Thursday, July 2, 2020

Jun 2020- Monthly and Mid-Year Passive income update(YTD Dividend/Interest collected ~ 31k)

 In the month of June 2020 , the stock market continued to fluctuate wildly so is my portfolio. June monthly passive income collected from my investment portfolio is around $5.8k despite missing out 1.3k from dividend suspension of my UK/EU finance stocks. This brings my half yearly passive income total to 31k. The passive income is so far my only consolation in 2020 as I have written off 42k of realized loss from selling some of my risky counters like MLP and retail Reits.  My liquid networth recovered by another 1% in June even though my liquid networth is probably still down by more than 100K.  Current investment portfolio is also sitting on a -9.5% paper loss end of June however the loss will be much reduced if I factor in the dividend yield.

As a result of volatile market throughout 2020 and dividend suspension/cut , most of my new positions have been bonds purchase. Comparing my portfolio distribution between Feb and June, I have increased my cash ,investment grade bond and bonds significantly to 70% of my liquid networth. With the huge re-balancing of my portfolio in the last 3 month, I am currently holding about 681K cash and 201K investment grade bonds which contribute about 45% and 13% respectively of my liquid networth. I will remain prudent for the remaining of the year with mainly bond purchase or stock that can still pay their dividends.

The passive income from dividend/interest is currently projected to generate about 60kSGD in 2020. When I started my blog, I have set a target of 100k passive income for fatFIRE and I have been chasing yield. After some hard thought , I analyze that my expense has been much lower than 50K pa, there is really no need to take excessive risk. This prompted some change in my retirement strategy to be as conservative as long as I have achieved a passive income that is more than my expense.

Dividends received in Jun2020 from Foreign Investment: USD $1411
Interest received in Jun2020 from Foreign Investment (bond): USD $1024
Interest received in Jun2020 from banks interest/FD/others in US: USD $397
Realized gain/loss : USD: 0
Dividends received in Jun2020 from SGX:SGD$2277
Interest received in Jun2020 from banks interest/FD/others in Spore: SGD $224
SGX Realized gain/loss SGD: 0
Total dividend and interest from my investment portfolio + bank/money market account + trading gain/loss generated in Jun2020 SGD$6325
YTD Passive income earned from investment only: SGD $31026
Detailed Dividend/Interest received from investment portfolio in Jun2020 :

Liquid Networth distribution:

Monthly Dividend/Interest earned Y-to-Y changes from 2017 to 2020:

Monday, June 22, 2020

Review of iShares USD Asia Credit Bond Index ETF (N6M /QL2 SGX Quote)

As my reader know, I am a fixed income investor who prefer to invest in US Corporate bonds. I have written 3 articles which focus on US Corporate bonds investment.
Introduction to US Corporate bonds investment . Part 1
Introduction to US Corporate bonds investment . Part 2
Introduction to US Corporate bonds investment . Part 3

However, scanning through the US Corporate bonds market is a tedious process as it is a trillion dollar exchange which is as big as any other US stock exchange with thousands of listing. 

As I mentioned before, many bonds listed in Spore are of poor quality and are considered as junk bond. There is no proper credit rating for these Spore bonds and it is very difficult to assess the credit worthiness for these bonds.  This resulted in recent years,many bonds default from Noble, Ezion, Swiber, Ezra , hyflux, Trikomsel ,Pacific Andes and the list goes on.That is why I never recommend any Spore individual bonds for investing.

Some readers have been asking me about investing in an investment grade bond fund or etf which are listed in SGX and readily available for retail investor.  Unfortunately, there ain't many around except a handful like ABF SPORE BOND INDEX FUND ETF (A35) and NIKKOAM SGD IG CORP BOND ETF (MBH). However, the interest yield on trade is as low as 2% which doesn't make sense as you can make safer investment in guaranteed short term single premium product from Spore Insurance company. 

Recently, I have invested in iShares USD Asia Credit Bond Index ETF (N6M /QL2 SGX Quote) which yield close to 4% . I am sharing some basic analysis of this bond ETF in this article.

A summary of N6M /QL2 is as below

  • Diversified exposure to debt instruments issued by sovereigns, quasi-sovereigns and corporates in Asia ex Japan region
  • Broad exposure to various types of debt instruments, for instance fixed rate, floating rate etc.
  • USD-denominated liquid investment grade and high yield debt instruments
From the fact sheet, here is a  summary of this bond ETF listed

I download the entire holding of this bond etf  to analyze the bonds that are invested and do some breakdown. The holding includes almost 200 bonds across the entire Asia Pacific countries and all major industries. If you do the breakdown in the credit rating of each individual holding, 3/4 of the holding are investment grade bonds and 6% are not rated.

I further dive into the non-rated bonds and found that it includes cash holding and some investment grade companies that did not get their bond rated. After adjusting the NR bond credit rating, this ETF is about 77.38% investment grade.

To analyze the risk factor on the non investment grade bonds holding in this ETF. The fund consists of 17.87% non investment grade bonds. I feel that not all non investment grade bonds are high risk as the Sovereign(Govt) bonds consist of  high 6.03% component. I feel it is less likely for a government to default on its bonds. This ETF also provide a more stable interest return compare to the dividend yield from the rest of the my equities investment which have been reduced or suspended.

Considering all these factors, I feel this ETF with approximate 4% yield is about 83% safe . As yield has been plummeting across all investment due to CV-19 crisis , this bond ETF is a risk worth taking to diversify my current investment away from reit and high dividend stocks.

Breakdown of Non-Rated bonds in N6M ETF

N6M ETF last 5 years annual yield: