HWZ Forums

Login Register FAQ Mark Forums Read

Balancing Index Investing and life goals.

Like Tree3Likes
Reply
 
LinkBack Thread Tools
Old 09-11-2014, 04:24 PM   #1
Senior Member
 
stoneblackdragon's Avatar
 
Join Date: Jul 2008
Posts: 523
Balancing Index Investing and life goals.

Hi everyone,

I have been a long time lurker in this thread, wanted to seek some advice about balancing my investments and goals.
I am currently age 25. Just graduated from NUS and landed a 3k-ish/month job. After subtracting my expenses, allowance to parents, insurance. I have about 1.6k to invest monthly.

I am deeply influenced by the idea of saving $1650 a month and that would almost get me to 100k in 5 years time. That is my goal.

I have evaluated my risk appetite and decided to set up a monthly RSP component through POSB invest-saver and OCBC BCIP comprising of:

$400 ABF- A35
$600 STI- G3B

Subsequently, I save about $600 in my OCBC-360 account. I am able to fulfill 2 out of 3% interest per annum.


There are some life goals coming up that probably would derail me from my savings.

1. I am intending to save $15k for my wedding in a couple of years
(currently, I have about 8k stashed away in two funds in fundsupermart Templeton total return and blackrock equity income , yes I know its not the best to go with mutual funds- tempted to cash out but I intend to let the funds run inside there for awhile more as I am making some gains through their monthly dividends reinvestment). So i may need to save 7k more. I channel about $200 a month into these two funds from my side income. One of the reasons why i bought these funds is that they r sgd hedged n give me some exposure to global stovks instead of buying n losing in terms of currency

2. I am intending to have about 30k for my BTO downpayment in 5 years. Currently my cpf just began accumulating. This will be done through saving the $600 cash component

Question:

1. should I invest in VWRD/VHYD/VUSA through stanchart instead of using ABF (or reducing my STI %) and treating my cash component of $600 a month as a bond component, would it make more economic sense?

2. is it better to cash out my mutual funds and park them somewhere else?

3. any other advice to help me reach my goals?

Hope it is not too confusing, i appreciate any advice given. Thanks
wahkao3 likes this.

Last edited by stoneblackdragon; 09-11-2014 at 04:30 PM..
stoneblackdragon is offline   Reply With Quote
Old 09-11-2014, 05:43 PM   #2
Master Member
 
Join Date: Dec 2010
Posts: 3,113
Hi! A fellow 25 year old NUS graduate here! Welcome to the working world!

I totally agree with, and can emphathise with your concerns. Like you mentioned, it is a balance between investing and hitting your life goals, as well as keeping a close eye on things that may derail your plans.

1)Personally, I dont recommend people of our age group to invest in equities, especially if they are going to get married within 3-5 years. In that 3 -5 years, stock markets can do very badly. Since you have already done a very good job projecting that you will spend 45k for the wedding, why not first ensure that you have 45k (or the PV of the 45k) is parked in your OCBC 360 account before you start investing? Alternatively, set aside a monthly amount for your wedding/housing fund in your 360 account so that in the case of a downtown, you still have money for wedding. I think it is important that your wedding budget should be insulated from the markets, so that your partner knows that you are prioritising it over a mere 4-5% extra returns through investments.

After taking care of your wedding fund savings, I would go ahead and buy the STI ETF and ABF, and put a certain sum of money in OCBC 360 as you mentioned. However, I would not choose to use OCBC/POSB invest saver because rebalancing through them can be cost-inefficient. Why not just invest using SCB? You can do quarterly dollar cost averaging rather than monthly DCA instead, shouldnt be much of a difference.

You have 100k of cash inflow into your investments, and possibly 45k out. Thats a lot of movement of funds in and out. Make sure that your 45K is secure!

2) Are you intending to get a 3 rm or 4 rm flat? In a mature or non-mature estate. Seeing that price variation from these permutation of choices can range between 150k to 460k (with and without grants), you should find out what you and your partner want, and save towards the projected BTO downpayment price.

3) PM-ed you on other tips!
w1rbelw1nd is offline   Reply With Quote
Old 09-11-2014, 10:05 PM   #3
Senior Member
 
stoneblackdragon's Avatar
 
Join Date: Jul 2008
Posts: 523
Hi w1rbelw1nd,

Thank you for your thoughtful reply.

I truly understand the logic of securing the 45k, come to think of it, quickly accumulating the cash to sit in ocbc 360 acct is a good idea as well.

I have not considered that perspective.
Am seriously considering quickly saving till I hit that amount before I start buying etf..

I am halfway through saving for my wedding 8/15k (intend to use the next two mth salary + bonus) to achieve it by end of 2014. before I let the 15k sit somewhere 'safe'. Hopefully I wont have to spend too much on weddings, want my gf to be happy of course, but also not paying out of the nose for it.

Therafter, I have about 1.6k monthly to work with for savings.

