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.
https://i1.wp.com/synapsetrading.com/wp-content/uploads/2014/06/cover-2.png?fit=1178%2C6836831178Spencer Lihttp://synapsetrading.com/wp-content/uploads/2014/03/logo-header1.pngSpencer Li2018-04-20 06:10:312018-04-20 14:01:49Interview: If You Had $250,000, How Would You Allocate it?
Announcement: I will be taking a long break to focus on my trading and coaching of existing students (as well as several new exciting projects), but before that I will be conducting one last session of the “Trading Foundation workshop” on 18 May 2017 and the last run this quarter of the “Trading Mastery Program” on 27 & 28 May 2017.
It has been a while since my last update on the Singapore markets (as well as my SG portfolio holdings), largely because the market doesn’t move much, so I only check on them once in a while.
Interestingly, I noticed that the STI has had an impressive run, coming off a low of 25xx to break past the 3000 level in the past few months. However, is this move sustainable?
Taking a closer look at this weekly chart which shows the historical prices over the last 20 years or so, one thing which stands out is that the market has been in a 7 YEAR sideways stagnation.
If we look back at the whole history of the index, this is somewhat unprecedented.
Which could explain why popularity in this market (as well as trading volumes) has been waning. In short, it does seem like a dying market.
Not to mention that during this same time period, the US stock markets have been steadily creeping up.
If we look at the most recent red shaded circle, that is where the current price is, and it seems to be running into massive headwinds. This means that the potential upside could be quite limited.
If we observe the large sideways range that prices have been moving in, the price is now at the top of the range. And we know that the best strategy in a range is to “buy low, sell high”, which means that the odds do not favour much more upside, unless there is some new strong positive price catalyst.
However, a cursory glance at recent news headlines seems to be painting a rather gloomy picture, with muted growth forecasts and ominous employment statistics. This tell me that downside catalysts are more likely that upside ones. In other words, there is more chance of a negative shock rather than a positive shock for prices.
In light of all these factors, I am planning to cash out most or all of my profits, and wait for more favourable odds to redeploy my capital. As a trader and investor, timing is always key.
Good luck, and trade wisely! 😀
P.S. I will be taking a long break to focus on my trading and coaching of existing students (as well as several new exciting projects), but before that I will be conducting one last session of the “Trading Foundation workshop” on 18 May 2017 and the last run this quarter of the “Trading Mastery Program” on 27 & 28 May 2017.
https://i2.wp.com/synapsetrading.com/wp-content/uploads/2017/05/straits-times-index-sti-140517.png?fit=1697%2C100410041697Spencer Lihttp://synapsetrading.com/wp-content/uploads/2014/03/logo-header1.pngSpencer Li2017-05-14 06:57:272017-06-03 02:53:11Why I am Planning to Liquidate my Full Portfolio of Singapore Stocks
First off, we would like to wish all readers a Merry Christmas and a Happy New Year, and we hope your 2015 has been an awesome and bountiful year!
For the upcoming year, there will be many interesting opportunities, and the key is to build up a strong portfolio that will continue to perform well for years to come. Without further ado, let’s get down to the top 5 investment ideas for 2016:
1. Build up your War Chest
The strategy for 2016 is to play defensive rather than be aggressive, as most asset classes will be under-performing, hence the saying “Cash is King” actually does make some sense in such a climate.
With the recently increasing interest rates, loans and interest payments will continue to get more expensive, so it makes sense to try and pay off your outstanding loans and debts.
The next step is to accumulate your war chest, by selectively investing in the right products, while at the same time holding sufficient cash on hand to capture new opportunities as they surface throughout the year.
In other words, do not be too eager to dump all your cash into investments all at once.
2. Be cautious of fixed income products
No that the trend of interest rates have changed, and are coming up from an all-time low, this might spell the end of the 30-year bull market for bonds. Hence, I will only be allocating a very small portion of my portfolio to this.
The only exception to this is if you are planning to purchase a fixed income product (such as a bond) with the intention of holding it to maturity, and you are contented with the fixed yield that this product is giving you. In other words, you are not expecting any capital appreciation gains.
3. Invest in the Right Currencies
With the US being the first to raise interest rates, we can expect the USD to strengthen against most other currencies, such as the Euro, Pound, Australian dollar, New Zealand dollar, and the Asian currencies (including the SGD).
This is especially likely since countries like the EU, UK, Australia, New Zealand are still planning to cut rates or have some similar operations that will continue to weaken their respective currencies.
