I had written something similar on the last day of 2017 (see here). I felt from now on, it would be a good tradition for me to write an annual review, preview and of course, about our dear friend Bob. So here it goes for this round.
2018 Review
If 2018 was a roller coaster, it would be a hell of a ride as compared to 2017 which was just a normal uphill climb. The S&P 500 Index fluctuated heavily between 2350s and 2920s this year1. For the Straits Times Index, it went to as high as 3610s and as low as 2960s2. A lot of factors had attributed to the volatility of the markets, but the main ones most people point to were tariffs and the related trade wars, and the rise of interest rates.
A year ago I had mentioned that I would look into cybersecurity, payment solutions and alternative energy. Using three United States (U.S.) based ETFs; HACK for cybersecurity, IPAY for payment solutions and ICLN for alternative energy, the year-to-date returns as at 31 Dec 2018 were +6%3, -0.12%4and -9.39%5respectively. They are still relevant in my opinion, as I foresee they are long-term trends rather than short-term fads (see here for my article on trends and fads). Do your due diligence and analysis before committing.
2019 Preview
If using the trade wars and interest rate hikes as basis, I would expect 2019 to be less volatile than 2018, provided that full resolution is achieved between the United States (U.S.) and China on trade issues, and the U.S. Federal Reserve adhere to its two-rate-hikes as announced6. Overall, 2019 will be a challenging year for the financial markets, local and overseas, therefore it is advisable to adopt a diversified portfolio stance and be prudent in your fundamental analysis.
In my humble opinion (and educated guesses), technology will continue to make inroads, especially on the disruption, artificial intelligence and blockchain areas. If you wish to venture further into them, do perform analysis on which sectors/industries will benefit from their development. You could use my associative investing method (see here) as a guide.
Bob
Compared to 2017 (+12.13% XIRR), Bob’s Bedokian Portfolio did not fare well for 2018 (-1.94% XIRR), though he had collected SGD 909.64 in dividends. Bob knows that his investment horizon is long term, so this “down” is just a kink in the journey. On 2 Jan 2019 he will inject another SGD 5,000 to the portfolio, so watch out for this space in the next few days.
That’s it for me. Wish you a happy 2019!
1 – Yahoo Finance. S&P 500 Index. https://finance.yahoo.com/quote/%5EGSPC?p=%5EGSPC. (accessed 1 Jan 2019)
2 – Yahoo Finance. STI Index. https://finance.yahoo.com/quote/%5Esti/ (accessed 31 Dec 2018)
3 – ETFDB.com. ETFMG Prime Cyber Security ETF. https://etfdb.com/etf/HACK/. (accessed 31 Dec 2018)
4 – ETFDB.com. ETFMG Prime Mobile Payments ETF. https://etfdb.com/etf/IPAY/. (accessed 31 Dec 2018)
5 – ETFDB.com. iShares Global Clean Energy ETF. https://etfdb.com/etf/ICLN/. (accessed 31 Dec 2018)
6 –Transcript of Chairman Powell’s Press Conference, p2. 19 Dec 2018. U.S. Federal Reserve. https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20181219.pdf(accessed 31 Dec 2018)
ReplyDeleteLike this blog To Be A Success Trader because get detail information regarding trading this is very helpful blog to all trader.
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Like the read , thanks for the details. Started bit late the investment journey and trying to understand stuff.
ReplyDeleteWould be helpfull to know the dividend stategy , how much average capital would be required for a dividend of 5k in an annual.
Assuming all is good and removing the rebalance part :)
Thanks in advance
Hi Praveen,
DeleteThanks for reading.
There are a few ways to implement a dividend strategy, depending on your preference. The most basic way would be to go for high-yield securities, in which case a good example is a full REITs portfolio. The ball-park average yield for REITs is about 7%, so to have a $5K annual dividend, the capital is about $71K.
The danger about having an all-REITs portfolio will be asset class risk; if the REITs took a big hit (e.g. a big hike in interest rates), their demand will go down and so will its share price and subsequently, dividends.
For myself I will go for a more diversified approach, hence I will forgo some returns for protection from risk. I plan my Bedokian Portfolio to return a yield of between 4% and 6%, hence the portfolio size is between $83K and $125K for a $5K dividend.
A point to note is that dividend yield is a percentage of distribution over the current share price, hence the percentage may be the same, but your dividend amount may increase as time goes by.
Hope I have answered your question. :)
Cheers!
Bedokian.
Hi Bedokian -
ReplyDeleteDetails was very usefull and detailed , thanks a lot for your time and yes its certainly helpfull
If you have any blog on portfolio do share the link will go through :)
Thanks again
Praveen
Hi Praveen,
DeleteYou are welcome.
Locally, you can look the blogs up at aggregated sites such as TheFinance.sg and SGInvestors blog. However, only a few are on asset class portfolios, while the rest emphasized on stock portfolios.
Books wise, there are a number of them written on asset class portfolios, but usually from an American perspective. There is no harm in reading them, though. Some books that I have read are:
- All About Asset Allocation by Richard Ferri
- The Bogleheads Guide To Investing by Taylor Larimore, et al
- The Intelligent Asset Allocator by William Bernstein
- How To Be A Successful Investor by William Cai (local based)
Hope this helps.
Cheers!
Bedokian.