*Official* Shiny Things club - Part 2

[Listopad]

I believe BBC would say this is a good debt -- your bonds (assuming almost risk-free like SSB) are yielding higher than your loan.

Imo, there is no need for you to take on extra risk by dumping the funds into stocks.
Stocks can yield 7%. It can also yield way lower. Do you honestly want that extra risk in light of a debt?

Bonds of 4% will not be of no risk. SSB is <2%. Mortgage may be of good debt but it will negate effects if u put it into SSB

 

[Listopad]

The Sgd bonds that I have invested in are not risk free, hence the 4% yield. Unfortunately, neither are they as diversified as a bond ETF, since the investments were done prior to me reading this forum. I could bite the bullet and sell them though and incur the bond spread.

What bonds are u holding

 

[razoreigns]

What bonds are u holding

Surbana, Olam, Frasers, Huarong. Remaining tenor between 2-8years.

 

[mmaro85]

thanks to all that replied on the topic of forex risks.

let me summarize why there seems to be a misconception that investing in foreign denominated equities is equal to taking on a forex risk, and please correct me if my understanding is wrong.

i think the key point is that term "forex risks" is understood differently and might have been used interchangeably with the two concepts below.

concept 1 - currency risk. Like what eD1s0n, BBCWatcher and ShinyThings mentioned investing in a USD denominated does not really have an impact on the underlying asset because ultimately the value of the underlying asset is based on its valuation in the case of a company and not a specific currency. There are cases where the company has a large exposure to USD like Apple holding large amounts of USD but let's not go there.

concept 2 - conversion risk (fees?). I won't exactly call this a risk because this can be viewed as part of the investment process. If you want to invest in something that is not available in the local market, e.g. IWDA. This would be more applicable to folks who are looking to draw down their portfolio.

I concur with you but some of the guys here just didn't understand or just pretend not to , that one day we will need to drawdown our investments as retirement funds. Giving long lectures on global economy does not change the fact that if we start to drawdown at an unfavorable time, fx losses could reduce significantly the percentage of capital gains in SGD.

Then again since we have on day one decided to accept this risk when we began our long term investment using a foreign currency, no point to listen to some of these guys and vomit blood.

Are you referring to to currency risk or conversion risk? Both will have an impact to your capital.

it bugs me that a lot of ppl in SG still have the misconception that investing in USD denominated equities is equal to taking on USD forex risk. (although technically there is a bit of forex risk if the company does business mainly in USD, and if there is a time gap between selling the counter and converting the USD back to SGD).

Doesn't help when some of the personal finance sites are also spreading this misconception.

I didn't quite get the part on the time gap, do you mean if there are fluctuations in USD, it takes a while for the stock market to reflect its valuation due to the company's exposure to USD (doing business in USD)? And if you convert during period, there might be some inaccuracies in the pricing?

 

[BBCWatcher]

Banks classically make money when they accept deposits and pay X% interest (or zero, or negative interest, or charge fees) and loan money at X+Y% interest. That’s their money machine.

When you can do the same — pocket the difference between your loan rate and reliably higher investment rate, you probably should. That’s what businesses do when they raise capital to fund worthwhile investments, that’s what students do when they get interest free loans to develop their human capital (and higher value to future employers, along with greater joy from learning, hopefully), and that’s what households should often do.

The only “caution” really is that you must be prudent and responsible. If you go blow every extra dollar (and more) at the casino, that’s not going to work. If you live beyond your means — buy a home that’s too lavish in the circumstances, or buy a car when you really shouldn’t have one at all(*) — then you can run into issues. Some people do this, and for those people probably the best they can do is to get a ~2% return on their savings by paying down a low cost mortgage faster than required. Otherwise they wouldn’t save at all or save very little.

