A Tale of Diversification ( Part 1 )

As you may notice from my portfolio (here ) which is very much skewed toward high yield counters like REITs and Business Trust. I would recognize and think that this is not good  in the long run as asset concentration in just one or two sectors in my portfolio, as such, I try to diversify and accumulate some non-REIT or Business Trust counters when the situation allows.

I have picked up some stocks like Telcos, Banks and Conglomerate since 2014 and of course every industry has its cycle and challenges, some of my investment turned out be in lost and some in profit. Always remembers that in any investment,” sometimes we win, sometimes we lose “, and business profitability is really unpredictable as the market move in cycles.

As of today , my investment in 3 telcos are not doing well and I am still sitting with paper loss of around -$14 K (including dividend received ) while for Conglomerate ( Keppel Corp & Sembcorp Ind) are just barely break-even with some profit of $1.5 K.

Both sectors are having their own set of problems like new entrant of 4^th Telco and slumping oil price which affected Keppel Corp and Sembcorp badly.

Telco is really facing the challenge of declining revenue even before start operation of new 4th telco as you may see from the latest result announcement from StarHub and M1 which have double digit decreased (%) in their profit.

(The) Boring Investor (Mr Lee Chin Wai ) has few very good blog posts on the topic of Telco's industry: The Telco Landscape in Singapore (here ), Can Telcos Stop the Decline in Profitability (here ) and Do Telco Investors Need to Fear the Fourth Telco? (here )

Investors starts to "feel the pinch" as StarHub decided to cut their dividend in the latest financial result announcement, overall, the industry will continue to face the challenges with increasing cost ( on new spectrum auction ) as well as declining revenue ( structure change in pricing strategy ).

Market may see some rebound in these sectors once a while with news on “merge and the acquisition “ which I may take advantage of re-positioning my portfolio while collecting the dividend at the time if stock price moving sideways.

Some experts said: “,,,, be certain that you will never achieve extraordinary returns with a diversified portfolio. To achieve extraordinary returns you must by definition choose to not diversify. “  or as this blog post highlighted “Don’t Diversify for the Sake of Diversification” (here )

What do you think? Do you have any comments or experience to share on recent diversification into stocks or new industry in your portfolio?

Cheers !!

Quote Of The Day :

"Wide diversification is only required when investors do not understand what they are doing." - Warren Buffett

“Two things should be remembered, after purchasing six or eight stocks in different industries, the benefit of adding even more stocks to your portfolio in an effort to decrease risk is small, and overall market risk will not be eliminated merely by adding more stocks to your portfolio” Joel Greenblatt

“The number of securities that should be owned to reduce portfolio risk is not great; as few as ten to fifteen holdings usually suffice.” Seth Klarman

/////Appendix  : Trading summary ////