Recently I have been thinking a fair bit about our portfolio structure.
There are two types of portfolio: growth portfolio, and dividend portfolio.
As the name suggest, growth portfolio consists of high growth stocks but the downside is that, these stocks don’t pay out dividends. Dividend portfolio on the other hand, are made up of dividend paying stocks like REITs, which is great especially for Singapore investors looking for REITs as a source of passive income.
Over the past 1 – 2 years since we really started to chart our financial goals, we have been actively buying Singapore stocks which are paying out decent dividends. This is because we are aiming towards an eventual S$5000 monthly passive income in the future so that we can retire reasonably well.
When we look at our portfolio composition late last year to even today, our Singapore stock holdings almost double our US stock holdings.
While that is good news and all, when we look deeper into the returns of the Singapore stocks versus the US stocks, our Singapore stocks, inclusive of the dividends, are not giving even the near levels of returns we are seeing from our US stocks. Most of our returns made from the market since the onset of our investment, is actually from our US stocks holdings.
So we hypothesized that we should shift our mindset from holding Singapore dividend stocks to holding US growth stock instead. This will give us better returns in the long run.
To check on this, we took a look at the public portfolio shared by users from Stocks Cafe, and we found very interesting findings.
Here’s a look at the top performing portfolios (3 years timeframe) shared on Stocks Cafe, sorted by their % return.
To see what are the similarities of these top performing counters, we took a look at their individual portfolios to see how much of these investors invested in the US market and what are the overweight stocks that they are holding on.
When we dig deeper and look at their individual portfolios, here’s what we noticed.
- Of the 23 counters which made >30% returns in the past 3 years timeframe, 61% of them invested in US stocks.
- The top 2 performing investor jpf and zhengkang, and Cosmicpubes (lol), had over 85% of their stocks in US holdings.
- For the top 13 best performing investors, they either made money through US stocks, or if they had invested in AEM, an electronics manufacturer who counts companies like Intel as their largest client.
The common denominator seems to be that, one should have a combination of US stocks to boost the returns of his or her overall portfolio. JPF, the investor with the best performing portfolio, has a 52.47% YTD returns and a 570.06% all time returns, and 85% of his portfolio is made up of US stocks.
So to be in the top 10 on the list, you need to either invest in US stock market, or invest in AEM.
This is definitely easy for us to point out in hindsight, because over the past decade, the theme had been technology, internet, and computer chips. We think this theme is still going to be around for another 5 – 10 years.
Investing in US market also makes a lot of sense because big global companies have bigger addressable market and can continue to climb in value – thus one may end up holding multi-baggers.
I think that gave us some affirmation to the returns on our portfolio: if we have more US stocks in our portfolio, there is a high chance that our portfolio will outperform a portfolio without US stocks.
Hence moving forward, we will be looking at shifting our equity allocation to more US stocks so that our long term returns will be better than what we have now.
Our current allocation:
|Portfolio||Singapore Holding||US Holding|
|Mr Budget||$84,806.08 (60%)||$57,855.33 (40%)|
|Mrs Budget||$64,139.80 (76%)||$20,025.90 (24%)|
Ideally we should swap the percentage around to probably 60 – 70% US stocks and 30 – 40% Singapore dividend stocks.
For friends and family who have been asking us what to invest in, normally I would ask them to allocate some towards the US market too instead of just investing in the SG market.
This is because it is a bit unrealistic for us to think that we can beat the returns of the STI index or Singapore fund managers out there by just spending minimal amount of time choosing to invest in a few Singapore counters. We are better off just investing in robo / the STI index.
However, if we were to invest in the US market or have a US-SG hybrid portfolio, there is a very high chance (61%) to beat the Singapore index.
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