The second topic in the interview was “Retirement should be _______”. My response was just 3 words: Restful, Blessful, Meaningful. We were given some time to ponder and prepare for the topics of discussion before filming the interview. Boy, I was surprised with the speed I came out with these 3 words when I was preparing for this particular topic.
All the 3 words are adjectives I chose to describe my ideal retirement lifestyle, and the words can simply mean full of resting, blessing and meaning respectively. Perhaps it was due to the obvious meanings of the words, that the video edit team chose to just display the words without any further description or explanation.
I wasn’t quite satisfied with just the 3 words. It felt somewhat hollow and I decided to put in more thoughts in search of deeper meaning. Soon I realized that while the words was meant to describe retirement lifestyle, they are equally applicable to life in general. Eventually, I expanded those words into a motto: “Living a Restful, Blessful and Meaningful Life!”
Let me describe the thought process with the 3 words and the motto.
Restful: According to the Cambridge Dictionary, the word Restful is an adjective used to describe something that produces a feeling of being calm and relaxed. One thing to take note though, don’t mistaken restful as just laze around doing very little, or even doing nothing. It is about doing things at rest, meaning without stress.
Blessful: I didn’t realize until I searched the word in many conventional dictionaries (e.g. Cambridge, Collins, Longman, Merriam-Webster, Oxford, etc.) that there is no such word. The only entry I found was on definitions.net, where Blessful is defined as a life full of blessing. I could have used “Blessed”, but it would be at odds with the other 2 adjectives in form (i.e. not ending with -ful). I decided to stick to “Blessful” (pardon my wilfulness and stubbornness).
Meaningful: The Merriam-Webster Dictionary defines the word Meaningful as an adjective for having a meaning or purpose. This definition might suggest that the synonym for Meaningful is Purposeful, but there is a difference if we delve deeper into the meanings. Meaningful is based on value system (value-driven), and purposeful is based on intention (goal-directed). I chose the former because I deem our value system can last a long while once established, but goal can change over times.
Life: The above 3 words are adjectives meant to describe a noun, which originally would be “Retirement”. Since I realized that the adjectives can equally apply to life in general, it became obvious to pick the noun “Life”.
Living: My wish for the described lifestyle is that it would last continuously for a life time. Hence, I have chosen a present participle form of the verb “Living” to begin the motto.
Adding the article (“a”), the coordinating conjunction (“and”) and the punctuation marks (“,” & “!”) to the above 5 words, the motto “Living a Restful, Blessful and Meaningful Life!” was born.
The life motto can actually apply to the spirit, soul and body in our life, but I would only focus on its application to the personal wealth management aspect of my life in this post.
Restful: As far as my investment is concerned, I’m moving towards a restful approach by leveraging on others to manage my portfolio. Over the years, I have reduced my individual stock holdings and adopted a Core Satellite Portfolio Investing (CSPI) strategy. I constructed portfolios with core holdings in global equity funds and several satellite funds in selected asset classes, themes, regions and sectors. I spent time keeping abreast with trends, performing regular portfolio reviews, adjusting portfolio composition triggered by trend changes, and rebalancing portfolio allocation to the target levels. I leveraged on fund managers and robo-advisors to manage the nitty gritty details in my investment portfolio.
Blessful: I really feel blessful with the current investment environment. There are so many instruments available for investment and trading, such as stock, bond, commodity, CFD (Contract for Difference), ETF (Exchange Traded Fund), unit trust, forex, futures, options, crypto, etc. The cost of investment and trading has gone down tremendously to reasonable levels, e.g. zero cost unit trust platforms, low cost brokerages, low expense ratio funds, etc. The proliferation of financial bloggers, YouTubers and educators has raised the general financial literacy level, and I for one surely benefited from their sharings. I’m blessed to have friends in my circles whom I can tap on their strong knowledge in diverse areas of expertise.
Meaningful: I find it meaningful to get involve with the personal finance communities. I learnt from others who share their views and experiences in response to people seeking advice to their financial situation. Some questions and sharings opened my eyes into areas I had never thought of. I also shared my own views and experiences, and many a time I learnt in the process from others’ responses, comments, feedback, clarification, and further questions. I felt that my effort was worth it when people thanked me for my sharings had helped them. Such appreciation and recognition are precious! Best of all, I grew in my very own financial literacy through it all.
