Taking a Peek Out of the Closet

Hello world!

It’s been some time and I thought it’ll be good for me to come out and say Hi in the midst of this storm.

Hi

I haven’t really been blogging because there’s not much I’ve done in terms of wealth accumulation y’all know. Just the basic DCA, ETF, etc kinda stuff. Not much I could have written about and I’m not a really consistent bloke anyway (read my past posts and you’ll see all the broken promise I made regarding consistency..hehhee). 

BUT NOW!

With so much going on in the world and market right now, I thought it’ll be good to pen my thoughts and build some roadmap for the days ahead. Less emotional and more systematic way of investing, aka The Lazy Man style.

First up, some performance reporting. 

All in percentage of course, since it looks better on me given that value of my portfolio is so paltry compared to the titans I know.

At this point of time, I have lost 1.5% of my portfolio. Equities took a hit which was buffered by gains in bond and alt invest. Could have improved the performance if I had devoted more effort in options trading or shorting, but oh well, just too lazy to do so. Would rather spend the time with my kid or nua-ing.

With that cleared, let’s set some plans for the days ahead:

- Continue to DCA ETFs on the 2nd Monday of every month;

- Continue to buy $X worth of ETFs with every 7% dip from the last low;

- Continue to buy $X worth of DBS, OCBC and CapitaLand with every 15% dip from the last purchase price;

- Sell Guocoland if the price falls below $1.20 (If it falls to this level, the market probably thinks it doesn’t have the cash reserve to survive this storm and I’ll be getting out while I can.).

On a side note, I wanna appeal for everyone to be kind and just help out if you can la. Some people I know are really affected by the turmoil and I honestly do not think they deserve it. They are just being dealt a bad hand at this moment that could kick them off the table forever. Not a fair game to them seriously :(

So be kind guys!

Assets Allocation - 2016

Asset Allocation.

Ah, please do not be frighten off by this pair of imposing words my dear friends, just like how I once was. 

But Mr.PassivePeon is no pussy though, as I made the effort to do some simple research and grew to like this easily implementable and understood strategy.

Asset allocation is merely a very systematic strategy to maximise your returns based on your risk appetite, by adjusting the proportions of different assets class (equities, bonds, cash, etc) in your portfolio, and most importantly, you abiding to the system at all time.

However, today, I am not going to break down into details the essence of this strategy as it has been very well covered online.

Instead, I am going to share the 'whys' and 'hows' of my assets allocation implementation. 

At the start of 2015, my assets were very disproportionate, highly skewed towards equities, particularly REITS listed in Singapore {"S-REITS").

	Percentage
Portfolio Allocations
Cash/Bonds	45.29%
Equities	54.71%
Total	100%
Equities Allocations
ETF	4.62%
Income Stocks	95.38%
Growth Stocks	0%
Total	100%

After reading about diversifying, assets allocation, index investing, I became smarter wiser aware that there are a few critical disadvantages with the above portfolio allocation: 

• My overall portfolio returns will be adversely affected if the S-REITS sector is facing headwinds as I have placed all my eggs in one basket. 

• I wouldn't be able to ride on the uptrend if the other market segments starts being looked upon favorably by investors as I wasn't vested in them. 

• In order to generate some meaningful returns, I have to be really good at analyzing all the individual stocks that I am vested in; either that, or I have to be really lucky.

So I started to think of diversifying to other segments, in order to reduce concentration risk, as well as to increase my earning opportunity.

But I know nuts about others market segments! And as the world greatest investor, Warren Buffett once said, "Never invest in a business you can't understand.".

Luckily I discovered this magical instrument, which is the Exchange Traded Fund (ETF)!

ETF are funds that tracks the markets by investing in a basket of assets that encompass the markets it is tracking, such as the local STI ETF and the global VWRD. This allows me to diversify my assets easily without me spending millions of hours to understand the business nature of all the vested businesses!

So early last year (2015 I mean), I decided that in order to diversify risk and increase my chances of riding on any random markets uptrend, I will try to allocate my assets in the following proportion:

	Percentage
Portfolio Allocations
Cash/Bonds	17%
Equities	83%
Total	100%
Equities Allocations
ETF	50% (All 50% in STI ETF)
Income Stocks	40%
Growth Stocks	10%
Total	100%

During mid-2015, I learned about a global ETF, the VWRD, which made me realize how small my local Singapore equities market is, when compared to the rest of the world (Creative vs Apple, anyone remember?). Hence, I decided to allocate some VWRD into my portfolio, so as to gain some global exposure and increase portfolio diversification.

By the end of 2015, my portfolio allocation is as follows:

	Percentage
Portfolio Allocations
Cash/Bonds	20.15%
Equities	79.85%
Total	100%
Equities Allocations
ETF	49.24% (34.33% STI ETF, 14.91% VWRD)
Income Stocks	50.76%
Growth Stocks	0%
Total	100%

Close but still some way off my ideal asset allocation. But this is not what's important!

What's important is the question on whether the strategy of assets allocation and diversifying has helped me?

And my answer will be.. Yes of course it did! Although the Singapore equities market fell by about 15% last year, my diversified portfolio has made a gain of 0.97%.

Which means I outperformed the market!

Woah woah, seems like this is the first time I used the word, 'outperformed'.

Okay, that's a very big word to use and kinda lame I know =_=" 

But for an inexperience and lousy investor like me, it's a damn freaking awesome feeling to beat the market!

Another reason I believe this strategy has helped me is the reduction of my eye-bags. I'm serious! Apparently, I am sleeping better nowadays, assured by the fact that my improved and diversified portfolio has better resilience to market shocks.

