Category Archives for Investment

I am switching to Endowus for my SRS investments and here’s why

Since 2014, I've been topping up my Supplementary Retirement Scheme (SRS) account and investing through OCBC's Blue Chip Investment Plan (BCIP), buying into Nikko AM Singapore STI ETF stocks each month in a dollar cost averaging manner.

For a lazy investor like me, this works really well because just like my cash investments through AutoWealth, all I have to do each month is to top up my SRS account and BCIP will make the purchase automatically at the end of the month.

At the same time, I avoid timing the market and getting swayed by market fluctuations.

Although I like how everything has been working out for the past 6 years, the Straits Times Index (STI) had a muted performance, considering we are undergoing the longest-running bull market in history.

Now that i have set up my StocksCafe account (use my referral link to test all their features for 2 months for free!), I am able to show how my SRS portfolio has been performing for the past 6 years.

The dividend yields from Nikko AM Singapore STI ETF is growing but doesn't get me excited given I'm going to be invested for the next 20 years and growth are much more important than dividends.

Shifting my SRS investment from a Singapore-focused portfolio to a global diversified portfolio

Given the lackluster long term performance of the STI, I'm convinced that it will be a better move to convert my SRS portfolio from being 100% Singapore-focused, into a global diversified portfolio.

For the past few years, I've been struggling to find a simple and automated way to do this. In my exploration of potential platforms and funds, the costs of investing can add up pretty quickly to around 1% to 3% per year.

For layman investors like me, it's can be challenging to sieve through all the funds offered on platforms like Fundsupermart and Dollardex, especially some of the feeder funds that are investing in multiple ETFs and funds (that means I'll need to read up on all those ETFs and funds!).

But these days, things are changing with robo-advisors like Endowus starting to allow investors to invest their SRS funds in funds from Dimensional Fund Advisors (DFA) for less than 1% per year. In my case, I'm looking at DFA's World Equity fund that charges 0.43% per year and Endowus charges an Access Fee of 0.4% per year.

Let's talk about Dimensional Fund Advisors

Kyith from Investment Moats has written a comprehensive article about DFA in his blog and I don't think I can do any better than him on this so you should read his article to get an in-depth knowledge about DFA.

But in a nutshell, here's what you need to know.

Founded in 1981, DFA uses market financial data to design and manage portfolios. They take a less subjective and more systematic approach to investing. They believe that by implementing this approach consistently, investors will understand and stick with their approach, even in challenging market environments.

In the course of their research, DFA found that securities offering higher expected returns share certain characteristics, which DFA call dimensions. To be considered a dimension, these characteristics must be sensible, persistent over time, pervasive across markets, and cost-effective to capture.

With these dimensions, DFA created broadly diversified portfolios that emphasize the dimensions of higher expected returns, while addressing the tradeoffs that arise when executing portfolios.

What resonated with me is how DFA chose to use data as the foundation in their approach towards designing investment portfolios in a strategic and systematic manner.

As of 30 June 2019, Dimensional has $586 billion (USD) in firm-wide assets under management.

Investing my SRS funds through Endowus

Endowus is the first robo-advisory platform that can help you invest your CPF and SRS funds for a low fee. I've heard them speak in a few personal finance and investment events.

In this blog article, I'm going to be focusing on solely about investing with your SRS funds.

Here's an excerpt about Endowus that I've taken from their website.

Our investment strategy is underpinned by a scientific process rather than speculation. We utilize modern portfolio theory that uses time-tested investing rules such as diversification and asset allocation to maximize your returns while minimizing risk. For equities, we utilise passive and systematic portfolios that have broad market exposure with tilts towards proven factors of returns such as value, size, and profitability, as evidenced by the research of Nobel Laureate academics. For fixed income, we leverage the expertise of the largest fixed-income investors in the world and their ability to execute time-tested strategies with real track records.

One of the most popular question that everyone has on their mind is how rebalancing will be executed.

Over time, the value of individual investments in your portfolio will move up and down and drift away from your target asset allocation. If an underlying holding drifts by more than 10% from its target allocation (i.e. a fund with a target allocation of 10% moves by more than 1%), we will send you an email to inform you. You will have the option to opt out of rebalancing if you choose, however, we believe an optimized rebalancing that maintains the target asset allocation is a meaningful contributor to long-term returns. If you do not choose to opt out of rebalancing your portfolio back to its target asset allocation, we will go ahead to execute the rebalancing three business days after you receive the email. Every cash flow (deposit or withdrawal) is used to rebalance your portfolio towards the target weights. In the absence of cash flows, we rebalance by selling and buying existing funds in the portfolio.

Where does your invested money in Endowus get invested in?