Coincidentally, I just found out that Ohio University had an article on Seven Word Life Motto. It describes a process to develop your life motto in seven words. It is interesting that my ad hoc process just happened to come out with an exactly seven word life motto! Seven is a number of perfection to Christian, and this life motto surely felt like a Godsend to me.
Disclaimer: This post is just for educational sharing purposes. Please do your own due diligence on any products mentioned in this post.
Performance Update
Here is the September 2022 Performance Update:
All 5 robo advisors and 3 benchmark indices extended into larger losses in September 2022. The world and US stock suffered more than 20% losses YTD, officially entered the bear markets. No portfolio was spared the bear attacks.
Key Observations
YTD returns of the 3 benchmark indices broke the -20% mark, officially entered the bear markets.
All 5 robo advisor portfolios couldn’t resist the bear attacks and clocked in monthly losses ranging from -4.12% to -8.25%.
Only SquirrelSave and StashAway portfolios managed to suffer smaller losses that the 3 benchmark indices.
SquirrelSave was particularly impressive with -4.12% loss, less than two third of S&P -6.78% loss.
Syfe suffered the largest monthly drawdown of -8.25% since inception this month.
Disclaimer: This post is just for educational sharing purposes. Please do your own due diligence on any products mentioned in this post.
When I published my blog post “Guide to CPF SA Shielding” in January 2022, I presented the selection criteria for SA Shielding would be using instruments that are low risk, low cost, low volatility and high liquidity. Among the CPFIS SA approved investment products, the money market funds and short term bond funds would meet all the four criteria. Specifically, I picked the Nikko AM Shenton Short Term Bond Fund for its lowest FSMOne Risk Rating and lowest Annual Expense Ratio.
With the current increasing interest rates environment, there is another instrument that is becoming a potential candidate for SA Shielding: the 6-month Treasury Bills (T-Bills) issued by Monetary Authority of Singapore (MAS). We would take a look at T-bills as a SA Shielding instrument and compare it with the short term bond fund in this post.
What are T-Bills?
As described on MAS website, T-Bills are short term Singapore Government Securities (SGS) issued at a discount to their face value and they give investors the full face value at maturity.
Here are the key details of T-bills:
As it is backed by the Singapore Government, T-bills can be considered a risk-free instruments. There are 2 tenors, 6 months or 1 year. This relatively short tenor makes it worth considering for SA Shielding as we would not be missing too many months of SA interests while our money is parked in T-bills.
The interest rate is determined by auction, and the interest is paid as a discount upfront to successful applicants after auction results are out. The full face value of T-bill, which is at $100, is returned to investors at maturity.
We can see that the details of this T-bill issue was announced on 22 September 2022 with an auction scheduled on 29 September 2022. Once an auction is announced, retail investors can submit applications for the T-bill through the primary dealers, namely the 3 local banks (DBS, OCBC or UOB).
Retail investors can apply for T-bills using cash, SRS or CPF:
For cash application, you will need a bank account with one of the 3 local banks (as primary dealers), and also an individual CDP account with Direct Crediting Services (DCS) activated. Application can be done through the banks’ ATMs and internet banking portals.
For SRS application, you will need a SRS account with one of the 3 local banks (as SRS operators). Application can be done through the banks’ internet banking portals.
For CPF application using OA, you will need a CPF Investment Account (CPFIA) with one of the 3 local banks (DBS, OCBC or UOB) and application can only be done in person at any branch of your CPFIA agent bank.
For CPF application using SA, CPFIA is not needed, but you will need a Debt Securities Account with one of the 3 local banks (DBS, OCBC or UOB). Application can only be done in person at any branch of the banks.
While the T-bills application cut-off time is by noon on auction day, the banks may close the applications deadline 1 to 2 business days before the auction. It is advisable that you check with your bank for the exact cut-off time.
After the auction results are released about 1 hour after the cut-off time, those who succeed in getting allotment would receive the T-bill on 4 October 2022, and they would receive the face value at maturity 6 months later on 4 April 2023.
Here are the auction terms for this T-bill:
The total amount offered in this auction is $4 billion. The minimum denomination is $1,000, meaning the minimum amount to apply for T-bills is $1,000 and the amount has to be in multiples of $1,000. There is a cap of $1 million per auction, but no limit in term of total T-bills investment amount you can accumulate over multiple tranches.
