My SRS Portfolio Sept 2021

My SRS Portfolio and Thoughts [Sept 2021]

My SRS Portfolio Sept 2021
My SRS Portfolio Sept 2021

We are done to the last quarter for the year. Have you accomplished your goals? Hope that things have been going well for you. In any case, this article is a simple reporting for my SRS updates.

Disclaimers: This is not and should not be taken as a buy/sell recommendation.

If you would like to see my past quarter thoughts, you can refer to March2021 and June2021.

It is also close to the end of the year, you might be considering SRS investment. Please refer my most read SRS article, 5 Things You Need To Know About SRS to learn more.

My Thoughts And Consideration

My SRS Portfolio Sept 2021 Data
My SRS Portfolio Sept 2021 Data

The elephant in the room is the exposure into Chinese Technology Stocks (SGX:HST). It has obviously pulled down the entire portfolio as 50% of my portfolio is invested into it. Unfortunately, this SRS portfolio is still small and there is a concentration risk that I acknowledged.

Policymakers in China announced regulatory reforms that has impacted sectors like construction (think Evergrande), private education (think TAL Education Group) and Technology companies that are handling data (think Didi).

In the case of my SRS impact, it was due to the technology sector. As you can see in the Top ETF holding for SGX:HST, it haven’t been doing well year to date.

SGX HST ETF Top 25 Holdings
SGX HST ETF Top 25 Holdings

I remain positive in this exposure as this ETF is invested into quality Chinese companies that can deliver sustainable growth in the next 3 to 5 years. With high internet penetration in China, I believe the performance of the companies will follow suit.

SGX: BTOU is a recovery play in the portfolio. The recovery will depend on COVID19 recovery attempts in US. I’m optimistic that the recovery towards working in office will come in 3 to 5 years time.

Lastly, I’m still considering if I should inject new capital into the SRS portfolio.

Final Thoughts

Disclaimer: this is not and should not be taken as a buy/sell recommendation. Like what Charlie Munger famously said: the big money is not in the buying or selling.. but in the waiting.

We have be having a 3 parts webinar for last quarter of the year. Feel free to reach out to me for more information.

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

 

 

Why Dollar Cost Averaging is Not Working On China's Stocks

Why Dollar Cost Averaging is Not Working On China’s Stocks?

Why Dollar Cost Averaging is Not Working On China's Stocks
Why Dollar Cost Averaging is Not Working On China’s Stocks… yet.

The last 2 weeks was a bumpy one for China’s stocks. Technology companies ranging from Alibaba, Tencent, Didi and all the way to the educational sector pretty much spooked investors all over the world. There was massive selling and it seemed to have paused after JD reported good earnings.

Some of these company’s valuation are getting attractive once again as prices corrected in the last 2 weeks. This wasn’t music to the ears for those that are already invested. On the ground, I heard of many investors who took this opportunity to average down (buying at lower prices to lower the average prices). However, some investors seemed to have cracked under pressure and started asking why dollar cost averaging is not working.

Today, this article seeks to explain why dollar cost averaging is not working on China’s stocks… yet.

What is Dollar Cost Averaging (DCA)?

You probably have heard of this term Dollar Cost Averaging (DCA) from a friendly Financial Services Consultant as he was talking about investment. This strategy was made popular to retail investors as a way to invest by reducing the impact on volatility (the ups and downs) in the stock market.

“Time in the market, not timing the market”. This quote always serves as a reminder that investing (not speculation) is about being in the market and not timing the market. (Read More: Why Buy Low And Sell High Is Useless Advice).

Dollar Cost Averaging
Dollar Cost Averaging (Source)

The power of dollar cost averaging is making volatility your friend by buying at regular intervals. It is your objective to own as many shares as possible. In the above example, you are invest $1000 for 6 months.

Month #1: Share Price $10. You will be able to buy 100 shares ($1000/10 = 100)

Month #2: Share Price $13. You will be able to buy 77 shares now ($1000/13 ≈ 77). You have 177 (100+77) shares now. The total capital is $2000. The total value of your shares $2301 (177*$13). At this moment, you are profiting $301.

Month #3: Share Price $6. You will be able to buy 167 shares now ($1000/6 ≈ 167). You have 344 (100+77+167) shares now. The total capital is $3000. The total value of your shares $2064 (344*$6).  At this moment, you are losing $939. Most people starts to open their warchest now.