Major funds are also likely to divert their funds into investments denominated in the USD, causing an outflow of funds from the Asian markets, which will negatively impact both the currencies and stock markets of these countries.
Hence, in the medium/long-term, I would prefer to be long the USD, or have net long exposure to it.
Now compare that to this chart of the S&P 500 representing the US Stock market. This definitely looks more bullish, doesn’t it?
For lazy investors like me, you can gain exposure to the US stock market simply by purchasing a low-cost ETF such as the SPY, and it will give you exposure to the USD as well.
For those who are willing to go one step further, you can check out the SPDR sector ETFs to pick out the stronger sectors, such as technology and healthcare. I will be looking into this during my next monthly portfolio update.
5. Commodities could be the dark horse
Commodities have taken quite a beating for the past few years, especially oil, due to a combination of political and macro-economic factors. In addition, a bullish USD is not good for commodities as well. That is why many analysts have been very bearish on commodities, including Gold, Silver, Copper, etc.
All asset classes move in cycles, and I believe that commodities will not stay down forever. In fact, this might be a good time to accumulate them on the cheap. My general strategy for this is to gradually accumulate more of these using diversified ETFs (such as GSG) as they fall lower, which is also part of my portfolio rebalancing strategy, and I am prepared to wait 3-5 years for them to appreciate in value when the cycle changes.
Of course, it would be a bonus if they start to turn up earlier within 2016.
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Since the launch of our daily trade alerts for stocks, forex and indices in June this year (about 5+ months), we have had 36 winning trades, 9 losing trades, and 10 trades that broke even, while trading just 15 minutes a day. Considering that each winning trade can potentially make 2-5x of each losing trade, this is an extremely bountiful year for us, and those who followed our trades.
We will continue to strive for excellence, and improve on this in 2016. We look forward to you joining us in our profitable and stress-free trading journey by applying this 15 Minute System.
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Seats are very limited, and we expect all slots on the trading floor to be filled pretty quickly, so for those who are keen, drop by for out next seminar to find out more, and reserve your slot if you are keen to join us. Check availability: http://synapsetrading.com/events/training-workshops/
Next year is going to be the year which our passive income is going to explode massively, not just for me, but for all my students and those who are hungry for success. Wishing you all the best in your financial success for 2016!
P.S. If you found this article useful, please share it with a friend who is interested in getting started in investing! 😀
https://i1.wp.com/synapsetrading.com/wp-content/uploads/2015/12/happy-new-year.jpg?fit=1599%2C9679671599Spencer Lihttp://synapsetrading.com/wp-content/uploads/2014/03/logo-header1.pngSpencer Li2015-12-27 00:56:562015-12-27 01:03:32Top 5 Investment Ideas for 2016 - Are You Ready?
Since the post-2007 crash recovery starting in 2009, how have the markets fared?
Stocks, represented by the S&P 500, have steadily climbed, gaining an impressive 130% over the 6+ years.
Commodities, represented by oil, silver and gold, did not fare so well.
Oil peaked in the first half of 2011, consolidated for about 3 years, then made new lows in 2014.
Silver and Gold peaked in late 2011, then steadily declined all the way till today, giving up almost all its gains since 2009.
As the Fed gets ready to raise the interest rates, this is likely to give a boost to the US dollar, which will further suppress commodity prices. For oil, this is especially bad, since there is already an oversupply forecasted for 2016.
A higher interest rate will also bring down bond prices, ending the 30-year bull trend, and in months to come, act as a drag on stock prices. This means that the stock market is a ticking time bomb.
If all these happens, we will have a scenario with:
Bullish US dollar
Bearish oil, gold, silver, commodities
Bearish bond prices
Bearish stock prices
Bearish economy?
That would be a pretty gloomy deflation scenario. 🙁
http://synapsetrading.com/wp-content/uploads/2014/03/logo-header1.png00Spencer Lihttp://synapsetrading.com/wp-content/uploads/2014/03/logo-header1.pngSpencer Li2015-11-23 01:10:142015-11-23 01:19:06The Past 6 Years Summarized in One Chart - Are We Headed for Deflation?
This article will show you the seven dividend-investing secrets that Buffett uses to grow his wealth consistently. Their findings are based on his spoken and written statements, as well as his holdings.
(Click on any button below to reveal Warren Buffett’s 7 Secrets!)
