Active Or Passive? It Depends.

When talking about investing, one could often hear the terms "active investing" and "passive investing". Usually, active means selecting investments and making decisions along the way, while passive generally means buying broad market indices and leaving them alone most of the time.

 

Picture generated by ChatGPT

However, one may look a little deeper than that. Assuming asset allocation remains constant, portfolio management can be looked at from two angles:

Selection: “What do I buy?”

Management: “What do I do with what I have vested?”

Putting these two together, there would be four outcomes as detailed below.

Passive–Passive

Passive selection + passive management.

The investor buys broad-based index funds or exchange traded funds (ETFs) and largely leaves them alone. There is little security selection and little portfolio intervention. Rebalancing, if carried out, is periodic and systematic, perhaps once or twice a year. This is probably the closest to what is commonly called a "set-and-forget" portfolio.

Passive–Active

Passive selection + active management.

The investor uses passive instruments, such as ETFs, but actively manages the portfolio. For example, an ETF may be replaced, cash may be deployed, or the portfolio allocation may be adjusted when the percentages change.

Active–Passive

Active selection + passive management.

Here, the investor actively chooses individual securities but largely leaves them alone afterwards. For instance, an investor may select a group of stocks and real estate investment trusts (REITs) based on certain criteria and hold them for the long term. Rebalancing, if required, is carried out periodically according to a predetermined process.

Active–Active

Active selection + active management.

The investor actively chooses the securities and actively manages them afterwards. Holdings may be added, reduced or replaced based on changing circumstances. Rebalancing is also actively determined rather than carried out at fixed intervals.

A Mix Of Both: Core and Satellite

A portfolio does not have to consist entirely of ETFs or individual securities. The two can be combined through a Core and Satellite approach¹.

The core is the central group of financial instruments, typically index ETFs, which forms the main basis of the portfolio. The satellites are individual securities such as equities or bonds, which can be used to enhance the portfolio further.

The idea is to combine the diversification of passive instruments with some individual security selection, potentially enhancing the yield and returns of the portfolio.

For example, an investor could have an equities index ETF as the core and selected individual equities as satellites. The same approach can be used for REITs and bonds, with the ETFs providing the broader exposure while the individual securities provide the additional selection.

Core and Satellite therefore describes how the portfolio is composed, while the four active–passive combinations describe how the holdings are selected and managed.

A Core and Satellite portfolio that is periodically rebalanced according to predetermined rules could be Active–Passive, if the individual securities are actively selected but the portfolio is otherwise managed systematically. If the holdings and rebalancing are both actively reviewed and adjusted, it could instead be Active–Active.

Conclusion

The Bedokian Portfolio can be implemented through all four combinations of active and passive selection and management.

The underlying constant, however, remains the asset allocation. The choice of ETFs, individual securities, or a combination of both can vary, as are the ways the portfolio is managed and rebalanced.

Ultimately, asset allocation, diversification and rebalancing work together to balance return potential and risk.

So, active or passive? 

It depends on what one is being active or passive about.

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Disclaimer

1 – The Bedokian Portfolio (2^nd Ed), p135-137

Privatising Profits, Socialising Blame

The recent roller-coaster ride in South Korea's KOSPI has been quite something. After a strong rally earlier in the year, the market experienced a sharp reversal in July before staging an equally sharp rebound. Majority of opinions focused on elevated margin borrowing and leveraged products, which had amplified the market's movements.

Picture generated by ChatGPT

To be fair, this is not a uniquely Korean phenomenon. We have had seen similar episodes in many markets over the years. When prices rise, investors talk about conviction, opportunity and being right. When prices fall, the discussion can sometimes shift towards interest rates, institutions, short sellers or regulators, to name a “few”.

 

It reminded me of an old phrase: privatising profits, socialising blame.

 

Who owns the decision?

There is nothing wrong with having conviction in an investment, but rather the question is whether the accompanying risks are understood and accepted.

 

One of my principles often advocated is to avoid leverage. Borrowing money to invest does not make the underlying investment better. It simply increases the size of the potential outcome, both up and down.

 

When markets rise, this can make a good decision look even better. When markets fall, however, the losses can become much harder to manage.

 

Framework or speculation?

For investing, we begin with objectives, risk appetite and asset allocation before moving on to individual securities. For trading, there is a defined trading plan, including the entry, exit and acceptable risk. Neither approach inherently requires borrowing money to make the numbers look more exciting.

 

Once leverage and excessive speculation enter the picture, the process can easily be reversed. Instead of asking whether an investment or trade fits the portfolio, the investor or trader starts with a position and then finds reasons to justify it. The larger the position becomes, the greater the temptation to defend it.