Month #4: Share Price $10.98. You will be able to buy 91 shares now ($1000/10.98 ≈ 91). You have 435 (100+77+167+91) shares now. The total capital is $4000. The total value of your shares $4776.30 (435*$10.98). At this moment, you are profiting $776.30 again. You are happy again.

Month #5: Share Price $7. You will be able to buy 143 shares ($1000/7≈143). You have 578 (100+77+167+91+143) shares now. The total capital is $5000. The total value of your shares $4046 (578*7). At this moment, you are losing $954 again. Some people start to freak out and wonder why dollar cost averaging is not working. In the case of China, the chart has been one direction downwards and “the moment” in the time for losses are prolonged.

This is the reason why people feel that dollar cost averaging is not working… yet.

Month #6: Share Price $10. You buy 100 shares. In total, you would have 678 shares. Total capital $6000. The total value of your shares $6780. You are profiting again.

You are making volatility your friend

Dollar cost averaging works when there are ups and downs. Currently, as the Chinese market is down, you will feel that it is not working. When the market recovers, DCA will suddenly “work again”. At this point, you will often hear people start talking about their investment gains.

“Time in the market, not timing the market”. 

I had to copy the quote again. Remember that investing (not speculation) is about buying shares of the companies/funds/assets you want through time. Dollar Cost Averaging is just one way that you can consider to invest.

Final Thoughts

You are not alone in this journey. I believe that there are many who have invested in the Chinese market because of good valuation. Of course, there will be non believers of Chinese market because of their tight regulations. At the end of the day, it is about investing with the strategy that you are most comfortable with.

You can buy stock tips. But you can never buy conviction.

Ask yourself if the asset allocation strategy fits your profile. Engage a professional to finetune the strategy. Lastly, do start. With every crisis, comes an opportunity.

With every crisis comes an opportunity
With every crisis comes an opportunity

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

We are forced to be investors whether we like it or not

We are “forced” to be investors whether we like it or not

We are forced to be investors whether we like it or not Low Interest Rate
We are forced to be investors whether we like it or not: Low Interest Rate Singapore 25 Years

This one chart explains it all. It was just a “few years” back when my parents told me that it is important to save money in the bank. Saving money in the bank does have many tangible benefits. Firstly, it creates a pool of emergency funds for a peace of mind. Secondly, it gives you a lump of money to prepare for any opportunities. Thirdly, if you don’t do anything, the banks will give you up to 7% interest per annum (Dec 1980). That sounds good to me!

Fast forward to 2021, the bank is giving on average around 0.05% and it seems to be getting lower. The low interest rate environment has changed many areas of finance. Firstly, it has already affected the insurance companies’ participating plans. Secondly and more importantly, it has lead to the erosion of money.

This means that the money you have now, will be worth less in future. For every $10,000 you have in your bank, the real value of your $10,000 will be halved ~$5,454.84 in 30 years if you continue to keep money in bank. (assuming 2% inflation rate)

You can say that we are in a generation that is “forced” to invest or suffer the erosion of money value with time.

We are forced to be investors whether we like it or not Value Erosion

What It Means For You?

Whether you are in your 20s who might be working for the next 40 years (damn) or in your 50s who might be retiring for the next 30 years, we are all exposed to the same erosion. As a retiree, it is important to understand that your savings value will go down in quantity and value. As a working adult, it is important to understand that your hard earned money is worth less down the road.

There is only one obvious thing to do. Either you keep pace with inflation (endowment plans/selected bond funds/etc does a decent job for this) or you have beat inflation. If you want to beat inflation, you will most possibly be expose to other asset classes which might have higher volatility and risk. It is crucial to know your risk profile here before you proceed.  You might be not suitable for certain asset classes and it is important to talk to professional to assess this.

The Chase For Higher Yield

There are only 2 ways to do this. Either you do it yourself or let others do it for you.

Do it yourself: This is an active role. It involves many things such as knowing what asset classes to buy, what assets in the asset classes to choose from, the pros and cons associated into each assets, the co-relationship between each assets, the duration of investment, the investment thesis and when to exit. This list is not exhaustive.

There is a very strong emphasis here on the level of financial knowledge which might take years to acquire. (All this time, still spending most of your waking hour working on the job). It is a longer process but definitely rewardable.

Do it for you: This is a semi passive role. There is still a personal responsibility to know what you are investing in. Otherwise, you are completely at mercy of the provider. In Do It For You, usually a portfolio is readily available. There will be an explanation on the investment thesis and if you subscribe to the investment thesis, you can consider taking up the Do It For You.

