Calling it quits!
When I first started my career, I wanted to make my first million by the time I hit 30.
During my 30s, whilst I focused on climbing the corporate ladder, I wanted to achieve financial independence. However, the goal post kept shifting higher and higher as Singapore entered a strong period of inflation. I remembered my ex-boss who has since retired, telling me to ensure that I have enough "FO capital" so that when the time comes, I will not be beholden to my job. Unbeknownst to him, I have been busily planning and executing my own plans towards financial independence, but it was good advice nevertheless. Decision to call it quits is a complicated one. My major concerns in this respect are:- (1) What do you do after quitting? How do you meaningfully occupy yourself? (2) When do you know whether you have enough financial resources to give up your career? (3) Am I prepared to give up on my wealth accumulation by quitting? The first question is not that easy to answer. However, I know what activities I would like to pursue (dependent upon my health and income) when I don't have to work:- (1) travel (2) sports - cycling, gym, golf, scuba diving (3) study and learn something new that is unrelated to my professional career (4) cook (5) write (6) manage my investments My thinking around the second question is focused on a cashflow perspective. As long as the cashflow from my investment portfolio is able to generate more than what my family needs (with some leftover) with a strong degree of sustainability and recurrence, I would deem it sufficient. However, the second question is also related to the third question, am I prepared to give up on my wealth accumulation? The current growth of my investment portfolio is facilitated by recycling 100% of my investment income and the leftover from my employment income. Haiz ..... it's pretty darn difficult to give up on my employment income by calling it quits even if my investment income is sufficient to finance my family's lifestyle. What are your concerns when you plan for your retirement? |
Bear in mind, at the end of the day, you will not bring anything to the grave. Why would you work so hard, accumulating millions and only die a month after your retirement at 70? Your kids will be quarreling, to grab your wealth. Best is to give your kids a proper education and tell them to build their own wealth. Go to YouTube and type "the true meaning of life in this world" and you will know what's your true purpose.
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Go to YouTube and search "what happen after you die"
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On your third question, it is easy:
Get your passive income up to 2 times your families current expenditure. You will save at a rate much higher than inflation and it will handle even your extreme kiasu syndrome. After a while, if your passive income is high enough, even education bills like $100K/yr for a couple of kids won't faze you. If you have to spend $1m a year on hospital bills for 5 years, it's probably not worth living, so healthcare isn't an issue. BTW, this what I think: You will be able to travel first class until you are sick of it. You will be able to buy the full carbon bike with $10,000 carbon wheels Your age will make it frustrating trying to learn anything. Dementia, Alzheimers. You will be able to buy a top restaurant and have the chef cook for you at home. If your investments earn twice your expenditure, why fix something which isn't broken. If you get demented, you might screw up an lose it all. Just leave it. From the way you write currently, I wouldn't try writing |
Whizzard, you are back! I'm one of those who followed your interesting posts of past. Last I recall, you were looking at Porsche sports cars and were denying having a mid-life crisis. Haha
So give us an update of the last few years. What have you been doing? More interestingly, did you get richer. Details please!! |
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My work also required me to travel frequently as it is a regional role. Initially, it was fun but requires loads of hard work. Before each trip, we would have to prepare the pitchbooks and work out the different strategies for each customer. In addition, most of the time I'll be meeting clients for the first time so the stress is intensified. For a number of years, I would travel every fortnight. These marketing trips are in addition to my role of executing the deals obtained in prior marketing trips. Even my gym instructor is getting fed up with my frequent requests to reschedule my training sessions! So, the job is fairly intense as we need to juggle a few deals at various stages of closure in different countries at any point in time. The pay is not fantastic as I am still paid less than what I was previously paid. However, it is still more than enough to support my family's lifestyle with some leftover but not a lot that it would make a big difference in terms of my wealth accummulation since I have adopted a more extravagant lifestyle lately. The salaried job has allowed me to rollover my investment income to grow the pot but my annual investment income is well below 10% of the portfolio so it would take quite a while to move the needle. I am tinkering with the idea of employing leverage to increase the returns but let's see how ..... my bankers are offering me loans at an all-in rate of approximately 1% + pa pegged to cost of funds (short term rates). Provided short term interest rates stay low, I could still increase the returns by leveraging my higher yielding bond portfolio. The game will come to a stop when the low and medium term interest rates converge so I am still thinking about it. But, it would give me a nice recurring passive income base