Category Archives for Investment

Automating the investing process with OCBC BCIP and POSB Invest-Saver

Do you believe in dollar cost averaging or lump sum investment?

Over the past few years, I’m a firm believer on the former. But do I practice what I preach? That’s a whole different story.

The ammunition is there but no bullets were fired

While I’m consistently socking money away in my investment war chest, I found that I’ve not made a single transaction in my online brokerage account at all this year. *The horror!*

It’s not that I don’t have money to invest in my portfolio but the reality is that I’m still a novice when it comes to investing in the stock markets and the number 1 problem with newbies like me is that I keep trying to time the market.

Now this is a flaw that I recognize that I have and unfortunately I just can’t seem to help it! *sad face*

Remove the human and automate the investing process

Because of the issues with the human (me), I decided to automate the investing process and take the human out of the process.

Automated investment is not a new thing in Singapore and 2 major banks, OCBC and DBS have already started offering this for some time now.

In fact, I’ve been using OCBC’s Blue Chip Investment Plan to invest my SRS monies in Nikko AM Singapore STI ETF for the past 2 years.

For my cash investments, I started using the POSB Invest-Saver to make monthly investments into SPDR Straits Times Index ETF Nikko AM Singapore STI ETF and ABF Singapore Bond Index Fund. The process of applying for the Invest-Saver through the POSB iBanking platform was very easy since I already have a savings account with the bank.

Planned automated monthly investments in 2017:

  • Nikko AM Singapore STI ETF (SRS and cash): $1,275 + $500
  • SPDR Straits Times Index ETF (cash): $500
  • ABF Singapore Bond Index Fund (cash): $500

Total automated investment in 2017: $27,300

Update: The comment from K is right. POSB Invest-Saver only invests in Nikko AM Singapore STI ETF and not SPDR Straits Times Index ETF. The article has been updated accordingly

Unfortunately, the monthly cash investment is still very small as bulk of my savings is still going towards funding my Cambodia SOHO property purchase.

Disadvantages of automating the investment process

Just because I’m doing it, doesn’t mean you should too.

If something can save you time, it’s probably going to cost you a little more money than doing it yourself.

I haven’t done the math but it’s very likely that using OCBC’s BCIP and POSB’s Invest-Saver to automate my investing process is most likely going to cost me a bit more than doing it manually on my online brokerage platform.

Weigh the pros and cons before making your decision. In my case, automating my investment process is definitely going to help align my investment portfolio with my investment objectives.

What are your thoughts on automating your investment process?

Donald Trump is now the President of the United States! So what?

Unless you’ve been hiding in North Korea, you’ve probably know a little about the US presidential election that Donald Trump has been campaigning for a long time now.

Most of the information probably revolves around the crap he spews every time they put a mike in front of him.

us-election-result

What some of my friends consider to be the worst case scenario has happened today.

Donald Trump has won the presidential race and is now the President of the United States.

Without a doubt, everyone is going to be talking about the election results today. As the results surfaced in Google, there’s was five minutes of buzz in the office from colleagues discussing about the results. A mere five minutes! That’s right, everyone got back to work and the world continues to spin.

As a regular employee in a multinational corporation striving for FIRE (Financial Independence and Retiring Early), let me offer four contrarian reasons about why I think the impact of the US presidential election result isn’t going to have a big impact on your retirement strategies.

Your company is not going to close down the Singapore office lah

Donald Trump wants to move jobs back to the United States and kudos to him if he manages to do that and get more Americans employed.

Global companies set up shop in Singapore to establish a regional presence in Asia and their Singapore offices primarily functions as a regional hub to connect to countries in Asia. Nothing has changed.

There’s no compelling reason for your global office to shut down regional offices just because Donald Trump is President of the United States.

In fact, your regional office is probably more important now than ever because Asia may be the only region that is bringing in the revenue.

So continue working and squirrelling away your savings as planned for FIRE.

With or without Trump, Singapore’s economy is already heading south

What you need to know is that if the government announces that the Singapore economy is down, it means that in reality, the Singapore economy has been heading south for quite a while.

Through my contacts, I’ve been hearing news about how many startups are dropping like flies, small and medium enterprises in Singapore are suffering and how it’s harder to generate new revenue nowadays.

If you haven’t been managing your expenses and making adjustments, it’s definitely a good time to start.

Foreign investors have nowhere to go except Asia

Europe is already in a mess. Donald Trump as the new President of the United States will bring a lot of uncertainty into the country.

