Locked down. Masked up. Social distancing.

2020 will be remembered for the Covid-19 pandemic. It is not over yet and its impact might still linger for a few more years. The positive is that the world is finding a way to live with it, so hopefully the worst is over.

The market crashed as expected but no one, at least not me, has expected such a fast recovery. I was mentally prepared for a negative first year return for my new portfolio, so am delighted at how well it has ended for the year.

Goal and Performance

The goal is to get at least 8% compounded annual return over a 5-year period, with the stretched goal at 12%. Hence at the end of 2024, my portfolio should be up by at least 47% and 76% respectively. I am pleased that just one fifth into the race, the portfolio is up by 23%. XIRR is pretty similar at 24%.

The exuberant US market contributed to the good return but my SG portfolio did not disappoint too as it also beats my stretched goal of 12%! As seen from table above, both portfolios beat their respective benchmarks by a good margin. Including dividend collected, 24 out of 28 current counters are in the green. How not to be happy with that? Even if I add in counters that I divested completely, 70% would still be in the green. This is definitely what I will accept every year.

The performance is even more amazing for the two sub-portfolios as both delivered more than 100% return! If only I have invested more? Nope, given the more volatile nature of these two sub-portfolios, I know it could have turned out “luckily I did not invest so much” situation. So am happy with the current small allocation.

While the income counters did not do as well this year, they are still in the positive and contributed most of the 18k dividend. Among them, Micro-mechanics, Parkwaylife REIT, SGX, UMS and Venture have bucked the trend of reduced dividend and increased their dividend for the year.

Top and Bottom 20% of the Portfolio

Zooming into individual counters. Performance ranges from -46% to 202%. In absolute value, it ranges from -10k to 36k. The growth counters have contributed more to the return this year, but still two income counters managed to squeeze into the top 6. Despite its 30% plunge in price recently, IFAST still came in way ahead in both percentage and absolute gains.

On the other end, all of them were completely divested. A question I asked myself is did I sell them because they were making a loss?

Not entirely. While I was definitely affected by the loss, I did deliberate about their chances and pace of recovery, and long term potential compared to the other counters before I sell. Also, I did not divest CRCT, FCT, MCT, OCBC and Ulta Beauty even though they had large losses along the year too. Thus far, SATS has proven me wrong. It would be very much less red if I had held on to it. But still, I have no regret as I continue to see much challenges for SATS in next few years and hence there will be little to no dividend.

Thinking Forward

A good start to the 5-year period but it is way too early to celebrate. Lots of uncertainties from this year will carry over to the next two years. While I believe the worst is over, this might not translate to a better performance for the coming year, given how much the market has recovered this year.

My gut feel (which happens not to be very accurate) tells me the income counters will have a better 2021. This is simply because they are coming off a lower base than the growth counters. It is hard to see how the tech stocks are going to sustain their incredible growth that they have recorded this year. Hence there will be some pressure on their price movement, given their rich valuation. However, just like I did not switch out from my income counters this year, I am not going to switch out from my growth counters. The near term volatility in the price does not change my belief on their long term potential.

So, what will I do with my portfolio?

Singapore has to take the world as it is; it is too small to change it.
But we can try to maximise the space we have to manoeuvre among the big “trees” in the region.
– One Man’s View of the World, Lee Kuan Yew

Taking a leaf from LKY’s insight on Singapore, my portfolio is just but a sampan in the sea and has absolute no impact at all on the market. But I will keep to my strategies and manoeuvre among the big funds and hopefully it can continue to serve its purpose.

Cash/Stock Allocation: Continue to keep 20-30% cash (including emergency fund) at any one time. Excluding emergency fund, the opportunity fund is about 10-15% of the portfolio size.

Income/Growth allocation: Continue to keep the income/growth ratio to 60/40 +/- 5%. Reits will continue to make up 25-35% of the portfolio. Projected dividend will be about 19k but I am hopeful for some positive upsides, so it might hit 20k.

SG/US allocation: Continue to keep the ratio to 70/30 +/- 5%. While the US market has outperformed SG market, I am not going to increase exposure to US market. From my few years of experience in investing in the US market, it is definitely more volatile. With the US market trading higher than average and a fifth of my portfolio invested in small caps, I am comfortable with my current exposure.

As for investment in other countries, it will be through unit trusts via CPF-OA, following the plan written in this post.

Paying Forward

I regularly donate a tiny part of my salary to Club Rainbow and Community Chest. With the inauguration of this portfolio, I decided that I will also donate a tiny percentage of each year’s return to AWWA, Children’s Wishing Well and any ad-hoc campaign at Giving.sg. To all readers of my blog, I hope you can start or continue to support the causes that resonate with you.

Wishing all a fruitful 2021 ahead!