The payout of S$1,863, the highest in the Enhanced Retirement Sum, is worth only S$845.37 in today's value. This is based on investing S$845.37 at a rate of 2.5% for 32 time period (that reveals my age. :) 32 years more to 65 years old).

It is tough to survive on S$845 in today's context. It will be the "same feeling" to survive on S$1,863 in 32 years time.

I can only guess what the retirement sum will be in 32 years time. Double? That sum will be "forced" into this CPF Life Plan and, definitely, it will be way higher than the current sum.

I was just barely 6 months in my first job when the financial crisis of 2007-08, also known as the Global Financial Crisis (GFC), happened. I remember losing approximately S$12,000 (probably 50% of what i had) back then. I felt lucky exiting my positions earlier. But I didn't had the cash to take advantage and accumulate the stocks I wanted when the STI was way below 2000 points.

From that, I knew I had to save hard and accumulate cash. There will be a time (surely) when you will have the opportunity again. Many years later, I started reading financial blogs and the term - War Chest - resonated how I felt in the 2008 GFC.

Today, I have already worked for 7-8 years. Managed to save a decent amount. But I still feel my war chest is probably the mini war chest as shown in the picture. With the STI dropping close to 20%, I am wondering when should I use my mini war chest.

Source: ASSI AK Facebook Page

I do follow ASSI on Facebook and I know he has started his "nibbling". There were followers in his Facebook account that even tracked what he has "nibble" (Look at the picture on the left).

I believe AK has a very deep war chest. In this list of stocks that he has nibbled, I am also interested in Vicom, Wilmar and Accordia Golf Trust. Maybe not Starhub, but Singtel.

So the question to myself, when should I start using my mini war chest?

Should I be a little more patient?

What should my plan be?

Today, the STI bounce back 1.51%. Did I miss the boat?

I wanted to use 20% of my war chest when the STI was below 2800. Probably, another 30% when the STI is below 2350. And use the rest when the STI has dropped below 1900.

To be honest, it is easier to articulate a plan but to execute it... it is going to be tough. It is definitely going to test my pain level. I am still pretty fine with the current 20% drop.

Anyway, I came across this blog post - Can past give Singapore stock investors lesson or two on STI?

Straits Times Index 2007-09 ‘Subprime Crisis’

Source: Can past give Singapore stock investors lesson or two on STI?

Do read Soh Tiong Hum's article (above link). If history is to repeat itself, we are currently at Stage A. So maybe, I have not missed the boat. I will start using my mini war chest pretty soon.

The Straits Times Index (STI) has underwent a major correction of at least 15% in the last 4 weeks.  A lot of investors and stock holders in the local market are definitely feeling the pain. This includes myself. My gains over the last 1.5 years were all gone in the last 4 weeks.

I have been buying the STI ETF since Aug 2013. I have invested about S$26,800 from my Supplementary Retirement Scheme (SRS) account using the OCBC Blue Chip Investment Plan to purchase the ETF on a monthly basis accumulating close to 8000 shares of Nikko AM STI ETF. With the recently major correction, I am down slightly more than 9%.

Read: Topping up SRS Account For The 3rd Consecutive Year

So what if the STI really goes down at 5% every month for a year? The Nikko AM STI ETF is designed to mimic the STI. Therefore, if the STI carries on to fall, so will the price of Nikko AM STI ETF.

Read:
Exchange Traded Funds - Simplified
STI ETF is a Simple Way to Profit

As of yesterday, 21 August 2015, the STI ended at 2,971.01 points. The Nikko AM STI ETF ended the week at S$3.05.

In the next few years, I believe I will not stop purchasing the ETF through the OCBC Blue Chip Investment Plan. The plan is to constantly use S$1,4000 monthly to purchase ETFs and average the price. I wonder what my portfolio of STI ETF will look like in 12 months if the STI carries on its downtrend.


Just looking at the calculation, after investing another S$16,800 (S$1,400 *12), the project market value will still be approximately the same as my current market value with the 7,971 shares I have. I would have accumulated more shares and slightly higher dividend payout.

I just have to stay calm. Time is on my side.

