Review of 2021

This will be a long post as I reflect on the following:

- CPF Interests

- 2021 Investment Results (YOY)

- 2021 Achievements Reflection

- CPF Interests

First off with the good news, our trustworthy CPF continued to deliver compounding interests along with another year of good employment. A total of $14,376.31 interests is credited, this is $1,508.46 higher than 2020's interest of $12,867.85 from government.

At age 37+, hopefully another 23-28 years employment (assuming lifelong employment at same or similar work till 65 retirement), hopefully the CPF balance could break the million dollar mark while cost of living do not rise too much when I retire then. With the combined balance of $411k, continued contributions & compounding interests, it should double within the next 18years (rule of 72 divide by 4% interests).

- 2021 Investment Results (YOY)

Next, on to the bad news, my investments (paper loss) did badly in 2H2021.

A total mark to market loss of $36,137.63 is booked, this comprised of $15k which was realized mainly from my exit of hospitality counters (Duty Free International & OUE Com Reit) early in the year, the rest of $21k loss are unrealized in US Options (based on Think or Swim's Net Liq.balance) which fluctuates wildly $10k+ each day depending on my Alibaba's price (if rise $22 from $118, I would breakeven my paper loss).

I continued to struggle with the psyche of managing options risk & its not an easy issue.

Eg. When you sold put, one's hope is that it may expire worthless.

Eventually, one would experience greed & tried selling naked weekly puts & start maximizing your available balance's leverage, the money came in fast during 1H2021 when weeks after weeks of options expired worthless, and I piled on new puts selling. Until when the price move against me (SI, TSLA, BABA etc.), even a 30-50% available balance (ie. $100k against a $200k portfolio) is insufficient as price went below your strike & deep ITM, every dollar drop is mark to market of $100 per option. If one have weekly puts sold, at some point, it would be impossible to roll down & out for a credit unless one roll more than 1 year out which would results with huge balance tied up in slow time (theta) decay.

Also, psyche wise, it mess up my past years of trading rules. If I hold stocks & it moved against me say 3-5% of cut loss rules, then I would cut loss for trading. Of course, I still mixed up with investing rules occasionally (I never really learn at times), like my OUE Com REIT & Duty Free that I cut loss too late. Anyway back to options, because of the desire to hold puts until expiry to avoid cost of buying back to close, when price pattern reverse, most traders of stocks would take profit but for options it messed up my psyche & the wishful thinking that the puts sold would expire worthless before price come down to the strike. Reality is one can identify turning points easily but one can never identify how low it might go, until it finish its falling trend. 

Even a fundamentally strong counter like BABA could be down for years (since 2019), as my TOS screenshot showed, my BABA shares (assigned at average of $192.50) & deep ITM puts sold took up the bulk paper loss of USD45k which literally vaporised my profits clocked 1H2021. I had to "deleverage" down & closed some BABA Puts then.

Lessons learnt: risk management is really personal emotions & character management; stick to cash secured or defined risks trade (like Diagonals, spreads) & never allow puts assignment risk to exceed 2x of cash holding. Very often, strikes that seem far at entry can come close or deep ITM... as the saying goes... the market can remains irrational longer than you can remain solvent. Having the ability to hold is an important risk pillar to support the whole investing / trading business.

- 2021 Achievements Reflection

Despite the poor investment returns, which turned my 9 years of track record to negative. I managed to achieve my financial goals set for 2021 (the first version, not the revised July 2021) where my 3 pillars (liquid assets, CPF/SRS retirement and HDB residence) each about $300+k, totalling over $1mil. Of course, in Singapore's Asset Rich Cash Poor structure, the home HDB residence is a depreciating asset as it would eventually become worthless at end of its 99years lease. However, any assets that has worth, consider good if it could generate income, but also not too bad if it could avoid expenses. Imagine if one do not have own shelter over its head, one would need to incur rental expenses each month to rent, that will definitely be a huge drag on one's financial journey to freedom.

Out of these 3 pillars, my liquid assets which include my savings, investments & retained earnings (from work & training) grew much slower than previous years (primarily due to investment realized & paper losses). My CPF & SRS retirement asset grew the most at $50k year on year which comes naturally from employment's contribution & interests. Although notably, the HDB residence also grew quite abit based on SRX appraised value though I expect it to stagnate in 2022 due to rising interests rate. 

To conclude, my focus for coming year will be on family building & trying for babies. As the "head of the household" (pardon my masculine tone to the ladies), I need to plan finances & grow them no longer for my self but for my family & future children's future education & maybe retirement (if I deposit their money to their CPF SA... Mmmm... still thinking).

Lastly, health is our greatest asset of all times, the fact that we survived the Covid-19 endemic 2nd year, we are the luckiest winners to continue to be alive and enjoy life's ups & downs.

Happy New Year 2022 & may all your goals come true, take care & stay safe!