 

This is not unique to any particular market or group of investors. Given the right combination of rising prices, easy credit and optimism, it can happen almost anywhere. The problem is that a speculative position does not become a sound investment simply because it has made money. When it eventually goes wrong, blaming the market does not undo the risk that was willingly taken.

 

Conclusion

The KOSPI episode will eventually become another market story. The technology, stocks and headlines will change, but the underlying behaviour will probably remain familiar.

 

For my take, one of the important disciplines in investing and trading is simply to own our decisions. If we are prepared to take credit when we make money, we should also be prepared to accept the lesson when we lose it.

 

A sound methodology cannot prevent every loss. What it can do is reduce the temptation to turn investing into speculation, and ensure that one wrong decision does not have the power to derail the entire journey.

 

The market does not owe us profits, and perhaps that is a good thing.

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Disclaimer

The Bedokian Portfolio Turns 10!

Back in July 2016, the first post on this blog went live. It was a short piece, little more than a welcome note explaining that this would be a space for observations and opinions on the markets and the economy, alongside clarifications on The Bedokian Portfolio ebook (then the first edition) that had just been published. I was hoping that the information from the ebook and blog would be useful to whoever was reading them. At that time, there was still a relative shortage of investment books written with a Singapore context, especially in the field of portfolio management. 

Picture generated by ChatGPT

Looking back at the past 383 posts, I had commented on the general market and economic situations, analysed the various securities (vested or not), and shared on the psychological and behavioural aspects of investing. Beyond the blog itself, the past decade also saw the publication of the second edition of The Bedokian Portfolio, The Trading Portfolio Handbook, and an amateur paper testing The Bedokian Portfolio on the United States market (all available for free download here). 

Recently, three apps were developed: Equities Indicator, Growth Indicator and S-REITs Indicator (see here), and they assist in screening value and dividend equities, growth equities and Singapore real estate investment trusts (REITs), respectively, according to the selection guidelines from the The Bedokian Portfolio ebook¹. The introduction of AI-generated pictures and characters for the blog, alongside the apps, represents my experimentation with AI, which I will elaborate on further below.

In the past ten years, we had gone through a global pandemic, trade wars, periods of low and high interest rates, the ongoing de-globalisation and the current AI boom. Through all of this, the five asset classes of the Bedokian Portfolio: equities, REITs, bonds, commodities, and cash, experienced their own respective ups and downs. It is precisely the correlation between the asset classes, together with the accompanying disciplines of diversification and rebalancing, that brought about the gradual compounding growth and relatively lower volatility of the portfolio.

Where is our portfolio standing now?

I had shared earlier here that our main Bedokian Portfolio was down 4.75% year-to-date (YTD). As of local market close yesterday (29 Jul 2026, 5:00 PM), our portfolio was up around 6.8% YTD, and the total market value had surpassed 9.4% of our year end 2029 target. The latter is broadly expected, as we are benchmarking against a 4% year-on-year growth trajectory, and this conservative performance measure acts as a dampener to smooth out the percentage swings of returns.

The Use of AI

In recent years, AI has become indispensable in our digital life. A lot of apps and even the familiar online search engines have seamlessly incorporated the AI tools, in particular large language models (LLMs) and chatbots. I had also started on this trend with the abovementioned picture generation, and development of the three apps through AI assistance (a.k.a. vibe coding).

On top of this, we sometimes use AI to assist and augment our investment and trading research and analysis. The fun part about this is we could use the output of one LLM, and input its result on others, i.e. using the “LLM-as-a-judge” method, to provide additional perspectives.

AI tools are powerful in terms of collecting, aggregating and summarising data and information, and sometimes in inference. Still, my honest opinion is, for the investing and trading aspect, some manual interpretation and intervention is needed, and the ultimate judgment call should be reserved on the individual investor/trader.

Going Forward

The future is unknown, as always, and there will be events that disrupt the whole scheme of things, like complex geopolitics and AI in the current context. What is known is that this blog will continue for the foreseeable future, providing tips and commentary on the investing world.

Here is to the next chapter, and to a fruitful investing and trading journey ahead for all of us.

Try out the Growth Indicator, Equities Indicator and S-REITs Indicator screening app for FREE. You can use it as a web page or save it as an app-like bookmark on your home screen of your computer, tablet or mobile for faster access.

Disclaimer

1 – The Bedokian Portfolio (2^nd Ed). Ch12 and Ch17.

How Liquid Should Your Liquidity Be?

