Singapore Savings Bond short term more rewarding.

Many readers asked me about Singapore Savings Bond recently and apparently it is because the coupon is now 1.55% for the first year which is much higher than what any local bank I know would pay for a 1 year fixed deposit.

I was not interested in the Singapore Savings Bond for various reasons and to avoid repeating myself, if you are not familiar with the reasons, please read the following blog (plus details on eligibility and mechanics):

Singapore Savings Bond: Good or bad?








When I blogged about the bond in the middle of 2015, the bond's coupon for the first year was 0.9%.

At that time, we could get 1.45% interest for a one year fixed deposit easily.

The Singapore Savings Bond was unattractive for money in my emergency fund and war chest, therefore.








Interest rates for one year fixed deposits have declined although I am puzzled why they would because with interest rates on the rise, short term interest rates should be impacted first.

Singapore Savings Bond's coupons.

Whatever the reason, the lower interest rates offered by local banks for one year fixed deposits make the Singapore Savings Bond's 1.55% coupon for the first year more attractive.








So, what to do?

I am going to have some of my war chest money in this bond.

Closing on 26 Jan at 9pm.

I am going to think of this as another fixed deposit.

With the higher coupon for the first year, having some money in the Singapore Savings Bond now gels more with my methods.

Taken from DBS internet banking.

Application or redemption is also very easy because they made it available through internet banking.

Very good for lazy AK who doesn't want to leave home to queue at an ATM.

Related post:
Use fixed deposits (FD) for emergency fund and war chest. (And now we say SSB too.)

My final word on Bitcoin and friends.

"January’s cryptocurrency selloff got fresh impetus on Tuesday when Bitcoin slumped as much as 25 percent, as the prospect of regulatory crackdowns appeared to spread..."

This story continues at the end of this blog.





AK says...

The key is to understand that Bitcoin is for trading.

Bitcoin is not an investment.

People can invest in Blockchain technology but with Bitcoin, it is really a trading game.





There are FOREX traders.

There are no FOREX investors.

Since Bitcoin is a virtual currency, people can be Bitcoin traders.

There are no Bitcoin investors.





People who call themselves Bitcoin investors are really Bitcoin speculators.

When people tell me that they invest in Bitcoin, I get the impression that they are either confused or they are out to confuse other people.

If we understand that Bitcoin is for trading and we cannot invest in it, we should remind ourselves that:

"The trading market is occupied by very large players who are just waiting for newbies to come in and throw their money away by trading aimlessly."

Know what we are doing.

Have a plan and a viable plan at that.






"While the largest digital coin was down 25 percent, it was still at the lowest level since early December, according to composite pricing on Bloomberg.

"Rival cryptocurrencies also tumbled. Ripple sank as much as 40 percent and Ethereum dropped 26 percent."

Read the full story here:
Crypto-currencies resume slide as Bitcoin tumbles.







Related post:
I should have invested in Bitcoin.

Was Soilbuild REIT a shabby investment?

Soilbuild REIT had to juggle not one, not two but three hot potatoes up until last month.

With the sale of KTL Offshore's property to its sponsor, they have two hot potatoes left (i.e. Technics and NK Ingredients).






In a blog in September last year (see related post at the end of this blog), I said that with the reduced DPU assumed then, if we demanded an 8% yield, we should only be buyers at 66c a unit.

Now, with KTL Offshore gone, with lower income, we won't be wrong to downgrade the REIT.

I wonder also if the REIT would see lower valuations which would impact its NAV and, therefore, its gearing level?

Estimating a more aggressive 10% reduction in the DPU assumed in September 2017, all else remaining equal, we might be looking at a full year DPU of 4.8c.

At 71c a unit, that is a prospective distribution yield of 6.76%.

From an industrial REIT with leasehold properties in Singapore, to me, it hardly seems adequate.

I say this partly because a REIT distributes cash flow and does not retain earnings.

So, the relatively low distribution yield is just not attractive enough for me.





If we demand an 8% yield, then, we should only be buying at 60c a unit with the reduced DPU assumption.

