Portfolio Update (Dec 2022)

Merry Christmas! Thought to give an update on the portfolio since it has been several months since I last posted. 

The global markets have not been doing well in the high interest rate environment; the S&P 500 is currently down ~20% YTD. However, on the home front, the STI ETF is doing relatively well, having gained ~7.4% YTD, backed by the strong performance from the local banks, and the likes of Keppel/Sembcorp etc. 

Seems like most assets are hurting with the high inflation rates, be it stocks, bonds, gold, crypto (yikes). One silver lining is the higher interest rates offered by SSBs, T-Bills, Banks FD - gotta make hay and milk the rates while its still available.

Portfolio Update

On the portfolio front, the total value dipped below 300k despite the monthly contributions via DCA into the indexes and the occasional individual counters. 

It's definitely not a comfortable feeling seeing the portfolio value trending sideways through the year even with monthly capital pump. Times like these are important to continue to stay invested and we will be rewarded for our patience in the long run. 

Growth Portfolio

China is finally relaxing its zero-COVID policy after several protests erupted in various cities. However the road ahead remains tough, as they will now have to brace for potential spike in cases from the relaxation measures. 

BABA has got to be the worst counter of the year thus far, currently sitting at a loss of ~54%. Looking back, the initial decision to invest was due to its stock price being heavily beaten down due to the shelving of ANT IPO and uncertain environment due to the China-Tech crackdown.

The decision was purely based on technical (albeit a failed one) and a conviction play that BABA would rise again in the long term given that it is still a high quality business with a huge customer base, sustainable leading positions in both eCommerce and Public Cloud. 

The uncertainty from the China-Tech crackdown forced me to reconsider further averaging down on BABA, and to limit my losses and wait out for further clarity. The China market seems to have bottomed, and I will be holding on to my existing shares while waiting for the recovery.

  • Lesson Learnt: Stick to your circle of competence (as what Warren Buffett always say) and back up your reasons to buy with concrete valuation (due diligence). 
  • Reminder: Proper asset allocation for 'play' money, bulk of assets should be in high conviction stocks

Index Portfolio

The portfolio continues to do what it's supposed to - taking the emotion out of investing and buying a fixed sum every month. The inclusion of bonds cushioned the impact of decline compared to a pure S&P500 allocation. However bonds were also not spared in this high interest rate environment, bond indexes declined too - contrary to the fact that stocks and bonds are inversely related.

The strategy going forward will maintain status quo - sticking to the ideal asset allocation, buying the laggard every month.

Previously I've mentioned that I have been investing S$2500 monthly into this portfolio. For the temporary near term, the amount would be reduced to approximately S$1000 - due to a new circumstance with requires me to have more cash on hand (more on this later).

Yield Portfolio

As the name suggests, this portfolio serves as a 'yield cushion' as part of my future retirement drawdown plan - using the dividends to fund expenses/serve as buffer before drawing down on the capital from the Index portfolio. 

With the current interest climate, prices of REITS have came down significantly from their ATH; presenting value/good yield for the long term holder. I've been adding more REITS to this portfolio to increase the yield, namely the 'blue chip' based their track record. 

Dividend investing is a slow and steady method, eventually the monthly dividend will grow from paying monthly telco bills to the entire family's expenses.

Cash Conservation for Property

Recently I bought my first property (hurray!), with several upcoming payments to be made. Capital allocated for investment would have to be reduced in the near term to conserve cash for the downpayment of the property. 

The full resumption of DCAs into indexes should resume in 2H of 2023 once the payment stabilises. Instead of totally staying out of the market, I thought it would be still a good choice to continue to stay invested (albeit contributing a smaller sum), while paying off my property's downpayment. 

Closing Thoughts

Investing in 2022 has been a roller coaster ride, markets bounced upon news of normalisation of COVID but yet dipped again on the back of rising inflation rates.

This once again reinforce that no one can predict the market, Mr Market does whatever he wants - opportunities present itself but we must be ready to take action when it appears. Have we done our valuation to derive our target price, what if the price falls even further etc.

Be clear of what you are investing in and how does that tool help you achieve your goal. Do not buy purely based on hearsay or gut feeling, always go through your due diligence process to assure yourself of the risks and that the benefits are worth. 

Trust the investing strategy that you have crafted and stick to the game plan! 

Til then, stay safe and invest responsibly!

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