Revamping my Portfolios

I’d like to share what I’ve been doing with my portfolios recently since starting a career at UBS! As UBS is the world’s largest wealth management firm, I love how it’s super aligned to my personal goals to grow and manage personal wealth.

With access to their regular chief investment office reports and inspiration from the best wealth managers in the world, I’ve decided to revamp my portfolio for something that is cost-effective, long-term and manageable.

There are now only two asset classes and two diversification strategies. Combining them with a short term cash fund I will strive to build a portfolio that works.

Established a Core Portfolio

Core Portfolio – Equity

This core portfolio is a passive index fund consisting of two ETFs that tracks the MSCI World and MSCI Emerging Markets in a 80-20 split forming the “World Equity Index”. I am a little overweight in EM compared to their market capitalisation in an ideal weighted world index as I believe the long term potential of EM is strong. While current headwinds do exist from the trade tensions and relative US economic outperformance, I see positive catalysts including mean reversion, addition of China A-shares into the MSCI Emerging Markets index and also, gradual financial liberalisation of other EM economies. Nonetheless, together, they form my core international equity holdings.

Core Portfolio – Bonds

A global, diversified aggregated bond portfolio would ideally act as a complement to my diversified equity portfolio. There is a lot of advice out there speaking about how we should try to buy and keep bonds denominated in our local currency to reduce FX risks.  I decided to go for a a diversified US-dollar denominated aggregate bond fund listed on the LSE to reduce withholding tax clawbacks.

Updated my Singapore Portfolio

Singapore Portfolio – Equity

This has been always been in existence since I started investing in 2012. I’ve decided to take a more passive approach to investing since work started. As such, I’ve decided to allocate a portion of my monthly income on the STI ETF as a foundation of this equity portfolio. I buy this through DBS’ invest-saver plan which allows me to dollar cost average monthly into this ETF. They had a 0.5% sales charge promo recently so I decided to take advantage of this promotion and increase my contribution!

I also like Singapore REITs a lot – and they are very good for tax-free dividends! As such, a proportion of my funds go into this as well (especially those from MapleTree and Capitaland!) Unfortunately, there isn’t any cheap way to DCA into a REIT ETF cost effectively.

There are some actively managed stocks in my SG portfolio but I have decided not to take up new positions in them going forward as my nature of work requires me to declare every single trade I make.

Singapore Portfolio – Bonds

Bonds act as a defensive hedge in the equity portfolio but in Singapore, there has been a lack of quality bond funds and investable bond assets for the retail investor. I’ve positions in the recent Astrea IV 4.25% bond and a couple of Singapore Savings Bonds but nothing too fancy here. I am awaiting the launch of the Nikko AM corporate bond fund into POSB Invest Saver so I can dollar cost average into the fund every month. Till then, bonds make up 10% of my current portfolio and I plan to increase its allocation  monthly to about ~20% of my total portfolio.

Construction of portfolios

With the above information, my international-Singapore portfolio mix is about 40%/60% at the moment, with an Equity-Fixed Income split of 90%/10%. I am a little too high on the equity side so the next few months’ salary will be used to increase my bond and cash holdings while I continue to build up on the rest of my core holdings slowly into more of a 80%/20% split.

I think trade war tensions will continue to put pressure on markets while US corporate earnings have been healthy, bringing US equity markets to heightened levels which might be overly optimistic (i.e. not discounting enough effects from trade tariffs and trade war escalation). As such, while I am not reluctant to increase holdings, I am cautiously awaiting dips in the market 🙂

Cash is King

There is definitely a segment on cash as well! I think for now, cash is king in such an uncertain environment and I’d love to hold a bit more cash to buy discounted securities on sale when they arise. I am taking advantage of the decent interest rates on my DBS Multiplier account as a short term solution. I decided to also include half of my emergency funds into a single month SSB and leave the other half untouched in a high savings rate account.

Final Words

It’s an exciting time to take control my portfolios again! Since giving up roboadvisors that just buy passive funds and charge close to 1% of my AUM for doing nothing, I’ve decided to do-it-myself and have an enjoyable learning process at the same time. Stay safe in the markets!

 

Derrick is a digital native, finance geek and avid photographer. He loves spontaneity but is a control freak at the same time.

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