Featured image by Hans Eiskonen on Unsplash

Happy new year everybody!

Who knew that we’d be almost 2 years into the pandemic with 2 (and almost 3) rounds of vaccines, and this virus is still managing to keep all of us stuck at home for the most part?! Even for an introverted home-body like me, this is starting to really get on my nerves.

Well, that’s on a personal note… however, on the financial side, things have been going swimmingly. Investment-wise, these last 2 years of COVID-infused economy had given me the 2 best years of returns since I’ve started investing – so I really don’t know how to feel about that. As usual, I’ll be breaking down some important life events plus my investments and their performance for you in this post, then I’ll be briefly going over my plans for 2022.

Here’s how I’ve broken down this post – warning, it’s a long one:

1. Life choices in 2021
2. Personal finance breakdown
3. Investment breakdown
4. Investment performance
5. Networth
6. FIRE progress check and projection
7. Plans for 2022

Life Choices in 2021

There were quite a number of things that happened in my personal life this year that I think resulted in significant impacts on both my quality of life as well as my finances – sometimes great sometimes horrible. So I thought it would be great to go over my rationale for each one and then give each of them a rating out of 5 for both the “Quality of Life” scale and “Benefit to Finances” scale.

Let’s go!

Moving into my own place

If you’ve been reading my blog, you’d know that I have a property that I’ve been renting out and that I’ve decided to stop renting it out and have now moved in to live in it with my wife early this year.

This was purely a lifestyle decision. Previously I have been living with my wife and my parent in-laws for about 4 years and it worked out very well. I did not mind living with them as they are extremely nice and I do not need a lot of personal space to feel comfortable, as long as I had some space to myself – which I did.

This allowed me to really save quite a bit of money as their house was already paid off and so did not require any mortgage payment. So instead I helped cover 100% of the utilities which was no more than S$200 per month.

Then the pandemic hit

However, once the pandemic hit and working from home became the norm, I barely left the house. Given that both my wife and I had to find space for both of us to work from home without disrupting each other, that became much more difficult – and made moving out much more attractive. Luckily, as my rental agreement with my tenants was ending in January 2021, the timing couldn’t have been better.

Once January 2021 rolled around, we decided not to find another tenant and instead moved into the unit ourselves and we couldn’t be happier. Now both I and the wife have our own space to work very comfortably – with a proper home office set up and our own living space.

Of course, with this move, while our quality of life increased dramatically, it also dramatically increased our monthly expenses. We lost the stream of income from the rental and must foot the bill for the mortgage ourselves. Plus, as the place was not furnished and it has been rented out for some time – we needed to do some renovations as well as purchase new furniture. We were happy to do up the place to our liking, but it did cost quite a pretty penny – which meant we couldn’t save as much as we could have this year.

I think in terms of financial costs (losing out on rent and the renovation) we’re probably down by about S$80,000 this year…

Rating

So based on the above, here is how I would rate this move:

Given the massive quality of life improvement but pretty significant financial cost, I’d still say it was very much worth it overall. If given the chance of a redo – I think I would still choose to go through with this decision again, no question.

Taking cash-out refinancing to invest

On the flip side of the property topic, since I was making a less-than-stellar financial decision by moving into my property instead of renting it out, I was thinking of ways to make it a “less bad” financial decision.

That lead to me taking a cash-out refinance loan on the property of about S$180,000 and then using that to invest in the market. You can read more details about that decision and what I did with the funds here: Gambling my house on the stock market: Cash-Out Refinance to Invest – Why I Did It.

I will be posting a more detailed update post – now that it’s been 6 months since the above article, but needless to say, as of today the decision has been an extremely good one.

At the moment, the S$180,000 loan amount has grown to almost S$220,000 today – almost S$40,000 in market gains – less than a year later!

Rating

Given the amazing returns and 0 impacts on my quality of life, this would be my rating:

The only reason why I didn’t give it a 5 out of 5 is because it did come with some (calculated) risk. Given the near 1% interest rate charged by the bank, this would have still been a negative move if the market had been flat or went down in the short term. However, given that on average the long-term market return of the stock market is more than 8% – this is a relatively safe decision.