If we are less demanding, a 7.5% yield means we should pay no more than 64c a unit.

However, if we demand a 7.5% yield, we can get that by investing in AIMS AMP Capital Industrial REIT which has a lower gearing level too.








How has the investment in Soilbuild REIT turned out for me?

To be fair, Soilbuild REIT's business parks (with relatively long remaining land leases to boot) are attractive and they were the main reason why I invested in the REIT in 2H 2014.

Unfortunately, bad things happen sometimes.

I believe that selling at NAV is a good outcome although I estimate a capital loss of around $4,000 from the sale.







Having said this, I have received more than $17,000 in income distributions from the REIT since I first became a unit holder.

Yes, I did say before that my investment in the REIT was a relatively small one.

So, roughly, the investment returned more than 8% per annum.





Not fantastic but, as an investment for income, not too shabby either.

Having plonked quite a bit of money in SingTel and ComfortDelgro in 4Q 2017, the money from this sale will shore up my cash position.

Related post:
Decline in Soilbuild REIT's DPU likely.

8 years AAA bond with 2.5% and 4% coupons.

UPDATED IN JULY 2018:

Find out more:
https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/retirement-sum-scheme




-------------------------------------
Conventional wisdom tells us that we should have some investment grade bonds in our portfolio because they help to smooth out volatility.

Investing in good quality equities is probably more rewarding in the longer term but we have to develop a stomach for the volatility that comes with the territory.






Whatever the case may be, when I turn 55, there is no way of knowing if equities would be in a rough patch or not.

So, having some money in investment grade bonds makes sense to me.

It gives me peace of mind.

The CPF is as good as a AAA rated sovereign bond and it is one that pays relatively attractive "coupons".

OK, to be fair, for a younger person, the "coupons" are less attractive than they are for an older person like me.

The closer we are to 55 years of age, the more attractive the "coupons" because the waiting time is shorter.

For anyone who has met the Full Retirement Sum (formerly known as the Minimum Sum) and who believe in having investment grade bonds, taking full advantage of the CPF Annual Limit is a good idea.






Why mention specifically people who have already met the Full Retirement Sum?

Well, at age 55, we will be able to withdraw all CPF money (from OA and SA) in excess of the Full Retirement Sum (formed by savings in our SA and OA) which would go into the newly created RA.

So, for people who have met the Full Retirement Sum, maxing out the CPF Annual Limit, we are setting the stage for a bigger "windfall" when we turn 55.

CPF Allocation Rates.

The CPF Annual Limit is $37,740 for now.





If mandatory contributions (MC) fall short, we can do voluntary contributions (VC) to hit the limit.

So, what am I doing?

I am buying an 8 year tenor AAA rated sovereign bond (i.e. making voluntary contributions to my CPF accounts) with "coupons" of 2.5% (OA) and 4.0% (SA and MA).

Now, you know my age. Alamak.





Read also the blog before this one:
CPF savings grew almost $200K in 3 years.

Related post:
Buying a AAA sovereign bond.

CPF savings grew almost $200K in 3 years!

I don't know if you would agree with me but I think the CPF Board has improved by leaps and bounds when it comes to communicating with CPF members.

I especially like the graphics they have produced to make things easier to understand.

Important or interesting information is clear at a glance when graphics are used well.





While waiting for the updated pie chart to be ready (see past pie charts: here), I will share this bar graph:

It is so easy to see how my CPF savings grew almost $200K in 3 years from end-2014 to end-2017!

The total amount was slightly more than $600K at the end of 2014.

By the end of 2017, it was almost $800K!





The CPF is about the government helping us to help ourselves.

For most of us, this is as close to State welfare as we can ever get in Singapore.

The government offers help.

Let us not foolishly reject it.

For those of us who play the MMORPG "Neverwinter" and have explored Sharandar, this should sound familiar.

Bad AK! Bad AK!





The growth of my CPF savings is really stunning when we remind ourselves that a big chunk of that growth is made up of contributions from the government.

Interest received in 2015:
$20,106.27

Interest received in 2016:
$21,641.52

How much was the interest income for my CPF savings in 2017?






