Portfolio Allocation / Management

[yeokiwi]

hi yeokiwi, how come these days don't have the great 'singtel' ipo for citizens to subscribe anymore?

Well.. That singtel ipo was not that great after all if you buy at the IPO price..haha.
In that period, our S'pore gov was trying to introduce long term equity investment to our ignorant citizens. With the liberalization of CPF fund to invest in CPF approved stocks, we see waves after waves of CPF $$$ plunging into our stock market.
As we all knew by now, the returns were pathetic. So, now our gov preferred to stress on the solid 2.5% return of the CPF acct.

and what do u mean by rerating?

Some stocks get re-rated to a higher PE due to some reasons. So, the share price increases proportionally.
Singtel and M1 are selling at PE 12-14 now. One day, for no apparent reason, our gov said that the telecom sector will close to all competitors from today onwards. Then, the investors may happily re-rate our telecom stocks to higher PE.(PE16-17?)

Seriously, till date, I still do not understand how the investment world allocate PE to each industry.

[KopiKat]

hi yeokiwi, how come these days don't have the great 'singtel' ipo for citizens to subscribe anymore?

Well.. That singtel ipo was not that great after all if you buy at the IPO price..haha.
In that period, our S'pore gov was trying to introduce long term equity investment to our ignorant citizens. With the liberalization of CPF fund to invest in CPF approved stocks, we see waves after waves of CPF $$$ plunging into our stock market.
As we all knew by now, the returns were pathetic. So, now our gov preferred to stress on the solid 2.5% return of the CPF acct.

I'm still waiting for their 'promise' of the PSA one...
Yes, Singtel IPO became very much a political disaster in those times. Even those who got it at IPO price ended up blaming the govt! So many ignorant CPF members treating stocks like a casino and getting the same outcome ... losing $$. No 'Undo' button here for the govt...

and what do u mean by rerating?

Some stocks get re-rated to a higher PE due to some reasons. So, the share price increases proportionally.
Singtel and M1 are selling at PE 12-14 now. One day, for no apparent reason, our gov said that the telecom sector will close to all competitors from today onwards. Then, the investors may happily re-rate our telecom stocks to higher PE.(PE16-17?)

Seriously, till date, I still do not understand how the investment world allocate PE to each industry.

IMO, if there's anything to be learnt from the financial crisises, it's that any rerating is usually done by Foreign Funds moving their huge funds in and out of our market. Even now, many a time, I can observe a usually not so liquid stock suddenly come alive with huge volume (either buy up or sell down) over an extended period of time. Most likely some Funds suddenly decided to buy/sell. This is how PE got rerated..

[mrEngineer]

Thanks to everyone whom have shared their inputs on their investment, stock picking strategies and number of stocks in their list. I would love if more people can advise on the fund allocation portion and average down especially in the case if you have low capital. Using my case (figures are approximate but not far) as an example:

50k liquid assets which consist of:
10k emergency fund
5k working capital fund (for monthly payments of bills and expenses)
20k invested (almost 40% mark to market loss - sold all my profitable counters)
15k cash left to invest

Actually I am very unhappy with my P&L this year as I am not able to save from my income..
(seriously i wonder how people can accumulate money at young age other than higher income???)
Forecasted Annual take home of 50k
15k allocated to separate saving fund for housing renovation and wedding etc
10k given to parents
10k daily expenses (food, clothes, entertainment, transport)
10k travel and misc expenses (no choice due to engagement plans)
5k self development and courses
0 savings for 2012

So if I were to clear all my stocks now I would left about 25-30k to invest.
Should I go for 10 stocks at 3k each or 5 stocks at 6k each?
Even if I were to do that, I will not have any $ left to average down or hold in my opportunity fund..
Also another point that bothers me is that the threshold to invest should be above 6k so that the commission charges will be maxed out.. But probably that should not be an important factor in portfolio allocation decision..

[thefarside]

Hi mrengineer. I used to have your P&L. And you are right that its very difficult to build capital at a young age unless you have a very good job which allows you to accumulate cash. Hence d.o.g.'s constant refrain that its better for you to focus on developing a good career and increasing your income to produce the surplus cash for investment.

But if you do it young and with good discipline, the power of compounding would work for you. The road looks long now but once you get traction with your earning power and reinvested income, you will see the curve suddenly becomes much less steeper.