We can never time the market. When will the next bull run be? Will the STI reach 5,000 points in the future. Or will it really drop to 1,500 points? Since buying the ETF is something I am doing for the long run, I should not be too bother with the price now.

Fingers crossed. Hoping for a slight correction only.

Read: Dollar Cost Averaging the Index ETF

In my earlier post - Should I Transfer Savings from the OA to the SA?, I grappled with the fact of transferring some savings from my CPF OA to my CPF SA before using the rest of the saving to lower my mortgage loan. Being able to finance my hosing loan is a consideration for keeping my savings in the CPF OA.

Here are some information:

1. Purchased a BTO (Singapore's Public Housing) that will be ready in 2017.
2. Purchased the place for ~S$575,000.
3. Paid 5% down-payment + Stamp duty using my CPF OA.
4. Remaining Loan amount: ~S$550,000
5. Will be taking a loan from Housing & Development Board (HDB) at 2.6%. Or should I not? 
6. Both my partner and me are working currently with no kids.
7. My current income is ~S$5,000. My CPF OA has ~S$120,000.
8. My CPF OA contribution monthly is ~S$1,150. 
9. My wife's income is ~S$3,500 and she has ~S$30,000 in her CPF OA.
10. My wife's CPF OA contribution monthly is ~S$805.

I did an enquiry on our eligible loan cap on HDB website. Based on our current income, the estimated maximum loan is S$562,000 with a repayment period of 25 years. Estimated monthly instalment at S$2,550.


Here are the plans:

Plan A:

1. Wipe out all our CPF OA savings (total: ~S$150,000) and take a loan of S$400,000 from HDB.
2. Estimated monthly instalment is S$1,815.
3. Continue to use CPF OA to service our loan instalment (total: S$1,150 + S$805 = S$1,955, more than enough).
4. No additional cash needed to service the loan instalment.
5. Big Assumption: Both will continue to work and earn the same income. Still thinking what we will be doing if we are going to have kids. That is a discussion on its own.

Plan B:

1. Wipe out only S$50,000 from our CPF OA savings and take a loan of S$500,000 from HDB. The remaining S$100,000 will still be in my CPF OA account. In order to do that, I will have to transfer S$100,000 into some investment product before transferring it back to CPF OA. I have to do my research if it is feasible.
2. Estimated monthly instalment is S$2,269
3. Use full cash to service the monthly loan instalment. My wife will contribute S$500 and I will pay the remaining S$1,769.
4. CPF OA continue to grow with monthly contribution of S$1,150.
5. Big Assumption: Both will continue to work and earn the same income.

Fast forward ten years, let's envisage what it will be like on Plan A:



Using DBS Repayment Scheduler Calculator (as shown above):

1. Remaining Principal Amount: S$270,239.69.
2. Interest Paid (so far): S$88,001.05 (painful!).
3. Both our CPF OA account will have S$0 (ZERO). Assumption is that we do not have any pay increment or bonuses.
4. Assumption - Since I am not on Scenario B, I will be able to save the S$1,700 monthly. Without investing in anything, I would have accumulated S$204,000 in ten years. If I have invested in something that gives me a yield of 2.5%, I would have accumulated ~ S$228,550. As for my wife, knowing her, no money will be saved.

Now, let's envisage for it will be like if I had serviced the loan on Plan B:


Using DBS Repayment Scheduler Calculator:

1. Remaining Principal Amount: S$337,799.62.
2. Interest Paid (so far): S$110,001.31 (very painful!).
3. My CPF OA account will have ~S$285,293. My wife's CPF OA account will have ~S$109,847. See below. Assumption is that we do not have any pay increment or bonuses. 
4. I will be super poor. S$1,700 a month :(. That is a big chuck of my salary.
5. We are able to finish paying the mortgage at the end of the 10 year using our CPF OA savings.

While there are some assumptions made, a well executed Plan B will allow me to finish paying my HDB apartment in 10 years. I am currently still in a discussion with my wife. A hybrid model using a portion of Cash and CPF OA savings to finance might be another option. Probably, using my wife's CPF OA contribution + my Cash to finance the loan is a better option.