Cash plays an important role in the Bedokian Portfolio, a pool of liquidity that could be deployed to the other four asset classes (equities, real estate investment trusts or REITs, bonds and commodities). Cash injections, through regular contributions from disposable income, dividends from equities, distributions from REITs, coupons from bonds and interest from cash, contribute to this pool.

What if one could get more bang for the buck from this liquid pool?

Sounds a bit contradictory as cash is meant to be readily deployable capital. Unless the cash is in physical form and locked away in a safe or a metal container of a famous powdered malt-drink, it is still earning something depending on where it is.

 

 Picture generated by ChatGPT

 

Where Else To Put Cash?

The first obvious place is the basic bank savings account, which is around 0.05% based on what I had seen from bank websites. The next bank offering would be fixed deposits that offer a higher interest rate but with locked-in periods ranging from one month to three years.

 

Besides banks, there are other means of holding cash and still earning something. Six-month and one-year Treasury Bills (T-Bills) are issued by the Monetary Authority of Singapore (MAS) and can serve a similar purpose to a fixed deposit, although they are government securities rather than bank deposits. There is another financial instrument issued through MAS, the Singapore Savings Bonds (SSBs), a 10-year savings plan with incremental interest rates over time.

 

Another mention is money market funds, or MMFs. These are unit trusts that invest in short-term debt securities such as T-Bills, short-term corporate debt and fixed deposits. Hence, they combine several cash management instruments within a single investment vehicle.

 

Not All Are Equal

Safes, bank accounts, T-Bills, SSBs and MMFs are ways to hold one’s cash in the portfolio and the latter four generate some return, albeit lower than the other asset classes. However, they are different in terms of their structures and characteristics. Bank savings accounts and fixed deposits are insured up to SGD 100,000 by the Singapore Deposit Insurance Corporation (SDIC), subject to conditions. T-Bills and SSBs are issued by MAS and backed by the Singapore Government. MMFs are investment vehicles, so they are subject to market forces and are not guaranteed in the event of a collapse, though the latter happening is very remote.

 

My take is that the more important aspect of cash is not about how much yield I can earn, but rather the liquidity of the various mentioned instruments. For me, liquidity matters more than squeezing out every last iota of return.

 

Monies from bank savings accounts can be withdrawn anytime. MMFs can generally be redeemed within a day or two. SSBs are redeemed monthly, while T-Bills and fixed deposits will have to wait till the end of the tenure, provided the former are not sold in the secondary market, and the latter are not closed prematurely. Looking across these cash management instruments, there is generally a trade-off between yield and liquidity.

 

Any Compromise On This?

Choosing a place to hold cash for the portfolio is like considering the "liquidity of the liquidity". My take is, as a ballpark, a holding period of no more than six months is preferred; this is the time frame where a typical passive investor would rebalance his or her portfolio, so a six-month T-Bill or fixed deposit would allow the funds to become available again for deployment. Also, other recent streams of cash received from the portfolio could be utilised first, and this may lead to a probable sub-division of cash into liquid (bank savings accounts and MMFs) and slightly less liquid places (T-Bills, SSBs and fixed deposits), or maybe even in safes and tin cans (though a trip to the automated teller deposit machines is needed for this).

 

Final Take

There is a tendency for investors to judge every asset class by its returns. Equities are expected to grow. REITs are expected to generate distributions. Bonds are expected to provide stability. It is only natural, then, to expect the cash component to chase the highest interest rates available.

 

But perhaps that is asking it to do something it was never meant to do.

 

One lesson I have learnt over the years is that every asset class should have a clearly defined purpose within a portfolio. Problems often arise when we expect one asset class to behave like another.

 

In the Bedokian Portfolio, the role of cash is simple. It is not there to outperform the other asset classes. It is there to provide a readily deployable pool of liquidity whenever investment opportunities arise. If it can earn a modest return while waiting, that is certainly welcome. But if chasing a slightly higher yield means sacrificing that flexibility, then perhaps the extra return is not worth the compromise after all.

Try out the Growth Indicator, Equities Indicator and S-REITs Indicator screening app for FREE. You can use it as a web page or save it as an app-like bookmark on your home screen of your computer, tablet or mobile for faster access.

Disclaimer

References

https://www.mas.gov.sg/bonds-and-bills

https://www.investopedia.com/terms/m/money-marketfund.asp

https://www.sdic.org.sg

 

Doing Nothing Is Doing Something

One of the oft-heard questions from fellow investors during periods of market volatility was, "What should I do now?"

Picture generated by ChatGPT

It is a natural question. When markets move like a roller coaster, there is an expectation that investors should do something, e.g., buying, selling or making some sort of adjustments to their portfolios.

However, sometimes the best decision is to do none of the above.

