Paying It Forward
As mentioned last year, I would donate a tiny portion of my profit each year to charity. This year, besides donating to AWWA and Children’s Wishing Well, I am also donating to Autism Resource Centre (Singapore) and Children’s Cancer Foundation. To all readers of my blog, I hope you would also support the cause that resonates with you.
Performance
If last year’s 23% return was unexpected, this year’s return of 28% is unbelievable. It’s not that I have not achieved such return before but with a larger and more diversified portfolio, I wasn’t expecting such good return and this is achieved after the carnage from mid-November. All time high from the portfolio this year was 33%, recorded on 18 November but since then my US portfolio, which is skewed towards high growth tech counters, have dropped by more than 10%. The drop in SPY was less, allowing it to overtake my portfolio in this final stretch.
Taking a step back and accepting the expected volatility of stocks, I am extremely pleased with two consecutive years of above 20% return! My original goal is getting at least a compounded annual return of 8% over a 5-year period and that is achieved in 2 years. Still a bit more to go to hit the stretched goal of CAGR 12%.
In absolute value, last year’s return from cash portion of the portfolio was about 1.2 times of my annual expenses and this year it hits 1.8 time! Financial independence already? No yet as these two years are probably exception rather than the norm. Long term wise, I do think a 6%-10% average return is more sustainable, which means I need my portfolio to still grow a bit larger.
Monthly volatility and maximum drawdown of portfolio has dropped compared to last year. Surprisingly, the monthly volatility of my portfolio is similar to SPY this year but maximum drawdown is much higher. Given that I have many mid-cap US tech stocks, I expect this to be the norm going forward and I can live with 10% maximum drawdown of my portfolio. Which means I am likely to only fire maximum 2 shots of opportunity fund for each correction in a year.
For this year, I have made use of the opportunity fund three times when portfolio dropped by more than 5% from its all time high. As mentioned before, the amount used currently is insignificant as compared to the portfolio size. What it does is that it soothes my emotion during a correction. Yes, despite so many years in the market, it still feels painful when the portfolio plunges. Over the years, I have learned not to resist the emotion but to accept it and find ways to manage it.
“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.”
I was right about my gut that it is not very accurate. The growth counters have continued to do well this year, registering strong growth in their businesses. On average, they have outrun most of my income counters. The exception are the two semi-conductors counters UMS and Micro-Mechanics, and the relentless Parkwaylife Reit! However, many of the growth counters have shared a lower expected growth going forward and what was said last year might come true next year.
Top and Bottom 5
2021
For the second year in a row, iFAST tops the chart in percentage and amount. I am expecting a weaker growth in the next two years, so its price might fall for 2022. Nonetheless, with the expected jump in both top and bottom lines from 2024, I am holding to my current holdings. With strong guidance from Arista Networks in the latest quarter and knowing both MSFT and META are investing as they move into metaverse, it should remain as a strong contender for top five next year too. I am also expecting UMS, Micro-Mechanics and AEM (7th this year) to continue to benefit from semi-conductor tailwind. Cybersecurity leader Zscaler will be in the race too with the continued adoption of tech worldwide. Tractor Supply is the black horse for this year. I have bought this rural lifestyle retailer for moderate growth but it has outperformed both in its business growth and share price.
As for the bottom five, three of them are reits. I continue to believe in their ability to provide good dividend in the coming years. MercadoLibre has been a surprise for me. It plummeted since its recent fund raising by selling shares at $1550. The market is probably factoring some risk for its Latin America business with expected inflation? Finally, CrowdStrike just joined after I have increased my stakes in it recently.
In terms of absolute amount, each of the top 5 counters gives a 5-digit return and cumulatively they contribute to 71% of this year’s gain. On the other side of the scale, I am glad that the maximum loss is less than $4k.
2020 – 2021
Current stake of iFAST is already a 8-bagger since inception. Its rise has been phenomenon and I did not add more to it over the past 2 years and had taken some profit in July. I am also very happy with the remaining 2-baggers which I believe will continue to do well. Interestingly, over the 2-year period, the gain gets larger but the loss becomes smaller. And that is especially telling for income counters as the dividend collected help to cushion the weaker price movement. I am hopeful that the loss will become even smaller or turn into gain in the coming years.
At the time of writing, I have a total of 58 counters in which 38 are in the green (66%). If I just consider the 30 counters in Platinum, Gold and Silver tiers, 77% of the them are in the green. So I do have my fair share of losses but the key players are doing well. The following are the 17 counters that are in the Platinum and Gold tiers. These are the one that will make a larger impact on my portfolio in the next few years.
Special Mention
I have 28 counters in the Unknown Tier in which I hold significant lower stake in them. In another word, their gain or loss would hardly move the needle. The following are counters in this tier that have registered significant unrealized gain or loss over the past two years.
| Top 5 | % Gain | Bottom 5 | % Loss |
| FLGT | 716% | CURI | -37% |
| TTD | 156% | TDOC | -42% |
| ETSY | 136% | PINS | -43% |
| TEAM | 115% | ZM | -50% |
| HUBS | 97% | LMND | -51% |
Among them, ETSY, TEAM and HUBS are near the Silver Tier. If not for the recent correction, they would probably have been promoted to the Silver Tier. FLGT which I only invested in $700 two years ago remains a wild card. I have not added more to it as I am unsure how it will be affected as pandemic eases. As for TTD I am still not too familiar with its business to add more to it. For the big losses, I am not cutting them yet as I am still positive of their mid to long term prospect. Also, since my positions in them are small (absolute loss per counter does not exceed 2k), they are not going to affect my portfolio’s return significantly. So I will just hold on to them until there are further development that either boost or shake my confidence in them.
CPF Investment
| Counter | 2021 Return | Average return since first purchased |
| AEM | 49.4% | 50.7% |
| Micro-Mechanics | 28.5% | 94.1% |
| OCBC | 17.6% | 18.6% |
| SGX | 3.7% | 12.5% |
| Unit Trusts | -0.5% | 14.9% |
I have 4 counters which I have invested with CPF. All four continue to do better than CPF-OA interest for this year. As for Unit Trusts, they did not do as well this year but they still provide a much higher return than CPF over the 2-year period.
Thinking Forward
I do not think I would get similar return again next year. Based on past record, my portfolio typically reports a negative or weaker annual return every three to four years. My last negative return was in 2018, so I might see a weaker return next year. Hopefully, this new portfolio can cushion the downturn more than previous version.
Inflation is here to stay and the strong companies will be able to pass the cost to the consumers. Comes January 2022, Netflix is going to increase my subscription from $15.98 to $17.48 and I am not going click the unsubscribe button yet. The expected rise in interest rate in the coming years will continue to cause volatility in the stock prices but I expect most counters in my portfolio, including REITs, to be able to manage this hike.
I am continuing my subscription to The Smart Investor All Stars and Dividend Portfolio services. I also just renewed my Motley Fools Market Pass services. To me, these services are value for money as they do the hard lifting for me and I just have to make my decisions based on their good work.
Finally, stretched goal is to achieve FI by 50. Three years to go and the possibility is there. Going to monitor the performance of this portfolio for a few more years before I decide if I am ready to forgo my regular pay check.
Wishing all a fruitful 2022 ahead!
Towards Financial Independence 