What We’ve Learnt This COVID19 – Using US Stocks To Boost Overall Portfolio Gain

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.

Source: Stocks Cafe

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.

  1. Of the 23 counters which made >30% returns in the past 3 years timeframe, 61% of them invested in US stocks.
  2. The top 2 performing investor jpf and zhengkang, and Cosmicpubes (lol), had over 85% of their stocks in US holdings.
  3. 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:

PortfolioSingapore HoldingUS 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.

Happy investing!

Also Read: What We’ve Learnt This COVID19 – Price Levels, Selling And Coffee Can Portfolio

Looking to invest via Syfe? You can use our referral code: SRP6X8B8Y when you create an account.

We would both get $10 to $100 depending on your first deposit amount, and you’d receive your bonus within 5 business days.

What We’ve Learnt This COVID19 – Price Levels, Selling And Coffee Can Portfolio

Hello everyone!

It’s been a while again since we last updated here! As usual, we want to write as much as we can, but haven’t really come out with much topics to update here.

So if you have any topics suggestions, or any questions – please drop us a comment below – we love reading them! 🙂

Today however, we thought we want to just quickly pen down some thoughts and nuggets of wisdom we have gathered from others here, both as a sharing and as a reminder to ourselves.

Obsession Towards Price Level

One of the key things that we’ve internalized recently is that, prices are just snapshots of offers from the market and that we should not be too obsessed by it. There was a recent saying we heard: “if you think the current price is too high, this is and will be the new low”.

A lot of times, there are a lot of counters which we are eyeing towards, and we often want to wait for the best time or a better price to buy. Eventually, what end up happening is that, we will miss the boat and the prices just keeps going up and up. And we will just not buy it.

This is true for companies with strong momentum and those that are 100 year old companies, such as amazon. Amazon for example, has been going up non stop – and at anytime you buy over the past 5 to 10 years, literally any day, you would still have made money today.

The lesson here is that, don’t be too obsessed about entry price – if it is a valuable company, just buy in and keep for the long term.

When To Sell

Which leads to my second learnings on when to sell.

Recently there was a few webinar which a few bloggers shared that during the COVID-19 downturn, they actually did not sell or adjust any of their portfolio. Of course, some of their losses might be recovered now. The more important thing though is that they did not trim any of their winners.

On when to sell – you should only sell when there are better opportunities to deploy your money. And it is actually quite hard to find better opportunities that the ones that you have invested in and are winning counters.

Case in point – during the last correction, Mr Budget sold off his winners Amazon, SEA, AXXN to lock in the profit and to buy more assuming the market crash more. However, the prices of these counters have since went back up at least 20-30%, and now his previous entry price is too far behind and quite unlikely that he will be able to get those price levels.

The lesson here is probably that you should never sell your winners and just ride with them. If there are any corrections, these corrections should actually give you opportunities to buy more of the winning counters.

Coffee Can Portfolio

In a recent webinar, the Coffee Can portfolio was introduced by Ser Jing from The Good Investor and I thought it really covers the 2 pointers above.

Coffee Can Portfolio is a concept based on the research done by Rob Kirby. In simple words, one selects a list of high quality growth stocks and invests in them, and then literally forgets about it.

The benefit of this is that, the costs are low in the long run because you don’t trade regularly (and save on fees), and also that you will not be obsessed with checking the prices everyday, and you wont time the market. You also wouldnt need to battle with your internal struggle of whether to sell to take profit.

Warren Buffet also had a similar saying:

“I could improve your ultimate financial welfare by giving you a ticket with only twenty slots in it so that you had twenty punches – representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments at all. Under those rules, you’d really think carefully about what you did, and you’d be forced to load up on what you’d really thought about. So you’d do so much better.”

And I think this really inspired me to take a look at our current holdings and to start identifying some stocks as our coffee can portfolio.

Of course, it is definitely easy to start a coffee can portfolio, but to actually have the conviction to hold it for long term and not touch it requires a lot of resolve, as well as a lot of financial freedom to be able to leave the portfolio there on the side.

For Mr Budget, I am currently holding about 21 counters. For my own coffee can portfolio, it would mostly be my US holdings: NVIDIA and Alphabet and only CMT for my SG holdings now.

