Yes, that's true to a certain extent, but what we can do is to minimize that risk exposure to the best of our abilities. Some of the bonds I purchased are under water, if I needed to liquidate them, but if I can hold them till they are called back or mature, I'll always get my principal back.

I've just taken a selection of the bonds which I hold with MBB - and as you can see, some have appreciated from the purchase price (the second line within the horizontal column), while some have depreciated. Regardless of the movement, as long as the companies are not bankrupt, I will continue to receive my coupon payments on time, every time - and, at the end of the day, I will get the $250,000 back for every bond purchased (sure, I might lose out if I bought some from the secondary market, but that's usually no more than one coupon payment).

[attachmentid=10518337]

This post has been edited by hksgmy: Jun 17 2020, 01:53 PM

Different people at different stages of their lives will have different risk appetites, based on different needs as well as financial capabilities.

At my age, I really cannot afford the roller coaster rides of the stock markets or Forex derivatives.

Bonds is good enough for us.

I don’t mind sharing the little that I know it it would be helpful to know about your financial background
as bond purchases are not for everyone.

I did try my hand at unit trusts, but in the end found it wasn't my cup of tea. I do have some blue chips which were bought early on, and which I've held on for dear life - these are the usual culprits (again) banking stocks in Singapore, Visa and Mastercard stocks. I mis-timed the DJIA (I do have a trading account with a brokerage, when my old UOB RM moved over to that brokerage house) - was hoping to catch a few stocks on the cheap, but didn't expect the rebound to be so fierce and violent, so I didn't get a chance to go in.

At the end of the day, at my age (50), I'm content just to make sure I stay above the official inflation rate (in Singapore, that's about 2% annually), and bonds and property rental returns average at least 3 - 5%, so that keeps me happy.

On average between 3-5%. The local Bank bonds are in the mid 3-4% range, the foreign banks (I have a few UBS and CS bonds) are up to 5.5%.

I managed to locate the SMS that my banker sent me - it’s just an excel sheet documenting my cash flow from the bonds I currently hold with her, but you can see from the 1st column, the coupon rates. I’ve obviously blanked out the names of the bonds to protect my privacy.

Most of the bonds we like to purchase are perpetual bonds with call back dates. I’ve had more than 1/2 dozen of these bonds redeemed at their first callable date and had to go pick new ones. Very frustrating especially if they are solid bonds paying good coupons.

Hope that’s helped to clarify.

[attachmentid=10518709]

Indeed, I beg your pardon. But, most of the bonds were bought at close to par value, some below par (during the COVID-19 panic), so on an average, the yields I’m getting are very close to the indicated YTM or YTC.

I’m also very conservative when it comes to calculating my holdings - regardless of appreciation, I always benchmark my bonds at $250,000 - even if I paid a slightly higher price for it. At most, I lose out on a coupon’s worth of payment, but that way, I don’t count my chickens before they hatched.

If you wish, you can check on an example of the bond prices I currently hold (with another bank) IN THIS RELATED POST - some have appreciated, some have come down from the initial purchase price - but I always take the whole lot as an average, so it’s easier for me to keep track of (I’m a simple man).

Hope that’s answered your question - my apologies for mis-reading your question initially.

If you’ll pardon me, may I ask an unrelated question please? Is your avatar the LED lamps from a BMW 6er?

This post has been edited by hksgmy: Jun 18 2020, 04:07 PM

Answered in the FI/RE thread

Wow... I have to echo the sentiments of what some of the others have shared: I'm super impressed! Your savings percentage is very impressive, made more so by your relative young age! Keep it up, and you might achieve the much vaunted financial freedom earlier than most! Well done!

Thank you for the kind words. However, fuzzy may have a point there. I’m almost twice your age (48 vs 26) and thus my risk appetite would naturally be different from yours, simply because I wouldn’t neither have the stamina nor enough time to recoup my losses if a “bet” goes badly wrong.

Since I don’t have a blog, please allow me to share my personal financial journey here with you - so you can learn from my mistakes and perhaps see a better way for yourself.

When I was your age, I didn’t have the means to invest - junior doctors made a pittance (even in Singapore) and whatever money I had as I progressed in seniority was spent on specialist exams and studies and courses (this is the part about self improvement that every one talks about and - at least in my case - it has proven extremely useful in increasing self-value and earning capacity). In fact, I will have to say I entered investing relatively late, when I was in my early 30’s.

We started off in properties - it was just our conservative natures - and built up a respectable portfolio. Then, we spent the next 10 years paying off all the properties - and that shows up as a big hole in our investment portfolio, as we didn’t add any stocks or derivatives or unit trusts or anything for that time period. All we did was to pare down the multiple mortgages and I was obsessed with paying as little interest as possible. My thinking, rightly or wrongly, back then was that I wasn’t confident of making more in actual quantum of returns (because of my limited capital) than what the banks were charging me in interests. So, the money I saved would be money I earned.

We became totally debt free by our 40‘s, and that’s probably when our personal investment journey (excluding real estate) started. I will admit, I got my fingers badly burned on stocks - to the tune of $50,000, and initially, we lost about another AUD100,000 in an ill-advised joint venture with an acquaintance in Adelaide.

From those experiences, my wife and I decided that we’d rather make do with lower returns in exchange for security and safety and peaceful sleep at night. So, it was initially fixed deposits for a few years, until bonds came into the picture. Before COVID-19, we also invested in Equity Linked Notes, and we have about $3,000,000 tied up presently. Thankfully, most of the prices have recovered and it looks like we will be able to ride out to their maturity, collecting our interest payment in full and recouping our capital - but, when the markets plunged in the initial days of COVID-19, I will confess I was ready to write off that $3,000,000 from our holdings and delay my retirement! This was also a lesson learned for me - it really showed up my risk adverse nature. Even a capital protected (subject to successful maturity and in the absence of knock-in events) product like the ELNs gave me sleepless nights. Once the ELNs mature, I’ll probably stick with bonds and bonds alone.

We are able to do what we do because - respectfully - my wife and I earn what can only be termed exceedingly generous remuneration packages. Bonds (at least the way we purchase them) require a large capital outlay. In the past, in other threads, I’ve shared a few photos of the values in my bond portfolio held by different banks and brokerage houses. As you might know, each bond is at least $250,000 (though some Australian ones used to start from $200,000 - not anymore). We also buy to hold till old - it’s not something we would actively trade. We’re happy to collect the coupons and let other braver, cleverer people do more exciting things with their money.

Thanks for reading. It’s rather fun reminiscing on my amateur steps as a basic investor.

This post has been edited by hksgmy: Sep 3 2020, 07:17 AM

Hi, congratulations on achieving the much vaunted FIRE lifestyle.

Without knowing the actual returns and your expenses, it's hard to comment further on the viability of your mix, but if you've managed to keep afloat and stayed FIRE'ed thus far, then the ballpark answer is "yes, you're doing it right - keep calm & carry on ".

IMHO, there's no real/ideal mix - I'm property & bond heavy, and I'm still able to reap returns of around 5% (which beats my benchmark of 2.5% of Singapore's CPF, since I'm based in Singapore), and thus, I can do without the stress of the market volatility. Having said that, I managed to pick up quite a few local banking stocks (the usual suspects - UOB, DBS & OCBC) at multiyear lows, but that's mainly for dividend returns - and the way I see it, there's more upside than down, so there you go. Your mileage may vary, of course.

Good luck & well done!