Maybe, I will not transfer my savings from the CPF OA to the SA.

So, Cash vis-a-vis CPF Savings to pay off my Mortgage. That's the important question. 

I am contemplating if I should transfer my savings in my CPF Ordinary Account (OA) to my Special Account (SA). If I do transfer savings from the OA to the SA, I will be able to earn higher interest. However, I do know that the transfer is irreversible and you can only transfer an amount up to the prevailing Minimum Sum in your SA.

CPF (hopefully everyone knows it is called Central Provident Fund) is Singapore's social security system that enables Singaporeans and Permanent Residents to set aside funds for retirement. It also addresses healthcare and home ownership.

Source: ASSI

The CPF savings in the OA earn a guaranteed interest rate of 2.5% per year, while savings in the SA earn a guaranteed interest rate of 4% per year. There is an additional 1% interest per year for the first S$60,000 of your combined CPF balances.

Read: CPF Explained

Recently, I read AK blog entry titled - A lot of money in my CPF SA is from the Government, which he also decided to reveal his CPF SA number publicly for the first time. AK has beefed up his CPF SA through OA-SA transfers and even voluntary contribution. To cut the story short, just look at the interest paid to his CPF SA - SS$7,651.65.

So, is beefing up my CPF SA a good idea. In theory, the higher interest compounded will make my money work harder. This will purely be for my retirement account and I will have less flexibility over the cash. In AK's words, "Why not let the government help me meet the minimum sum?"

The government would have to pay more interest with a higher balance in your CPF SA and this will go towards meeting the minimum sum required at retirement age.

Logical as it sounds, the question is should I use the savings in the OA to pay for my upcoming house or should i transfer some savings over to the SA to earn a higher interest.

It has been a yearly ritual since 2012 that I will tabulate my "Balance Sheet" just before my birthday.

Looking back, this has been an important exercise which allows me to track my progress.

It is a simple exercise to assess my current and non-current asset.

I define my current asset has all assets that are reasonably expected to be converted into cash within a month. My current assets include cash in the bank and equities. For simplicity sake, anything from a long-term perspective, it will be placed in my non-current assets. This includes my insurance (value till date), CPF Ordinary & Special Account (similar to America's 401K), and Supplementary Retirement Scheme (SRS) Account.

The progress from 2014 to 2015 was largely on my non-current assets. This was due to the constant contribution to my CPF Account, yearly SRS contribution, and growing intrinsic value from my insurance policies.

Can't wait to see the progress in 2016. I will need to grow my current asset at a faster rate.

I am Half-A-Millionaire.

Recently met a fresh graduate (let's just name him Mr. E) and he was speaking to me about how he started his small investment portfolio.

He graduated in 2013 and started his first job in August 2013. He immediately invest S$200 from his monthly salary to purchase Nikko AM STI ETF using the POSB's Invest-Saver program.

1. 3,000 shares of Suntec Reit.
2. Yongnam's shares were consolidated. I am just holding this counter out.
3. Received 2.106 new CIT for every KIT unit held. In addition, purchased another 4,810 shares.
4. 3,000 shares of Keppel DC Reit.
5. 5,000 shares of Saizen Reit.
6. 2,471 shares of Nikko AM STI ETF. 

It has been a long time since I have updated this blog. My new job has really kept me really busy. Nevertheless, I have still been tracking my portfolio and the dividends "generated" on my trusted excel file.

Total dividends (1H 2015): S$2,925.47
Average Monthly Dividends: S$487.57

A breakdown of the dividends till June 2015:

1. Nikko AM STI ETF - S$276.01
2. Keppel Infrastructure Trust - S$503.15
3. Suntec Reit - S$336.49
4. OUE Hospitality Trust - S$169.50
5. Fraser Commercial Trust - S$49.78
6. CapitaMall Trust - S$110.80
7. Starhill Global Reit - S$204
8. Asian Pay TV - S$82.60
9. Comfort Delgro - S$315
10. Interests (from OCBC and SC) - S$878.16

Quite happy with the progress. Working towards a S$800 monthly dividend plan