You will build a complete income portfolio plan with holdings by type, limits and rules.
By this point in the course, Wei Ling had a folder full of work: a dividend tracker, a scorecard for three stocks, a yield trap checklist, a REIT structure map, a REIT scorecard, a sub-sector map and a rights issue worksheet. What she did not have was the one document that tied them together and said what she was actually going to hold, in what proportions, and under what rules.
That document is this project. It takes about an hour, longer if you need to update earlier scorecards, and it is the final project for the course.
The brief is to build a written plan for an income portfolio you could hold for years. It should state your income target and what yield that implies, list the holdings by type with target weights, back every single stock or REIT with work from earlier modules, set limits by sector, sub-sector and country, and end with your four rules. Someone reading it should be able to see what you hold, why, and what you will do when things change.
The plan uses holdings you choose. Nothing in this course recommends any of them, and the plan is yours to judge. If you want advice on your own situation, a licensed financial adviser is the right person to ask.
At the top, write your yearly income target at today's prices, your capital, and the yield they imply, as in lesson 8.1, Start from the income you need, not the highest yield. Note how that yield compares with the range in your scorecards. Then write your total return view in one or two sentences: what you expect of the portfolio's value over time, such as capital keeping pace with inflation over five years.
If your required yield is well above what covered payers offer, say how you will close the gap: more capital, more time or a lower target.
List your holdings in groups:
Blue chip and other dividend stocks, S-REITs grouped by sub-sector, ETFs such as an STI ETF or a REIT ETF, and fixed income such as T-bills, SSBs, bonds or fixed deposits
Give each holding a target weight as a share of the portfolio, and an expected recurring income. The weights should add up to 100%. The income should add up to roughly your target. If it does not, adjust before you go further.
For every single stock, attach the scorecard from lesson 2.5, Score three dividend payers, updated with current figures. For every single REIT, attach the REIT scorecard from lesson 5.5 and the structure map from lesson 4.5. For any holding with a high yield, attach a yield trap checklist from lesson 3.4.
For funds, attach the factsheet's sector and country breakdown, which you need for the limits.
This is the part that takes longest, and the part that makes the plan defensible. A holding with no evidence behind it should come out of the plan until you have done the work.
Set your limits: the most income you will take from any one sector, any one REIT sub-sector and any one country, with the reasons from lessons 2.4, 6.5 and 8.2. Then check your target weights against them and flag anything over. Adjust until nothing is.
Below the limits, copy in your four rules from lesson 8.3, Rules for reinvesting and for dividend cuts: reinvesting, spending, cuts and topping up.
Wei Ling's finished plan ran to two pages plus attachments. Page one had her target of S$12,000 a year, her S$300,000 of capital and the 4% it implied, all made-up figures for this example, with a total return view of capital at least keeping pace with inflation. Below it, a table of eleven holdings across four types, with target weights and expected income. Page two had her limits, with banks capped below their STI weight and no REIT sub-sector above a set share, followed by her four rules. Behind those pages sat a scorecard or checklist for every single stock and REIT, each with sources and dates.
A finished plan has all four parts. Every number has a source and a date. Every single holding has its evidence attached. Nothing breaks your own limits. And the rules are specific enough to follow on a bad day.
Put the plan together from the work you already have, and date it, because the first thing your rules will ask of you is to come back to it when something changes.
Submit an income portfolio plan with target weights, limits, the supporting scorecards and your four written rules.
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