Random Post #9 – Counting your chickens

As I lying in hospital this week with a herniated disc, I was kept up one night in particular when I was excited to see my ETF’s value start to rise and rise and rise!

vfv 5 days

Wow look at that, up 4.82% in just a matter of minutes on Wednesday!

I excitedly told my friends and family how much money I was making and was proud as punch. That was until I got discharged from hospital and actually sat down to work out my monthly rebalancing plan.

It was then I realised that Google finance was giving me a bum steer.

See, what Google finance does is it uses the current exchange rate all the time – meaning that when you purchased your ETF’s it doesn’t care what the exchange rate was at the time. It just uses the current one so it appears that you gains may be wildly inflated. (It may also make it appear any losses are also exaggerated).

So this is what actually happened that day:

vfv 5 days comparison

It was rising just as fast as the CADUSD rate was dropping! The reason being, the underlying assets are all in USD (S&P500 companies). This is actually amazing in the sense that the market is extremely efficient at picking up the actual value of the assets regardless of the currency.

I’m now looking for a tracking application that keeps in mind your base currency and what the exchange rate was at the time of purchase. If you know of one please let me know. (Yahoo Finance appears to have the same problem).

By the way this is a FAQ about the risk of currencies fluctuating. Definitely there are risks when purchasing stocks that are not in your base currency. But also, with risk there is reward – the currency can also swing in your favour.

One key point is though, it does not matter what the trading currency is. What matters is what currency the underlying assets trade in. For example, the ETF’s I am buying off the Toronto exchange trade in CAD, but the assets are USD based. Therefore what is more important to me is the SGDUSD rate (I am buying CAD with SGD for trading purposes). I am not concerned with the SGDCAD, or CADUSD rates.

Just like water finds its own level, so will your stocks when trading in a different currency as people will be quick to try and take advantage of any currency swings – bringing it quickly back in line to the actual underlying value.

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Random Post #8 – Andrew Hallam book launch

Yesterday I had the great pleasure to finally meet Andrew Hallam in the flesh at his book launch for “The Global Expatriate’s Guide To Investing”. There is another session coming up this Wednesday and I would highly recommend you to attend if it all possible: – http://andrewhallam.com/2015/01/the-global-expatriates-guide-to-investing-singapore-book-launches/

Andrew led the discussion about how easy it is manage your own investments with as little as 1 hour per year, but also about how naturally we are bad investors who typically buy when prices are high, and sell when low! Most of us under-perform the benchmark because of our emotions and belief that somehow the experts know when is a good time to buy and sell (and we follow their advice), when in fact their predictions are only accurate 46% of the time!

The simple fact is that investing for your retirement is a long term plan and you need to just stay with it. Ignore the news, just stay with your allocation plan and rebalance your portfolio once a year. And of course, keep your fees as low as possible.

Andrew gave a few examples to show us how very few of us understand “basic” compound interest when thinking on our feet.

He gave the below example:

If you had, $10,000 invested in the market for 30 years and it returns 5%, your final value would be $44,677.

The question is, if your return was 10%, what would your value be then?

I took the lazy route and just made the simple double it assumption: 10% is double 5%, therefore $89,354 is double $44,677. Sounds good right?

Whoops, I forgot to bring my compound interest formula with me!

Compound Interest Formula

The correct answer is in fact $198,374!

The point of this example was two-fold:

  1. We are terrible at doing these type of calculations on the fly, therefore easily manipulated into buying heavily marketed financial products.
  2. Percentage points matter! You may not think a few percentage points matter but with compounding they really add up. If you buy an Actively managed Investment Linked Plan, you’re going to be paying a lot of fees on this which is going to have a significant effect on your final return.

The alternative approach (and much more sensible approach) is to manage it yourself, by buying extremely low management fee index tracking ETF’s which will allow you to soundly beat the experts at their own game.

I’m looking forward to giving away my signed copy of Millionaire Teacher to a close friend, the book that really woke me up!

Millionaire Teacher

Random Post #7 – What if….

On my previous post, Mr Kevin Pattison brought up some excellent points that brings me to this post about “What if’s”.

