Friday, January 31, 2014

Dividends / Coupons for Jan 2014

I wanted to be like the Dividend Warrior and take a photo of my statements, showing all my payouts received over the month, but then I got way too lazy and I decided not to do it, haha.


Fidelity Global Div Fd A - MINCOME (G) SGD Div-Reinvest SGD 2.46
UOB United Emerging Markets Bond Fd SGD Div-Reinvest SGD 4.17
JPM Global Corporate Bond A (Mth) SGD (LU0719511627) Div-Reinvest SGD 5.09
JPM US Aggregate Bond A (Mth) SGD (Hedged) (LU0719512195) Div-Reinvest SGD 2.96
JPM Emerging Mkts Div A (Mth) SGD (Hedged) (LU0890818403) Div-Reinvest SGD 4.24
JPMorgan Asia Pacific Income A (Mth) SGD (H) (LU0898667661) Div-Reinvest SGD 4.33
FTIF Templeton Global Bond Fd A (mdis) SGD - H1 Div-Reinvest SGD 2.07
FTIF Templeton Global Total Return Fd A (mdis) SGD - H1 Div-Reinvest SGD 2.76
Phillip Singapore Real Estate Income Fd A SGD Div-Reinvest SGD 12.5
First State Dividend Advantage Div-Reinvest SGD 10.1
       
  Total   50.59

Fine, $50.59 isn't really something to shout about.

Next month my payouts are going to drop because I've sold away my EM div equities and my Asia Pac income fund, so that's a $8.50. On top on that, Phillip and First State pays out quarter, so that's another $22.60 chopped off.

On the flipside, I've added to my positions in my Templeton bonds, and it is quite likely that I will be adding to the rest of my bond positions at the start of next week as well. We will see!

Anyway, I'm in the asset accumulation phase of my life now, which is why dividend re-investing is going to work out and be quite awesome for me!

Then again, who can complain about their portfolio getting an extra $30 boost every month?

This time it is $30, soon it will $50, then $100.

The next thing you know, I'll be blogging with $1000 coming in every month!

Thursday, January 30, 2014

Week 4 / 2014 Updates

Oh gosh, I know I'm kind of late. I've been meaning to post this up for a while now, but I either forget or it slips my mind. Haha soon, it'll be week 5 already! Anyway, here we go.


The major changes are as follows:

  • Asia ex Japan is no longer borderline
  • REITs showing slight improvemenmt
  • HY back in the buy zone
  • Commodities no change
  • Bonds as a whole are improving


The major changes are as follows:

  • DM equities are off all-time highs
  • EM equities are weakening
  • REITs are unchanged
  • HY credit is improving
  • Commodities still looking cheap
  • Gold Miners pretty much unchanged for the week
  • Bonds are about the same
  So, the follow-up action that these seems to be telling me is that:
    • Stay flexible and be prepared if sentiment changes from equities to bonds

    Tuesday, January 28, 2014

    Cutting Losses

    Today, I am selling 2 of my losers.

    The first one is the JPM Asia Pacific Income (month) SGD (Hedged). This is a balanced fund with both equities and fixed income, and it's main aim is to provide distributions. Honestly, it seems like a great fund to have for the lazy no-frills investor with a long holding period. However, I find that this fund is not performing up to my liking, though I must say that it is robust. I have to admit that I did buy this on a whim because I was quite sold on the Asian growth story. Recent weeks have evidently proved me wrong.

    I think that if the Asian growth story does come to realization, I will be able to capture it much more effectively with the other funds I have, with more control over my asset allocation.

    Even though I have received $17.53 in dividends from it over the past 4 months, which comes about to a decent 5.3% annualised distribution, the capital gains losses aren't that appealing to me. Overall, after including the dividends received, my realized losses should be $38.88, with a 3.88% loss. Point to note is that I did pay a 0.75% sales charge, so this fund actually only lost me 3.13%. Anyway, it's a small loss to help me tidy up my portfolio and focus my efforts on my true portfolio.

    The second one is the JPM Emerging Markets Dividend (month) SGD (Hedged). This is a simple equity fund with allocations to the emerging markets, with an emphasis on dividend equities. The pretense of it all is good. EM has a lot of potential to grow, it has been underperforming as of lately, plus the dividends paid out should buffer capital loses. However, it seems that it is not the case. 

    I have gotten a total of $12.66 over the past 3 months, giving it an annualised dividend yield of 5.1% which is fairly decent for equity stocks. However, the capital losses are just too much to bear. As of yesterday, the fund has lost me $88.54 even with dividends reinvested, meaning I have lost 8.54% so far.

    The main reason why I'm selling this fund is that it is clearly still in a downtrend. While for my other funds, I have tried to catch the falling knife, this one is cutting me deep. At current prices, the drawdown is almost 15%. EM markets has had the last max drawdown of a whooping 65%. I still feel that there is plenty of downside left for this fund, so I will be cutting my losses now.

    Total realized losses will be updated once the actually selling price of the funds are made known to me.

    Update: Realised losses were $87.48 for the EM Equities and $40.56 for the balanced fund. Overall, realised losses of $128.04.

    Monday, January 27, 2014

    CNY Financial Spring Cleaning

    On 26th December 2013, I wrote a post regarding all the things that I would like to get done so I can slowly work my way towards my financial goals. Here's an update to that list so far:

    • Rummage through all drawers, old wallets, red packets and hidden stashes for money (exchanged all my US$ with my Dad for his US trip and got credited the SGD amount straight to my bank account)
    • Note down any of my hard assets (jewelry) and collectibles
    • Keep vintage notes
    • Consolidate remaining cash (still need to rummage my old primary school drawer)
    • Sort based on currency
    • Gather all coins
    • Sort coins based on Series
    • Encash 2nd Series coins at the Mint (managed to cash in $90.55 worth of coins)
    • Consolidate all bank accounts and credit/debit cards
    • File all monthly account balances
    • File all unit trust dividends and summaries
    • Cancel cards no longer in use
    • Replace cards that are old (POSB and Citi look like they need a change)
    • Apply for new cards if needed (Make a table to mix and match Credit Cards and Banks for maximum benefits)
    • Consolidate all existing insurance policies (NTUC enhanced income shield and DPS, to my current knowledge. Along with MSIG travel insurance and PA insurance)
    • Print and keep all the terms and conditions of policies
    • Evaluate possible new insurance policies (term insurance)
    • Contact CIMB regarding fixed deposits (I think that the $10,000 minimum is putting me off, especially since my DBS account requires a $5,000 minimum balance and it is my main drawing account)
    • Prepare income tax filings
    • Find out about tax credits applicable (only NS credits I believe)
    • Understand more about tax credits, CPF monies and SRS account
    • Prepare portfolio tracking template
    I think I managed to do quite a bit of things, especially the bank statements. I pretty much managed to compile almost all my bank statements from since my account opening in 2006 with a balance of $0, to it's current state. I think I'm only missing a few statements!