Bear in mind that home equity isn’t actually very liquid. There are some cases when people accelerate repayment on a mortgage and the acceleration itself ends up getting them into cash flow trouble because their liquid deep reserves aren’t big enough for a genuine emergency and the bank(s) won’t agree to refinance (which has a significant transaction cost anyway). So they have to sell their homes to raise liquid funds to cope with the emergency. Yes, this really happens.(**)

How you invest your savings is largely a separate issue, and you would invest them prudently, in a way that’s well diversified and with a risk profile that’s appropriate for your age and investment time horizon. I don’t think holding a small number of large value (I presume) individual Singapore dollar junk bonds (and/or low investment grade bonds) is the best approach, honestly.

(*) I took a car loan once at 2.9% APR in the U.S. because I needed the car, it was a car I could easily afford and non-lavish in the circumstances, and I was/am a responsible saver who invested prudently — and 2.9% was cheap money. (U.S. car sellers frequently offer genuinely low cost or zero cost financing as a promotion.) I took the maximum term offered, set up the monthly loan servicing to be automatic, and I paid the loan in full, on schedule but no faster. Did I win? Yes, absolutely. That worked out very well indeed and contributed to greater wealth...for those who are responsible and prudent. It also added to my credit history and improved my credit score. Singapore is different. Car loans aren’t as cheap, and cars are pure luxuries (with very rare exceptions).

(**) Another important point when the secured lender has no legal recourse beyond the security.... When the asset is distressed, it might be prudent to walk away, quickly. This actually happened in the U.S. only 10+ years ago. Imagine you bought a home in Florida in 2006 or 2007 with no money down — 100% loan to inflated value ratio — and then the value of your home was cut in half. You now have a $700,000 mortgage on a $350,000 property, let’s suppose. What should you do? Run away, probably. True, it’ll wreck your credit score for 7 years, but the mortgage lender has no recourse. And that’s exactly what many thousands of people did, entirely rationally and sensibly. There were many thousands more who continued paying their underwater mortgages for a while, lost their jobs, drained all their savings to continue servicing their underwater mortgages, and then defaulted anyway, wrecking their credit scores for 7 years but much later. That was not smart, but it was an understandable emotional response — not a financially sensible response. Singapore is different. In Singapore lenders have recourse, so the sort of stuff I describe probably won’t happen as much. But hypothetically it could, especially with foreign buyers. (Banks and the government know this, by the way, which is why we have LTV ratios and ABSD.) There is at least one “ordinary” situation when something similar occurs. Let’s suppose you have a HDB unit and you’re servicing the mortgage using OA funds — a common pattern. That means you must have Home Protection Scheme mortgage insurance. Well, now you die. HPS pays off the loan (or your share of it, anyway). If you paid down this cheap loan faster than required, you (your heirs, really) lost OA interest at least plus much or all of the HPS payout. And that’s not as good — your heirs lost some wealth.

 

[eD1s0n]

I didn't quite get the part on the time gap, do you mean if there are fluctuations in USD, it takes a while for the stock market to reflect its valuation due to the company's exposure to USD (doing business in USD)? And if you convert during period, there might be some inaccuracies in the pricing?

I was just trying to say that there is Forex risk if you let your USD sit as cash for too long. Bad phrasing on my part :/

 

[BBCWatcher]

I was just trying to say that there is Forex risk if you let your USD sit as cash for too long.

Of course you wouldn’t do that, because you’re a rational, sensible, prudent investor.

By the way, having “excess” U.S. dollars to spend while living full time in Singapore isn’t such a horrible problem. You can spend them on real goods (physical and non-physical, such as e-books) purchased from U.S. merchants such as Amazon.com, which does ship to Singapore I’m quite sure. And U.S. dollars are accepted if you want to take your next vacation at Disney World, Disneyland, the Grand Canyon, or on Broadway (as examples). They work great if you want to send a grandchild to a U.S. university, as another example. Their real value is quite stable for real goods (and some services) that you’re probably already buying as a smart shopper and vacationer, to some degree anyway. There is a reasonable argument that you’d be taking more (not less) currency risk if you’re maniacally holding *only* Singapore dollar cash and cash-likes (such as SSBs and CPF assets) while retired and living full time in Singapore, if only because Amazon.com (the U.S. version) sometimes offers better deals on particular products than local merchants do. So I don’t think you ought to have an extreme aversion to that particular currency, the world’s most consumer useful one. These aren’t South African rand we’re talking about here. (Unless you have a particular, frequent interest in South African vacations.)

