Sunday, 28 December 2014

Portfolio Updates: Dec'14

Time for a long overdue update of my portfolio. After a long 3 years hiatus :0 

This time round, besides updating about my portfolio, I will also be doing some assets allocation.  As this blog post from one of our local bloggers shows, assets allocation is equally if not more important than our skill in selecting the winning stock. This article serve as a good supporting material on why assets allocation is more important that individual stock selection. The above links provides the technical reasons for why we should know how to allocate our assets properly.

However, on a more personal level, I feel that asset allocation is very critical to me as a novice investor. This is because assets allocation allows me to have a system in place, to guide me. I am afraid that my emotions will get the better of me in times of crises, causing me to freeze in my decision making.

Hence, by following this tested and proven system, my investment decisions will be made simpler as all I have to do is to allocate my assets according to the system!

So without further ado, please allow me to 'show-hand' my humble portfolio once again :D

Current Portfolio

Total Amount in Equities: $20225.00
Percentage of Total Assets:  55.25%

Total Cash in Hand: $16378.85
Percentage of Total Assets:  44.75%

Total Assets:  $36603.85

From the above, we can see that I am about 55% invested in equities, with the balance purely in cash idling away in a low interest savings bank account.

Target Portfolio for 2015

For the upcoming year, I am going to allocate my assets into different mediums in accordance to the following percentage. This is after doing much reading, especially on the theory of "invest in equities in the percentage of 110 minus your age, with the balance in bonds".

If I follow this guide to a tee, the percentage I should be in equities will be 83% (110-27yrs old = 83%). Therefore, the amount to be in equities is as follow:

Amount in Equities = 83% of Total Assets =  $30381.20

Of the 83% in equities, I intend to tweak the percentage for each class of equities (income stocks, growth stocks, etc) . Hence, the breakdown of my equities allocation would ideally be something as follows:

Amount in ETF = 50% of Amount in Equities =  $15190.60

The bulk of the equities will be in ETF. My intention is to based my equities on a solid foundation and what better foundations are there other than a basket of solid blue-chip companies?

I will split this amount into three tranches to be invested in the STI ETF at 3 different periods of the year (April, August and December) or whenever the value of the ETF dips by 10%. This is to reduce the risk of investing at peak pricing.

Amount in Income Stocks = 40% of Amount in Equities =  $12152.48

Income Stocks will make up the second largest portion of my equities holding at 40%. The idea is to have a core of equities that will give out consistent dividends that are better than the market average. However, this comes at a cost of lower growth for these equities which I am willing to accept as price volatility usually do not swing too much most of the time.

REIT belong to this family of income stocks and I am vested entirely in REITs currently. Hence, I will have to consider divesting some of my under performing REIT holding (Yes Lippomall, I am pointing my finger at you) in order to meet my ideal portfolio allocation. 

Amount in Growth Stocks = 10% of Amount in Equities = $3038.12  

Growth Stocks will make up the remaining 10% of my equities holding. This is to whet my risk-taking appetite so as to allow the majority of my investment decisions to be made with clarity, without chasing after stocks that offers growth with huge price volatility. Moreover, there is also a chance that I might invest in a multi-bagger, improving the performance of my portfolio tremendously with minimal loss.

With the above arrangements, I have come to the end of my equities' allocations.

The remaining 17% of my portfolio shall remain in cash or the Singapore Bonds ETF when there are dips of 10%. I might also open the OCBC 360 savings account soon, where I will deposit my cash into. This is to reap the benefits of the 3.05% interest being offered by OCBC. 3.05% in interest is higher than the returns most bonds are offering anyway!

In summary, by the end of 2015, hopefully my portfolio will looks something like this:

Portfolio Allocations
Equities Allocations
Income Stocks
Growth Stocks

Time for a disclaimer. Lol.

I am not saying that this method of assets allocation is the best. To be truthful, I am not even sure if this will yield me the best result. However, I genuinely feels that this asset allocation best fulfill my own requirements and most importantly, will allow me to sleep in peace at night.

Hopefully, in a year time, I will have something positive to blog about with regards to this assets allocation and we will know if it works:)


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