Portfolio Updates: January'16

Oh wow, what a month! If you have been following the news, you would know that the market did very badly within the 1st week of the year.

To think that I was recently anal enough to boast of outperforming the market for 2015. Within days of posting my self-glorifying post, Mr Market made me regret putting that blogpost up :(

But hey! Not everything is dark and gloomy!

Initially, I thought that my portfolio would be down by about 20% in the recent market crash. However, thanks to two lucky buys (Saizen REIT and Fortune REIT), my overall portfolio loss has been kept to below 5%.

Although it can be claim that my asset allocation strategy is working as my portfolio did not do that badly as expected, I would rather attribute it to good luck. 

Honestly, I did not do much analysis of the two buys other than ensuring that they fulfill the following metrics when I made my purchase:

- Purchase price lower than Net Assets Value (NAV) 

- Gearing Ratio less than 35%

- Yield of more than 5%

- Consistent or improving Distribution Per Unit (DPU) on a year-on-year basis

- And some other general study of their management and the market trends.

So yea, those two were really lucky buys and I can claim no credit to that. 

Anyhow, here's a look at my portfolio as of Jan'16.

Portfolio updates for the month of January'16:

• Purchase 400 shares of Sembcorp Industries at $2.65 apiece (and watched it drop by 20% in the next few days. Scary time indeed!) 

• $400 in cash was injected into the portfolio.  

     

Actions I will take for February'16:

• If the price of STI ETF drops below $2.40, I will make another purchase of about $2400 worth of STI ETF. This will bring the average price of my STI ETF purchase to below $3.

• Continue my purchase of VWRD by investing my second tranche of S$5000 when the price of the VWRD drops to USD$54.72, which is a 20% drop from my last purchase price of USD$68.40.

• The third and last tranche of S$4000 will be vested when the price of VWRD drops to USD$38.30, which is a drop of 30% from the last purchase price of USD$54.72.

• In the event that the VWRD and STI ETF does not drop to my target price, I will rebalance my portfolio in the month of May'16 and Nov'16 accordingly to my asset allocation strategy.

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A snippet of my staycation at Quincy Hotel earlier in this month. And yes, the stay was awesome!

How to React to a Market Downturn

Oh wow, what a tumultuous start to 2016. So how has it been for you?

Given that within the first month of 2016:

1. The Chinese equities market crashed yet again;

2. Price of oil fell below $30, a level not seen since a decade ago;

3. Investors around the world seems to be reeling in shock from the above news and are withdrawing from the market, bringing assets prices (equities, commodities, everything!) crashing down; a reminiscence of the market crash in 2009.  

On a personal note, my portfolio has decline by about 20% during this period of market uncertainty. 

However, I am taking comfort in the fact that I am not the only one who is experiencing the heartache as well as the myriad of emotions that comes with a declining portfolio. Right guys? 

In fact, I believe you will have at some point of time, become confused, fearful, and panicked over your position in the market.

Likewise, so am I. 

But what have you done in reaction to this sudden downturn in market condition? Beside panicking of course..

Now now, please allow me to give a disclaimer first. 

This post will not be a guide on what you should do to maximize your returns in a crashing market. I am far from qualified to be able to do so.

Instead, I am just going to share my plans and thought processes, which has enabled me to remain as calm and rational as possible in such a volatile period. 

What's the major benefits of staying calm and rational you ask?

1. You are less likely to make hasty and silly decisions that will adversely affect your investments returns in the long term.

2. Hmm..Instead of having sleepless nights due to the constant worrying, staying calm allows you to get a good night sleep baby. Every single night. 

So what are my thought processes and plans during this period of great upheaval in the market?

• I sat on my portfolio, à la the "lazy style", with no plans for divesting any of my downtrodden assets during this crazy period.

• This is because I know that my plans are for the long term. Studies have shown that 20 years down the road, my plans such as the purchase of ETF, will still give me positives returns regardless of how badly the market is currently doing.

• In fact, the current market fall of 25% from its height is to be expected and I have already factored in such market crashes during my planing. During the 1997 Asian Financial Crisis and the 2009 Global Financial Crisis, several equities market, such as Singapore, crashed by more than 50%! And then the market recovered abruptly.

Look! There will always be a recovery after every crash.

• Hence, whenever I feel like panicking and off loading my equities at a loss in this bearish market, I will tell myself not to be rash and think long-term instead. 

• If I still feel uncertain and worried, I will refer to my previous posts where I have detailed my investment plan. When I read my previous postings, I am reminded that I have a plan and the downturn has been factored into my plan. Hence, I should continue to stick to my plans and not be swayed by my emotions.

• We must also realise that a market downturn is also a good buying opportunity if we wish to remain vested for the long term. By re-reading my previous posts, I am reminded to purchase undervalued assets when my target price is hit. This is contrary to my previous experiences when I did not have a plan and hesitated to invest when the price was attractive, causing me to lose awesome opportunities to be vested in greatly undervalued assets.