Moving forward, I will also be increasing my US equity exposure so that there are more global high growth counters in my coffee can portfolio.

Will do more updates on this, and add a new “Coffee Can Portfolio” update on our portfolio section.

What have you learnt this COVID19?

Also Read: Our Thoughts On The Very Irrational Market Behaviour

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April 2020 Monthly Expenses Update

At the end of every month, Mrs Budget and I will reconcile our monthly expenses and see what are we spending on, and where we can optimise or cut down our expenses.

We subscribe to the believe that every penny saved is a penny earned – sometimes its easier to save S$100, than to earn S$100, both of which results in the same net worth increase.

In April, here’s what Mr Budget spent on.

ExpensesApril
Meals$393.69
Transportation (mrt)$10.00
Groceries / Home$194.99
Phone Bill$56.10
Mum$111.33
Income Tax$103.05
Malaysia Mortgage 1$800.00
Singapore Mortgage$1,206.91

Mr Budget’s total expenditure for April is at $2,876.07, a further reduction as compared to last month’s expenditure of $3,563.78.

Total essential expenses add up to only S$654.78 (meals, mrt, groceries, phone bill).

If you strip it down further, bulk of the payment goes into mortgage payments. There were no expenses recorded under “travel”, “entertainment”, “Haircut”, “shopping” or “Others” as Mrs Budget and I had been holed up at home. This should paint a good picture of our expenses when we retire.

For Mrs Budget, here’s what she spent on.

ExpensesApril
Meals$10.90
Family$600.00
Groceries / Home$194.99
Phone Bill$25.00
Endowment$303.97
Shopping$55.84
Dog$282.63

Similarly, Mrs Budget also only spent $1,473.33 this month. Total essential expenses add up to only S$230.89 (meals, groceries, phone bill), while the others are variable expenses. Mrs Budget bought an insurance for her dog hence that’s recorded as a one off expenses.

This monthly numbers also serves as a good indication of our cash flow when we retire, so now we have a good idea of how much we need to retire.

Before covid and post covid, our expenses has dropped by at least 50% – 60%, showing that we really spend a lot indulging in variable expenses such as travelling, entertainment and shopping – definitely something to think about.

We don’t foresee any big expenditure coming in the next few months, and we will continue to tighten our belts and watch our cash outflow so that we can tide through this uncertain period.

How has March been like for you?

October 2019 Monthly Expenses Update
November 2019 Monthly Expenses Update
December 2019 Monthly Expenses Update
January 2020 Monthly Expenses Update
February 2020 Monthly Expenses Update
March 2020 Monthly Expenses Update

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monthly updates

What Have We Done This Month Towards Our Financial Goals – April 2020

So April has came and gone now. 33% of 2020 is now over.

For the whole of April, both Mrs Budget and myself had been mostly staying at home due to the circuit breaker.

While everyone else is doing a monthly portfolio update, we thought it is more meaningful to document what we have done this month towards our financial goals.

Mr Budget
Position Added: SPH REIT, Centurion, Alphabet
Take Profit: Fu Yu, Accordia Golf Trust, Keppel Infrastructure Trust

Mrs Budget
Position Added: SPH REIT, Centurion, Alphabet 
Take Profit: N/A

This month, we bought into 3 counters, namely SPH REIT, Centurion and Alphabet.

For SPH REIT, we believe that the Reit, which is trading below its NAV, may reward its unit holders in the long run due to several reasons – exposure into students accommodation and SPH is slowly realising that it is morphing into a property player. 

Similarly for Centurion, while it may be in the news now for not so good reasons, the counter is still undervalued, and once COVID is over, the price may go up again due to its defensive accommodation nature.

We previously sold off Centurion and bought back in straight after to lower down our entry price further. We spoke about SPH REIT and Centurion in our previous update 2 weeks ago too.

For Alphabet, we have been eyeing this counter for a while now – the parent company of Google is probably the dominant player in the online advertising space, and with its recent battered down share price, we took a position in Alphabet which we will keep for very very long.

To replenish our war chest further, Mr Budget sold off his holdings in Fu Yu, Accordia Golf Trust, and Keppel Infrastructure Trust. To be honest, the selling off are all speculative play, as we foresee the prices to drop further in the next few months. If the price level fall back to lower than our entry price, we will pick them up again for cold storage. 