Had the interest rate been higher (like 3% or more) then this would not be worth the risk.

Switching jobs (again)

Now on to my last major lifestyle choice of 2021. Remember that I mentioned the extremely stressful job that I jumped to in 2020? If not, you can read about it here: My FIRE Path: Locking down 2020 and looking towards 2021.

I mentioned that while I received a major pay bump due to the offer, the job was extremely stressful and that I was thinking of taking a break. Well, I didn’t have to take that break. The job did get better, not because of the job itself, but because I changed the way I look at the job. It became much more bearable, but while I was no longer stressed (or as stressed out) the job was not giving me any fulfillment.

So instead of actively dreading the job, I was rather coasting through it but felt like I was wasting my time working on something I didn’t believe in. This meant I still wouldn’t mind changing jobs if I found something that I was passionate about and was able to give a similar compensation.

Well, an opportunity did come knocking in the latter part of this year and I took it! Another jump, financially it was ok – more like a lateral move, but I believe much more in what I’m doing – which made all the difference.

Rating

This was another lifestyle choice rather than financial, so I’m going to give it a…

Overall definitely a good decision as it makes getting up every day to go to work more fun but at the same time I’m not giving it a full 5 score in the Quality of Life department because it is still a job and comes with its own sets of challenges 😀

Personal Finance Breakdown for 2021

In terms of personal finance, I think this section will be rather brief. I’ll break things down based on my income, expenses, and then finally the amount I managed to save and invest.

Income

In terms of total income – after CPF – this year is about S$206,000 total from both monthly income as well as bonus.

Expenses

Here’s how I would breakdown my expenses per month:

Given that monthly expense, my total expense for the year is about S$142,000 – that’s pretty huge.

However, not all of that is really “expense” that is gone altogether. The portion that I am paying back to my dad for the property is quite hefty (S$5,060 each month) but that goes back into buying back the condo I am staying in and thus is building up equity. At this point I own about 85% of the condo now, having paid back that percentage to my father. The number looks big this year because previously this was covered partially by the rental income that I was getting for the property.

Once that’s all paid, it should reduce my monthly expense quite a bit.

Savings and Investment

Given that my income was about S$206,000 and the expenses are about S$142,000 then it should come as no surprise that – aside from the S$180,000 from the cash-out refinancing of the property – I was able to save and invest a total of about S$60,000 this year – and another S$7,000 for CPF contribution.

This makes the savings rate this year only about 30%, quite low, but again this is due to paying back my dad for the condo – which still builds my networth. You will be seeing the effect of this later in the networth section.

Now, this brings us to the juicy part, the details of my investments for the year.

Investment breakdown for 2021

As mentioned above, the investment out of my pocket this year is a little over S$60,000, and with the additional S$180,000 from the cash-out refinancing this year, the total investments came to be about S$240,000.

How this year’s capital injection was allocated

So out of the S$240,000 that I’ve injected into my portfolio this year, here’s how it was allocated:

If you’ve been following my blog, you may be a little bit confused with this allocation so let’s go through my reasoning for each.

Adding to my global index allocation and switching to VWRA

I think the allocation into IWDA is self-explanatory, this has been my staple go-to ETF since I started to get exposure to the mid to large-cap companies in the developed economies.

However, this year instead of buying EIMI this year, I’ve swapped over to buying VWRA. This is because my broker made it hard for me to buy EIMI – which I normally use for my emerging market allocation – and I don’t want to manually manage the allocation between the developing markets and developed markets anymore. So instead of buying IWDA and EIMI in the future, I will simply buy VWRA going forward.

I’ve only just started adding to VWRA near the end of the year, so that’s why I’ve only got S$10,000 in it so far.

In the end, about 76% of the capital injected this year went to broad-based index funds – pretty standard.

Now that’s out of the way, what about the other stuff?