• There is also my personal experience in the market since 2008. Throughout these few years, I recognized that at the first sign of a downturn, speculators and so-called industry "experts" will bash the market mercilessly, either through very pessimistic analyst report or by aggressively shorting the market, causing further panic and mayhem in the market.

• But yet, as if on command, all these speculators and  industry "experts" will suddenly sing praises of how the market is set to recover, and manipulate the market to recover swiftly. While the majority of us, the retails investors, are left in their wake and will not stand to benefit from the sudden market recovery if we had sold off our equities in a panic during the market crash.

My point is this guys. There is no need for us to do anything during a market crash if we have a well thought-out plan. Get on with your life for the world is not going to end and things will normalised in time to come.

Instead of panicking and trying to cut your losses, why don't you take this opportunity to observe the market and see for yourself that the market indeed functions in a cycle. Gain some knowledge and experience in dealing with a market crash, and factor what you have learnt into your investment plan. And stick to it!

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Photo of Missus PassivePeon, taken at the Singapore Sport Hub.

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).


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

Paying Yourself First

Hi friends! Do you think that having a pile of cash on hand will be useful? 

Regardless of whether it functions as a tool to generate more income, or to function as your emergency stash for rainy day, having cash savings on hand will be useful, wouldn't it?:) 

BUT! Are you always left with just dimes and pennies at the end of the month, without making any saving? If so, you are just like me many years back when I was a teenager.

After some time, I kinda grew sick of seeing an empty bank account all the time. So I decided to open another bank account which I termed my "savings" account. This account is where I immediately deposit a portion of my income (usually 25%) into once I receive any income. Additionally, if I receive any extra income, such as dividends or bonus, I will also deposit 90% of it into the "savings" account at once.

Once the monies have been deposited into my "savings" account, it will not be touched except for investment or education usage. 

All discretionary spending, such as dating, movies, eating out and daily expenses, will be covered by the monies I have in another account, which I termed as my "spending" account.

Surprisingly, after some time, I realized that this method of saving has a terminology ("Paying Yourself First") dedicated to it and it is in fact, a very popular saving method advocated by peoples who are financially literate.

So how has this method of saving helped me, a sandwiched middle-class citizen residing in Singapore, considered the world most expensive and yet exciting country to live in.  

Well, for one thing, in terms of measurable benefit, I can see how my savings are growing consistently throughout the years. This is definitely much better than seeing an empty bank account at every months end, all the time.

However, it is the intangible benefits of this saving method that appeals to me more. By putting aside my monies into my "savings" account even before I have the chance to spend it, it means that:

• I never ever have to fret that I will sub-consciously over-spend and end up not being able to save;

• I can spend however much I want, as long as I still have monies in my "spending" account;

• I have a darn good reason to say "NO" to purchases or events when the monies in my "spending" account is getting low (pssst..it's easier to decline invitation to eat out when you claim that you are broke);

• I am happier as I see my "savings" account grows;

• I am more motivated to save more monies when I see my "savings" account grows;

• I do not have to worry that I will end up broke yet again at months end, and thus being unable to save.

So how's that for the benefits of paying yourself first when you get your paycheck? :D Want to give it a try?

It's easy to start this saving habit. All you have to do the next time you have monies coming your way is to immediately put aside a portion of it (maybe 25% for a start?) into a dedicated account. 

In fact, it can be even easier and convenient with the automated services the banks are providing nowadays. Check with your banks on setting up an automated transfer to your "savings" account on every payday and you will have made a good start on your journey to financial independence! :D    



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Street art. Oriental style. Photo taken along Jonker Street at Malacca, Malaysia.

Goals Review and Setting - 2016

As 2015 draws to an end, it is time to review the goals I made for 2015. 

There are some hits and misses with the goals I set. Nonetheless, I am still glad that I have put down my goals in writing as I can see some improvement in my life compared to the period when I was goal-less.

Anyhow, here's my goal review for 2015!

1) Increase Monthly Dividends Income to $150

My monthly dividends income at the end of Dec'15 hits a grand total of only $100.58. Quite some way off from my target of $150.

I'm not giving excuses, but it's probably because I partially divested from one high-yielding counter earlier in Feb'15, and I sat on my cash pile for the majority of the year without making my monies work for me.

Gotta make my monies work harder for me for 2016!

2) Get Through My Studies Without Failing  

I passed all the modules I took! By a comfortable margin to boot! However, still some ways to go from acing my modules and results can be better if I put in more effort.
 

3) Posting At Least Two Blog Post

I have posted a total of 21 blogpost this year, which is still 3 posts away from my target for this year.

Nevertheless, we can all see how goal setting is helping me as the total blogposts I put out for 2015 far exceeds the numbers I put out for the previous three years combined.

4) Make New Friends With Two People Having Interest In Financial Literacy

Nil. Zilch. Nada. 

I have made no new friends with similar interest in financial literacy. Despite repeatably reminding myself to be more outspoken online, I failed to take the initiatives to mingle more with people who are financially literate.