for a few years if I set it up properly. I think I can assess credit risks but how interest rates would move is another kettle of fish! Any experts here have any views? I would like to learn. Private bankers only want to sell and earn commissions. I don't trust them at all. Only use them for execution. Took a fair bit of money out of the equity markets recently. Don't know whether it was a good idea on hindsight as the markets are still charging ahead. Whatever, markets will always go up and down and a realised profit is always better than an unrealised profit. Now, as long as I don't do something stupid with the spare cash I should be fine - patience and adequate research before I redeploy. I have also sold off my overseas properties. Waiting for the currency markets to move in the right direction before I bring the cash back to Singapore. I don't see the Singapore property market being a particularly good asset class currently but I have my eyes set on something here if it moves to my level. Well located freehold landed properties should still be a good investment class but not the non-landed segment. Again, patience and adequate research and analysis. Else, I just use it to pay off the bank loans for my existing investment properties in Singapore if mortgage rates were to spike up. And yes, I got my Porsche a few years back. I am enjoying it. 5 years warranty and maintenance programme is a joy! The other day, a message popped up saying that my engine oil is low. I called up and asked them what kind of engine oil do they use, as I planned to top it up at the petrol station. They asked me to drive into the workshop at Leng Kee and it will be topped up within 10 minutes, no prior appointment needed. I drove there during lunch and they topped it up with 2 litres of oil. When I asked how much, they said payment not required as it is covered under the maintenance programme - even for engine oil. Sweet! Now, if I can only get them to do the same for my petrol! I am now itchy to get another Porsche, this time a convertible. But COE so high! $21 per day just for the COE. Insurance and road tax and would cost an additional $36 per day. Still haven't factor in other usage based expenses and depreciation and assume no financing. Haiz! Got to earn more money!!! And so, this rat has to continue running because he cannot stop wanting! |
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I am also not that old lah! Most people my age will still be building their careers. It is also not a given that you would develop dementia or Alzheimers when you get old although they are certainly risk factors. I think learning because "you want to" vs "you have to" is quite different. More importantly, learning keeps the mind active. Cooking is a different form of enjoyment, at least to me. I can always go out and eat at restaurants but cooking a delicious dish on my own is a form of achievement. It also keeps the mind active! So, if I am retired and have time on my hand, why not? For me, eating out at a good restaurant is a form of pampering. They serve different needs. Lastly, I have to agree to disagree with you on the point about actively managing an investment portfolio. We just have to do the best with the cards that we are dealt with - illnesses and accidents may or may not happen. They can't be planned for so in the meantime, we manage based on our circumstances. E.g. I have invested in Datapulse for some years which has been paying fairly good dividends (about 10% pa). The stock doesn't appreciate much but it provides good dividends. But, the world is moving away from what the company does i.e. CD and DVD replication services. As high speed broadband becomes increasingly pervasive, consumers find it more appealing and convenient to download their songs, movies, games and software online instead of physically buying the discs. Some of this has even gone to a cloud based model. I recently divested my entire holdings in this company as I am no longer confident that its business is sustainable in the long haul. It may remodel itself into something more promising in the future but at the moment, if it continues the way it is, I am not that upbeat about its business prospects. It has provided me with a good dividend yield all these years but the time has come for me to say farewell to it, take the money and move on to another better investment hopefully. It's still paying a good dividend and the share price has stayed up and it would be easy for me to leave it as it is but I think that investment is getting riskier for me. |
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I would stay invested in equity markets. Rising rates means that economies are recovering. For Singapore, there is a switch from yield plays to cyclicals. Recovery seems to be taking hold in the US, so you might want to shift some funds there. US real estate is rising rapidly. If you are trying to time the market and willing to feel lousy for a while so you can make a lot of money, put it into Europe, perhaps that villa on the French Riviera. I wouldn't hope on property prices coming down in Singapore. There are too many people like you waiting on the sidelines with a ton of cash. I personally know 20+. If you are under-levered, why are you paying down your mortages? That is just not sensible. Besides, if you make an arrangement with a private bank by collateralizing your properties and equities, you can always raise a few million in an instant should an opportunity come along. You will always have "dry powder", even without keeping a ton of cash earning nothing. |
