Investing

My mid-year investment review

Given my propensity for procrastination, I think we would be more than halfway through the year by the time this post is up?. Nevertheless, I still want to pen my thoughts and provide an update on how my investments have been doing so far. Doing so allows me to look back on some of the lessons learnt and take stock of my own performance so far. As such, without further ado, let’s get into my very own mid-year investment review.

Performance

Unless you have been living under a rock, you would know that the world is currently fighting a global pandemic. The Covid-19 pandemic, coupled with the drastic fall in oil prices triggered a stock market crash in March. This resulted in major indices all over the world recording losses of more than 20% from the highs recorded in February. Naturally, my own investment portfolio also took a hit, declining by as much as 25% at one point.

Personally, it was disheartening and scary to see a sea of red in the stock market. Despite that, I hunkered down and took the opportunity to purchase stocks which I had been looking to buy. This was in line with my belief that prices were at a discount and the market would eventually recover. Thankfully, a majority of the stocks that I purchased had since mostly gone up in value, given the slight market recovery. However, my investment portfolio is still currently sitting on around 6% in losses.

Now I am not saying that I’m happy with the loss made in my investment portfolio. Rather, I feel it is important to put the loss into context. For me, most of the loss can be attributed to my investment in the STI ETF. Since the ETF broadly tracks the performance of the Singapore market, I am confident that it would eventually recover in the long run. Hence, I’m not overly concerned about the loss in my portfolio. After all, that loss would still remain as a paper loss until I choose to realise it.

Moving forth, I will be waiting for the next market correction to once again load up on stocks in my to-buy list and par down the average purchase price of my current holdings.

Holdings

With my purchases made during the market correction, my current investment portfolio looks like this:

Investment holdings
Investment portfolio asset classes

For now, a significant portion of my holdings is in cash. This is important for me as it gives me buying power during the next market correction. Since I feel that the market is currently fairly priced, I would not be deploying my ‘war chest’ anytime soon. Instead, I will just be patient and slowly add to the cash portion while looking out for opportunities to add quality stocks into my portfolio.

I am also glad that I had been able to increase the REITs portion of my portfolio. A higher REITs portion would most likely result in a higher dividend return for my entire portfolio. As such, I would expect my dividends for this year to surpass that of last year. This can only bode well for the future and also the total value of my portfolio.

In time to come, I will be looking to increase the REITs portion of my portfolio. My holdings in the STI ETF would also be eventually sold (once it is no longer loss-making). I will be patiently waiting for that day as the proceeds gained can then be invested in other stocks.

Portfolio Value

With my purchase of stocks and the slight market recovery since then, my investment portfolio currently amounts to around 117k. Although it is not that high, I am happy with the amount thus far, given that I only broke the 100k mark last year. If all things go well, I can expect my portfolio to amount to around 130k by the end of the year. Realistically speaking though, I expect it to be closer to around 125k instead. This is due to my own personal outlook for the near future, which I will explain more in the last part of this post.

Lessons learnt

As the saying goes “Life lessons seem to be learnt at the worst times”. In the context of the stock market, investing during a market downturn has really taught me a few things and also reinforced the importance of other things which I already knew. Here are the ones which I feel are more important and significant. Although I briefly mentioned some of these lessons in my post about my investment journey, I would be delving into more details here.

1) Investing requires mental fortitude

When it comes to investing, mental fortitude can never be highlighted enough. The market correction in March certainly reiterates this point. If I did not have the mental strength to hold onto my holdings when it was a sea of red, I would not have been sitting on some of the gains I have now.

Besides not selling, I also needed to have the courage to add more to my portfolio. This was never easy especially during the early days of the correction when the market continued to bleed day after day. This is when my research on stocks came into play.

By relying on my past research on stocks that I wanted to buy, it gave me that little bit of extra confidence to initiate the ‘buy’ calls on the stocks in my shopping list. I can give a small pat on my back given that most of the stocks I had bought during the market correction are sitting on some nice gains now. However, now is not the time to be complacent. Instead, I will continue to fine-tune my investment strategy so has to get more winners into my portfolio.

At the end of the day, we all need to be aware that the stock market has periods of ups and downs. To profit from the market, we need to develop the mental strength to ride through the downtimes. The best way to do so is to alter the perception of such periods. Instead of looking at it as all doom and gloom, treat it as an opportunity to load up on quality companies instead. With this change in perception, it thus makes holding on and buying stocks during such times that much easier.

