Sunday, December 31, 2017

2017 Review, 2018 Preview, and Bob

2017 Review

Many people had cited 2017 as a strong bull market year; for the Straits Times Index (STI), which is considered a proxy for the local equity market, it opened at 2,887 points on the first trading day of 2017 and closed at 3,402 points1 at the last trading day of the year, giving it a 17.8% rise.

In fact, we do see a bull of various degrees across other asset classes as well; for REITs, the FTSE ST REITs index showed an increase from 711.54 points to 855.88 points2, a whopping 20.3%. On the gold front, it rose from USD 1,150.00 to USD 1,306.303 throughout the course of 2017, a 13.6% improvement (barring forex gain/loss). Even for local bonds, using the Thomson Reuters/SGX Singapore Fixed Income (TR/SGX SFI) index, it rose 6 points from 124.5 to 130.5 between 3 Jan and 29 Dec 20174, a miniscule rise of 4.8%.

In the United States, one of the biggest economies in the world, the S&P500 enjoyed a 416-point run which attributed to a +18.4%5, while its bond index (through the S&P US Aggregate Bond Index) also managed to post a small increase6.

But perhaps the headline of the year is of course, cryptocurrency, which some had generated thousands of percentage points in returns in 2017, depending on which one you are in. There are many critics on cryptocurrencies, although there are stories and anecdotes on how some made it big with them.

2018 Preview

Frankly, I do not know what exactly lies ahead, but we could make educated guesses of what is coming based on indicators and signs, which I had covered here. In my opinion, disruptive technology would continue to reign in the next year. Sector or field wise, I would consider looking at cybersecurity, payment solutions and alternative energy.

Nevertheless, it is important to keep the course of your investment and adhere to the basic rules of The Bedokian Portfolio such as rebalancing to your preferred asset class allocation.


Since Bob had started out his Bedokian Portfolio with an initial capital of SGD 30,000 and a mid-year injection of SGD 5,000, he had collected SGD 868.88 in dividends, while also enjoying some unrealised gains from his ETFs. Bob would rebalance his portfolio on 2 Jan 2018, the first trading day of the new year, with an additional SGD 5,000 injection. Also, he is considering on whether to go into a bit of active investing, so do stay tuned on his counter picks.

A Happy 2018 to all of you!

1,2 & 4 – Singapore Exchange. Indices. (accessed 30 Dec 2017)

3 – Goldprice. Gold price chart.

5 – Yahoo Finance. S&P500. (accessed 30 Dec 2017)

6 – S&P Dow Jones Indices. S&P US Aggregate Bond Index. (accessed 30 Dec 2017)

Tuesday, December 5, 2017

Cryptocurrency – An Introduction

If you have been reading the financial news lately, one word keeps popping up almost everyday, and that word is “cryptocurrency”. Whether people are talking about Bitcoin, Ethereum, Dogecoin, etc., they are members of the same cryptocurrency family.

What Is Cryptocurrency?

“Cryptocurrency” is a portmanteau of the words “cryptography” and “currency”. As the name suggested, cryptocurrency (crypto for short) is a digital currency that uses encryption technologies with regards to its creation and regulation of its use. Most, if not all, cryptos are non-regulatory and decentralised; in other words there is no central regulatory body (such as governments and central banks) or any-body overseeing it.

Crypto is an early example on the use of blockchain technology, in which each record and/or transaction is stored as a block, from the creation of the crypto coin right up to the latest transaction. It is secured in a way as the makeup of data in a block is dependent on the one before, and that one before is in turn dependent on the one before, and so on. Right now the use of blockchain is instrumental in financial technology, or fintech.

The first crypto was Bitcoin, created back in 2009 in the aftermath of the Global Financial Crisis. As of now there are more than 1,000 types of cryptocurrencies.

A Whole New Asset Class?

In my ebook, I had mentioned briefly that each asset class is different from one another in terms of their characteristics.1 Asset classes occupy the highest degree and order of all the financial instruments due to their different correlation.

So for the case of crypto, it could be viewed as cash on the surface, since it shared similar characteristics such as liquidity. Crypto is border-neutral, meaning I could use it anywhere in the world without considering the forex rate, provided the goods and services are priced uniformly across the globe.

It could also be seen as a commodity since it is mined (digitally) and some coins (e.g. Bitcoin and Litecoin) have a planned final total number in the future, much like the finite resources of gold, silver and oil on this planet.

To make things more exotic, there is even a corporate bond denominated in Bitcoin.2 And, as I was writing this post, an oil-backed cryptocurrency is coming up.3

So how crypto fits in the overall scheme of things in terms of asset classes would probably depend on how each investor views it. If an investor thinks crypto is the way things are going for currencies, then he/she may put it in the Cash component, while if another investor view it as a store of value given the limited circulation of some cryptos, then it could be under Commodities. Or some may not view crypto as an asset class at all; it is just for speculation and trading. More so, others may think these are all fads and bubbles, and would die off or burst someday.

So Are Cryptos Suitable for The Bedokian Portfolio?

I have to admit that it is still a little bit early for me to answer this question. At the moment there is no right or wrong answer, just different perspectives. If you share some of the viewpoints as I had described in the previous paragraph, then by all means treat them accordingly.

If you really wish to play safe, then bring it out of your Bedokian Portfolio and invest/trade in them separately.

1 – The Bedokian Portfolio, p11

2 – Nakamichi , Takashi. Bitcoin Bond Debuted By Japan’s Fisco. Bloomberg. 17 Aug 2017. (accessed 4 Dec 2017)

3 – Ulmer, Alexandra & Buitrago, Deisy. Enter the ‘petro’: Venezuela to launch oil-backed cryptocurrency. Reuters. 4 Dec 2017. (accessed 5 Dec 2017)

Monday, November 27, 2017

Singles Day, Black Friday and Cyber Monday

And the common theme among them? Yes they are retail related, and billions of dollars of retail sales were reported from these days. For the active Bedokian Portfolio investor, this would be an interesting sector to look into.

