What a year! What a year.
Even though 2018 ended disastrously, the performance of 2019 completely made up for it. Since the major drop in at the end of last year, the market in 2019 went on to grow over 28%.
Anybody who was buying into the market during the year should have had a great time – defying any predictions of market collapse that were floating around. Any investors that freaked out and got out of the market at the end of 2018 and sat out on the sidelines in 2019 would have missed out on the recovery and growth.
So given the recovery, how did I do this year?
First, let’s take a look at how I did on the personal finance side of things.
Personal Finance: My 2019 Expenses
On the personal finance side, let’s take a look at my spending this year to see how close I am to my estimate for my FIRE number.
The first and major part is my monthly expenses.
Luckily, though I am now married, Mrs. FIRE-Path Lion and I are currently living with her parents until we can find a place to call our own. They’ve already paid off their mortgage so I help out by handling all of the utilities and management fee. This has allowed us to save on one of the largest costs for any family, the housing cost.
Here’s what the breakdown of monthly expenses looked like for me:
|Utilities||S$200 (total for 4 people)|
|Income Tax||S$600 (Average)|
|Total||S$3,390 / month|
|Total for Year||S$40,680|
The food cost is a mixture of cheap eating and some dinners that I pay for both myself and the wife, so it does include more than just 1 person cost (that’s how I justify the high amount, haha.)
Same with transportation, I normally try to take bus and train both ways. However, since I work in the same area as the wife, we sometimes take grab to and from work together. This allows us to share the cost (sometimes she pays, sometimes I pay. But as I earn more than she does, it’s usually me hahaha.)
With 2 people sharing cab, it’s actually not that expensive and it’s a convenience that is sometimes priceless when we’ve had a bad day at work and just want to get home to relax.
Other Big Expenses in 2019
Aside from the normal monthly costs, this year also happen to have a few large expenses, the largest of which was my honeymoon.
So here is a breakdown of the large purchases:
|Presents for Friends & Family||S$1,050|
|Honeymoon||S$15,000 (Total for 2 people)|
The Honeymoon cost does seem very high, but for context, it was in the U.S. and Canada, it was 3 weeks long and the cost is for 2 people. Which works out to roughly S$2,500 per person per week, inclusive of flight and hotel, so I don’t think it’s exorbitant, especially for a honeymoon.
Total expenses for the year: ~S$60,000 or ~S$5,000 per month. Pretty close to my estimate!
When this amount is spread out across the year, this is what the monthly expense looks like in a pie chart:
Fun Fact: If I wanted to sustain this level of expense after I stopped working, my FIRE number would be S$1,500,000 at 4% safe withdrawal rate!
Personal Finance Objective in 2020
Based on the amount I’m saving, it looks like I won’t quite make my FIRE-by-40 target! I’m going to have to cut back on my spending a bit if I hope to meet that goal. Luckily I think I can still do it.
The most important savings I can make in 2020 is to not have any more Honeymoon, lol.
Of course, the point of saving and having money is to spend it buying what makes us happy. I thoroughly enjoyed our honeymoon and would do it over again if I have the chance.
It does help me understand that I can easily hit a higher savings rate if I wanted. Based on what I spent in 2019 and what I will likely make in 2020, I want to reduce my expenses to about S$4,500 per month in 2020. This should cut my expenses down from S$60,000 per year down to just S$54,000 per year.
This will allow me to save more and accelerate my progress towards my FIRE number and doing so before 40 will become much more doable.
Of course, just saving money will not be enough to get me to my FIRE number. It’s important to invest as well so that the savings can grow instead of sitting stagnant in the savings account.
So what did I do for investments in 2019 and how did it do?
Investment: Following My 2019 Investment Plan
Looking back at what I wrote in a similar post last year, I wanted to increase my portfolio value by at least S$100,000 in 2019 and I’m happy to say that I managed to do that.
At the end of that post, I went over my learnings and investment plan for 2019. Let’s take a look at whether I managed to follow each item in the plan.
Plan #1: Stay the course & continue investing regularly
I certainly achieved this goal as I’ve continued to add to my investment portfolio each and every month without fail.
I did make a mistake in February though and ended up not investing then (doh!)