    In other more interesting news, I have just transferred over a big lump sum into my Phillip account, mainly for the cash management facilities. I will leave in the Phillip MMF for now, but come the start of Feb, I will see what new 0% sales charge or other promotions Phillip has, and then I will consider where to park my cash. I am personally hoping for UOB SGD Fund Class A, but if it is naught to be, most likely Nikko AM STBF then.

    Sunday, January 26, 2014

    Insurance, Everywhere


    I was initially going to do a follow-up post by Investment Moats regarding endowments and RSP investing into the STI ETF.

    That led me to go read up more about endowments. Which led me to read more about this insurance and that insurance, and I literally just went all around the world on insurance. If I thought I knew more about insurance after talking to Janice, I think I know a heck a lot more about insurance after spending the better part of last night and today reading forums and comparing insurers' products.

    In the end, I was stunningly surprised by Investment Moats additional post today regarding life insurance, but I just blogged about it, especially reference to David Merkel from The Aelph Blog.

    So of course I delved in deeper the whole of today figuring out about term insurance in Singapore, what do they generally cover, how much do the premiums costs, the differences between different insurers' products and what-not.

    Basically, I've come to the conclusion that as of right now, I'm actually pretty much covered quite well, since I am under the DPS which was forced onto me by the government. $46,000 if I just die now is not a bad deal for coughing up just $36 a year I think.

    Other than that, I've been directed to go look much close at the AVIVA-SAF group insurance, NTUC LUV and SAFRA group insurance. I've barely touched the surface, because I would like to make a really full comprehensive look and comparison of all the different term insurance plans out there, and really, objectively come up with the perfect solution and answer for a person like me, in my situation right now.

    Anyway, taking a break for the rest of the night, my brain is tired!

    Saturday, January 25, 2014

    Life Insurance Advice?

    Here is the full post from The Aleph Blog:

    ----------------------------------------------------------------------------------------------------------------------------

    Another letter from one of my readers:
    Hello,
    I am reaching out to you because you are among the “Got To Guys” in your industry
    I am doing an “expert” and “common man” round up on my blog and I think a lot of people including me will benefit from your expert advice
     I will publish a detailed post in about 10 days and will obviously mention your blog along with a link back to your website. I will also be adding a custom infographic related to the topic of discussion and reach out to journalists when I am ready with my post.
    I just need few minutes of your time to answer TWO questions mentioned below:
     If you can tell me:
    “If you had to buy life insurance at current age, which policy would you buy? and which company will be your choice?”
    I appreciate your time and it will be a favor if you reply back.

    There are only two reasons to buy life insurance. You can:
    • Protect your loved ones after your death.
    • You can scam the taxman.

    If you are young, the first reason predominates.  In order to do that, long-dated term insurance will do the trick.  Insure yourself for 20-30 years, and over that time, build your assets so that at the end of the life insurance policy, your heirs will not need the insurance.  And neither will you, should you survive.  That is what has happened to me.  I have no life insurance — instead, I have assets.  Should I die, my family will survive with my wife having to go to work, intelligent lady that she is.
    (She doesn’t have a financial bone in her body, she is a princess, as her father was well-off.  She has lived with me long enough to absorb my prejudices, and grasp that there are no easy pickings in markets, so avoid those with get rich quick ideas.)

    If you are old and wealthy, the second impulse is important.  How do you send money to heirs, away from the taxman?  Life insurance in the US is outside of the estate.  A large insurance policy can take assets that would be taxable to an estate, and move them outside of the estate.

    As an aside: estate taxes are stupid.  The intelligent wealthy don’t pay them, or pay little of them.  The wealthy have a phalanx of helpers who they hire to reduce their estate (and other) taxes. It would be far better to tax everyone as traders, and capture income taxes when they are really earned.

    As to your second question: what insurance company to buy from?  If your policy is small, it doesn’t matter.  If your company fails, the state guaranty association will pick up the remainder.  If your policy is large, buy from the highest quality companies, you don’t want to deal with the guaranty associations after a default.

    ----------------------------------------------------------------------------------------------------------------------------

    Suddenly this makes SO much sense to me. Why invest in life insurance if you can invest in real investments? I am currently very tempted to do a very in depth analysis of getting a 30 year term insurance now, locking in the low rates until I reach 55. By then, I would have proper assets to bequeath to loved one. Why do I have to die to make it work?

    If I'm not wrong, based on the time value of money, it is really more worth it to purchase a cheap, simple, no-frills term insurance plan, and then wisely invest the remainder.

    At least at the end of the day, you will be able to enjoy a large chunk of your assets, rather than having a whole block square off for your future loved ones to squabble about. I will really consider this soon over the next few weeks.

    Red Chinese New Year?

    Marubozu, one of the Singaporean bloggers that I follow just posted up this post with this image, which I think is a FANTASTIC snap shot of how things looked like at Friday's close.


    Everything, BLOOD RED.

    Lance Roberts from STA wealth posted up an interesting article too, reminding us of Bob Farrel's Rule #9 (When all the experts and forecasts agree – something else is going to happen.and showing a nice clean chart, with a very telling sign.

    He also reminds us something, which I think far too many people in the financial industry, especially, financial advisors fail to mention and most likely choose to overlook:
    "INVESTORS get bombarded with advice over whether to buy shares. Much of this comes from interested parties; brokers or fund managers, whose salaries are dependent on getting them to buy stocks. The media chips in too, but most reporting consists of trend following; if the market goes up, journalists quote someone who can explain why the market has gone up. 
    The problem with this approach is that investors (and commentators) can get carried away with the crowd. Of course, everyone is bullish when the market is at an all-time high; that is why the market is high. What we need is a reliable valuation measure. Then you can sit back and say "buy when the market is cheap" and sell, or at least not buy, when it is dear."
    I think he has a very clear and blunt way of pointing out the facts, which is why I like to read his articles. He is also not too caught up with either market direction, which I believe is a key important trait that a money manager should have - the flexibility and agility in thought and action to move away from anchored positions and take an alternative action when the observable evidence acts against you.

    Which also reminds me of Chris, from CCM. Mr. Observable Evidence. He has got to be the most emotional money manager I know. I think he might be a robot. He does have a cool beard and look like Guy Fawkes. He introduced to me the very novel idea of comparing ratios, to observe a shift in allocation from one to another. The one that I really see the most information coming from is the SPY:AGG ratio, which, has been rising, showing preferred allocation to stocks over bonds.


