CY09 portfolio

Hi,

Thanks for the compliments. For me, being a new investor, I am still trying ways to reach "financial freedom". On why I decided to concentrate my portfolio. It goes as such: As long as I do my homework on them, in the long run, I will be rewarded. Thus, I have decided to invest in 5 (maybe 6) counters which I have shortlisted with what i get from my salary and dividends. However, before investing into any of them, I will keep an eye out during the short term, to decide when to put my money into the counters.

It is true that diversification spreads out risk, but if i truly know the 5 counters I am investing in thoroughly and gauge they are my "best 5 ideas", I believe I do not need to diversify. In fact, comparing a concentrated portfolio against a diversified, if one counter is a star performer in the former, the former's portfolio's return will be rather high. The converse is true if one counter in the concentrated portfolio is a loser.

*5 stocks to me is a good enough diversification. If i had been convicted about my research, all my proceeds would be in my "best idea".

(13-09-2014, 09:49 PM)CY09 Wrote: Hi,

Thanks for the compliments. For me, being a new investor, I am still trying ways to reach "financial freedom". On why I decided to concentrate my portfolio. It goes as such: As long as I do my homework on them, in the long run, I will be rewarded. Thus, I have decided to invest in 5 (maybe 6) counters which I have shortlisted with what i get from my salary and dividends. However, before investing into any of them, I will keep an eye out during the short term, to decide when to put my money into the counters.

It is true that diversification spreads out risk, but if i truly know the 5 counters I am investing in thoroughly and gauge they are my "best 5 ideas", I believe I do not need to diversify. In fact, comparing a concentrated portfolio against a diversified, if one counter is a star performer in the former, the former's portfolio's return will be rather high. The converse is true if one counter in the concentrated portfolio is a loser.

*5 stocks to me is a good enough diversification. If i had been convicted about my research, all my proceeds would be in my "best idea".

Let's me touch a bit on diversification. According to modern portfolio theory, the diminishing return on diversification occurs around 20 stocks. But I need to remind that the "risk" is defined as price volatility in the theory

In other word, if we have higher tolerance on volatility, the number can be lower.

At the moment, I am taking 10 as an optimum diversification, both for an acceptable volatility, and risks of "unknown know", and "unknown unknown".

Sharing a thought.

I do agreed 20 stocks are quite optimal. However 20 stocks means 5% each on average. For ease of simulation, a million dollar will be 50k. Still quite a large amount in absolute term. In such situation, low yield bond, FD or PS comes in, say 40%. That's leave 600k of which 5% is about 30K on average each. Depending on individual risk level, something to play around with.

(14-09-2014, 07:47 AM)corydorus Wrote: I do agreed 20 stocks are quite optimal. However 20 stocks means 5% each on average. For ease of simulation, a million dollar will be 50k. Still quite a large amount in absolute term. In such situation, low yield bond, FD or PS comes in, say 40%. That's leave 600k of which 5% is about 30K on average each. Depending on individual risk level, something to play around with.

IMO, for focus approach, in order not to overly dilute the effort, 5% is minimum on a stock. The optimum should be around 10% average, 5-20% depending on the confidence level on every investment.

Just an update. As of today, my holdings are:

Sing Holdings (22.5%)
Penguin (26%)
KSH (29%)
Fischer (16%)
TTJ (5.2%)

what happens to cash? cash should constitute a big portion of your assets at this point of time ^^

Cheers

(17-09-2014, 10:10 AM)CY09 Wrote: Just an update. As of today, my holdings are:

Sing Holdings (22.5%)
Penguin (26%)
KSH (29%)
Fischer (16%)
TTJ (5.2%)

Hi Behappy,

I beg to differ. Cash should not be a big portion of my asset at current point of time. In fact, I keep only 6 months of expenses (which amounts to less than 5% of my stock portfolio). For this amount I keep it separate. Also, the percentage breakdown is entirely based on my stock portfolio amount.

As for the idea of keeping a "war chest", I do not currently subscribe to the idea because I do not want to build a "war chest" by keeping cash in a low interest acc. Some may ask me why not build a "war chest" with your CPF fund or SRS? This I do agree; however as I am 26 and just entered the workforce, my CPF account is still less than 60k and SRS is not beneficial to my income bracket. Secondly, many stocks I keep watch on are selling at 60% to my valuation of them. Given such circumstance, the opportunity cost of keeping liquid cash for a long period of time is too high and should be instead deployed with discretion to what I intend to purchase now.

(17-09-2014, 10:10 AM)CY09 Wrote: Just an update. As of today, my holdings are:

Sing Holdings (22.5%)
Penguin (26%)
KSH (29%)
Fischer (16%)
TTJ (5.2%)

Like you, I have a substantial amount in Penguin. I'm looking at TTJ as well, thanks to some of the buddies (including you) who managed to bring this counter to my attention.

(26-09-2014, 11:28 PM)CY09 Wrote: Hi Behappy,

I beg to differ. Cash should not be a big portion of my asset at current point of time. In fact, I keep only 6 months of expenses (which amounts to less than 5% of my stock portfolio). For this amount I keep it separate. Also, the percentage breakdown is entirely based on my stock portfolio amount.

As for the idea of keeping a "war chest", I do not currently subscribe to the idea because I do not want to build a "war chest" by keeping cash in a low interest acc. Some may ask me why not build a "war chest" with your CPF fund or SRS? This I do agree; however as I am 26 and just entered the workforce, my CPF account is still less than 60k and SRS is not beneficial to my income bracket. Secondly, many stocks I keep watch on are selling at 60% to my valuation of them. Given such circumstance, the opportunity cost of keeping liquid cash for a long period of time is too high and should be instead deployed with discretion to what I intend to purchase now.

I used to think like you when I am 26. Full of confident, thinking that I have made my first pot of gold from the SARS crisis...until the the day Lehman bros broke the financial market. There are so many stocks I wanted to buy but money is limited. I even sold my fully paid HDB to raise cash to buy stocks.If I can turn back time I will do things differently, this time I will have a cash war chest.
Btw I am only 35 and I made my first M at 31 and I have no degree.

Hi Wolf,

Noted, thanks for the advice