A 2-year old Portfolio: End-of-year Review

Today is the last day of 2020. What a year 2020 has been for every one. For some, it has been horrendous; for others it was just challenging but short of being daunting. For me, 2020 has been somewhat rocky, but not particularly disconcerting. I’m still able to keep my head above water career-wise, and in other aspects of life as well. Thank God.

My wife, the capable home captain, runs a tight ship, thanks to her efficient ways and thrifty trait. The kids all did well in school, with only the eldest needing a couple of months of tuition leading to the school’s final exams (the IP curriculum is challenging, to say the least).

I was thus able to concentrate on my work and investing. Here’s a quick summary of the portfolio:

Summary (30.12.2020)

#1 Self-selected Stocks

#2 MoneyOwl

#3 Syfe (Global ARI & Equity100)

Global ARI
Equity100

1. Total Cost of Investment: $179,889.47 (Capital injected for 2020: $76,384.18).

2. Total Current Value of Investment: $187,902.71

3. Total Dividends Received in 2020: $5,788.23 (Average Cost Yield: 4.87%)

4. Total Profit from Closed Positions: $2147.42

I didn’t exactly have a plan or target to grow the portfolio to $200K by the end of 2020. I should cross that mark come the second quarter of the new year. Perhaps a $230K portfolio might be attainable end 2021, assuming I invest an average of $4K-5K per month.

Forever Portfolio

I am still very much a value cum dividend investor.

I am for value investing because I simply like a bargain … who doesn’t, right? Buying stocks at a discount to their intrinsic value appeals very much to me as I love to get good deals.  In addition, I also like dividend investing … mainly for these two reasons: (1) passive income from regular dividend payments; (2) capital appreciation over an extended period of time.

I have formulated my own dividend machine aka my Forever Portfolio that I hope to grow over time:

Only Keppel DC Reit is missing in my Forever Portfolio. Keppel DC is currently overvalued (PB: 2.42). Nevertheless, it might still be worth buying into given that it has plenty of investment merits. I need to sit down to study this stock carefully in order to make an informed decision.

Apart from the absence of Keppel DC Reit, my Forever Portfolio is close to completion and I should be able to sit back, maintain it as my own unique index, keep putting money into this portfolio, collect dividends, and tweak it from time to time. I keep reminding myself that it is time in the market that matters, and not to time the market. Similarly, I will continue to invest monthly in MoneyOwl and Syfe to capture the larger globally diversified investment market.

Conclusion

Going forward, my plan is to invest:

1. $1600 every month for MoneyOwl and Syfe (Equity100): S$800 each.

2. $2000-S$3000 every month for the Forever Portfolio or some growth stocks. I’ve been learning to get my feet wet with growth investing. It’s pretty exciting looking out for stocks that provide a significantly higher average rate of return than the general market. Might parking my money in Kristal with its offering of numerous Ark ETF portfolios be a hassle-free solution? I’ve got quite a lot of homework to do in 2021, don’t I?

2020 has been a problematic year for most investors. However, markets have generally recovered and investment opportunities still abound. I hope and pray 2021 will be a better year for every one looking to grow their portfolio.

Audentes fortuna iuvat! (fortune favours the brave)

Reaching $150k in 20 months since Day 1

The last time I hit the milestone of injecting $100,000 into the stock market was sometime in March.

Fast forward 5 months, my capital invested has exceeded $150,000 in August:

All together, I am still sitting on a few thousand dollars of paper loss. Since I have a long investment horizon, I’m not particularly fixated on my current paper loss (only 3% of total portfolio cost). Despite the broader stock market rebound, 65% of my stocks are still down from their pre-March highs.

Self-selected Stocks

A couple of months ago, one of my endowment policies became due and I found myself with an instant amount of cash to deploy in the stock market. I deployed a certain portion of it and still have a significant amount left in cash. Coupled with my monthly budget for investing from my income, I’ve invested over $50,000 in 5 months.

Prior to discovering the benefits of investing in the stock market, I put my extra cash with insurance companies by buying endowment policies. Endowment policies were suitable for me then as I was looking at growing my savings in some low-risk instruments.

However, I realised that I could tolerate more risks, and the 3-4% projected yield at the maturity of these policies no longer satisfied my risk appetite. Why take a 3-4% yield when I could have 5-6% yield on dividends by investing in Reits, for example? I still have 3 more endowment plans, with one maturing next year and the last maturing in 6 year’s time.

My stock portfolio comprises of 60% Singapore stocks, 24% US stocks, and the remaining 16% China/HK and Malaysia stocks.

