What would you do?

[orange_sky]

Assume the following scenario:

-42 year old married with 2 kids
-Staying in a full paid up home with another rental property of $2k rental/mth
-Stock portfolio of $1.8m (after marking down 30% from recent downturn)
-Job is unstable but well paid (btw ~30k/mth)

I don't see Singapore property market doing well for the next 18 months but neither would stock market (esp Singapore). I have been buying STI ETF on the way down and the average price is high still (slightly above $3). Haven't been buying any more as I am not sure I can stomach any more pain.

Say I have cash of around 1.5m. Should I continue to buy equities on the way down for the next 12 months or buy another property in Singapore (there will be the issue of ABSD)?

 

[V_for_Vanilla]

I would buy equities. Will not consider buying another property unless Absd removed.

 

[sAVaGEmP5]

On the equities part, maybe u can buy other country index. I dont see how sg market can go up. On the property buying, if its me, i aim for the golden belt, like those properties in orchard which are soon going to be in distress situation, pick a few good ones.

But frankly your question needs some1 above your networth to answer haha..

 

[Majestic12]

Don't even bother with both options. Hold the cash since deflationary forces are still overwhelming and the bottom is not in sight yet - investors are still not bearish enough for there to be a major turning point.

 

[infusionist]

Hi Orange_sky,

I recommend a diversification of your portfolio.

I'd do a 30% to wait for the chance to come into local property market when the ABSD and cooling measures drop off and prices are well within your reach.

I'd take another 30-50% put them in a good US corporate bond fund. why? market isn't doing well and there is absolutely no growth indicator in any global markets. I'd expect the USD to strength vs SGD as usual in recessionary like environment so that allows forex gains for you. Corporate bonds to give u better yields than normal. Timeline 2-3 years.

20% investment in an endowment for stable income growth savings long term for your retirement for yourself, wife; or kids education.

Remainder hold on cash in case of the instability with job.

Just a recommended opinion

Cheers.

 

[orange_sky]

Thanks all for the reply. Maybe I should wait till June to have a clearer picture before deciding.

 

[limster]

If you are 42 with a $1.8m share portfolio, means you were investing during the last financial crisis. So do the same as you did last time

A lot of people here haven't even gone through the last GFC, you probably more experienced than the average person in this forum.

 

[doody_]

Buying property may be a good idea as a long term investment. There is ABSD but if you buy a freehold property and leave it for your kids, then you can spread it over the next 30-40 years and it won't be that painful.

 

[Shiny Things]

Say I have cash of around 1.5m. Should I continue to buy equities on the way down for the next 12 months or buy another property in Singapore (there will be the issue of ABSD)?

The ABSD is an enormous slug of cash - it's going to be a huge drain on your returns.

If you've already got a decent allocation to equities (hold on to those; they'll head back up and you're collecting 3-3.5% dividends in the meantime), and you've got enough cash to cover any unexpected expenses, then it's time to start moving some of your cash into bonds.

As people have suggested below, it's a good idea to move some of your equities into overseas stocks as well. You want exposure to the US; Europe; and Japan, and if you can buy all that with one hit through an ETF then you might as well do it.

The people suggesting US corporate bonds (no, you don't want to take FX risk with your bond money; the time to do that was when USD was at 1.25, not up here above 1.40) and endowment plans (why lock the money up for 15-20 years?) are wrong.

 

[orange_sky]

If you are 42 with a $1.8m share portfolio, means you were investing during the last financial crisis. So do the same as you did last time

A lot of people here haven't even gone through the last GFC, you probably more experienced than the average person in this forum.

To be honest, I didn't invest much during the last GFC. My two good trades were my current home and an investment property which I bought and sold. I have been bearish since 2012 and only started investing mid 2015 when markets started coming off. It however has been a painful ride as I probably bought in too early in the downtrend (I underestimated the magnitude of the down move).

My main consolation is that I am relatively debt free so I should be able to ride through this downturn without risks of having to liquidate any assets due to any liquidity issues.

 

[orange_sky]

The ABSD is an enormous slug of cash - it's going to be a huge drain on your returns.

If you've already got a decent allocation to equities (hold on to those; they'll head back up and you're collecting 3-3.5% dividends in the meantime), and you've got enough cash to cover any unexpected expenses, then it's time to start moving some of your cash into bonds.

