The year started on a sour note marked by a volatile month with almost all asset classes in the red. The worst-hit was US REITs at -8.4% and the least affected was Gold at -1.7%. We saw a similar month back in Sep 2021. While markets have been ramping up rate hike expectations, the recent outlook by the US Federal Reserve seemed even more hawkish than most. The fallout spread across all markets as the prospects of higher rates bore down. Below is the breakdown by assets and geographies of the multi-strategy model maintained with iFAST as of the end of January.
The multi-strategy model was hit across the board. However, a small allocation to Hong Kong and UK equities helped mitigate some losses. All in, the overall portfolio lost 4.3% for the month.
Let's see how our retirement heroes are faring at the end of January 2022.
John, 31 years old, looking to retire in 19 years
John invested USD 40K upfront at the beginning of November 2020 and he contributed USD 500 every month subsequently. As of the end of Jan 2022, he has contributed USD 47K and he is currently sitting on some comfortable profits of USD 6K. If he sticks to his plan, he can expect to withdraw USD 7.5K every month when he retires in 19 years without ever depleting his retirement nest egg.
Paul, 51 years old, looking to retire in 9 years
Like John, Paul invested USD 40K upfront at the beginning of November 2020. However, he knows he has a shorter runway than John to compound his portfolio. The good thing is that he has a higher income than John so he contributes USD 4K every month subsequently. As of the end of Jan 2022, he has contributed USD 96K and currently sits on some comfortable profits of USD 6K. If he sticks to his plan, he can expect to withdraw USD 9.5K every month when he retires in 9 years without ever depleting his retirement nest egg.
Sam, 66 years old, already retired
Sam doesn’t have any runway to compound his wealth as he is already retired. Fortunately for him, he had accumulated USD 1M of savings which he invested upfront at the beginning of November 2020 and started to draw out USD 10K every month from this portfolio. As of the end of Jan 2022, he has already drawn a total of USD 150K but his portfolio is still worth USD 1.0M. In fact, he can expect to continue drawing USD 10K every month while his portfolio value remains about the same. This is a 12% withdrawal rate in a retirement account that never depletes.
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