go of my investment in SATS in early February when, inexplicably, the stock price went higher.

Inexplicably?

Well, at least to me, it was inexplicable.

There is no accounting for Mr. Market's mood swings, I always say.

I really didn't want to have to bother with the proposed rights issue especially when I used my SRS money to invest in SATS.

This was many years ago but long time regular readers might remember my blogs on SRS money and how I would use them to generate higher returns.

If you are new to my blog or need a refresher, I shared a screenshot of my SRS investment portfolio in 2017:

Win and win again with SRS.

I was careful to invest my SRS money only in endowment policies and businesses which I thought would never have to do equity fund raising by issuing rights.

Anyway, I bought into SATS donkey years ago at about $2.90 a share and I have received many years of dividends.

This matter of acquisition and fund raising has been going on for so long and I am glad to be rid of it.

I actually produced a short video on this in October last year and, obviously, I wasn't too pleased even back then.

Watch video here:

Given the rather large impending rights issue, I was really lucky to be able to book a capital gain upon disposal too.

At least, I feel lucky now.

Hard to say if I would have seller's remorse later as, to be honest, the acquisition could turn out well.

Alamak! 

I shouldn't dwell on that or I might go crazy (again.)

The money raised from the sale could be used for 6 months T-bills in March.

Yields on short term treasuries in the U.S.A. have been elevated and, if this persists, we could see higher yields for T-bills in Singapore too, everything else being equal.

I don't think there will be any changes to my investment portfolio for the rest of February.

Now, I need to think about March.

References:
1. How to use SRS money?
2. Have $10K? Invest or save?
3. No T-bills in February?
4. Emergency fund and float.

Emergency fund, float & convenience cash. Buffers.

I blog about emergency fund from time to time. 

I have mentioned having a float at times too but not as often as my talks to myself on emergency fund because I didn't think it was as important.

Why?

Well, know it or not, all of us have a float.

Just like an emergency fund, it just varies in size for each of us.

Not everyone has an emergency fund and I suspect most don't have one or an adequate one.

However, I suspect that, unless extremely financially constrained, all of us have a float.

Now, I am not using the word "float" very strictly like a finance professional would.

In finance terms, a "float" is money that appears in two accounts at the same time as the money is being transferred from one account to another.

What I refer to as my float has a similar flavor but with a larger temporal window.

My float is money which I have on hand which is farther away than "convenience cash" which is money I keep at home and, therefore, nearest to me. 

However, money in my float is nearer than money in fixed deposits.

Yes, it is money in my savings and current accounts.

My float is really a form of convenience cash but just not as convenient.

Although not as large a sum as my emergency fund, the float is still around $100K at any one time.

The float exists so that I have ready funds to make routine monthly and quarterly online payments or whenever they are required. 

The float also exists to honor monthly and yearly GIRO payments which I have in place.

So, the money in my float is money which has been earmarked for various payments to be made in the future.

Yes, the float is to fund consumption.

Admittedly, my float could be smaller as I am not excessive by most standards when it comes to consumption. 

However, I was serious when I said I was mental on multiple occasions.

Buffers allow me to sleep better at night.

Having a larger float gives me another buffer.

What this also means is that in case of an urgent need for a relatively large sum of money in my family, I have money which can be deployed immediately.

However, my float alone isn't sufficient as an emergency fund which must be able to cover many months (and in my case, it is 24 months) of expenses for my whole family in case our cash flow goes negative.

Anyway, to be used in an emergency is not the primary purpose of my float but it could be used to plug sudden one off financial gaps.

My float is really wearing many hats.

So, the term "float" is pretty apt as the money can go wherever it is needed especially when it has a comfortable buffer.

Why am I blogging about this if I thought it wasn't important before?

I was thinking about random stuff and quite suddenly felt like doing it. 

I just thought "why not?"

If anyone should ask me what I meant by having a "float" in future, I would have a blog to point them to.

I hope I am right when I assume most people have a float just like me and that I am not being more mental than usual.

Do you have a float, oppa AK style?

References:
1. Emergency fund.
2. Convenience cash.

OCBC & UOB follow DBS: Special dividend?

What a great way to start a morning!

What a great way to start the week!

In my most recent blog, I talked to myself about my plan when it comes to fixed income.

However, I also mentioned that I have a significant exposure to equities as fixed income alone would not get us to financial freedom.

For most of us, this is the hard truth.

We must invest in bona fide income generating assets and businesses if we want to be financially free one day.

The decision to invest in DBS so many years ago has been paying dividends, literally.

Investing in OCBC a little later and then in UOB in the COVID-19 bear market has been very rewarding too.

Now, I wonder if OCBC and UOB might follow DBS and reward their shareholders a little better?

Let me try asking my mental bowling ball which thinks it is a crystal ball.

Compared to UOB, there is a better chance of OCBC following DBS in declaring a special dividend as OCBC's CET-1 ratio is more robust.