Top 3 worst performers: (1) Eagle Hospitality Trust, (2) SATS, (3) Comfort Delgro.

Top 3 best performers: (1) Mapletree Industrial Trust, (2) Digital Realty Trust (USA), (3) Frasers Centrepoint Trust.

All you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from the stocks that don’t work out.

Peter Lynch

Dividends collected to date for year 2020: $3806.50 (Average $475.81 per month)

I’m basically a value investor in search of stable dividends but I’m beginning to look at owning some growth stocks. During this time of the pandemic, Singapore shares seem to be underperforming as compared to US and China stocks. Just look at how tech stocks have rallied since March. I kick myself now for not getting my hands on such stocks as Apple, Amazon and Alibaba in March when I had the opportunity and money to deploy. Anyway, I see growth investment mixed in with my dividend-paying stocks as a good way to create a more diversified portfolio

MoneyOwl

I began investing with MoneyOwl in July 2019. The investment portfolio consists of Dimensional Global Core Equity Fund and Dimensional Emerging Markets Large-Cap Fund. Of the 5 portfolios offered, I’ve chosen the most risky portfolio where the asset allocation is 100% global equities and 0% bonds. My time-weighted return for this portfolio is a decent 5.2%.

From MoneyOwl website

Syfe

I invested with Syfe primarily because of its one of a kind 100% Reits portfolio that tracks the SGX’s iEdge S-Reit 20 Index. The top 5 Reits (Ascendas, MLT, MIT, MCT & Keppl DC) represent slightly more than 50% of the entire portfolio of 20 Reits.

I like it that I can just regularly contribute to this portfolio and reap the benefit of dollar cost averaging. I don’t have to think much about transaction fees, rights subscription and reinvesting my dividends … I just let Syfe take care of all these for me. My all-Reit portfolio’s time-weighted return is -2.69%. In 15 years, with monthly deposits of $400, this portfolio might grow to $125,200.

I also invested in Syfe’s Global Automated Risk-Management Investments (ARI) portfolio. Through this instrument, I am investing in a blend of equity, bonds and commodity ETFs. Syfe’s proprietary ARI engine automatically manages my portfolio to maintain my chosen risk level (22.3 out of 25 max). This portfolio’s time-weighted return is -14.22%. It needs to do better. In 15 years, with monthly deposits of $300, I can expect the portfolio to grow to $217,400 (most likely scenario).

Comparing both the 100% Reits portfolio with the Global ARI portfolio, the latter provides a greater growth trajectory, owing I suppose, to the use of the SPDR S&P 500 ETF (24.32%) and the Consumer Staples Select Sector SPDR Fund (21.21%).

If I were to invest 2k in the Global ARI portfolio every month for the next 15 years, which is very doable, I would have become a millionaire with a portfolio that amounts to 1.3 million. 3k per month for 15 years or 1.5k per month for 20 years, I would have grown the portfolio to 2 million.

Very interesting scenarios of the future indeed!

However, I do take such rosy predictions with a huge pinch of salt. Nobody knows what the future is like 15 years from now. There might just be another more severe pandemic or a world war that will utterly destroy the world financial market as we know it today, who knows?

I’m considering switching one of these portfolios to Syfe’s Equity100 portfolio because it uses the Invesco QQQ ETF to achieve a growth and large-cap tilt. At least 43% of the Equity100 portfolio will consist of the QQQ ETF. The top 5 ETFs form about 90% of the Equity100 portfolio’s composition [QQQ, Consumer Staples Select Sector SPDR Fund (XLP), iShares Core S&P 500 UCITS (CSPX), iShares MSCI EAFE (EFA), and Health Care Select Sector SPDR Fund (XLV)]. I need time and wisdom to evaluate this option.

The stock market has rallied significantly since the beginning of the pandemic. In fact, the S&P 500, in recent weeks, has closed at new heights since the coronavirus pandemic was declared in the USA in February. It is truly one of the most amazing recoveries on record. Nevertheless I’m mindful of the great divide between Wall Street and Main Street, and the fact that a great deal of optimism has been priced into the market at this moment.

____________________

In July, I got a 5% increase in my salary. Peanuts … but still I should be thankful especially when many have lost their jobs, or taken a pay freeze or substantial pay cut.

That 5% pay rise comes in handy when it comes to Kiddo #1’s education i.e. IP-school fees, and also tuition costs. The teaching pace in Kiddo #1’s school is really accelerated, and Kiddo #1 is falling behind in two subjects, hence the need for private tuition. I’m paying about $200 per week for private tuition … so expensive! But I’m willing to help Kiddo #1 “survive” in this school that for over 100 years have taken in the cream of the crop of all Primary 6 pupils. Yeah, whatever the cost.

