Friday, April 3, 2020

Newbie Portfolio - End 2020 03

Dear All,

Unfortunately, as I have cut losses on Keppel Corp, this sample portfolio was left with only 2 securities (bonds) and it caused a Concentration Violation in my account.

I was forced to combine the 2 remaining securities back into a bigger portfolio.

When I make additional purchases (to bring the sample portfolio back to at least 3 securities), I will publish updates again.

As a rough estimation, after I cut losses on Keppel Corp, this sample portfolio was down about 20% on an Absolute basis.

Regards,
Newbie

This blogpost is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to buy or sell the investment product mentioned. It does not have any regard to your specific investment objectives, financial situation or any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of your acting based on this information.

Friday, March 6, 2020

Newbie Portfolio - End 2020 02

Ah, Coronavirus.... how much damage have you done?

Portfolio Performance (Start Date: End November 2019 with SGD400k Cash)







Definitely not a good month with the Coronavirus situation blowing up around the world. My new portfolio took a significant hit, causing Month-on-Month performance, Absolute Performance, and Annualised Performance to all be negative now.







Fixed Income portion of the portfolio is still registering gains and the Equities portion was the main culprit for dragging the portfolio into negative terrority.

I was surprised Keppel Corp had declined so much in price even though the Temasek $7.35 partial offer is still in progress. Perhaps this period of uncertainty led some Investors to think the partial offer might be cancelled. I, however, have strong faith that Temasek will carry through with its intention to raise its stake to 51% to have more control over Keppel Corp's business strategy.

Current Portfolio Margin Value:
a) SGD282,422.77 x 0.6 = SGD169,454
b) SGD262,876.71 x 0.5 = SGD131,438
c) SGD253,600 x 0.7 = SGD177,520

Total Portfolio Margin Value = SGD478,412

Total Liabilities = SGD411,576

Margin Ratio = 411,576 / 478,412 = 86.0%

I didn't work out any sensitivity analysis scenarios as the Market Decline is a good enough measure already. It can be observed that after the February market decline, my portfolio took a 7.4% month-on-month decline and my Margin Ratio only went up slightly from 83.7% to 86.0%.

We will probably see the effects of the Fed 50bps rate cut on 3rd March 2020 in my End March Portfolio update. My belief is it remains a Golden Period for Investment Grade Fixed Income for the next few years.

Regards,
Newbie

This blogpost is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to buy or sell the investment product mentioned. It does not have any regard to your specific investment objectives, financial situation or any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of your acting based on this information.

Monday, February 10, 2020

Newbie Portfolio - End 2020 01

So how did I perform in the first month of the year?

Portfolio Performance (Start Date: End November 2019 with SGD400k Cash)













Portfolio continues to have good performance largely due to expectation that interest rates will remain low / be reduced. It also looks like the entry timing of both my bonds was great.

OK, last month I mentioned that I would cover Portfolio Margin calculations.

As you can see from my Overview, my portfolio consists of both Assets and Liabilities. The reason why a FI will be willing to extend loans to finance my purchases is because I invest in high quality assets (usually defined as having a reasonable Credit Rating for bonds and having a decent Market Capitalisation for equities).

The 3 securities in my portfolio currently enjoy:

a) SCOR 5.25% USD Coco Perp - 60% Lending Value
b) HSBC 5% SGD Coco Perp - 50% Lending Value
c) Keppel Corp Shares - 70% Lending Value

Using their Market Value, this translates to a Portfolio Margin Value of:

a) SGD273,140 x 0.6 = SGD163,884
b) SGD259,919 x 0.5 = SGD129,960
c) SGD270,800 x 0.7 = SGD189,560

Total Portfolio Margin Value = SGD483,404

Referring to above Overview Screenshot, my total liabilities are SGD404,767.

Margin Ratio = Total Liabilities / Total Margin Value = 404,767 / 483,404 = 83.7%

How should Margin Ratio be interpreted? Generally speaking, the higher the Margin Ratio, the closer the Portfolio is to Margin call (situation whereby client has to topup Collateral into the portfolio or risk being Force Sold).

Most FIs will mark-to-market your portfolio daily and recalculate the Margin Ratio.

