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

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

Lessons From My Historical Trades – Keep Calm And Keep Holding On To Get >100% Returns

One of the recent discussions I had with Mrs Budget was that, I should have held on to some of the stocks I bought when I started investing back in mid 2017. 

Back then, Mr Budget started off by looking at US equities.

Some of the popular counters which I was looking at include NVIDIA, AMD, Micron, PayPal, Amazon, Adobe and more. These are counters that I am familiar with as I see them everywhere.

Obviously, these are all high growth stocks and their price were increasing every single day. When I first started to invest, I was a trader and just bought them based on price action and what other financial analysts were saying. 

There were no research done whatsoever on my part, and because my position was very low, to me then, it made sense for me to trade in and out. 

Here are some of the historical trades which I have made.

StocksOpen PriceClose Price% P&LEntry DateExit DateHolding period (months)Current PriceCurrent % P&L
AMD$16.76$24.2444.63%16/7/201829/8/20181$52.26211.81%
Facebook$171.96$175.001.77%23/3/201826/7/20184$213.0623.90%
Huya$36.46$45.0023.42%12/6/201819/6/20181$20.31-44.30%
Micron$50.63$58.9116.35%9/4/201831/5/20182$57.3313.23%
Netflix$320.00$353.5410.48%9/3/201831/5/20183$371.0715.96%
NVIDIA$192.89$204.055.79%01/12/20179/3/20183$262.9736.33%
Adobe$173.69$185.426.75%01/12/20179/3/20183$370.00113.02%
Alibaba$180.27$174.50-3.20%01/12/20179/3/20183$215.7719.69%
Micron$44.05$55.7626.58%01/12/20179/3/20183$57.3330.15%
Alibaba Group Holding Ltd$144.34$177.9923.31%04/08/201729/11/20174$215.7749.49%
Facebook Inc.$126.57$175.1738.40%04/08/201729/11/20174$213.0668.33%
PayPal$78.25$73.12-6.56%04/08/201729/11/20174$120.0653.43%
The Walt Disney Company$110.92$105.02-5.32%04/08/201729/11/20174$142.5928.55%
Activision Inc$62.34$63.201.38%04/08/201729/11/20174$61.63-1.14%
JD.com Inc$41.52$38.57-7.11%04/08/201729/11/20174$40.10-3.42%
Amazon.com Inc.$979.85$1,152.0717.58%04/08/201729/11/20174$2,133.91117.78%
Micron Technology Inc.$34.51$44.6829.47%04/08/201729/11/20174$57.3366.13%
Nvidia$179.86$197.779.96%04/08/201729/11/20174$262.9746.21%
Mr Budget’s US Equities Trade History
Trade history in image

From the table, you can see that my average holdings were only a few months. The profits from each trade were subsequently poured into the market. 

Looking at the table, if I held on to all the stocks I bought until today, I would have made a lot more! Some of the big multi bagger which I’ve missed out is definitely AMD, Adobe, and Amazon!

For AMD, while I took a 44% profit in just 1 month, if I held on to now (19 months), the profit would have been 211.81%!
For Adobe, while I took a 6.75% profit in 3 months, if I held on to now (36 months), the profit would have been 113.02%!
For Amazon, while I took a 17.58% profit in 4 months, if I held on to now (26 months), the profit would have been 117.78%!

Other positions would also see a profit of between 15% – 70%. 

If history is any lesson, I should definitely hold on to any good US stocks for at least 12 – 24 months, and let the multi baggers continue to go up and just ride along with the bull wave.

Of course, this is easy for me to say now because in 2019, US equities generally had a good run and any US technology equity would have grown up by a fair bit if you went into the US market early last year.

Epilogue – while the tables looked great, in the end of 2018, there was a mini correction and I made a lot of bad calls and sold a lot of my active holdings back then at a loss, hence wiping out all of my profits throughout the first few years of investing. I also conveniently left out these trades towards the end of 2018, all of which are money losing trades haha.

So moral of the story – for strong US equities which are category leaders, be strong and keep holding on as long as business fundamentals remains intact, and the price are continued to be supported by growing EPS.

Don’t be afraid even if the prices are hitting new ATH (all time high) every other month.

Also, trading is mostly bad if you do not have time to actively monitor the counters.

Do you have any counters that you regret selling?

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New Investing Rule – Only Invest In Dividend Paying Companies

Mr Budget recently came across a thread on Quora which is quite interesting – What is the wisest financial advise you have heard from a rich person. 

According to Mr Wonderful, one of the sharks of Shark Tank, he follows a few investing rules:

  1. If a company has no cash-flow, don’t invest! A company without cash-flow is valueless and nothing more than a speculation.
  2. Never buy a stock that doesn’t pay a dividend

He adds on further by explaining his investing rule with proper stats: “Over the last 40 years, 71% of the stock market’s return came from dividends, not capital appreciation”

“Don’t wait for the stock price to go up, get a check every other month and take your share of profits. I’ll never own a stock that doesn’t pay a dividend,” ~ Mr. Wonderful.

I think this is a very good yard stick that I will be using to guide my purchase decisions in the future. I also read somewhere that companies who have a dividend policy are more savvy in terms of capital allocation and capital utilisation, as compared to companies without a dividend policy. 

Strong companies will always give a share of the profits back to the shareholders. Companies that produce dividends on the other hand, have to ensure that their cash flow is strong enough on a regular basis to make the dividend payout and thus are managed differently.

This is also reflected in REITs – all of which have dividend policies and their prices have been increasing over the past decades. 

Another reason why this is a good investment barometer is that, when the cash of the company starts running short, dividends are among the first expenditures to get cut. That will serve as a good indicator of how the company is performing in terms of capital utilisation.

What this means is that, for growth stocks without dividend policies, Mr Budget will have to be more mindful about deploying our investment capital into them. 

Some of Mr Wonderful’s other rules for investing:

  • no more than 5% in any one name
  • no more than 20% in any sector
  • volatility is the enemy, so stick with less volatile large caps and dividend payers
  • Take your age, and put that percent of your wealth into bonds

This is a good reminder as Mr Budget just liquidated Beyond Meats, a counter which I bought few months back and suffered a 60% capital lost.

The counter was bought without proper analysis at the fear of missing out, and subsequently caused a 60% capital lost.

The Mrs asked me why did i not hold onto it – but what i didnt tell her is that, for me to recover my position and break even, the counter would have to go up by 120%, a highly unlikely case given the increased competition and the wearing off of the novelty.

Hence, it’s better for me to just cut loss (one of my biggest lost position) and to see if I can deploy the cash into something else.

And this time, into a dividend paying counter.

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