Plan #2 : Contribute S$7,000 to CPF SA
Check! Done and dusted. Money is sitting there earning the guaranteed 4% interest and helping to reduce income tax in YA2020.
In fact, I’ve already contributed another S$7,000 to my CPF SA today (1-Jan-2020) so that it can start earning the 4% interest as soon as possible and cut my tax for YA2021 next year.
Plan #3 : Invest all my bonus immediately in a Lump Sum instead of spreading it over time
That’s done too. If you notice the 2 large spikes in the cash flow chart above at 1-Apr-2019, that was when I placed my bonus into SRS to buy the STI ETF as well as the larger part into IWDA.
At that time the STI ETF was S$3.24 per share and IWDA was at US$56.08.
The STI ETF was very erratic throughout the year as a result of the U.S.-China trade war and ended the year at S$3.278, slightly higher than where I purchased in lump sum.
As for IWDA, it is now worth US$63.03, a US$6.95 increase from that day in April. It spent the majority of the year after that date at a price point higher than where I bought it so this worked out very well for me, despite the trade war causing quite a bit of volatility.
This was a big win for lump sum investing overall.
Plan #4 : Get to a better asset allocation
When I ended 2018, I mentioned that my asset allocation was too focused on the tech sector. I had 16% in QQQ and 14% in AAPL – and when we add up the 14% in technology holdings in IWDA – I had over 44% of my portfolio invested in the technology sector!
This isn’t good practice if we wanted to be diversified, so I committed to shift the balance of my portfolio away from tech and get closer to a portfolio with 70% in IWDA, 10% EIMI and 20% STI ETF as possible.
So how did I do? … It’s a bit complicated. Let’s take a look.
Here’s the chart of the tickers (and how much of each) I added to my portfolio during 2019:
Looking at it you’ll notice a few things:
- No AAPL or QQQ in sight.
- Predominantly IWDA compared to EIMI and ES3.SI (STI ETF)
Let’s take a look at these points one by one.
No AAPL or QQQ
I didn’t add any more money to my existing AAPL and QQQ position at all. As money flowed into the other tickers in the portfolio, the allocation in these 2 tickers as a percentage of the total portfolio reduced. So I think that was a success. You’ll see how much of my current portfolio is made up of AAPL and QQQ further down below.
A lot of IWDA compared to EIMI and ES3.SI
In order to get closer to a 70% allocation towards IWDA, I needed to make sure that the majority of the funds that is added to my investment portfolio goes into IWDA and that is what I did. Almost 68% of the funds that I invested last year went into IWDA.
The rest went into EIMI and ES3.SI to bring their allocation up relative to the amounts that were already sitting in AAPL and QQQ in the previous year.
However, despite the amount of funds that were added to the portfolio, I didn’t manage to really bring down the allocation of AAPL and QQQ by much. Let’s take a look.
Investment: 2019 Results
So given all the additional funds that I added to the portfolio in 2019, how does my portfolio allocation look now?
Nice, we’re much closer to the allocation I set out to achieve at the start of the year.
- The allocation in AAPL went from 14% last year to 12%. This is only a slight drop even though funds have been channeled to other assets in the portfolio, mainly due to the amazing performance by AAPL this year. More on this later.
- Allocation to QQQ went from 16% to just 9%, due to the additional funds injected into the portfolio. Good. Now AAPL + QQQ only make up only 21% of my portfolio instead of 30%.
- STI ETF (ES3.SI) went from 22% at the end of 2018 to 18.4% at the end of 2019. Despite getting 20.6% of the injected funds, the percentage allocation dropped. This is due to the lagging performance of the STI ETF compared to the rest of the portfolio.
- EIMI increased slightly to 8.2% from 7% even though it received 11.8% of the injected funds. This is also due to the lagging performance of EIMI compared to the other components of the portfolio. Other assets grew much faster so EIMI end up not growing much in allocation despite funds being injected.
- Given where everything else in the portfolio, although IWDA received 67.6% of the injected funds, it grew from 40% of the portfolio in 2018 to 52.4% of the portfolio at the end of 2019. This is edging closer to the target of 70% but it’s still very far away due to the presence of AAPL and QQQ, both of which did extremely well. I will count this as a win though as I do not want to sell any of the holdings, instead I prefer to add to my IWDA position as a way to increase its allocation.