Lowering my allocation for STI ETF (ES3) to just match the SRS contribution

I am reconsidering my allocation to the STI ETF quite a bit, to be honest. While I still believe there is some merit in being overweight in your local market to protect against currency fluctuations, the STI ETF does provide much lower returns while still being less diversified (thus more risk) than just buying a global index. It’s quite clear after 5.5 years of investments, the STI ETF performance holds no candle to global indices.

At the moment, ES3 is the worst performing ticker that I have with an annual return rate over the last 5.5 years of just 3.05% – this is already factoring in the dividends. Not bad still if you compared to bonds or a savings account, but when IWDA and EIMI return close to 20% and 8% respectively over a similar time period, holding too much STI will drag down the returns of the rest of the portfolio while being higher risk given the lower diversification.

As a result, instead of targeting the initial 10% and then later 5% of my allocation to the STI ETF, I will only allocate as much as needed that year to satisfy the limit for the SRS account contribution. While this means I’m still holding STI ETF, this at least allows me to get some tax relief in the meantime.

However, I am seriously considering shifting the SRS funds over to Endowus instead to get the same tax benefits while also capturing global market returns using their DFA funds. I might just do that this year… we’ll see… and if I do, I’ll give you an update.

Decided to bet more on tech (QQQ) and especially Apple (AAPL)

On the flip side of the low returns of ES3, the tech sector has been killing it and has been the major reason why my portfolio has outperformed the global index in the previous years.

I mentioned previously that I planned to only contribute to the index going forward to slowly reduce the percentage allocation to both my QQQ and AAPL holdings over time. This has been the case before 2021.

However, this year I did a complete 180 on this decision. While I don’t intend to put all of my allocations into technology, I’ve decided instead to maintain the allocation that I already have of roughly 80% index funds and 20% into QQQ + AAPL. This would be my high-conviction play which will scratch my itch for stock picking.

At the same time, I don’t think these 2 picks are controversial – I’ve been invested in them for a long time, I work in the tech industry, and also have a lot of conviction in the power of technology to change the world.

My case for QQQ

I truly believe that the tech sector will continue to be the key driver for growth and our economy in the future. Sure they did extremely well because of the pandemic, but I think they will continue to push innovation and play a key part in humankind’s progress for the foreseeable future.

Plus, given we are in the early days of the metaverse entering the public consciousness, I think there’s a huge room to grow here and QQQ is a great ETF to hold to get some exposure to that sector.

As for AAPL

I know that this goes against the fully passive approach, but… I just like the stock (and Tim Apple.)

Haha, ok but on a serious note, Apple is the one company which I follow obsessively (I know it’s unhealthy) because I truly love their products and where they are going. Call me an Apple fanboy but my family and I are in their ecosystem and I think they have a bright future ahead.

I’m not willing to bet the farm on them, but having about 10% of my portfolio allocated to them is the level of risk I’m willing to accept.

So far, it’s the best performing ticker I have in my portfolio – returning over 43% annually for the past 4 years that I’ve held the stock.

So instead of aiming to lowering the percentage holding here, I’m looking to maintain the allocation to roughly 10% for the foreseeable future – which was why I added slightly to the position this year.

Which turned out to work out for me this year as Apple outperformed significantly and is now near all time highs.

Maybe once I’m near enough to FIRE or the company direction changes significantly, I will slowly reduce the allocation and shift it over to index funds, but for the time being, I’m quite happy with this allocation.

Dipping my toes into the murky crypto waters with Ethereum

Lastly and probably most shockingly, the 2% of the investment funds that were thrown into Ethereum.

If you were not in a coma in 2021, you’d probably have been aware of how crypto, blockchains, and NFT has been taking over the investment media everywhere.

So I also took some time in 2021 to look into the space a little more and, again – seeing some potential – I decided to slowly dip my toes in. I very much think of this as a lottery ticket play and am only really comfortable having less than 5% of my portfolio allocated to it. If it works, great, if I lose everything – it’s not going to be a disaster. Let’s see what happens.

