2022 Review, 2023 Preview And Bob

2023 is coming in soon! In this post, I will share my views for the past year, my opinions of the coming year, and give an update on Bob’s portfolio.

2022 Review

 

2022 will be remembered as the year where the good times came to an end.

 

First up, we had the massive crypto meltdown. Taking Bitcoin as a barometer, from the highs of USD 47.7K at the beginning of the year, it fell to a low of USD 16.6K by 30 Dec 2022, a 65% drop, and this is not the worst. We had seen the collapse of several coins and entities related to cryptosphere: Terra-Luna, Three Arrows, FTX, to name a few, and these events shook the confidence of cryptos, even amongst their die-hard supporters (for now).

 

Next, we have the 2 “INs” wreaking havoc in the markets: INflation and INterest rates, and their rise had resulted in much increase in prices, and queue numbers in banks, finance companies and T-Bill applications. Though at this stage the interest rate returns are no match for the inflation numbers, they seem to be existing on two separate worlds when it comes to their approaches.

 

However, we still have some bad times coming to an end, too.

 

The opening up of countries from the pandemic lockdown had brought about the phenomenon of “revenge travel”, and this is very pronounced with the large numbers of tourists coming into Singapore (and Singaporeans going out), bringing in much needed revenue to our local economy, with hospitality and retail REITs benefitting significantly. And not forgetting the world’s second largest economy, China, is opening as well, after relaxing from their zero-COVID stance, and they would contribute more stuff than just tourists.

 

On the markets front, the S&P 500 index was down almost 20% YTD, while our local STI was (surprise surprise) up by around 3.7%. 

 

Finally, we look at the year-to-date performance of HACK, IPAY and ICLN ETFs, which represented my next big things cybersecurity, electronic payments and clean energy respectively:

 

HACK: -28.16%¹

IPAY: -32.31%¹

ICLN: -5.35%¹

 

The results were expected, as equities (especially in the technology sector) were hammered throughout the year. The silver lining from all these is that I have the option of adding more of them (i.e., averaging down), and since they are ETFs, bankruptcy risk of a single company is almost non-existent (save for a fund house blowout, which is low, too).

 

2023 Preview

 

Looking back at my 2022 preview, I was (almost) dead right on the inflation-interest rate issue, a bit late on the China one (for now), and my metaverse forecast is literally a non-event (for now). This meant that there is a huge disclaimer on what I was about to say, because (as always repeated) I do not really know what the future holds.

 

For 2023, I will only address one item and that is what a lot of people are talking and worried about: recession. Whether is it really coming, and if so, how short or long it will be, are questions on everybody’s minds, and there are no quick answers for these. The only things which we can do is to stay calm, stay invested and stay diversified.

 

Bob

 

As at 31 Dec 2022, Bob’s Bedokian Portfolio had grown to slightly above SGD 85K in value (excluding the cash component which is not shown) and gained a dividend amount of SGD 2,481.67. Overall, Bob’s portfolio was down 6.83% YTD, which is not too bad given other indices and companies suffering double digits. Bob will rebalance on 3 Jan 2023 with another SGD 5,000 injection, so stay tuned to his portfolio.

 

Happy 2023!

 

Disclosure

 

The Bedokian is vested in HACK, IPAY and ICLN.

 

Disclaimer

 

1 – ETFDB.com, YTD as at 29 Dec 2022 (accessed 31 Dec 2022)

 

Bob Is Rebalancing Yet Again…With Some Changes

Bob will be rebalancing his portfolio on 30 June 2022 with another SGD 5,000.

This time round, Bob will be using a different brokerage for his portfolio. As you know, previously Bob’s transaction fees were on the high side, thus this resulted in reduced returns.

 

With the advent of more brokerages offering lower commissions, Bob had decided to switch over to them for his trades, as well as transferring the entirety of his portfolio (assumed free of charge).

 

Remaining brand-neutral and given the size of his trades, the assumed transaction fee per trade would be SGD 5.00 (for Singapore securities) or USD 5.00 (for U.S. securities). I understand actual fees may be lower, but I would keep it at that quantum.

 

Bob’s portfolio can be accessed here.