The auction is conducted based on uniform price auction, meaning once the cut-off yield is determined after the auction, those who bid at the cut-off yield or lower will get allotment.
There are 2 types of applications: competitive and non-competitive. Competitive applicants would submit bids (yes, they can submit multiple bids) indicating the minimum yields they are willing to accept, whereas non-competitive applicants do not participate in the bidding process and they would get allotment at whatever cut-off yield is determined by the auction.
T-Bill Auction Process
After the auction is closed, non-competitive bids would be allotted first, up to 40% of the total amount offered. For this T-bill, the total amount offered is $4 billion, 40% would be $1.6 billion. If the total amount of non-competitive bids doesn’t exceed $1.6 billion, all non-competitive applicants would receive full allotment. Otherwise, they would be allotted on a pro-rated basis.
For example, if total amount of non-competitive bids is $2 billion, each applicant would receive 1.6/2 = 80% allotment of the amount they applied.
Non-competitive applicants will get the allotted T-bill at the cut-off yield, which is determined by the competitive bids.
After the non-competitive applications are settled, all the competitive applications would be arranged in ascending yield order (i.e. from the lowest to highest yields). The amount applied for each yield are accumulated starting from the lowest yield, and when the cumulative amount exceeds the amount offered to competitive applications (which is total amount offered minus amount allotted to non-competitive applications), that would be the cut-off yield.
In terms of allotment:
Those who bid lower yield than the cut-off yield would get full allotment.
Those who bid exactly at the cut-off yield would get pro-rated allotment, i.e. the balance amount offered to the applicants at cut-off yield would be distributed in proportion to the amount they applied.
Those who bid higher yield than the cut-off yield would get nothing.
Lets take a look at the auction results of this T-bill:
In this example, total amount allotted is $4 billion (which is the same as total amount offered indicated in the auction announcement) and total amount applied is $9.7 billion. There is an over-subscription, which is shown by the bid-to-cover ratio, calculated as total amount applied divided by total amount allotted = 9.7/4 = 2.42.
The total amount allotted to the non-competitive applications is $1.2 billion, which is less than 40% of total amount offered. Hence, they get 100% allotment of the T-bills at the cut-off yield of 3.32% p.a.
With $1.2 billion allotted to non-competitive applications, the remaining $2.8 billion is allotted to competitive applications. The results show that the allotment to those who bid at the cut-off yield is approximately 8%.
The cut-off price is the net amount paid for the T-bill after receiving the interest in the form of upfront discount. The cut-off price in the auction results is calculated in the following steps:
Face Value = $100
Cut-off Yield = 3.32% p.a.
Term to Maturity = 182 days
Pro-rated Interest = $100 x 3.32% x 182 / 365 = $1.655
Cut-off Price = $100 – $1.655 = $98.345
If the applicant applies for $10,000, it means the successful applicant would receive $165.50 interest as a discount after auction results are out, and also receive 100 units of the T-bills on the issue date.
The median yield is the middle yield in the ascending list of successful competitive bids. If the list has an odd amount of bids, the median yield is the yield right at the middle. If the list has an even number of bids, the median yield is the average of the middle pair.
The average yield is the sum product of the amount of successful competitive bids and the respective bid yields, divided by the total amount of successful competitive bids.
[Updates on 18 December 2023] When I first wrote this post, I thought the median and average yields were based on all competitive bids, but someone told me they were based on successful bids. I couldn’t find anything on MAS website to confirm this, so I left it vague by just mentioning competitive bids. Recently I noticed MAS had put information bubbles besides median and average yields, which clearly stated that they are computed based on successful competitive bids, hence the updates in the above two paragraphs.
The 6-month T-bills are issued fortnightly and 12-month T-bills quarterly. There are many opportunities to use T-bills for SA Shielding. Lets just focus on the shorter 6-month tenor.
The period for the CPF SA money used to hold the 6-month T-bill can span 7 to 8 months. During the holding period from application (carry out between announcement and auction dates) to maturity, you would miss the pro-rated monthly SA interests for the amount parked in the T-bill. Hence, you would want to choose those T-bills with 7-month span for SA Shielding.
For example, the 6-month T-bill issue BS22119T we looked at has its application month in September 2022 and maturity month in April 2023, i.e. it spans over 8 months. This happens because the issue date has crossed from auction month to the next month.
To reduce the holding period to 7 months, it is advisable to choose those 6-month T-bills with all the announcement, auction and issue dates in the same month.
