War Chest Planning And What We Are Doing During This Uncertain Time

Looking at the market movement the past few days and weeks, we are slightly spooked by the atypical market movement, and are currently living in uncertain times now.

If you hold any US equities, you would have noticed that the past few days, the S&P 500 as well as the NASDAQ have been swinging by 2-3% per day upwards and downwards, and the market is unsure which side they want to head towards.

The 2-3% gain on one day is quickly wiped out the next day, only to recover the following trading day.

Other than the price movement, earnings from big and small companies are giving mixed signals – while most companies we are monitoring registers continued growth in earnings, but they are giving revenue drop guidance.

The full impact of the virus towards the global economy will only be registered by individual company’s P&L in the next 1 or 2 quarters. 

We are also seeing new lows everyday from counters adversely impacted by the COVID 19, such as DBS, which dived more than 10% from a month ago.

SATS too plunged >20% from the price a month ago, almost a 4 years low. Comfort on the other hand, is testing its 2 years low of S$1.91, and if the current price of S$1.92 breaches that, we will be seeing price levels from 2013.

Building Up War Chest And Preserving Cash

So what are we doing? For now, we are looking to build up our cash in bank.

What this means is that, we are resisting the urge to buy individual counters, although the price levels are very very attractive. If you look at our monthly updates, what you will notice is that every month, Mr or Mrs Budget will be initiating a position in a local counter. We will be putting a brake on that for now.

We think that the COVID-19 impact is still not being priced in fully by the global market – worse still, this might even catalyse the next recession.

The tax season and our annual insurance premium is here too, so hopefully the savings can offset these new additional expenses. 

Continue Our Syfe DCA With Reduced Contribution

Besides building up our cash holding, we will still continue our monthly DCA into Syfe our Roboadvisor.

The Irrelevant Investor recently did an article comparing the portfolio growth of “buying the dip” vs DCA and found very interesting insights.

What he found is that, a straight dollar cost averaging actually did better than the buy the dip strategy across the history.   

He also concluded that if something goes up over time, then the longer you delay investing, the worse off you are. 

So for the Mrs and I, we will still continue our monthly DCA. However, we will reduce the DCA slightly from a monthly of S$1,500 to S$1,000. This is so that we can build up our cash to buy high quality blue chips stocks that are really too attractive to give a pass now. 

Cutting Down On Unnecessary Expenses And Exploring Free Entertainment

The third thing that we are doing during this uncertain period is to cut down on unnecessary expenses.

What this means is that, we will try as much as possible to lower our entertainment cost and dine out cost. This also means that we will try to cook in more, eat more cai fan for lunch during work, as well as looking out for free entertainment such as exercising during the weekend or simply Netflix-ing at home more.

Hopefully we can bring up our current cash holding and leverage on the market recovery if it does happen.

This is our war chest planning for the next 6 months:

Cash HoldingMr BudgetMrs Budget
CurrentS$55,774.29S$49,400.74
Targetted in 6 monthsS$65,000.00S$65,000.00
6x Monthly Expenses S$30,000.00S$12,000.00
Available for InvestmentS$35,000.00S$53,000.00
“Bullets” available for
S$5,000 individual investments
710

What are you doing during this uncertain times?

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. 

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