2021 Review, 2022 Preview And Bob

Very soon we will see the end of 2021 and the beginning of 2022 in a few hours’ time. In this post, I will share my views for the past year, my opinions of the coming year, and give an update on Bob’s portfolio.

2021 Review

 

As mentioned in the last preview, 2021 was still dominated by the COVID-19 narrative, with a couple more viral variants taking the spotlight; first we had the delta, and now we are going through the omicron spike. There was no global consensus on tackling the pandemic, with some places adopting a zero tolerance, some embracing an endemic approach, and others somewhere in between, but almost all agreed that vaccination is the way to go.

 

Despite these, the global markets and economies were experiencing a growth surge as if the pandemic had taken a back seat. Illustrating this point, the S&P 500 index had risen 27.23% year-to-date (YTD) as at 30 Dec 2021, with our local Straits Time Index grown at 9.84% YTD as at 31 Dec 2021. The quick recovery, however, had brought about a supply chain issue on a worldwide scale, with the faster-than-expected rebound of demand and the hard-to-catch-up supply side. This was seen as one of the major reasons in pushing the inflation rate up. All around, the price of items ranging from food and holiday gifts to energy (electricity, oil, etc.) are rising.

 

One more thing, here are the three counters which are representative of my “next big thing” (i.e., cybersecurity, electronic payments and alternative energy respectively), and see how they performed in 2021:

 

HACK: +7.96%¹

IPAY: -12.34%¹

ICLN: -24.09%¹

 

Well, every day is not a Sunday, but do think long term.

 

2022 Preview

 

As usual (again), I would like to give a disclaimer that I really do not know what the future holds. Judging from the current trend, the inflation issue, and the (highly probable) accompanying raising of interest rates by the U.S. Federal Reserve, may dampen the growth of markets and most asset classes (see here and here for more info). There is a silver lining, though, as not all sectors/industries are adversely affected by rising interest rates, such as banks, where their profitability typically stems from the difference between lending and savings rates, and companies in the consumer staple/essentials sectors, where their products and/or services are still used, high rates or not.

 

The next big thing (even so it has been big for the past two or three decades), for at least the next decade, would be China. In the face of a lot of news (not all are good) and the geopolitical situation, China’s markets and economy are worth exploring due to their contrasting features; they may be autarkic in certain areas (e.g., their own technology sector), yet they are considered a major manufacturer for the world. This simultaneous independence, interdependence and dependence of markets, economy and trade, especially with U.S. and European ones, made it a good investment area to consider. 

 

Another talking point for 2022 would be the potential hype of the metaverse. The technologies behind this concept is not new, like virtual reality, gaming, networking, etc. Yet it is the seamless mashing of these, plus the normalisation of being connected from anywhere anytime, meant that mainstream adoption of the metaverse could be possible.

 

Bob

 

As at 31 Dec 2021, Bob’s Bedokian Portfolio had grown to slightly above SGD 80,800 in value (excluding the cash component which is not shown) and gained a dividend amount of SGD 1,817.21. All asset classes (except cash) had shown healthy growth for 2020. Bob will rebalance on 3 Jan 2022 with another SGD 5,000 injection, so stay tuned to his portfolio.

 

Happy 2022!

 

Disclosure

 

The Bedokian is vested in HACK, IPAY and ICLN.

 

Disclaimer

 

 

1 – ETFDB.com, YTD as at 30 Dec 2021 (accessed 31 Dec 2021).

 

Rebalancing Bob’s Bedokian Portfolio

Bob had done his rebalancing on 30 June 2021, which I had reflected here, with another SGD 5,000 injection.

Bob had opened another brokerage account for the purpose of investing in overseas securities. For his inaugural overseas investment, Bob had purchased five SPDR S&P 500 ETF (SPY) shares as his first step into the U.S. market. 

 

Also, he had added some positions to the ABF Singapore Bond ETF, given the decline of its price in the last six months.

 

In a related development, from 30 June 2021, the SPDR Gold Shares ETF can be traded in both USD and SGD on the Singapore Exchange¹, which means going forward, Bob could choose either currency for his gold ETF.