Most FIs will have a threshold of 100% Margin Ratio before they trigger a Margin Call. The grace period they give clients to topup the portfolio will vary (usually between 1-3 working days). It is very important that you request your FI to explain their Margin Call concept to you in detail before you decide to undertake Portfolio Leveraging. Different FIs may have different rules.

Next update, I will work out some sensitivity analysis on my portfolio.

Regards,
Newbie

This blogpost is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to buy or sell the investment product mentioned. It does not have any regard to your specific investment objectives, financial situation or any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of your acting based on this information.

Thursday, January 9, 2020

Newbie Portfolio - End 2019 12

The year has come to an end, so let's see what has happened over the last month of the year!

Portfolio Performance (Start Date: End November 2019 with SGD400k Cash)
Month 00 End Nov 2019 NAV: SGD398,751.44 (N/A mom) (-0.31% absolute) (N/A p.a.)
Month 01 End Dec 2019 NAV: SGD403,951.88 (+1.30% mom) (+0.99% absolute) (+11.86% p.a.)

As at End November 2019, it appeared as if I had utilised all of the SGD400k cash I started out with. To the ordinary investor, that would seem the end of the road. No further investments can be made.

However, if you are more sophisticated and are open to the idea of Security Financing, you would be able to continue to make investments, specifically: Leveraged Investments.

Leveraged Investments is a concept whereby you pledge Securities to a Financial Institution ("FI") and in return, the FI provides you with a Loan to finance your Purchases.

What this means is with the SGD400k cash that I have used to purchase Keppel Corp and HSBC Coco Perp, I would be able to obtain Loans against them as well as Loans against future purchases.

Let me show my Portfolio as at End December 2019 so this concept can be clearer:


So based on the above screenshot, you can observe 3 key figures:

Assets: SGD803,858.92
Liabilities: SGD399,907.04
Total NAV: SGD403,951.88

The Liabilities figure may be something new to some Investors, but I assure you that this is "Good Debt" and if used wisely, it can be used to amplify your Investment Returns.

In short, my Assets have doubled from SGD400k to SGD800k, financed by a loan of SGD400k from the FI. So how have I used this additional SGD400k?



Firstly, I had purchased a USD denominated bond: SCOR 5.25% USD Coco Perp.

My entry yield is approximately 5.35% YTC 5.3% YTM. The bond was purchased below par price.


This is one of the larger Reinsurers in the world, with France Country of Risk. For more information on the Issuer, please refer to: SCOR SE About Us

The specific security that I had purchased was a Re-tap of an existing Coco Perp that was issued about 1 year ago. It will funge into ISIN FR0013322823 sometime in January 2020. The main issue is rated A- by S&P.

More information: Retap of existing Coco Perp

My second action for the month was to add more shares of Keppel Corp. This does not require more elaboration as I remain confident that the Partial Offer by Temasek will have a high probability of upside from my entry levels. Any dip in the share price of Keppel Corp would be seen by me as a buying opportunity.

One new screenshot I would like to include in this blog entry would be the Currency breakdown of my Assets and Loans:


It can be observed that my USD Asset and Liability exposure almost offsets each other, which means that I have hedged out almost all of my USD FX exposure (remember my portfolio started off with SGD400k cash and I measure this portfolio returns in SGD equivalent). This is one of the beauties of using Loans to finance a purchase that is not in your home currency: FX exposure is largely hedged out. Whether USD appreciates or depreciates against SGD, my portfolio measured in SGD will not be significantly impacted.

So what can be taken away from the above lengthy messages?

The above portfolio currently has a size of SGD800k and is earning Investment Returns on the entire SGD800k, with a need to service the interest cost of a SGD400k loan.

I think that's enough discussion for this post. In my next update, I will detail further about Portfolio Margin calculations.

Regards,
Newbie

This blogpost is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to buy or sell the investment product mentioned. It does not have any regard to your specific investment objectives, financial situation or any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of your acting based on this information.

Monday, December 9, 2019

Newbie Portfolio - End 2019 11

Here it is! My first portfolio update for my new portfolio! It is for End November 2019.