If you have too many U.S. dollars and don’t know how to spend them, I can help solve your problem: just send the U.S. dollars to me. Then you won’t have too many U.S. dollars, and you can rest easier. I also accept other currencies if you’re looking to rid yourself of other excess currency concerns. I particularly like euro and yen, but I only charge a modest disposal fee (payable in Singapore dollars) to accept your other nasty excess currencies, as long as they are legally obtained. Do we have a deal?

 

[razoreigns]

How you invest your savings is largely a separate issue, and you would invest them prudently, in a way that’s well diversified and with a risk profile that’s appropriate for your age and investment time horizon. I don’t think holding a small number of large value (I presume) individual Singapore dollar junk bonds (and/or low investment grade bonds) is the best approach, honestly.

Hi BBCW,

Thanks for your reply. Yes, I probably did not do the best thing by investing into small number of bonds. In my mind, I was thinking that I was having a mortgage loan and any savings (beyond emergency cash fund) was either going to be used to repay the mortgage or to be placed into safer assets, with low volatility and income producing. I choose to invest into SGD bonds as it was yielding better than the interest that I was paying.

But if I read you and the forum consensus correctly, then the savings should be invested proportionally, by age, into IWDA, STI and bond etf.

My current portfolio is:
6% Cash
37% SGD Bonds/CPF - multiple single bonds
8% SG equities - mostly in single larger caps, very little in STI
49% in property - mainly in my residential property, but I also have a property yielding 6% currently.

Based on my current asset allocation, I should be selling bonds and buying IWDA. That is where my hesitation is - I have mortgage debt and should I still be investing into higher volatility equities? My current debt to total asset ratio is 16%. Is there a rule of thumb what this ratio is ideally at?

Singapore is different. In Singapore lenders have recourse, so the sort of stuff I describe probably won’t happen as much.

Yes, it is precisely because I know banks have recourse that I view the debt that I have taken against the house as just debt in general that is against my name, without being tied to any specific asset class. If I invest in any asset class, it could be viewed as leveraged investments, be it bonds or stocks. Now, if it was leveraged, conventional wisdom would be to do fixed income instead of equities? Hopefully, I was able to express my thoughts and dilemma clearly.

 

[BBCWatcher]

Based on my current asset allocation, I should be selling bonds and buying IWDA.

That would be age (time horizon) and risk appropriate, yes.

That is where my hesitation is - I have mortgage debt and should I still be investing into higher volatility equities? My current debt to total asset ratio is 16%.

If I understand correctly, that's not very high at all (as a general matter).

Is there a rule of thumb what this ratio is ideally at?

I don't think so. It's situational. A fresh university graduate might have an infinite debt to asset ratio in financial terms -- some student loan debt and no financial assets to speak of -- but a huge amount of human capital as a direct consequence of incurring that debt. (Or how about not getting that Ph.D. from Stanford, because then student loan debt would be $0? Well, that's one decision, but is failure to make that human capital investment a bad decision? Yes, usually, on average, it would be a very bad decision.)

When you're trying to figure out how to manage debt, I would consider some core principles:

1. Is the debt low cost, high cost, or somewhere in between? Low cost debt is great stuff quite often, and current mortgage interest rates are genuinely low. "Low" and "high" are relative to reasonable, prudent investment opportunities and market conditions.