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What is different from you is that the local company I worked for got taken over by a very large mainly Asian conglomerate. After a few months of integration, the consultants they hired decided that I should run a division of the conglomerate. Haha. Last thing I really wanted, but I was curious. It came with a few interesting perks and I insisted on being paid the same level as when I was working for the global firm, which they relented. Now I get Business Class everywhere, even KL, and a nice car and driver both in Singapore and at the HQ country. I went from managing a team of 30 to 300 professionals. I thought it would be a nightmare, but no. I found someone to replace myself and embarked on a new journey. Now I travel every week, but to HQ in a foreign Asian country for a LOT of meetings. Between various committee and board meetings, I think I do about 30 a month. It's very low stress. I just sit there in a conference room and give groups of people who wander in a hard time then am whisked off to a nice lunch. I'm relearning golf in order to play with board members and have had to make a few new suits. Interestingly, one small Singapore company has already approached me to be on their board. I can already see my future retirement as being on a few Singapore company boards, being paid $50-100K each. Point is that after you rise to a certain point in a large organization, everything suddenly becomes low stress. |
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The type of companies for a long term portfolio that you manage passively would be yield stocks that are stocks with decent yields and growth that at least matches GDP growth or inflation. These could be blue chips like bank stocks, SPH, high quality REITs, ST Engineering, Singtel etc. If you are in these types of stocks rather than small caps, you should not have to do anything with your portfolio, should you become demented :) |
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Be careful about getting into cooking. I've had friends get into it, build a fancy kitchen with built-in appliances, $10K Viking Range appliances. Even hire a specific maid just to be the cook's assistant (dice onions, peel garlic etc). They have all grown FAT. Somehow, the cook cannot resist tasting all the high fat, high calorie sauces. hahahaha |
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I have a list of items to do. Watch and engage kids as they grow. Talk to parents more. Love wife more. Get that 6 pack and a gold in ippt. Write a book. Cook more. Read more. Catch up with old friends more. Be consistently a good person to everyone. And when I feel full with life, then use that energy and see what new obsessive adventure life has for me. New business, community work, stay overseas if kids are older by then? The issue of purpose in life is always the same regardless of wealth and income once our basic needs are met. |
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*LIKE* :) Don't get carried away with the consumption. It can only make one happy for so much and so long. Beyond that it is how you use what you have been given. |
dear wealthy posters, what's the minimum F.O. capital needed to lead your kind of comfortable life? let's say you now have 20m, but do you think you could have led a similar lifestyle with just 10m? or even 5m?
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Without recurring employment income, the expenses can add up pretty quickly and its always desirable to have some buffer for the unexpected once off expense. |
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Believe me, exercise and keeping fit is very important to me even now. Since my productive hours belong to the company, I have less time to exercise but once I regain those productive hours, I will spend more time lounging in the gym. I haven't bought the convertible yet. Still trying to earn extra to pay for it or save up more of my salary for it. If I fail to earn extra, then no convertible lor. Finally, girlfriends. Ahh ..... what can I say except to exercise some discipline and not to get involved with the wrong ones. Contrary to popular belief, not all are necessarily gold diggers. Hahahaha! |
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For me, I got to plan for a scenario without such opportunities. Hence, I have to continue running the rat race, slave driving boss notwithstanding! |
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First of all, the seat is superbly comfortable compared to the horrible shapeless seat on SQ's new business class. You also have a separate bed, which feels like a real bed with real bed linen, not a converted seat. You can change into your supplied Givenchy pajamas by closing your door and shutting your windows. Food wise, SQ business has deteriorated significantly, but First is still top class and you can order almost anything anytime. The people you travel with are also far more interesting than in business. Once I was in SQ's "Private Room" at T3 and I saw a CEO of a listed company that I know and went over to talk to him. I ordered some Chirashi Sushi and we were chatting, when a Singapore minister walks by with an aide carrying his suitecase. He recognizes the CEO and joins us. The young aide (who probably had an Oxbridge degree) just sits there completely mute, while the three of us chat and eat. Don't think I'd have that experience in the business class lounge Haha. As a side note, I now run into the minister occasionally when I do brisk walking in a certain part of Singapore at a certain time of the morning because he exercises at the same time. He recognizes me and we talk. |
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After listening to the story of my divorced friend, I am very very careful. |
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My overall leverage for everything is only 35% to be safe. 50% is too high. I don't need to maximize my returns by taking undue risks. I think most people with 8 digit networth will feel the same. |
