Portfolio Allocation / Management

Hi all buddies,

I realized that I do not have a clear portfolio plan / strategy as I am overly focused on analyzing individual companies business even though ben graham has mentioned that portfolio management is most important to all investors. Anyone can share their experience on value investing on overall portfolio allocation? For e.g. number of companies in your portfolio, how much $ to put into each investment, how frequent one should average down/up and the volume you average down/up (1 lot or 10 lots etc), % of cash to put into stocks (in my case I have 50k assets and about 20k in investment that are suffering paper losses, 10k emergency fund). My investment performance has not been really satisfactory - getting about 2-3% if including paper losses. All inputs or sharing will be appreciated! Or any portfolio allocation books to recommend?

Have you read "20 upon 20 Practical Portfolio Management" - Michael J. Hanson.? Perhaps you might find this book interesting. There are many more in our "NLB". All FOC.

Well for me I own just 6 companies (one is technically a REIT not a company, so that makes it just 5). I put the most amount of money in my highest conviction company, in terms of stability, track record, risk-rewards, valuation and dividend yield. These factors are assessed by myself and usually I will allocate about $5,000 to $10,000 at one go into the investment of my choice.

There is no particular formula for adding to my positions. As long as it delivers value and I sense an adequate margin of safety, I will purchase it.

Unless you're holding onto some s-chip, you shouldn't worry at all about your portfolio. The time will come and euphoria will return again to the market at some point down the road. Dont be wavered by what you see now.

I am not holding on s chips but penny counters. Recovery may take more than 5 years.

Your performance is superb already.

My portfolio is about 20% in the red. Main bulk of losses comes from SG pennies and Citibank..

I think I need to hold a decade for Citibank..

(25-06-2012, 11:30 PM)Musicwhiz Wrote: Well for me I own just 6 companies (one is technically a REIT not a company, so that makes it just 5). I put the most amount of money in my highest conviction company, in terms of stability, track record, risk-rewards, valuation and dividend yield. These factors are assessed by myself and usually I will allocate about $5,000 to $10,000 at one go into the investment of my choice.

There is no particular formula for adding to my positions. As long as it delivers value and I sense an adequate margin of safety, I will purchase it.

What will you do if there are 2 new companies or more that you have been looking at become significantly undervalued? Will you add them into your portfolio or will you choose to focus on averaging down on your portfolio considering that the 2 new companies are better and more undervalued than your portfolio?

(26-06-2012, 08:46 AM)Zelphon Wrote: Your performance is superb already.

My portfolio is about 20% in the red. Main bulk of losses comes from SG pennies and Citibank..

I think I need to hold a decade for Citibank..

Most probably for a decade. i have some "BAC" too. i have read sometime ago a US fund management company that never allow to invest in financial institutions. In USA, it is very "common" for banking institutions to close for good, historically. To me our banking institutions may follow USA's system one day. As PAPY looks up on USA and may try to follow some of their practices one day. That's why "Too-much-sick" lost a lot in USA in 2008/2009 fiasco.
The day when our banks allow to lent too liberally is the day. Never say never going to happen here. It all depends who is the PAPY then.

(26-06-2012, 08:49 AM)shanrui_91 Wrote: What will you do if there are 2 new companies or more that you have been looking at become significantly undervalued? Will you add them into your portfolio or will you choose to focus on averaging down on your portfolio considering that the 2 new companies are better and more undervalued than your portfolio?

I would have to allocate considerable work and research to be able to identify "new" companies which are not part of my portfolio, and which are attractive. Even then, I must consider what I mean by "attractive". Industry attractiveness, valuations across comps and intrinsic value after accounting for various factors, all play a part in that determination.

Then there is also the opportunity cost test - balancing one investment opportunity against another to see how I should allocate my funds. It may be all on one company, or 50:50; it really depends. No hard and fast rules to this.

Ultimately it all boils down to my risk-return assessment and factoring in my holding period (and dividend yield while waiting).

(26-06-2012, 09:28 AM)Musicwhiz Wrote: Then there is also the opportunity cost test - balancing one investment opportunity against another to see how I should allocate my funds. It may be all on one company, or 50:50; it really depends. No hard and fast rules to this.

Ultimately it all boils down to my risk-return assessment and factoring in my holding period (and dividend yield while waiting).

Hi MW, great to see your sharing. Do you have a template or guideline to help you decide on the risk-return assessment or opportunity cost? Or it is more a "art" way of approach based on gut feeling at the very end of the decision process? I find myself hitting the gut feeling path very often which has resulted to my poor performance. Perhaps my investment decision process is not as stringent as yours.