So the equity purchase movement this month is really just a recycling of our existing holdings into new counters which are trading at below NAV, and these stock purchases are funded by the selling off of 3 existing share counters.

There were some positions which Mr Budget sold off last month which he deeply regretted now: his positions in Amazon, SE, as well as AXXN – all of which he entered at excellent prices and are all now back to their all time high.

The market is really irrational and are not reacting to all the negative news in the economy, so hopefully the prices will come back down for him to pick them up again.

If it doesnt, it’s a really good lesson for Mr Budget to not let go of winning counters in the future and to just let the winners run. That’s probably one of the many lessons learnt from this market sell down.

The market had also rebounded a fair bit and our positions entered last month (Keppel Pacific Oak +27%, Ascendas India Trust +10%) gave us a decent rebound onto our portfolio value.

Overall, the portfolio of Mr Budget has now broken even, which means everything is at cost to Mr Budget now. What this also means is that we are now back to zero since started investing 2 years ago.

However, we think that the market will continue a slow decline over the next few months, and our view is still that we will see further market correction.

That said, in case we are wrong, we are continuing to invest, cautiously, over the next few months.

Our net worth continue to grow this month, due to contribution from our salary as well as the rebound of stock prices.

Our combined net worth is now at S$650,000, including CPF but excluding our property and mortgage. 

With the various transactions, here’s an update on our war chest:

Mr Budget War ChestS$100,000
Mrs Budget War ChestS$40,000
Mr Budget Home Loan War ChestS$50,000
Mrs Budget Home Loan War ChestS$150,000

As our war chest has been increasing, and our cash position % is getting slightly larger than what we would ideally like, hopefully we are able to deploy our war chest soon. Counters on our watch list:

  1. Ascendas REIT
  2. Keppel DC REIT
  3. IREIT Global
  4. Suntec REIT
  5. SGX
  6. DBS
  7. Mastercard
  8. SEA
  9. Booking
  10. Adobe
  11. Amazon
  12. Square
  13. Facebook
  14. Fu Yu

Stay safe everyone, and happy hunting!

Monthly Tracking

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Funding Societies’ Rising Default Rate Paints Worrying State Of SG Businesses

Few nights ago, Mrs Budget shared something which we thought we should pen our thoughts down.

So over the past few months, Mrs Budget has been cashing out the money payments received from the loans she backed through funding society, a peer to peer loan financing company.

If you are unfamiliar with funding society, basically you can go onto the platform, look at profiles of companies who are asking for loans, and decide if you want to loan and help the companies out.

As these companies are usually rejected by bank loans due to higher risk, the interest on these loans can go up to between 10 – 20%.

Both Mr and Mrs Budget has been putting a small amount of money backing SMEs in Singapore, probably about S$5,000 total each.

For Mrs Budget, she shared that during the past few weeks, she has seen a lot of loan defaults on Funding Society, and that her capital is now mostly turning into a loss position, with only small chance of recovery.

What it means is that, Mrs Budget will most likely lose up to S$3,000 from funding society due to a non recoverable loan default!

For Mr Budget, he is still quite fortunate as his loans are quite diversified across many companies,. With his loan exposure per company set at S$200 max per company, the default rate is still quite manageable.

However, since February, Mr Budget has already disabled the auto-invest function under Funding Society and is now only collecting all the disbursed loans.

What he also noticed is that, the defaulting companies are skyrocketing since he last checked! Hopefully there will be lesser defaulting and non recoverable loans.

We also saw similar reviews on Seedly where a lot of retail investors have been saying that they are now sitting on capital losses although they have been investing for a while now.

Most of the investors on Funding Societies shared the same situation: investing over 2 to 3 years, from net gain to now net loss.

And all of this started in the past few months.

“Well, I would like to share my experience with this platform & anyone who is investing in P2P lending. In the span of the last 2.5 years, I invested around 100000 SGD on which I made around 4K SGD as profit after all the fees after 2.5 years. I thought I was making some real profits, however soon my dreams got shattered when almost 5-6 of my loans got default & resulting in loss of around 9k SG. There you go my 4k profit changes into 5k loss from my own pocket. Now forget about interest or profit I couldn’t able to protect my principle.”

