Stagnant Networth / Portfolio... And my excuses for a married guy

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As per some recent blog posts, these are for re-organising my thoughts for myself, for self-reflection and to hold myself accountable for events that has transpired in recent years.

Feel free to comment and point me out.
Thanks uncle cw88 for reminding me to think of lessons learned.
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Quite some years ago, I decided not to track all my expenses, and just spend as I want to. I have already lost count of the number of years, but for me, at least I made sure I spend only what I have and paid up all credit card bills every month (credit card for ease of purchase and discounts). Nothing on debt.

One of the main thing that was nagging me on my mind, was my rate of growth of my networth. In the early years, the growth rate was rather good, but as I checked my portfolio recently, I realised I had not had much portfolio growth.

Honestly, I was puzzled, confused, and little bit unhappy. I know I have been spending a lot more, made some big investment blunders, but I thought it would have been better. And the main reason why was because I did not put a figure to everything I have been doing.

So I decided to do a reflection exercise to track back on myself past few years. It was easy to track myself on some older posts as I had not been actively posting past few years.

As I looked back at some older posts, I realised that was a point in time in Nov 2016 where my portfolio actually touched $350k. I had reached $320k at age 32 (2015), and $350k at age 33 (2016).

As it stands, my portfolio is still at around $350k in the year 2019 with about $25k++ warchest, which means there was minimal to no growth. There are still funds here and there in different bank accounts which I am too lazy to really sum all up.

So from 2016 to 2019, I only grew on average by $8k+ a year, even though my dividends is ~$18k annually. What actually happened? Since I was not spending any effort in tracking where my money went past few years, I was actually a little at a loss.  Within the 3 years, I should have had dividends of around $54k. And maybe extra savings from work. But where did they go to?

Having been too passive in those few years, I have to think back slowly in time, discover the reasons, and see where I can improve on myself.

Based on my self-reflection, there were 3 major reasons
(1) Quitted full-time job in 2012
(2) Increased expenses due to house and children
(3) Poor decisions in the stock market


(1) Quitted full-time job in 2012
I quitted my full time engineering job in 2012 and had pumped in about $40k to takeover a tuition centre. I was doing both engineering and teaching tuition before that, working almost 80 hours a week. Income was great, and there was no time to spend $$, so savings rate was almost 90% or more. That set the base.

Come 2012, I reached a stage where I had to decide whether to reduce the amount of tuition and continue with my engineering job, or quit my job and do full time tuition. I was too tired to continue doing what I have been doing for the 3 years prior. I chose to quit my job.

Income immediately fell drastically. Not only had I no full-time job, tuition income fell too due to increased business expenses. Due to my number of students (more than 3 in a group), I am not able to teach at home by law. Apparently, URA and HDB do not allow advertisements, be it flyers on even online ads, for tuition services at own residential places. Some tutors flout this law, but that's them.

Profits are not that great yet, because we have also been reinvesting the bulk of them back to the centre to improve on site facilities for the students.

I also had quite some funds invested to keep the business going for a while before finally being able to slowly withdraw them out in recent months. That contributed to my warchest.

(2) Increased expenses due to house and children
In the past, before wedding, I stayed at my parents place. Expenses were near zero as electricity and water bills, internet bills, town council fees, household items like toilet papers etc, were paid by my parents. I did gave them a monthly amount which I still do now, although I was fortunate that they don't really need it.

Mid 2014 was the wedding, and expenses shot up for household. My arrangement with my wife is that I would try my best to pay for majority of the expenses to see if we could survive on a single income, while the majority of her salary would be saved for potential future uses, e.g. in the event we were to upgrade our home. Also, the exercise to survive on a single income is also in case she decided to stop working to take care of kids. It has worked well so far, such that she has a substantial enough savings in both cash and CPF.

In short, majority of expenses fall on me, and so I shall do a rough breakdown.

Because I also work at home, PUB bills come up to almost $300+ a month. In addition to all the other bills, estimated monthly amount is around ~$500 currently.

In addition, we got a family car. It was a shared expense between me and wife, so it was some ~$40k upfront that was put in. Along with this come season parking charges, car maintenance charges, parking charges, road tax, car insurance, petrol, car cleaning, etc. Excluding the one off upfront payment, this works out to about ~$5.4k annually on my shared part, or average of ~$452 monthly.

