Walking the Portfolio Path: A Lesson in Total Portfolio Management

 Hi everyone! It’s me again, back with another reflection on this marathon we call investing. Today, I would like to talk about something close to my heart—portfolio management. Too often, I see folks (and I’ve been guilty of this myself) zooming in on the daily price ticker of a single stock, feeling stressed and anxious when one of our holdings takes a dive. It’s human nature, isn’t it? We watch that one stock plummet 10% in a day, and suddenly, the world feels like it’s crashing down. But here’s the thing I’ve learned over the years: that’s not the full picture. Investing isn’t about one stock’s wild ride, it’s about managing the whole portfolio, like tending a garden with different plants blooming and wilting at their own pace.

Let’s step back for a moment. Stock corrections happen. Businesses don’t move in a straight line upward; they ebb and flow with their industries, economies, and market sentiments. Some days, your REITs might be dragging their feet while your blue-chip banks ( like 3 Big SG Banks now) or industrials are soaring. Other times, it’s the reverse. That’s the beauty of a portfolio—it’s a living, breathing mix of winners and, yes, the occasional losers. I like to call those underperformers “lemons.” Every investor has them. If you don’t, you’re either lying or you’ve just started yesterday! 😊 The key isn’t to avoid lemons entirely (good luck with that); it’s to see them as part of the bigger orchard. A few sour fruits don’t ruin the harvest if the rest are ripe.

Cycles, Corrections, and Mean Reversion

This brings me to a concept I’ve come to lean on heavily: mean reversion. It’s a fancy term, but it’s really quite simple. Markets, industries, and even individual stocks tend to swing like a pendulum—overreacting on the upside when euphoria hits and overshooting on the downside when fear takes over. But over time, they gravitate back toward a “mean”—a kind of equilibrium tied to their fundamentals. Think of it like my previous blog post about André Kostolany’s man walking the dog: the economy (the man) trudges along steadily, while the stock market (the dog) dashes back and forth, sometimes far ahead, sometimes lagging behind. Eventually, though, the leash pulls it back closer to the path.

I’ve seen this play out countless times in my own journey. Take the REIT sector in Singapore, for instance. Back in 2020, when COVID hit, some of my REIT holdings tanked—dividend cuts, tenant defaults, the works. It felt grim. But I held on, knowing that real estate cycles don’t end in one bad year. Sure enough, as the economy stabilized, those same REITs clawed their way back, dividends resumed, and prices reverted toward their long-term trend. That’s the mean reversion at work. It’s not a guarantee—some businesses never recover—but for solid companies or sectors, it will, it’s a reminder to stay patient. The portfolio takes hits, but it also recovers if you’ve picked your holdings wisely.

The same happens for my commodities stocks now, it is a down cycle for commodities (coal/iron ore or even Oil ), some of my holdings like BHP / RIO are down by 10-15% YoY), but they performed well after COVID-19 and gave out good ( special dividend ) a few years back in 2021/222. So, I guess we will have to ride through this till the next commodities bull cycle and just collect the dividend while waiting.

** As a high-leverage investment asset class, REITs are sensitive to interest rates and inflation, particularly in the uncertain "Trump tariff" environment. Rising interest rates increase borrowing costs for REITs, which often rely on debt to finance property acquisitions. This can reduce profitability and depress share prices, as higher yields on bonds compete with REIT dividends for investor capital. Conversely, lower rates typically boost REIT valuations by reducing financing costs and enhancing dividend appeal.

Expected future inflation adds complexity. Moderate inflation can benefit REITs, as property values and rents often rise, boosting revenue. However, high inflation may erode purchasing power and prompt aggressive rate hikes, pressuring REITs. The "Trump tariff" uncertainty—potential trade disruptions and cost increases—could stoke inflation while slowing economic growth, creating a mixed outlook. REITs tied to industrial or retail sectors may face heightened risks, while residential or healthcare REITs might prove more resilient. I think inflation may stay "higher for longer" and REIT would have to depend on better and higher rental reversion to catch up with higher interest costs and to be able to increase the DPU.

Beyond XIRR: Slugging Percentage and Batting Average

Now, when it comes to measuring how we’re doing, I know many of us love our XIRR (that’s the internal rate of return, for the uninitiated). It’s a great tool to see the annualized return of our investments, factoring in cash flows. I track mine religiously—gives me a sense of how the portfolio’s growing over time. But XIRR isn’t the whole story. There are two other metrics I’ve come to appreciate, borrowed from baseball of all places: slugging percentage and batting average. They’ve helped me shift my focus from obsessing over daily price swings to understanding the portfolio’s overall health.

