A Quick Update on Personal Finance and Investing

I have been quite inactive for a while. Therefore, I have decided to make a quick update. This article will not be an educational one. It is more of a personal update on finance and investing.

Personal Finance – Adjusting Allocation

As shared in one of my previous articles, I have a budget allocation that I have been following when I was  much younger. Initially when I started on this, I would allocate more to investing and saving so as to accumulate capital and money at a faster rate. Such an allocation arrangement is mainly influenced by my mindset about money and among other reasons. 

Just last year, I wrote about an article on thoughts about savings as a teenager. In a Facebook post on Seedly group, I shared with the members my allocation, whereby I would only allocate about 12% for expenditure and the remaining for investing and savings. I sought the group for advice on whether I should allocate more for expenditure as I felt that I did not spend my youth well since I am saving aggressively for the future and I felt miserable that I often contemplated whether to make big ticket purchases that will be useful in the long run. For example, buying a new shoe during NS knowing that majority of the time you will be wearing boots.

I always have this perception since young that money is meant to grow instead of spend. As I become older, I gradually change this towards spending. The change is to a certain extent as I do not want to transition myself from an extreme saver to extreme spender. This is why I have been advocating that one should strike a balance between both ends and allocate based on individual lifestyle and needs. 

With this gradual change in perception, so is my allocation strategy. I will occasionally do a review on my strategy and since the last reveal in June, where I allocate about 18% for expenditure, this has increased to 24% while investing allocation is down from 60% to 55%.

Since the launch of FSMOne’s ETF RSP late last year, I have been contributing 30-43% of my allowance of my NS allowance per month to build up a position in S&P 500. This percentage is well below the 55% allocation for investment. As usual, the remaining amount will be transferred to savings and expenses accounts, thus increasing my allocation for expenditure and savings by at least 12%. 

Investing – Changing Strategy

In August, we saw the US market hitting all time high almost every day. On the other hand, my stock pick which was mainly in Singapore did not reflect the same movement as the US market. This made me come to a realisation how inferior the Singapore market is. My portfolio was underperforming the US market as my stock pick was lagging behind and instead it felt like it was dying slowly as the day goes. There are some counters in Singapore that outperformed the STI but unfortunately they were not under my radar. 

I have been monitoring the US market for quite some time and August was the month where I felt the market went into crazy mode and almost every investor who was on the sideline piled into the rally due to FOMO. Be fearful when others are greedy comes to my mind and I believe that eventually the music will stop. I was anticipating a pullback since it had rallied so much in a month but I did not expect a deeper pullback than what was experienced months ago. S&P 500 index is 6% below its peak while Nasdaq entered into a correction the fastest in 3 trading days, now down about 9% from its peak. 

I believe that every investor is asking themselves this particular question – when will the music stop. We cannot predict what’s going to happen and some have decided to take the plunge and buy into stocks during the most uncertain times. Will this time be different? We do not know this pullback and correction will be sustained for a longer period of time and looking back at the charts, I feel foolish staying sideline and not taking the plunge to buy at a lower price (even after this pullback). 

I have decided to diversify out of the Singapore market by initiating a position in QQQ at $268 when it entered into the correction phase one week ago. I will add more QQQ in the coming months if it continues its downward trend trajectory. My goal is to increase my exposure to the United States to about 50% from 30% in the coming months and reduce my exposure to Singapore stocks due to its underperformance when compared against other markets. 

I hold DBS, Koufu and Lendlease Reit as part of my Singapore stock picking. I have decided to trim positions in Koufu in the coming months. I feel that the fundamentals have not changed but I believe that I have allocated too much.  Deploying into other counters in the future will be a better idea.

The Federal Reserve met for the last time this week before the Presidential Election and news headline showed that the Fed sees interest rates near zero until end of 2023, sets new economic conditions to be met before raising rates. The Fed will only start to raise interest rates when labor market conditions return to the “maximum employment”  and inflation has risen to 2% and is on track to moderately exceed 2% for some time. 

What this means for the banks is that Net Interest Margin will stay for long and this has dampened the interest in investors buying into banks recently. I do not think that the Federal Reserve will explore negative interest in the near future so the only headwind that I believe is still ongoing is the uncertainty of banks’ asset quality. 

I will not be reducing exposure in DBS as I believe that it is still a dividend and capital appreciation play, albeit capital appreciation will come later. I might consider averaging down further but a further research has to be done with the new guidance given by the Fed as one I do not like the fact that my portfolio is concentrated in one sector. A possible article on this research should be out in the coming weeks, so do look out for it. 

Closing Thoughts

Not every investor’s investing journey is a smooth flowing one. Investing is a lifetime process and I am glad that I discover mistakes in my strategy early, to acknowledge and rectify it. Starting off with ETF in a new market is a small step in a right direction, in my opinion. When one feels confident in the market then probably investing in individual company will be another step forward.

For now, we shall see how the market will unfold in the coming weeks and I will be happy to initiate more positions if it allows.

Till next time.

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4 thoughts on “A Quick Update on Personal Finance and Investing

  1. I am disappointed with STI as well. Besides US, I am also into Hong Kong market (as a door into China market). I also hope to increase the % of these foreign holding to 50% in time to come. It is currently about 20% … a long way to go …

    Liked by 1 person

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