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

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