My investment journey

Oh dear!
I have always determined my annual expenses ( in great detail... from wedding ang pows to panadol )
and ensured my investment returns was at least 3 times more!.. or at least 2X.. it varies.

(24-01-2018, 02:32 PM)psslo Wrote:

(24-01-2018, 01:34 PM)gzbkel Wrote: Thanks for all the useful sharing on this thread.
Though I am still working (IT), I definitely need to plan ahead.

For the people already retired/semi-retired, whether by choice or circumstances, do you subscribe to the theory of Safe Withdrawal Rate (SWR) of 3-4%?

Many websites cite this theory, here is one example: https://www.madfientist.com/safe-withdrawal-rate/

Teh Hooi Ling studied this question & did some backtesting from a Singaporean context. She quoted 5% as a safe withdrawal rate if your returns can match the STI. I am relying on this strategy myself starting this year.

https://docs.wixstatic.com/ugd/b39173_db...4e9e61.pdf

https://docs.wixstatic.com/ugd/b39173_24...f57693.pdf

It'll be interesting to test the same methodology to see if the market (or the underlying economy) that you choose to invest will make the difference on the end results, e.g. Japan market crashed after 1980s and did not recover for a very long time and Singapore economy has grown quite well in the last 40 yrs so did its stock market.  If cannot get similar results across different markets/economies, then it'll be very important to choose which one to invest as a whole.

(24-01-2018, 04:56 PM)zz... Wrote:

(24-01-2018, 02:32 PM)psslo Wrote:

(24-01-2018, 01:34 PM)gzbkel Wrote: Thanks for all the useful sharing on this thread.
Though I am still working (IT), I definitely need to plan ahead.

For the people already retired/semi-retired, whether by choice or circumstances, do you subscribe to the theory of Safe Withdrawal Rate (SWR) of 3-4%?

Many websites cite this theory, here is one example: https://www.madfientist.com/safe-withdrawal-rate/

Teh Hooi Ling studied this question & did some backtesting from a Singaporean context. She quoted 5% as a safe withdrawal rate if your returns can match the STI. I am relying on this strategy myself starting this year.

https://docs.wixstatic.com/ugd/b39173_db...4e9e61.pdf

https://docs.wixstatic.com/ugd/b39173_24...f57693.pdf

It'll be interesting to test the same methodology to see if the market (or the underlying economy) that you choose to invest will make the difference on the end results, e.g. Japan market crashed after 1980s and did not recover for a very long time and Singapore economy has grown quite well in the last 40 yrs so did its stock market.  If cannot get similar results across different markets/economies, then it'll be very important to choose which one to invest as a whole.

For me, I have money parked at a boutique fund (pan asian stocks) that has been yielding me ~10% pa return after fees. So I do feel a high level of confidence about withdrawing 5% as retirement income. 

I think if you can find a diversified investment that can yield ~10% a year on average over time, regardless of geography, you should be fine.

Excerpt from the 1st article:
"Also for the above study, I used the Straits Times Index. If one is able to construct a portfolio of stocks that can outperform the market index over time, than there is an even greater margin of safety."

(24-01-2018, 12:04 PM)Ben Wrote: As for me, life is simple but certainly happier now than before. Each day, I will spend about 3 hrs driving for Uber/Grab. Rest of the time to have kopi with friends, join activities in CCs, exercise and of course, on investment related stuff.

sounds fantastic! i aspire to be this way in a few years.

(24-01-2018, 02:32 PM)psslo Wrote:

(24-01-2018, 01:34 PM)gzbkel Wrote: Thanks for all the useful sharing on this thread.
Though I am still working (IT), I definitely need to plan ahead.

For the people already retired/semi-retired, whether by choice or circumstances, do you subscribe to the theory of Safe Withdrawal Rate (SWR) of 3-4%?

