[seek financial advice]

[Dolphinqiqi]

Both of us are going to be 40 very soon.
- 500k+ in cpf. SA/MA account reached the limit.
- an EC with 800k+ loan.
- almost 300k in SG stock. Can receive 17k dividend this year.
- Plus 90k cash and enough insurance including life insurance.
- cash flow is around 100k per year.

After reaching 300k in SG stock, thinking if we should adjust investment plan. A few choices in mind.
- continue to invest but to world ETF, IWDA.
- buy another condo
- buy 100k SSB first before further stock investment.

Can get your opinion which choice we should go for?

 

[BBCWatcher]

Currently your household has this investment portfolio:

* 100% Singapore, 0% global
* approximately 40% in stocks/stock-likes and 60% in bonds/bond-likes

For the second calculation, I’m assuming you have approximately $200K of equity in your home.

The general recommendation for your age would be an 80%/20% split between stocks and bonds, and certainly something more than 0% in global investments, to mitigate risks that disproportionately affect Singapore or the region. So yes, steering monthly savings into IWDA (or IWDA+EIMI, or VWRD) would make a lot of sense since it would push your portfolio in both directions.

Assuming both your and your spouse’s CPF accounts are similar (MA=BHS, SA=FRS or higher), then you might consider servicing your mortgage, at normal pace (with today’s still low interest rates), using your Ordinary Account(s). That’s an interesting decision, though. If you’re CPF rich but your spoues is CPF poor, or vice versa, I would work to fix that, especially if one spouse isn’t yet collecting all possible bonus interest.

You could certainly shift some of that $90K of cash into SSBs, assuming they’re higher yielding. SSBs are not as liquid as a regular bank account, but they are still highly liquid. They’re good for handling the third emergency month onward.

A Supplementary Retirement Scheme (SRS) account starts to get fairly interesting at your age. A Straits Time Index (STI) fund works well inside a SRS account. If your “Singapore stocks” are already inside SRS accounts, fine. If not, you could possibly take a look at whether there’s a reasonably low cost way to move your existing Singapore stock holdings into the SRS. Unfortunately I don’t think you’re allowed to do that “in kind,” and it’d require a sale followed by another purchase, both with commissions.

You’re hugely invested in real estate at present, I would point out. As you pay off your mortgage that real estate percentage will increase. Singapore stocks are skewed rather heavily to real estate (in Singapore and in the region), too. Thus I would not double down (or triple down) on any one sector, and that includes real estate. In my view it’s better to stay well diversified.

 

[Dolphinqiqi]

Thanks, BBCWatch. I took these two advice.
- Invest into global ETF
- Reduce the estate related stock holdings in SG. This needs some time to change out. I don’t hold any bank related stocks. Besides bank, any other type? I hold engineering, estate, telco.

Current property is 450k + 800k loan.
Yes, my spouse and my CPF are well balanced.
SRS, I only use it for tax reduction purpose. Very small amount, 10k only. If it doesn’t help for tax reduction, I prefer not to transferring anything into it.

 

[hwmook]

Both of us are going to be 40 very soon.
- 500k+ in cpf. SA/MA account reached the limit.
- an EC with 800k+ loan.
- almost 300k in SG stock. Can receive 17k dividend this year.
- Plus 90k cash and enough insurance including life insurance.
- cash flow is around 100k per year.

After reaching 300k in SG stock, thinking if we should adjust investment plan. A few choices in mind.
- continue to invest but to world ETF, IWDA.
- buy another condo
- buy 100k SSB first before further stock investment.

Can get your opinion which choice we should go for?

1. Your SG stock must be heavily biased to REITS to receive that amount of dividends.
2. Your portfolio is heavily tied to SGź property which is too risky. Buying a 2nd property only add to the same risk.

 

[BBCWatcher]

- Reduce the estate related stock holdings in SG. This needs some time to change out. I don’t hold any bank related stocks. Besides bank, any other type? I hold engineering, estate, telco.

I didn’t necessarily recommend that. You might simply give global stocks some attention, and just leave the Singapore stocks alone for now. That’ll naturally shift your portfolio allocation.

