Invest a Lump Sum & Then Consistently

The next step is to invest your lump sum of funds, and then add on to your portfolio on a monthly basis. To buy ETFs, you need a broker account. A good broker you can use in Singapore is Interactive Brokers (IBKR), which has low fees and lets you buy the funds we need with zero fuss. Opening an account is easy – just follow the step-by-step application process.

Don’t forget to first find your net worth and determine your investible cash, if you have not done so!

Download the FIRE Singapore Bogleheads Template

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Click on above image to download the template. Click on File -> Make a Copy to copy it to your own Google Docs.

This is the part where people who hate numbers might cringe. But trust me, I’ve made it very easy for you. This template automatically calculates, and tells you exactly how much of each ETF you need to buy each month. It’s like having a robo-adviser for free. No paying of management fees!

Plug in ‘Age’, ‘Bank Accounts’ & ‘Emergency Fund’

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Let’s give your funds rotting in low-interest bank accounts a boost.

The first thing to do is to enter your age. This is for calculating the proportions of each ETF component you need to buy.

Remember our earlier post on how to calculate your investible net worth? Enter your available liquid cash under ‘Bank Accounts’, and your value of ‘Emergency Fund’, to find out how much investible cash you can invest for now.

In this example, our investible cash is S$3,000.

Asset Allocation

G3B and IWDA

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‘Target Allocation’ shows your ideal allocations between each ETF. Since we haven’t bought anything yet, ‘Current Allocation’ is empty.

The G3B and IWDA are equity (stocks) ETFs. The percentage of stock ETFs you should have is 110 minus your age.

For someone who is 37 (in our example), this works out to be 73%.

Since we want to be split equally between Singapore and overseas stocks, we need 36.5% in G3B, and 36.5% in IWDA. Makes sense?

Singapore Bond Index Fund

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Bonds are an important part of your portfolio.

The ABF Singapore Bond Index Fund (or A35) tracks a basket of high-quality bonds issued mainly by the Singapore government and quasi-Singapore government entities.

Since we have 73% of equity ETFs, we need 27% of bonds. Read more about how bonds work.

Proportions of Equities Versus Bonds

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Equities when young for maximal growth. Bonds when older for less volatility.

Bonds are a good investment when stocks are not doing well, because bond prices generally rise when that happens.

Inversely, when bonds are not doing so well, stocks rise. This is good for us because each component acts as a hedge for the other.

If you play around with the ‘age’ cell. You will realise that at a younger age, your allocation to equities is bigger.

Returns for equities are generally better than bonds. When you are young, you want more exposure to equities to build up your portfolio quickly.

As you age, we reduce allocation to equities, and opt for less volatiles bonds with less impressive (but stable) returns. This avoids unexpected whipsaws during your retirement phase.

Making Your First Purchase

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The first step always seems daunting, but believe me, it becomes second nature over time.

What we want to do now is very simple. Simply take a look at the ‘Buy (SGD)’ column. The template is telling you to buy S$1,095 worth of G3B and IWDA each, and S$810 of A35. This is based on our investible cash of S$3,000.

The reason we have a ‘Buy (USD)’ column is because IWDA is bought in USD (under the London Stock Exchange).

When you buy IWDA via your broker, you need to indicate the amount you want to buy in USD. The template automatically converts S$1,095 to the prevailing USD equivalent for you.

After making your purchases, notice that you will own the ETFs at the precise allocations you want (see projected new values/allocation).

Maintaining the Allocations

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Just do this once a month (above values are just examples).

After investing your lump sum, your portfolio needs no more than a monthly check-up to maintain its allocations. It is time to invest your money on a monthly basis.

When you receive your salary each month, decide how much you would like to pump into your portfolio.

It doesn’t have to be the same every month, but strive for a bigger amount as far as possible (leaving enough for your expenses).

You can update the ‘Bank Accounts’ value in the template to get the ‘Investible Cash’ amount, or simply just edit the ‘Investible Cash’ cell directly. In our example, we assume that we will invest S$1,500 this month.

Update Invested & Current Values

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Look at your broker account and update the yellow values.

Update the yellow cells, so we know how much we have invested for each ETF so far, as well as the current values. These values can be found in your broker account.

In our example, notice that we have made S$105 for G3B, S$19.93 for IWDA, and lost S$20 for A35. Note that these values are exaggerated (relative to portfolio value) over a 1-month period, just for demonstration purposes.

Notice that our current allocation has shifted a little out of whack at 38.64%/35.93%/25.44%? Our job now is to bring them back close to our target allocations, and this is easy as you will see in the next step.

Note About Dividends

G3B gives you dividends twice a year, and A35 once a year! Do remember to minus these amounts from your ‘Invested’ cells, since dividends are effectively profits that reduce your capital outlay.

In IBKR, dividends are credited directly into your cash account for re-investing or withdrawal. If you reinvest these dividends (and you should), you can update your invested amounts accordingly.

Buy more G3B, IWDA & A35

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Time to bring back our allocations!

Look at the ‘Buy (SGD)’ column, which tells you exactly how much of each ETF to buy (S$481.17 of G3B, S$565.23 of IWDA and S$453.60 of A35).

After buying the specific amounts of each ETF, notice that your allocations are back on track (refer to projected allocations)!

Do This Consistently Every Month

Just. Do. It.

Now, you just have to take a look at the template once a month, and keep doing this religiously as possible. It’s OK if you can’t do it every month (life happens), but it should be rather consistent. Have a big purchase in a few months (e.g. home renovations etc)? Skip a few months of investing. Just got your year end bonus? Pump everything into your portfolio to make up for months you weren’t able to contribute to your portfolio.

Why I Recommend IBKR as a Broker in Singapore

Choosing a broker to use can be a source of confusion, with many options popping up (some based overseas, and some in Singapore).

Many DIY investors in Singapore feel that IBKR is the best broker. It offers the lowest commissions and access to stocks, options, futures, currencies, bonds and funds from a single integrated account. If an exchange provides a rebate, they pass some or all of the savings directly back to you. They offer the lowest margin loan interest rates of any broker, according to the Barron’s 2020 online broker review.

You can also earn extra income on the fully-paid shares of stock held in your account. IBKR borrows your shares to lend to traders who want to short and are willing to pay interest to borrow the shares. Each day shares are on loan you are paid interest while retaining the ability to trade your loaned stock without restrictions.

Also, as IBKR is a broker with a registered office based in Singapore, I do feel safer knowing that there is a local presence, in an event I need to contact them easily.

Enjoy the Fruits of Your Labour

Just an example. You don’t have to go the beach if you don’t like beaches.

Once you’ve achieved your portfolio target in 5, 10, 15 or 20 years (depending on how hardcore you are), it’s time to retire. Simply withdraw 3% – 4% from your portfolio every year to spend. Remember to keep the portfolio allocations in check. It’s basically the same process as using the Google sheets to add investible cash, except that the investible cash value is now negative. Meaning, when you withdraw from your portfolio, you withdraw overweight funds. In case you don’t have one, start investing with IBKR, a reliable broker with low fees based in Singapore.

And that’s it! If it sounds easy, it’s because it is. You don’t need to be a ‘finance expert’ or be really good with numbers to grow your money effectively. I could really end the retirement instructions here. Building a Bogleheads portfolio sounds simple enough, but there are ways people inflict damage to their portfolios. Read on below to find out why:

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