Many websites cite this theory, here is one example: https://www.madfientist.com/safe-withdrawal-rate/

Teh Hooi Ling studied this question & did some backtesting from a Singaporean context. She quoted 5% as a safe withdrawal rate if your returns can match the STI. I am relying on this strategy myself starting this year.

https://docs.wixstatic.com/ugd/b39173_db...4e9e61.pdf

https://docs.wixstatic.com/ugd/b39173_24...f57693.pdf

Thanks for those links.
In the first article, Ms Teh considers whether various portfolios will survive until 2016. Some of the portfolios starting at 2007, 2000, 1996 etc are only 10-20 years old at the end of her experiment, not much of an accomplishment.
A portfolio will need to survive 30-50 years depending on the retirement age.

But since STI does not have a long history anyway, she don't have much choice I guess.

(24-01-2018, 02:45 PM)Porkbelly Wrote: Oh dear!
I have always determined my annual expenses ( in great detail... from wedding ang pows to panadol )
and ensured my investment returns was at least 3 times more!.. or at least 2X.. it varies.

Happy for you 
You must be rich or frugal or both.

(25-01-2018, 08:44 AM)gzbkel Wrote:

(24-01-2018, 02:32 PM)psslo Wrote:

(24-01-2018, 01:34 PM)gzbkel Wrote: Thanks for all the useful sharing on this thread.
Though I am still working (IT), I definitely need to plan ahead.

For the people already retired/semi-retired, whether by choice or circumstances, do you subscribe to the theory of Safe Withdrawal Rate (SWR) of 3-4%?

Many websites cite this theory, here is one example: https://www.madfientist.com/safe-withdrawal-rate/

Teh Hooi Ling studied this question & did some backtesting from a Singaporean context. She quoted 5% as a safe withdrawal rate if your returns can match the STI. I am relying on this strategy myself starting this year.

https://docs.wixstatic.com/ugd/b39173_db...4e9e61.pdf

https://docs.wixstatic.com/ugd/b39173_24...f57693.pdf

Thanks for those links.
In the first article, Ms Teh considers whether various portfolios will survive until 2016. Some of the portfolios starting at 2007, 2000, 1996 etc are only 10-20 years old at the end of her experiment, not much of an accomplishment.
A portfolio will need to survive 30-50 years depending on the retirement age.

But since STI does not have a long history anyway, she don't have much choice I guess.

The biggest problem for equities is when you are forced to get out either by need ie medical, marriage, house etc or fear eg margin call, crossed the fear threshold etc

Bonds have certainty in 1) redemption at par if the company doesn't go bust and 2) certainty of tenor

These 2 asset classes are very different for different purpose. A more useful chart that Ms Teh should include is how bonds return over those periods. Over 30 years period even 2.5% CPF return would double... that would be the opportunity cost.

(24-01-2018, 02:32 PM)psslo Wrote:

(24-01-2018, 01:34 PM)gzbkel Wrote: Thanks for all the useful sharing on this thread.
Though I am still working (IT), I definitely need to plan ahead.

For the people already retired/semi-retired, whether by choice or circumstances, do you subscribe to the theory of Safe Withdrawal Rate (SWR) of 3-4%?

Many websites cite this theory, here is one example: https://www.madfientist.com/safe-withdrawal-rate/

Teh Hooi Ling studied this question & did some backtesting from a Singaporean context. She quoted 5% as a safe withdrawal rate if your returns can match the STI. I am relying on this strategy myself starting this year.

https://docs.wixstatic.com/ugd/b39173_db...4e9e61.pdf

https://docs.wixstatic.com/ugd/b39173_24...f57693.pdf

You may not want to depend too much on Teh Hooi Ling's study. 

First, Singapore economy now is different from that in 1970s, 80s and 90s. Moving forward, STI returns may be different from the returns in 1970s-90s. 

Second, there's inflation. $50K today may worth $25K of purchasing power in 24 yrs time, assuming 3% inflation. For early retiree, it's best that assets continue to grow at rate of inflation. If no, a $1m portfolio may only have 0.25mil purchasing power after 48 years, assuming 3% inflation.