As people have suggested below, it's a good idea to move some of your equities into overseas stocks as well. You want exposure to the US; Europe; and Japan, and if you can buy all that with one hit through an ETF then you might as well do it.

The people suggesting US corporate bonds (no, you don't want to take FX risk with your bond money; the time to do that was when USD was at 1.25, not up here above 1.40) and endowment plans (why lock the money up for 15-20 years?) are wrong.

Thanks ST for chipping in.

I am debating between adding on more bonds or more equities. Bond because I am getting cold feet from my underwater equity ETFs but at the same time, it does not make sense to buy equity ETF when it was more expensive and not buy them now. Maybe I will just split it 50:50 but at a much slower pace.

I am already exposed to overseas stock on VT and IWDA (approximately 20%). Perhaps I should consider buying overseas bond ETF as well.

I agree with you on not getting into any endowment (too opaque for me) or any corporate bonds (due to heightened credit risk in the next 12-18 months).

 

[Shiny Things]

Thanks ST for chipping in.

I am debating between adding on more bonds or more equities. Bond because I am getting cold feet from my underwater equity ETFs but at the same time, it does not make sense to buy equity ETF when it was more expensive and not buy them now. Maybe I will just split it 50:50 but at a much slower pace.

Everything you've said here is really well thought out. You're right that it doesn't make sense to buy equities high and not buy more when they're lower, but also, it's worth having a decent slug of bonds in your portfolio, because it gives you extra stability in times like this. (Cash does the same thing, but cash yields a lot less than a decent bond portfolio).

I like your idea of buying 50:50 stocks/bonds.

I am already exposed to overseas stock on VT and IWDA (approximately 20%). Perhaps I should consider buying overseas bond ETF as well.

Yeah - maybe put a little bit more into overseas stocks. The other thing is, you'll want to punt that VT and replace it with more IWDA; you're paying extra withholding taxes on the dividends from VT that you wouldn't be paying on IWDA. (If you're a US taxpayer, disregard that.)

I'm not really a fan of overseas bonds - you're effectively taking on a bunch of currency risk for not much reward (ask anyone who invested in Brazilian, Mexican, Australian or Chinese bonds over the last couple of years).

I agree with you on not getting into any endowment (too opaque for me) or any corporate bonds (due to heightened credit risk in the next 12-18 months).

Mmm - you don't need to be too harsh on corporate bonds. There's certainly a lot of risk in a few sectors (energy; basic materials; shipping), but a general corporate-bond ETF, or government bonds like the ones in A35, are still a good idea.

Ping me a PM if you'd like me to take a closer look at your portfolio; this is the sort of thing I usually prefer to do in a formal consulting arrangement.

 

[wondrdoggie]

ABSD is crazy money to pay. I am also looking for either a 2nd property to buy or upgrade to a landed, but I refuse to pay the ABSD.

When your portfolio size is in the millions, you actually have a lot more options to diversify, not just across counters but also geography and asset classes. At the very least, if your portfolio is not international, you should really consider doing that. No reason to restrict yourself to a geography. But if you do, you should make sure you hedge your fx risk. There are also assets classes beyond bonds and equities and properties to consider. Depends on your comfort zone.

Curious, are you DIYing your investments or using private banker?

Just to share, I hold barely 10% in SG investments currently though I used to hold more via sgd bonds. The rest are in US, European and Japanese/others assets. Most of which are hedged for fx.

 

[orange_sky]

ABSD is crazy money to pay. I am also looking for either a 2nd property to buy or upgrade to a landed, but I refuse to pay the ABSD.

When your portfolio size is in the millions, you actually have a lot more options to diversify, not just across counters but also geography and asset classes. At the very least, if your portfolio is not international, you should really consider doing that. No reason to restrict yourself to a geography. But if you do, you should make sure you hedge your fx risk. There are also assets classes beyond bonds and equities and properties to consider. Depends on your comfort zone.

Curious, are you DIYing your investments or using private banker?

Just to share, I hold barely 10% in SG investments currently though I used to hold more via sgd bonds. The rest are in US, European and Japanese/others assets. Most of which are hedged for fx.

Thanks for the post. I don't have a private banker. My quantum doesn't qualify me for one nor do I believe in using one. So far my investments are mostly sti etf, abf, iwda and vt. I have other small singapore blue chip counters as well some pref shares. My end goal ie to reduce to less than 10 etfs.