OK, now that’s the allocation out of the way, how did the portfolio perform?
I think it performed extremely well!
Let’s take a look at a graph of my portfolio value over time – from the very start of my investment career in 2016:
I was able to hit the S$300,000 portfolio milestone this year. The portfolio started 2019 with a value of S$129,705 and ended the year at S$307,128 – an increase in value of over S$177,423 in one year.
Of course this also included all of my contributions as well as my lump sum bonus contribution early in the year. That really worked out though since after I made the lump sum contribution, after it recovered from the correction in December 2018, the market continue to take off massively.
Based on my spreadsheet, the rate of return on the portfolio in the last 4 years is hovering around 13.2% annually. Here’s a cool daily chart of rate of return over time (plus the massive crater at the end of 2018):
Based on the charge the XIRR looks to be averaging around 12% and I hope that the trend continues. With the rule of 72, if I can maintain the rate of return of 12%, my investments will double every 6 years! That’s insane!
That’s pretty impressive! But which components of the portfolio contributed to the gains?
Portfolio Components Performance
Here’s a breakdown on how each component performed (all returns calculated in SGD):
|Ticker||Allocation||Internal Rate of Return (3.5 years)|
|EIMI||8.22%||Not enough data for realistic number.|
Overall Portfolio Internal Rate of Return: 13.2% year on year
Let’s breakdown the performance of each ticker one by one:
AAPL & QQQ… Godlike Performance
Even though I didn’t add any more funds to AAPL or QQQ, their allocation stayed relatively high due to their amazing performance in 2019. AAPL shares essentially doubled in value going from as low as $142 at the beginning of 2019 up to $293 at the end of the year – up $151! This also contributed to QQQ’s wonderful performance as all the FAANG stocks did quite well this year.
So despite not receiving any more investments, they grew so much that their value within my portfolio stayed high.
Even though their performance was amazing, I don’t think I made a mistake in staying away from contributing more to these 2 tickers. Hindsight is 20/20 and things could have gone the other way with the trade war. Given the growth that AAPL has this year, it’s very unlikely that this level of performance will continue into this year. The sales of iPhone 11 and AirPods Pro (I think it’s going to be massive) is likely already priced in.
IWDA’s Amazing Returns Despite the Trade War
As the title suggests, although there’s an ongoing trade war between U.S. and China, IWDA had an amazing year. It just didn’t seem like anything could stop the market from continuing to provide great returns (which sort of scares me a bit.)
Even though the yield curve inverted in the middle of the year, the stock market continued to rally.
EIMI was sideways most of the year till the year-end rally
Unlike the developed market fund, the developing market one didn’t fare so well during the trade tensions. The value fluctuated throughout the year but was pretty much moving side-ways the entire time. However, there was a new sign of life at the end of 2019 with the anticipation of some progress on the trade negotiations. I won’t be holding my breath though. I’ll keep adding to my holdings until I hit my target allocation.
STI ETF performed ok, but lukewarm compared to the rest of the market
Overall, my STI ETF holding is giving me more than 9% return year-on-year, quite good, but it could not hold a candle to the performance of the rest of my holdings.
Yes, I still think that the STI ETF is still an important part of the portfolio for a Singaporean investor as I highlighted in my Bogleheads Portfolio for Singaporeans post. It’s meant to provide me with a local market investment to hedge against currency fluctuations, however I don’t think I will need as much as 20% of my portfolio allocated to it as my portfolio size continues to grow ever larger.
Therefore I will likely readjust my portfolio allocation in 2020 to hold less STI ETF in favor of the other tickers.
Speaking of which, what are my investment goal for 2020?
My Plans and Goals for 2020
I think with the FIRE movement, the great thing is that things get more simple the longer we are on the path rather than more complex. So I think this section will be even shorter than last year’s.
My objective for this year is going to be similar to last year but do even more of it. Here they are:
Plan #1: Contribute S$7,000 to CPF SA
Similar to last year, this is a no-brainer for a person with my income. This will reduce my taxable income as well as lock in the high guaranteed interest of the CPF SA earlier. In fact I’ve already contributed this year’s amount on the 1st of January 2020. So there you go, first item already checked!