See related post:
Helping to fund my retirement.

My CPF money forms a cornerstone in my retirement funding strategy.

Risk free and volatility free, it helps to give me peace of mind.

Confession and what AK thinks of retirement.

AK said...
"I have left behind the prescriptive world of responsibility and routine which demanded that I made regular and meaningful contributions to the establishment and clients (in ever more difficult conditions)."
(See related post at the end of this blog.)

Reader says...
I see things quite differently. I never felt the world demanded anything from me.





It’s more like what I wanted from the world. And now that I have most of what I want , I do feel a moral need to give back to this world. 

Ranging from being a good son (which you agree) to a good father/husband/friend but also to help other less lucky humans whom I do not know.

As for structure, disciplined people usually remain rather disciplined even in retirement. 

I find myself disciplined in exercise and the way i run portfolio. I am sure you are extremely disciplined on your portfolio thinking and actions too.





Structure and routine is not a bad thing even in retirement. I spoke to quite a few retirees and all speak of having some loose routine and structure. Of course no need to be siao on like during wealth forming days.

Anyway thanks for sharing. I believe each of us have different philosophies and happy that you have found your own balance! 

Was it always so stable or did you take a few years? I took about 3-4 years since retirement to reach this stage of thinking

AK says...
Ultimately, for me, financial freedom is but a stepping stone to a life of freedom.

I guess this is why I can identify with Charlie Munger when he said he wanted to be rich because he desperately craved freedom.

As I have always known what I want, it was easy to slip into retirement when it finally happened.

Mentally, I have always been prepared for it.






There are things which I have always wanted to do or to spend more time doing.

So, I am also prepared for a busy retirement.

I keep saying that I am busier in retirement than I was before.

However, I am happier because I am doing things I want to do which includes being charitable to the needy and this is something I have blogged about many times before.





Unlike you, I don't feel a strong moral obligation to give back to society but I am quite happy to contribute because I can and because I want to.

The only strong moral obligation I feel I have is to my parents.

OK, yes, you are right about having some degree of discipline and loose structure in retirement.

In my case, probably very little to the extent that I don't feel it is there. 　

Definitely not "siao on" which I probably was a little when I was a young working adult.





To be honest, I do not feel that I am a very good investor.

A fellow blogger told me before that he thinks I am financially very comfortable because I am better at personal finance matters than most people, all else being equal.

I agree with him.

Financial prudence is the foundation of wealth building and preservation.

For people who make a lot of money, if they have a modest lifestyle and save most of their money, in a relatively benign inflationary environment, they don't really need to do much else to have a comfortable retirement.






As an investor, I have an approach that is pretty forgiving if I were to make mistakes.

I also don't aim to beat any benchmark.

Again, it is all "agar agar".

Enough of KPIs at work.

I tell myself that as long as I don't do anything ridiculously stupid, given time, I should do well enough.

If I am right more often than I am wrong, given time, I should do well enough.

So, I have to be very clear what is an investment and what is a speculation.

Having said this, I do allow myself to speculate but I keep speculations relatively small.





Apologies but AK is very long winded.

Finally, to me, structure and routine are not bad nor good things in retirement.

Some people have a greater need for them and some don't.

In retirement, we shouldn't have to worry and  we should be free to choose whatever makes us happy. :)

Related post:
Financial freedom or freedom in retirement?

Financial freedom or freedom in retirement.

AK is a very responsible person and is a good role model.

I get the feeling that some people think that way.

Well, I don't think so.

I am sharing something from my FB wall here and you are welcome to eavesdrop.






AK says...
I am enjoying life now and doing stuff that I didn't have enough time to do before.

I was disciplined and thoughtful so that I can be less disciplined and thoughtful as I enjoy an early retirement.

Don't ask:

"When you have to stop working, can you afford to?"

Ask instead:

"If you want to stop working, can you afford to?

Reader says...
That make sense and was my motivation and is my justification nowadays. 

But to probe more if you are ok to share, what criteria is used to decide how you spend your time on stuff you like?

