Humbly seeking your advice

[davidsim]

Hi everyone, I have been here for sometime just reading everyone’s postings and I hope that you guys could offer me some advice on what to do with my portfolio. I am retired (victim of the recent car loan curbs) and hence earning no income but I have my wife, 3 children (aged 19, 18 and 16) and my mother to support.

My investment objectives are (in order of preference):
1. to generate an average of $13,000 per month from my investments annually (including property)
2. to achieve a nominal CAGR of 4% over the next 5 years

Right now my current investment portfolio excluding my main residence includes
a) SGX stocks: 2.3 million – Net yield 3.34% ($76,820)
b) SGD Bonds maturing in 2017: 0.5 million – Net yield 4% ($20,000)
c) SGD Cash (excluding emergency fund): 0.8 million – Net yield 1.1% ($8,800)
d) SGD Property: 2 million – Net yield 2% ($40,000)

This gives me a net income of about $11,700 per month which results in a shortfall of about $1,300 which I am trying to find ways to make up.

I know the obvious answer would be to use the cash I am holding to purchase short to medium term bonds (<7 years) yielding about 3-4% or stocks yielding about 4% (e.g. Singtel) but I am wary that the prices of these 2 assets in particular bonds have risen so much that their risk return trade off is no longer attractive. In addition, I was thinking maybe it would be good to maintain the flexibility to take advantage of corrections in the market (<20%)

I’m actually quite clueless about the stock market and my main source of wealth is actually 2 properties I bought a long long time ago…. 1 of which went en bloc last year. My stock portfolio actually resembles the STI. With high weights in DBS, UOB and Singtel… I have made money but I am very aware that I am just lucky.

I also have a $500,000 loan against my main residence which I took out last year fixed at 1.5% interest for 5 years. Currently hedging this off with the bonds maturing in 2017. Would not cost effective to pay off this loan as I am locked in for the 5 years. Also the cost of holding this loan is only 0.4% pa given that I cash at 1.1% with ANZ.

A humble thanks in advance for any advice offered. Would really appreciate any advice and new insights offered.

I computed your individual returns based on the % Net Gain figures provided and added it above in red. When totalled up, it gives $145,620 or $12,135/mth, higher than your computed $11,700 and closer to your $13,000 target. So, either you have made a mistake in your computations or perhaps, due to rounding error on my side (ie. your Net Yield % had been rounded up by you).

Anyway, if the shortfall is so important, like you yourself mentioned, the most obvious answer is to use the cash to purchase bonds. If risk is your main concern here, check out SGS Bonds ie. Singapore Government ones. The longest term ones are giving a Yield ~2.77% (Coupon 2.75%) and that ought to bring you a lot closer to your $13,000/mth target (will exceed if computed using your above individual Net Yield figures).

In the longer run, since you'd professed to be clueless on the stock market, how about putting it with the professionals? ie. Fund Managers. You'd of course still have to put in effort to find the right one by checking their performance and talking to them. In this forum, there's always d.o.g.

No, I don't know him personally but his posts (since I started participating in forum in 2005) had always been very well researched and supported with solid facts and figures. If he's who I suspect he is (accidentally stumbled on some articles in an online magazine site, with contents and style strikingly resembling his), his CAGR is easily in the 20s (%) since '08 (but always bear in mind past performance is not a guarantee of future ones).

Hi Kopikat,

Thanks for pointing out that discrepancy. I will go and recheck my figures. Being $865 short will make me feel a lot better . Perhaps this is the best advice so far. Haha.

The shortfall is not that important to me but I don't want to just 'bear with it' due to my poor investment knowledge as I think it is only responsible of to do my best for my family's sake. I would estimate that in slightly over 4 years time my eldest will be working and that should more than make up for the shortfall. My total estimated shortfall over this period is about $65,000 which I am actually comfortable with.

I guess a more simple question would be to ask "If you were me would you be doing anything different?"

Also thanks for getting me to consider fund managers. Would you happen to have any of your cash invested with them?