As Kevin pointed out, there are many other variables out there which can catch you with your pants down. I’ve often thought of three things that could hit at the same time which would deliver a crushing blow to my well laid plans:

  1. Markets crash – I am fully invested in multiple index funds now. My contingency against this situation is two fold, a) keep working, keep buying the laggards at bargain prices, or b) sell my bond-based ETF’s to purchase the laggard to turbo-charge the swing up again. (Once again, all about maintaining your target ratios).
  2. Interest rates shoot up on my home loan. Already as of this month they are coming up rapidly in Singapore. I’ve been enjoying 1.38% or something ridiculously low like that for the last year. If it really started to get out of hand, I may start diverting funds allocated for investment into the loan instead.
  3. Unemployment – if things really took a turn for the worse, this would really be a stinker – especially if the other two occurred at the same time. It’s really easy to expect your current salary for the rest of your life; today I was reading about a CFO in Singapore making good money for many years, lost his job, and could only manage to find after many months searching a job which pays him 50% of his previous salary.

Never say never, this would be a black swan event for all three to strike at once but it is possible and is very scary. I am quite well covered for hospitalisation, death, critical illness and other life insurance related situations. At least this part I don’t have to worry too much about although I still do need to get my Will sorted out.

Back to Kevin’s other points though:

“In your example above, don’t forget that if you don’t pay the extra $36K each year off your mortgage (i.e. you choose the option of paying your mortgage over the entire 25 years) you pay an extra $250K in Interest over that period, and remember, you have to pay your marginal tax rate on most of the investment earnings (which are positively geared) so your $2M extra is suddenly looking closer to $1M extra, and your calculation is based on your ability to earn 9% cumulative every year for 25 years – I haven’t seen that happen too often ! As a comparison, most major Australian Retail Super Funds have only averaged about 4.5% nett over the past 25 year period. (and that’s only because the last 3 years have been pretty solid)”

I will readily admit my simple spreadsheet comparison was exactly that – simple. Unfortunately for me, Kevin doesn’t know of my OCD tendencies – which means I’ve had to do it all over again – this time using historical data of bank interest rates and ASX/200 returns going back to 1989. The results of which are very interesting… (I probably should have used a 50K loan instead of a 500K loan – who was borrowing that much back in 1989?)

-Assumptions

  • ASX/200 returns are Total Returns meaning dividend reinvested returns
  • Dividends are assumed to be 5% every year of the TR, of which tax is paid fully at the highest marginal rate.
  • Franking credits are not taken into consideration. So this is possibly a worst-case scenario example from a taxation point of view.

full loan investment with tax fast loan with investment with tax

You’ll probably need to click on the images above to see it clearly, but doing the same exercise as before, this time the advantage of investing early was ‘only’ about $200K. That’s 10x less than my very excited example last time! I can fully understand with interest rates as high as they were why people may wish to pay off their loan first – who knows what tomorrow will bring.

Why is the delta so low this time around? A few reasons – interest rates were ridiculously high in Australia in the late 80’s / early 90’s. But even throughout the rest of the 25 year period it averaged 8.67% – a lot higher than my conservative 5%.

Second, the 2008 financial crisis wiped 40% of the invested value in almost one fell swoop.

But still, this doesn’t really account for everything…. it’s TAX!! Wow, I had no idea how badly tax at the marginal rate of 45% kills you.

Check out the same example, but without taxing the dividends:

full loan investment no tax fast loan with investment no tax

Now we’re talking! $4.376m (investing early), versus $3.582m (paying off the loan first, then investing).

Technically the amount of interest paid on the home loan is irrelevant. In both scenarios you own the home and the balance of your investments. Take the one with the larger investment pile even if in the process you helped make the bank richer.

This finding also mirrors the finds of the ASX Long Term Investing 2014 report:

tax ASX report

Returns ASX 2013

legend asx

As you can see, if you’re investing into Australian shares directly and you’re on the highest tax bracket, it will significantly bring down your long term average. This is why it’s a good idea to invest through your Superannuation fund if you’re sure you won’t be needing that money until retirement.

“The impact of tax had a cumulative and compounding effect” – That sends shivers down my spine. Ah, the joys of living in a country that doesn’t tax dividends or capital gains!

Back to Kevin:

“In my view, it all comes back to how long you want to invest for – this is a major determining factor in what type of investment you need to choose. Over a 25 year period, depending upon economic conditions (eg. interest rates and unemployment rates – in Australia and overseas) you need to remain flexible with your investments, to give you the best chance of achieving your goal. The trouble is – its always easy to know when to buy into something – the challenge is knowing when to get out – and none of us ever get that right.”

Couldn’t agree more – this whole blog is really about investing for retirement – definitely a long term view. Remaining flexible is paramount for me. I believe that a good mixture of ETF’s that provide wide diversity delivers exactly that. Very liquid if you need to change path due to any unforeseen circumstance.

