Interview: If You Had $250,000, How Would You Allocate it?

Recently, during an interview, I was asked this question, to suggest a possible portfolio allocation for people (Singaporeans) in their early 30s, with $250k of investible cash to start with. Here is my answer in full:

If you only have $250k to start with, I would suggest a diversified approach of various asset classses to maximise returns.:

  • 25% allocated to cash (war chest)
  • 10% to cryptocurrencies
  • 20% to trading account
  • 20% to commodities
  • 20% to businesses, startups, angel investments
  • 5% to stocks, REITs, ETFs

Currently, the bulk of the holdings is in cash, since the market is pretty “risk-on” at the moment with much political and economic uncertainty about trade wars and real wars. Hence, I only included minimal stock holdings, as the stock markets (S&P 500)are at 8-9 year highs, so I will wait to buy in at a lower price should the opportunity arise.

One important factor is the 20% allocation to trading account, as this generate monthly cashflow from stocks/forex trading to continue growing the total portfolio size aggressively, which can then be allocated to other asset classes within the portfolio.

10% to cryptocurrencies is considered a “wild bet” which could be a zero or hero; lastly 20% to businesses is for people who have some prior experience to invest directly in businesses, or start their own. Personally, my portfolio includes several businesses, including a cafe and pub.

I have allocated 20% to commodities, as commodities are likely at their cycle low. The GSCI (Goldman Sachs Commodity Index) is one of the main benchmark for commodity prices, and the (GSCI/S&P 500) is used to measure the prices of commodities relative to stock prices. Currently, this measure is at a 50-year low, which suggests cheap commodities as a potential investment.

I have excluded real estate from this sample portfolio, as I do not include “own stay” property as an investment asset, and $250k is too small for any major property investment. For my own portfolio, i have invested in several properties as I feel that the Singapore property market will continue to rise for the next 5-10 years.

I have also excluded fixed income, as for Singaporeans, the CPF (SA account at 4%) is pretty much similar to a “risk-free” high-yield bond, hence it serves well as the fixed income component of the portfolio. For my own portfolio, i have hit the minimum sum, which will provide a good safety net for retirement.

I hope this has provided you a good template to start building your portfolio, but do keep in mind that ideally you should be looking to rebalance your portfolio every 1-3 months.

Invited to Speak in Philippines at the Traders Fair & Gala Night

This coming weekend, I has been invited to speak at Philippines (Manila), and to take part in the Gala Dinner.

I will be sharing about my trademark “15 minute strategies”, and how they have helped me maintain my consistent returns while travelling across 50+ countries.

And after the event, I might also be taking a few days off to tour the area, so do drop me a PM if you are around the area!

Thank you Finexpo for the invitation! 

3 Major Catalysts for Cryptocurrencies in 2018 – Time to Buy Now?

Since the highs in December 2017, Bitcoin and most cryptocurrencies have seen a sharp decline, and agile traders/investors have mostly exited to await better buying opportunities. This includes myself, and after cashing out my profits in early 2018 (after the double top reversal), I have been waiting for the past few months for a timely opportunity to get back into the market.

Despite the volatility, I am still optimistic for the long-term potential of Blockchain and Cryptocurrencies, hence it is important to know which catalysts will likely move the prices for 2018, and when is the optimal time to get into the market.

1. Increased Regulation

At first glance, this might seem like a bad thing, as many countries around the world (China, Australia, Taiwan, Philippines, US, etc) start to clamp down on Crypto-related activities, or impose some kind of restrictions and controls. And prices reacted to such news of regulation negatively as expected, with a prolonged downtrend lasting several months.

However, what most people don’t realise is that such regulation is actually a good thing in the long run, and necessary for Cryptocurrencies to become more “mainstream” and widely adopted. Which means that while we can expected prices to fall, it is also a good catalyst to enable us to buy these assets at lower prices in the future. Timing is key.

2. Institutional Funds

Once their is sufficient regulation and prices are low enough, institutional investors (hedge funds, asset managers, etc) are likely to come into the market. This is where the big moves are going to come from, as we saw from the dotcom boom. And recently, we have heard some news/rumours that big names like George Soros, Rothschild, Rockefeller, etc are starting to come into the market.

If we look at the graph below, we can see that a major trend is usually driven by institutional investors, which means that despite the meteoric rise of Cryptocurrencies over the past few months, it is still nowhere near a bubble, since the “real big money” from institutional investors have not started to pour in yet.

Imagine a future where fund managers and pension funds all include Cryptocurrencies as one of the asset classes in their portfolios, together with stocks, bonds, gold, etc. This will definitely create a huge demand for it, and push up prices faster than we have ever seen.


3. Scale & adoption

One major debate is whether Bitcoin (and other cryptocurrencies) can serve its purpose as a global currency with a stable store of value, and cheap & fast transactions. Currently, it is not there yet, and how fast it can get there will depend on how well the product can be improved. The volatility will naturally decrease over time as the market cap increases, but the speed and cost of transactions will depend on innovations and improvements from developers.

Is it a Good Time to Buy Now?

Personally, I have starting accumulating it for the past week or so, as evinced by the recent charts I have been posting. Looking at the chart below, we can see that prices have corrected from $19k+ to around $7k, where there is strong support, forming a potential double bottom.

And if the regulation starts to tone down and more institutional investors start coming it, this will be a pretty good confluence of factors to expect a further increase in prices.

 

I will be happy to continue accumulating as prices and fundamentals continue to improve. Stay tuned! 😀

 

How to Combine Price Action with Multiple Timeframes

One of the simple yet powerful techniques I use to allow me to quickly identify trading opportunities with minimal time and effort (typically 15 minutes a day), is to use this Excel table which combines price action with multiple timeframes.

To create this table, I observe the daily and weekly charts of various products (forex, stocks, cryptocurrencies, commodities, etc), and list down whether I think it is bullish or bearish on each timeframe. For the weekly chart, I only need to update it once a week, and for the daily chart, this takes me a few minutes a day.

Here are some chart examples:

This is the daily chart of the EUR/USD, and you can see that it just completed a pullback and is looking bullish. So under EUR, I mark it as bullish. For most products, I always benchmark them against the USD for easy comparison.

 

This is the weekly chart of the EUR/USD, and you can see that it is also very bullish, and rebounding off a large trendline. With the alignment of both the daily and weekly trends, this make the EUR/USD a very good long trade to be in. And since the GBP is also weak, going long on the EUR/GBP is also a good idea.

 

For the S&P 500, the long-term trend is bullish, but the short-term trend is bearish. In such a scenario, we will pass and wait for more price action. The goal is to take the best trades, not take as many trades as possible. Quality over quantity.

At the start of every week, I will be posting the updated table on the Synapse FB page, with the best trading opportunities for the week. For those who do not have much time to trade, this will be an easy way to find good trades without having to use any complex indicators/software/algorithms.

Follow-up on Bitcoin Short: When is A Good Time to Buy? (Bonus: ETH Analysis)

In my last blog post here, I called for Bitcoin to drop from its current $13k+ to between $8k and $10k, using the measurements of the swing counts.

Now, the price of Bitcoin has fallen below $10k, but I am not planning to catch a falling knife, so I will wait for the fall to end and the dust to settle, before entering the “post dot-com landscape) and buying up coins for cheap.

One of my readers also suggest an analysis for ETH, and I have posted the analysis here inside the “Live Trading Network”, which you can gain lifetime free access with just one click.

Thanks, see you soon!