2. How easy or hard is it to service that debt? To pick an extreme scenario, if you have zero income and zero liquid savings, then it'll be quite difficult to service a mortgage. But if both of those are reliable and relatively abundant, no problem.

3. Do you exhibit behaviors that are thrifty and prudent? Do you find it easy and natural to save a surplus, or are you most inclined to live paycheck to paycheck (or even beyond paychecks)? From your descriptions so far you appear to have no particular concerns here.

4. If the cost of the debt is subject to change -- if interest rates rise -- would that be a particular problem, or are you well defended? If you could transfer funds to pay off the debt just before it becomes expensive, no problem. (As I was fortunately able to do just before my student loans converted from 0% interest with deferred payments to X% interest with required payments, where X% was comparatively unattractive and at attractive enough to pay down in full.)

Note that "well defended" doesn't mean you have to back a mortgage exclusively with bonds, although that is one possible approach. It's perfectly OK to have adequate defenses.

5. Are there any prepayment penalties if you were to accelerate repayment on a suddenly, genuinely high cost loan? Avoid such loan terms if you can, or at least try to minimize them.

Yes, it is precisely because I know banks have recourse that I view the debt that I have taken against the house as just debt in general that is against my name, without being tied to any specific asset class.

That's a reasonable view for/in Singapore, although lenders don't have unlimited, unfettered recourse. There are still some constraints.

If I invest in any asset class, it could be viewed as leveraged investments, be it bonds or stocks. Now, if it was leveraged, conventional wisdom would be to do fixed income instead of equities? Hopefully, I was able to express my thoughts and dilemma clearly.

Money is fungible to a significant degree, but what's actually leveraged is the home, the property. If you take the broad view you're describing -- and I think it's too broad -- then you could just as easily argue that the cup of coffee you bought earlier today was a leveraged coffee purchase. Yes, true, you have an outstanding loan (a mortgage), but is everything else you do (financially speaking) also leveraged? I guess you could answer yes to that question, but that seems at least a bit over-the-top.

Buying stocks, bonds, and/or funds using broker margin would certainly be leveraged investing.

Leverage is not necessarily or even often a bad thing, as long as the leverage (debt) is low cost and manageable along the lines I described above. No, that's not a recommendation to go buy Bitcoin using broker margin.

 

[cuddlefish]

Opening separate brokerage accounts?

Hi everyone,

I've got a few quick (I hope) questions and would appreciate your input, thanks!

1) I understand that IB has layers of customer protection in case of insolvency. Should I still be concerned about the 500k limit of SIPC coverage per account for IB - should a second account be opened under my partner's name?

2) Is concentration risk a concern, where everything is held under IB? Should I consider using another broker to mitigate this?

 

[razoreigns]

Hi BBCW,

This is really an excellent write up and worthy to be re read. You put so much thoughtfulness in them!

2. How easy or hard is it to service that debt? To pick an extreme scenario, if you have zero income and zero liquid savings, then it'll be quite difficult to service a mortgage. But if both of those are reliable and relatively abundant, no problem.

I think the mindset for many people who are uncomfortable with any debt in their lives is the fear of retrenchment. While you could be drawing a comfortable salary now, there is no certainty in that for the future. And mortgage loans are long term, 20+ year obligations. Sadly, retrenchments are common situations today and for some, to get reemployed might even take up to 3 years for a commensurate position (no joke, I keep an emergency fund for 3 years of expense). That is also why I had sought to build an income portfolio - to service the mortgage passively without dependence on employment income.

Money is fungible to a significant degree, but what's actually leveraged is the home, the property. If you take the broad view you're describing -- and I think it's too broad -- then you could just as easily argue that the cup of coffee you bought earlier today was a leveraged coffee purchase. Yes, true, you have an outstanding loan (a mortgage), but is everything else you do (financially speaking) also leveraged? I guess you could answer yes to that question, but that seems at least a bit over-the-top.