Saving $600 a month in cash, is intended to hit my goal for 30k downpayment for BTO (aiming for a 400k+ house in punggol area).

($600 x 50 months) = 30k [probably if i ballot for a house and built by 2019] [not considering how much CPF deduction there is]

Thereafter the 1k a month is to invest for my future.
In an ideal world, I hope not to draw on it for wedding or BTO (but may have other causes), I want to not hold too much in cash because I feel like I need to build up a comfortable investible nest egg.Therefore I am considering a 60/40 STI/ABF portfolio although I do want so exposure to international stocks

Once I get married, and have to start servicing a house loan and everything, I doubt I can save/invest 1k a month. But i hope to use these few years to build a portfolio where it can continue to go, have dividends to reinvest e.g..

Last edited by stoneblackdragon; 09-11-2014 at 10:07 PM..
stoneblackdragon is offline   Reply With Quote
Old 09-11-2014, 11:55 PM   #4
Master Member
 
Join Date: Dec 2010
Posts: 3,113
Hi w1rbelw1nd,

Thank you for your thoughtful reply.

I truly understand the logic of securing the 45k, come to think of it, quickly accumulating the cash to sit in ocbc 360 acct is a good idea as well.

I have not considered that perspective.
Am seriously considering quickly saving till I hit that amount before I start buying etf..

I am halfway through saving for my wedding 8/15k (intend to use the next two mth salary + bonus) to achieve it by end of 2014. before I let the 15k sit somewhere 'safe'. Hopefully I wont have to spend too much on weddings, want my gf to be happy of course, but also not paying out of the nose for it.

Therafter, I have about 1.6k monthly to work with for savings.

Saving $600 a month in cash, is intended to hit my goal for 30k downpayment for BTO (aiming for a 400k+ house in punggol area).

($600 x 50 months) = 30k [probably if i ballot for a house and built by 2019] [not considering how much CPF deduction there is]

Thereafter the 1k a month is to invest for my future.
In an ideal world, I hope not to draw on it for wedding or BTO (but may have other causes), I want to not hold too much in cash because I feel like I need to build up a comfortable investible nest egg.Therefore I am considering a 60/40 STI/ABF portfolio although I do want so exposure to international stocks

Once I get married, and have to start servicing a house loan and everything, I doubt I can save/invest 1k a month. But i hope to use these few years to build a portfolio where it can continue to go, have dividends to reinvest e.g..
Hmmm so thats how you intend to finance your BTO....

Ideally, you would want to hold on to stocks/bonds as long as possible because of the higher returns. That is why,on average, you would be better of investing what you have now on stocks/bonds. If you have concrete plans already then I would say the most cautious way would be to allocate a certain sum per month into your marriage's 15k. Same goes for your BTO.

In that way, you can do pretty good dollar cost averaging with your investments.

BTW, it may not be a good idea to liquidate your unit trusts IF you want to buy again. You might incur all the sales charges etc and this will hit your returns. If you ever want to sell your investments to fund your wedding (which i do not recommend), you should sell those with least transaction fees (ie your STI/ABF ETFs). Otherwise you can use that opportunity to forever stop owning unit trusts
w1rbelw1nd is offline   Reply With Quote
Old 10-11-2014, 02:17 AM   #5
Supremacy Member
 
Join Date: Dec 2009
Posts: 8,945

1. should I invest in VWRD/VHYD/VUSA through stanchart instead of using ABF (or reducing my STI %) and treating my cash component of $600 a month as a bond component, would it make more economic sense?

2. is it better to cash out my mutual funds and park them somewhere else?

3. any other advice to help me reach my goals?

Hope it is not too confusing, i appreciate any advice given. Thanks
1) No, you're fine. Keep the money for the downpayment in a separate pot from the rest of your investments, because you'll need it a lot sooner than you'll need the rest of your money.

2) Yeah, cash them out and stick the money in a fixed deposit. Money you need in two years shouldn't be in the stock market.

3) Other than that I think you're basically fine. You're starting small, you don't need to get into global stocks yet - get used to the idea of investing a regular amount each month, and then you can diversify once you've got a bigger pot. Stick to G3B and A35 - keep it simple.

(Also, you can buy them through Stanchart instead of the BCIP, and it'll be a bit cheaper.)
Shiny Things is offline   Reply With Quote
Old 10-11-2014, 08:10 AM   #6
Senior Member
 
stoneblackdragon's Avatar
 
Join Date: Jul 2008
Posts: 523
Thanks guys, i will tweak it accordingly and execute
stoneblackdragon is offline   Reply With Quote
Old 10-11-2014, 11:21 AM   #7
Supremacy Member
 
Join Date: Jul 2002
Posts: 6,075
At this point in time, there's no reason to use BCIP anymore because they charge $5 per counter per trade. I agree that you should just use SC and buy whenever you have enough money to buy.