Global investors will have nowhere to turn to except Asia and Singapore will have a high chance to be in the center of everything.

With more foreign investment potentially on the table, I’m confident that Singapore will be able to tide through this rough patch.

Stay on track with your investment strategies and don’t invest with your gut

We’ve had two major events this year. Brexit and the US presidential elections. If you were swayed by emotions on hopes that Britain would remain in EU and Hillary Clinton would win the presidency, you would have gotten caught by market sentiments by making irrational decisions.

Personally, I’m comfortable with my current retirement strategy and don’t see the need to make any drastic changes just because of the US presidential election. There’s no reason to panic.

What are your thoughts about Donald Trump being the new President of the United States?

A different perspective on the Supplementary Retirement Scheme

The Supplementary Retirement Scheme (SRS) was started in 2011 2001 and is part of the Singapore government’s multi-pronged strategy to address the financial needs of a greying population by helping Singaporeans to save more for their old age. It is operated by the private sector (mainly local banks).

Participating in SRS is voluntary and you can contribute any amount to your SRS account, subject to a cap ($12,750 in 2015 and $15,300 from 2016 onwards). In 2013, the three local banks administering the scheme said they have seen up to 20 per cent annual growth rate in the number of new SRS accounts opened over the past five years which to me, is a good sign because that shows that more Singaporeans are planning for their retirement.

Why naysayers are against contributing to the Supplementary Retirement Scheme

Despite the increase in new SRS accounts, there are many naysayers who are against the idea of contributing cash to SRS accounts.

Here’s a calculation on tax savings that I’ve taken from OCBC’s website on Supplementary Retirement Scheme based on an individual who earns $60,000 per year (that’s $5,000 per month) and $20,000 in personal reliefs.

supplementary-retirement-scheme-calculations

Naysayers would say that it’s ridiculous to contribute $12,750 in cold hard cash just to enjoy $405 in tax savings, especially the case for the lower-tier of middle income earners. They also argue that the tax savings is minimal when compared to returns generated from investments made with the same amount of money.

It’s really just a retirement savings plan with tax benefits

The way I look at my SRS account, I see it as a retirement savings plan with the added bonus of tax benefits. It acts as forced saving to prepare me for future retirement and I can’t access the money until the age of 62. As a reward for saving for retirement, the same amount is deducted from my taxable income.

Some people see it the other way round, where the sole purpose of having a SRS account is for tax deductions and totally missed the point that it’s meant to complement their CPF accounts and build their retirement funds.

supplementary-retirement-scheme-diagram

Consider the money in your SRS account as a part of your investment portfolio

Using my OCBC Blue Chips Investment Plan (BCIP), I am able to use the money in my SRS account to make regular investments in the stock market. As I am focusing on creating an investment portfolio of ETF index funds, I use the money in my SRS account to purchase Nikko AM STI ETF shares every month. In the past few months where the market is on a downturn, the monthly investment from my BCIP account using my SRS money benefited me because it helped to average down on my Nikko AM STI ETF stock holdings.

In the past, all SRS withdrawals must be made in cash. If money in the SRS account was used in investments, the investments had to be liquidated before the proceeds could be withdrawn in cash from the SRS account.

From July 2015, SRS account holders will be able to apply to their SRS operators to withdraw investments from their Supplementary Retirement Scheme (SRS) accounts without having to liquidate their investments (refer to Ministry of Finance website).

This means that if I reach the age of 62, where I am qualified to withdraw from my SRS account and I didn’t have any urgent need for the cash, I can transfer $40,000 worth of investments from my SRS account to my CDP account. That allows my SRS investments to continue to grow in my CDP account and I can liquidate them when I need the cash. This method of transfer will also qualify for 50% tax concession.

A contingency plan when the Singapore government makes more changes to CPF Life

As we continue to plan for our retirement, the reality is that policies governing our CPF accounts is ever changing and will continue to evolve according to our population trends, e.g. mortality rate, etc.

It’s safe to say that by the time I reach the stipulated retirement age, the age when payout from CPF Life commences is not likely to remain at 65. Having a fully funded SRS account of $400,000, I will be able to withdraw $40,000 from 62-72 without having to pay any taxes. That provides a fallback for me if the age where CPF Life payout commences is delayed by a couple of years.

Conclusion

As someone who is on the lower tier of the middle income class, I still believe that contributing to my SRS account has its merits and will continue to do so until it’s fully funded. I’m also pretty sure that my SRS account will play a pivotal role in my retirement planning many years later.

Are you contributing to your SRS account? I’d love to hear your thoughts.

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