Great illustration! I didn't see it that way, when I drank my coffee! While slightly exaggerated (since coffee is really a necessity, while investments are not), I think you have brought the right perspective to me. Cheers!

 

[mozzozo]

Hi guys, any recommendations for an app that can show you and track your consolidated portfolio?

 

[BBCWatcher]

I think the mindset for many people who are uncomfortable with any debt in their lives is the fear of retrenchment. While you could be drawing a comfortable salary now, there is no certainty in that for the future.

Yes, that is a fear. But let’s suppose you’re retrenched. Which profile would you rather have:

(a) $200,000 of home equity, a $2,000/month low interest loan payment, $2,000/month of other household expenses, and $400,000 of liquid assets, or

(b) $500,000 of home equity, no loan payment, $2,000/month of other household expenses, and $50,000 of liquid assets?

That’d be a typical pair of alternative situations. In scenario (a) your total net worth is higher because you really can reliably beat a ~2% return over reasonable time periods or longer, and you can keep the household afloat for at least 100 months without having to sell off your home. (More actually since the savings are bigger and keep growing.) In scenario (b) you can keep the household afloat for about 25 months, and then you’ve got to sell the home. I’m assuming a bank won’t refinance a mortgage for an unemployed customer, which seems like a reasonable assumption.

You can still decide to sell the home in scenario (a), but you have >4 times as long before you must.

Yes, I know, this seems counterintuitive, but there’s no flaw in this logic. It’s a simple illustration of better versus worse household debt, wealth, and cash flow management. Cheap debt, combined with responsible savings and prudent investing behaviors, means a household gains more “altitude” more quickly, for more stability and financial security, not less....

....Also why I keep harping on how important Disability Income Insurance is to most households.

And mortgage loans are long term, 20+ year obligations.

Not exactly. They’re obligations to repay funds within a term or faster. If the obligation truly becomes weighty (the interest rate becomes high) then you can dispose of the obligation more quickly or instantly. But imagine a 0% interest loan for a moment, like my student loans which were 0% with deferred payments while in school plus a 6 month grace period. Why would you ever want to pay that off any quicker than required, in a “normal” currency with some inflation anyway? If you could make that deal last 50 years you would. The same principle applies in a ~2% interest mortgage world with ~6% expected long-term average returns on prudently invested savings.

Mortgages are not like having a child. There’s no legal option to shove a child out the door at age 8 and say goodbye forever. (*) Maybe that’s why Singaporeans have more mortgages than children.

(*) Well OK, you could give your child up for adoption.

 

[Ilovemathstutor]

Hi everyone,

I've got a few quick (I hope) questions and would appreciate your input, thanks!

1) I understand that IB has layers of customer protection in case of insolvency. Should I still be concerned about the 500k limit of SIPC coverage per account for IB - should a second account be opened under my partner's name?

2) Is concentration risk a concern, where everything is held under IB? Should I consider using another broker to mitigate this?

I would place them at interactive brokers to the limit that they have.
then, open another at TD ameritrade.
the last time, we calculated that means you have > 2.75m usd per account?
if not, it's not a problem that plagues most people.

 

[cuddlefish]

Ah I've found a couple of previous posts with that discussion, thanks! Gotta keep hustling then!

 

[highsulphur]

Which brokerage offers the cheapest commission for usd counters on Sgx? The trades should be directed to CDP rather than to be held in custodian by the broker.

 

[razoreigns]

Yes, I know, this seems counterintuitive, but there’s no flaw in this logic. It’s a simple illustration of better versus worse household debt, wealth, and cash flow management. Cheap debt, combined with responsible savings and prudent investing behaviors, means a household gains more “altitude” more quickly, for more stability and financial security, not less....

Really excellent stuff. Your simple illustrations really show factually which strategy is in fact safer. Definitely counter intuitive, especially when you think that taking on debt is taking on more risk.