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Right now, short term rates have been relatively steady, while long-term rates have risen sharply, causing the carry trade to be the most profitable it has been in years. At 38 years old, you are managing your portfolio like you are 70 years old! Getting 2-4% return for the past few years, you should change your bankers. Maybe when you signed the forms, you ticked that you were an unsophisticated investor, hence they don't show any high yield instruments to you as they believe you can't understand them. Rules are strict since the minibond problems. Overall leverage of 35% isn't that bad a strategy, but property can be leveraged much further because it isn't usually a very volatile asset class. Even the MAS allows property owners to leverage 60-80%. At 50%, that is pretty safe. It's hard to imagine Singapore property more than halving in value, such that you have a margin call. |
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I have been in markets and trading and investing since 18 years old. Risk profile is aggressive as I do options on my equity positions and structured notes when appropriate. I use overseas pb and local pb. The 2-4% is referring to their balanced discretionary portfolios over last 3 years. It is rather low I agree but due to this year bond not moving and in 2011 equity markets not strong. To clarify on the returns, I refer to 4-5% annualized on net investible assets. This refers to bonds, equities, alternatives, cash (most hnwi i know hold 20% cash!). The last item is a major drag. So eg this year, one does 6% returns on 40% equity, 1% on 40% bonds and 0 on cash, return is 2.4%. So with some leverage it goes to 3.5% at best. My 6% equity is fair as em are down, sg is up 3%, only us is up a lot, bond suck this year, cash is zero. If u know a pb who can give me 6% on this basis, I will happily switch! Let me know. |
No, carry trade can mean many things, currency, interest rates etc. For the past 3 years, I've been borrowing sub 1% to fund yield stocks, preference shares etc. Both in SGD and USD. You can even get 5% yield out of U.S. stocks like Verizon and AT&T. Capital gains overall are over 100% and I'm also drowning in a sea of dividends. The cash yield based on my purchase price over the past 3 years or so is probably around 8-9%. I will gradually move the higher beta equities over to long bonds when the yields are higher. I haven't done it yet because yields are still rising. I'm also generally a long term passive investor so if my holdings of high quality equities or bonds crash, I'm not going to panic. The large part of my equity portfolio is already free as the dividends have covered my purchase cost. I've been through several cycles. Good non bank companies will recover and I can always hold the bonds to maturity.
As for dealing with your bankers, the better you know them, the straighter they are about the products they are selling you. I've bought structured products from them selectively. Some of the currency arb ones have been good even though I know the bankers made a lot of money off them. I also stag IPOs using massive leverage. On the most recent IPO, I pressured the bank to bid for $30m of an IPO on my behalf. I was pretty confident it would go up because of massive demand. My allocation of about $150K of the IPO or 0.5% was completely expected given that it was massively subscribed. The stock went up 10% on the first day and I sold it earning $15K. I've done this more times than I can count. But I don't do every IPO. I do my research. Now, it is remotely possible that I will one day end up with $30m of a dud that falls in price, but I don't think so. I watch these deals closely and will pull out. The more simple bond mathematics you know, the less money you will make. haha. You clearly run in a different HNI crowd than me. Everyone I know has made a ton of money in the last few years, easily surpassing the 4-5% you target. If you can't make money in such a buoyant market over the past 3 years, it doesn't bode well for the next few years! As for cash, I keep about $1m around. Keeping 20% would be nuts. The rest is invested. I don't see any need to keep that much cash when the banks will lend me large amounts should I ever need it. |
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Point on cash, I also used to think should have low cash positon like 5%. But when I asked my much richer friends (all entrepreneurs closer or at 9 digit net worth rich not banking and finance rich), they all hold much more cash and property than what portfolio allocation theory advocates. Read over 50% in cash and property where cash can be 10-30%.. Having written so much, the point I am making for this thread is that there is a lot more to life than trying to earn much more money beyond 15-20m. Each dollar really gives much less marginal utility at least to me. So if your investments can make enough income to cover annual expenses by 1.5 and more times whatever your level of expense, you really need to ask if you want to keep maximizing and what risks you want to take and time you want to spend on investments. My goal is to beat inflation by 2-3%, have less stress while at it. Stress not from portfolio mgmt but stress from always wanting to win the next guy in terms of net worth. |
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I think you hit the nail on the head, but perhaps not in the way you think you did. You mentioned "you and your entrepreneur friends". That's the difference. You struck it rich through a business and perhaps are afraid that it is a one trick pony so you are very concerned about preserving your wealth.