    This chart is from his 23 Jan 2014 post. As of the week closing 25 Jan, the ratio has dropped below both moving averages, and a crossover has occured. a 3 week (15 day) and 5 week (25 day) crossover, which I has been selected pretty well as good moving average indicators for his model so far. That means that there is now a shift in preference for more bonds than stocks.

    Another ratio that I'd like to share is the HYG:AGG ratio, which I follow, which I think is a good indicator of credit RISKON vs RISKOFF. Credit RISKON is sign that the economy is doing well.


    Based on the chart, you can see that the ratio just fell off the cliff. A crossover of the weekly moving averages is not a good sign for the lower credit bond market. This means that economic confidence is weakening. People now rather investment grade bonds, compared to higher yielding bonds, which are more susceptible to defaults in worsening economic situations.

    Next is a chart showing market breadth.


    Market breadth is weakning, no doubt about it. It is at the lowest it has been in over a year, even more than the June correction. Based on the notes (here and here) of this indicator, a drop below 65 would spell imminent equity market risk. RSI is below 50, and both black lines from the MACD and SlowS are under the red line. I would not be surprised if the drop under 65 is signaled at next week's closing.

    Based on the iM market updates, none of their indicators are showing a recession, but they seem to be heading downwards, which would mean, signalling a recession soon if that continues.

    So now, let's look at the CHART MASTER, Mr. Chris Kimble. Honestly, if I was like a proper money manager / had more money invested, I would definitely subscribe to his services. Right now I don't have enough money to justify to myself paying his fees. His charts are clean, long-term looking and very frank, without offering a biased personal opinion, but with great humour.

    First chart, long term resistances for the S&P:


    Second chart, the Real Estate market weakening as a prelude to the S&P:


    Next, his Joe Friday special on bonds:



    So, just looking at the above recent points that I have posted today, let me make a summary of them:
    • World Indices are now bonkers
    • S&P is signalling lower prices based on a long term MACD indicator
    • S&P just bounced off a massive confluence of strong, long term resistance
    • The Real Estate market is weakening, which can signal a prelude to the S&P decline
    • HY credit losing favour to investment grade bonds
    • Weakening market breadth
    • Bonds are becoming more favourable than Stocks now
    • Bonds are at support levels, Yields at resistance levels and both are showing extreme sentiment
    Personally? I LOVE this set-up. I am risk adverse, and signs that bonds have limited downside and are at sentiments extremes makes it's a great contrarian play. On top of that, bonds are a less riskier asset class, which makes holding them much more appealing to me.

    So, if the market is signalling that the equity market is weakening, based on technical analysis for resistances, breadth waning, leading sectors waning, that can't be a good sign. Coupled with the increased favour into bonds from a price perspective, along with the technical arguments, a move into non credit sensitive, investment grade bonds would be quite a good move.

    But you know me, I like diversification. All my eggs in the bond basket is not going to do me. So, here's a bonus chart.


    The gold miners contrarian play feels very much like the bond play now, except that the asset class is much riskier and more unconventional. The technical reasons for its upside are still valid though.

    So, looking at all of these observable evidences, what am I (not telling you to do anything) about it?
    • Liquidate equities holdings
    • Liquidate credit risk bonds
    • Re-assess available capital for investment
    • Ensure all investment strategies are currently funded as of target funding of End Jan
    • Correctly move current allocations to the correct target allocation
    • Consider a (3, 6 month, 1 year?) future date with continuing regular contributions, and consider moving those highly possible cash reserves positions then, into bond allocations now. That means, upon reach the future date, bond allocations would be at target allocation without adding new funds to the asset class, just only to the pool of capital (money working harder for you, because less time spent out of market, than in the market)
    • Continue raising dry powder for the epic allocation and future future recovery (long time away from realizing those profits)
    • Consider a Yen basket as a CFD currency play (see photo below)


    Honestly, the market looks piping and ready to reverse in direction on many fronts. I would love to gloat about all my past calls like bonds (the contrarian play opposite of what EVERY bank said) and gold (my bottoming forecast), but I think rather than that, I shall steel myself with good strong discipline to take advantage of the markets. I can and will prove that even the little investors can make great returns if they would just take the Red Pill and open their eyes.

    This going to be the start of something very interesting. I would not be surprised at all, if on hindsight, people called 24/1/2014 as the start of the bear market of the 2nd Great Financial Crisis.

    Thursday, January 23, 2014

    9% Alpha with Munger and Van Gogh?

    Mebane Faber is awesome.

    Here are 2 posts which he posts annually at the start of the year, reflecting the performance of 13F cloning, which is a topic that he is very well versed in.

    2012 review (longer post)

    2013 review (short review)

    AlphaClone beat the S&P by 12% in 2013, which I think is just massive.

    From 2009 to 2012, 13F clones beat the S&P by almost double the yearly arithmetic returns.

    As he points out squarely in his 2013 review post, 4/5 years of outperformance, with an overall average of 9% annualized outperformance is STUNNING.

    I think their amazing success might actually be their downfall once the public catches on to this incredible alpha strategy.

    Personally, I believe alpha is out there in the market. This is clearly evident in the spectrum of returns that constituents of an index can give. I can't remember the source, or the where I saw the graphic, but I believe that a fantastic stock picker will outperform the market.

    Do most people outperform the market? No.
    Are most people good stock pickers? No.
    Are these massive hedge fund managers good stock pickers? Yes.
    Have they proven that they can outperform the market? Yes.

    Now, the issue is, will hedge fund managers retaliate and try to manipulate their holdings to shake off these 13F clones piggybacking their stock picking abilities?

    I believe that the answer is no, because:

    1. Cloning 13F holding is not mainstream yet
    2. Altering strategies to shake of cloners may adversely affect performance
    3. These guys only care about performance
    My next observation / hypothesis is that markets ascend more gradually than descending. Therefore, in a bull market, 13F are easier and better to clone, since the gains are extended over long enough periods of time to hold and benefit. In a bear market, cloners will not be able to get accurate and up-to-date information, meaning that they entirely lose the benefit of market timing, which is quite essential in short strategies. That is my personal, uneducated, unresearched guess on why cloners performed with -4.63%, when the S&P gained 2.1% in 2011.

    I think that 13F cloning is a fantastic strategy though, since it has so far proven quite reliably a significant amount of alpha generated. I beg to be shown other strategies which are as clean and simple as this, that have statistically significant alpha being generated.

    Here is a post by AlphaClone, giving their 10 reasons why they are superior. You don't have to believe everything that you read, but I find myself having a hard time disagreeing with their logic on most of their points.

