Income Review 2016

Not many streams of income left in 2016 that will bring me into 2017, having liquidate most of my positions to purchase a second home.

Passive income:

As can be seen... my passive income dropped from 2016 as compared to previous years. Liquidated most of my assets to get another house which i am currently staying in. So it will be like a fresh start in 2017 when i try to build up my portfolio again to get income from dividends. Meanwhile, also hoping that the rental from my HDB will add a much needed boost to my passive stream.

Been holding cash a bit the past few years to buy another house, I guess that's why my dividends income wasn't that significant anyway.

Also only managed to get 1 month of rental out of my flat, and i net the agent's commission off. My US apartment continues to generate income, although there seems to be en-bloc interest in that. Let's see if i am forced to sell out, which is not ideal as i kind of like the regular USD income stream.


Portfolio as at 31 December 2016:
A grand total of $2,130. Now that I do not expect to use huge amounts of cash anymore in the near future, I am more comfortable in placing more into equities. Although the current amount i am placing now is still $300 a month. I should be looking to increase the amount in 2017. Waiting for my expenses situation to stabilize further, and to build up a bigger financial buffer too.

Prestige Life Rewards

I was introduced to this new and wonderful product by a Great Eastern Agent. Don't invest in property, invest in Prestige Life Rewards (PLR) by Great Eastern. This works like property investment, only better!

Wow - is it true?



Because this agent is a friend, I am open to hearing more, and I was promised an analysis between property investment and PLR. As I have a HDB, the comparison will be between the 2.

As I receive the analysis, I opened it up, and was immediately sold by the great benefits of this product. Let me share it with you.

Actually I was being sarcastic. These kind of "analysis" actually pisses me off more than anything.

The analysis is quite biased and did not present a balanced view of both products. There is only the supposedly good points of the product and the cons of property investment – to me, this is more a sales pitch than any fair analysis

For example, and just to name a few:

(1) There was mention of an upcoming oversupply of HDB flats. This failed to mention the governments intent of increasing population in Singapore.

(2) Failure to mention that we are in a rising interest rate environment, which would adversely affect the product (given the element of premium financing).

(3) ABSD was mentioned that is incurred in purchasing a property – a noticeable omission was the mention the equivalent distribution cost associated with purchasing the PLR?
This to me gives a very indication of where the 'advisor's' interest lies - whether in providing an unbiased comparison of 2 products, or only interested in talking up 1 particular tied product. I think the answer is very obvious.

Fortunately, I also received the Benefits Illustration. This is a product that has an element of premium financing. That is, I put in an initial $800,000 (based on my property value) for a total premium paid to Great Eastern of $2,392,912

So I compared the cash bonus (or passive income goes the sales pitch) vs the net rental

It is obvious to me that rental income from the HDB yields overall better passive income. And I need to remind myself that the passive income from PLR has the added advantage of leveraging, and the indicative rate is the higher end rate with 2% borrowing cost constant. How true is that? I will leave you to judge.

For transparency, I am using a monthly rental of $2,500 - given a 5 room HDB in Bukit Merah, rental increasing at 2% p.a, y.o.y. In URA's website, we can see that the rental at 2007 is approximate $2,000 vs $3,000 in 2016. Instead of the 4% increase, I used a more conservative rate of 2%.

The surrender value of the HDB (sale in this case), vs the PLR is quite different though as there is an element of leverage. If all goes well at the end of 40 years (at 4.75% rate by Great Eastern), the surrender value is $2,615,066. Would my HDB be worth the same 40 years later? Probably not. However, this is not an apple to apple comparison, given the leverage involved.

What would be more comparable is if I sold my HDB and purchased 2 properties with leverage. In that case, I am sure the pay-off changes again.

Is it a good product? Did I bite?

No - qualitatively, I doubt that the motivation of the 'advisor' is for my well-being. Quantitatively, PLR takes a higher risk profile as an asset and still fail to beat the passive income element.

I did not thank the agent for introducing this product as I felt like I wasted time analysing on an inferior product. Thinking back - perhaps I should thank the agent, because it gave me a topic to write upon.

It really drives home the point of how no one cares for your money more than yourself.