At the same time, I’m looking at this as an extremely long-term play as I plan to keep buying and holding a little bit for the next 10 years. Here are some of the reasons why I picked ETH over other coins:

1. More Mature
2. Has Utility
3. Wide Ecosystem Support
4. Highly Liquid
5. ETH2.0 roadmap aims to fix most things wrong with ETH1.0

Seems like a safe bet long-term (relatively) within the crypto space. So I’m gonna put S$1,000 a month towards ETH and see where this goes.

Although, it’s also possible that I have no clue what I’m talking about and this could be the signal for the market top. Imagine the headline “FIRE Blogger and Passive Investing Advocate Goes All-In with Ethereum!” Well, now you’ll know why!

Investment Performance for 2021

Now that you know how I allocated my investment funds in 2021, let’s take a look at how my portfolio performed overall.

Before we start, I want to highlight that the S&P500 and IWDA gained over 28.79% and 22.86% respectively in 2021 alone, so if you were in the broad market this year you should be grinning from ear to ear!

Now let’s take a look at how I did overall.

Investment performance

Here’s the value graph for both the portfolio value as well as the capital injections from the start of my investment journey till the end of 2021:

And here’s the absolute percentage gains and annual returns chart:

Mapping out the total gain over time:

Here’s the breakdown of the data for 2021:

For all intents and purposes, 2021 was a spectacular investing year – coming just behind last year. The only hiccup to the up-trend was due to the Evergrande crisis at the end of Q3 and Omicron showing up in Q4. (You can see the huge dips in the chart around that time.)

I’ve more-or-less hit the new year-end goal of hitting S$1,000,000 portfolio value by the end of the year that I set for myself in my mid-year post: My FIRE Path: 2021 Mid Year Update – Blowing past my year-end goal & hitting 50% FI.

That’s a portfolio increase of more than 72% from the start of the year – of course that was partially the capital injection and not all from market performance – more on this later.

In terms of net gain (portfolio value minus the amount of money put in) I’m closing in on S$330,000 in gains that I would not have had if I had just let the money sit outside uninvested. It’s really motivating to see money multiplying passively and know that it will continue to do so.

The average return for the portfolio also increased from 18.35% p.a. to 20.43% p.a. over 5.5 years – that’s a really spectacular return over that timeframe.

Portfolio Value Change: Contribution between capital injection vs market gain

Out of almost S$420,000 in increased value in the portfolio this year, one part of the increase came from capital injection and another part came from market gains. Here’s how it was split and how it compared to previous years:

Here’s the data in table form:

Based on this table, you can clearly see the power of compounding at work. In 2020, S$100,000 of the portfolio increase came from market gains, however in 2021 that amount is more than S$178,000 – 78% more than the last year mainly because there’s now more money invested that can work for me.

However, the opposite is also demonstrated, the first 3 years, the market gain didn’t give me much at all! 2016, 2017, and 2018 combined the market gave me negative returns!

However, it started picking up after that. This really shows that you need to be patient to really start seeing the effect of compounding growth. As you have more and more funds invested, the market movements start to become more and more significant.

The longer you leave the funds invested, the more it grows, and so on.

Portfolio allocation and individual asset performance

Now that you know how the entire portfolio did and how the investment funds were allocated, let’s take a look at how the portfolio looks like and how each of the constituents did for the year.

Here’s what my portfolio looks like at the end of 2021:

The index funds currently make up about 80% of all allocations and the last 20% is split between AAPL, QQQ and ETH with ETH only making up less than 0.5% of the portfolio.

Here’s how each of the constituents performed over the time I’ve held them:

As you can see, Apple and QQQ are the best performing holding that I have. Apple more than tripled in the 4 years I’ve been invested and I think there’s still more growth left if their foray into VR/AR, car, and health proves successful.

You may feel that my portfolio performance has been purely because I was super lucky with Apple and QQQ that index investing does not matter, but that would be an incorrect way to look at it.

The index funds in my portfolio formed the core of my portfolio which allowed me to take higher risk with a smaller portion of it while still maintaining good returns and relatively lower risk.