    Conclusion
    By the end of the next US recession, I will make sure that I change my current situation so that I can be able to trade ETF's in the US market. I will be hoping to piggyback on AlphaClone's ETF, while also making sure that I have a currency hedge on the USD if I can see the currency going against me. Simple weekly SlowS and MACD stuff.

    Wednesday, January 22, 2014

    Gold Miners, Gold Miners

    Stumbling through the internet, I chanced upon this article on Market Anthropology. I have to say, I have encountered them before, and I really do like their work. They tend to keep things as objective as possible and don't assume to know too much.

    They have proposed a rather interesting argument by identifying the derivative and broader index relationship between Financials and the S&P, as well as miners and gold. Their presentation and explanation of the relationship and their observations are very interesting, to say the least.

    Throwing me another bone from an older post, they also another observation regarding gold's relationship to interest rates and their interest rate predication.

    Just look at the little sprout now, right at the end. Does that look a bit like it has bottomed out and that it is the beginning of an uptrend?

    I don't know, but I think I should be loading up on a bit more gold miners. The downside seems awfully limited from here.

    Hospitalization Insurance (Shield Plans)

    I'd just like to post some quick links about shield plans.

    The limit from using Medisave funds on any Private Medical Insurance Scheme is $800 a year, until aged 65.

    There are 5 private insurance companies that offered integrated shield plans which are enhanced versions of the very basic MediShield. MOH has done a good job compiling the information into a single sheet for comparison's sake, even splitting the plans based on wards classes, but I would be skeptical on when the information was updated.

    The link to the MOH comparison tables are here.

    However, one of the main things that are missing from the MOH tables are the presence and difference in additional schemes, such as riders which will reduce or eliminate out-of-pocket payment, either for the 10% co-insurance or the deductible.

    A quick google ended me up on a disused blog by a Singaporean that has already done the quick and dirty work on comparing plans, as well as their add-ons. The only problem is that the information is almost a year old, so premium rates have changed, as well as parts of certain plans.

    Anyway, since I'm more free these days, I should be making my own spreadsheet and do my own analysis. I will, of course share it on my blog. I'm quite sure that after I select my insurance plan, I will not keep the spreadsheet updated, so it will likely be only accurate as of that point of time.

    Tuesday, January 21, 2014

    Nostramoney Honey

    If bonds and gold are improving, why are equities hitting the ceiling now?

    My gut feeling is telling me that something isn't right, and I wouldn't be surprised if in the following months or maybe even weeks, our tactical rules for our DEWTAAP will scream at us to get out of equities and credit PRONTO.

    At the same time, our S&P market timing will trigger a nice fat sell signal, finally letting me deploy my cash sitting in 0.05% interest (being eroded away by 2% inflation)

    That will cause bonds to strengthen and perhaps gold blasts through the roof?

    Fundamentally, knowing that paper gold and the gold markets are so manipulated, I think I have come to the conclusion that miners are the way to go. If there are so many claims on registered gold, and not enough to go around, what happens? Honestly, I don't even know, it's too confusing.

    What I do know, is that whatever gold prices rocket up to, the people that will definitely benefit are the gold miners. If they need more gold, they can just ramp up production and produce more damn gold! I am under the impression that they are just running are bare minimum to cover costs while waiting for the next gold bull to come along.

    Hopefully by the golden cross signal and the 200 SMA finally turning positive, I'll be 100% invested from my contrarian account into gold miners equities.

    My near term outlook for gold is now a turn lower from current spot price of $1255.20 USD to perhaps $1215 area, and then it is just perfect and blasting off from that, since it has just broken its 50 SMA trend line and will be subsequently posting a higher low instead of a lower low.

    However, if prices continue and break $1290, then I'm quite certain that there is no turning back for gold anymore, and all aboard the contrarian portfolio!

    Week 3 / 2014 Update

    NB: All future weekly updates will be attempted to be posted up Monday night, by Tuesday noon. All moving averages and fund prices are correct to me, as of the previous Friday's closing price. The only exception is DB Commodity and it will be using the previous Thursday's closing price.


    The major changes are as follows:
    • DM equities unchanged, going strong
    • Asia ex Japan looking like it's ready to signal all systems go!
    • REITs are unchanged
    • HY credit is improving, about to generate a fully invested buy signal
    • Commodities are looking pretty again
    • Gold Miners has been massively rising, above to slice through the 200 SMA!
    • Bonds on a whole are improving

    The major changes are as follows:
    • DM equities are posting new highs
    • EM equities are inching back up
    • REITs no change
    • HY is up a notch
    • Commodities are improving nicely
    • Bonds as a whole are all moving up nicely
     So, the follow-up action that these seems to be telling me is that:

    • Get ready to double up on Asia-ex Japan equities
    • Gold is looking like a good idea to start stacking even more
    Bonds are all fully invested, and since they have recovered a bit and gold has also recovered, my portfolio is FINALLY into positive territory! I would say that other than the fact that I have cash sitting around for the my DM equity positions, I am rather satisfied with how my portfolio is currently invested now.

    Now, it's just a wait and see game. When (not if) things start to happen, do you know what you to do to protect your portfolio and maybe even gain from it?

    Commodities Fund Change? Not For A Long While

    As you know, I would like to post my weekly updates based on last Friday's closing as soon as possible. I realised that I can get all the fund information by Monday night latest, except for one fund. That fund is DB commodities. For some reason, the fund is updated very delayed. Apparently it is updated at 2.00pm CET, which is 10pm Singapore time. And the last time I checked at midnight, no, the fund NAV price was still not updated.

    So, since that has been irritating the shit out of me, I've been thinking of an alternative fund for my basket of commodities, and lo and behold, there is one, Schroder AS Commodity Fd A Acc SGD Hedged.

    Link to Fund Website and to the Dec 2013 Factsheet and the 4Q 2013 Update.

    The main reason why I want to change fund is because:
    • The DB fund is just out of sync for me to update my fund prices, even after Monday's closing
    • TER of DB is 2.35%, while Schroder is 1.99%
    • Schroder has a high water mark performance fee (fund has to increase by 33% to even trigger)
    • The screenshot below

    I don't know about you, but I find this pretty amazing. This is extracted from the 4Q update by the way.

    The Schroder AS Commodity Fund beats every index, except for marginally losing to Roger's index. Personally, I think this is pretty legit good performance, especially if you're looking at the average of the 4 indices, which I think is a pretty decent benchmark to look at, especially since the commodities sphere is a bit decentralised. Even knowing which benchmark to follow is a tough decision as it is!

    The DB fund follows the S&P GSCI benchmark, which actually over the past 3 years have consistently beaten the fund, which I think is pretty decent performance as well.

    So damnit, why not switch already? What is the problem?