Annual reviews or semi-annual reviews are important here to see how the investment is doing. Generally, it is a passive role after that.

 

Final Thoughts

Whether you choose to do it yourself or do it for you, the reality is that you have to do something. If you don’t, the retirement journey just might be a little hard.

We are forced to be investors whether we like it or not
We are forced to be investors whether we like it or not

Till then, take care!

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

3 Things To Know Before You Do CPF Shielding

3 Things To Know Before You Do CPF Shielding

As the population gets financially educated especially when it comes to the usage of CPF, the idea of CPF-SA shielding is gaining traction. Some says it is a “loophole” and wants this to be closed. Personally, I think it is weird to call it that way. It is like calling investing a loophole because it helps you achieve financial freedom.

If you have read my articles before, you would be aware that context is very important for planning and today’s focus will be the 3 things to know before you do CPF-SA Shielding.

3 Things To Know Before You Do CPF Shielding
3 Things To Know Before You Do CPF Shielding (Beautiful Photo From NME)

What is CPF SA Shield?

At age of 55, your Retirement Account (RA) will be funded from your Special Account (SA) first and then your Ordinary Account (OA) to make up Full Retirement Sum (FRS).

Read More: 5 Things You Need To Know About Your CPF

As SA gives 4% interest as compared to OA 2.5%, there is an interest (pun intended) to keep monies in SA. The idea of CPF-SA shielding is to fund your RA with more of your OA than SA by transferring your SA monies out temporarily.

So what can go wrong?

Read More: 5 mistakes people make using their CPF

Context. It is always about context. In my own opinion, not everyone should/can do shielding.

 

Context #1: Paying For Mortgage Using CPF-OA

Your CPF-OA contribution rate at age 56 is 12%. Using an salary of $6000 (Ordinary Wage Ceiling is $6000 anyway), $720/month goes into your CPF-OA. If your monthly mortgage is > $720/month, you might be using your previous CPF-OA contribution if you don’t want to use cash. (There is a whole literature on why you should use cash but we will leave it for another discussion).

When you do CPF-shielding, your CPF-OA balance drastically reduces and this might mean that you would need to use cash for your mortgage. This might adversely affect your cashflow in future.

 

Context #2: It Assumes You Know Where to Park your Money Temporary

There are several instruments that you can consider purchasing using your CPF-SA. Different investment carries different risk. It is most important to know your own risk profile or work with someone who can do that for you. Even money market funds carries it’s own unique set of risk. Please take time to understand the benefits and risk of your chosen funds.

To illustrate an example: Mr Suay bought $100,000 worth of Singapore Bond Funds using his CPF-SA to do shielding at the age of 54. Before Mr Suay could sell the Singapore Bond Funds, there was an economic crisis. Typically, volatility of bond funds are not high. However, because of the crisis, Mr Suay may see his Singapore Bond Funds be worth $90,000 now. Mr Suay may experience losses if he wishes to sell it and put it back into his CPF-SA.

And yes, there may be transaction costs involved. Please do the calculations to see if it is worth it.

Sidetrack: It is only when you know what the risk is, then you can learn how to manage those risk. It might be unwise to avoid risk altogether.

 

Context #3: If you are risk adverse

Every trained financial professional will be able to find out your risk profile by doing a questionnaire. If you happen to be a risk adverse individual, this might not be the best strategy for you.

It is okay to be risk adverse. I think everyone of you will have a different experience with money. There is nothing wrong planning your financial journey as a risk adverse individual. It just means the instruments that you will be using will be different from the rest. There is nothing wrong with that. You are uniquely you.

 

Final Thoughts

I believe that are merits of doing CPF-SA shielding if done well. The most important consideration is to see if this strategy makes sense to you. The context of the strategy is very important. It may not be applicable to some out there especially if they fall into #1, #2 or #3 as explained above.

If you wish to find out if CPF-SA shield is applicable for you, please do reach out to me.

Till then, take care!

Read More: CPF Accrued Interest Trap

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

Why Buy Low And Sell High Is Useless Advice

Why Buy Low And Sell High Is Useless Advice

I hope this will be the last negatively titled article. So much bad advices have been given out of context by gurus such that I felt that someone have to make a stand when it comes to these advice. The previous article Why Buy Term And Invest The Rest Is Bad Advice captured many eyeballs but I would much prefer to build a personal finance site that is more positively charged.

