Portfolio Management/Update

This should be a short post on transactions I have made in the past couple of months and also to lay out my portfolio management style.

My portfolio have just 3 transactions over the past few months. I sold out Isoteam (5WF) and DBS (D05) from my cash portfolio, and I bought Gold ETF (O87) for my CPF Investment Account. Overall, my stock investments have yielded quite a bit over the 3 years.

Stock Bought Price Sold Price PnL
ISOTEAM LTD 0.3 0.415 40.86%
DBS GROUP 14.843 18.28 26.02%

The next section is to lay out my portfolio management style. I realized that in the past few years I started investing, I was more focused on stock picking rather than viewing my stocks as a portfolio. Now that I have a lot more money compared to when I first started, I need to be more mindful of portfolio management. Furthermore, I have always struggled with the issue of how to measure return on portfolio due to capital injection at random times. Thus, I have not been able to compare portfolio performance. Now, I have decided to try to clarify things and set rules for myself in order to guide my investing thesis. The reason why I sold my positions is because I would like to hold more cash as I would like to have gunpowder for a crash. I know that there has been a of doomsayers that predict a crash coming but there hasn’t been one, but eventually there will be one and I would like to be in a situation which I am able to take advantage of the situation to buy shares cheaply.

In any case, here are a couple of rules which I would like to set for my stock portfolio.

  • Start with a base calculation of $20,000 for the year 2017. So this means that my initial starting portfolio will be $20,000. (I know it’s not a lot, but it is already >50% of my current liquid net worth.) This will include cash position which I have set aside for stock investing. This way, I will be able to better calculate my stock portfolio return and compare against the various index benchmarks.
  • Stick to SGX stocks for now. I feel that I still need to get used to stock investing since it is an activity not done frequently throughout the year, and also my starting base is not large enough for me to venture into foreign markets. The commissions as it is for SGX are already killing me due to my small positions and I feel that I am not yet ready to venture into foreign markets.
  • Have a cap of <10 stocks in my portfolio. Don’t believe that I will breach this limit anytime soon considering that at the moment I only have 2 stocks in my portfolio. It is still good to set this cap so that I will have better information on my stocks and to keep track of them better.
  • Portfolio allocation – 50% dividend, 25% value and 25% growth
    • 50% dividend means that I would allocate approximately $10,000 of the initial portfolio to stocks with stable dividend yield, ideally >7%. This will probably consist of business trusts and REITs.
    • 25% value and 25% growth portion is a bit tricky. It is not a proportion cast in stone as my idea for the initial portfolio is to have 3 stocks for this section, which will approximate to $3,000 per stock. Personally, I feel that it is easier to identify undervalued stocks based on defined metrics and filter criteria from financial analysis. Growth stocks are a lot harder to identify.
  • Develop a plan to identify the stocks suitable for the portfolio. Something that I am still working on.
  • Quarterly review of individual stocks when financial statements are available.
  • No fixed holding period. Once the value reaches the target set, liquidate the position.

That’s all for now, hope that this will give me greater clarify on how to manage my portfolio. It might change over time but this is to be expected as I am still only beginning my investing journey and will be prone to making mistakes along the way. The key is to make minor adjustments along the journey to make things work in the end.