    The minimum investment amount into Schroder's fund is a whooping $10,000 SGD!!! Minimum subsequent investments are $5,000 SGD, which is pretty steep as well! In that sense, I think I don't really have a choice now when it comes to investing in commodities. ETFs have a high minimum entry rate of $7,000 SGD as well.

    I guess my course of action for the next 5-6 years will be pretty much as per normal, since I won't be able to hit the minimum investment of $10,000 until my DEWTAAP portfolio is about $120k, and my overall investment portfolio is around $200k!

    Dang, I thought I found a perfect way out of my commodities issue :/

    Monday, January 20, 2014

    Week 4 / 2014 Currency Outlook

    Just a quick recap, I've going to be journaling currency trades here for 2 reasons
    1. Keep a record of my calls for myself and everyone to see and scrutinize
    2. Make myself do a lot of work, and hence, reflective thinking before I make a trade
    It's not easy to post up a trade, and I'll be showing you why in the series of graphs to follow further along this post.

    I'll just start by reminding my future self that I'm on 2 accounts now, one with real money that is sharing my S&P timing capital, and another demo account which I am using to really practise my strategy.

    In my first account, I'm holding EUR/USD short for about 3-4 weeks now


    So above is the daily chart, you can see the pink spots on the price chart are where I took my positions, and the pink spots on the bottom are the indicator signals that I used. This lines up with my weekly chart below, which shows the MACD and SlowS both rolling over as well, which I why I've taken the trade and I've still been holding on to it.


    On my Demo account, I've taken 3 positions. Long AUD/USD, Short GBP/JPY and Short EUR/JPY. I've closed the GBP/JPY prematurely because it just didn't see, like it was working well for me. I closed out slight over breakeven.

    Below is my AUD/USD trade on the daily and weekly. My entries are quite clear with the small blue triangle, as well my the red horizontal line being my stop loss.


    I think the main reason why this trade isn't going my way so far is because I pulled the trigger a bit prematurely. On the daily chart, my entry was great according to my rules, but on the weekly, it was not a good call at all. The SlowS did not leave the oversold territory, making it rather dangerous to go long. The MACD also was not flat or nearing a crossover. I have a feeling that I may be stopped out just before a turnaround, but I think I've learnt my lesson here.

    Now below is my EUR/JPY trade that I'm doing quite well for. Again, the daily and weekly, with my entry position marked by the orange triangle and stop loss with the red horizontal line. (blue triangles are long, orange triangles are short)


    I have to admit, that my entry on the weekly was not perfect, but the MACD histogram was rolling over when I took it.

    Since my daily entry points are good, I am now looking to refine it and make sure that they are much more agreeable with my weekly entry points. I feel that the best possible trade would be entering on a perfect line up of daily and weekly technicals, and holding the position until the weekly indicators are showing a potential future slowdown, and exit based on a nice daily technical exit!

    So, other than that, the next pairs that I am holding out for and just observing for now are the USD/CAD and the AUD/NZD. Just a quick chart to show why.


    The USD/CAD looks very ripe for a short soon, but I'm hoping for some sideways consolidation moves over the next week or so, so that the MACD can flatten out and look like it can give a sell confirmation.


    The AUD/NZD is also looking quite tasty from these longs for a nice long. Again, I'm hoping for some consolidation for the MACD to catch up so that it can issue a buy signal closer to when the SlowS can give one too. Interestingly, this is a multi year that it has just bounced from, so the downside is actually quite clipped, while the upside seems to be quite... massive.

    So, I'll be thinking about how I can make future updates a lot more palatable to digest, as well as understand. But for now, know that the loonie and the AUD/NZD pair may soon have a massive turnaround!

    Saturday, January 18, 2014

    Retired at 30? Mr. Money Mustache

    I was reading a post on Market Watch which interviews Mr. Money Mustache. The 511 on his is that he retired with his wife when he was just 30 years old. Now he's 39, and for the past 9 years he's been raising his son while pretty much doing whatever he likes, work or play. I have stumbled across his blog before and read his story, and it is one of true amazement.

    Funny though that I never thought to bookmark him down. In any case, I've added him to my blogroll, I quite like his blog!

    Anyhow, back to the post on MarketWatch. It was a Q&A session, asking quite an array of questions, from background history, philosophy and even non-financial advice.

    I'll just extract my favourite parts of the post.
    • ...if you understand the fundamentals of what it means to be a happy person, you realize that buying more stuff for yourself has no relationship at all to how happy you are.
    • Your income is determined by what you do for a living. But your spending should be decided based on your needs — the things and experiences that truly make you happy.
    • For most people, cutting costs is by far the most powerful way to increase wealth. This is because it is easy to burn off almost any amount of money — just ask the 78% of NFL players that have financial problems shortly after turning off the cash fire hose of a pro sports career.
    • But the key to making this work is not cutting out treats — it’s eliminating your desire for those treats in the first place.
    Basically, income should not determine spending, which for most people, does not hold true. The more money someone earns, the more money they spend. Spending seems to be a percentage of their income, rather than a fixed amount of money regardless of their income. I think this was an excellent point that he brought up. People just generally live too vivaciously in today's world.

    And once you realise that if you earned less, you would've spent less, and you still could be happy, that's when realization all comes tumbling down to you that you don't need a lot of money to be happy. You just need a basic amount of money to cover your needs, because that's all you actually really need.

    The rest, the wants? They have to stay as wants. Things that are wonderful to have if you have the excess money for it, but are things that you can also comfortably live without. Most people have the problem here, when they think that they NEED what they WANT.

    In one of his most recent posts, he brings this even another step further, postulating that nirvana is finally reached once you realize that you can be happy with anything, regardless of what you have now, and what you don't. I think that is the true meaning of finding happiness through freedom. Being able to be happy regardless of whatever situation you are in, because you know that you have the skills and abilities to create an environment in which you can survive and be happy.

    This post is mostly on behavioural investing, which I think is often overlooked compared to the raw technical investing that most of the world is so preoccupied with. So, to end this off, I'll just link a last post by him that talks about the technical aspect of having a 4% Safety Withdrawal Rate. It was a very interesting read, and I think everyone ought to read it to know how he arrived with that 4% number.

    All right, that's it for me tonight, I'm taking a break from all these investment reads!

    Overbought Market? My Thoughts on Valuation Metrics

    Just browsing through the blogroll that I regularly follow on my right toolbar, and stumbled upon this post, which is actually a repost from Mark Hulbert.

    The article mentions the follow 6 indicators which are currently not... very appealing:

    1. P/E ratio
    2. CAPE
    3. Dividend Yield
    4. Price/Sales ratio
    5. Price/Book ratio
    6. "Q" ratio
    Let me go through my thoughts on the above ratios.