Plan #2: Contribute the maximum allowed to the SRS as soon as possible
Similar to the CPF SA, the SRS will allow me to reduce my taxable income and still invest and grow the funds for my future retirement. If you want to read up on how this works, you can read my post on how to use the SRS to reduce your taxable income here.
Plan #3: Rebalance the portfolio to reduce STI ETF from 20% down to 10% of the portfolio
As mentioned in the above section, as my portfolio size increase, I feel that I should start reducing my allocation in the STI ETF and towards other holdings. There are a few reasons for this:
- I only really need a certain amount of SGD holdings in order to provide a safety net against currency fluctuation. Since my portfolio size is increasing, the percentage that the SGD allocation should be will reduce as the absolute size is kept relatively stable.
- I believe that international and global markets is more diversified and provides a higher growth potential compared to the 30 companies within the STI ETF.
So I think as I rebalance to 10% of my portfolio in STI ETF, I will keep EIMI at 10% but bump up the allocation of IWDA to 80%.
Of course, I will never get to 80% allocation in IWDA because AAPL and QQQ are still there and I won’t be selling them any time soon, but I can get closer to this allocation as I add more funds to my portfolio.
Plan #4: Continue to invest consistently and regularly whenever I have enough funds
Again, similar to last year, I will continue to add funds whenever I have enough cash. This has ensured that I continue to accumulate assets in 2019 whether the market did well or not.
It has served me quite well and provided a handsome return when I could easily have been worried about the market volatility during a trade war and end up sitting on the side-lines.
I think continuing to add to the portfolio is definitely the right choice going into 2020.
Plan #5: Invest all my annual bonus at once when I receive it
Also similar to 2019, I will again invest all my annual bonus into the market when I receive it again near the end of March.
It’s worked extremely well for me this year and as I analysed in my previous post on DCA vs Lump Sum, there’s a higher likelihood of Lump Sum doing better than DCA, I think the same strategy will give better odds at a better performance than waiting and spreading out the investments over time.
However, I might follow Big ERN’s strategy that he highlighted in this post and start a 3-month DCA before the bonus arrives. This only works if I know exactly how much I will receive and when (which I will.)
I’ll report back at the end of next year to see how that strategy worked out.
Plan #6: Continue to contribute to IWDA, EIMI and ES3.SI
Yes, AAPL and QQQ did amazingly this year, however as I mentioned above, this is blind luck on my part and it could have gone the other way. I will continue to hold AAPL and QQQ but will still not add directly to the holdings. A massive part of IWDA is already holding the components of QQQ and a large part of that is also AAPL. If AAPL does well, I will benefit from it but if other companies does well, I will also gain.
As I mentioned in my post on “Why index investing works”, consistently predicting which companies will do well and which will not is very unlikely. I will continue with my passive investment strategy and get on with life.
Objective #1: Reduce my expenses to S$4,500 a month
Given that my 2019 expenses was about S$5,000 per month, and this is with the S$15,000 spent on my Honeymoon, I think S$4,500 should be very much doable.
This should increase my savings rate and allow me to invest more and accelerate my progress towards my FIRE goal.
Objective #2: Grow the portfolio to at least S$400,000
Given the amount that was able to add to the portfolio in 2019, I am fairly confident that I can add at least another S$100,000 to the portfolio in 2020. I don’t want to get cocky though since the market could tank and wipe out half of the portfolio tomorrow. You never know. So I think S$400,000 portfolio is a reasonable goal.
That’s it! That’s a wrap on 2019, a wonderful year for a consistent investor. It shows how unpredictable the markets can be but still ultimately rewards an investor that has been consistently investing over the long term.
How about you? How did the market treat you in 2019? I’d love to hear your stories and goals for 2020.
It’s the start of a new decade, a new journey and exciting future awaits.
Nobody can predict how the markets will do tomorrow or a year from now, but I guarantee that a recession is coming… eventually. Then the market will recover again… eventually.
Since nobody can predict any of this in a consistent manner, the best thing to do is to stay the course and keep investing come hell or high water.
In the long term our persistence will pay off. So keep at it and you’ll surely be rewarded!
Happy new year and good luck in 2020!
Until next time.