(25-01-2018, 12:44 PM)specuvestor Wrote:

(25-01-2018, 08:44 AM)gzbkel Wrote:

(24-01-2018, 02:32 PM)psslo Wrote:

(24-01-2018, 01:34 PM)gzbkel Wrote: Thanks for all the useful sharing on this thread.
Though I am still working (IT), I definitely need to plan ahead.

For the people already retired/semi-retired, whether by choice or circumstances, do you subscribe to the theory of Safe Withdrawal Rate (SWR) of 3-4%?

Many websites cite this theory, here is one example: https://www.madfientist.com/safe-withdrawal-rate/

Teh Hooi Ling studied this question & did some backtesting from a Singaporean context. She quoted 5% as a safe withdrawal rate if your returns can match the STI. I am relying on this strategy myself starting this year.

https://docs.wixstatic.com/ugd/b39173_db...4e9e61.pdf

https://docs.wixstatic.com/ugd/b39173_24...f57693.pdf

Thanks for those links.
In the first article, Ms Teh considers whether various portfolios will survive until 2016. Some of the portfolios starting at 2007, 2000, 1996 etc are only 10-20 years old at the end of her experiment, not much of an accomplishment.
A portfolio will need to survive 30-50 years depending on the retirement age.

But since STI does not have a long history anyway, she don't have much choice I guess.

The biggest problem for equities is when you are forced to get out either by need ie medical, marriage, house etc or fear eg margin call, crossed the fear threshold etc

Bonds have certainty in 1) redemption at par if the company doesn't go bust and 2) certainty of tenor

These 2 asset classes are very different for different purpose. A more useful chart that Ms Teh should include is how bonds return over those periods. Over 30 years period even 2.5% CPF return would double... that would be the opportunity cost.

Hi Specuvestor,

The context is that of retirement income. One can assume that by the time you reached the age for retirement, most if not all of your financial commitments (wedding, housing, kid's education, etc) are already taken care of. You just need to provide for you basic needs, which will include medical insurance covering treatment & hospitalisation.

Bonds (safe/low risk) comes with lower rate of return. If there was a chart for bonds, it will likely show the retiree running out of money after X number of years. With CPF return of 2.5% and withdrawing 5%, cash will run dry eventually, so either you withdraw less or you put in more into your retirement fund. Unless you plan to just whittle your retirement fund down, & hoping not to outlive it, it is just not sustainable.

(25-01-2018, 01:09 PM)thinknotleft Wrote:

(24-01-2018, 02:32 PM)psslo Wrote:

(24-01-2018, 01:34 PM)gzbkel Wrote: Thanks for all the useful sharing on this thread.
Though I am still working (IT), I definitely need to plan ahead.

For the people already retired/semi-retired, whether by choice or circumstances, do you subscribe to the theory of Safe Withdrawal Rate (SWR) of 3-4%?

Many websites cite this theory, here is one example: https://www.madfientist.com/safe-withdrawal-rate/

Teh Hooi Ling studied this question & did some backtesting from a Singaporean context. She quoted 5% as a safe withdrawal rate if your returns can match the STI. I am relying on this strategy myself starting this year.

https://docs.wixstatic.com/ugd/b39173_db...4e9e61.pdf

https://docs.wixstatic.com/ugd/b39173_24...f57693.pdf

You may not want to depend too much on Teh Hooi Ling's study. 

First, Singapore economy now is different from that in 1970s, 80s and 90s. Moving forward, STI returns may be different from the returns in 1970s-90s. 

Second, there's inflation. $50K today may worth $25K of purchasing power in 24 yrs time, assuming 3% inflation. For early retiree, it's best that assets continue to grow at rate of inflation. If no, a $1m portfolio may only have 0.25mil purchasing power after 48 years, assuming 3% inflation.

I take your point on STI returns. However, I think the point that Ms Teh is making is that equity returns should be sufficient to provide a steady retirement income, with the STI as an example. What she is trying to prove is that equities as an investment class is capable of yielding >5% return each year so that after your 5% withdrawal, you still have extra to plow back into your original sum for investment. As that retirement pie grows, your 5% also increases, & that will hopefully help mitigate your inflation concerns.