It does look like the world stock market is approaching an imminent crash in the months ahead in the current climate of high interest rates, impending inflation, the Russia-Ukraine military conflict and the resultant energy and food crises.
Some say that the current jitteriness seen in the stock market is akin to a crash, while others say that the stock market crash is not here yet, with the premonition that the worse has yet to come. I am of the opinion that what we are seeing right now is just a market pullback, albeit a very unsettling and deep one .
Since January, I have only committed some SGD7000++ to my investment portfolios. I am putting aside more for my warchest so that I have more cash to deploy in the event of an actual market crash. Currently my warchest is about 20% of my total portfolio value, which is not a lot actually. I hope that by the time the Great Winter Sale comes around, I have already amassed 25% (or better yet, 30%) of my current portfolio in cold, hard cash.
It’s time to cut back on spending and work harder to earn more.
With inflation getting worse by the day, it’s hard to cut back on overall spending … but one must never give up trying. It’s a good thing that we don’t own a car and hence not have to worry about high fuel prices. I can’t even remember when the last time was that I tapped on the Grab app or flag a taxi down on streets. We use public transport all the time now.
Our family has also basically stopped eating hawker food. We, as a budget-conscious family, have not gone to a restaurant for a long time. Even a McDonalds meal was a while back in January. We are nowhere close to sampling Jeanette Aw’s “whatthefudge” or any of FannWong’s bakes any time soon. We have resorted to cooking at home or going over to our siblings’ or parent’s place to eat (when invited, of course!). Mum has been an excellent blessing cooking for all of us, and buying us food from the market to take home (cue the music 世上只有妈妈好).
A 2nd Family Income and A Side Hustle
To help mitigate rising costs of living for the family, my wife and I have done two things;
1. My wife has started on a job recently. Actually she does not have to as my income alone is sufficient to meet the family’s various needs, even during this time when prices of most things go north. She wants to use her time profitably now that the kids are older. It certainly helps to have a second income for the family. Part of her income goes to buying groceries for the family. She puts aside the rest for rainy days.
2. I restarted tutoring, my side hustle, this year. I started tutoring after I completed my O levels aeons ago. Tutoring a compulsory school subject and teaching an enrichment subject over the years have always given me a good side income. And I have done so on and off for many years before stopping entirely when the kids arrived. I picked up tutoring again after friends and family members started asking in January. I earn slightly over SGD1400 for spending 8 hours with my students per week. This amount just about finances my investments in MoneyOwl and Syfe every month.
Crypto Destruction and a Battered Stock Portfolio
The talk around town last week was Terra Luna crypto crash. At this point in time, let me just express my sympathy to those investors who had lost their investments in the Luna collapse. Some had their unrealized gain of tens of thousands and even hundreds of thousands of dollars gone up in smoke in the crash. To those affected by this crash, I wish you well and hope you will recover not just your fortune but also your confidence in investing. Please do not let any negative thoughts or any snide remarks made by others bury you deeper in your despair.
誰無暴風勁雨時，守得雲開見月明水滸傳, The Water Margin
Thankfully, I did not hold any Terra Luna in my crypto portfolio. Nevertheless, my crypto portfolio took a severe beating in the recent crypto massacre. The absolute dollar value of my crypto portfolio dropped by a whopping 61.8%! My crypto portfolio consists of the usual suspects such as Bitcoin and Ethereum, and some metaverse tokens and a few Defi coins.
Is the slump in the cryptocurrency market a prelude to the eventual cryptocurrency winter? Will cryptocurrencies die and become obsolete in the future? Depending on who you ask, you are going to get a different answer. Personally, I think cryptocurrency is here to stay. The kind of correction in the overall crypto market that we are currently seeing is nothing out of the norm, given the volatile nature of cryptocurrency.
No one, not even so-called experts, has been able to predict the crypto market with any level of precision, and that probably won’t change any time soon. I have my own convictions on cryptocurrencies and it’s best that I follow my own persuasions. I know for a fact that the crypto market is rife with speculation. I have also come to accept that crypto prices can change direction very quickly.
Therefore I have limited cryptocurrencies to just 5% of my overall portfolio. Right now, my crypto portfolio is only 3% of my entire portfolio value. So I still have some more wiggle room in my crypto portfolio.
My growth stock portfolio is also not doing very well: XIRR -53.76%! The 3 worst performers in my battered growth stock portfolio are:
1 . Palantir -71.14% (2.85% of growth portfolio)
2. ARKK -65.96% (4.49% of growth portfolio)
3. Alibaba -44.87% (19.81% of growth portfolio).
Growth/Tech stocks have had a good run up until January this year. During the pandemic period, growth stocks valuation and price were off the charts! However, the valuation and price for these stocks are now on a downward trajectory. Is it time now to start buying growth stocks? I am thinking very hard and long on this.
Well, I need to admit to myself that the outlook for the stocks in my growth portfolio is still cloudy. It is therefore only prudent for me to wait for the turbulence in the market to subside first before adding more substantial positions. There are just too many negative signals in the growth stock market to not be cautious.
Nevertheless, I have not ruled out taking nibbles from time to time … just not big bites. I’m taking small amounts of my expendable money and investing them in high quality stocks such as Amazon, Google and Apple as their prices come down. I’m buying the dips with a few hundred here and a few hundred there.
To facilitate my small purchases, I use SYFE Trade. May is the last month (3rd month) when I get to enjoy 5 free trades and a minimum fee of USD0.99 per trade thereafter. Beginning June, I will get 2 free trades, and from the 3rd trade onwards, I will have to pay a minimum fee of USD1.49 for each trade.
My dividend portfolio is also not in a good shape, although not as badly thumped and bruised as my growth portfolio: XIRR -14.56%. The 3 worst performers in my dividend stock portfolio (after accounting for dividends collected) are:
1 . China Life -33.2 % (1.33% of dividend portfolio)
2. PingAn -28.28% (5.58% of dividend portfolio)
3. Comfort DelGro -26.97.% (2.86% of dividend portfolio).
I love collecting dividends, and it is therefore no wonder that my dividend portfolio makes up 72% of my overall investment. I find comfort and security in well-established companies that have a track record of distributing earnings back to shareholders year after year. As we head towards a bear market, dividend stocks are, in my humble opinion, safer bets than growth stocks as dividend-paying companies tend to have more defensible business models, stronger balance sheets, healthier cash flow, and less down-side risks than growth companies.
As of now, I am keeping to this portfolio structure: 70% dividend stocks, 25% growth stocks, 5% cryptocurrencies.
One thing is sure though: signs are indeed pointing to worrying times ahead.
How long will stagflation last.should it come to pass? Will Russia launch a nuclear attack on the EU? How will the USA’s desperate attempt to contain China end? Will the tension between the 2 super-powers eventually escalate into a war, thus starting the 3rd world war? What will the world be like when climate change, food shortages and energy crisis worsen?
I really don’t know what to think!
I’m hoping and praying for peace to prevail, starting with the cessation of conflict between Ukraine and Russia. But come what may, I’ll keep investing while keeping cash at a comfortable level. I hope my faith in humanity is not misplaced and that world leaders are not stupid enough to trigger a massive war that will threaten peace and prosperity for the world.
As a reminder to myself in these uncertain times: work hard, invest wisely, and hope for the best.