If you look at the IWDA returns, it forms 68% of my overall portfolio, and it’s currently yielding 19.59% over 4.5 years. If I had not invested in anything else, that would still be a fantastic return – only slightly lower my current overall performance so it would not have required luck to get this type of return by going with index funds.

Networth at the end of 2021

Now that you know how the investments went, let’s take a look at the change in overall networth. Now this isn’t that important for my FIRE plans since CPF won’t be accessible until much later, so my FIRE number does not include CPF and Property. It’s a nice to have and will come into play when I turn 65, so it’s just nice to review once in a while.

Overall, my networth this year across CPF, Property, and Investments (Cash-out Refinance + Investment Portfolio) grew by about S$550,000 in 2021. I started the year at around S$1,000,000 in total networth and ended the year with roughly S$1,550,000.

Aside from investments and cash-out refinancing, the majority of that came from the growth of my property ownership.

Growth in property ownership

This was where most of my free cashflow went this year as I mentioned in the Personal Finance section and it paid off.

At the beginning of the year, I owned about 40% of the property (based on how much I’ve paid back to my dad) but by the end of the year, that ownership has grown to more than 83%. This shows up as the property portion of the chart.

This has already had the mortgage + the cash-out loan remaining amount deducted, so it is net value.

CPF didn’t really grow much

The CPF portion, combining all 3 accounts, went from roughly S$210,000 to S$237,000 – a gain of just S$27,000 total.

This is mainly due to the fact that I am using my CPF OA to pay for the property, so the benefit of that actually shows up there rather than here. Also, my mortgage payment is more than the monthly OA contribution, which means that my OA balance actually drops every month and because of annual bonuses and interest, etc. the balance stays more or less stable year on year.

FIRE Progress Check and Projection

Based on my current portfolio value, let’s map that against my original savings and FIRE plan:

Here are a few things to note in order to be able to read this chart:

• The green horizontal line on top is my FIRE number: about S$1,850,000.
• The yellow horizontal line below that is my current portfolio value: about S$1,000,000

This shows that I am about 54% of the way to my FIRE number, awesome! However, how am I doing and how much longer do I have to go before I reach that number?

Initial Projection

Now, if you look at the red and blue dotted line on the bottom, that was my initial projection.

The blue dotted line signifies how much I was planning to be able to save and invest over time. There’s no compound growth here, just projected annual increments and bonuses.

The red dotted line signifies if that amount were to be invested at an 8% return per year. I picked 8% because that should be the conservative average real return over time for a conservative portfolio projection.

This simple model initially projected that I would reach my FIRE number within 144 months (where the red dotted line crosses the green horizontal line) or about 12 years.

However, then I actually mapped it against my actual savings and investment portfolio timeline.

My actual investment

That brings us to the dark purple and dark blue solid lines above the dotted lines.

At the moment I am 68 months or 5.7 months into my investment journey (that’s why the 2 lines stop mid-way.)

The dark solid blue line is what I actually saved and invested. If you compare this line against the blue dotted line, I am about S$260,000 ahead (the vertical gap between the dotted and solid blue lines) or about 28 months (2 years and 4 months) ahead of the projection in terms of savings is concerned. You can see this by comparing the month where the dotted line would reach the same amount as the current solid line.

As for the solid purple line, that’s my actual portfolio value. If you compare that with the projection, which is the red dotted line, you can see that I am about S$485,000 ahead of the original plan. According to this chart, in terms of timeline, I am about 35 months ahead in terms of portfolio value.

That’s really great! I’m 2 years 4 months ahead in savings terms and almost 3 years ahead in portfolio value terms according to my model.

So how long do I have left before I reach my FIRE amount?

Predicting the FIRE date

Here’s the really cool part about this chart, we can use this to gauge roughly how long I have left to save and invest in order to reach my target FIRE number.

In order to do this, we can look at 2 parts of the chart to get:

1. The pessimistic date estimate
2. The optimistic date estimate

Once we have these 2 pieces, we can say that we should reach FIRE between those 2 dates.