1. Look for Businesses with Long Corporate Histories
Companies with long histories offer investors fewer surprises. These businesses know exactly what they do, and they do it well. Very few businesses continue to be successful for decades. As technology progresses, industries change. Consumer tastes change as well. For a business to thrive for such long periods of time it must either continuously reinvent itself, or exist in an industry that changes slowly.
The advantage of investing in businesses with long corporate histories is that they are more likely to continue generating cash flows going forward. The slower an industry changes, and the longer a business has been around, the more likely that business has a strong competitive advantage that will survive far into the future. Investing in businesses with long histories is a conservative approach to investing. Warren Buffett looks for much more than just a few years of success before he is confident a business truly has staying power and a lasting competitive advantage.
2. Look for Businesses with Strong Competitive Advantages
Buffett looks for businesses with strong, durable competitive advantages. To do well in stocks, you must think like a business owner. As a business owner, you would want your business to be able to beat the competition. More importantly, you’d want something that prevented the competition from ever being able to match you. That’s what a strong and durable competitive advantage offers.
Finding businesses with a competitive advantage that lasts for decades is a much more difficult task. There are few businesses that can reliably sustain a competitive advantage year-after-year. The few businesses that can enjoy above-industry-average returns on capital which can be reinvested to spur growth or returned to shareholders.
3. Look for Undervalued Businesses
To find value in the stock market, one often has to look at the most “beat down” and “unloved” stocks. The most glamorous high-flying growth stocks are not where to look to find value.
There are several ways to find value in high-quality dividend stocks. Stocks with low price-to-earnings ratios are a good place to look for value. Businesses that have suffered from negative one-time events that do not threaten the continuity of the business is another great place to look.
4. Keep a Focused Portfolio
The higher your conviction in any one stock, the larger your portion of your portfolio you should allocate to this stock. If you are very confident that a stock is undervalued, the business has a strong competitive advantage, growth is likely to persist for the long run, and management is shareholder friendly, you should naturally invest more than you would in only a mediocre opportunity.
The advantage of keeping a portfolio of 12-to-20 positions is simple: You can invest in your best ideas, which have a higher probability of stellar performance while still getting much of the benefits of diversification. Owning a portfolio with hundreds of stocks in it virtually guarantees mediocre results.
5. Invest for the Long Run
Investing in businesses for long periods of time has several advantages. First, it allows truly exceptional businesses to compound your wealth without having to do anything else.
Holding stocks for long periods has another advantage. Rarely buying and selling stocks greatly reduces portfolio turnover. Low portfolio turnover means lower frictional costs like brokerage transaction costs, slippage, etc. The lower you keep your investment related costs, the more money you have to actually invest. Holding for long periods of time allows your money to compound in your best ideas, is tax efficient, and reduces investment related costs; a win-win-win situation for individual investors.
6. Look for Shareholder Friendly Management
From the perspective of a shareholder, an excellent management team is one that creates real value for shareholders. The best managers will repurchase shares when stock prices fall and abstain when prices rise. If the business does not have great investment opportunities to reinvest corporate profits, the management will pay out excess cash flows as dividends to shareholders.
Analyzing the moves a company’s managers make is a good way to understand their motivations. As a general rule, businesses with long dividend histories and share repurchases are shareholder friendly and make good investments. Finding the truly exceptional manager — like the next Buffett — is very difficult. But looking at the moves management has made is the first step.
7. Keep Things Simple
Even though Buffett is an investing genius, he always looks for simplicity. When you think of complicated businesses and investment plans like Enron or Long Term Capital Management, the results can be devastating to your portfolio. It is far better to invest in easy-to-understand high-quality businesses within your “circle of competence.”
Your circle of competence is the area of the market you know best. If you are a doctor and regularly deal with a variety of health-care companies, you may be well-equipped to identify and invest in the highest quality health-care businesses. Most people are familiar with a variety of consumer goods products. Analyzing businesses with products that you are familiar with greatly reduces your risk of making a foolhardy investment. Don’t invest because everyone else is doing it — invest because you understand why a company has been successful, and will likely be successful for decades.
The above write-up is an extract/abridged version of this original article:
https://sg.finance.yahoo.com/news/much-earn-above-singapore-average-000031337.html
My Personal Views
Besides trading 15 Minutes a day to generate trading income and grow your capital base quickly, you should also consider building a portfolio to diversify your investments, and invest in other asset classes such as stocks and REITs to bring in more passive income.
If you look at secret number 7, this is the reason why I have already prepared my shopping list, which I will be showcasing at my next free seminar.
Check availability: http://synapsetrading.com/events/training-workshops/