That said, I still use BCIP for regular purchases with my SRS money.
djchris is offline   Reply With Quote
Old 10-11-2014, 12:02 PM   #8
Arch-Supremacy Member
 
naro's Avatar
 
Join Date: Nov 2002
Posts: 14,626
At this point in time, there's no reason to use BCIP anymore because they charge $5 per counter per trade. I agree that you should just use SC and buy whenever you have enough money to buy.

That said, I still use BCIP for regular purchases with my SRS money.
agreed. I just did an analysis of OCBC BCIP, POSB Invest Saver and manual via SCB Online Equities trading here: Which platform for Regular Index Fund Investing? | finance4uandme

POSB Invest Saver makes sense for investments of less than $1,000 per month.
naro is offline   Reply With Quote
Old 10-11-2014, 01:21 PM   #9
Senior Member
 
stoneblackdragon's Avatar
 
Join Date: Jul 2008
Posts: 523
thanks Naro, i have did some calculations too. if i have 1k a mth,
600 for sti and 400 for abf
wouldnt posb for ABF and ocbc for sti end up with the lowest cost of $7 a mth
stoneblackdragon is offline   Reply With Quote
Old 10-11-2014, 02:05 PM   #10
Arch-Supremacy Member
 
Join Date: Mar 2008
Posts: 12,433
thanks Naro, i have did some calculations too. if i have 1k a mth,
600 for sti and 400 for abf
wouldnt posb for ABF and ocbc for sti end up with the lowest cost of $7 a mth
Your fee per month is $10...OCBC charge the higher of 0.3% or minimum $5 per counter...since you are investing in 2 counters, it is minimum fee $10...

Sorry, I read it wrongly...

$400 for POSB Invest Saver would be $4...

OCBC BCIP is the higher of 0.3% or minimum $5...

So your total fee a month is $9...

Last edited by makav31i; 10-11-2014 at 08:08 PM..
makav31i is offline   Reply With Quote
Old 10-11-2014, 02:37 PM   #11
Senior Member
 
stoneblackdragon's Avatar
 
Join Date: Jul 2008
Posts: 523
hmm, yup yup.
posb charges 0.5% for abf bond fund.so its $2 out of the $400
stoneblackdragon is offline   Reply With Quote
Old 10-11-2014, 03:06 PM   #12
Banned
 
Join Date: Dec 2007
Posts: 15,162
Bookmarked.
InnovaIQ is offline   Reply With Quote
Old 10-11-2014, 07:39 PM   #13
Senior Member
 
stoneblackdragon's Avatar
 
Join Date: Jul 2008
Posts: 523
Chanced upon this article.


What Fresh Graduates and Young Persons Should NOT Do - The IFA on Duty

Decided that i should focus more on saving cash in the ocbc 360, so far i have been too eager in investing end up with 8k in mutual funds but not much savings.

gonn save more than i invest, starting with next mth salary, possible save 1k a mth first n use 600 to 800(additional income) on sti n abf

will also cash out my fundsupermart accts soon (nearing breakeven pt) switch them all to money market funds or risk rating 1 bonds.


One bad habit of mine is that I am a saver if i cannot see the money. For the last few months, the first thing i do with my salary is tat i channel 1.6k to unit trusts. Then the remaining are for parents, xpenses etc...

often money in my bank acct get depeleted fast but if i park it somewhere where its troublesome to take out, i dont spend much. But no excuses, gonna learn to save n hold on to the cash
wahkao3 likes this.
stoneblackdragon is offline   Reply With Quote
Old 10-11-2014, 07:50 PM   #14
Supremacy Member
 
Join Date: Jul 2002
Posts: 6,075
For your ABF purchase, why don't you set the sum aside and then buy it by the lot on SC when you have enough to make the purchase? The price doesn't really fluctuate much to be worth paying additional charges to buy odd lots each month.

Agree on the savings bit. What I like about OCBC's online banking portal is that you can set saving goals and put money into them. Once they are into your goals, you cannot withdraw the money through ATM or swipe your card unless you move them out from the goals. It helped me save money without going through a lot of hassle.
djchris is offline   Reply With Quote
Old 11-11-2014, 10:11 AM   #15
Arch-Supremacy Member
 
naro's Avatar
 
Join Date: Nov 2002
Posts: 14,626
thanks Naro, i have did some calculations too. if i have 1k a mth,
600 for sti and 400 for abf
wouldnt posb for ABF and ocbc for sti end up with the lowest cost of $7 a mth
thanks for pointing out. I made a mistake in my calculation.

POSB Invest Saver is one of the most expensive.
naro is offline   Reply With Quote
Reply
Important Forum Advisory Note
This forum is moderated by volunteer moderators who will react only to members' feedback on posts. Moderators are not employees or representatives of HWZ. Forum members and moderators are responsible for their own posts.

Please refer to our Terms of Service for more information.


Thread Tools

Posting Rules

Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are On