2) Never go all in

No matter how great an entry price of a stock might be, I have learnt that it is always best to buy in batches. Doing so has allowed me to average down my overall purchase price for most of my stocks. In addition, it also allowed me to prudently deploy my cash and not have the fear that it would run out that soon. The last thing I want would be to not have enough to purchase quality companies at low prices.

Buying in batches also mitigates risk in the event that stock prices fall further. As no one can predict when the market has bottomed out, there may be instances where we catch a ‘falling knife’. In such instances, buying in batches helps to reduce losses and also provides room to manoeuvre should prices continue to drop further.

Looking at my own portfolio, stocks which I had bought in batches are sitting on gains while ones which I went all-in are currently sitting on losses. Although it might be a small sample size, this kind of reaffirms the theory of buying in batches. As I continue to invest in the stock market, I will see if this theory continues to hold water or not.

3) From time to time trim the weeds

Needlessly to say, not every stock I bought had been winners. There has been a fair share of losers in my portfolio. For example, I have recently sold off my holdings in Singtel. If you had read my previous posts, you would know that Singtel was one of the first few stocks I bought when I first started to invest in the stock market. Despite being a household name, Singtel’s share price had been steadily decreasing over the years. This was mostly due to weak business fundamentals of the company. However, in spite of the decline in share prices, I continued to hold my Singtel shares, even adding to it during the market correction.

The thought to sell it only came when I did a re-evaluation of my stock holdings. I realised that I have held onto Singtel shares not because the company was doing well, but rather because I did not want to realise the losses I had chalked up. Although realising losses is never fun, I figured that it would be better for the long run. This then gave me the courage to finally initiate the ‘sell’ order through my online broker.

At the end of the day, we need to be aware that we would not always be right about our stock buys. To determine whether to hold on to a loser, consider the business fundamentals and your reasons for purchasing the stock. If the reasons for buying is no longer valid and the fundamentals are weak, I feel it is best to trim it from the portfolio. After all, we should prioritise holding on to the winners instead of losers, no matter our aversion to realising losses.

4) Never have FOMO

When it comes to investing, fear of missing out (FOMO) can be a dangerous thing. Be it when buying or selling during a bear or bull market, FOMO can bring more pain than gain. This is due to the influence of emotions in our decisions.

When emotions get in the way of our investment decisions, we often make hasty decisions. This can mean buying or selling at the wrong time. As such, to avoid bad decisions, I am striving to always base such decisions on facts and numbers. To me, it is a tough but necessary step in becoming a better investor.

My future prediction for my portfolio

As humans, we can never accurately predict how the future will turn out. If you can, please let me know so I can fix an appointment with you. I would definitely like to know how my life would turn out?. Despite the inaccuracy of predictions, we can still come out with viable hypotheses based on rational thinking and current trends.

Personally, I feel that we have yet to fully witness the economical fallout from the Covid-19 pandemic. Due to massive economic stimulus from governments across the world, as seen in the massive 2.3 trillion stimuli unveiled by the US Federal Reserve and Singapore’s very own close to 100 billion in Covid-19 reliefs, the survivablity of companies have been prolonged, despite consumer demand dramatically falling in recent months. It would be foolish to presume that governments will continually inject such funds into the economy to sustain it. As such, I predict that there would be a rise in corporate defaults in late 2020 when such reliefs dry up.

Furthermore, despite such reliefs, we have also seen some businesses either closing down or cutting costs. Given that the pandemic currently shows no sign of abating, companies’ revenues will definitely be affected. This perhaps explains why the IMF predicted that global GDP growth will shrink by 4.9%.

So what does this all mean for my portfolio? If my prediction is right, I foresee that my portfolio would dip at some point before 2020 ends. This is due to my belief that there would be another market correction soon. However, I would still expect the total value of my portfolio to increase nevertheless.

Regardless of whether I’m right or wrong, I feel that I am in a good place to take advantage either way. If the market dips, it represents a buying opportunity. If it continues to rise or stays the same, the value of my portfolio would increase steadily. In my eyes, it is a win-win no matter what happens.

Conclusion

All in all, I am happy with how my investments have turned out so far for 2020. While the future might be uncertain, I will still continue to allocate funds to my portfolio. Doing so allows me to add to my buying power in anticipation for the next market correction.

In addition, investing during a market downturn has also reiterated the importance of thinking long-term and having discipline. This would only bode well for my journey as a investor. How has 2020 been for you in terms of investing? Let me know in the comments below!

Found this useful? Share it!

Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.