Do you over invest?

[hwmook]

Will these interest rate come down soon with Fed recent announcement

Sure will, SORA already drop 0.4% in response to Fed announcement. You just wait for the update from the banks.

 

[hwmook]

If you think about it; excess amounts of money which you accumulate, either can be spent on things or experiences which many people may think it is waste, but then it is excess money, so anyways you spend it, it will feel like a waste to a lot of people.

What would be the other alternative? Not earning that excess money at all, by retiring early or by giving that excess money as inheritance or charity.

Anyways, I feel, financial independence is about mainly focussing about funding of core expenses throughout lifetime and also some discretionary spending throughout lifetime. Beyond that people who are fortunate enough to accumulate excess savings, can do anything with it, there are no rules, everything is game.

I am also the type who spend money on experience but haven't need to pay cash for biz class yet since I got miles to burn. I don't buy any branded stuffs and frown on overpaying for soft drinks during meals but splash on helicopter rides and whale sighting cruise. My wife think I am crazy but after the experiences will feel damn pleased.

 

[Meemoosaa]

this is actually quite tricky so I would appreciate some tips how to do this.

Throwing money at frens I feel a bit awkward if they feel pressured to reciprocate.

Those that are wealthier than me, will definitely try to reciprocate and end up giving me stuff I don't need. I got wine collecting friend trying to give me unwanted bottles to make space for new stuff. If I give him stuff, I am probably obliged to accept the wine which I don't drink.

Those that are less fortunate than me, is it also awkward to throw gifts at them every month? Can share your experience?

My parents no problem. In addition to the usual pocket money, happy to pay for their holidays, Because of their age, they travel with their group of equally elderly friends, and they only travel to Malaysia and enjoy the company of friends. Not as if I have to buy them sq suites to sydney every quarter.

I know of someone who is a DINK, set up her own educational trust for anyone in her large extended family who wishes to further their education. So anyone in the family can basically "apply". So she has nieces, nephews and younger cousins all applying for it. haha. She has no plans to retire early as she loves her work is a huge believer of education. I don't think she's a multi millionaire or anything but she believes in contributing back.

 

[hwmook]

I know of someone who is a DINK, set up her own educational trust for anyone in her large extended family who wishes to further their education. So anyone in the family can basically "apply". So she has nieces, nephews and younger cousins all applying for it. haha. She has no plans to retire early as she loves her work is a huge believer of education. I don't think she's a multi millionaire or anything but she believes in contributing back.

I think I kind of enjoy teaching, maybe I will just be a tution teacher when I retire early.

 

[x9evolution]

Will these interest rate come down soon with Fed recent announcement

FD rate had already came down , UOB one also came down few months back , OCBC 360 don’t know when will follow

 

[Nofear40]

In this case, won’t the passive income drop a lot? And unstable to rely on this for retirement income? realise that 2/3 of my passive income is from bonds, endowment, savings etc

 

[highsulphur]

In this case, won’t the passive income drop a lot? And unstable to rely on this for retirement income? realise that 2/3 of my passive income is from bonds, endowment, savings etc

Bonds payout should be stable during interest rates but yield will fluctuate with capital gains and losses. Even dividends yields can fluctuate.

Nothing is for certain. Just need to cater for some buffer

 

[DevilPlate]

In this case, won’t the passive income drop a lot? And unstable to rely on this for retirement income? realise that 2/3 of my passive income is from bonds, endowment, savings etc

U already lock in the yields from bonds

 

[BBCWatcher]

In this case, won’t the passive income drop a lot? And unstable to rely on this for retirement income? realise that 2/3 of my passive income is from bonds, endowment, savings etc

Bonds payout should be stable during interest rates but yield will fluctuate with capital gains and losses. Even dividends yields can fluctuate.

Nothing is for certain. Just need to cater for some buffer

U already lock in the yields from bonds

We should distinguish between direct holding of bonds and bond funds. Let's start with bond funds, and I'll use MBH as a prototypical example.

Over long enough (or longer) time periods MBH will probably generate an average net real return of about 0.5%. More simply, it should do a bit better than Singapore dollar inflation over long enough (or longer) time periods. That's an educated guess, but I think it's a reasonable forecast. MBH invests in investment grade (and pseudo "investment grade") corporate and quasi-sovereign Singapore dollar denominated bonds. As of the end of July, 2024, its bond portfolio had a weighted average nominal yield to maturity of 3.62%, and the weighted average duration was 5.7 years. As interest rates fall (bond prices rise) its share price should rise (its existing bond portfolio will appreciate). But it's only a ~5.7 year bond fund, so both good times and bad times (in bond market terms) don't last forever.

If you're directly holding an individual bond, that bond could mature tomorrow (or at least very soon), or almost 50 years from now. (MAS has been issuing 50 year bonds lately.) If you're just holding a bond until maturity then you get whatever the coupons are until maturity, assuming there's no default. Then face value at maturity. If you bought a "high" interest rate bond, congratulations. If you bought a "low" interest bond, I'm sorry. But either way the coupons are whatever they are. Coupons are fixed, of course (with bonds issued in Singapore anyway), and (with inflation) coupons will have progressively lower real values. Once the bond reaches maturity the deal ends. If you're 90 years old holding a bond with 38 years to maturity then you can depend on coupons outlasting your lifespan (assuming no default). If you're 30 years old holding a bond with 4 years to maturity, different story.

At maturity you may be thrust into a low interest rate environment (high priced bonds), high interest rate environment (low priced bonds), or something in between. How lucky do you feel? That's an advantage of bond funds: they hold a larger portfolio of bonds than you can usually hold, and they continuously cycle bonds through their portfolio, consistent with the fund objectives.

 

[StableInvestor]

In this case, won’t the passive income drop a lot? And unstable to rely on this for retirement income? realise that 2/3 of my passive income is from bonds, endowment, savings etc

Yes, your passive income from your cash component will likely drop as the the FDs and Tbills rates are likely to go lower in the coming months. Will be good to consider Singapore Savings Bond to lock in the rates for longer. You can also rebalance more of your cash portion into bond funds or bonds.