As a recap, I was tasked to startup a new Investment Portfolio using SGD400k cash. I started construction of the Investment Portfolio around Mid-November 2019. This is the Overview as at End November 2019:



For simplicity's sake, I will take my "Starting Net Asset Value" as SGD400k and End November 2019 as my "Starting Date". The current Net Asset Value is slightly below SGD400k due to a few reasons:

1. Mark to Market losses of some of my investment positions.
2. Mark to Market prices for Fixed Income usually is "Mid Price" whereas an Investor usually buys Fixed Income closer to "Ask Price".
3. Trading fees and commissions.

So what are the Investments that I had made to start off the portfolio? I had started off with one Fixed Income and one Equity:




More details of the Fixed Income can be found at this website: HSBC 5% SGD Coco Perp Factsheet

I am not affiliated with FundSupermart. However, I would recommend Investors who do not have access to a Bloomberg machine to use FundSupermart for their informative webpages. Whether you want to use FundSupermart for trading would be your own choice.

My entry yield for the HSBC 5% SGD Coco Perp is: 4.3% YTC 4.9% YTM.

For the Keppel Corp equity trade, I was mainly jumping on the bandwagon after Temasek announced that they are going to increase their stake in Keppel Corp to 51%. Details here: Temasek to increase stake in Keppel to 51%

For me, it's a straightforward case where I would have the opportunity to sell at least 1/3 of my Keppel Corp holdings to Temasek at SGD7.35. The other 2/3 would be exposed to fluctuation in prices but I am confident that Temasek would bring forth significant changes to Keppel Corp that would result in the share price above current levels.

How did I arrive at 1/3? Temasek currently has about 20% stake in Keppel Corp. They need to purchase another 31% out of 80% outstanding shares. 31/80 = 39%. Further, it is possible that other investors who had bought Keppel Corp at prices above SGD7.35 would refuse to sell to Temasek (hence I might be able to sell more than 39% of my holdings to Temasek in the tender process).

An article on how to react to Temasek increasing their stake in Keppel Corp that I particularly liked (I am not affiliated to him) can be found here: Article by Drwealth

OK, so what's next Newbie? You started with SGD400k cash. You used up almost all of it within a few weeks. What else can you do?

STAY TUNED for End December 2019 updates where you can see what other tricks I have up my sleeve.

Regards,
Newbie

This blogpost is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to buy or sell the investment product mentioned. It does not have any regard to your specific investment objectives, financial situation or any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of your acting based on this information.

Friday, December 6, 2019

New SGD400k portfolio by Newbie

Dear All,

I have been tasked to startup a brand new Investment Portfolio using SGD400k cash. So what kind of portfolio can I construct using SGD400k capital? What kind of Investment Strategies will I employ? What kind of portfolio size will I end up with? What kind of portfolio returns/yields will I achieve?

STAY TUNED for updates which I will post the moment my month-end statement has been generated. I will probably use screenshots from month-end statements as updates.

Best regards,
Newbie

This blogpost is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to buy or sell the investment product mentioned. It does not have any regard to your specific investment objectives, financial situation or any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of your acting based on this information.

Friday, August 3, 2018

Portfolio Update - 3 Aug 2018

Dear Readers,

It was 3 years ago that I last updated this blog. Time really flies and it was really fast. I hope you have been doing great with your own investment and personal finances.

Just a little bit of an update about myself now.

As some of you might have already known, I no longer hold any individual single stocks on the SGX. I am still on my regular savings plan through POSB Invest Saver though. I pick up STI ETF only in the plan.

I think STI ETF is 1 of the few stocks on SGX that is worthy of holding in the long term. Most but not all of the other SGX stocks are still in a doldrum, in which they are neither here nor there. That explains why our STI has been sideways.

I am still keeping about half of my cash in some high yield savings accounts like DBS Multiplier, OCBC360, UOB One and Citibank Maxigain.

From the perspective of the US market, we are already in the longest bull run of the stock market history. So it is wise and prudent to keep some dry cash on the sidelines. 100% or being fully invested in the stocks market is definitely not a good preposition to be right now.

Speaking of the US market, I am currently holding a couple of stocks with Interactive Brokers. I really love this foreign broker because of its low cost and ease of funding and withdrawal. If you like to know which stocks I am holding right now, do come and chat with us on the chat box. Till the next update. :)