For as long as I have invested, the benchmark I compared my portfolio to, was SPDR STI ETF, as I only invest in companies that are listed on the Singapore exchange.
I started tracking the portfolio like how any fund manager would, using the NAV method, which suits me more, as capital flowing in and out, will not have an impact on the returns of the portfolio.
Many individuals would prefer the XIRR method, as it takes into consideration – capital injected, dividends reinvested etc. It is more suitable for an overall tracking of an individual finance situation, while NAV is solely based on the manger investment capabilities.
The SPDR STI ETF is flawed as many seasoned investors would have realised by now.
It is heavily weighted on the finance sectors. Just DBS, UOB & OCBC, Singapore 3 largest banks, we are already close to 50% of the whole ETF weightage, add real estate and we are close to 70% of the whole ETF.
This 2 sectors belongs to the “old economy” sector which many new investors has more or less shunned. But yet SPDR ETF continue to be quite powerful, despite it’s most obvious flaw.
Out of my 8 years, my portfolio outperformed STI ETF for 5 years, and underperformed it for 3 years.
With any kind of investment tracking or comparing, the start and end point matters very much.
At the start of 2015, STI ETF was selling at about $3.4, higher than end of 2022, at $3.31. Your capital gains would be pretty limited, even if you have used dollar-cost averaging, and injected money at the start of subsequent years. most of your gains would have come from the dividends instead. If you invested in STI ETF only in 2016, at a start price of $2.95 or in 2021 at a start price of $2.895, your gains would be much higher over a shorter period of time.
While research has shown that lump sum investing yields better returns than dollar cost averaging, you would need a strong stomach to sail through all the temptations and self doubt.
I did a spreadsheet calculation, based on the scenario if I have injected the same amount of capital at the same timing that I did for my own portfolio, into STI ETF instead and reinvested all my dividends collected back into STI ETF, my CAGR for these 8 years would be 2.48% vs my value investing portfolio returns of 8.65%.
At 2.48% CAGR for 8 years, it would not have attracted any new generation investors who have been wowed by the speculative returns of crypto or the IT stocks in these few years with all the free money flowing everywhere until the feds started tightening the monies supply to tame inflation.
The recent fixed deposits, ssbs, T-bills seems like a better choice than the STI ETF, maybe some would consider CPF better than STI ETF.
But yet despite all the bashing, STI is one of the best performing country index among the world in 2022, it’s returns at 7.61%!
Very very few investors can beat STI ETF returns this year.
Onwards to my own investing idealogy
I personally feel that a value investing based portfolio is a pretty defensive portfolio, at -14% in 2018, it does not certainly seems so. But because the cheap gets cheaper, as long as the fundamentals of the stock remain intact, I am always more than happy to continue averaging down, sometimes I can be wrong, but there is a fall back on value(Ncav), and it is ok to cut loss at -10 to -20% when the fundamental changed.
While for growth stocks, we are sometimes buying on the euphoria and optimism of the crowd, as seems in recent years.
Telsa reached an all time high above US$400 13 months back, and it is now at about US$123, at -65% for 2022, it is still extremely expensive, what is the fall back on value of it? And at US$123, it is much cheaper than when you got in at US$200, US$300 or even US$400, so what is stopping you on averaging down all the way? The perception of it has changed.
The timeless quote never fails.
In the short run, the market is a voting machine but in the long run, it is a weighing machine.Benjamin Graham
Emotional based investing is heavily reliant on faith and the stomach to weather through good times and bad times. But yet because of its reactive nature, emotional based investors often buy high and sell low. A herd based mentality is perhaps one of the worst traits an investor can have.
In my best year, 2017 with 37.69% returns, I was holding on to 10 stocks, with only 1 stock in red, which was Tye soon. Sunright gave me a 167.67% returns, while PNE, LHT & Multi-chem gave me 30+%, I sold Tiong Seng for 72% returns that year.
My investing was for long term, however with close to 10 years in the stock market, I find my investing outlook getting more short term, and I have to constantly remind myself, why did I brought this stock and why am I selling it?
My strategy to sum it up, is the cigar butt investing approach. In small Singapore, most of our value stocks are penny stocks, stocks that very few will touch, and the liquidity in SGX is quite bad for all these penny stocks. When your purchase order reaches 5 digit figure, it can be quite hard to fill up your order, which is very limiting, and frustrating at times.
Excluding the house and loan, 75% of our net worth is invested in the stocks portfolio, and 25% is emergency cash. So diversification is crucial, my ideal stocks counter would be about 20, with each counter occupying 3 to 10% of the portfolio, these numbers allows me to sleep well at night. In 2017, Sunright & Multi-chem was occupying 20% each in the portfolio.
Very few can really invest money that they can afford to lose, for me it is money that we do not really need for the short term. And everyone invest for a purpose, my main purpose is for retirement, and if possible, early retirement.
To be self sufficient in our silver years in terms of money, so that my children will not be the sandwich generation like our generation. You will still need love, care and concern when you are old, and it would be nice for someone to follow you to all the hospital appts and follow up, but they do not need to foot the bills.
Short term, it gives me stability for my family, knowing that we are cashflow positive years after years, our money buffer getting stronger.
We continue to inject money into the stock portfolio, year after year, sacrificing a bit of the short term wants and nice to have, for long term needs. It is extremely hard to be a single income family nowadays, but if there is a will, there is a way. In life we lose some, and we gain some. Investing is my forte, and it is part of my life planning.
P.S. The crypto portfolio is down by 90%, talk about value investing!