 

1 – SPDR Gold Shares ETF Now Traded in Both USD and SGD. SGX.com. 29 June 2021. https://www.sgx.com/research-education/market-updates/20210629-spdr-gold-shares-etf-now-traded-both-usd-and-sgd (accessed 3 July 2021)

2020 Review, 2021 Preview And Bob

2020 is coming to a close, and there is one word that I would sum it up with: tumultuous.

 

2020 Review

 

2020 will be taken as a lost year of sorts, depending on whose perspective. However, from this doom and gloom emerged the scale and speed of adaptability and pivoting which we had not seen before. Thoughts had become ideas, and ideas manifested into practical applications. The COVID-19 pandemic inadvertently created a huge social experiment on a global scale, and humans were either welcomed or forced to change their habits and styles, which is now deemed as the “new normal” (one of the most overused phrases of the year).

 

The financial markets had seen its fair share of a roller coaster journey throughout this pandemic year. The STI (as at 31 Dec 2020) year-to-date (YTD) was at -11.76%, recovering from a -30.22% YTD on 23 Mar 2020, its lowest point. The S&P500’s YTD was even more impressive: +15.52% (as at 30 Dec 2020), despite a fall to a low of YTD -30.75% (also on 23 Mar 2020). The disparity between the two could be attributed to one main factor; the S&P500 contained a number of technology counters, in which the sector and industry (and anything related to it) experienced a super huge boost in their relevance and importance in paving the way of the new normal.

 

Speaking of which, here are the three counters which are representative of my “next big thing” (i.e., cybersecurity, electronic payments and alternative energy respectively), and see how they performed in 2020:

 

HACK: +41.31%¹

IPAY: +33.49%¹

ICLN: +142.08%¹

 

To me, they are still relevant in 2021, and the years to come.

 

2021 Preview

 

As usual, I would like to give a disclaimer that I really do not know what the future holds, with the very big real-life COVID-19 example which almost all of us did not see it coming, and not expecting it would still be current, unlike SARS that faded off within a year.

 

2021 would still be dominated by the COVID-19 narrative, and with it affected sectors and industries such as overseas air travel and tourism will remain as it is. However, true to the resiliency and innovation of humans, activities such as domestic tourism are keeping a semblance of activity to keep the economic machine going. The pent-up demand is there, not just for the tourism business but others, too, and as long as the supply is available, it would be life as per normal (or new normal), even with COVID-19 is around.

 

Technology would be “invading” (instead of creeping) into our lives, as we are looking at more ways and methods to get our things done without physically mingling with others (read: social distancing). However, humans are social creatures, so some semblance of face-to-face meeting is here to stay, so do not write off places like malls and offices totally.

 

The next “market down” due to the pandemic, if it happens in 2021, may not be as drastic as the 30-ish percent fall back in end March 2020, partially credited to the vaccines which are being rolled out and the general populace starting to get inoculated, and COVID-19 does not come as a surprise anymore. However, while not trying to be a fortune teller, there might be a fall due to the downstream repercussions of the COVID-19 reaction, which may happen this year, next year or even not at all. Having a balanced portfolio is still key in reacting to the economic situations around us.

 

Bob

 

As at 31 Dec 2020, Bob’s Bedokian Portfolio had grown to slightly about SGD 67,000 (excluding the cash component which is not shown) and gained a dividend amount of SGD 1,741.67. All asset classes (except cash) had shown healthy growth for 2020. Bob will rebalance on 4 Jan 2021 with another SGD 5,000 injection, so stay tuned to his portfolio.

 

Happy 2021!

 

Disclosure

 

The Bedokian is vested in ICLN and IPAY.

 

Disclaimer

 

1 – ETFDB.com, YTD as at 30 Dec 2020 (accessed 31 Dec 2020)

Bob And Staying Long Term

If you do not know Bob, he is our sample investor who started off passive investing through ETFs following the balanced Bedokian Portfolio allocation (35% equities, 35% REITs, 20% bonds, 5% commodities and 5% cash, see here) starting from 1 Jan 2017. He rebalances his portfolio every six months with SGD 5,000, usually at beginning January and end of June. After close to 3.5 years, as at 9 June 2020, his overall time weighted returns are at 13.11% (based on calculations from StocksCafe) to date.

