Hello Money Makers!
It is my turn to brief you on my current portfolio, the road getting here and my future plans.
I decided to categorize my holdings in 3 broad asset classes – Equities; Property; and EPF (which is the Malaysian Superannuation Retirement fund). My assets are divided equally between the Malaysian market and one Northern European AAA economy.
My current goal is to reach RM25,000 monthly in passive income through dividends and other yields from the assets. This goal has changed over time, for instance it was RM20,000 around 10 years ago when I effectively started on this journey. This has lead me to realize that a number is no more than guideline and not necessarily a fixed goal as the goal posts moves upwards with time (inflation and consumption patterns).
My existing assets would conservatively be able to yield around RM15,000 a month in passive income – which means I am already financially independent with quite a comfortable margin (based on existing consumption patterns). However, the plan is to keep going until I reach the goal of RM25,000 in order to have a wider margin of safety.
Having technically reached financial independence, this blog serves as a space for me to share topics and tips related to my interest in investing and wealth creation, as well as to do my part in increasing financial literacy among fellow Malaysians. It also serves to to help me evaluate performance and follow my progress.
How I got here: Saving as a lifestyle
I started saving very early on, putting aside RM500 on my first RM2000 salary. The strong savings culture is something I have got from home and has followed me throughout my life. My savings ratio today is 81.3% of my net salary (excluding EPF allocation that is set aside automatically). My lifestyle is frugal and I try to avoid expenditures that I deem unnecessary and lavish. There are however two areas in which I spend above average and that is on F&B and with my personal trainer. Mrs Money and I will talk about how we plan to reduce our F&B expenses in a future post.
My investment path: stocks > properties > index funds
My long-term investment strategy has changed over time. I began investing in my university days in the dotcom heydays without any real knowledge of the stock market. However, I consciously started investing around 2007 after reading the Intelligent Investor by Benjamin Graham, written in 1949. It’s a book on value investing that covers stock analysis, and I highly recommend it to any long term value investor. Warren Buffett often refers to this book as the basis of his investment philosophy. The time-tested tools in this book came in very handy through the Lehman Brothers crash, and was particularly useful given that my plan at that time was to keep my investments limited only to the stock market.
In 2011, I stumbled into the property market by chance and now own two properties, with the second purchased in 2014 in the KLCC area. The capital appreciation of these have been diametrically different, which since has cautioned me on market risk. Properties tie capital, and my risk aversion meant that I prioritized paying off my mortgage. Therefore, any new investments in stock were effectively halted in mid 2011. I also had less time to spend following the market, and my long term 12 shareholdings (which have since been pared down to 6) due to work engagements. The occasional increase in my equity portfolio comes from reinvesting of dividends.
Fresh funds have since 2016 been channeled to an index fund following the stock market in the AAA Northern European market. This index fund does not have any fees or charges and allows me to eliminate concentration risks on stocks. This fund has returned 20.2% over the past 3 years, despite an abysmal -2.06% in 2018.
This asset class covers stocks, bonds, mutual funds and other similar investments. My current portfolio is heavily weighted towards stocks but index funds are gaining traction and I expect it to be balanced holdings within 3-4 years. Investing in the stock market is time consuming and increases my concentration risk on certain companies. Whereas my index fund investments are distributed over the top companies as per the index and eliminates the concentration risk. I expect my equities to yield 10% per year over a 10 year period including dividends.
I own two properties, one in Europe (2011) and one in KLCC (2014). The property market in Malaysia has been in a slump for the past 4 years and the capital appreciation has been weak (negative – 16%). I do however have a strong believe in its potential as a long-term investment due to its location in the heart of KL. The property in Europe was acquired in 2011 and has appreciated close to 50% since. Like the property in KL, the location is good and there is more potential with that investment with time.
The Malaysian Employment Provident Fund is a superannuation fund that every resident company and employee is required to contribute to in behalf of the employee. The funds performance is guaranteed by a minimum 2.5% dividend. I have contributed to this fund for the past 11 years and the performance has been above expectations.
Writing this post gave me an opportunity to evaluate my holdings in a more holistic way than I have done in many years. My new set target is to rebalance Equities, Property and EPF equally. This means more free cash flow will be invested in Equities and EPF. EPF is per definition a discretionary investment done without any active participation from me so my investments in Equities will take most of my time and my blog contribution. The goal will be to have ⅓ of my assets in Equity class products that yield 10% per year over a 10 year period.
Any suggestions on equity products I can consider adding to my portfolio, or comments on my asset distribution and future strategy?