To be fair, I don’t think its entirely Funding Societies’ problem. When times are good and when people earned up to 10% a year in the early days, no one complains. And now when companies start to belly up, then people complain.

Returns on investment for loans are also decreasing year on year

Increasingly, I think more of these businesses are going to face more problems with cash flow, which will lead to loan defaults, and closure of businesses. Closure of businesses will then lead to unemployment, and then leading to individual cash flow problems.

This gives an early indication of the state of businesses in Singapore, and I think we are going to hear more from mainstream news soon.

Funding Societies or P2P loans are secondary market which provides liquidity for businesses – and with default rates ballooning up, this is yet another clear sign and indication that things will get worse.

For investors thinking of investing in high risk investment vehicles, this is definitely not a good time right now. For the amount of risk for platforms like Funding Societies, they will probably need to return 20-40%, as compared to a 3.35% – 23.87% return on investment based on 2019 figures.

Also Read: Our Thoughts On The Very Irrational Market Behaviour

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Our Thoughts On The Very Irrational Market Behaviour

It’s been more than a week since Mr and Mrs Budget wrote something here.

To be honest, we want to write more but have been running out of topic to write. So if there is anything you’d like us to share more about, please feel free to drop them in the comments below. We love hearing from our readers.

So today we wanted to share an observation that we made over the past few days.

It seems as though market has reentered the bull market again, where it has gained 20% since the low just 3 weeks ago. Every other day market seems to be rallying. Stock prices continued to charge upwards as if nothing happens.

This has definitely triggered a lot of FOMO feeling amongst investors, Mr and Mrs Budget included.

To overcome the FOMO in us, we have to resort to discussing and reassuring to each other than this cannot be a V share recovery. And it seems as though this is more of a very irrational investing behavior as opposed to keeping up with what is happening on the grounds.

COVID-19 No Signs Of Slow Down Yet

First of all, there is still no signs of a successful development of a vaccine towards the covid 19 virus.

Everyday there are more new cases globally and the graph is still an upward sloping graph. While the daily new cases globally seems to be tapering off, but I think there are still under reported cases globally.

Daily new cases seemed to be plateauing

If consumer confidence are not restored, how can share price increase to pre covid 19 pricing?

Weak Business Fundamentals Not Announced Yet

COVID outbreak and the lack of vaccine aside, business fundamentals are still giving out waves and waves of bad news. AGMs of companies are pushed back, and companies like Lendlease are announcing revisions to their projected dividend.

Other than that, what we have heard from F&B owners is that traffic and business has plunged by more 80% during this circuit breaker period where everyone is required to stay at home. Streets are all quiet and people are not spending any money at all.

Empty Orchard Road

With companies increasingly going out of business, this means unemployment will increase as a result of that.

All the signs on the ground are pointing to negative signs – how can this be a V shape recovery? PM Lee also mentioned that this will not be a V or U shape recovery.

“It is going to last quite a long time: it is not a V-shaped down dip, it is not a U-shaped dip.” – Lee Hsien Loong

Bad Economic Projection Globally

If you have been following the news, there are certain big headlines recently that should warrant some worries from the financial market, but yet the market is rallying every other day.

According to International Monetary Fund chief Kristalina Georgieva, the outlook for global growth was negative and the IMF now expected “a recession at least as bad as during the global financial crisis or worse.” This was back 3 weeks ago.

Let’s take a look at the chart above – if you look at the past 2 major financial crisis – the Financial Crisis in 2008 as well as the dot com bubble in 2000, the peak to bottom is more spread out and takes longer.

Comparing that to COVID 19 where the impact should theoretically be a lot worse than the previous crisis, the chart clearly shows that we are still at the beginning of the crisis.

Even during the 2009 financial crisis or the SARS crisis, people are surely still spending, unlike now where the whole of Singapore is under a “lockdown”.

The latest world economic outlook published by IMF also paints a similarly bad picture where global economies is set witness one of the worse economic contraction in history.

So we need to reassure ourselves again and again that after looking at the recent bull run up, the worse is yet to come. How can this be a V shape recovery and how long more can we expect the prices to go up?

