Seeking advice on portfolio

[NTL]

There are some retail bonds listed in SGX. There are also Preference Shares. You may want to check them out. Don't need $250k to buy.

[Temperament]

I wont give you any stock tips since you have done a considerable amount of studying for the past 1 year but i can share with you what not to do.

Bonds are "a terrible investment" right now, Berkshire Hathaway Chairman and Chief Executive Warren Buffett told CNBC Monday (6 May 2013). He recommended holding a comfortable amount of cash but otherwise investing in "productive assets", and called having a set asset-allocation strategy "silly." Bond prices are artificial right now given the Federal Reserve's purchases of $85 billion a month, "and when that changes, people could lose a lot of money."... I think it's silly— to have some ratio like 30 or 40 or 50 percent in bonds. They're terrible investments now.

The interesting thing about investment is most people ignore advice given out by warren buffett. In the world of investment, why would anyone not take the words of buffett seriously... i am always puzzzled

I beg to differ. Not everyone has the one in billion talent that buffet has. So for him, of course bonds are bad investments now. But for me, I have bought bonds since 2010 and have found that they give much needed cash and stability to portfolio. Of course if I bought all equity, probably would have done even better by 3-4% annualized but I did not foresee liquidity driven rally so strong...

And yes, bonds are 30-40% of portfolio but they give me substantial piece of mind as they cover my expenses annually.

Agree, to each his own circumstances and needs will differ from person to person.

For my own portfolio, i would prefer to keep 3-5 years of cash to meet all my liquidity/ short term needs, and the rest in equities. The low upside and high downside in bonds just make me nervous

Sorry, can you elaborate on:

i would prefer to keep 3-5 years of cash to meet all my liquidity/ short term needs, and the rest in equities.

Do you mean you lump them together as one or ?

---

Yes! Everyone of us has our own experiences and outlook in life. So we have to understand our self first (find our self first) before we can be a successful investor.
I agree with DOG as a Newbie investor, invest yourself first by reading as much as you can then see whether you can find some part of yourself in your reading.
Example:-

i found part of myself in reading WB:- on
Warren Buffett: - “Success in investing doesn’t correlate with IQ once you are above the level of 125. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing”.

But to tell the truth, i admit i only plunged into the market after readings and observing for more than ten years. Then after plunging into the markets, manage to survive for some years before i came across about WB on the above.
So now you will understand why i choose the nick name- Temperament.
(Not a shame to let everyone knows (at the risk of irritating some High IQ Snobs) as i only have very basic education-ITE only. And dare to blog here)
My apology for being long winded.
OLD MAN.

[Porkbelly]

Portfolio mix depends on purpose of investments.

A general statement of purpose may not help. Besides, through time, the needs will change.
Income producing, capital appreciation, trading ( or flipping as in property markets) require different methods. Defining the purpose will help determine the method that is most suitable to the owner.

Buying bonds and keeping them to maturity has a different purpose as what Warren Buffet does. He may be buying and selling them before maturity.. which is different from retail investors who have a different purpose.

Bonds provide income stability because the coupon payments are predictable.
The risk is in the company going bust and that bank deposit interest rates are higher than the yield.. also the rate of inflation over the term of the bond.
Bonds have their place in portfolios, though for early starters, their minimum purchase amounts can be prohibitive ( $250,000 and holding costs if denominated in US$ or other currencies) There is one bond in the SGX ( Capital Malls Asia) that trades in lots of $10,000 , I think.

Always start a portfolio that is understood. The purpose, the method, the time frames, review annually and as the mechanics becomes more familiar,
one can build upon it. Be prepared for losses. But ultimately each portfolio's success is measured by its original purpose. It cannot be measured against another.

In today's investment climate, a 6% return on any portfolio annually is spectacular.

[Temperament]

Portfolio mix depends on purpose of investments.

A general statement of purpose may not help. Besides, through time, the needs will change.
Income producing, capital appreciation, trading ( or flipping as in property markets) require different methods. Defining the purpose will help determine the method that is most suitable to the owner.

Buying bonds and keeping them to maturity has a different purpose as what Warren Buffet does. He may be buying and selling them before maturity.. which is different from retail investors who have a different purpose.

Bonds provide income stability because the coupon payments are predictable.
The risk is in the company going bust and that bank deposit interest rates are higher than the yield.. also the rate of inflation over the term of the bond.
Bonds have their place in portfolios, though for early starters, their minimum purchase amounts can be prohibitive ( $250,000 and holding costs if denominated in US$ or other currencies) There is one bond in the SGX ( Capital Malls Asia) that trades in lots of $10,000 , I think.