Eg for me, there are issues of still contributing, being useful, example for kids etc.






AK says...
I don't have a framework. 

I just do what I fancy doing each day.

MMORPG, gardening, aquarium keeping, family, friends, blog related activities, reading, watching documentaries, anime, K-drama, doing some physical exercises etc.

There isn't any routine per se. 





More of this one day and more of that another day?

Maybe, even doing mostly one thing some days?

If I want to, yes.

I am like a cook in a Chinese zhi char (cooked food) store, agak agak (estimate) the amount of this and that in the cooking.

Nothing exact.

Everything is by feel.

Happy (and yummy enough to eat) can already lah.








I have left behind the prescriptive world of responsibility and routine which demanded that I made regular and meaningful contributions to the establishment and clients (in ever more difficult conditions).

Not only do I not want to ever go back, I don't want a retirement life that even remotely feels like that.

AK the escapist!

AK doesn't want to be reminded of work.

AK is lazy but he really has good reason to be.





OK, if I had to take care of kids (or old folks), I can imagine that my life would partially, more or less, be run according to their needs and there could be a routine of sorts imposed on me.

I don't know about kids but the time will come when I would have to take care of the old folks at home.

It is something that is probably inevitable.

It is a responsibility that I accept.








Other than that, for now, free from chains, I am enjoying a life that is anything but structured.

Financial freedom is not the same as freedom in retirement.

In retirement, even in doing the things I enjoy, there isn't any structure per se.

This really is freedom.





Yes, AK is so utterly irresponsible!

AK is a bad role model!

Bad AK! Bad AK!

Related post:
Average income workers can be rich.

Views on CPF, insurance and investments changed after eavesdropping on AK. (Don't be "jelly". Make others "jelly".)

Reader #1 says...

I have been following your blog since Aug2015 and benefit greatly from it.

As an employee with salary below average, I couldn't have much to invest.

However I value the awareness that you created among your followers.

I am started to be more responsible to my own financial management and learnt a little bit about investment.

I believe many of them out there too.

I feeling grateful to "meet" you through text.





I want to say thank you again on this very first day of the year because I am still continuing benefit from your blog.

My view towards CPF, Insurance, stocks have changed.

In year 2017, I invested in shares and topping up my SA.

Although all are in very minimal but at least it’s a sign of improvement to me.

Thank you very much for what u have shared in your blog. We learn a lot from you.

Thank you. Wishing you another good year.

May you and your family Stay healthy and happy always. :)

Reader #2 says...

I was fortunate to find your blog few months ago, and have been reading your blog/FB posting almost daily since then.

Just want to take this opportunity to Thank you and appreciate my gratitude to you for sharing your financial wisdom with us.

I have really learned a lot from you, and as your loyal 徒弟, I have put those in real actions. E.g redeemed my home loan, cancelled my ILP, did my CPF VC, opened SRS account, and did my MA top up today.

I was reluctant investing in share in the past.

After I learn the idea of investing for income from your blog and read books you recommended in the blog, I finally decided to open a trading account.





Did my first trade and bought Comfort delgro last month, also nibble on Singtel and ST Eng.

Have the rest of my war chest loaded, patiently waiting a correction in new year and buy more when Mr Market is in distress.

I have started learning the basic FA and TA now, still have a lot things to learn, will keep reading your blog and learn from the experience.

So, do continue to talk to yourself often in the new year, the more the merrier, hehehe.

Wish you have a fabulous new year, good health and of course more passive income, huat ah !!!





AK says...

All of us have different circumstances and all of us have different ability to improve our financial health.

If we diligently do whatever we are able to do in order to have a more secure financial future, it is always better than doing nothing.

I realised that many Singaporeans might not have the funds to invest with even if they want to.





This was a big reason why I decided to blog about the CPF as much as I did in recent years, sharing my own story.

Making full use of the CPF will give us a measure of financial security in our golden years.

If sharing my story has helped regular working people to take action towards achieving greater financial security, then, the time and effort I have put into this blog is all worthwhile.

The ultimate goal is financial freedom but we have to start taking baby steps even as we think big.