We had seen the fall and subsequent rise of the equities’ and REITs’ prices between end February till now, and some of us may have entered during the lows of end March. Notwithstanding the concerns on the disconnect between the markets and the economy in general, you may have wondered if Bob had bought in during that down-down period, he would be getting a better bargain than at his scheduled upcoming rebalancing date of 30 Jun 2020. As an active investor, naturally I would have felt a sense of waste and opportunity cost imposed, but we know emotions are a no-no in the world of investing and trading, so we just looked back, sigh and moved on (I called this moment “the one that got away”, but honestly I did get some counters on the cheap during that period). 

For Bob, since he is only looking at his portfolio once in a while, I guess he may have other more pressing concerns during this time, such as worrying for his job, the safety and well-being of his family and coping with the isolation and boredom resulting from the circuit breaker measures. Of course, Bob might have heard from his social media channels and friends about the stock market, and the fear and opportunities that come with it. Probably he is just taking it in his stride and believe in the long term.

The Long Term

And this is precisely what I am going to talk about. Investing is meant for long term, and by my definition it is a period of at least 10 years. Ups and downs, peaks and troughs, are part and parcel of the market and economic cycles, and over the long term you are likely to get overall positive returns. During the timeframe of Jan 1994 to Dec 2019, using the balanced Bedokian Portfolio with U.S. based asset classes, a USD 10,000 investment, rebalanced annually, will return USD 50,145 (inflation adjusted). If we look at the 10-year rolling returns, it resulted in a range between 4.92% and 11.58%, with an average of 8.36%¹.

Let us stretch a bit longer using only U.S. equities and 10-year treasury bonds (60%/40% respectively), from Jan 1972 to Dec 2019, an initial USD 10,000 (rebalanced annually) will return USD 130,424 (inflation adjusted) and the 10-year rolling returns were between 3.32% and 15.69%, averaging at 10.29%². The figures were considered not bad, as there were a number of economic crises in those years besides the all-too-familiar Dot Com Bubble and the Global Financial Crisis (e.g. 1973 Oil Crisis, 1987 Black Monday crash, etc.).

When you look at the graphs and charts of equities, REITs or maybe bonds, first by the day, then by the week and the month, the peaks and valleys are pretty obvious, but if you continue to zoom out by a year, then five years and then ten, chances are you will see an upward slope, generally. This is what you want to achieve for your portfolio; the gain in price and value. These are made possible because of two important and simple factors: the inherent growth of the economy and the power of compounding. 

Using the world’s gross domestic product (GDP) as an indicator of economic growth, since 1961 till 2018, annually it had always been a positive percentage growth with the exception of 2009 (see Fig. 1)³. If this GDP is an investible financial instrument, you can see the compounding effect work over the years.

Fig.1 - World GDP growth (annual %), 1961 - 2018. Source: World Bank

Therefore, in investing, stay calm and long term, and be diversified.

1 – Statistics from Portfolio Visualizer (www.portfoliovisualizer.com), using Backtest Asset Allocation. 35% US Stock Market (equities), 35% REITs, 20% Total U.S. Bond Market (bonds), 5% Gold (commodities), 5% cash. Starting year of 1994 was selected as it was the earliest year with REITs data.

2 – ibid. The U.S. Stock Market and the 10-year Treasury bond were selected for the equities and bond components respectively, since these two contained data from 1972, which was Portfolio Visualizer’s earliest data point year.

3 – GDP growth (annual %). The World Bank. https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?end=2018&start=1961&view=chart (accessed 9 June 2020).

2019 Review, 2020 Preview And Bob

2019 is coming to a close, and we are soon entering the third decade of the twenty-first century. It has been an eventful year, and the best is always yet to come.

2019 Review

After suffering a scare during the Christmas period of 2018, the markets had recovered when 2019 began. For the U.S. markets, using the S&P 500 as a gauge, its year-to-date (YTD) performance up till 26 Dec 2019 stood at about +29.08%¹, despite the trade war roller coaster ride that prevailed throughout the year. The STI’s YTD was about +6.17%¹, which was not that bad despite the lower than expected local GDP figures for 2019.