Whizzard (I think) and I are professionals, not entrepreneurs. I've been through several cycles and have managed both people and finance in large global firms. The people I mix with are professionals including a lot of bankers. As I mentioned before, I'm a very passive investor. How do you think dividends have paid off the purchase price of the large part of my equities portfolio? I move a small part of my total portfolio around with my view of the world economy, but the bulk is held forever. Or in the case of bonds until maturity or preference shares, when the bank redeems because it doesn't qualify for regulatory capital anymore. I know entrepreneurs too. Some can be reckless with their business strategies but so conservative with their investments. Others are part of syndicates which move small illiquid stocks (like their own companies) around. If you hang out long enough with your entrepreneur friends, they will let you into their secrets. It's all quasi illegal from my perspective. haha. From your posts, it sounds like you are reading too many investment texts. Just relax and observe the markets over time. With age comes wisdom. |
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Issuer Instrument Yield to Call Duration A. Perp. 5.32%. 2.08 yrs B. Bond due 2036 4.35%. 2.72 yrs C. Perp. 5.63%. 3.28 yrs D. Perp. 4.51%. 3.37 yrs Weighted average yield = 4.9525% Weighted average duration= 2.8625 years Assuming 50% financing at 1%, int cost = $5,000 pa Portfolio yield = $49,525 pa Net portfolio yield = $ 44,525 pa Capital invested = $500,000 Return on Capital invested = 8.905% pa Strategy = hold till maturity with 50% leverage Risks = borrowing costs shooting up but I think it would be unlikely to cross 4% during the duration of the proposed portfolio. I also don't think medium term interest rates would move so much such that the bond/perp prices would crash to trigger a margin call within the remaining duration. What do you think? Would you invest in it (assuming bond structure is acceptable i.e. the issuer will exercise the call when it comes due). |
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I need to redeploy and lower my cash component but am facing a dilemma. Shall I time the market? Wait for asset prices to correct or redeploy now? For every dollar I redeploy into the equity or bond market, I think I can get at least 6% yield, with some leveraging of between 30% - 50%. Hmm, maybe I should get the bankers to do some work. Have them run various yield simulations for equity and bond portfolios with different levels of leverage and margin call scenarios whilst I figure out what to do. If you have some spare cash lying around that you don't need to fund your lifestyle, what would you plan to do with it? Will you invest it immediately? If so, on what asset class? |
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Buying perps
Issuer will call bond only if bond price is above 100 generally. Then they reissue at 100 mah. I think what u mean is that the perp bonds have variable reset coupons. For eg, santande gbp, mapletree logistics perp have coupon resets every 5 years. The yield calculation u are using works only if they call, which is not likely if interest rates go up. Rate up, bond price fall below 100, no call. So your duration is much higher. People who hold >5 year bonds and perps this year all Kena hit bad in June. As your banker. Most bond portfolios are down up to 5% or flat.