If only I could put this $800 per month into the stock market … oh well.

The most valuable investment we can make is in our children’s education. When we make education a priority, we give our children opportunity. Opportunity to learn at higher levels than their parents were able to learn; to earn at higher levels than we were able to earn.

Martin O’Malley, Former Governor of Maryland and Mayor of Baltimore

Disclaimer: I am only an amateur investor and nothing you read here on my blog constitutes financial advice.  I write here to detail my investments, strategies, and analyses.  Feel free to read at your own risk.  Should you need financial advice, consult a licensed financial advisor.

April Investing Activities and Thoughts on Current Market Frenzy

Success in investing doesn’t correlate with IQ once you’re above the level of 125.  Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing. 

Warren Buffet, 1999.

Counters bought in April

Micro Mechanics @ $1.45

Netlink NBN Trust @ $0.88

Fraser Centrepoint @ $1.75

Mapletree Commercial Trust @ $1.64

I’ve never spent so much money in the stock market until March and April this year.  Thanks to the pandemic, many stocks have become very attractive in prices.  Nevertheless, it was quite unsettling even as I made my purchases … should I wait for prices to drop further … will prices go south after I’ve made my purchases?  

That’s the thing about investing, there is no way of knowing if the stock price will go up or down at any one point in time.  Thus, having a plan and sticking to it help me to weed out the uncertainties, keep perspective during this tumultuous time in the stock market, and stop me from making heat-of-the-moment decisions (e.g. the recent speculation on Biolidic).

Here are the stocks that I plan on maintaining in my FOREVER portfolio:

(Non-Yellow: Already accumulated)

With the 4 purchases made in the month of April, my Forever portfolio is now 2/3 complete.  I still plan on accumulating the following as planned:

Ascendas

Ascendas India

Keppel DC

MapleT Logistics

Valuetronics

Vicom

I’m also considering adding Fraser Logistics and iReit Global to my watchlist.  I might also switch out Vicom with SBS Transit (already accumulated).  

Thanks to the recent rebound, the overall portfolio has improved and registered a positive XIRR of 0.35%.  The question on most people’s mind is, has the market already bottomed out and is now on the ascent?

Depending on who you ask, you are going to get different answers.

Well, it does seem like the market is no longer singing the blues, but crooning strains of “hallelujahs” and “glad tidings”.  Has the new bull market already started or is this just a series of dead cat bounces?  

Tens of thousands of people are hospitalised and dying because of Covid-19, graveyards are getting filled, the world economy has been substantially paused, Singapore is practically in lock-down mode (semantically, circuit breaker mode) and yet very strangely, people are flocking to the stock market.  The great disconnect between the rallying stock market and the economy’s slump is unmissable and certainly very perplexing.  

Here’s how I try to make sense of the situation:

The worst is behind us?

I think it is fair to say that for many investors the worst of the falls has already been “priced in”.  The stock market does not dance in step with the economy.  In fact, the stock market is always many steps ahead.  At the expectation of a downturn, investors begin to dump shares.  Hence share prices go south quickly while the economy takes its time to approach a recession.  By the time the recession arrives, all the bad news have been “priced in” and dusted.  At that point, investors are already looking forward to the recovery. 

But the thing is, is recovery even close to be seen on the horizon?  Let’s not forget that the government has yet to declare a recession which economists have been saying Singapore will be entering a recession in the 2nd half of 2020.

According to the latest MAS monetary policy statement published 30th March: The COVID-19 pandemic has led to a severe contraction in economic activity both in Singapore and globally, due to the combination of supply chain disruptions, travel restrictions imposed in many countries and a sudden decline in demand. The Singapore economy will enter a recession this year, with GDP growth projected at −4 to −1%.*

How long will this recession last?  Nobody knows for sure.  

Again from MAS: The Singapore economy will contract this year. GDP growth will eventually recover following the abrupt downshift in the level of activity, but there is significant uncertainty over the depth and duration of this recession.

We have been warned by the media that there will be more job losses and wage cuts in the months ahead.

So, good times are back?  We are in a V-shaped recovery, you say?  You might be right in your optimism, but I’m not so sure.  

Irrational Exuberance

It’s not difficult to see how people are getting optimistic.  The SG government is doing a great job handling the pandemic, the earlier complacency notwithstanding.  Local transmission is coming down (although transmission in the foreign worker dormitories is a different story), and we don’t have a high fatality number.  The government has come in with guns loaded to rescue the economy.  The Resilience Budget announced on 26 March, and the earlier Unity Budget, totalled 55 billion!  In the USA, they don’t fight the Feds; in Singapore, we don’t fight the PAP.

