During last year’s review, I started to think about my next step as this year marks my 20th year in the market. It’s the last quarter of the year and with greater clarity of my plan, it’s time to put it down in writing and use the next 3 months to prepare the groundwork , so that I can launch it by 1 Jan 2020.

Goal

This will remain status quo since the last strategic review done 5 years.  I am going to continue to aim for a CAGR of at least 8% with a stretched target of at least 12%. Based on my past 5-year, 10-year and 15-year records, I have achieved about 12-13%. So I am quietly confident that I should be able to obtain at least 8% for the next decade. And with some luck I could hit the 12% mark. Barring any unforeseen circumstances and depending on my withdrawal rate, portfolio size should at least double in a decade time and hopefully it can provide an annual dividend of at least 50k.

Strategies

These will also largely remain similar to what I am currently doing. The numbers given serve as a guide and I am sure I will deviate from my plan along the way due to various reasons . However, I will aim to keep the fluctuation below 5%.

1. Cash-Stock allocation of 30% to 70%. The 70% refers to the counters bought with cash, and excludes the counters bought with CPFIS. The cash provides a psychological  defence and also acts as an opportunity fund during bear market.
2. Dividend-Growth allocation of 60% to 40%. With limited surplus from my day job, the dividend received provides the necessary cash for me to constantly add to my position. As for growth counters, I hope that I can achieve a few multi-baggers to supercharge the return.
   • Dividend counters will include REITS and Business Trust but their allocation will be kept within 30% of the entire portfolio.
   • Growth/value counters will include a portion for punting but that will be kept within 10% of the entire portfolio.
3. International-Singapore allocation of 30% to 70%. Most growth counters would come from US markets. It is really not easy to find growth counters in Singapore market.
4. A diversified portfolio of about 30 counters with exposure to any individual counter  limited to 10% of portfolio (by cost). It does mean I will not get maximum return from the outstanding counters but downside will be protected and that is more important to me.

Key Changes

With the goal and strategies largely the same, what will then be the differences? After thinking through and trialing the few ideas in my last year’s review, these are what I will implement.

One Portfolio with Different Segments

With a decade to go before 55, I will combine my cash and CPF portfolio and track them as a single portfolio which will make the transition more seamless 10 years later. With that, I will only track two sub-portfolio – Singapore portfolio (with CPF subsume under this) and US/HK portfolio.

The biggest impact of combining my cash and CPF portfolio together will be on dividend-growth allocation. As my CPF counters are Singapore dividend counters and they occupied about 17% of the enlarged portfolio, this will probably increase the amount of money that I need to allocate to growth counters in the International markets.

Liquidating the Portfolio?

The other idea I was toying with is to liquidate and rebuild the entire portfolio. Decided not to do so as I am likely to purchase back most of the counters that I currently hold and that leads to unnecessary transaction cost. Instead, I would be using 2019 year end’s price as the purchase cost. What it meant is that I would use the next few months to think and decide if I am comfortable to purchase my current counters at current price. It is likely that I will divest a few counters and trim some of the rest.

Excluding STI ETF when Computing the Return?

This idea ding-dong in my head and the final decision is to exclude it from the portfolio. The key reason is that I bought SIT ETF only because I hit my stock limit for CPFIS.  Also, it is likely that I will sell it when I reached 55 (and IF) I can transfer the holdings to my CDP.  I will still continue to track ES3’s return as the minimal I hope it can achieve is more than the CAGR of 2.5% that CPF-OA is offering.

Changing Benchmark

All along I have been using STI ETF (ES3) as my benchmark because for the longest time I am only investing in Singapore market. Now that I am in the US market too, I am going to benchmark my International portfolio with SPDR S&P 500 ETF (SPY). My overall return will be benchmarked against ES3 and SPY with the same allocation ratio as my portfolio.

I am also likely to use Stockscafe to track my return. That will act as a check to my personal tracking.

Conclusion

It feels good to start anew and I am looking forward to put thing in place and start a new era in my investing journey. Reaching 55 in a decade time provides me a good timeframe to work towards my goal. At current time of writing, it seems more likely for me to achieve my goal at 55. But with some luck, I might still reach my original goal set 20 years ago …….

Financial Independence by 2024