In regards to getting out – this is another part of passive investing that is very interesting: There is no real getting out stage, and there is no timing involved. You build it up year over year, increase your home bias and bond allocations, and when it’s time to retire you start just selling lot by lot what you need to live. You keep the bulk though and hopefully it will outlast you. You’ll pay minimal capital gains tax as you won’t have any other income, plus you held for the long term so you’ll get a good CGT discount.

I’m sure Kevin knows people that were due for retirement soon after the GFC, but probably had to keep working a bit longer due to the massive impact that downfall had. I would say though that if that wiped them out so badly, they may have been invested too heavily in assets not suitable for that stage of their life.

And finally:

“I agree with your comments re; paying off your loan – you should never do this if the differential between the mortgage rate and the investment rate is significant – providing your future income is somewhat secure.

fallout thumb

I know lots of successful investors, and every single one of them have taken a ‘hit’ or two or three along the way. No one gets it right all of the time – Its all part of life’s great learning curve.

So be careful – simple spread sheet calculations can lead you astray if you’re not careful.”

I’m already feeling a ‘hit’ coming on. I feel like I’ve entered right at the top of the market, but in reality I’ve been investing a good amount each month right after the worst of the GFC happened. (This was the Zurich Vista product which it turns out is a very expensive product in terms of fees). Truth be told though, it still performed alright although it could have been a lot better though if I knew then what I know now. Because of the boost that fund gave me, I would not be in the position I am in today when I finally made the maximum partial withdrawal. Those are the funds plus some additional savings which I have now invested into low-fee index tracking ETF’s.

As for simple spreadsheets – as I’ve confirmed today they’re not too bad in Singapore where investing and taxation is very simple! As for Australia though, this really just double confirms my prior thought about getting my numbers double checked by an expert. It is complex and I am still only 50% confident that those above spreadsheets are accurate. There’s a good chance I’ve still missed something.

Anyway I am spent. Give me a few days breather Kevin if you need to comment further!

Random Post #6 – What would I do if I lived in Australia?

Given that lately a lot of my friends have been relocating to, or moving back to Australia (both Australians and Singaporeans) – I have been thinking about what I would do in terms of investment if I were to move back to Australia with my family.

When I was 30 years old, I left Australia with a chip on my shoulder as I was paying a huge amount of tax for what?

Now that I’m married with two children, maybe there would be more tax breaks available to me? Probably, but also probably not a huge difference in the scheme of things. (Singapore is very generous when it comes to baby bonuses and tax deductions for working mothers – just to be clear that is for my wife, not me).

Anyway, that aside – what would I actually do?

If I had a decent sized mortgage paying 5% interest, would I try and pay that back as fast as possible?

Or would I put as much into Superannuation as possible to enjoy the lower 15% tax rate payable on those contributions?

Then there’s property versus shares. If I had surplus cash, what should I invest in? According to this SMH article, equities have outperformed property over the last 10 years quite soundly, however property has slightly outperformed equities over the last 20 years.

equities vs propery

I am not a fan of negative gearing on property as I believe it’s an unfair system where non-investor tax payers are subsidising those making property losses on paper, but whom will probably benefit from capital gains in the future.

Ultimately I would probably do what I’m doing today – invest in a few select ETF’s that give me a broad range of diversity. Vanguard Australia offers a lot of very attractive ETF’s with low fees and excellent returns over the last few years.

vanguard australia

It’s hard to ignore the results of property returns in this chart – if I was going to invest in property this is how I would most likely do it; a) for liquidity, and b) for ethical reasons (I don’t think you’ll be enjoying any negative gearing on this type of product).

In regards to tax efficient investing – this is what Vanguard themselves have to say about the matter – https://www.vanguardinvestments.com.au/retail/ret/education/inv-library/tax-effective-investment-strategies.jsp

Which is also mirrored by SPDR in more detail.

So to summarise – what would I actually do? Actually I’m still not sure, maybe it depends on what your cash balance is at the time.

For example, if I had a home loan of 500K and was paying 5% interest over 25 years my payments would be $2,922.95 a month. If I was taking home let’s say $10,000 a month between myself and my wife, that would leave us with around $7K for all other expenses and any left over could be invested – either directly, or into Superannuation. Let us say we have $3000 a month for investment or early mortgage payments.