I had used 3 ETFs that represented my long-term trend views for cybersecurity (HACK), payment solutions (IPAY) and alternative energy (ICLN). Let us see how these three perform YTD for 2019 (as at 27 Dec 2019):

HACK: +23.64%²

IPAY: +42.58%³

ICLN: +44.57%⁴

2020 Preview

The known fact is that we cannot really predict the future, but based on factors and indicators, and sans black swan events like the Hong Kong protests, we may be able to derive some “educated guesses” to guide us in our decision. Let me share with you some of my “guesstimate” opinions.

I would see some volatility in the U.S. markets given that it is an election year. Although a new challenger has yet to be nominated to challenge the incumbent, the candidates’ various stands on policies and opinion polls may swing several sectors or the markets as a whole. If you are an active investor, stay close to the news and use the ups and downs to your advantage on your buy or sell decisions.

In the local scene, the S-REITs run-up that was experienced during the whole of 2019 had showed signs of tapering, but with interest rates likely remaining low and there might be a chance of the gearing limit increasing from 45%⁵, we may see a boost in this asset class again in 2020 if both of these fall into place.

On the technology front, though there will always be new stuff and concepts invented and created respectively, the mainstream ones that were seen as disruptive a few years ago (such as e-payments, ride sharing, etc.) are, using the technology adoption cycle, at the border of early adopters/early majority, based on my personal observations in the developed world. This is good news for growth investors as there is still room to go, but not so much for value and dividend investors as most of these companies are still burning cash to sustain the growth. Hence, in my opinion it is better to use ETFs for exposure to the emerging technology sectors, and/or identify matured sectors/companies that provide upstream or downstream support to the former.

I would like to reiterate (again) that it is prudent to stay diversified (e.g. The Bedokian Portfolio’s asset class allocations) in order to optimize your gains and ride out the losses while maximizing capital protection and minimize risks.

Bob

As at 27 Dec 2019, Bob’s Bedokian Portfolio had grown to slightly above SGD 59,000 (excluding the cash component which is not shown) and gained a dividend amount of SGD 1,955.89. All asset classes (except cash) had shown healthy growth for 2019. Bob will rebalance on 2 Jan 2020 with another SGD 5,000 injection, so stay tuned to his portfolio.

Happy 2020!

Disclosure

The Bedokian is vested in ICLN.

Disclaimer

1 – Yahoo Finance. 2 Jan 2019 – 26 Dec 2019 (accessed 29 Dec 2019)

2 – ETFDB.com. ETFMG Prime Cyber Security ETF. https://etfdb.com/etf/HACK/ (accessed 29 Dec 2019)

3 – ETFDB.com. ETFMG Prime Mobile Payments ETF. https://etfdb.com/etf/IPAY/ (accessed 29 Dec 2019)

4 – ETFDB.com. iShares Global Clean Energy ETF. https://etfdb.com/etf/ICLN/ (accessed 29 Dec 2019)

5 – Meixian, Lee. MAS seeks views on raising 45% leverage limits for S-Reits. Business Times. 3 Jul 2019. https://www.businesstimes.com.sg/companies-markets/mas-seeks-views-on-raising-45-leverage-limits-for-s-reits (accessed 29 Dec 2019)

Bob Is Rebalancing Yet Again, But…

We are coming into Bob’s bi-annual rebalancing again. As 30 June 2019 is a Sunday, Bob has two options: either doing it on 28 June (Friday), or on 1 July (Monday).

Thing is, Bob is aware that the G20 Summit is coming up on 28 – 29 June, and along with it a possible meeting between the leaders of the two largest economic powerhouses, China and the United States, on settling the trade dispute.

Bob knows that the core ethos of rebalancing is to inject fresh funds into his Bedokian Portfolio, and then adjust it accordingly to his strategic allocation. However, whatever happens on the period of 28 – 30 June 2019 may bring a difference between the trading days on 28 June and 1 July, as in whether the markets will go up, down or (remotely) sideways over the weekend.

You see, Bob is worried that if he does his rebalancing on 28 June, only for prices to slide further on 1 July if not-so-good news happens during the Summit, then he will feel shortchanged by buying them at a higher price. Conversely, if he chooses 1 July instead, and prices are higher than on 28 June due to good news, then he will still feel shortchanged for not buying at a low.

So how now, Bob?

Choice #1: Stick To The Plan

Since Bob had started his Bedokian Portfolio back in the beginning of 2017, he had never done a rebalancing no later than 30 June. So sticking to his policy, he will do it on 28 June 2019 as planned.