Always start a portfolio that is understood. The purpose, the method, the time frames, review annually and as the mechanics becomes more familiar,
one can build upon it. Be prepared for losses. But ultimately each portfolio's success is measured by its original purpose. It cannot be measured against another.

In today's investment climate, a 6% return on any portfolio annually is spectacular.

Well put.
You just reminded me again - determine the aim of (why) the investment first before proceed, then you will most probably will not be lost.

Actually many endeavours in life (if possible all undertakings in life) should be the same. Think why (the aim) first is very important, in order not to be out of "control".
It is not late for me to go over all the whys again for my Total portfolio.
i think once a while going over the whys are good because the aim may change through time.

Just like if i ask myself why i am here? i know there are 101 reasons i can give. But really the only reason and the most important reason is i can not stop learning. For the matter, i think no one should if even only reason is to keep one's brain working.-Keeping DEMENTIA at bay is all important to me. What about you? Still too young to worry?
Ha! Ha!

[dan6]

This is my first post after reading ValueBuddies over the past 2weeks. Need your advice on the below

1) I'm 38yrs this year, married with 2 kids (9 and 7)
2) Already brought insurances for all 4 of us
3) Also had set aside 12months emergency funds

Current portfolio...
- I only started stock investment in Feb 2012, and had been reading forums/books and attending seminars for the past 1 year

WARNING: LONG POST

First of all, you should identify your investment goals. Are they:

1. To fund the children's university education;
2. To provide for retirement expenses for you and your wife;
3. To leave a legacy for the children to inherit;
4. Something else; or
5. Some/all of the above?

Your answers will determine the time horizon for your investing and the amount of loss you can stomach. And remember that most people have LESS risk tolerance than they think. Everyone says they can take some loss, but they will only know their true risk appetite in a bear market.

Also, you need to consider your earning power relative to your net worth.

If your earning power is high relative to your net worth, you can quickly bounce back from losses. If not, you may not be able to tolerate losses.

Also, if you are willing to risk losses (and permanent downgrades in standard of living) in exchange for the possibility of vastly increased net worth, you can take more risk.

If you have not considered any of the above, you should probably put your money in the bank until you have figured out WHAT you want your investing to achieve. Talk to a financial planner if you haven't already done so. Consider using a fee-based planner so that they don't have any incentive to sell you products.

Just pay for advice, it's a one-time cost and will at least help you think about your financial goals. A commission-based planner will only make money by selling you stuff, so whatever they come up with will involve them selling you stuff, when sometimes the correct thing for you to do may be to NOT buy anything at all.

As for your investment questions:

One year of experience is too short to safely invest a meaningful portion of your net worth on your own. Starting in Feb 2012 means you have only experienced a bull market, which makes things all the more dangerous because you have not yet suffered through a bear market.

$50k of exposure is probably too much unless you are willing to suffer significant losses while you improve your knowledge. $50k in a major ETF (STI, HKSE, S&P etc) would probably be a more sensible place if you insist on having stock market exposure while you learn.

Your best investment right now is knowledge. If you have not already done so, buy and read The Intelligent Investor, a book endorsed by no less than Warren Buffett. I have this book (hardover 1970 edition) and it has paid for itself many times over. I daresay that for a reader who is willing and able to apply its principles, it is worth far more than its weight in gold. Even if it sold for $1,000 I would call it a bargain, but you can buy it in the bookstore for less than $100. Or borrow it from the library for free. But if you are serious about investing you should buy a copy, because you'll read it again and again as the years go by.

If you can combine time, knowledge and experience, you can find investments that have superior risk/reward ratios i.e. "low risk, moderate return" or "moderate risk, high return". Without all three, however, the "low risk, low return" maxim applies i.e. if you do not want to take too much risk, you must also accept a low return.

Until you can easily read and understand financial statements, and can arrive at a reasonable idea of what an investment (whether stock, bond, property etc) is worth, the best place for your money is probably the bank. You have some experience investing in property. Aim to at least reach the same level of comfort with stocks before you take meaningful exposure on your own.

As for bond funds my $0.02 is: Just say NO. The reason is that bond funds do not EVER hold bonds to maturity. In order to maintain an average duration, they continually buy and sell bonds. This means that when interest rates go down, the bond funds will get capital gains as they sell their bonds. Conversely when interest rates go up the bond funds will incur capital losses when they sell their bonds.

Interest rates are very low now. If interest rates go up during the period you own the bond fund, you are very likely to suffer losses. The longer you hold the bond fund, the more likely that rates will rise during this period. You can't sell AFTER rates go up because the bonds will already have lost their value, you have to sell BEFORE. But do you have a crystal ball? I don't.