If I had no other savings at that point in time – it may be best to pay off the mortgage as quickly as possible to avoid paying as much interest on the loan. Let’s do some calculations: (I am shocked by this result, I hope my math is correct!)

Loan extra payments

So the above table shows that we are making $36K of additional payments each year, and we manage to quickly pay off our loan after just 10 years. Not bad. As soon as we have quickly paid off our loan, we invest that exact combined sum ($71,476.23) into our investment plan and expect 9% returns each year. At the end of 25 years, we own our house and we have $1.168m worth of investments. Seems okay right? WRONG!!

This is what it looks like instead if we start investing immediately:

Loan no extra payment

At the end of the 25 years, not only do we own our house but we also have $3.323m in investments! Over two million more dollars!

Holy moly, I am completely shocked by this result. I thought that paying off your loan fast was a good thing? It appears that this is only the case if interest rates are higher that what your investment can return, which historically has been very rare. If I am wrong about this someone please comment and let me know!

Now all this is not taking into consideration taxation on dividends, franking credits, or capital gains tax. But even if it were, I doubt very much that tax will have much of an impact on that two million dollars.

Now to really summarise.

  1. I would get some tax/professional* advice to make sure my calculations are correct.
  2. If correct, regardless of my debt situation, I would always be putting my savings into low-cost ETF’s. (Unless interest rates were exceptionally high).
  3. I may consider putting more into Superannuation funds that allow you to purchase low-cost ETF’s. This will help reduce the amount of tax paid on your investments. These savings compared to the top marginal rate are significant and are likely to account for more than 2% a year. This is a lot over the long term. The downside – this money is locked in until retirement age – so be very careful with this and make sure you won’t be needing that money beforehand.
  4. For property, at this point I would still only purchase my primary residence. This is my own personal choice though. Over the last 20 years property and equities have made similar returns. (I think the property bubble has finally peaked, but I have been saying that for 15 years now).

See you on the flip side!

The_Itchy_&_Scratchy_&_Poochie_Show_64

*By tax/professional advice, I mean independent and fee based advise. Not advice from the “professionals” at your friendly bank/insurance company that want to sell you some expensive financial product!

Random Post #5 – About Singapore as place to work or invest out of

Singapore is a small island off the southern tip of Malaysia, and is considered a city-state.

I’m not going to go into the full history of how Singapore came to be, but to quickly summarise Singapore first came to attention when a free port was opened that allowed traders to trade without paying customs duties. As such it quickly grew into a major hub of business and it is this style of thinking that has led the country to what it is today – a lost cost place to do business.

Without any major natural resources, Singapore instead relies on human talent as its major export. Today Singapore is known as a hub for many financial institutions, IT companies, and still to this day – shipping and logistics.

In order to draw in that human talent, Singapore has very low income taxes, and no capital gains taxes (low by my standard anyway, coming from Australia). With anything though there is a lot of controversy in Singapore about how it looks after its people. For example, because taxes are very low – there is no government pension. Likewise, there is no free health care. And because the country is so small, car ownership is ridiculously expensive. There is also no minimum wage, and foreign workers are often used as the builders of major construction projects, or for jobs that Singaporeans are not interested in doing. I don’t claim to know all the ins and outs, however from my six years in Singapore I have become quite so-called “localised”.

  • I live in an HDB flat – Housing Development Board (HDB) flats are what 80% of the population lives in. They are “affordable” 99 year leasehold properties that either Singaporean or Permanent residents can own. Foreigners are okay to rent them as long as HDB has approved the original owner to lease out their own flat.
  • I am a Permanent Resident. Originally I was here on an employment pass, however the requirements for maintaining an employment pass were getting quite difficult, and given that I had married a Singaporean citizen, I did not want to be in the position that if I was out of work for whatever reason they could kick me out of the country after 30 days!

Singapore suits my style – i.e, I don’t like to give the bank money in interest, I don’t want to pay a lot of tax, and I like to keep my costs as low as possible (or as my friends call me, a tight-ass Aussie). Singapore offers all that. The vast majority also speak English, and everything is written in English so communication is not a problem. (You’ll pick up many Singlish words over time).

Many ex-pats will complain that Singapore is so expensive, and it can be, but for me the choice is there. You can live cheap, or you can live expensively. For me I think I’m in the middle ground where my basics are covered at a reasonable price, leaving me enough spare to enjoy some travel and nice restaurants now and then.