Choice #2: See The Outcome

Bob will sit it out through the weekend and see how things unfold. Good or bad result, he will have to accept the outcome and carry it out on 1 July.

The Bedokian’s Take

Rebalancing or not, and if you are Bob or not, we do face such situations and tests in our investing life. Putting it simply, we can learn two things from here. Firstly, investing is long term. Ups and downs, they are just kinks in your investment journey, so do not fret much. Secondly, if a decision has been made, do not look back. Make do with what you have and press on, taking this as an investment lesson.

With this, Bob has decided he will do his rebalancing on 28 June.

You may see Bob’s portfolio after rebalancing from 29 June 2019 onwards here.

2018 Review, 2019 Preview and Bob

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)

Here Comes Bob (Again)

Bob will be rebalancing his portfolio with an additional injection of S$5,000 on 2 Jan 2019. And no, Bob has still yet to consider individual company securities, despite his pledge to look into them early this year. Oh well…

Look out for Bob’s portfolio status here in January 2019!

It’s That Time of the Year Again

The first half of 2018 is coming to a close, and it is that time of the year again; yes, Bob will be rebalancing on 29 June 2018, the last trading day before the start of the second half, with an additional injection of $5,000.

I had mentioned that Bob may consider investing in some individual company securities, but had yet identified any to invest in, so he will be going along with his original ETF strategy. The $5,000, plus any dividends collected, will be split among the asset classes.

So watch out for Bob’s portfolio status here in July!

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.

Bob

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. http://www.sgx.com/wps/portal/sgxweb/home/marketinfo/indices/indices (accessed 30 Dec 2017)

3 – Goldprice. Gold price chart.

https://goldprice.org/gold-price-chart.html (accessed 30 Dec 2017)

5 – Yahoo Finance. S&P500. https://sg.finance.yahoo.com/quote/%5EGSPC?ltr=1 (accessed 30 Dec 2017)

6 – S&P Dow Jones Indices. S&P US Aggregate Bond Index. http://us.spindices.com/indices/fixed-income/sp-us-aggregate-bond-index (accessed 30 Dec 2017)

Bob Is Rebalancing

I had mentioned here that Bob would be rebalancing his Bedokian Portfolio with an S$5,000.00 capital injection on 30 June 2017. Let us go through how he did it step by step.

In The Morning

When the market opened at 9:00 AM on 30 June 2017, Bob checked the opening prices of the securities in his portfolio. He then translated the prices to the table below (Fig. 1).

Fig. 1

Note: USD 1 = SGD 1.38

Bob added S$5,000.00 to the cash component, bringing it up to S$7,019.22 (see Fig. 2).

Fig. 2

Purchasing The Securities

There are now a few ways to allocate this newly injected cash amount among the different securities. If the asset class allocation is still within the designated percentages, he could just make the cash portion at 5% and split the rest accordingly.

Another way is he could work out the ideal percentage allocation of each asset class and purchase the securities as close to the shortfall amount. For example, using Fig.2, the current STI ETF stands at 31.22%. The 35% amount of S$36,991.01 is S$12,946.85, so he would try to purchase about S$12,946.85 – S$11,550.00 = S$1,396.85 worth of STI ETF.

Bob followed the second method, and then purchased the following securities, using the Last Done prices of 30 Jun 2017 (all transaction costs included):

STI ETF x 400 shares x S$3.27 = S$1,335.31

Philip Dividend REIT ETF x 1,700 shares x S$1.295 = S$2,229.20

ABF Bond ETF x 1,200 shares x S$1.16 = S$1,419.35

Bob did not purchase the GLD ETF as firstly, the commodities portion is still within percentage deviation of 2.5% (5% - 4.43% = 0.57%). Secondly, for SGX, he would need to buy at least 10 GLD ETF shares, the minimum required, which would upset the asset allocation if purchased.

After rebalancing, Bob’s Bedokian Portfolio would look like this (Fig. 3).

Fig. 3

References:

http://bedokianportfolio.blogspot.sg/p/bobs-bedokian-portfolio.html

http://bedokianportfolio.blogspot.sg/2017/06/have-i-forgotten-bob.html