In addition, to ensure SA money is deducted and credited in the first month and the seventh month respectively, you would prefer the period between auction and issue dates that are located in the middle of the month, giving ample times for debit and credit to happen within the month before auction and after maturity respectively.
Refer to the issuance calendar, the few upcoming issues that satisfy the above consideration would be BS22120E, BS22122Z, BS22124H.
Of course, the obvious selection criteria for the appropriate T-bills are that your 55th birthday would fall between the auction/debit date and maturity/credit date for SA Shielding purpose.
T-Bill Breakeven Yield for SA Shielding
In order to recover the 7-month SA interests for the amount parked in the 6-month T-bill, the cut-off yield of the T-bill has to be higher than the SA interest rates.
With the current SA interest rate at 4% p.a., the cut-off yield of the T-bill would have to be 4% x 7/6, which is 4.67% p.a. in order to breakeven. This is more than 1% higher than the latest 3.32% p.a. cut-off yield. Will it happen?
We can see that the cut-off yields had been on an uptrend since the beginning of the year. It took approximately 3 months to raise the yield by 1%. If the current trend continues, we might come close to the breakeven cut-off yield by end of the year.
Alternatively, I have done a linear trendline projection on the yield graph using Microsoft Excel:
Indeed the projection shows that the cut-off yield might reach about 4.5% p.a. by year end, and could exceed breakeven yield by early next year. With the US Federal Reserve continues to raise its key rate aggressively, such possibility is not unthinkable.
Preparation for SA Shielding using T-Bills
As application of T-bill using CPF has to be done in person at any branch of your bank, I would suggest you visit the bank before doing SA Shielding to make sure you meet all the prerequisites for T-bill application using SA money.
Find out from your bank about their T-bill application process, their exact application cut-off time, their charges, how would they inform you about the allotment, the time taken to refund the capital or discount upon allotment and the face value upon maturity if successfully allotted.
Strategy for SA Shielding using T-Bills
Create a list of 6-month T-bills with auction and maturity dates that span across your 55th birthday, as well as the auction-to-issue period located in the middle of the same month.
Compute the breakeven cut-off yield from the current SA interest rate.
Monitor the T-bill cut-off yields to get a feel of how the trend is developing and how close it gets to the breakeven yield.
Ideally it would be good to get the breakeven cut-off yield, but you may decide to accept a lower yield and view the yield loss as part of the cost of SA Shielding. After all, this yield loss can be recovered by the +1.5% boost in interest rate due to SA Shielding.
Depending on your yield target and the T-bill yield trend, you can choose to start applying for any T-bill in the list you created. The later the T-bill you choose, the more SA amount you can shield if it continues to increase due to Mandatory Contribution (MC) and Voluntary Contribution (VC).
However, don’t wait till the last T-bill tranche issued just before your birthday. There is a possibility that you don’t get full allotment from the issue, and you won’t have any opportunity to shield your balance amount using T-bill anymore.
When you apply for the selected T-bill, you just simply submit competitive bid at your target yield. If you get full allotment, you are done with SA Shielding. If you get partial allotment, you continue to apply the balance amount in subsequent issues, until you fully shield your intended amount.
Some may like to fine tune this strategy by starting initial application with competitive bid at the breakeven yield, and progressively lower your competitive bid towards your target yield in subsequent applications to increase the chance of getting allotment.
You may consider moving to non-competitive bid towards the tail end to secure allotment, but run the risk of the cut-off yield might be lower than your target yield.
Short Term Bond Fund Risk Analysis
Before comparing SA Shielding using short term bond fund and T-bill, let me update my risk analysis on the Nikko AM Shenton Short Term Bond Fund with the latest historical prices (downloaded from Yahoo Finance with data up to 30 September 2022) and additional statistical measures:
With additional 9 months of price data, the largest loss remains at -0.98% on 25 March 2020. It suggests the largest loss is an outlier that rarely happened in history. Therefore, I have added a few statistical measures for a better risk analysis.
The average 5-day move is 0.03% and the Standard Deviation (SD) is 0.10%. Statistically it means we would suffer loss at 2 and 3 SD levels with 2.3% and 0.1% probability respectively.
The conservative 3 SD loss is -0.28% for this short term bond fund. Coupled with potential loss of up to 2 months of SA interests (4% x 2 / 12 = 0.67%), total cost of SA Shielding might be up to -0.95%, and lets round it up to -1%, recoverable by 8 months of additional 1.5% interests.