At the same time, because I may not be able to ever count on a government pension, and I am no longer paying Superannuation back in Australia – I really need to plan for my own retirement as there may not be any entity out there that will look after me. Therefore I must invest my money wisely if I hope to beat inflation and then some.

Now that I am a PR, I do pay into my CPF account in Singapore. CPF (Central Provident Fund) is a compulsory retirement savings plan that all citizens and PR’s must pay into. It gives guaranteed interest returns which are bond like in stability. Better than bonds in fact, it is guaranteed. A lot of people will also complain about CPF (is there anything humans won’t complain about?) because they can’t control the investments going into it (there are certain funds you can choose to invest with it, but not very extensive), and there is a minimum sum balance that needs to be maintained upon your retirement. This minimum sum keeps going up, so a lot of people feel that they will never be able to access their own money. This isn’t exactly accurate, it’s just that they will not be able to access a lump sum and to me this is the whole idea of why this minimum sum was brought in in the first place. Previously people could withdraw the lot, give it as a loan to their kids or gamble it away, and then what? The money is gone and who is going to look after them? So to me, minimum sum is a safety net to ensure your own stupidity won’t get you.

CPF can also be used to help pay for your mortgage, and your health care / insurance premiums. To me it is a good centralised system.

Speaking of centralised systems. In Singapore most government agencies are tightly integrated with each other. Every person in the country has an identity number which you can use across just about everything. (Some may consider it very 1984 though).

TL/DR; Singapore is a great place to work and invest out of, extremely safe and clean country, public transport is excellent, car ownership is expensive, home ownership and rent varies, as do food costs. There are no capital gains taxes for individual investors, nor is there any estate tax liable upon your demise!

I give it 4 out of 5 stars.

#7 – Making your first ETF purchase

Congratulations if you have made it this far! It’s no easy feat opening up these trading accounts and understanding the theory behind passive investing (Although it’s ultimately much easier to understand than trying to understand how the snake-oil actively managed product salesmen operate). Anyway, pat yourself on the back if you’ve managed to get to this stage – most people put it in the “Too hard, I’ll do it later” basket, or the “I don’t have enough time right now, I’ll do it later”. The key aspect is that later never comes.

By the way, I read a really interesting blog post by Wilfred Ling the other day. The part I found really interesting was what he wrote about people in general:

“I also made the mistake of believing that it was actually possible for EVERYBODY to learn about investments. The hard truth I learn was that there are some who will never have the aptitude to learn about investments as it is a subject that is both academic and subjective. If an individual does not have the minimum academic background and abilities, they will not be able to learn investments. If an individual is not comfortable with making decisions based on subjective and ‘gut’ feelings, it is not possible to learn about investments.”

So count yourself fortunate if you have necessary aptitude to make it this far.

Back to business!

You’ve got login details? Check. Okay let’s go:

Let’s start with DBS Vickers. Once logged in you’ll see a wealth of tabs and information. It’s worthwhile just exploring by yourself for a while.

  1. Let’s say you know what you want to buy, like VFV for example. First go to Trading > Order Entry:DBS Order Entry Toronto
  2. Change the Market to Canada,
    Order To: Buy,
    Quantity to how many units you wish to buy,
    Order Type: Either Market Order, or Limit Order (Market Order will just buy at the prevailing rates until the order is filled, Limit Order will only buy at your set price – I would just go for Market Order as the volume for this ETF is quite good, it will usually get filled in seconds close to the Sell rate).
    Order Duration: Good for Today, or you can set a longer period of time but probably unnecessary. If your order is not completely filled in the day (unlikely), it will fill what is possible. (Also look into fill and kill / fill or kill).
    Traded currency: This is not actually an option, just telling you what it is traded in.
    Settlement Currency: Here you can choose either CAD or SGD to settle your transaction. I’ve found that if you settle in the native currency, and then call up DBS Vickers to lock in an FX rate, you will get a better rate than selecting the SGD option which will just use DBS bank’s published rates. When you call them up to book an FX rate, typically the larger the sum, the better the rate.
  3. Next click Order Preview:DBS Order Summary
  4. Click Submit!

At this point you’ve finally done it! The next part is the settlement portion which will more or less happen automatically, either with money you have deposited directly to DBS Vickers via cheque or through the DBS bank portal, or via a wire transfer from another bank. After the money is there, call up DBS to book an FX rate. You can do this at any time, before or after you make your trade. Alternatively if you let it settle in SGD, if you have set up GIRO to your DBS account will automatically take the necessary amount from your linked bank account.