    I think P/E ratio is junk. Earnings these days are manipulated way too wildy and freely. Don't even get me started on forward P/E ratios. Economists and analysts that do these forecasts are a bunch of clowns as a whole. Some forecasters may be more accurate than the average monkey throwing darts, but I don't think that it's possible to get accurate forward P/E ratios, therefore making them unusable. The plain vanilla P/E ratio itself is pretty erratic, but I think for investment frames of within 5 years, it is fairly useful as an indicator of tops and bottoms.



    CAPE, on the otherhand, gives a much cleaner, bird's eye view of what the P/E ratio should be helping you do. I would say that this is more useful in long term value investing, since the timeframe which it works best is about 20 years.



    Div Yield has not been a useful indicator over the past 20 years. If you look at the graph, it really doesn't tell you anything. I long to see the day where this is a useful indicator again, since the 2 variables used in its calculation are so objective and not subject to manipulation.

    Price to Sales and Price to Book have absolutely horrid graphs. If you don't believe me, you can click on those links to see for yourself. I didn't even bother to link them up because they look rather useless. I don't see them as a reliable indicator of any sort.


    The "Q" ratio, on the other hand, I like that. It is fairly elusive and only updated quarterly, but I think it's a good valuation metric. It is nicely tracked by Doug Short, making these arcane calculations available to the idiotic mass public like myself.

    The "Q" ratio is the upgraded version of Price to Book ratio. Instead of Price to Book, you get Price to Replacement Costs. Since book value uses old historical accounting costs, I feel that they can be quite distorted and non-reflective of current asset values after just a few years after acquisition. The "Q" ratio solves this problem by assuming if all assets were replaced today at the current market value. A useful timeframe for this is about 15 years!

    --------------------------------------------------------------------------------------------------------------------

    Personally, I find valuation metrics and indicators to be very.... subjective.

    All analysts that believe in valuation metrics and indicators need have a very particular characteristic to be able to use their beliefs effectively, and that is consistency.

    There have been way too many instances of market bulls and bears citing certain measures and indicators to argue their point, and then when their hypothesis is nullified by those indicators, they go out and find another set of indicators that also shows their point.

    In my personal opinion, an investor should have a small toolkit of valuation metrics and indicators. The construction, calculation and most importantly, their limitations should be very clear to the investor using them as analytical tools, so as not give confirmation bias to beef up personal viewpoints. As people, we are too impressionable by external factors, so we have to stand our ground and know when our indicator is useful and is giving us an actionable signal, as opposed to mixed signals caused by circumstances which distort the indicators and limits their reliability.

    Perhaps in a future post I can jot down what are the metrics and indicators that I use, and where are the resources that I find these information from.

    Thursday, January 16, 2014

    Contrary to Popular Belief...

    Here is a table ripped from Meb Faber who ripped it from Barry Riholtz who ripped it from BlackRock.


    Now, would you look at that?

    Everyone has a positively negative view on fixed income, and they all have a positive view on equities for this 2014!

    Of course such negativity naturally brings out the contrarian eye in me, so I thought back about what David Merkel said regarding safe assets investing, as well as Bob Farrel's Rules, particularly rule 9.

    #9. When all the experts and forecasts agree -- something else is going to happen

    But then again, the knowledge that irrational markets can outlast a trading account always hits home to me and prevents me from just about shorting everything I can.

    Here's a nice simple clean chart from CMC.


    I think it's quite clearly labelled to show the different market phases and that most people would agree with it on hindsight. Can the market go up higher? Definitely, I do think that it can, and it probably will. However, In this new normal, I don't know if we can really expect a parabolic blow off which will mark the euphoric state.

    Everyone seems to think that this will happen eventually. And when the blow-off happens, it will give off massive red flags for all the pros to rush out of the exit while the building is on fire. Are there really that many suckers to pass the parcel to? (I'm actually afraid that the answer is Yes)

    Maybe I'm skeptical because I'm young, or that because I read too much Zerohedge, but what makes everyone think that an obvious euphoric state that is painfully obvious for everyone in the market to see, observe, think and react will happen before a market crash? Once such information is known to the public, this information is slowly digested and arbitraged away, such that no one can have an advantage.

    I'm not saying that a parabolic blow-off isn't going to happen. 2007 personally didn't look like a parabolic blow-off to me based on these monthlies here. All I'm saying is that just waiting to spot the blow-off as an indicator as a market top might not be enough.... I think the effectiveness of this indicator will be severely diminished over time until something which is a customary sign before a market top now becomes an optional pre-cursor. With the benefit of hindsight, backtesting, raw computing power, complex fine-tuned algorithms, HFT and more people in the finance industry in any previous time of history in the world, I would argue that the market is becoming more efficient.

    Who knows, maybe over the next 3 or 4 market cycles I might actually be right about this future prediction. But until then, I think I will be sticking to my guns, investing more in unloved asset classes and remaining unnaturally skeptical of the gravity-defying equity markets. I can see so many fundamental and technical reasons for this rally to exhaust itself, but of course, my opinion is but a drop of water in this huge ocean.

    Stay safe, and know the risks you might be taking chasing momentum! (My least favourite alpha factor premium)

    Week 2 / 2014 Update

    I've rearranged the funds in order of their sensitivity and ability to capitalize on tactical allocation. Most noticeably, you can see that all the bonds have been shifted down to the bottom of the list, because they are all quite robust. Robust in the sense that max drawdowns are just simply unable to exceed 20% no matter how you look at it. Drawdowns of 10% would already be quite a huge drop for this asset class.

    Dividend equities, Real Estate equities, HY bonds, Commodities and Bonds are now the different groupings here. Even though HY bonds are not as sensitive as commodities, I have left them near the equities groupings since they have a high correlation to those asset classes.


    The major changes are as follows:

    • DM equities are still going strong
    • EM equities are weakening
    • Real Estate on a global scale has picked up slightly
    • HY bonds looking to join DM markets on the upward march
    • Commodities have been underperforming
    • Gold has left it's bottom

    The major changes are as follows:

    • Equities on a whole has gone under a slight retreat
    • Real estate has not moved
    • Commodities inched lower
    • Bonds edged down as well
     So, the follow-up action that these seems to be telling me is that:
    • Bonds look like they are in good position to improve from here
    • Commodities bottom is still unknown, need more decisive moves
    • Continue monitoring equities for a pullback
    Personally, given the fact that most of these bond funds are quite sturdy, I have come to rationalize with myself that it makes a lot more sense for me to just continually keep adding positions into bonds. Since they all have payouts and reinvest into themselves, it prevents the lazy and fearful devil in me from sitting too heavily in cash. My recent move to fulfil my target weights in the bond funds moved me from sitting in 55% cash to just 24% cash now. Cash has also been split between liquidity and additional yield, so that I can bump up my cash returns even a tiny bit.