In the process of registering my account, I played around with their Model Asset Allocations to see what funds will they recommend me to purchase based on my preferred asset allocation.

Here's what an 60/40 equities and bonds asset allocation recommendation looks like.

By toggling around the different asset allocation models, I was able to see that Endowus will invest my money in the following funds based on my selected asset allocation model:

  • Dimensional World Equity Fund (Equity allocation)
  • PIMCO GIS Global Bond Fund (Bond allocation)
  • PIMCO GIS Emerging Markets Bond Fund (Bond allocation)
  • PIMCO GIS Global Real Return Fund (Bond allocation)

Similar to AutoWealth, what I like about this is that there's only 4 funds that I need to read up on and understand where the money is bring invested in. I just need to research on them and decide whether I like these funds, or not.

Before doing any research, decide on your asset allocation first. In my case, I only intend to do an investment with 100% equities allocation so I only need to do my research on Dimensional World Equity Fund.

My deep dive into Dimensional World Equity Fund

Dimensional World Equity follows a simple and repeatable approach that blankets nearly every investable company in the world, including emerging-markets companies.

Using the research of renowned academics such as Eugene Fama and Kenneth French, the strategy focuses on stocks with lower valuations (measured by price/book ratio), smaller market capitalisations, and higher profitability (using an adjusted measure of operating income).

Their research shows that stocks with these characteristics have tended to outperform over the long term. The managers exclude the most expensive and unprofitable companies completely and apply market-cap multipliers to give under or over weightings to the remaining stocks, depending on how much they possess of the desired characteristics (that's the dimensions we talked about earlier).

The result is a portfolio that is broad and well-diversified, with a blend of growth and value stocks.

Looking at the fund's investment across the globe, we can see that it remains heavily invested in United States with 54.78% of equity invested in that region.

In terms of sector weightage, we can see that the fund is also well-diversified across Consumer, Financial Services, Industrials and Technology. This is important as I'm planning to invest for the long term and not be affected by cyclical market fluctuations.

Even though the fund is heavy on United States, the top 10 stocks that is held by the fund is only 5.69% of the entire portfolio. That tells us that the fund is so diversified that not a single company will be able to cause the fund to incur a huge loss even if it closes down.

Dimensional World Equity Fund in a nutshell

  • ISIN: IE00BF20L762
  • Launched in 19 Mar 2018
  • Fund type: Open Ended Investment Company
  • Price currency: SGD
  • Domicile: Ireland
  • Benchmark: MSCI All Country World Index (ACWI)
  • Fund Size (Mil) as of 27/01/2020: GBP 1757.88
  • Dividends: Accumulating
  • Expense Ratio: 0.43%
  • Total number of stocks invested as of 30 Sep 2019: 10,918 stocks across the globe

My experience using Endowus to invest my SRS funds

Registering my Endowus account was an easy and seamless process that required very little interaction with the Endowus support staff.

I registered my Endowus account following the instructions on the website and it took 2 days for my UOB Kay Hian account (used by Endowus to make the investments on my behalf) with the linking to my SRS account to be ready for investing.

It took a total of 4 days for my SRS funds to move from my OCBC SRS account into my UOB Kay Hian account and invested into Dimensional World Equity Fund by Endowus.

A total of 6 days from account registration to being invested is relatively fast, compared to my past experience with other investment platforms. I also like that everything was communicated in a timely manner through email so i didn't have to log into my Endowus account daily to check on the progress.

I have also scheduled recurring investment using my Endowus account so that money will be moved from my SRS account into Endowus every month and injected into my investment portfolio for dollar cost averaging investing.

Having enjoyed a great experience investing through Endowus, I've been recommending my friends to invest their SRS funds through the Endowus platform.

Have you invested your SRS funds through Endowus? I'd love to hear your experience on using their platform.

Start your investment with Endowus

This is not a sponsored post, but I do have an Endowus referral link that you can use to register your Endowus account. We will each get $20 in Access Fee credit (equivalent to $10,000 advised free, assuming Access Fee of 0.40%) after you have created and funded your account.

it's not a lot of money, but it can pay for 6 months of Access Fee.

What is the Wuhan Coronavirus and will it change your investment strategy?

The biggest topic trending on the streets for the past few days has been the Wuhan Coronavirus that has infected thousands and spread to multiple countries so far. I'm not going to post any statistics here because those numbers are meaningless and you should check official sources for real-time statistics.

One of the major challenges today is the fact that China isn't the most transparent country so you can't really be sure if the information shared on the Internet is true or not.

In fact, there was a false rumour going around Facebook claiming that Woodlands MRT was closed for disinfection due to a suspected case of the Wuhan Coronavirus infection, urging the public to avoid that train station. Ministry of Health has come out to clarify that this was false.