For those who are almost 100% vested – surely it doesn’t make any logical sense for prices to recover back to 3 months ago with all that has happened?

How can the market price behave as though nothing is happening outside in the real world, and that we can just “discount” the impact of the COVID 19?

This reminded me of the feeling when bitcoin prices are hitting its all time high every single day about 2 years back. Everyday the prices are just going higher and higher, until everything starts falling apart.

Giving Into FOMO

Of course, while it is easy for us to rationalize all of this, but we are all but weak humans filled with greed.

To avoid missing out in case we are wrong, and caving into our FOMO-ness, we made 2 more counter purchases over the last few days:

  1. SPH REIT – Trading at below NAV and may go into the student accomodation business, with a 45% upside.
  2. Centurion – Trading at below NAV (0.54). Been holding onto Centurion, exited it few weeks ago, and reentered again at a lower price, with a 47% upside.

What we have been buying is into companies which fulfill these requirements:

  1. Below their NAV – great businesses which are undervalued now
  2. Has a good sponsor – wont close down
  3. At least 40% upside to previous high

If the prices plunge further, we are more than happy to average down on the counters we picked up over the past 2 weeks.

With the two new entries onto our portfolio, here’s an update to our war chest:

Mr Budget War ChestS$70,000
Mrs Budget War ChestS$30,000
Mr Budget Home Loan War ChestS$50,000
Mrs Budget Home Loan War ChestS$150,000

Our home equity loan has still not come in yet so hopefully that will be in soon for us to do our cash allocation strategy.

Through it all, we need to constantly remind ourselves that, this is most probably not a V shape recovery, and it is very irrational to expect prices to keep going up.

So if you are feeling FOMO – it’s a normal feeling and you are not alone, but please dont let irrationality takes over.

If you have to take some action, like us, please only buy in small batches and only on counters which will not crash too badly if there’s another upcoming crash. Don’t go 100% vested now. Currently, counting our incoming home equity loan, we are probably only using 20% of our available war chest.

Stay safe folks! 🙂

Also do let us know what topics you’d like us to cover or if you have any questions to ask us.

Also Read: What Have We Done This Month Towards Our Financial Goals – March 2020

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March 2020 Monthly Expenses Update

At the end of every month, Mrs Budget and I will reconcile our monthly expenses and see what are we spending on, and where we can optimise or cut down our expenses.

We subscribe to the believe that every penny saved is a penny earned – sometimes its easier to save S$100, than to earn S$100, both of which results in the same net worth increase.

In March, here’s what Mr Budget spent on.

ExpensesMarch
Meals$450.07
Transportation (mrt)$40.00
Entertainment$48.40
Groceries / Home$201.05
Phone Bill$56.10
Income Tax$103.05
Hair Cut$34.00
Digital Subs$30.56
Malaysia Mortgage 1$785.47
Malaysia Mortgage 2$407.21
Singapore Mortgage$1,215.26
Others$192.60

Mr Budget’s total expenditure for February is at $3,563.78, a further reduction as compared to last month’s expenditure of $4,868.09

The bulk of the expenses are mortgages related expenses, and if we remove all of those expenses, the true expenditure will be at S$1155.83. Mortgage related expenses is at S$2407.95, making up to 68% of the monthly expenses. 

For Mrs Budget, here’s what she spent on.

ExpensesMarch
Meals$154.60
Transportation$80.00
Family$600.00
Entertainment$17.00
Groceries / Home$201.05
Phone Bill$25.00
Endowment$303.97
Insurance$87.25
Income Tax$290.97
Shopping$14.31
Gifts (Wedding Festives)$170.14
Dog$231.35

Mrs Budget total expenditure is at $2,175.64, significantly lower than February’s expenditure of S$10,260.33. This amounted to her 6 months low, and reverted back to the normal true monthly expenses.

We dont foresee any big expenditure coming in the next few months, and we will continue to tighten our belts and watch our cash outflow so that we can tide through this uncertain period.

How has March been like for you?

October 2019 Monthly Expenses Update
November 2019 Monthly Expenses Update
December 2019 Monthly Expenses Update
January 2020 Monthly Expenses Update
February 2020 Monthly Expenses Update

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