Whats more, I kinda like being myself and not molding myself into a different persona just so that I can make friends online. If a genuine friendship occurs, great! awesome!

Otherwise, then too bad. I guess I'll just be a silent stalker and glean some wisdom off the blogs of financially wise individuals then.

  

5) Career Advancement In My Regular Job

Well, I did not get promoted. After all, how could I still be promoted after the conversation I had with my previous boss? 

Did I just say previous boss? 

Yupp I certainly did! 

After getting my increment and bonus from my previous job, I made the decision to change job, with an increment of about 7.5% to boot!

Okay. While the increment was not much, I just felt great leaving an organization where I do not feel valued and was not given much opportunity to grow. 

And it gives (yes, gives, not gave, cause it's still giving me:p) me immerse pleasure when I told my non-appreciative boss that I'm giving him the boot!

With 2015 gone, we should look forward to 2016 with renewed optimism. After all, we are one year older and one year wiser. With the lessons learned, 2016 should be a more rewarding year for us! 

For 2016, I have set the following goals:

1) Increase Monthly Dividends Income to $200  

This is one my main goal and I hope that eventually, the dividends that I obtain will be able to fully cover my living expenses.

At $200 a month, my current portfolio will have to yield about 5.21%. Which is quite achievable provided that I sought out income yielding equities during early 2016, and not leave it till late like what I did for 2015.

2) Graduate and Score 2 A's for My Last Two Modules  

I am two modules away from graduating and I want to give it my best shot, hopefully graduating with at least a 2nd Lower Class Honours.

3) Posting A Blogpost Every Week

Well... if my 2015 goal of two blogpost a month yielded me 21 blogpost, imagine how many more blogpost I can produce if I set myself a target of posting weekly!

“Shoot for the moon. Even if you miss, you'll land among the stars.”

― Norman Vincent Peale

4) Increase View Count to 10,000 

Okay.. a very ambitious goal I admit. But hey, I did not pluck out this figure from thin air!

To have a good shot of hitting 10,000 views, I will have to acquire skills in Search Engine Optimization (SEO) and online marketing, which are very practical skills to possess in our current new age economy anyway.

I think.

 

5) Remain in my Current Job Unless Elsewhere Offers Increment of 25%

Hmm. This is not really a goal but more of a reminder to myself.

I have been changing jobs ever so frequently, with most job stints lasting less than a year. This does not look very good on my resume and additionally, I have remained in the same position, with no additional job responsibilities,  despite my multiple job hops.

Which means that I'm basically hopping on the same stones again and again. Pointless.

Hence, I endeavor to remain in my current job for at least 2 years, unless another positions offers an increment of at least 25% over my current package.

I have come to the end of my goal review and setting friends. Hope that everyone has achieved what you endeavor for this year, and wishing everyone success for 2016!

Happy New Year!And enjoy the upcoming long weekend!

Damn, I am going to miss this long holiday :( Don't you?


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Photo taken during Christmas period at Garden by the Bay, Singapore. My country can be so mystically beautiful too!

Portfolio Updates: December'15

Merry Christmas and a Happy New Year friends!

Guess we all had a hell loads of fun in recent days, exchanging gifts, feasting and most importantly, meeting up with friends and relatives to usher in the festive periods.

That is why I burned a hole in my wallet and have to tighten my belt in the coming days :(

Luckily, I implemented the system of 'paying myself first', and separate the monies I have for spending from my portfolio assets. Hence, my portfolio asset was not affected.

On the market front, the STI ETF, which I have always been monitoring and nibbling at, fell to $2.89 at one point, which made it extremely tempting for me to purchase. However, I followed my plans made during November'15,  and only got in at $2.95 during the last week of this month.   

I am not entirely sure if following the plans so strictly will be any good. I guess I will only know how well this system will work only with time and experience. Or..do any you have any advise for me?

Anyway, I'll be quick for my last portfolio update for 2015 which is as follow :D

Portfolio updates for the month of December'15:

• Purchase 700 additional shares of STI ETF at $2.95 apiece. This brings the average price down to $3.13 for my total shares of STI ETF.

• $700 in cash was injected into the portfolio. 

• Received my first dividends from the global ETF, the VWRD, which comes up to a grand total of.... $23.26

    

Actions I will take for January'16:

• In the super unlikely event that the price of STI ETF drops to $2.065, which is a 30% drop from the last purchase price of $2.95, I will make another purchase of about $2000 worth of STI ETF.

• Continue my purchase of VWRD by investing my second tranche of S$5000 when the price of the VWRD drops to USD$54.72, which is a 20% drop from my last purchase price of USD$68.40.

• The third and last tranche of S$4000 will be vested when the price of VWRD drops to USD$38.30, which is a drop of 30% from the last purchase price of USD$54.72.

• In the event that the VWRD and STI ETF does not drop to my target price, I will rebalance my portfolio in the month of May'16 and Nov'16 accordingly to my asset allocation strategy.

	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%

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Photo of Melaka river, taken at dusk during my last oversea trip to Malacca, Malaysia.