However, if I could get a low cost loan on IWDA/ES3 etc (similar to mortgage loan rates), wouldn't it then be logical to max the LTV on those instruments out? Surely there is some point whereby this strategy becomes a really risky and even reckless proposition.

Therefore, I wanted to know if there is an ideal total debt/total asset ratio in personal finance. For companies, these are key metrics to look out for. If I take reference from the government, then all loans (mortgage, personal guarantees, credit card debt, car, all others) should not be more than 60% of your monthly income. I think this is too aggressive. For HDB buyers, the ratio is 30% of your monthly income as a cap to the loan. I also think that this is still too high (not as a cap, but should one really spend 30% of income on housing?).

....Also why I keep harping on how important Disability Income Insurance is to most households.

But aren't these too expensive for the amount of coverage it provides?

Mortgages are not like having a child. There’s no legal option to shove a child out the door at age 8 and say goodbye forever. (*) Maybe that’s why Singaporeans have more mortgages than children.

(*) Well OK, you could give your child up for adoption.

I was more thinking along the lines of an expensive wife, but well, the example with kids works too!



Separately, on the topic of asset allocation - where do properties come in?

My current allocation is:
- 6% Cash (this is an emergency fund + daily expenses)
- 37% Bonds (including CPF monies)
- 8% Equities
- 49% Properties (44% is my primary residence, 5% in a rental property)

Based on my age, the recommended allocation is:
- 32% MBH
- 34% IWDA
- 34% ES3

Do I just exclude the value of properties in the above allocation model or should I count it under ES3 (since they are SG properties)? I have my own stay residence and another property that is earning rental. These are illiquid and chunky and would not be easy for me to switch asset classes.

Secondly, in my youth, my parents had purchased an AIA whole life insurance policy for me. It has already been serviced for the 23rd year by now. Should I surrender the policy and switch to ETFs or should I just consider it under my bond allocation? The cover that comes with the policy is not high. Projected yield if I surrender the policy in 2 years is 3.77%, in 7 years is 3.86%, if until age 65, will drop to 3.5%.

 

[d5dude]

Great illustration! I didn't see it that way, when I drank my coffee! While slightly exaggerated (since coffee is really a necessity, while investments are not), I think you have brought the right perspective to me. Cheers!

Wrong way to think about this. Coffee is consumption, its not the same thing as investment in bonds, stocks or even an education, buying coffee means your money is gone forever, you should never borrow to consume, this is what the plebs do and it is what keeps them in perpetual poverty.

You are overthinking your situation, 2% mortgage rate is cheap money, you should take it as long as you have the ability to service the mortgage comfortably with your salary, if you are jobless or have an unstable income then maybe its not such a good idea. Stocks can reliably generate more than 2% return a year over long term, as long as you can tank the volatility, since lump sum investing beats DCA in terms of returns, its always better to invest earlier than later.

 

[BBCWatcher]

However, if I could get a low cost loan on IWDA/ES3 etc (similar to mortgage loan rates), wouldn't it then be logical to max the LTV on those instruments out? Surely there is some point whereby this strategy becomes a really risky and even reckless proposition.

I'm generally not too enthusiastic about broker margin for "ordinary" long-term investing. Margin interest rates can sometimes be fairly reasonable, but margin calls can be unpleasant. One interesting thing about most stocks and stock funds is that you can get a price quotation at any time (at least while the trading markets are open), so they can express volatility. Your home doesn't have any real way to express its instantaneous value. Mortgage lenders have the right to issue their own "margin calls" when general or local property market conditions suggest they're in danger of not having enough collateral, and that actually happened to some in Singapore during the Asian Financial Crisis. But in stock markets margin calls can happen more often simply because there's so much more immediate transparency in valuations, with the broker's computers keeping close tabs on your margin positions.

There's also some regulatory risk. Hypothetically the regulator could order brokers to close out all margin positions. That's a small risk probably, but it's not inconceivable.