Do take note that for those whose birthday doesn’t fall near the beginning or the end of the month, the whole SA debit to credit cycle would happen within the same month. They would only miss 1 month of SA interests (4% / 12 = 0.33%), together with 3 SD loss could bring the cost up to -0.61%. This could easily be recovered by additional 1.5% interests in 5 months time.
Short Term Bond Fund vs T-Bill for SA Shielding
Here is a summary of considerations for SA Shielding using Short Term Bond Fund vs T-Bill:
Short Term Bond Fund
SA Shielding using short term bond fund could be quite a daunting process for someone who is new to unit trust investment. One would need to go through the process of opening a trading account, obtaining the necessary qualification and getting familiar with the trading platform just to prepare for SA Shielding.
In order to reduce volatility risk, the execution window could be as short as 5 business days. One would need to watch the timing closely, place the buy order early enough for the Shield Amount to be deducted from SA before 55th birthday and execute the sell order as soon as RA is formed at 55th birthday.
My risk analysis already shown that the cost of SA Shielding using short term bond fund could be up to -1% based on statistical analysis, but human emotions could kick in if the bond fund suffers losses at the point where one is supposed to execute the sell order. Such loss aversion might trigger a delay in placing the sell order, hoping that price would recover soon. This inevitably widen the holding window and increase the exposure to possibly larger loss.
One would need emotional stillness to execute the buy and sell orders without hesitation for SA Shielding to be effective. Short term bond fund would be a convenient instrument for SA Shielding because it could be traded through the online portal of the trading platform. And it is reasonably safe as short term bond funds are relatively non-volatile.
T-Bill
On the other hand, SA Shielding using T-bill could be a relatively simple process. Besides the inconvenience of having to visit the primary dealer bank in person and filling up the form to apply for T-bill, the bank would take care of submitting the application form, deducting money from SA, settling refund of capital or discount after auction, holding allotted T-bill in custody, and returning T-bill face value to SA at maturity.
The only thing to do on the applicant part is to select which tranche of T-bill to apply and decide on the competitive bid to apply. With an execution window of 6 months, there are plenty of T-bill tranches to choose from. As for the competitive bid, one can set a yield target from analyzing the cut-off trend and deciding on the acceptable cost of SA Shielding by subtracting the breakeven yield from the target yield.
T-bill is issued by MAS and backed by Singapore Government. It can be considered a risk free investment with capital and yield guarantee.
Summary
When I first wrote about SA Shielding, T-bill cut-off yield was under 0.5%, way too low a yield to compensate for missing 7-month of SA 4% interests then. With the recent increasing trend of cut-off yield, T-bill is becoming a viable option for SA Shielding.
T-bill is appealing to risk averse people, particularly those who are not comfortable with unit trust investment. Once settled the target yield to apply for, the cost of SA Shielding can be computed and known. They can rest their mind and let the bank handles all the administrative details.
Both short term bond fund and T-bill are fixed income instruments. When used for SA Shielding, the former is actively managed by yourself and the latter is passively managed as it is left to be managed by the bank. Ultimately, you need to choose the appropriate instrument based on your personality, risk tolerance and investment experience.
As of today (30 September 2022), there isn’t any new PoW ETH fork created, mentioned as a possibility in Tokenize Exchange’s announcement on the Ethereum Merge.
Performance Update
Crypto market remained in the doldrums in September 2022:
BTC, ETH and SOL stayed below the Ichimoku Cloud and near the support levels. They are probably going to stay at support levels for a little longer.
After LUNA2 airdrop was released in May 2022 (my airdrop was delayed to September 2022 because of processing time by Tokenize Exchange), there were 2 price spikes in June and September 2022, but most of the time it was hovering around $1.50 ~ $2.50 region. It is probably going to stay that way until a new catalyst comes along.
Here is the performance update as of 30 September 2022:
Overall the crypto portfolio allocation had increased to 3.5%. The LUNA performance has included the LUNA 2.0 airdrop. Interesting to see that TKX had turned into positive territory, and it represents the highest allocation within the crypto portfolio. This is probably because it is an utility tokens used in Tokenize Exchange platform. As long as people continue to trade in Tokenize Exchange, there would be demand for TKX.
Personal Wealth Life Cycle Management (PWLCM) 