Instead of watching the latest video shared by your friends on Facebook or listening to the latest pantry chatter, I highly recommend everyone to visit the Ministry of Health website to get the latest update on the virus and what we can do to try and reduce the chances of getting infected.

Here are some resources from credible sources

Here are a few resources released by the Singapore government and the Ministry of Health.

Wuhan Virus - Situation in China: Taking Precautions

Infographic on what is Wuhan Coronavirus and what precautions you can take today

Prof Leo Yee Sin of National Centre for Infectious Diseases (NCID) answers a few key questions about the Wuhan Coronavirus

Will the Wuhan Coronavirus change how you invest?

For some people, they have the know-how and the capital to make bets on specific sectors and stocks to capitalise on trending news like the Wuhan Coronavirus.

Brian Halim from A Path to Forever Financial Freedom took a bet on Top Glove Corporation Bhd, a rubber glove manufacturer that owns and operates 43 manufacturing facilities in Malaysia, Thailand, and China. He purchase their shares at $1.72 per share using CFD leverage at 2.8%.

Top Glove Corporation Bhd closed at $2.35 today and I'm happy for Brian.

Are you making bets on companies based on the Wuhan Coronavirus?

Personally, I've not done anything remotely similar because I don't have the know-how and capital to make similar bets. I also know that I've never been good with luck-based games like blackjack, toto, 4D so it's unlikely that I'll get luck with short term stock picks. I also know that I lack the mental strength in making such bets. The last time I shorted a stock many years ago, I wasn't able to concentrate 100% at work and was consistently checking the stock price.

I'm much better at skill-based games like mahjong where I have some level of control over winning and losing, and it's a longer game where the winners and losers are determined after multiple rounds.

I'm better off not making any stock bets for short term gains to take advantage of the current situation.

Keep some dry powder on hand in case the market goes down the toilet

We know that on a macro level, some of the industries are going to be affected if the Wuhan Coronavirus situation continues for a few more months (at least).

For example, we know that retail stores are going to be experiencing lesser footfall which translates to lower sales. If this continues for the long term impact, shopping malls may also be challenged with retaining their existing tenants.

Major businesses like Starbucks and Yum China (KFC and Pizza Hut) are starting to choose to suspend operations until further notice. The profitability of those businesses are clearly going to take a hit in the books.

We are also seeing stock prices of pharmaceutical companies going up but that's mostly investor sentiments since it will be months before any company comes up with a vaccine for the Wuhan Coronavirus.

I'm going to stay invested with the bulk of my cash in my portfolio, my dry powder will mostly consist of my CPF Ordinary Account which will be progressively deployed if the market tanks by say, 20%?

Choosing to stay invested and not lose sight of the long game

As a lazy investor, it's times like these when I have to keep reminding myself that my investment portfolio is for the long game (at least 10 years). I don't intend to make any big changes to my investment portfolio and continue to make incremental investments every month.

Remembering that I'm going to stay invested for the next 10-20 years, the Wuhan Coronavirus is going to look like a small situation when I look back at this when I retire at 50.

If the prices of those ETFs that I'm investing in are heading on a downward trend, I'm happy to be getting them at a cheaper price. I know that this month's incremental investment is going to average down the equities in my investment portfolio.

Staying healthy is also an investment

Don't be overly-fixated in making investment decisions. Remember that your health matters as well!

Take the necessary precautions to reduce the risks of getting affected by the Wuhan Coronavirus, or any other illnesses.

Eat more healthy food, exercise regularly, and practice good personal hygiene.

Are you changing your investment strategies because of the Wuhan Coronavirus? I'd love to hear your thoughts in the comments below.

Photo by Piron Guillaume on Unsplash

Getting my feet wet with dividend investing with NetLink Trust

It’s been 4 years since I’ve held any individual stocks in my portfolio. I decided to explore the markets again for stocks to build a portfolio on top of my existing ETF investment portfolio using spare cash that I have accumulated from surplus in my monthly budget.

Based on my calculations, the ETF investment portfolio that I’m currently building will be more efficient left alone till 62 before I start drawing down from it. So I’ve been thinking about setting up another investment portfolio.

The purpose is to build a separate investment portfolio that has the potential to provide retirement income before I reach 62 and complement the excess CPF money that I will have in my CPF accounts after 55.

I intend to make this portfolio contain a mix of value, growth and dividend stocks, with a larger portion being dividend stocks.

As a start, I decided to pick a safer stock to invest in. After screening through a number of stocks, I decided to invest in NetLink Trust for dividend income.

Here are some of the criteria I used to evaluate my purchase.