Current property is 450k + 800k loan.

OK, so your stock/stock-like allocation percentage is somewhat higher than I estimated.

Yes, my spouse and my CPF are well balanced.

Awesome.

SRS, I only use it for tax reduction purpose. Very small amount, 10k only. If it doesn’t help for tax reduction, I prefer not to transferring anything into it.

I think you misunderstood me. My point is that the Singapore stocks are probably best held inside your SRS account. (I assume that $10K is part of your $300K.) If you’re making SRS contributions then you probably want to do it in the form of ES3, the STI. What you might consider doing is something like this:

(a) Make a SRS contribution, and buy ES3.
(b) Sell the same amount of your non-SRS Singapore stock holdings.
(c) Use the proceeds from that sale for IWDA, IWDA+EIMI, or VWRD, on top of your regular investment flow.

The only thing I don’t like about that is that’d incur some costs, particularly in part (b). But if your saving into global stocks is going to outpace your SRS contribution, then you can probably avoid part (b) and its associated costs.

 

[Dolphinqiqi]

Thanks, hwmook. REITS is around 1/3 in my investment.

1. Your SG stock must be heavily biased to REITS to receive that amount of dividends.
2. Your portfolio is heavily tied to SGź property which is too risky. Buying a 2nd property only add to the same risk.

 

[Dolphinqiqi]

Thanks, BBCWatcher.
I really don’t get why SG stock investment is better be put in SRS. Can you share more on this point?
SRS’s investment cannot be withdrawn easily. Have to wait to 62 and subject to tax. From my point of view, why not under a normal iocbc or SC investment account? Commission fee is same for SRS.


===My point is that the Singapore stocks are probably best held inside your SRS account. (I assume that $10K is part of your $300K.) If you’re making SRS contributions then you probably want to do it in the form of ES3, the STI. What you might consider doing is something like this:

(a) Make a SRS contribution, and buy ES3.
(b) Sell the same amount of your non-SRS Singapore stock holdings.
(c) Use the proceeds from that sale for IWDA, IWDA+EIMI, or VWRD, on top of your regular investment flow.

The only thing I don’t like about that is that’d incur some costs, particularly in part (b). But if your saving into global stocks is going to outpace your SRS contribution, then you can probably avoid part (b) and its associated costs.[/QUOTE]

 

[tangent314]

I really don’t get why SG stock investment is better be put in SRS. Can you share more on this point?
SRS’s investment cannot be withdrawn easily. Have to wait to 62 and subject to tax. From my point of view, why not under a normal iocbc or SC investment account? Commission fee is same for SRS.

These investments are for your retirement anyway, so it should not matter that you cannot withdraw them until 62. Yes they are subjected to tax (at 50%), but don't forget whatever you put in is also tax deductible, so overall you will almost always gain on tax. There are some weird outlier cases where you may lose, but you don't really have to worry about that because you'll be filthy rich anyway.

 

[BBCWatcher]

What else would you buy with SRS dollars if not ES3?

 

[celtosaxon]

What else would you buy with SRS dollars if not ES3?

SRS investments are limited to lousy, uncompetitive unit trusts or SGX traded securities, including far more competitive ETFs which are essentially unit trusts that trade on the SGX.

Are you suggesting ES3 because of liquidity? How about S27 (US=SPY)?

 

[Dolphinqiqi]

SRS is not attractive since tax deduction has reached its limit. Very limited money in SRS.

 

[Knight_Rider]

Thanks, BBCWatch. I took these two advice.
- Invest into global ETF
- Reduce the estate related stock holdings in SG. This needs some time to change out. I don’t hold any bank related stocks. Besides bank, any other type? I hold engineering, estate, telco.

Current property is 450k + 800k loan.
Yes, my spouse and my CPF are well balanced.
SRS, I only use it for tax reduction purpose. Very small amount, 10k only. If it doesn’t help for tax reduction, I prefer not to transferring anything into it.

IWDA Is great. But Monday Trump say something stupid you gotto push back your retirement another 40 years.