So what do we have? Directly related would be the retail stores themselves and online retail platforms, and indirectly we have REITs with retail malls, logistics and delivery companies, payment solution companies and the hot products that people will buy during these days, among others. In fact, you could use the associative investing method that I had mentioned here to plot one big chart to see the whole picture.

And retailers are not reactive as well. They would want to know the behaviour and mannerisms of their customers. Big data comes into mind, so this is another branch of the chart to look into.

Looking from another perspective, with the advent of online shopping comes the risk of hacking and compromising of sensitive personal information. While many viewed this as a threat, an investor must look at it opportunistically, legitimately of course. Cybersecurity firms come into play, as well as the infrastructure that supports cybersecurity.

It seems that I have gone off topic. If I go on and on, I guess the even an A0-sized paper would not cover the whole chart. As you can see, everything is inter-related with one another. The challenge would be the find the right companies to invest in for dividends, and a proper fundamental analysis would be a good tool for that.

Happy shopping!

Wednesday, November 1, 2017

Mental Accounting

What is mental accounting? According to Investopedia, mental accounting is “…individuals divide their current and future assets into separate, non-transferable portions. The theory purports individuals assign different levels of utility to each asset group, which affects their consumption decisions and other behaviors.”1 In other words, it is a form of thinking where an individual allocates his/her resources into different, mutually exclusive categories, even though the resource (usually money) is the same thing and from the same source. It is applied commonly to personal budgets (e.g. meal budget, transport budget, etc.) and investments (e.g. The Bedokian Portfolio, trading portfolio, etc.). This concept was first mentioned by economist Richard Thaler, who had just won a Nobel Prize in Economics

Mental accounting is a form of bias, and it is one of the biases discussed in the field of behavioural economics and finance. Due to the segregation nature of how one places his/her resources, it could have a profound effect on investment and/or trading decisions.

The main reason why I brought this topic up is because I have mental accounting bias. If you have noticed from my ebook and some other writings, I espoused segregating cash into cash for The Bedokian Portfolio, emergency funds and savings. Although it is a form of bias (and “bias” is a not-so-good word, I reckoned), there are some advantages in having it.

Advantage #1 – Accounts and Budgets

Since the term “mental accounting” contains the word “accounting”, you will associate this word with accounts and budgets (and accountants). Almost all businesses and companies have some form of account budgeting in place in order to control and monitor the expenditure. A runaway account or budget is a definite no-no as this would mean uncontrolled spending. Translating this to your personal or family context, it is a good form of controlling your expenses.

Advantage #2 – A Clearer Picture

This is what I think separates good and bad mental accounting bias: the ability to see a clearer picture. Those with bad mental accounting tend to see their capital and resources as parts only, while a good one will see the parts and how they all fit together. By seeing it on a whole, we tend to be more flexible and willing in moving the capital across the various parts. Breaking down the mutually exclusive thinking is key.

An Example

A family man on payday segregates his income into expenditure and his kid’s tuition budget diligently, among others. One day his fridge broke down and this meant buying a new one immediately.

A case of bad mental accounting would see the man lamenting that this fridge purchase is going to eat into his expenditure, and start thinking of having instant noodles for the rest of the month. A good case of mental accounting would see the man looking at other budgets, including his kid’s tuition account. Realising that the tuition account had ballooned to an amount that could cover a couple of months’ worth, he would transfer some of the excess to cover the cost of the new fridge.

1 – Investopedia. Mental Accounting. (accessed 1 Nov 2017)

Tuesday, October 17, 2017

Specialist Diploma In Fund Management And Administration

First and foremost, this is not an advertorial nor am I representing the institute that offered this specialist diploma. I am writing this since I had graduated from this course and would like to share my experiences with you. I felt this course is suitable in understanding how the financial markets, the fund industry and their related functions work.

Overview Of The Course

This one-year program is offered on a part time basis by Nanyang Polytechnic. There are a total of six modules, three each in one semester. The first semester covers the fund management aspect and the second one covers the fund administration part. Being an academic course, there are tests and examinations, and each successful semester would give you a post-diploma certificate, and the completion of the entire course would grant you the specialist diploma.

Most of the lecturers who taught us had a day job in the industry, meaning their teaching stint was on a part-time basis, which was good as they could relate their real life experiences from the topics in the modules.

I shall not describe each module in detail (you could read up more about it in the link below under Reference).

My Eye Openers From The Course

There were a few “A-Ha!” moments for me during the course. One of which was the calculation of a fund’s net asset value (or NAV) and the accompanying fund management fees. Being an “outsider” of the industry, this gave me an eye opener. Another was the securities settlement process, which gave me a “behind the scenes” peek on what transpired between the filling of an order to the actual delivery of the securities from one party to another.

Bedokian’s Take

If you are well-versed in some of the modules described above, I would say this is a walk in the park for you. Although it is basic, you could develop further on the topics taught and discussed, and this in turn could lead to another set of knowledge and opportunities in your investment and trading journey (I am a proponent of continuous learning). However, before you go into it, I would recommend you to start familiarising and understanding some financial terms and jargons from online resources (e.g. Investopedia).

Besides the academic part, you could take this chance to network with your lecturers and classmates as well. For my cohort, about 70% of us are in the accounting/banking/financial/fund industries, with the remaining 30% (like myself) coming in just to learn more.


The course details may have changed since my last attendance, so there could be some differences in my post above. You are encouraged to contact the institute directly and/or attend their preview talks, which are typically held near the end of the year, to find out more.

Special thanks to my ex-classmate ‘M’ who provided additional material.