Personal Updates- 20 Oct 2019

Wow, time flies and it has been quite some time since my last blog post on 28 September. I am also quite busy with two staycations in J.B and Penang in the last two weeks after my younger daughter finished her PSLE exam.  As usual, we spent a great time on movies / food/shopping and of course sight-seeing. My last visit to Penang was a few years back where we were onboard cruise ship to Phuket, we arranged a day-trip to Penang and didn’t really have much time to walk around.

Well, this time around we have more time to explore the "beauty" of Penang as we spend  4 Days/ 3 Nights at Penang…. :D

Venturing into HKG/CHN Market

As I mentioned in my previous two blog posts before ( here, here ), some of the HKG & CHN’s stock looks interesting (attractive) after long battle of a trade war between two major economy and continuous social unrest & protest in HKG. Some stocks have actually moved towards -2SD level although HSCE ( Hang Seng China Enterprises Index) still holding at -1SD.

I have decided to deploy some of my war-chest into this market ( around 5% from my war chest and another 4.5%  shifting from my current portfolio by disposing 3 counters i.e CDW / PNE Ind / ISEC and also reducing my stake in SING TEL and Sembcorp Ind ).

HKG/CHN stocks are now about 9.5% of my total portfolio value and with the yield on cost around 7% whereby I am expecting to get approx. $4.2K of dividend from this market in 4^th Qtr 2019.

I know China is a much risky market as compare to Singapore as some may still vividly remember the bad experience they had or big losses from S-Chip saga. Cooperate governance is still a major risk in investing in china market and we can see that in many cases accounting scandal involving cash balance in the bank and inflating sales & revenue figure are quite common and rampant.

As you may notice that I try to pick more large-cap companies and S.O.E ( State Own Enterprise) in my HKG/CHN portfolio and currently banks/ utilities constitute a major part of my portfolio with 55% vs total value.

In investing in HKG/CHN market, one may also need to accept the “high volatility “ of this market, at any point in time, you may see some of your stocks moving +/- 5% in a day, which I would consider quite rare in Singapore’s counter unless there is any major issues or event which trigger the big swing. Banks and REITs formed the majority of STI index weightage and these two sectors are holding very well till date with so much liquidity waiting or stand by to enter the market, once there is a small dip in the price, investors will rush in to buy, especially the REITs. We can see the exceptional good response from EFR ( Equity Fund Raising ) of some REITs to fund their acquisition, mostly oversubscribed by many times.

As the protest in HKG still have no sign of abating and the so-called " Phase One" agreement between China and US to end the trade war dispute may not be signed eventually, there is still a lot of downside risk in short term, but if we believe that HKG will survive from this crisis and China will continue to prosper in next 10-20 years, I may consider adding more if the market drops further by 10-20%.

Portfolio Construction / Investment Strategies 

There are few investment strategies in constructing or building up your portfolio, depending on your risk tolerance and investment profile / horizon:

Barbell Investment Strategy : <source: Investopedia.com>

What Is the Barbell Strategy?

 

According to modern portfolio theory and many other investment philosophies, successful investing is achievable by striking an acceptable balance between risk and reward. (See "The History of the Modern Portfolio.") For most investors, this entails cultivating a portfolio of securities that have intermediate-risk characteristics and offer middle-of-the-road returns. Contrarily, an acceptable risk/reward balance may likewise be achieved with an entirely different paradigm known as The barbell strategy, which aims to usher in substantial payouts without taking on undue risk.

 How the Barbell Strategy Works

 

The barbell strategy advocates pairing two distinctly different baskets of stocks. One basket holds extremely safe investments, while the other only holds highly-leveraged and speculative investments. In other words, this method urges investors to stay as far from the middle as possible.

One of the strategies highlighted by DBS’s CIO. You may find the article here :

How to invest as it’s no more “business as usual”?

As a retiree, I need a consistent income to meet my monthly expenses, as such, I think “Pyramid Investment Strategy “ is more suitable for me where it provides a more stable "base income" from low-risk asset class ( Bond / FD/ REITs).

What is an Investment Pyramid : < source:Investopedia.com>

An investment pyramid is a portfolio strategy that allocates assets according to the relative risk levels of investments. The bottom of the pyramid is comprised of low-risk investments, the mid-portion is composed of growth investments and the top is speculative investments. The risk of an investment is defined by the variance of the investment return, or the likelihood the investment will decrease in value to a large degree.

BREAKING DOWN Investment Pyramid

An investment pyramid strategy builds a portfolio with low-risk investments as the base, equity securities of established companies as the middle, and speculative securities as the top. The base (the widest part of the pyramid) would contain government bonds and money market securities, stocks would make up the middle of the pyramid and then the top would be options and futures. Thus, the higher you go up the pyramid, the greater the risk and the potential return.

Example of an Investment Pyramid

As an example, Harold went to his financial advisor for advice on how to position his portfolio. The advisor suggested that based on Harold's goals, risk tolerance and time horizon, he should adopt an investment pyramid strategy. The advisor suggested Harold put 40-50% of his portfolio in bonds and money market securities, 30-40% in equities and the rest in speculative items such as derivatives and futures.

My Pyramid

As I mentioned, there are a lot of ways that you can work with to construct your portfolio, depending on your investment horizon and risk tolerance, you may choose whichever investment strategy that fit your profile. At the end of the day, a profitable portfolio is more important regardless of which strategy you choose.

image credit to sina.com.cn

Cheers !!   😃