This year has been tiresome.
I’ve never been so overwhelmed and bored at the same time. I’ve been filled with both worry and hope, and the year has come and gone without major disaster in my life.
My heart goes out to those whose lives continue to be affected by the wars in Ukraine and the Gaza Strip and it’s a constant reminder of how lucky I am to live in a country where the biggest gripe in recent memory seems to be how Ya Kun has raised the price on their kaya toast set from S$4.80 to S$6.30 within a year.
Once I realise how peaceful life here is, it turned out my year had been good after all.
Portfolio
Alas, I wish I could say that my portfolio did wonders this year but if you were invested outside of the major indexes like I was, this year would have been very subpar in terms of returns.
Nevertheless, my portfolio^ has reached a new milestone because of my high savings rate and because I let the dividends compound. The negative sentiment surrounding interest rates staying higher for longer in September and October also provided a good opportunity to deploy a little more investments into REITs which were beaten down further although there has been quite a sharp rebound since November.
^(To be clear, my portfolio only includes cash set aside for investments and the market value of my money invested in equities, bonds, and other financial instruments. I DO NOT include the value of my share of the property used as a residence and the monies in my CPF. I track these numbers as part of my Net Worth but when I say “portfolio”, I’m referring to the value of my investments alone.)
For privacy reasons, I won’t report the actual amount in the portfolio. Let’s just say that it’s a six-figure portfolio which is not quite F- You money but it isn’t chump change either. Based on growth rates, the portfolio’s CAGR is around 23% over its lifetime of 15 years but much of this is due to the low starting base (a low five-figure sum) and subsequent stuffing of cash into the portfolio over that same period.
Yes, I’ve been saving a lot of money and the main reasons for that are: (1) I’ve worked in the government all my life, drawing a decent (but not obscene) salary that would put me around the 70-80th percentile of income earners in Singapore, (2) I have family (spouse included) that are pretty self-sufficient although I have been giving a token sum to my parents all these years, and (3) I don’t have kids.
I hope the above reasons are clear to demonstrate that not everyone in Singapore will be able to get to where I am in 15 years but I estimate that even without the second and third reasons, my portfolio would still be six figures but half or a third of what it currently is. I also hope that this doesn’t come across like I’m bragging because I’m not. In fact, if I were more disciplined with my investments, I reckon my portfolio would be seven figures or at least it would be very much closer to that milestone.
Money, Money, Money
In terms of net worth, it has continued to climb in line with the portfolio and no thanks to the forced CPF contributions required by the government. The property market in Singapore has continued to remain resilient despite higher interest rates and the new models that the Government has introduced to the BTO market. Nevertheless, I don’t track the market value of my property and value it at cost.
The biggest epiphany I’ve had this year is that many people in Singapore are probably not going to do well in retirement because they have little to no assets (besides their primary residence) that can help fight against inflation.
This year is probably the year where the mental budget for the cost of dining out in Singapore has reached a minimum of S$10 per meal. I remember visiting either the UK or Australia as a kid and thinking that dining out in those countries was so expensive because the average meal cost between 10-15 units of their currency.
Ladies and Gentlemen, I think this year will be the year where we can say that Singapore has reached that mark. If you dine out at any one of the newer hawker centres or coffeeshops, you’ll see that many of the mains are priced at around S$6-8. Once you add a cold drink, that’s easily close to S$10. If you go beyond the hawker centres and coffeeshops, it’s going to be very difficult to stay under S$10 per meal.
The wonderful thing about high(er) interest rates this year is that many risk-averse individuals learned about the joys of investing in T-bills. While that helped with the inflation situation a little, it didn’t actually help people get wealthier. If you think of someone running on a super long treadmill, T-bills just prevented someone from falling off the treadmill, it didn’t necessarily help them get ahead of the pack.
Invest in real assets, my friend.
This year really underscored the importance of owning real assets – businesses, real estate, or anything that allows for increasing prices over time.
While the principle is simple, the difficulty is in identifying which assets to own. Furthermore, the assets have to be purchased at a reasonable price, or the rate of return may not be sufficient to provide a return high enough to beat inflation.
Despite it being a difficult task, I don’t think one should avoid it unless you have a huge enough source of capital such that mediocre returns will still provide enough dollar returns for any current and future expenses.
Ok, that’s all I have to say. I know I haven’t been blogging much but that’s life.
Ryan Goh: Life through these eyes 