In contrast, when you own a bond directly, even when interest rates rise and the bond declines in market value, you can choose to hold the bond to maturity and get repaid in full. So if you want some income and nominal protection of capital (which means guaranteed losses after inflation), yes you can buy bonds directly. But do not EVER buy bond funds unless you are prepared to take interest rate risk (risk of capital losses), or you are specifically buying a junk bond fund, in which case the returns will be highly correlated to the stock market i.e. you are buying for capital gains and not income/safety at all.

Hi All,
Where are the places that i can get Paid Advice to help me think about my investment portfolio?

[d.o.g.]

Hi All,
Where are the places that i can get Paid Advice to help me think about my investment portfolio?

Go to the MAS website, look up the directory of Financial Institutions, then go to the list of Financial Advisors. Within that list, there are 4 sub-groups that may be of use to you:

licensed to advise on life policies
licensed to advise on securities other than collective investment schemes
licensed to advise on collective investment schemes
licensed to advise on structured deposits

Most of the licensees are paid by commission, so you'll have to do some work to identify those that are fee-only. To my knowledge, there are very few fee-only advisors. You can just call - there are only 59 in all on the current list (I just checked). Won't take more than 2-3 minutes per company.

If you are fine with commission-based advice you will have plenty of choices - just be aware that most, if not all, of the advice you get will involve you buying the products they carry, even if they are very similar to what you already own, or even if they are not truly appropriate for your circumstances. If you don't buy, the advisor will starve. So they will ask you to buy.

Note that MAS defines financial advice quite strictly, whereas many lay people deem the opinions of friends and acquaintances to also be advice. For example, as a fund manager I may have certain opinions on various listed companies, but I am not legally able to advise anybody on whether the companies' stocks or bonds would be suitable investments, even if I can (and do) take the appropriate course of action within the fund that I manage. To actually tell somebody to "buy X" or "sell Y" I would need a separate financial advisor license.

As usual, YMMV.

[Contrarian]

> Where are the places that i can get Paid Advice to help me think about my investment portfolio?

Unfortunately most of the advisors are geared towards unit trust.

Even remisiers I heard cannot give advice on stocks ???

[NTL]

> Where are the places that i can get Paid Advice to help me think about my investment portfolio?

Unfortunately most of the advisors are geared towards unit trust.

Even remisiers I heard cannot give advice on stocks ???

Talking about this, you are right partially. I would say the advisors are bounded by what they can advise, which are mainly insurance and unit trust, from the exams they took. Remisiers and stock brokers have to take their respective exams to be able to "advise", or talk about stocks. Otherwise they will not be complied to the licenses they have.

For Phillips Capital, where they have insurance, unit trusts and stock broking, maybe there are advisers who are able to advise on all? Can always check that out at any of the Philiips Investors Centres. Heard that CIMB is possible too.

[dan6]

Hi All,
Where are the places that i can get Paid Advice to help me think about my investment portfolio?

Go to the MAS website, look up the directory of Financial Institutions, then go to the list of Financial Advisors. Within that list, there are 4 sub-groups that may be of use to you:

licensed to advise on life policies
licensed to advise on securities other than collective investment schemes
licensed to advise on collective investment schemes
licensed to advise on structured deposits

Most of the licensees are paid by commission, so you'll have to do some work to identify those that are fee-only. To my knowledge, there are very few fee-only advisors. You can just call - there are only 59 in all on the current list (I just checked). Won't take more than 2-3 minutes per company.

If you are fine with commission-based advice you will have plenty of choices - just be aware that most, if not all, of the advice you get will involve you buying the products they carry, even if they are very similar to what you already own, or even if they are not truly appropriate for your circumstances. If you don't buy, the advisor will starve. So they will ask you to buy.

Note that MAS defines financial advice quite strictly, whereas many lay people deem the opinions of friends and acquaintances to also be advice. For example, as a fund manager I may have certain opinions on various listed companies, but I am not legally able to advise anybody on whether the companies' stocks or bonds would be suitable investments, even if I can (and do) take the appropriate course of action within the fund that I manage. To actually tell somebody to "buy X" or "sell Y" I would need a separate financial advisor license.

As usual, YMMV.

Thanks d.o.g, Contrarian, NTL for your input. Never knew there are such info in MAS website. Found fee only FA thus far and still going through the list.

The key purpose is want to find out if paid advise FA can recommend how to make the USD70K savings to work harder that is sitting in the foreign currency account. I tried to find out through banks and they are selling me bond funds and short term dual currency investment, which i am not that convinced yet. My only other investment are mainly stocks in SG & US market.

Let me know too if anyone has any input what to do with foreign currency (in savings) on hand. Thanks

[pianist]

what about dual currency deposits? basically u r trying to sell an option to the bank. this one dun have commission to be incurred..the bank earns on the spread while u earn on writing the option - time value of money..sounds like win-win.