Let’s start with the batting average. This is the percentage of your investments that turn out to be winners—stocks that either appreciate in price or deliver the income you expected. It’s like how often a batter gets a hit. A higher batting average means you’re picking more winners than losers. Mine sits at 69%, which I’m pretty happy and satisfied about it. It tells me that nearly 7 out of 10 of my picks are doing their job—paying dividends, holding steady, or growing over time. Does that mean 31% are lemons? Yep, some are. But that’s fine—nobody bats 100%, not even Warren Buffett, and some may still have a chance to recover and revert to mean.

Then there’s the slugging percentage. This one’s about the size of your wins. It measures the total “impact” of your gains relative to your at-bats (or investments). A stock that doubles in value or pumps out hefty dividends has a bigger slugging impact than one that just inches along. My slugging percentage is 2.29, which I’m happy with. It means that when I do hit, I’m often hitting big—those winners are carrying enough weight to offset the lemons. Together, these two metrics give me a fuller picture than XIRR alone. A high batting average keeps me consistent, while a decent slugging percentage ensures the portfolio packs a punch. As mentioned, as investors investing for the long term, we tend to pick up some " lemons" along the way, but if we have more winners than losses and with a slightly higher "slugging percentage", we should be Ok and doing well in the long run.

** My biggest loss ( pain ) was Eagle HT followed by ARA HT, two hospitality trusts badly hit during the Covid-19 pandemic.

Batting Average vs. Slugging Percentage <source:www.nasdaq.com>

The Portfolio Mindset: Volatility Isn’t the Enemy

So why does all this matter? Because it’s about training ourselves to see the forest, not just the trees. When we fixate on one stock’s price drop, we’re missing the point of portfolio management. Volatility is normal—it’s the dog zigzagging on the leash. Some days, my portfolio’s down 2% because a sector’s out of favour. On other days, it’s up 3% thanks to a dividend payout or a market rally. That’s just noise. The real game is keeping the whole ship steady over the years, not panicking at every wave.

I’ll be honest: early in my journey, I’d get rattled by those dips. I’d second-guess my picks, wondering if I’d bought a dud. But over time, I’ve learned that volatility isn’t the risk we should fear. The real risk is permanent loss of capital—putting your money into shaky penny stocks, chasing hype, or speculating on the next big thing without doing your homework. That’s when you’re not just growing lemons—you’re torching the orchard. A good portfolio, built on solid companies with strong cash flows and sustainable dividends, can weather the ups and downs. The lemons might sting for a while, but the winners pull you through.

My Portfolio Breakdown by Sector :

My Own Path: A Work in Progress

Take my own portfolio as an example. It’s a mix of Singapore Banks /REITs/ Conglomerates, some HKEX stocks, a sprinkle of UK dividend payers, and a few other odds and ends. I won’t bore you with the full list (you can dig into my older posts if you’re curious!), but it’s not perfect. I’ve got a couple of holdings that have been underwater for years—lemons I probably should’ve pruned earlier. But the total picture? It’s humming along. My dividend income is enough to cover my living expenses and then some, with about half reinvested for the next leg of the journey. The batting average of 69% and slugging percentage of 2.2 tell me I’m striking a decent balance—enough wins, with some big ones to boot.

Does that mean I’ve cracked the code? Hardly. I’m still learning, still tweaking. But the shift to a portfolio mindset has been a game-changer. It’s freed me from the daily stress of watching tickers and let me focus on what matters: building a machine that churns out income, year after year, through boom and bust.

You will see your portfolio value moving up and down along with sector rotation, depending on your percentage allocation to each sector and that's why sometimes you outperformed the market and sometimes under. It is definitely OK and it continues to move and rotate... 👌😊

Closing Thoughts: Patience Over Panic

So here’s my parting word, friends: treat your investments like a portfolio, not a collection of individual bets. Corrections will come, stocks will dip, and some will turn out to be lemons. That’s all part of the cycle. Lean into mean reversion, measure your progress with tools like slugging percentage and batting average alongside XIRR, and keep your eye on the long game. Volatility’s just the market doing its thing—it’s not the risk that’ll sink you, it is like a " ticket" to enter the "game" if you want to enjoy the "Alpha", as such, you would have to embrace it not to " avoid" it. The real danger is chasing quick wins or buying into hype without a solid foundation. Stick to quality, manage the whole portfolio, and let time do the heavy lifting.

As Warren Buffett once said, “The stock market is a device for transferring money from the impatient to the patient.” I’ve found that to be true, not just for individual stocks, but for the portfolio as a whole. Keep walking the path, lemons and all, and you’ll get there.

Until next time, happy investing!

Cheers! 😊

STE

PS:

" Regression Line Chart for World Major Stock Markets"