Monday, October 14, 2013

MH's Updated Portfolio

Hi all,

Back again to my favourite topic of asset allocation.

After much thought, I think it has dawned upon me that instead of using ETFs as part of my portfolio, I will be enlisted the use of funds to replace them instead.

Firstly, they start up costs of ETFs are so high. To efficiently engage them, I will need about 6k to minimize my costs.

On the negative side, this means that I will not be buying the market, and therefore my returns will not be the market. However, the funds will of course try to mimic the underlying and outperform if possible, but I'm not really risking much in hopes of that.

I think it would be great to be the market, but I would be content making decent returns above inflation, which I think will be my goal.

On the plus side, I will be get distributions regularly, which I will be using for value averaging my portfolio.

So here are the 4 mutual funds that I will be replacing the ETFs with.


US eqFidelity Global Div Fd A - MINCOME SGD1.5%
EAFE eqDWS Invest Top Dividend S1Q SGD1.72%
EM eqJPM Emerging Mkts Div A (Mth) SGD (Hedged)1.5%
CommoditiesDB Platinum Commodity USD R1C-C1.35%

Let me first start off with the commodities. When it says Optimal Yield, it makes my knees go weak. Sure, commodities have been monkey hammered crazily as of the last 3 years. But the year before that? 40% increase, wtfbbq. With commodities really feeling the pain lately, I think it might just be the time to get on that bandwagon. Not to mention, I also have a strong feeling that precious metals will be soaring. The fund has just 9% in these precious metals, which honestly have been doing quite badly as of late, which is definitely justified. However, looking towards the future, I might even invest in gold or gold-related securities in my satellites. Anyway, a different story for a different day.

Fidelity Global Dividend fund just looks great. I like the dorky fund manager too, he seems to me like he knows what he's doing. Plus, a monthly distribution will definitely make me all the more committed to this fund. Dividend yield was 2.96% the last time I checked.

Next, the DWS fund. Well, honestly the fund looks like it has been under performing and hasn't been doing too well in the past few years. However, given it's pretty good track record, I am deciding that I'm going to give it a go. It seems to be under performing its benchmark quite massively over the past 3 years. It is likely to be one of my few funds which are not hedged. I guess it does give me a slight diversification compared to the Fidelity fund, if not I might as well just have 1 fund. Dividend yield is at 2.68%.

What worries me is that there might be some overlap. Of the top 10 holdings, there is an overlap of Sanofi and Norartis. I sure would feel a lot better if the weightings are not so large, and a larger and wider ranged of diversified holdings. Fidelity follows the ACWI, while DWS follows MSCI World High Dividend Yield. I guess both of them do satisfy my criteria for developed markets exposure.

Lastly, we have the JPM Emergining Markets Dividend fund. I don't know if I have talked about it before, but it is something that I am quite excited about. The fund seems to be outperforming its benchmark, even though the asset class as been under performing as a whole. The benchmark is of course the MSCI Emerging Markets. I personally like it quite a fair bit! Dividend yield is 5.58% and it is SGD hedged.

I'm definitely quite sold on the benefits of dividend stocks, even though technically total returns should be the same. I just like the accountability, as well as the continuous cashing out, which at least helps me extract value before it collapses - though I'm not saying that it will though.

However, that being said, I am not going to enter any of the equities above until the correct seems over. Even if I enter when it's already recovering, at least I won't have half my portfolio taking a 20% hit, which will definitely affect my returns for at least the year. I also will not be entering into the emerging markets scene until it is a lot more clear about the future prospects of the asset class and only after all the big taper moves have been made.

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