I'm not necessarily opposed to using broker margin, and (in "small" doses) it could make some financial sense. But that'd be after tapping any more attractive cheap money offers.

To answer your question about ratios, lenders (and regulators) are supposed to apply some standards. Those standards are really designed primarily to protect the lender and the banking system, not necessarily the borrower who usually has more information about his/her own creditworthiness anyway. So I really fall back on my "it's situational" answer.

But aren't these too expensive for the amount of coverage it provides?

Disability Income Insurance? Well, it's a reasonably competitive market with three carriers in Singapore offering it. And the alternative is...?

Separately, on the topic of asset allocation - where do properties come in?

They can count generically as "stock-likes" when you're trying to figure out stock-bond allocations. If they are individual properties then they have specific geographic places, so when you're looking at how much geographic risk you have you assign them to their various places. Individual REITs are usually geographically concentrated, too. REIT funds may or may not be geographically diversified.

Secondly, in my youth, my parents had purchased an AIA whole life insurance policy for me. It has already been serviced for the 23rd year by now. Should I surrender the policy and switch to ETFs or should I just consider it under my bond allocation? The cover that comes with the policy is not high. Projected yield if I surrender the policy in 2 years is 3.77%, in 7 years is 3.86%, if until age 65, will drop to 3.5%.

Tangent314 enjoys taking at look at those questions if you'd like to post the policy details (with personal details removed). Presumably the projected yield isn't guaranteed.

 

[w1rbelw1nd]

Really excellent stuff. Your simple illustrations really show factually which strategy is in fact safer. Definitely counter intuitive, especially when you think that taking on debt is taking on more risk.

However, if I could get a low cost loan on IWDA/ES3 etc (similar to mortgage loan rates), wouldn't it then be logical to max the LTV on those instruments out? Surely there is some point whereby this strategy becomes a really risky and even reckless proposition.

Therefore, I wanted to know if there is an ideal total debt/total asset ratio in personal finance. For companies, these are key metrics to look out for. If I take reference from the government, then all loans (mortgage, personal guarantees, credit card debt, car, all others) should not be more than 60% of your monthly income. I think this is too aggressive. For HDB buyers, the ratio is 30% of your monthly income as a cap to the loan. I also think that this is still too high (not as a cap, but should one really spend 30% of income on housing?).



But aren't these too expensive for the amount of coverage it provides?



I was more thinking along the lines of an expensive wife, but well, the example with kids works too!



Separately, on the topic of asset allocation - where do properties come in?

My current allocation is:
- 6% Cash (this is an emergency fund + daily expenses)
- 37% Bonds (including CPF monies)
- 8% Equities
- 49% Properties (44% is my primary residence, 5% in a rental property)

Based on my age, the recommended allocation is:
- 32% MBH
- 34% IWDA
- 34% ES3

Do I just exclude the value of properties in the above allocation model or should I count it under ES3 (since they are SG properties)? I have my own stay residence and another property that is earning rental. These are illiquid and chunky and would not be easy for me to switch asset classes.

Secondly, in my youth, my parents had purchased an AIA whole life insurance policy for me. It has already been serviced for the 23rd year by now. Should I surrender the policy and switch to ETFs or should I just consider it under my bond allocation? The cover that comes with the policy is not high. Projected yield if I surrender the policy in 2 years is 3.77%, in 7 years is 3.86%, if until age 65, will drop to 3.5%.

Actually, I dont think you need much help with whatever you are doing - I think you have the idea that it is not a straightforward answer.

I would want to add it really depends on your own personal circumstances. Your job stability, your obligations to your family, and even your goals in life (aim to start a capital intensive business etc) , all these have an impact how you choose to look at debt.

I want to have maximum flexibility in my life as a result I have a preference to get a cheaper residential housing, not using housing as an investment vehicle, not topping up CPF SA, and invest in a disciplined manner AFTER doing a detailed annual budget. May not be the same preference as everyone, but I do I