Investment manifesto

[malcontent]

I’ve been thinking about posting something like this for a long time. Expats and locals alike have often asked me, how does one begin investing? This is a big topic with a huge learning curve, but I will begin at the end and see how much interest there for working my way backwards toward the start. So, at the end of the road, here is what successful investing looks like:

No less than 50% or more than 75% of your investments in low cost, broadly diversified equity funds. Those who are decades away from retirement could even go up to 100%, but with CPF that is practically impossible. These are not numbers I dreamt up, but back tested and proven, going back before the Great Depression that started in 1929.

For non-US persons, for tax reasons, this usually means one simple fund like ISAC, an ETF domiciled in Ireland and traded in London, which you’d buy through the likes of Interactive Brokers. For US persons, for tax and reporting reasons, this could either be a single ETF like VT or the combination of two, like VTI and VXUS. This is a set it and forget it, buy-and-hold kinda thing that you do not need to monitor or touch, except to rebalance.

The ETFs mentioned include thousands of stocks, there is no need for stock picking or market timing — invest as soon as you have the savings available and do not accumulate piles of cash. If it’s too late, then divide your pile into 12 parts and invest these large chucks each month with your regular savings. Do not worry about the price of the ETF, set a deadline to invest and do not hesitate. Lack of discipline is the number one cause of investor failure.

The stock market has delivered 10-12% average annually over the decades (nothing beats it on a risk adjusted basis), and this holds true even going back to the Great Depression. Yes, bad years happen, you could see your portfolio drop by half, but sit tight and it will come back. The lower prices mean you get even more shares as you continue to buy each month. Who doesn’t like a sale? What matters is the price when you need to sell, and it’s not as if you’ll need everything all at once on day one of retirement.

Let me leave it there and see if anyone has any interest in this topic.

[smoulder]

Fully agree with this approach. For the average Joe who doesn't know enough about investing and is too busy to learn, this should be the investment method of choice.

I'm surprised that in this day and age, more people are not doing it.

[malcontent]

There is a perception that high net worth investors have access to better investment techniques or vehicles that can outperform the broad market. Yes, some private equity investments and complex derivative strategies can outperform… in the short-term (just as a bet on an individual stock can), but they can just as easily underperform.

This idea that professional investment managers can consistently beat the market in the long-term has been proven false time and time again. Rare people like Warren Buffet who have consistently outperformed the market in the long-run are clear exceptions. Worse still, higher net worth investors are often targeted with higher risk strategies, but nobody talks about the ones that don't pay off. High risk can mean high reward, but what are the odds of success?

This is why it always goes back to: where you can get the highest risk adjusted returns? Whether your total investments are worth $100k, $1m or $10m, the way you invest and what you invest in should largely remain unchanged.

[haspu]

Good points. I would just add that having an emergency fund first is important so you don’t need to sell in a downturn. Automating ETF contributions also helps with discipline and avoids timing mistakes.

[malcontent]

Funny thing about an emergency fund — I’ve never had one. I’ve always had plenty of revolving credit and I’ve always paid off the entire balance on all my cards each month — every single time throughout my entire life without fail. Even today I’ve got 6 figures of credit at the ready in both Singapore and the US. So for an emergency, I honestly don’t see the need to leave cash wasting away in a savings account.

Funny thing too — even in retirement, I don’t feel the need to keep even one month of expenses in cash. I leave funds invested until needed — then I pull from equity or bonds, depending on how my asset allocation is tracking. I just don’t get why people feel the need to pad themselves with cash.

[smoulder]

Funny thing about an emergency fund — I’ve never had one. I’ve always had plenty of revolving credit and I’ve always paid off the entire balance on all my cards each month — every single time throughout my entire life without fail. Even today I’ve got 6 figures of credit at the ready in both Singapore and the US. So for an emergency, I honestly don’t see the need to leave cash wasting away in a savings account.

Funny thing too — even in retirement, I don’t feel the need to keep even one month of expenses in cash. I leave funds invested until needed — then I pull from equity or bonds, depending on how my asset allocation is tracking. I just don’t get why people feel the need to pad themselves with cash.

When you say "cash", I presume you are referring to typical savings accounts with next to no interest? What about high interest accounts - what's your take on them?

And bonds = bond ETFs? Curious what role you feel bonds or bond ETFs play in a portfolio.