Update Feb 2016

In addition to recording my transactions, I also decided to track down on a monthly basis, how much passive income i receive from dividends

Total of $815 for the month of February. Given that i only hold 15,000 STI ETF shares, seems like February is a good income month for me.
The yield of the ETF is around 3.5% to 4% at this current price now.

Also elected to receive dividends in the form of scrips for Frasers Commercial Trust since i do not need cash at the moment, so might as well reinvest it back in.

Added 500 shares to my STI ETF for this month, at a price of $2.65. A lot of people are avoiding the markets given the volatility, but my thinking is that if i am comfortable buying in at $3.30, i should be even more comfortable buying in at a lower price.

Gonna be adding positions on a regular basis going forward!

Passive Income Review 2015

Finally received all the information i needed to do a review of the passive income for 2015.

Currently i have 3 streams of income, and hopefully i can eventually grow it to a stage where it can support my daily expenses. Currently the target is $4,000, a figure which i derived from my average expenditures tracked in 2015.

See Expenses Review 2015

(1) Options Strategy
This is a bad year for my options-strategy due primarily to the huge market fluctuation in July/August 2015. 1 bad trade nearly wiped off my whole year's profit. In actual fact though, i would not have suffered such a hit if i have done set a cut-loss when the swing is more than 10%. However, i did not expect the swing to be of such magnitude, and i closed off the position at a huge loss. To be honest, i think i panicked a little with this options trade. The lesson learn would be for me to have better risk management.

Even though the money i put in here for options trading is my 'play money', i still do feel heart pain to the loss suffered. I think the concept of loss aversion is very true here. I hope to do better utilizing options for passive income in 2016. Compared to 2014's passive income, 2015 is a disaster.

(2) Dividends
Dividend income for 2015 almost doubled from 2014 as the market tumbled a little in the later part of 2015. I took the opportunity to load up a little on STI ETF. That contributed to the increase in dividends from 2nd half 2015 onwards. In 2015, i'm looking forward to a full year's contribution from dividend income from those new positions entered, and hopefully as more funds come in, i can take advantage of the further weakening of equities prices in 2015.

On a whole, while dividends doubled, the total amount is still quite minuscule, just 2.1k for the whole year. Definitely need to build this up.

(3) Rental
Slight improvement from last year. Although this is relatively stable. The major contribution to the improvement comes mainly from the strengthening of USD over SGD. For a same amount of USD rental income, i get more SGD (not that i actually FX it back to SGD for me to use)

What i did with the income is using the income generated from this rental to add to the investment monies i hold with my wife. Hopefully, it can grow again to a substantial amount.

Summary:
Total passive income for 2015 is $7,008, which works out to be $584 per month. A far cry from the target of $4,000.
I guess that's why i need this blog - to serve as a tracker and to motivate myself to keep up the journey to work towards financial independence.

Financial Resolution 2016

As with all new years, resolutions are always made. I set out to cut expenses and increase revenue last year, and i shall have similar goals this year. However, i will be more specific this time round.

As they say, targets should be a little of a stretch, so i shall try to streeetch it a little.

(1) Save $12,000 in 2016 for myself. I didn't managed to achieve this in 2015, and i shall aim to accomplish this. This amount shall be invested when good opportunities arises. That is $1,000 a month, and hopefully if i do get SOME bonus and tightening of my belt in some ways, i should be able to achieve this.

(2) Continue to build up buffer in each of my expenditure category in YNAB.

(3) Increase my annual passive income by $500 by the end of 2016. Have deployed some of my savings a.k.a war-chest in Q3 of 2015 when the markets took a tumble. Hopefully the full year contribution of the deployed cash (and additional returns from deployed savings into investments) would be able to come into play and help me achieve this increase.

Have you made any goals?

Dividends Update - May 2015

Nothing much to blog about this month... but typically the month of May is quite a good month for dividends collection, as most Singapore companies have a December year end.

Security			Net Amt
KEPPEL CORP			SGD 360.00
SGX			SGD 40.00
SPH			SGD 70.00
MFG INTEGRATION			SGD 50.00
FRASERS COM TR			SGD 0.27
BOARDROOM			SGD 53.77

Total of $574.04

Frankly, given that it's a good months for dividends, my passive income from equities is really not a lot.

Aiming to get it higher!