Resilient business model and strong economic moat

This is an important one for me because of my past history in stock investment. Each time I invest in a stock, I don’t even look at their performance, much less sell them for many years.

Netlink NBN Trust has a unique economic moat since it designs, builds, owns and operates the passive fibre network infrastructure of Singapore’s Next Generation Nationwide Broadband Network. The trust’s extensive network provides nationwide coverage to residential homes and non-residential premises in mainland Singapore and its connected islands.

In the next few years, I can only foresee that more service providers will be moving their customers over from cable services to fibre optics connection (if they have not already done so already) and fibre optics connectivity will be the norm in Singapore. That represents a stable recurring (and potentially slowly increasing) revenue for the company.

On the technology front, there’s nothing more advanced than fibre optics communication and when one comes up, it will take several years before it reaches a level maturity that the Singapore government would be willing to take a risk and make a nationwide change from fibre optics.

In my opinion, the number of residential fibre optics users is also unlikely to decrease, ever. If the Singapore economy goes into recession and you will probably choose to shop less and eat at home more often. But would you think about cancelling your Internet service? I highly doubt so.

Pays dividend and dividend per share is stable or rising

In 2018, NetLink Trust paid out 0.068 cents in dividends over 2 periods (May and November). That’s around 8.4% dividend yield at the time of this article where the last transacted price is $0.81 per share.

While what I’ve learnt is that we want to pick stocks that have a stable or rising dividend paid for at least 5 years, I’m choosing to make a concession given that NetLink Trust’s distribution policy is to distribute 100% of its cash available for distribution (“CAFD”).

Decent market capitalisation

In most of the investment workshops I’ve attended, the trainers have mentioned that market capitalisation is important in screening stocks since it generally corresponds to a company’s stage in its business development.

A company with low market capitalisation is seen as less conservative since it has a high chance for massive growth and also a high risk of massive failure. A company with mid to large market capitalisation is naturally considered much safer with lower risk of getting wiped out in a recession. However, they often also have lower chance for growth since they would have already achieved a certain stage of growth.

Since the purpose of this investment is for stable dividend payouts, mid to large market capitalisation is preferred. NetLink Trust has a market capitalisation of $3.16 billion which makes it a mid cap stock.

Net Asset Value

The Net Asset Value of a company represents its net value as an entity and is calculated by using subtracting the total value of its liabilities with the total value of the company’s assets.

We can use the net asset value of a company as one of the measurements to tell if the current share price is worth paying for. To do this easily, we will take the net asset value of the company, divided by the total number of shares to derive the net asset value per share. Using the net asset value per share, we can then compare it with the current share price of the company.

If the net asset value per share is higher than the current share price, then it is an indication that the company could be undervalued. To truly tell if a company is undervalued, we will need to examine the company’s profitability and operating cash flow to see if the company has any issues.

I’ll write about it next time when I’m looking at value stocks.

For NetLink Trust, its net asset value is $0.77 and that’s pretty close to the current price of $0.81 per share (5% premium of net asset value). I think it’s a fair price.

Current Ratio

A company with a current ratio less than 1 most likely does not have the capital on hand to meet its short-term obligations if they were all due at once. Likewise, a company with a current ratio greater than 1 indicates that it has the financial resources to remain solvent in the short-term.

For long-term investors like me, this is important as we will always keep current ratio in mind whenever we re-examine our portfolio to ensure that the companies we invest in have the financial strength to weather through any short term turbulence, should its debtors come knocking on its doors.

With NetLink Trust having a current ratio of 2.64, it gives me the confidence that NetLink Trust has the financial strength to keep the business going.

Irrelevance of dividend payout ratio

I struggled with this at first because by plugging in the formula, the dividend payout ratio came out to be almost 3 times the earnings and looked crazy unsustainable.

That was until I researched further and after reading an article on, I learnt that the Trust may choose to distribute dividends from operating cash flow instead of accounting profits like regular companies.

Therefore dividend payout ratio as a screening metric for NetLink Trust is no longer considered.

Going in with 60% confidence

I can’t say I’m spotting sure wins here. I mean, I’ve only attended a couple of workshops and picked up some knowledge about investing. I’m trying to put them to good use by making investing decisions based on data.

My purpose for picking up NetLink Trust is purely for its dividend payouts so if it fails to deliver its promise on dividends, I’ll remove it from my portfolio.

What are your thoughts about NetLink Trust as a dividend stock investment? Do you think I should be using other metrics to analyse this stock instead? Please share them in the comments below.

You won’t trust Mickey Mouse to manage your portfolio so there’s no reason to trust Mickey J to make investment decisions for you either. The contents in this article should be considered as entertainment until you do your own due diligence by spending time researching about stocks and make your own investment decisions.

Photo by William Iven on Unsplash

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