Monday, September 23, 2013

MH's Personal Investment Building

Well, not that I've written a post about my investment building and its reasons, why don't I share what I have done for myself so far?

Updated as of 22/10/12

Level 1: Solid Foundation
I personally have no debt to speak of as of today. I am gracious and thankful for my parents to have provided me my whole life until I graduated from school. My only debt is to them, and I have already started giving them a portion of my monthly salary.

This situation could change if I decide to get a place and move out during the next property downturn.

Summary: 
I have no debts :)

Level 2: Easy Access Savings
I have squirreled away a very sizable amount emergency cash, while I must admit, is sitting idly in my savings account, accumulating peanuts of interest. I am getting a very lovely 0.05% on my savings account, I SHIT YOU NOT. Thanks bank.

I have almost no expenses at all to speak of, though I have been planning what would be my forecasted future monthly expenses if I move into a place of my own. I think I can safely say that I am definitely able to buffer myself for 3 months of expenses.

If you are curious to see which bank I use, click this link. In my defense, the locations of their ATMs, as well as their status as being the go-to bank for local IPOs is enough to keep me with them for the time being. I am quite fond of their internet banking system as well, which is fast, efficient and safe.

Summary: 
I have a savings account with online banking features, with more than 3 months worth of expenses buffer, yielding 0.05%

Level 3: Cash Savings Account
Now, here's something I'm doing right. I have quite a fair bit of money sitting with me on the sidelines for now waiting for an idea and an opportunity. That money is nicely in my Phillip Cash Management Account. Now, what's so awesome about this? Well, this is my bridging account that gives me access to all the above levels, except lvl 11!

The beauty of this account is that while it gives me access to all those different assets, as long as I am undecided with my money, it will automatically park my money in a money market fund the next day. Should I ever need to use that money for any investment, I am able to transact immediately on that day itself. If I need to withdraw money, it takes less than 2 days for the money with be withdrawn.

A money market fund isn't the greatest, I am aware of that too. However, given that the local banks are offering nonsense interest rates, and that an 18 month fixed deposits yield is 0.5%, I think that this PCMA is perfect for me considering how liquid it is and the convenience it offers. With the ability to withdraw my money with no obligations within 2 days, the account projected yield is 0.48%. And of course, since this is an money market fund, the interest rate closes follows that of the banks here. When rates rises, I don't have to worry about trying to catch that yield.

Summary: The Phillip Money Market Fund which has a project yield of 0.48%

Level 4: Investment Grade Bonds
Well, it may be little known, but I have forayed into bonds just recently. You may want to read my posts here and here.

For bonds, I think I have aptly explained my stand in the first link, but let me explain my current approach and reasoning just for the sake of reinforcement. I have decided to go with bond funds as they offer low capital, fast, cheap and easy diversification. Although the prospects of a bond ladder does sound appealing, the capital outlay along with the accompanying work requires far too much work and expertise. I guess that's why I'm paying the expense ratio. For these bonds that I've chosen, their diversification is very broad based, and these funds are actively managed, meaning that managers can use their discretion to avoid any pitfalls in the near future. My current strategy for bonds is to avoid the US and Euro markets and stay on a short duration.

Summary: 
UOB United SGD Fund Class A [1.639]
Templeton Global Bond Fund A mdis SGD-H1 [13.0839]
Schroder ISF Global Corporate Bond [11.9799]

Level 5: Junk Bonds
Again, refer to the links in the above post to read more on my buying process.

I have to admit that for this bond fund, I initially did not know that it was a junk bond fund. Seeing it's credentials and past performance, I must admit that it is really impressive. It is globally diversified, while it still stays in the very safe rating of having a BB average bond ratings.

Summary: 
Templeton Global Total Return Fund A mdis SGD-H1 [12.0237]
Legg Mason WA Global High Yield Fund [1.00]

Level 6: Real Estate Investments
I think many people can attest for the fact that REITs have suddenly become a hot thing to investment in as of the recent years. Yield and property, it's a Singaporean's wet dream. Instead of buying a property to rent out, it's sort of the same thing, but with less capital outlay!

I managed to snag this when it dropped 15% from it's peak in May (see chart). Hopefully, this was a good bargain buy! I will be looking to add in global real estate, and highly likely to cherry pick and purchase individual REITs if their prices tumble even more and my securities account is up!

Summary: Phillip Singapore Real Estate Income Fd A with expected div yield of 4.92% and capital appreciation


Wrap Up
Well, so far that's not too bad, isn't it? I'm up to Level 6 of my own personal Investment Building, learning a lot along the way about each asset class that I'm investing in. I must admit that I am erring on the side of caution. Though I am up 6 levels, I have less than 25% of my capital invested. I may be cautious, but I have time of my side to make sure that I enter and time the market well, though I'm sure that once I ever step in, I will disregard timing from then on.

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