While doing nothing is mostly thought of as being indecisive or lazy, but in investing, it could be a form of a deliberate action taken.

The Urge To Act

Humans are conditioned to equate action with progress, i.e., getting things done. Problems in our personal and working lives are taken care of by doing something, so when issues popped up, the urge to solve them is there.

The catch is that markets do not reward activity, but rather they reward good decisions.

Has Anything Really Changed?

Let us assume that an investment portfolio fell 10% over a few weeks.

Has the investor's financial objective changed?

Has the investment horizon shortened?

Have the businesses of the securities held permanently deteriorated?

Has the portfolio drifted sufficiently to warrant rebalancing?

If the answer to these questions is "no", then perhaps the investment plan requires no immediate action. The market has changed, but the portfolio itself may still be doing exactly what it was designed to do.

Knowing When To Act

This does not mean investors should never act.

There are occasions when action is necessary, like business fundamentals have deteriorated, asset class allocation drifted too far from the target percentages, and/or personal circumstances has changed. In such cases, being inactive may be the wrong decision to take.

The important point is that decisions should be driven by one's investment philosophy and methodology, not by the latest market headlines.

Takeaways

One of the least known lessons in investing is that not every situation demands a response.

There are times to buy. There are times to sell. And there are times to simply allow a well-constructed portfolio to continue doing its job.

Doing nothing is not the absence of a decision. When supported by a sound investment framework, it is a decision in its own right.

Try out the Growth Indicator, Equities Indicator and S-REITs Indicator screening app for FREE. You can use it as a web page or save it as an app-like bookmark on your home screen of your computer, tablet or mobile for faster access.

Disclaimer

Bob’s Portfolio Update: June 2026

Our Bedokian Portfolio test investor, Bob, had recently rebalanced his portfolio on 30 June 2026, which can be seen here.

At the end of last year, I had mentioned that Bob would be changing his real estate investment trust exchange traded fund, or REIT ETF (here). As observed, Bob usually rebalances his portfolio biannually: the first market day of the year in January and the last market day in June. On 30 June 2026, along with the usual SGD 5,000 cash injection, Bob had swapped out the REIT ETF with another. The timing was impeccable as that date is the last cum-dividend day for the replacement ETF (Amova-StraitsTrading Asia ex Japan REIT Index ETF, or ticker CFA).

Picture generated by Gemini

Why The Switch?

The previous counter in Bob’s holdings, the Phillip SGX APAC Dividend Leaders REIT ETF (BYJ), was the first of its kind, listed in October 2016. When Bob started his investment journey in January 2017, the availability of the Phillip REIT ETF came at the right time to be the representative for his REIT allocation.

In December 2025, while preparing for rebalancing, Bob reviewed the portfolio and decided to change the REIT ETF. The major consideration points were:

• Cost – Total Expense Ratio (TER): BYJ’s TER is 1.70% while CFA’s TER is 0.55%. A lower TER meant that returns would be eroded lesser by fund expenses.

• Size – Assets Under Management (AUM): BYJ’s AUM is around SGD 10 million and CFA’s AUM is around SGD 712 million. A higher AUM allows better economics of scale in which a lower TER is one of them. Also, a higher AUM fund enjoys better liquidity in terms of a narrower bid/ask spread that is good for quick transaction and price discovery.

• Diversification – Holdings and Exposure: BYJ holds 30 REITs while CFA holds around 43 REITs. In terms of geographical and sector exposure, accordingly BYJ is three countries (Singapore, Australia and Hong Kong) with a huge skew towards retail (around 43%); CFA’s exposure is six countries (Singapore, Hong Kong and India among them) with at most 26% to a sector, therefore is more diversified.

• Dividend Yield: The 12-month dividend yield as of the fourth quarter of 2025 for BYJ and CFA are 4.23% and 5.36% respectively. A dividend yield of 5% and above is preferred as REITs are seen as the main income generator in the Bedokian Portfolio.

Why Not Others?

Good question. There is three other REIT ETFs listed, namely Lion-Phillip S-REIT ETF (CLR), CSOP iEdge S-REIT Leaders ETF (SRT) and UOB APAC Green REIT ETF (GRN). Taking the four considerations in the previous section, CLR’s and SRT’s TER are slightly higher (both 0.6%) and consisted only of Singapore-listed REITs. GRN also has a higher TER (0.82%) and has the lowest dividend yield among the five (3.88%). 

However, if asked for an alternative to CFA, Bob would likely choose CLR for its larger AUM and higher dividend yield.

Takeaways

Bob's switch from BYJ to CFA is less about chasing performance and more about maintaining portfolio efficiency. A lower TER, broader diversification and a higher distribution yield made CFA the more suitable candidate for the REIT allocation today.