The pessimistic date

In order to get the pessimistic date, we can look at the number of months between where the yellow line and green line crosses the red dotted line like so:

According to this current chart, the number of months between where we are now (where the yellow line crossed the red dotted line) and where we want to be (where the green line crosses the red dotted line) is about 40 months or 3.33 more years.

This is based on the current portfolio value, assuming that from now on we’d get only an 8% return and we only save at the originally projected rate. This is why it’s the pessimistic date.

Now for the optimistic date

For the optimistic date, we’ll take a look at another line. If you see there’s a lighter purple curve that extends out from the dark solid purple line – that’s the trend line projected based on the actual portfolio growth from the start of my investment journey till today.

This is just a best-fit trend line based on an exponential curve. It’s looking for a line that fits best with the current curve, which is much faster than the original projection, so it’s going to be much more optimistic – based on the 20% year-on-year return that we’ve been experiencing.

In order to see how long this optimistic curve projects how long is left, we similarly look at the difference between where the yellow and green line crosses the purple curve:

Based on this curve, the optimistic projection has me reaching my FIRE number in 21 months – or in less than 2 years!

Bringing both together

So based on these 2 curves, I’ll reach my FIRE number between 21 and 40 months, 1.75 to 3.33 years!

Of course, the current portfolio performance and progress are extraordinary so I don’t expect this amazing trend to continue… however even if I assume just an 8% return and normal consistent savings, I should reach it within 3.33 years.

Reality should be somewhere in between.

Really amazing! I’m certainly in the last mile now. Let see how accurate that turns out to be next year.

How much do I have to save in the next year to keep up with the pessimistic estimate?

One last cool thing to see here is the chart’s ability to tell you how much you need to save in order to achieve the pessimistic estimate in the next 12 months.

We can do this by looking at where the yellow line crosses the red dotted line and look at where the blue dotted line is, then look 12 months ahead to see the blue dotted line and get the difference like so:

According to this chart, in order to keep up with the pessimistic projection, I will need to save at least S$126,000 in the next 12 months – if I can beat that, then I should be able to stay ahead of the pessimistic scenario.

I’ve got my work cut out for me!

Note: If you find these charts useful and you want to create one for yourself, I’ve shared a spreadsheet template for all the charts I used here: Sharing My Portfolio Tracking Spreadsheet.

Plans for 2022

Phew, so that’s way longer than I thought this would be!

Well, that brings 2021 to a close, and now to look forward to 2022.

Investment and saving plans

There isn’t much to mention there that hasn’t already been mentioned above and in previous year’s posts, but here’s a rough plan:

1. Save and invest consistently every month
2. Invest all my annual bonus immediately when I receive it (time in the market!)
3. Buy VWRA instead of IWDA + EIMI going forward
4. Maintain AAPL and QQQ at around 10% each by only adding to VWRA
5. Contribute just enough to STI ETF to match the SRS contribution limit for the tax deduction
6. Buy a little bit of Ethereum (S$1,000 worth) each month and see where that goes
7. Contribute the maximum tax deductable amount to CPF SA (S$8,000) – already done.

That’s it, pretty straightforward.

Savings Goals

I was able to invest less than I hoped in 2021 since I was funneling most of that into paying for the property, but I hope to shift it back towards investments this year.

Given the projections above, I have to save and invest at least S$126,000 in order to stay ahead of the pessimistic estimate after all, so that’s what I intend to do.

Based on my income and expenses, my goal is to be able to save and invest at least S$150,000 in 2022 based on the above investment plans. That comes to slightly more than S$10,000 per month – but that should be possible if I make sure that almost 100% of my annual bonus gets funneled into investments similar to 2019 and 2020.

Let’s see if that works out.

Closing thoughts

Well, that’s it! That closed out 2021 for me. I hope that this post was interesting for you and shed some light on my thought process as well as my investment approach.

How did you guys do in 2021 and what are you planning for 2022? I’d love to hear from you, so don’t hesitate to comment down below!

Until next time!
FPL