$1.46 mil Daedalus Income Portfolio Update

Here is the update for my Daedalus portfolio for October 2024. If work is not too busy, I will try to provide an update where possible.

I explain how I constructed this portfolio in Deconstructing Daedalus Income Portfolio. You might not understand what I wrote below if you haven’t read this post.

All my personal planning notes such as income planning, insurance planning, investment & portfolio construction will be under my personal notes section of this blog. You can also find the past updates in the section.

Portfolio Change Since Last Update

The portfolio was valued at $1.434 million at the end of September and is currently at $1.463 million at the end of October.

We reported a portfolio change of $29,000 for October 2024.

As of 3rd November 2024, the portfolio is valued at $1.456 million.

Here are the primary security holding returns for the month-to-date and year-to-date:

The returns of Dimensional funds are in SGD, with the rest in USD. I have also listed the major index ETF performance for comparison. The performance would have been a little higher if I listed the Dimensional funds in USD.

October is traditionally one of the more negative months of the year, and true enough, most major indices were down. Yields on longer maturity bonds climbed as the market either priced in stronger growth or the fact that demand for US fixed income will be reduced and supply to increase because both US Presidential candidates have no intention to reduce the burgeoning US deficits incrementally or significantly. This adversely affects the Global Aggregate Bond UCITS ETF.

The portfolio gains 2.7% due to the weakening SGD against the USD.

Role of Portfolio

The goal of the portfolio is to provide consistent, inflation-adjusted income for my essential and basic spending. The portfolio is sized based on a conservative 2.0-2.5% Initial Safe Withdrawal Rate (SWR) so that the income can last even considering challenging historical sequences such as the Great Depression, external war and 30 years of high inflation averaging 5.5-6% p.a.

The timeframe that the income stream to be planned for: 60 years to Perpetual

I am currently not drawing down the portfolio.

For further reading on:

My notes regarding my essential spending.
My notes regarding my basic spending.
My elaboration of the Safe Withdrawal Rate: Article | YouTube Video

Based on current portfolio value, the amount of monthly passive income that can be conservatively generated from the portfolio is

The lower the SWR, the more capital is needed, but the more resilient the income is.

Nature of the Income I Planned for

Different income strategies will give you different characteristics of income streams. They can be more consistent or volatile, inflation-adjusted or non-inflation-adjusted, for limited duration or perpetual.

An income stream based on the Safe Withdrawal Rate framework is consistent and inflation-adjusted, and if we use a low initial Safe Withdrawal Rate of 2.0-2.5%, the income stream leans towards a long duration to perpetual.

Here is a visual illustration of how the income stream will be based on the current portfolio value:

The income for the initial year is based on a 2% Safe Withdrawal Rate. The income for subsequent years is based on the inflation rate in the prior year (refer to the bottom pane of inflation in the previous year). If the inflation is high, the income scales up and if there is deflation, the income is reduced.

Investment Strategy & Philosophy

After trying my best to learn how to invest for a while, the portfolio expresses my thoughts about investing at this point.

The portfolio is run in a

Strategic: allocation doesn’t change by short-term events.
Systematic: rules/decision-tree-based implemented either myself or an external manager.
Low-cost: investment implementation cost is kept reasonably low both on the fund level and also on the custodian level.
Passive: I spend relatively little effort mentally considering investments and also action-wise.

Portfolio Change Since Last Update (Usually Last Month)

I sold off three minute positions that are inconsequential to the portfolio to reduce the need to input the dividend transactions. I sold off all the UltraShort Duration UCITS ETF bond and rebalance them into

VanEck Morningstar US Wide Moat UCITS ETF.
SPDR MSCI Emerging Markets Small Cap UCITS ETF.
JPM Global Equity Multi-Factor UCITS ETF.

With this I hold almost zero cash and reached a 86% equity 14% fixed income allocation.

Current Holdings

The following table is grouped based on general strategy, whether they are:

Fixed Income / Cash to reduce volatility.
Systematic Passive, which tries to capture the market risk in a systematic manner.
Systematic Active, which tries to capture various proven risk premiums such as value, momentum, quality, high profitability, and size in a systematic manner.
Long-term sectorial positions.

Portfolio by Account Location

Portfolio by Region of Securities

Portfolio by Fund, Cash or Individual Security

Portfolio by Strategy.

Main Custodians

The current custodians are:

Cash: Interactive Brokers LLC (not SG)
SRS: iFAST Financial

If you want to trade these stocks I mentioned, you can open an account with Interactive Brokers. Interactive Brokers is the leading low-cost and efficient broker I use and trust to invest & trade my holdings in Singapore, the United States, London Stock Exchange and Hong Kong Stock Exchange. They allow you to trade stocks, ETFs, options, futures, forex, bonds and funds worldwide from a single integrated account.

You can read more about my thoughts about Interactive Brokers in this Interactive Brokers Deep Dive Series, starting with how to create & fund your Interactive Brokers account easily.

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