[Temperament]

Hi thefarside,
What you say is quite true. However don't be discouraged. i did not invest until the age of 40. And so i had a larger capital to start with. Especially using my wife and my CPF. And my wife's portfolio always made more money than mine because averaged down using her CPF last after exhausting mine. So you see the power of averaging down if you picked the correct stock. If the wrong one, sayonara.
And if you can think investment is a lifetime project, you will be patience. Of course at that time, i did not think like this. But now i think everyone who invest in the stock market should. No hurry & no sweat. Patience is the name of the game. My 2 cents.

[CityFarmer]

...

50k liquid assets which consist of:
10k emergency fund
5k working capital fund (for monthly payments of bills and expenses)
20k invested (almost 40% mark to market loss - sold all my profitable counters)
15k cash left to invest

Actually I am very unhappy with my P&L this year as I am not able to save from my income..
(seriously i wonder how people can accumulate money at young age other than higher income???)
Forecasted Annual take home of 50k
15k allocated to separate saving fund for housing renovation and wedding etc
10k given to parents
10k daily expenses (food, clothes, entertainment, transport)
10k travel and misc expenses (no choice due to engagement plans)
5k self development and courses
0 savings for 2012

...

I started to invest (seriously) after 40, after I had accumulated size-able fund. IMO, the view of "focus on developing a good career and increasing your income to produce the surplus cash for investment" is very valid. It take time to accumulate the starting fund.

Been prudent is an important factor. If it become a life style, it help a lot in the accumulation.

I did not spend much on housing renovation, travelling, wedding, clothing and entertainment. It is nice to spend on those, but opportunity cost is a real concern

I am glad my wife had the same view.

[mrEngineer]

Thanks everyone with the encouragement. My original target was to hit 100k of liquid assets by 30 but now at 28 it seems far away for me to reach this target due to many large expense items like renovation, wedding and diamond rings etc. I have trying to ask myself how much I can cut my expenses but it seems almost impossible. I think it will get worse after 30 when start having kids because I think that will cost 10k per parent for each child..

[Bibi]

I would love if more people can advise on the fund allocation portion and average down especially in the case if you have low capital.

I re-started investment in year 2006 after i read books on value investing. I had 70k to invest. if you can recall that year 2006 to 2008(?) is the bull run and its really damn easy to earn money. However, i stuck with 90% cash (63k) cos i felt the stock prices are really too high. My fren all laugh at me on keeping so much cash. They say i can wait another 10 years and i wont be able to use that cash. Come 2008 or 2009, when stocks started to fall, i started to buy slowly all the way till STI hit 1.5K? Due to my limited funds, i focused on only 2 stocks. Yap, 63k of money all in just 2 stocks buying all the way down. I have to be damn confident of the 2 stocks i am going to wack. I survived the crisis and is seating on 110% (out of my initial total investible cash of 70k) of profit/paper gain.

Now my portfolio is 120k in stocks. Again mostly in 2 stocks and just 5% in another stock. 300k+ in cash (comes from salary savings and profit from stocks). I dont believe i have to wait another 10 years before i can use all my 300k+ cash into stocks because i am confident know they will fall. And i am confident i will earn at least 100% profit on my 300k+future salary savings when the next crisis comes.

People can laugh at me for losing 5% annually due to inflation for holding cash. But i know my time will come.

[karlmarx]

The expenses you're making which has impeded you from reaching your target are in my opinion, worthwhile. I'll never trade money for an ideal home/family; you should feel proud of the effort you have put in.

It is normal to be deep in the red, from time to time. And given that you're invested sum is not huge, you should be glad that you're making mistakes on smaller sums now rather than in the future when your investment capital is likely to be much larger (and the fallout from mistakes more amplified). Don't be too bothered by the red, and don't stop looking for good buys.

[Jared Seah]

mrEngineer,

This achieve by X age thing can be stimulating; but it can be another self-imposed "rat race"... Enjoy your life journey at your own pace

You may want to take the time to improve your stock picking (method) and loss control (money management).

You wouldn't want to have $100,000 tomorrow and be sitting on minus 40% mark to market loss would you? (Keeping your losers and selling your winners?)

You may noticed in another thread on long term investing returns that there's a thin red line connecting the "more" successful investors - TIME is the constraint, not money.

Time as in experience in the market.

Time as in how much time devoted to research (knowledge) and practicing our craft (competence).

A fast car to a unskilled driver is just an accident waiting to happen.

Just a whistle in the wind...