I've been pondering these questions recently -
bond ETFs plus equities with bond ETFs forming immediate cash needs
Or
Equities plus cash (high interest account and/or MMF)

I would love to hear your thoughts on this.

[malcontent]

When you say "cash", I presume you are referring to typical savings accounts with next to no interest? What about high interest accounts - what's your take on them?

And bonds = bond ETFs? Curious what role you feel bonds or bond ETFs play in a portfolio.

I've been pondering these questions recently -
bond ETFs plus equities with bond ETFs forming immediate cash needs
Or
Equities plus cash (high interest account and/or MMF)

I would love to hear your thoughts on this.

Yes, cash = typical savings/checking accounts that pay close to zero interest. When I retired, I explored higher yield alternatives. Last year I tried opening an online-only bank account with high interest (in the U.S. these are called HYSA or high yield savings accounts). After a lot of research I opened an account with Synchrony (former GE Capital) which had a 3.8% yield at the time. After several months of trying it out, I could not deal with the clunky, bare bones features.

After more research, I realized that some brokerage accounts not only have a rich feature set, but also a sweep that automatically invests every idle cent into a MMF, and when bills come in, it automatically liquidates to make the payment… and the yield is the same as a HYSA. So I am trying that out now… so far so good.

As far as bonds go, I had invested in US treasuries plus some short duration bond ETFs like SGOV and SHV, but because we now live in a high tax state, I’ve shifted to a short duration (less than 1 year) state muni bond fund for tax reasons. You get the idea, directly held treasuries and ultra short duration bond ETFs.

In Singapore the best ETF you’ve got for bonds is probably MPH, but the duration is intermediate term — you can see what that does to the price of the bond fund. My purpose in holding bonds is for safety, and duration the major risk factor. You can buy US treasuries through a broker in Singapore and I believe they are tax free, but you’ll still have the currency risk, so I wouldn’t recommend that if all of your future expenses were in SGD.

I have enough in bonds to cover the next 5-6 years of expenses which should allow us to hold onto our equities through a severe crisis. Back when I was working, it was less, maybe 2-3 years. To me, that is the role they should play in a portfolio.

I’m not sure what you mean by equities plus cash, I keep all of our equity investments in a separate account for ease of management. I’m not a big fan of high yield bond funds which tend to be as risky as stocks, so I limit exposure to those and focus on equity as the highest risk adjusted return investment out there.

[smoulder]

When you say "cash", I presume you are referring to typical savings accounts with next to no interest? What about high interest accounts - what's your take on them?

And bonds = bond ETFs? Curious what role you feel bonds or bond ETFs play in a portfolio.

I've been pondering these questions recently -
bond ETFs plus equities with bond ETFs forming immediate cash needs
Or
Equities plus cash (high interest account and/or MMF)

I would love to hear your thoughts on this.

I’m not sure what you mean by equities plus cash, I keep all of our equity investments in a separate account for ease of management. I’m not a big fan of high yield bond funds which tend to be as risky as stocks, so I limit exposure to those and focus on equity as the highest risk adjusted return investment out there.

You read this wrong

I'm referring to holding cash instead of bonds here. Cash in this case, perhaps held in high yield savings accounts like UOB One or OCBC 360 for example and /or MMFs.

[malcontent]

Ah, ok. I know many people in Singapore chase after those bonus (teaser) offers, but I never have. Too many hoops to jump through, and terms are always changing… a lot of effort for a little payoff that is often temporary. To a large extent, banks in Singapore play the same games with credit cards, and I never got into that either.

I always focus on sustainable rewards/interest rates. For example, my credit card trifecta was Citi SMRT (selected groceries, dining, transit & online), DBS Esso (gas) & StanChart SimplyCash (fallback). Each one paid decent rewards even without hitting a minimum monthly spend. I now have a similar trifecta credit card setup here in the U.S. — that might evolve into a five headed dragon.

[smoulder]

Yea true. That's a good point about the sustainability of Singapore high yield accounts and the various hoops you have to jump through to qualify for the high interest.

So the credible alternatives options for "cash" would be good quality bonds and mainly their ETFs, treasury and MMFs.

[Wd40]

In my view Investment Manifesto is like kind of a reminder for us so that we dont make mistakes in our asset allocation based on our feelings at that moment in time. I am expecially vulnerable to this. Hence I just used Chat GPT to draft my investment manifesto, here it is:

# My Investment Manifesto

**I do not need more money; I need fewer mistakes.**

I have already won the game.