One thing I want to mention to help keep your transaction fees low is the minimum trade amount. With Vickers it is either CAD $29, or 0.50% of the trade, whichever is higher. Your goal is to to exceed that $29 charge each time, otherwise you aren’t keeping your costs as low as possible.

For example, $10,000 x 0.5% = $50, or if we use some basic high school algebra (your teachers were right, it would come in handy one day!), a x 0.5% = $29, a = $29/0.5%, a = $5800. So to make you transactions worth it, always trade at least $5800 CAD otherwise you’re paying too much in commissions.

You don’t have to trade every month, it could be every other month, or every quarter, or every half. Whatever suits you. Alternatively if you may wish to check out Standard Chartered Bank who don’t have a minimum fee (but may whack you on the FX rate instead). One way or another, they’ll all get their pound of flesh.

I was going to give an example through Citibank’s platform, but it’s more or less the same. For me I am only buying my SGX based ETF’s through Citibank as they offer lower fees than Vickers. Unfortunately they don’t have access to the Toronto market, only HKSE and NYSE. (Reminder, avoid buying off the NYSE or any other US domiciled products unless you want to bear the risk of paying Estate Tax if you suddenly shift on from this world).

If you’re reading this and you really want a Citibank example, post in the comments and I’ll add to this entry.

Over and out!

#8 – How much do I need to retire?

Random Post #3 – Staying the course

Now that I’ve finally managed to make all of my large initial trades, the time has come for me to keep calm and panic!

keep calm and panic

Just kidding, now is the time to stick to the plan and ignore the noise which is easier said than done. By now everyone knows the famous Mike Tyson quote: “Everybody has a plan until they get punched in the mouth.” — It is critical to stay on target. (Needed to insert some Star Wars reference into this).

Staying the course is possibly the most important aspect of passive investing. Every month or less, checking on your portfolio and looking at the percentage allocations of where they are meant to be, and what they currently are. You have two choices to make – either buy more of the under-performing funds with your incoming salary, or sell off some of the top performing so that you can purchase the under-performing. I’ll give you one other option – do nothing. Even up to a whole year you may wish to just sit it out. There’s a good chance it will correct itself again automatically. There is some quote about markets being schizophrenic in the short-term but in the long-term common sense will prevail.

These are my target ratios:

A35.SI = 36%
ES3.SI = 10%
VDU.SI = 15%
VFV.SI = 35%
Cash = 4%

But this is more what it’s looking like right now:

A35.SI = 33%
ES3.SI = 10%
VDU.SI = 14%
VFV.SI = 34%
Cash = 9%

As you can see, I’ve got more cash on hand than I would like (but it’s also giving me some peace of mind right now). Also because of the recent Oil price plunge, my VFV and VDU have been suffering and have dropped lower than what I initially paid. By the way, I never actually got down to 4% Cash as planned – I am still pending to buy more A35 bonds.

So what will I do from here? First of all I’m going to wait until I get paid next in a few weeks time. Then I’ll re-calculate the situation and top-up with my salary what is currently the furthest off my planned allocations.

At this stage things would need to be quite desperate for me to sell off one ETF to buy back another. Although if markets really dropped by 40%, then I may not have any other chance but to sell some of my bond ETF’s (A35), to re-purchase those equities ETF’s (VFV, VDU, ES3) at a discounted price. Markets being markets, in time they should recover and go on to set new highs. It may take a few years, but this is a long term plan – not a get rich quick scheme. Definitely a get rich slowly scheme though!

Just to be clear, if the price of my equities ETF’s keep dropping, I will simply purchase more of them at a discounted price with my incoming salary (touch wood on remaining employed!). Even if my salary isn’t enough each month to make up the gap, I will continue to do so until my percentages are really way off, at which point I would have to take the more drastic action of selling off some of my bond ETF’s to purchase majorly discounted equity ETF’s. When the market rebounds, it will give my entire portfolio a nice turbo-boost as those cheap ETF’s increase in value faster than what the stable bonds would.

Remember that every time your buy or sell ETF’s you will be paying commission fees to your broker. So unless you are retiring, you really don’t want to sell your ETF’s unless absolutely necessary. I am looking forward to the day when I need to sell some of my equities ETF’s because they have out-performed the bond ETF’s and my salary can’t keep topping up the difference! Being a passive investor means keeping your costs as low as possible, and fees are definitely part of it.

So the lesson is – ignore the noise, and stick to the plan! (And don’t pay too much in commission fees).