I would avoid bonds now not because I think they will fall lower but because I am fully allocated and I think better opportunity in equities. I had 40% bonds last year in a mainly 6 year bond ladder, now it is 35% and I will let it fall to 33.5%. The amt which matures going into Asian equity and alternatives. I am slightly contrarian, so I am ok with entering commodities and Asian equities next few mths when everyone thinks otherwise. Now people are all entering us and Japan. Former I am already in. Latter don't mind adding slightly. As for cash, I have cash position that is 20% of asset. Reason is for flexibility to buy big if I need to and for new business possibility. I leverage up 35%, so I still have 100% invested. The other 15% is primary home. I treat the 0.8% loan interest as fee for flexibility. Not sure if overpaying... But if interest rates rise, I will buy longer dated bonds and maybe reduce leverage if it makes sense. Just sharing and I hope it helps u. Be very careful and don't waste your hard earned money. Bankers do have some good advice but depends how your relationship as some poster pointed out. And also your banker experience. My experience is that best is learn from own experiments and from peers or betters who share. |
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Recently UOB issued a 4.9% S$ perp which qualifies for the new Basle III rules. I expect the other Singapore banks to follow suite. With long-term rates rising, I didn't bite on the UOB perp. I'll wait until they hit 6% as long-term rates rise. There is good history of banks redeeming their perps. In fact, OCBC just redeemed their 5.1% perp they issued about 5 years ago. So, I would hold off on buying perps and bonds for a little while or until long-term rates stop rising, then I would buy and hold until maturity or redemption. If you like short term instruments, there are always a series of Credit Link Notes or CLNs available. They are used a lot by banks who lend to a corporate and want to offload the risk to investors. They are typically medium duration, about 2 years. But you have to evaluate the credit yourself and don't forget the credit of the bank issuing the notes, especially European banks. I don't touch bond ladders with a 10ft pole. The private banks make too much money off them. For bonds, I buy direct, but it's $250K to $1m minimum investment. Picked up some Capitaland bonds in 2009 for 10% yield! |
BTW a little tip for dealing with bankers. I take mine to expensive lunches all the time and I choose the restaurant and pay even though they always offer. You want to be the first guy they call when a good investment opportunity arises.
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That is why I specifically chose the earlier perps issued by (1) investment grade Asian banks; (2) which generally have higher loan-to-deposit ratios ("LDRs"); and (3) which are also systemically important institutions in their own countries. In any case, the Asian banks are generally not so adventurous in terms of their trading books so the main issue you have to look out for in assessing an Asian bank's risk is mainly the credit risk of its loan portfolio, regulatory risks of their home regulators and liquidity risks (alleviated by their low LDRs). What I am most afraid of and can't really analyse is the timing and speed of interest rate hikes. I have read various research and economic forecasts and you know what they are worth right? Logical arguments aside, at the end of the day, there are always qualifiers to those forecasts. But, a punt on short and mid term rates not rising more than 4% within a 2-3 year duration seems fairly safe to me at the moment. Hence, in my view, such a short duration, investment grade rated portfolio should be safe enough for a buy-and-hold strategy to generate a 8%+ return on capital. Everyone knows and expects interest rates to rise, the issue is when and how sharp. Since no one can tell, we will need to have a strategy to protect or at least mitigate such risks when it happens and that is why I chose investment grade banks (generally credit spread would rise less compared to high yield names) and deliberately kept the duration short. Also, I am not aware of any banks not redeeming their perps at their respective call dates. I must confess that I don't follow the perps market closely and hence may have missed out on some which may not have called in the past, so I asked the bankers and they said they were also unaware of any who have not redeemed thus far. The key issue to me hinges on issuers redeeming their perps at their call dates because all you need is one joker who doesn't call and the rest of the perps would fall in a knee jerk reaction. The other factor supporting this is that banks have a reputation to protect and they will need to make the call when due because if they do not make the call, it signals that the banks are in some sort of trouble. For an institution that runs their business premised upon reputational risks and consumer confidence, that is the last thing they would want to signal. Hence, the more I think about it, the more inclined I am to plunge into it. Based on my current circumstances, I will still be very much overweight cash even after I invest into this. Furthermore, I probably won't have the guts to invest 100% of my investable cash into equities should a correction happen. |
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Remember, they only make when they sell you something. Whenever you buy any securities, they also charge you custody fees. I think dealing with them politely and portraying yourself as a humble person plus develop a good rapport should be adequate. |
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Yes! I learned something new today. I was not aware of this additional factor that incentivises banks to redeem even if current perp price below 100. But I agree on duration for sure. Now is the time for low duration and when lt rates stabilize then can extend it. |
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