At age 46, with a portfolio of approximately ₹13.4 crore and annual expenses of about ₹12 lakh, my financial security does not depend on maximizing returns. My portfolio is already capable of supporting my lifestyle many times over.

The purpose of my portfolio is not to become rich. It is to preserve purchasing power, maintain optionality, support my family, and allow me to sleep peacefully through all market conditions.

My allocation of roughly:

* 34% Indian Equity
* 28% International Equity
* 38% Debt

is intentional.

The debt allocation is not a mistake. It is not idle money. It is the stabilizer that protects me from making emotional decisions during market crashes. It allows me to rebalance into equities when others are fearful.

The international allocation is not a bet against India. It is protection against concentrating all my wealth in a single country when my job, future inheritance, and life are already heavily tied to India.

I accept that debt will likely underperform equities over long periods. Its job is not to maximize returns. Its job is to reduce risk and provide resilience.

I accept that there will be times when:

* Indian equities outperform everything else.
* US equities outperform everything else.
* Debt appears unnecessary.
* My portfolio underperforms more aggressive investors.

These periods are expected and do not justify changing my strategy.

I will not alter my asset allocation because of:

* Market highs
* Market crashes
* News headlines
* Social media
* Friends' returns
* Fear of missing out

I will only change my allocation if my life circumstances, spending needs, family situation, or long-term goals materially change.

My goal is not to achieve the highest possible portfolio value.

My goal is to maintain financial independence, protect my family, and enjoy life with confidence and peace of mind.

The greatest risk to my wealth is not market volatility.

The greatest risk is abandoning a sound plan because of emotion.

Therefore, I will stay the course.

[smoulder]

@Wd40 aren't you working in a 9 to 5 job now?

[Wd40]

@Wd40 aren't you working in a 9 to 5 job now?

I do, it has been about 3 months. But I am not really counting on it. It is nice for engagement, passing time, feeling a sense of accomplishing something. The salary is 1/4th of my Singapore salary, but it pays my bills and I am able to save it bit. But relative to my networth it is nothing.

[malcontent]

@Wd40 yes, it’s good to write out your investment manifesto. Staying the course is probably the most important rule, provided you are adequately diversified.

I assume your India exposure is indexed, like Nifty 50 or similar? You have a significant overweight position in India (home country bias). I have some of that myself, being 85% US and only 15% non-US equity, which includes some India inside EEMS.

I definitely do not have “more than enough” to meet my retirement needs, but I am hoping it’s enough even if I never work again… time will tell. I am comfortable living a bit on the edge.

[Wd40]

@Wd40 yes, it’s good to write out your investment manifesto. Staying the course is probably the most important rule, provided you are adequately diversified.

I assume your India exposure is indexed, like Nifty 50 or similar? You have a significant overweight position in India (home country bias). I have some of that myself, being 85% US and only 15% non-US equity, which includes some India inside EEMS.

I definitely do not have “more than enough” to meet my retirement needs, but I am hoping it’s enough even if I never work again… time will tell. I am comfortable living a bit on the edge.

In my case the geo arbitrage was very favourable, my withdrawal rate is a little over 1% of my portfolio which is extremely conservative and people often tell me I am living like a miser, although I am happy and spending more doesnt bring happiness to me. I am bit like Mr Money Moustache in terms of my spending philosophy. I believe in the 80/20 rule in most things in life and it applies to spending to. If you want something, if you spend 0, you have 0 fun. But if you spend 20% you get 80% of the fun. Beyond that it is the law of diminishing returns kicks in.

I bought a used bike and a used car. The car is Suzuki SX4 sedan of 2010, which is quite popular in North America, especially the hatchback 4X4 version, and it cost me like 1/10th the price of a new car and gives me much more joy than buying a brand new car. When you buy a used car, you take care of it and want to keep it in top condition so that it doesnt breakdown, you are involved in it. It is not a point a to point b thing. You need to source parts that are not easy to find, that process is fun in itself. The car itself is rare on the roads and that is a novelty in itself.

For someone who is a driving/riding enthusiast who was deprived of this pleasure for over a decade in Singapore, one would think I would go and spend like crazy and buy a top of the line car/bike. But no, that doesnt identify with me.