In 2017 came our first child, and 2019, our second. Expenses went up even further, with diapers and milk powder, baby wipes, diaper creams, etc etc. There were also one-off expenses due to confinement nanny, confinement food/medicinal herbs, hospital bills, gynae bills, etc. Monthly expenses include childcare, doctor fees, etc. All in all, for both children, excluding the one-off expenses I estimate a current monthly spending of ~$1.5k. Might most likely be an overestimate, but I guess not too much over. Childcare is already $500, milk is about $180 per month for the younger one, maybe cheaper for the elder one. Diapers probably around $50 a month, assuming 6 changes a day with average 30c per diaper. Paediatric fees are around $100++ each visit when sick.

My own spending on my own wants also increased. With tablets and new phones and useless stuff from taobao because it was cheap... Also, toys and books for my elder child is also classified under here... However, this does not affect too much. I estimate an ~$150 average monthly which may increase in the future.

Because of family, I have also taken an additional life insurance coverage ($2.2k a year) on top of my term insurance ($400 a year). Wife's salary covers hers for now. There is also the hospital and accident insurance I took up for both kids (~$1.3k a year I think, for each kid). So there is another $430 per month here.

Lastly, food is a major expense. Be it eating out, or buying to cook. Supplements, for myself, for my wife, for my kids. Groceries, etc. Water filter expenses.  My expenses in this area is estimated to be about $800 monthly. Might be more, might be less, this is just an estimate.

In total, there were one-off expenses of ~$60k on my end, from 2017 to 2019, the bulk being the car and the hospital/gynae fees. The estimation of recurring expenses is about $3.8k monthly, or around $46k annually. I'm personally surprised by this quantum, but I don't think I will seek too hard to reduce it for now to maintain the current standard of living.


(3) Poor decisions in the stock market
A long time ago, I used to think this way:
Dividends are passive. I just need to buy and forget.

In other words, buy at a correct and good price, forget about it and come back few years later.

That was a huge mistake. I might have gotten a counter at a good price at the point in time, but that only governs the downside... Losses are minimised... in my case, by dividends. I was lucky, really lucky, for SPH, Starhub, M1 and SMRT.

In a few short years, industries can change. Disruptions can happen. One needs to be keenly aware of the business environments and etc. What works well in the past, may not work well in the future.

And that was what I had missed for Starhub and SPH. I had my fair share of ups and downs, of the bumper dividends received, but I missed following business updates closely on the industries.

Indeed, investing, even for dividends, cannot be passive. I was overly passive, lazy, and also careless, in my approach to my portfolio management.

So back in 2016, my portfolio included Starhub and SPH at a value which is ~$20k in total higher than now. With both counters a combined $20k lower today, and a 100% write-down of Hyflux perps of $21k, and my portfolio still around the same, it means I must have pumped in almost $40k cash into my portfolio, with some profits from the sale of Singtel.

Most of my portfolio gains were made between 2009 to 2014, but none of those are being accounted for here as my base year for this self reflection is 2016 till now.

Noble group loss was not included in this because the capital loss was almost equal to the capital gain made from Saizen Reit. So the comparison between 2016 and 2019 would not have been much different.


My Conclusions for myself
As I write this post with all the calculations, I finally gain some clarity about my financial situation and how I have been "anyhow" allocating cash without much thinking.

So over the past 3 years, of the $54k dividends received, $40k have gone back into the portfolio which sort of buffered the loss from SPH and Starhub. $14k are in the warchest ready. Another additional $10k has been put in from savings.

The majority of my income are actually spent on (2), family. Previous years when I was single, I saved 80% to 90% of my income and spend on average $1k a month. At $46k annual spending for my family, that was an increased of $45k annually, times 3 years, compared to when I first started out. Granted, a small $2k went into life insurance (for 25 years) and would be part of a tiny portion of retirement amount.


Conclusions in general
(1) Passive investing cannot be overly passive. It is never buy and forget.

(2) The best time to build your portfolio based on hard work and savings, is right after graduation and before marriage, which is typically the onset of the 3 big financial bombs. That's where we have the most amount of time and energy to build our first pot of gold.

Although it is always said that our highest earning power is when we are between age 40 to 60, I have not reached that age yet to be able to compare and reflect on it. So for now, at least up to mid thirties, my conclusion is likely to remain true.