The key takeaway is that passive portfolio management, as practiced, is not a "set-and-forget" exercise. While the overall framework remains unchanged, the securities used to implement it may occasionally need to be reviewed and updated as new securities become available.

Disclosure

The Bedokian is vested in CFA.

Try out the Growth Indicator, Equities Indicator and S-REITs Indicator screening app for FREE. You can use it as a web page or save it as an app-like bookmark on your home screen of your computer, tablet or mobile for faster access.

Disclaimer

References

https://phillipfunds.com/phillip-sgx-apac-dividend-leaders-reit-etf/

https://sg.amova-am.com/general/funds/detail/amova-straitstrading-asia-ex-japan-reit-index-etf-sgd-class

https://www.reitas.sg/wp-content/uploads/2026/03/SGX-Research-SREIT-Property-Trusts-Chartbook-Q4_2025.pdf

The Seven Questions Of Investing

Many investors spend a great deal of time asking which share, real estate investment trust (REIT), bond or commodity to buy. Far fewer spend time asking the questions that should come before that decision.

Picture generated by Gemini

In my opinion, investing can be distilled into seven simple questions:

• Why invest?

• When to invest?

• How to invest?

• What to invest?

• Where to invest?

• Which to invest?

• Who am I investing for?

 

Why Invest?

Investing is a means to an end, not an end in itself.

Some invest to build passive income. Others invest for retirement, financial independence, wealth accumulation, or simply to preserve purchasing power against inflation. A clear objective gives direction, and more importantly, it helps determine whether a strategy is suitable in the first place.

 

If one does not know where he/she is going, it is difficult to even take that first step.

 

When to Invest?

This is the question many people tend to overthink.

 

For the long run, the better time to invest is usually when one is ready with sufficient capital and a clear plan. Waiting for the “perfect” market condition often means waiting for a very long time. As the adage goes, “The best time to invest was 20 years ago. The second best time is now”.

 

That said, money needed for emergencies or short-term expenses should stay outside the investment portfolio. For everything else, systematic investing is usually better than market timing.

 

How to Invest?

This concerns one’s investment philosophy and methodology.

 

Some investors prefer passive investing through exchange traded funds. Others select individual securities. Some favour value investing, some dividend investing, while others focus on growth. There are also those who combine multiple approaches, like myself.

 

The best methodology is not necessarily the one with the highest historical returns, but the one that can be consistently and comfortably followed through both good and bad markets.

 

What to Invest?

This is the question of asset allocation.

 

Asset classes such as equities, REITs, bonds, commodities and cash each have different risk and return characteristics. An investor’s main task is to decide which of these classes belong in the portfolio.

 

A basic two-class mix of equities and bonds may be enough for some. The Bedokian Portfolio, however, utilises all five to achieve a more balanced and diversified portfolio.

 

Where to Invest?

Once the asset classes have been determined, the next question is where to obtain that exposure.

 

Investors today can access markets all over the world, from Singapore to the United States, and from banks to technology. The answer depends on factors such as diversification needs, familiarity with the markets and investment objectives.

 

An investor may decide to invest in equities, but that equity exposure can come from many different places.

 

Which to Invest?

Only after answering the previous questions should security selection begin.

 

This is the question most people start with, but it is really one of the later questions that should be asked.

 

The objective is not to find the perfect security, but to identify securities that are suitable for the role they are meant to play within the portfolio. A security should be selected because it fits the framework, not because it happens to be popular at the moment.

 

Who Am I Investing For?

Most investors begin by investing for themselves.

 

As life progresses, however, the answer may expand to include a spouse, children, parents or even future generations. For some, investing eventually becomes less about wealth accumulation and more about wealth preservation and legacy.

 

This question may influence portfolio risk, insurance needs, retirement planning and succession arrangements. After all, investing is ultimately about people rather than numbers.

 

Conclusion

Many investing mistakes occur because investors jump straight to “Which to invest?” while neglecting the questions that come before it.

 

A share, REIT or bond is merely a tool. Whether that tool is appropriate depends on the objective, methodology, asset classes, markets and ultimately the people involved.

 

For those who have yet to embark on the investing journey, whether for oneself or for one’s acquaintance/friend/family member, it is worth asking these seven questions in sequence. The answers may not guarantee success, but they will provide a clearer framework for making investment decisions and building a portfolio that serves its intended purpose.

Try out the Growth Indicator, Equities Indicator and S-REITs Indicator screening app for FREE. You can use it as a web page or save it as an app-like bookmark on your home screen of your computer, tablet or mobile for faster access.

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