Today, the article focus mostly on the strategy buy low, sell high and why it is useless.

Why Buy Low And Sell High Is Useless Advice
Why Buy Low And Sell High Is Useless Advice

 

What is Buy Low and Sell High?

The intention for investment is very simple. It is to make money (repeat this in your mind). When you make an investment, you must have every intention for your investment to grow in value in future. Take an example of Facebook (FB). In 18 May 2012, the share price of FB was $38. When you invest into FB at that time, you would have strongly believe it would grow. Today, 9 July 2021, the share price is $350. You would have made 816% by “buying low and selling high”.

Why Buy Low And Sell High Is Useless Advice Meaningless Facebook Stock Chart
Why Buy Low And Sell High Is Useless Advice: Meaningless Facebook Stock Chart

This advice is often easy to say but in reality very difficult to do. Worse, there are many experts out there who will confidently claim that they have a secret system to buying low and selling high.

I offer you 3 reasons why this advice often does more harm than good.

 

It Assumes A Trading Mindset

If you see any guru who preach about “investing in the long run” and “buy low and sell high”, run away and run away fast. These 2 concepts simply DO NOT mix well together.

The notion of “buying low and selling high” suggests that there is a certain price that you would like to buy and let go. Often, these entry and exit points are obtain from the study of charts (technical analysis). In most cases, the timeframe of this strategy is shorter in nature to make a profit in the stock market.

If you have invested into FB for the long run in 2012, you would be in a lot of pain thinking when to sell simply because FB would have repeated tested the all time highs every few months. The whole intention of “investing in the long run” would be thrown off course because this person is constantly thinking when to sell. Simply put, “investing in the long run” and “buy low and sell high” do not mix well.

At this juncture, I would like to state that if this individual is having a trading mindset. The “buy low and sell high” make sense. It is the essence of his investment thesis as much as “trend is your friend”. But not if you are a long term investor.

 

It Assumes A Symmetry of Returns

The phrase “buy low and sell high” implies that the stock market goes up 50% of the time and goes down 50% of the time. I believe that it would work well in that situation.

However, in reality this isn’t the case. Bull market are persistent. Bear market don’t last very long. Therefore, the cost of waiting for the “low” is extremely high.

To illustrate this case, UBS demonstrated this with 3 portfolios.

#1: Buy and hold

#2: Sells when the S&P 500 hits a new all-time high, buying back into the market after a 5% drop

#3: Sells at S&P 500 record highs, buying back after a 10% correction

Starting from 1960, an USD$100 investment would be worth the following in 2018 (when the article was written)

#1: $28,645 (Yes. No typo here)

#2: $422

#3: $390

You can see that strategy #1 beats the other “buy low, sell high” strategy hands down. The cost of waiting is terribly high if you follow a strict “buy low, sell high” strategy.

 

It Assumes A Strong Psychological Mindset

While, it is almost impossible to know when the worst days are, buying low is not easy at all. I will take the most current event as an example.

Disclaimer: This is not a buy/sell recommendation.

Alibaba (BABA) stock price plunged down to a new low at $205 (9 July 2021).

In 27 March 2018, revenue for BABA is 226.9 B Yuen. Share price was $192.

In 31 March 2021, revenue for BABA is 798.6 B Yuen. Share price was $229.

While revenue increased 250%, share price only grew 19%. This new low has been attributed to the CCP (Chinese Communist Party) clamping down on Chinese Technology Stocks. Several gurus are calling “sell” because of regulatory risk. Many bloggers are also selling BABA because of “opportunity cost” and believe that money could be put into other counters that is in momentum now. Honestly, I don’t blame them. It is not easy to see your stock price being beaten again and again. It isn’t psychologically easy when price is down. Nobody likes to be wrong. Nobody likes to be wrong for days, months or years. Often, people may even sell at a lost because it may be psychologically difficult.

Long term value investors however are adding into BABA. Among which, Charlie Munger and Mohnish Pabrai are the more noticeable names that are adding into BABA.

 

Final Thoughts

Disclaimer: I have mentioned some companies above for illustrative purposes. These are not and should not be taken as a buy/sell recommendation.

Personally, I think “buy low and sell  high” is an over-simplistic investment thesis. While, it is easy to explain it in theory, reality often paints a different picture. I feel that you should focus on simple, actionable and personalized investment thesis to help yourself achieve the financial freedom that you want.

 

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.