Tuesday, 19 April 2016

Progress update on financial goals

It's time for a progress update on our financial goals for 2016.

We have been buying the Singapore and International ETFs regularly over the past few months and the rebound in the stock markets in Mar and Apr have helped us as well. It's been growing at about S$3,000 every month since the Jan balance of S$20,000. The ETF portfolio looks on track to hit S$40,000 if we can keep this up.

However, I must admit that we have been buying less ETFs given the recent rally in the global stock markets. To be honest, we probably didn't buy the ETFs aggressively enough during the bear market in Jan and Feb. Having to buy the ETFs during the current bull market is not ideal.

Since we have switched to an ETF investing strategy in Mar, most of the growth so far has been coming from the recent rally in the Singapore stock market. It was growing at about S$5,000 every month since the Jan balance of S$100,000 but this is expected to slow significantly. We have not added any new stocks but have been averaging down on our existing stocks when opportunities come up.

Unless a bear market surfaces again during the rest of the year, we will probably not make any major purchases of stocks. We have been exploring the idea of dividend reinvestment plans to grow the share portfolio, especially for the REITs, but we have yet to come to a decision on them. In any case, we anticipate the Share portfolio to each S$120,000 by year end.

3. Other portfolio to reach S$150,000 by 31 Dec 2016

I realised we haven't set a goal for our Other portfolio and the aim is for this to reach S$150,000 by year end. We contribute about S$200 each month to our wholesale life policies and this grows slowly over time since the returns are low.

Our investment cash holdings have been increasing as we have been investing less in the markets. The bond holdings have not changed since mid 2015 and they are not likely to increase unless there are high quality corporate bond issues we can invest in later in the year. We still seem to be on track at this time. 

We are expecting quite a bit of dividend income in Apr and May but doubt we will get to S$5,000 by year end. The dividend yield of ETFs is lower than shares and our switch to an ETF investing strategy should probably result in lower dividend income growth.

We have also been experiencing dividend cuts with some of the shares (e.g. oil & gas industry) and this goal is not looking good unless we make some major investments in Q2 and Q3 of 2016. 

Our strategy to maximise interest income from bank accounts and hold corporate bonds is working out fine. The interest income is exceeding the dividend income by quite a bit for now although we do not anticipate significant growth in interest income.

If that happens, it might actually mean we are holding too much cash and more work is needed on the asset allocations. We should meet this goal but it might take until the end of the year for interest income to exceed S$5,000.

6. Net worth to reach S$100,000 by 31 Dec 2016

Generally, our net worth is increasing positively with each month from paying down our mortgage, tax & credit card debt. Although market gyrations do impact our net worth negatively at times, it has continued to trend upwards due to our current monthly savings rate of about 40%. We should be able to meet the goal of our net worth reaching S$100,000 by year end provided nothing major happens.

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