Sunday, June 18, 2017

More On Associative Investing

Back in August 2016, I had touched on the concept of associative investing to capitalise on disruptive technology companies, where we could invest in areas that support and/or result from these firms, especially since there is little or no avenue to invest in the said companies themselves.1

The basis for associative investing is simple; all sectors and industries are dependent on one another, and it is making use of these interdependence relationships to carry out investing. For example, if you want to invest in e-commerce, besides e-commerce companies, you could take a look at sectors and industries that are related, like data centres, logistics firms, payment solution companies, etc.

A simple way to carry out associative investing is to draw out a relationship chart (e.g. a family tree or an organisation chart) of the sectors/industries concerned. To draw the lines and fill out the various boxes in the chart, you could get the information from online and documentary sources, personal observations or even logical inferences and deductions. After filling out the related sectors, you could select companies and ETFs that best fit these sectors/industries, and then carry out fundamental analysis on them to pick the right ones for your Bedokian Portfolio.

It is not necessary to name the sectors/industries or their sub-categories if you are not familiar with them. Using the e-commerce example above, you could instead use simple terms such as “computers”, “smart phones”, “delivery vehicles”, etc. in your charting.

Once you get the hang of this relationship charting, you could further modify it by having the target sector/industry in the middle of the chart, with suppliers/supporters on top and consumers/resultants at the bottom, creating an “upstream and downstream” map. You could also include competitors and substitutes, making it like a Strength-Weakness-Opportunity-Threat (or SWOT) analysis.

Associative investing allows you to view the entire economic and market ecosystem, as well as the dynamics amongst them. It could also be used to spot future sector/industry trends, a topic which I will touch on in my later posts.

1 -

Wednesday, June 7, 2017

Have I Forgotten Bob?

No, I do not. In fact, I still remember him and his Bedokian Portfolio. This is the nature of passive investing, where the portfolio would just sit there (and be easily forgotten) and you do not look at it again until the time that you want to rebalance it.

Anyway, since we had started this test portfolio at the beginning of the year, let us take a look at the status as of 6 June 2017:

*USD/SGD rate at 1.38, from as at 6 June 2017

**Inclusive of dividends from STI ETF of S$185.50 and from Philip AP Dividend REIT ETF of US$159.57 x 1.38 = S$220.21. Bank interest not included.

Bob’s Bedokian Portfolio, which started off with S$30,000.00, has an overall gain of S$1,861.62, which included S$405.71 in dividends parked under the Cash component. Asset class percentage wise, they are still within the tolerable range (recap: ±5% for asset classes of more than 10% allocation and ±2.5% for asset classes below 10%), so Bob need not do rebalancing to address the percentage deviations. However, Bob has decided to transfer S$5,000.00 from his emergency fund and inject it to his Bedokian Portfolio, and he would do a rebalance on 30 June 2017.

So we shall wait till then to see how he does it.

For up-to-date information on Bob’s Bedokian Portfolio, you could visit this page to monitor the progress.