8 years of investing and tracking

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.

Till then.

P.S. The crypto portfolio is down by 90%, talk about value investing!

Stock portfolio finally back in the green amidst the year of Covid

Previously, i had to manually remember dates for the release of company financial reports, and most of the time i do missed it, but with the SGX mobile app, after adding stocks into my favourite list, and pressing the alarm button on the top right, i am able to get very timely notifications and it has been hassle free since then.

This week, many companies which i have invested, have released their financial results, i would say it is a mixture of good and bad results.

The commentary section at the last of the financial report is one of the most important aspect that every investors should look out for other than the figures. And covid19 is mentioned in most if not all of the listed companies.

This is a very important period for investors, as we are able to see firsthand how the covid 19 has financially impacted the listed companies.

Before the covid striked, the portfolio at it’s best this year was about +5% in Jan/feb, and at it’s worst about -18% in April/May.

This is my first time experiencing a black swam event, and i think as a value investor, i made some bad decisions, by selling some of my stocks at the lowest.

Here are some of my thoughts back then, the stock market was getting more and more expensive, there were very minimal good value stocks, and thus i was looking at some of the more conservative growth stocks, for value stocks, most companies are the kind where they are largely unheard of, at least for me, while the big names very seldom appeared in the value stocks screening, so at the first quarter of this year, i purchased some big names whose price was beaten down, like Great Eastern, brought at about $22 and sold at $17.70, hong leong finance brought at $2.65 and sold at $2.2, terrible timing to sell back then when everyone was very pessimistic.

And i have since constantly reminded myself to be greedy when most people are fearful and fearful when most are greedy. It was a good opportunity to know myself better, and the kind of conviction which i had, or believe i had.

As a value investor, i am skeptical of many things, and the stock market always seems like it is overly optimistic, or a wild swing into overly pessimistic mood, the rapid sell down and the rapid rise back of the US markets is a strange sight to behold.

As a value investor, buying is the easier part, while selling is the hardest, the portfolio reached an all time high NAV of $1.585 in end of 2017, since inception in start of 2015, with a CAGR of 16.72%, Sunright exploded that year, and contributed to most of the portfolio gains, then Sunright slumped down back to the recent low of $0.375, i did’t sell anything when it was on it’s way up, and also not on it’s way down, it contributed greatly again to 2018 portfolio returns this time negatively, the worst results of all time at -14% for that whole year. Sunright continued to be the third largest holding of the portfolio, after cash portion and Multi-chem. i have sold off a little bit this year to re balance the portfolio.

Next on to Multi-chem, the whole portfolio is in green at 0.87% gain despite of all the mistakes that i made this year, after it rises an amazing 75% since the start of 2020 including dividends given. I purchased it in 2016 in the range of $0.475 to $0.555, and it is the largest holding of my portfolio.

There were a lot of mistakes made in the selling part this year, and a little bit of trading in and out of the market when the prices rise or fall drastically in a short period of time, and it did not ended up well, selling stocks for a small profit and watching it rise and rise. All in all, the selling made in this year has been bad, but the buying was good, a lot of stocks purchased this year in the first/second quarter has risen well.

There is still 4 more months to go before 2020 ends, and a lot of things can happened in a short period of time, the portfolio will most likely go back to the red again, i am aiming for a 5% to -5% range, and the whole stock market can tank again, though Singapore stock market has not recovered yet and is now around -17.5%. It is a good time to invest in the STI ETF at $2.594 with a timeframe of 5 years and beyond.

The stock market is a voting machine in the short term, but it will always revert back to a weighting machine in the long term, company by company. It can be kind of silly trying to justify and interpreting everyday market movement, why this stock went up, why this stock went down, there will always be a reason for it, if you cast your net as wide as possible, and getting people to speak the reason that you want, for recognition, fame or fortune.

“But as long as the music is playing, you’ve got to get up and dance.” Especially so when your job and income depend on the daily movement of the stock market.

But for the retail investor, we are reminded by the sage of Omaha. “The stock market is a no-called-strike game. You don’t have to swing at everything – you can wait for your pitch.”

Avoid things that you do not know, avoid the hype, understand yourself, find out what kind of investor you are and stick to your circle of competence.

Stay safe, and hope everyone avoid over leveraging, and also do not put your eggs in one basket.

“A rising tide floats all boats….. only when the tide goes out do you discover who’s been swimming naked.”