It’s the start of the new year 2021, and most financial bloggers are putting up their report card for the year 2020, as the CFO of the family, it is my duty too, to consolidate and conclude for the year.
Let’s look at how the portfolio has grown over the years.
This year the portfolio grew by 9.53%, while STI ETF dropped 8.46% including dividends. The CAGR of the portfolio stands at 6.73% over 6 years.
2018 was a bad year for the portfolio, with a -14% performance, and the portfolio’s NAV has not recovered to End 2017 value of 1.59 yet. If i am a fund manger whose performance fees is based on a high water mark, i would have worked for free for 3 years by now, if i do not have new clients coming in, in the year of 2019 and 2020. Nevertheless, we inject new capital each year, so the portfolio absolute value is still growing steadily.
This year will be a milestone year, as the portfolio officially enters its 7th year, by the rule of 72, at 10% targeted returns, i will be doubling my starting capital at the end of 2021, or to be precise at 7.2 years. I will need to grow the portfolio at 30% this year to have an NAV of $2.00, however i won’t be doing anything different, value investing is still a very bottom up approach, on an individual company basic.
I am still invested in Singapore market only, while there are many opportunities outside Singapore, very exciting too, my target of 10% can be achieved in Singapore given the portfolio size. It’s me who is the problem, not the market.
A few thoughts i would like to share my views on:
This year was a very important year for my investing conviction, a lot of the theories was put into use, and i have failed in one that i felt was very important.
” … to be fearful when others are greedy, and greedy when others are fearful.”Warren Buffet
If the conviction was strong, and the discipline to follow your conviction was high, this year would be a good year to buy more and sell less, anyone who had done so, would be looking at sizeable gains this year. I did the opposite of selling more and only buying after i realised that it was not a good time to be selling, i also tried to time the market, as it swings steadily up and down in a tight range on a weekly basic, or so i thought, clocking in small gains and missing out on long term gains.
I was caught with my pants down, which reemphasize the important of cash level in the portfolio, i was a little lazy in the screening of stocks in the year of 2018 and 2019, so i told myself i wanted to work hard in 2020, i did much more screening, and was looking at financial reports of interested companies that fulfilled my criteria, so there were a few good companies that i wished to buy at the start of 2020, when the news of covid got serious, the cash portion of the portfolio was close to 0%, so while it was a good time to buy stocks from March onwards, i was selling stocks to raise cash, which was quite silly, if my conviction is strong, i would have injected more money into the portfolio. As a value investor, our cash holdings can be high at times, which will pull down the overall performance of the whole portfolio, sometimes this cash portion can also save the portfolio from dropping too much, if i was fully invested in 2018, it would not had been just -14%, it will be much worse.
It has been said many times that the stock market is forward looking, and the price is very seldom a true representation of the current economy or company value, most often, the price of the stock market/ companies swing to and fro, briefly touching its intrinsic value every now and then. A trader trade short term based on the flow, the trend, the graph line, RSI, moving average etc. The quant invest based on it’s algorithm. The dividend investor relies heavily on the dividends yield, while the growth investor looks for how much the companies can grow than its current value, the macro investor more on the whole wide economy trends and what is the next new innovation and disruption, while the value investor more on the asset values of the company. These investors make up the stock market, along side many others type of investors and big fund management corporation. The stock market is often a tussle between many groups at one time, depending on the monetary powers on each side, and the liquidity present in the whole market & economy.
On hindsight, the US market new highs is pushed by the extremely low interest rates, and flush liquidity in the market right now. It is almost as if covid has not happened, and the world is in a very good shape, which i think even people on the main street can see that it is not so. The greed level seems to be high right now, with many earning good money from the stock market, and many others who have missed the rise, following right in the footsteps, so 2021 will continue to rise?
If everyone want to continue dancing, the music has to go on, but as people start getting tired, and wish to go home, there will be lesser people in the ballroom, and at a certain point, the music will stop.
There will be displeasure from people who want to dance a little more, but has a hunch that the music will soon stop.
There will be disbelief from the people who heard from all the fantastic reviews from people around them, that there is a 24/7 ballroom which plays good music, they sold some stuffs for money, they set aside budget to make this long trip, and truth beholds, the music was great, the people are great, but suddenly after 3 songs, the ballroom electricity was shut down, no music, no ventilation, no lights.
The people living around the ballroom, knows something was brewing, there were noise issues, traffics issues, legal issues, this situation can’t go on forever, but yet people are still flocking into town, creating good income for the people in town who offer services, food and accomodation for the visitors.
Soon, people start moving into this town, where job opportunities are abundant. A new eco system was created, with the ballroom in the center of the new economy.
What happened when the ballroom closed? What happened before the ballroom closed, with a few privileged people knowing the news before it closed? What happened to the people that came last?
I have no doubt, that there will always be another ballroom to replace the previous one, there are people whose livelihood depends on the existence of the ballroom, but if you do not, it is always prudent to wait. Opportunities lost do not results in losses.
I do not have much interest in investing gold, as much as i do not have much interest in investing properties. But i think they are one of the best way to fight inflation with very minimum effort needed in the research/ reading phase. Many older folks got their fingers burnt in the stock market, following the hot stocks, or that mentality that government linked stocks will never failed. But the gold jewelry they purchased many years back, even taking into account the jewelry design fees, they are still looking at a very good profit.
For properties, you get good returns, because of leverage, the value does not fluctuate as much as the stock market, and inflation include properties prices too.
Gold has been compared with bitcoins as alternative investment, however gold has practical usage in the world, but bitcoins does not have any practical usage yet, at best an ideology. You will find some gold in most families, but rarely bitcoins, so it is still a bit far fetched comparing bitcoins to gold. Long term wise, it can be very good at fighting against inflation, especially in country which is very unstable, whose fiat currency are at a big risk.
It is getting easier to invest in gold, whether it is physical gold, or gold etf etc. There are still some hurdles, and more expensive fees as compared to the stock market.
I think gold is more of an insurance rather than an investment, you do not need to claim from insurance most of the time, but just that few crucial claims can benefit you for life. I have strong faith in the SGD, much more than USD, although if USD fails, most currencies will go down with it. In my generation, it is quite hard to fathom SGD and the Singapore Govt failing in its monetary role.
The Singapore government is like a value investor, very cautious and stingy at times. This is very important to a small country with no natural resources, the covid year was one of the rare times, that the government is giving a lot of money to the citizens, USA is like someone with high income power, top 1% income tier, with high spending habits with no savings, a spendthrift, spending all the income and getting into debt to fund that lavish lifestyle. We wouldn’t teach our children to spend all their monthly income, and wait for next month to come, so why should a country do so, unless it is to stay in power, and who benefit most from it?
I got a hole in my backyard, the hole gets bigger as the months passed by, i got some stuffs to fill up the hole, but the hole gets even bigger from all the weight of the stuff. Should i get the hole check, instead of dumping stuffs to cover the hole, if the hole requires extensive repair works and quite a long timeframe, which will affects me, my house and all my neigbours, are we willing to bear with it? Or we would just cover it as the experts has said, in my lifetime it shouldnt be a problem. You can move house if you want to, as the repair cost can be quite high. Luckily i still have a choice to move, but what if i do not have a choice?