I'm not aiming for high returns hence not really looking to invest in anything funky. Anything 3-4% on a relatively low risk basis I'd good for me.

 

[MikeZhang]

Thanks for the post. I don't have a private banker. My quantum doesn't qualify me for one nor do I believe in using one. So far my investments are mostly sti etf, abf, iwda and vt. I have other small singapore blue chip counters as well some pref shares. My end goal ie to reduce to less than 10 etfs.

I'm not aiming for high returns hence not really looking to invest in anything funky. Anything 3-4% on a relatively low risk basis I'd good for me.

Bonds should do give you that returns or more.

 

[MikeZhang]

Thanks for the post. I don't have a private banker. My quantum doesn't qualify me for one nor do I believe in using one. So far my investments are mostly sti etf, abf, iwda and vt. I have other small singapore blue chip counters as well some pref shares. My end goal ie to reduce to less than 10 etfs.

I'm not aiming for high returns hence not really looking to invest in anything funky. Anything 3-4% on a relatively low risk basis I'd good for me.

Bonds should give you that returns or more.

 

[frenchbriefs]

i plugged the numbers into a compound interest calculator,assuming u spend 60k a year(a middle/upper middle class lifestyle) and save and invest 300k a year passive etf style at 9% pa....at the end of 20 years u will have 18 mil dollars,at the end of 30 years u will have 48 mil,at the end of 40 years u will have 119 mil.for once theres a possibility of building a real fortune here,a real empire.a hdb flat cost 400k imagine how many of them shits u can own,a typical apartment in australia major cities is roughly about 400k.....which means assuming u have 48 mil at 60 years old,u are generating enough passive income to buy 12 hdb flats or condo apartments in australia every year.something that people take a lifetime to own.

now the question is how do we get a job that pays 30k/mth which is in the 0.1 percentile of income group.

 

[orange_sky]

i plugged the numbers into a compound interest calculator,assuming u spend 60k a year(a middle/upper middle class lifestyle) and save and invest 300k a year passive etf style at 9% pa....at the end of 20 years u will have 18 mil dollars,at the end of 30 years u will have 48 mil,at the end of 40 years u will have 119 mil.for once theres a possibility of building a real fortune here,a real empire.a hdb flat cost 400k imagine how many of them shits u can own,a typical apartment in australia major cities is roughly about 400k.....which means assuming u have 48 mil at 60 years old,u are generating enough passive income to buy 12 hdb flats or condo apartments in australia every year.something that people take a lifetime to own.

now the question is how do we get a job that pays 30k/mth which is in the 0.1 percentile of income group.

Firstly you are too optimistic about the expenses. Mine is about 100K. Secondly it's unrealistic to assume 9% return consistently. Thirdly the salary comes with a high degree of risk in terms of job security. I reckon I will be retrenched at least 3 times in my career.

 

[mummy1234]

Assume the following scenario:

-42 year old married with 2 kids
-Staying in a full paid up home with another rental property of $2k rental/mth
-Stock portfolio of $1.8m (after marking down 30% from recent downturn)
-Job is unstable but well paid (btw ~30k/mth)

I don't see Singapore property market doing well for the next 18 months but neither would stock market (esp Singapore). I have been buying STI ETF on the way down and the average price is high still (slightly above $3). Haven't been buying any more as I am not sure I can stomach any more pain.

Say I have cash of around 1.5m. Should I continue to buy equities on the way down for the next 12 months or buy another property in Singapore (there will be the issue of ABSD)?

I think now is a good time to start looking at shares...I would also put some money in FDs while waiting for ABSD to be removed or look at commercial property for which there is no ABSD or other countries properties if there is better rental yield..

 

[bazingaman]

Firstly you are too optimistic about the expenses. Mine is about 100K. Secondly it's unrealistic to assume 9% return consistently. Thirdly the salary comes with a high degree of risk in terms of job security. I reckon I will be retrenched at least 3 times in my career.

Good reply. Difference between reality - paper calculations.

I would focus more on BONDS in this environment. If I can find some blue chip or retail with 4-5 coupon that would be good for me. Also, would put some money on India in this down turn. That's probably a good power house for the near future. Ofcourse the big risk is its not China. Politically, culturally or geographically there is a huge risk.