    Tuesday, January 14, 2014

    Adding Portfolio Bulk

    After reviewing my portfolio, I've realized that it has been almost 4 months since I've started my investment journey, so since its the new year, and I have so much cash reserves, it's about time to add to my positions!

    I've made some minor changes to the funds which will follow the tactical rules and I have also purchased quite a few funds today.

    I've added into positions for my EM bonds, Global bonds, TIPS, US Agg bonds and even Corp bonds. All this because I have realized that this asset class has already gone through a big correction, I feel that their current downside is limited, mostly due to fundamental reasons.

    However, fundamental reasons are too vague to act upon. These bonds all have relatively low max drawdowns. Other than Corp bonds, they are all more than 4% off their all time highs, so further downside is quite strictly limited to another 5% off from my current position. Other than the TIPS, they are all monthly distributing, meaning that they are constantly reinvesting their payouts into themselves, which also helps buffer absolute losses.

    On the Contrarian front, I have also added a minor minimum reinvestment sum into gold miners, because I have seen them pick up a bit. They look ripe to run based on a weekly look at it, but looks a bit stretched from the daily point of view. A decisive higher low will give me further encouragement that this asset class might finally be turning around.

    With all that said and done, I'm quite happy that I'm utilizing my cash, instead of having it lie around.

    To boost my cash returns, I have ensured that my DEWTAAP and Contrarian funds are duly in my Phillip account, which means that they are automatically included into the money market fund.

    On top of that, I have also put in a small cash amount from my DEWTAAP reserves into Nikko AM Short Term Bond fund to generate some extra premium returns on the cash. I've calculated that it is quite unlikely that in the near term (within 3 months), that I will require these funds, so why not earn a bit of extra on the side, eh?

    Week 2 updates should be up tonight after the blasted DB commodities prices are finally out!

    Saturday, January 11, 2014

    Bond Buys?

    After that previous post on factor premiums, I have been thinking how can this knowledge be actionable by an investor like me?

    Firstly, for equities, regardless of the factor premiums, equities will experience market cycles. As such, I think that it is of course prudent to focus on these strategies once it can be ascertained that the market is currently priced at attractive values, if not, at least fair values. Since momentum and low volatility would work against us in such an environment, the other 2 factor premiums which are Size and Value do seem like they can be harvested still. Therefore in the aftermath of a steep market correction, I would propose the Legg Mason Royce US Small Cap Opportunities Fund as the fund of choice to capitalize of the Size and Value factor premiums.

    The fund is diversified in it's holdings (it has to be, size the market cap of the companies are small), targets micro-caps to make up a large chunk of its portfolio, targets companies trading at discounts, has been around for over 10 years and has succinctly categorized their purchased based on values themes, such as turnarounds, unrecognized asset values, undervalued growth and interrupted earnings.

    As for bonds, I think that I am already covertly incorporated the last 2 factor premiums into my allocations already. The fund in question that is fulfilling this role is the Templeton Global Total Return Fund. The fund looks for riskier higher yielding bonds compared to it's counterpart of the Global Bond Fund, but has kept duration and maturities low. Duration is a very low 1.45 years, while maturities are 3.34 years. Average credit ratings are BBB, which I think the fund has identified to be the sweet spot for yields, but with safety.

    This fund is truly something. It sits on the brink of investment grade, meaning that is does not high credit risk. Maturities, and hence duration, are kept low, meaning that there is muted interest rate risk. There is no liquidity risk because the unit trust can be bought and sold any time, albeit with 1 day lag. Holdings are at 505 issues, which is very diversified.

    In fact, I just compared it to my statistics on the fund 3 months ago. Maturities have been smashed down from 5.18 to 3.34 while duration from 2.18 is now 1.45! Yields have also gone up, from 3.34% to a whopping 4.1%!!

    Comparing to Nikko AM Short Term Bond Fund (which is in my mind, the safest non-money market fund available), which is at 1.68 years of duration with a YTM of only 2.22% and an average credit rating of A-, this blows the socks off that fund! Compared to UOB SGD Fund (which I think is the best risk-adjusted bond fund), which has 1.5 years duration and 2.9% YTM, again, this fund is still massacred by the Templeton Fund!

    Here is a simple table of all the numbers and shit that I just spewed out.


    DurationYTMCover
    Templeton Global Total Return Fund A (mdis) SGD - H11.454.883.37
    UOB United SGD Fund CL A1.52.91.93
    Nikko AM Shenton Short Term Bond Fd (S$)1.682.221.32

    A quick check on the Global Bond Fund also shows that current distribution yields are higher today than it was a few months ago.

    Hmmm, after reviewing this, I am currently massively leaning towards accumulating much more of the Global Total Return Fund and probably more of the Global Bond Fund as well. Both of these funds currently seem to have very strong protection from a variety of risk factors

    Interesting Research Paper Factor Premiums

    Last week, a post on The Capital Spectator caught my attention because of one of the links that he had referred to. This was a link to a research paper hosted on SSRN, authored by Koedijk, Slager & Stork (2013), titled "Investing in Systematic Factor Premiums".

    Firstly, the thing that you notice is that the paper has been very professionally edited. It looks as if it was a distribution leaflet by a top banks regarding their investment insights and outlook for the economy. I find this much more useful than banal predictions.

    Though much of the paper is spent explaining their research findings, applied to different markets with different mixes and approaches, I find that 3.6 Choice of factor premiums, to be the most insightful section of the whole paper.

    The paper expressed their views regarding certain factor premiums, and have identified the following:

     Equities Factor Premiums
    • Value (low price relative to fundmentals)
    • Momentum (recent high returns can lead to more high returns)
    • Size (small cap stocks are riskier because of more uncertainty)
    • Low Volatility (low beta stocks have tracking error and less speculative) 
     Bond Factor Premiums
    • Term Spread (long maturities have higher interest rate risk, and have more premiums)
    • Credit Spread (high yields are more risky, and offers more premiums)
    • Short Treasury and Short Credit (2-3 years maturities have the best risk-adjusted returns. Low duration dampens interest rate risks and provide these bonds a different set of systematic risks)
    Following these observations made by them, they of course proceeded to test their theories. If they can show that these specific factors and generate a premium when compared to the general market, then they would be able to show that these are worthwhile areas for investors to try and find alpha from.