However, I gotta continue to work hard and keep up with the momentum. Currently, I am underweight in VWRD and I have no growth stock in my portfolio. I believe I can still squeeze a better performance if I improve on my allocation. So for 2016, I will work towards the following target allocation:

	Percentage
Portfolio Allocations
Cash/Bonds	18%
Equities	82%
Total	100%
Equities Allocations
ETF	50% (25% STI ETF, 25% VWRD)
Income Stocks	40%
Growth Stocks	10%
Total	100%

18% of my assets will be either in cash or bonds, to function as my warchest so that I am able to make opportunity dips into the market during crashes.

82% will be allocated for equities, which has been proven to be one of the better performing assets class over the long-term.

For my equities allocation, I have choose three equities class to be vested in.

10% will be set aside for growth stocks, which offers better returns at a cost of higher risk. Getting some growth stock will also aid me in my personal development, as it will hone my skill in researching and analyzing companies to be vested in.

40% will be allocated to income stocks, such as REITS and business trust, which tends to offer a steady yield at a cost of slower growth. This equity class will form the backbone of my portfolio as it is capable of offering a steady flow of passive income via regular dividends payout.

50% of my equities will be focus on ETF, with an allocation of 25% for the local STI ETF and the balance to the global VWRD. While income stock will be my backbone, ETF will form the main 'body' of my portfolio, offering sustainable growth by diversifying among some of the largest companies in the world (Macdonald, Apple, etc). 


Done! I  am done with planning my asset allocation for 2016.

While my method of assets allocation is definitely not the most ideal ones. I figures it suits me the most given my current financial knowledge, age, laid-back(aka lazy) personality, as well as my moderate risk appetite.

If you have only just started out on your investment journey, I would feel that it will be good if you read more about the various strategies (asset allocation, permanent portfolio, dollar-cost averaging, etc) and slowly nibbles on small positions and tweak your portfolio in which the risk-reward is at a level where you will be comfortable with.

If you made any losses, do not take it too hard and just treat it as tuition fees for a lesson on Mr.Market.  

All the best and may the force guide you and bring balance to your life (sorry, couldn't resist. Star Wars season).


*******

Sunset photo taken during my trip to Kukup, a small fishing village off the coast of Johor, Malaysia.

Portfolio Updates: August'15

And I thought July was exciting....

August 2015 turned out to be an even more exilarating month for me as I hit two major 'milestones'.

• August 2015 is the first time I witnessed the local stock market crash by more than 20% (3549.85pts to 2808.31pts) while I'm still vested in the market😪.

• August 2015 is also the first time I witnessed my overall portfolio sinking into the red😭.

Oh well, the recent market downturn is not to be unexpected. After all, the signs have been out there since last year; Greece crisis, overheated Chinese equities market, upcoming interest rate rise by the Fed, etc.

So with the recent upheavals in the market, my portfolio has shrunk correspondingly. However, I also recognise that this period represent a good buying opportunity for me to average down.

First up, let's have a look at my current portfolio before I bare out my plans for September'15 ☺️

Portfolio updates for the month of August'15:

• Purchase 1000 additional shares of STI ETF at $3.14 apiece. This brings the average price down to $3.308 for my total shares of STI ETF.

• $500 in cash was injected into the portfolio. 

• $595 obtained via an educational bursary was injected into the portfolio.

• Transferred $3000 cash to my trading account (Philip MMA) in preparation of future shares purchase.

• Received dividends from the following counter which was injected into the portfolio:

         - STI ETF - $73.50 
         - Lippomalls REIT - $109.50 
         - Fortune REIT - $144.04 
         - Starhill REIT - $51.60

Actions I will take for September'15:

• In the event that the price of STI ETF drop to $2.512, which is a 20% drop from the previous purchase price of $3.14, I will make an addition purchase of about $2500 worth of STI ETF. 

• In the super unlikely event that the financial market implode and the price of STI ETF drop to $1.7584, which is a 30% drop from the last purchase price of $2.512, I will make another purchase of about $2500 worth of STI ETF. 

• If the price of STI ETF does not drops to $2.512 but still remains below $3.00 until the last week of September, I will make additional purchase of about $1500 worth of STI ETF.

And this is it for the actions I will take for the local Singapore market. Starting from September 2015, I will allocate a portion of my portfolio to the global market. For my first baby step, I will look into purchasing the Vanguard All-World ETF (VWRD).

Basically, the VWRD is an ETF that replicate the performance of all common stocks in developed and emerging countries; which means that the VWRD comprises of common stocks (Apple, Macdonald, etc) that are listed in the various major stocks markets. 

Hence, by being vested in VWRD, we are essentially investing in most of the major corporations in the world while diversfying our risk across the different geographical locations and industries sectors.

Once my settlement account from Standard Chartered Bank has been set up in the coming weeks, I will proceed to invest in the VWRD. About $12,000, split into three equal tranche, has been allocated for the purchase of VWRD. 

• The first tranche of $4000 will be vested immediately since the current price of VWRD is below USD$66.63, which is 10% below the last high of USD$74.03. This 10% difference provided me with a margin of safety for the purchase.

• The second tranche of $4000 will be vested when the price of the VWRD drops by about 20% from the last purchase price, or by the end of March'16; depending on which comes first.

• The third and last tranche of $4000 will be vested when the price of VWRD drops by about 30% from the last purchase price, or by the end of June;16; depending on which comes first.

With that, I have reached the end of my sharing. 

Let us take a deep breath now and brace ourselves for the upcoming turbulence✈️!
 

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:

	Percentage	Value
Portfolio Allocations
Cash/Bonds	17%	$6222.66
Equities	83%	$30381.20
Total	100%	$36603.86
Equities Allocations
ETF	50%	$15190.60
Income Stocks	40%	$12152.48
Growth Stocks	10%	$3038.12
Total	100%	$30381.2

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:)

Adios~