Don't be "jin jelly".

Make others "jin jelly".

OK, I know.

Bad AK! Bad AK!




Read also:
AK apologizes to everyone who "jin jelly".
Related post:
A cornerstone in retirement funding.

AK apologizes to everyone who "jin jelly".

Reader said...
I didnt stalk u hor... hahaha but cannot get out of sight of u lah.. !! 

ASSI is everywhere

These bunch of kids only dare to envy, don't dare to take actions.








And shared this screen shot:

"Save hard till the extent of being a miser. 

"Then can start a blog blog abt yr wealth, take screemshot n post here let everyone envy.

"Tiagong it's ASSI."







Alamak!

Why like that?

Talking to myself, my intention is to inspire myself to take steps towards financial freedom.

Definitely, I am not out to make anyone "jin jelly" (HWZ lingo for "jealous").

I apologize if I have made anyone "jin jelly".





Honestly, very cham like that.

No wonder I sneezing like mad.

Read also:
Helping to fund my retirement.

Related post:
HWZ says AK "self-victimize himself".

Government helping to fund my retirement.

AK is a lazy fellow but AK likes to eat fruits.

When he goes to the orchard to pluck fruits from fruit trees, he would pluck those low hanging fruits first.

They require the least amount of effort and they also pose the least amount of risk.





When all the low hanging fruits have been plucked, then, he has no choice but to start climbing up the trees to reach fruits higher up.

Climbing trees, there is always a risk of falling.

The higher he climbs, the harder the fall.

Risky business.

Low hanging fruits for the win!

Thank goodness for low hanging fruits, he says.

At the end of 2017, the low hanging fruits harvest was pretty good:

OA interest: 
$11,958.68

SA interest: 
$9,464.79


MA interest: 
$2,063.23






Total interest received:

S$ 23,486.70

I have shared my story many times before and by spinning it differently this time, I hope it is still an interesting one.

Related posts:
1. A lot of money in my CPF.
2. Upsizing our CPF savings.

1st voluntary contribution to CPF account in 2018.

AK has become a bit more IT savvy and he now contributes to his CPF account using internet banking at home.

OK, you are right. 

I admit. 

AK has become even lazier in his retirement and will try not to leave home, if possible.





Bad AK! Bad AK!

How to do it? 

Er... You mean how to contribute to CPF account using internet banking or how to become even lazier?

Who threw a shoe at me?

Who? Who?

See related post #1 at the end of this blog.





Anyway, I just did my first online voluntary contribution to my CPF account in 2018!

This was to my CPF-MA which, of course, earns 4% interest a year.

For those of us who are still gainfully employed and paying income tax, contributions to our own CPF-MA will also enjoy income tax relief.

For people under 55 years of age who have already maxed out their CPF-SA (i.e. hit the Full Retirement Sum) and for people who are 55 or older, no top up to the CPF-SA is allowed.

However, we can still contribute to our CPF-MA if it has yet to hit the Basic Healthcare Sum (BHS).







The BHS is $54,500.00 in 2018.

Contributing to our CPF-MA if it has yet to hit the Basic Healthcare Sum (BHS) is a good way to earn 4% interest a year.

Of course, in the process, this helps us to enjoy "free" H&S insurance too.

See related post #2 at the end of this blog.





Last year, I said doing a contribution to our CPF-MA at the start of the year would get us an $88 "ang bao" from the government.


For those who still have mandatory contributions to their CPF accounts and hit the BHS in 2017, with the higher BHS in 2018, they can make a voluntary contribution of $2,500 to their CPF-MA now.

This means that they will get a $100 "ang bao" from the government!





What about AK?

See for yourself:

My CPF-MA is lower than the BHS for 2017 because there was a deduction made to pay for my H&S insurance plan last year.

Lacking mandatory contributions from being economically inactive means that I would be able to make a bigger voluntary contribution to my CPF-MA.

So, my ang bao from the government is going to be more than $100!

How much more?

You calculate yourself hor.

Happy New Year!




Related post:
1. Online contribution to CPF.
2. Free H&S insurance in Singapore.