Wednesday, July 23, 2014

Thoughts after 1/2 yr of managing my parent's money

I recently handed a cheque of $600 to my father. It's his half yearly 'coupon' from buying LP's bond with a principal sum of 60k. It's right on track to deliver 2.5% to 3.0% returns per year. Actually it's more than that, but LP's bond is capital guaranteed, I've to reserve a certain amount of cash paid out in the event of redemption of bonds that I've bought above par value to cover the capital loss.

Ya, I know it's still lower than CPF, but it's hard to achieve this kind of returns in this time and yet also guarantee the capital. Still, it's better than my parent's initial plan of putting their money in fixed deposit earning maybe 1% pa. I'm potentially offering 3 times as much, and I'm glad I did it for them, even though I don't need to.

I heard from my father that another tranche of money is coming in at the end of this year. It's from his endowment plans he put earlier, amounting to about 100k. Not sure if I can offer capital guarantee again because I'm holding quite a big portfolio already from my parents (160k!). I will most likely outsource the risk to others...maybe find a good annuity for them? We'll see how it goes when he gets the fund and perhaps let me know what's his intentions are for that amount of money.

Not a good sign eh?

With their medical fees mostly covered by hospitalization plans, and knowing that they have a sum of money to do what they wanted to do during their retirement phase, having paid up all their housing debts and having their children giving them a monthly allowance to cover their transportation and food bills, I'll be happy to be in their shoes. All in due time I suppose. I'm not expecting to have any inheritance from my parents - they are pretty down to earth folks who had worked hard to get to where they are. They should spend all their money up before they go. At the very least, I'm quite sure they won't be a financial liability to their children. That's already a big plus.

Managing their retirement fund makes me want to have my own retirement funds too. But alas, I've a hefty housing bill to pay, amounting to 1k per month from me, and another 1k from my wife. I'm trying to raise capital that can draw dividends amounting to 1k per month to at least cover my housing contribution. That will greatly relieve my fixed expenses per month. 1k per month for 12 months will be 12k per year. If I have to invest at about 4% to 5%, that'll be about 250k to 300k. If luck is on my side, I should be able to reach that amount in another 3 or maybe 4 years.

That should be my financial goal in the near future. We all have to start somewhere to boost up our passive income. There's a lot of unknowns, but I'm sure I can handle it when I reach there.


Anonymous said...

Management fee?

Singapore Man of Leisure said...

Are you freaking serious!?

Sorry...I can't help myself.

Management fee?

I think its education fail somewhere if we are so financial savvy until parent's money also want to make.

Even we snake-oil salesmen don't do this to family.

financialray said...

Keep a substantial amount of money for health related costs. The amount can never be too big. Don't underestimate. Otherwise, family ties can be strained if the unexpected happens.

Cory said...

Have you tried put some in bond that is relatively safe such as CMT etc

Richard Ng said...

Nice! I am sure your parent is proud his son! Keep going...

Marinabay Avillion said...

How about asking your parents to top up their CPF Retirement Account? I am not kidding (SERIOUSLY). Even if they have met their Minimum Sum for their cohort, they can still top up to the current minimum sum ($155,000). The RA earns 4 pct p.a and they can enjoy a bigger monthly draw down from age 65. I am assuming that your parents are on Minimum Sum Scheme, not the compulsory CPF Life scheme. Please ignore if my suggestion seem silly.

Anonymous said...

Housing expense is a bummer.

clog toilets, leaking aircon... sigh, been spending quite a bit on my place.

It it wasn't my place I wouldn't..


la papillion said...

Hi anonymous,

Nope, no management fee for them. They've already paid way in advance before I managed the funds for them.

la papillion said...

Hi financialray,

That will fall under my emergency funds and a part of it will also be the cash held in fixed D that I told my parents I would not manage for them. They need to hold a certain amt of liquidity (in the form of cash) for emergencies. With this buffer, plus the insurance from hospitalization, should be adequate enough for the risk of such things happening. Crossing fingers.

la papillion said...

Hi Cory,

Yea, I did. 10% of one tranche and another 26% of a second tranche of funds is allocated to capmall bonds. I'm waiting for Temasek's one, rumored to be out this coming yr end. I intend to switch some of the above par ones for these, provided I can bid successfully.

la papillion said...

Hi Richard,

Nah, I do what I can. They should have told me earlier..but then again, I might not be ready yet. Must be the right time at the right mindset, haha :)

la papillion said...

Hi avillion,

They are like me, self employed, so they do not have much cpf in their account, if at all. Besides, they are already passed the withdrawal age, so don't think you can put in more money once you hit that age limit.

Anyway, this fund is not for their living expenses. That is already taken care of by the amount that their children gave them monthly. This extra bit is for their own private use..maybe go for tour, spend it on family etc. So, locking up in cpf isn't such a good idea. Thanks anyway :)

la papillion said...

Hi JW,

Haha, I had the same problems...these days, I budget some money every month to cater for such unexpected expenses. Bo pian :/