Still, if UOB wanted to, they could declare a special dividend too as their CET-1 ratio, although not as strong, is pretty decent.

Don't hold your breath though as this is what we got from a mental person asking his mental bowling ball for directions.

Coming back to DBS, a special dividend of 50 cents a share is pretty impactful to me.

This is especially when DBS is one of my largest investments today.

I think I might give myself a little treat.

Won't overdo it since 2023 still has a long way to go and we don't know how the rest of the year is going to turn out.

Like I shared in my blog on my full year 2022 passive income, I am still expecting zero growth in my 2023 passive income.

This is just me being realistic as some of my investments would probably be generating lower income for me.

CapitaLand China Trust has already reported a lower DPU, for example.

Oh, well.

Happy thoughts for now.

To all fellow DBS shareholders, hip hip huat ah!

Recently published:
1. SSB, T-bill, CPF and UOB ONE.
2. Changes to portfolio (Jan 23.)

References:
1. Largest investments updated.
2. 2022 passive income.
Latest YouTube video by AK:

SSB, T-bill, CPF & UOB ONE. Use them. My plan.

A few months ago, I said that it made more sense for me not to do voluntary contributions to my CPF account and to buy Singapore Savings Bonds (SSBs) instead. 

That was when Singapore Savings Bonds were offering 10 year average yields of more than 3% p.a. and it happened for 3 months in a row in 4Q 2022.

Money meant for voluntary contribution to my CPF account in January 2023 were all very nicely deployed into SSBs without any leftovers.

This year so far, SSBs have been offering lower than 3% p.a. in 10 year average yields which is less attractive than the what my CPF account offers.

Of course, what the CPF offers each of us is different based on our age group and how much we have in the Medisave Account. 

The percentage allocation to the Ordinary Account, Special Account and Medisave Account would be different from person to person and could result in a different average interest rate for each of us.

Anyway, before I veer farther off track, if the SSBs continue to offer a lower than 3% p.a. in 10 years average yield for the rest of the year, I am not worried as I would resume voluntary contribution to my CPF account then.

I could do this in the month of December instead of waiting till the new year which was what I had to do in years past.

This is because I have yet to do any voluntary contributions this year, of course.

So, one month in advance for a one month extra interest income.

For now, I will wait and see what the SSBs will offer in the months ahead all the way till December.

After all, the Fed is not done raising interest rate yet with probably a couple more hikes incoming.  

I know many are saying that inflation has been tamed but if inflation in the USA remains elevated, there could be more than just a couple of 0.25% hikes left to go. 

In such a case, we could see yields going higher especially if the US dollar strengthens against the S$.

In case you are wondering why the strength of the S$ is a relevant consideration, it is quite simple. 

A stronger S$ means our country would not have to offer higher yields to compensate bond holders because the S$ is more valuable and bond holders would gain from the exchange rate.

I am veering off track again.

Anyway, what is the plan or, more accurately, my plan?

1. Set aside $42K from my passive income generated this year for voluntary contribution to CPF in 2024.

Money meant for voluntary contributions can be deployed in December 2023 while money for top up to the Medisave Account will be deployed in January 2024.

2. Wait and see if SSBs offer more than 3% p.a. in 10 year average yield in the coming months.

If they do, deploy funds meant for the CPF in 2024 into SSBs instead.

If they don't, use the funds to get 6 months T-bills as long as the yield curve remains inverted which means the front end of the curve remains more rewarding.

Total amount to be deployed this way is $38,000.

3. The strategy of using 6 months T-bills can only extend till June or July 2023 because I will need the funds to be ready for voluntary contribution to my CPF account in December 2023 or January 2024.

If SSBs continue to offer lower than 3% p.a. in 10 year average yield from August to December or the last 5 months of the year, any money meant for CPF voluntary contribution coming in after July 2023 will have to sit in my UOB One Account.

I do not enjoy the highest tier interest rate offered by UOB One Account as I do not have any earned income to credit. 

However, it still offers a relatively attractive interest rate at least for money which cannot be locked up for a few months.

All I have to do is to spend $500 on the UOB One Card and have 3 monthly GIRO transactions.

I meet these conditions every month, anyway.

If you are new to eavesdropping on AK, I do have a significant exposure to equities while the CPF, SSBs and T-bills together form the fixed income component in my portfolio.

See:
Banks and REITs dividend machines? T-bills, SSBs and CPF?

I am mental and this blog is really more for myself as I don't want these thoughts to keep circulating in my mind.

You have been warned.

I use my blog as a "Pensieve."

What is a "Pensieve?"

You didn't watch the Harry Potter movies?

"The Pensieve was a magical device used to review memories." 

Source: Harry Potter Wiki.

My mind feels lighter now.

Recently published:
Changes to portfolio in Jan 23.

Related blogs:
1. CPF or SSBs?
2. Growing passive income?
3. $1.1m in CPF savings!