We all have confidence in the SG government to contain this crisis.  I mean, when it comes to resolving a crisis, nobody does it better than the PAP, and no one people can come together as united, and as quickly, as Singaporeans.  The circuit breaker period will most likely not be extended past June, some lockdown measures will be relaxed, kids will go back to school, adults will go back to work (after having their hair cut), shopping malls will see a lot more footfall, etc.  So with this level of optimism and the view that the worst is already behind us, coupled with the fear of missing out, investors begin to rush into the stock market and chase perceived gains.  

Yes, Singapore will open up … but to a very different state of affairs.

On restarting the economy, Mr Lee said in his May Day speech: After we bring down the number of new Covid-19 cases, we can ease the circuit breaker measures, and progressively restart our economy.  This will not be straightforward. We need to step up Covid-19 testing and speed up contact-tracing. And we must proceed cautiously, with safeguards, so infections do not flare up again. We have kept essential services going. But the rest of the economy will have to open up step by step, and not all at once. Some industries will open up earlier than others, and recover sooner. For example, those critical to keeping our economy going domestically. And those that keep us connected to the world and to global supply chains. Other sectors will have to wait, especially those which attract crowds, or involve close contact with other people, such as entertainment outlets and large-scale sporting events … Significant structural changes to our economy are likely. Some industries will be disrupted permanently. Companies will have to change their business models to survive. Some jobs will simply disappear. Workers in these industries will have to reskill themselves, to take up jobs in new sectors. But there will also be new opportunities, and new jobs created too

Mr Lee did say in an interview with CNN on Mar 29: By the time it (Covid-19) goes around the world, and then finally runs its course, I think that is several years, unless something happens to abort that process.**

Yes, the Singapore economy will open progressively but due to the length of time this virus will run its course, we are not returning to status quo ante any time soon.

If your employer is a responsible one, you might find yourself sitting 1.5 metres away from your colleague.

Restaurants will not pack diners in.

You might find empty seats on your left and right when you next enter the movie theatre.

Businesses will be making significantly lesser money or take a longer time to return to profit.  Some will go bust.  Dividends to share holders will either be suspended or materially reduced (some Reits have already cut dividends, ranging from 20% to 70%).

Also, with wage cuts and job losses mounting across the economy, many people will be spending carefully and investing circumspectly.

So really, do all that paint a nice rosy picture of the Singapore economy from now till the end of the year?  Not really.

The health of the world economy is fast deteriorating.  Economists are even saying that the world is possibly entering a period of depression.***   Trump is also threatening to reignite the US-China trade war to punish China for the mounting economic costs of the pandemic in the USA (actually, Trump is making China the scapegoat for his own failure in handling the health crisis). 

First, the Covid-19 pandemic.  Next, the collapse of the oil price.  And coming, a renewed US-China trade conflict.  Considering all these, is it fair to expect the recent recovery momentum in financial markets to recede and fade in the near future?  Maybe.  Can’t really affirm this in absolute certainty though.  Remember, the market is irrational.

Honestly though, should we expect another wave of cold front even as we see currently tender shoots of recovery in the Singapore stock market?  Will we revisit (or not) the low of March 23?  Are some investors getting ahead of themselves and throwing caution to the wind?   I don’t know for sure although I’m leaning on the view that there is further pain to come in the next half of the year.  

During this time when the market can swing either way, I need to be calm, patient and disciplined.  I’m neither optimistic nor pessimistic.  I want to approach investing during this period logically, rationally and cautiously.  In the midst of uncertainties as a result of the disconnect between the stock market and the local economy, having a plan for investing and a price list help … a lot.  I find it easier to live with a simple story line than one that is convoluted, i.e. if A happens just do B, rather than, if A happens in the absence of B, and C and D align, then execute E.  

In a perverse way, I do wish the low of March 23 to return just so I can snap up more stocks at those attractive prices.  Better still, a new low lower than that of March 23.  Will that happen?  Don’t know.  But should that happen, I’ll be singing a glorious song and visualising pots of gold as I put in my buy orders.

* https://www.mas.gov.sg/news/monetary-policy-statements/2020/mas-monetary-policy-statement-30mar20

** https://www.straitstimes.com/politics/pm-lee-coronavirus-could-take-years-to-run-its-course-world-must-brace-itself

*** https://www.channelnewsasia.com/news/commentary/economic-depression-recession-is-ahead-roubini-12691926