    Finally, let me wrap up the summary of their paper with an excerpt from their conclusion. "The research in this first paper shows that investing systematic factors offers many benefits above and beyond conventional asset-orientated investments. We see that various institutional investors have also now realized the potential benefits of factor investing and are currently implementing organizational changes in their investment process. A decision by an investor to invest in factors should be taken strategically with a long term horizon within the framework of a strong governance structure"

    My personal take on this just struck me like a lightning bolt as I was reviewing their paper another time. If diversifying across asset classes and practicing asset allocation can empirically improve both returns and volatility compared to the market index, why would it not work with factor premiums as well? Kind of like what I think that they are implying in their conclusion.

    If the asset universe can be broken down into different asset classes, each with their own unique sets of factor premiums that have been proven to improve returns or lower volatility, then a deviation from the asset class benchmark index could provide much better risk adjusted returns.

    In turn, if each asset class can now spawn a subset of that asset class that has taken into account the factor premiums and has better risk adjusted returns, would then diversifying each of these new asset classes with each other provide a portfolio which provides both the benefits of the diversification, as well as the benefits of harvesting factor premiums?

    Now, that's food for thought for another day!

    Inflation or Deflation?

    Kimble Charting Solutions has kindly provided this chart, which I feel is particularly interesting.


    This is the chart of the CRB (Commodity Index). And as you may or may not know, commodities has historically been a tool used for hedging against inflation, since commodities are real assets.

    A break up might signal inflation is creeping back into the economy. Gold will rally, as will TIPs and other real assets. (Purchase more gold miners and inflation linked bonds)

    A break downwards would signal deflation. Commodities will continue to be hit, but bonds will naturally start looking more attractive. (Purchase corporate bonds and US agg bonds)

    It shouldn't be long before we know where the move might go to, but below I have thought up of a possible hypothetical situation that may pan out.

    Personally, I don't really know what is going to happen. But if I could make a best guess, it would be that deflation will come first. Commodities will be smashed down for a last final time, while bonds are bid for protection. The rush to bonds will ease of the stock market, and now suddenly all the QE cash will now be out of the system and into the economy. Once that starts, then I would turn around and say that we're due to see quite rapid inflation in the economy. Commodities, TIPs will do well due to the inflation. If the stock market correction goes deeper, bonds will all do well (except for credit of course), as the economy plunges into recession.

    Do I think a correction or recession is around the corner? I do, and this is purely based on historical averages of bull markets, as well as the weird underlying fundamentals that have been driving up the economy. I wouldn't say that I am going to short the market right now. "Irrational markets can stay irrational longer than your account can stay solvent", so I will be looking for confirmation of these signs.

    Of course, who doesn't love to make predictions of what will happen tomorrow and in the future. This is just the current scenario that has been playing out in my brain right now. Will hedge accordingly to reduce all equity positions, non-traditional bonds, increase AAA bond positions and monitor commodities.

    Thursday, January 9, 2014

    Short Term Cash Management Ideas

    I just realized that since the start of the new year, Phillip has updated and changed the list of their bond funds which have been on a special promotion of 0% sales charge.

    Only when it affected me, did I realize how much I enjoyed this tiny little perk. With bonds funds generally geared towards forming a more steady baseline of returns, a 0.75% sales charge along with whatever expense ratio the fund internally has can slaughter and cut down returns, to the point where going negative is a real possibility.

    Let's use UOB SGD (Acc) as a case example.

    As of 5th Jan 2013, their current NAV-NAV 1 year returns has been 3.95%. Throughout 2013, the worst drawdown was 1.16%. If the simple metric we are using here is just potential gains over potential loses, we have 3.95/1.16=3.41, if there was no sales charge. With a 0.75% sales charge, it would knock down the ratio to 2.76. This is a drop of 20% of the risk-reward ratio. Of course, returns took a 25% hit.

    Now let's see for Nikko Short Term Bond Fund.

    As of 5th Jan 2013, their current NAV-NAV 1 year returns has been 1.77%. Throughout 2013, the worst drawdown was 0.89%. If the simple metric we are using here is just potential gains over potential loses, we have 1.77/0.89 = 1.99, if there was no sales charge. With a 0.1% sales charge, it would knock down the ratio to 1.89. This is a drop of 5% of the risk-reward ratio.

    I've always thought that the Short Term bond funds would all perform quite equally, but it is quite clear the LionGlobal and Aberdeen funds were horrible performers in 2013. Therefore I feel that my short - medium term liquid cash management solutions shall be one of the following 3:

    1. Phillip SGD Money Market Fund
    2. Nikko AM Short Term Bond Fund
    3. UOB SGD Fund Class A (Acc)
    For my DEWTAAP, based on previous research, roughly 30% cash will be held in the account at almost all times because of all the different asset classes behave differently from each other.

    Currently as of now, while waiting for buy signals and being wary of further downside, the DEWTAAP is only 55% invested in funds. That means it is sitting in a ridiculous 45% in cash.

    My plan is to ensure and maintain that the account is minimally funded to my target allocation. Currently as of now, it is short by quite a bit. However, it would just sit in cash. Since idle cash in the Phillip account is automatically managed in the money market fund, I should be looking at cash yields of about 0.4% a year.

    However, when it is reasonable to do so, I will transfer cash which I know will be held in the medium term into the Nikko AM STBF and attempt for conservative yields of over 1% with the knowledge of very muted downside risks.

    Lastly, if ever again there is a promotion for UOB bond funds, I might decide to put excess cash in there instead, since the risk-adjusted returns are better, as well as absolute returns are higher.

    I should be transferring over a substantial portion of my cash reserves in my bank account into my Phillip investment account later tonight, to cover up the shortfall funding so that I can be funded at my target amount.

    In terms of cash management, I don't think there seems to be any other approaches. Will be keeping on eye out for any better alternatives!

    Wednesday, January 8, 2014

    Slow Moving Year Start

    It seems like a slow start to the year, doesn't it? Or is it just me?

    Perhaps now that I've redefined my strategy and stop trading by the hours and only look at the dailies instead, everything's a lot more smoothed out for me. I've a lot less bothered about news or facts and figure releases, since I'm looking at the big picture and long term.

    I saw a quote the other day, "We cannot change the direction of the wind, we can only change our sails".

    Honestly, I find that quite comforting and reassuring, though a bit more sad when applied to life as a whole. It's such a simple explanation on why things do not happen just because we want them, and also why the successful people don't count on luck for things to go in their favour, but actively "adjust their sails", so to speak.

    It's barely the middle of the 2nd week of 2014, and I am feeling rather restless just sitting down and waiting for things to happen. With my new (and I would say, more successful) method of CFD currency trading, I have higher probabilities of generating returns, but it comes at the expense of passing up a lot of trades.

    I will start working on my month end portfolio presentation. It's still hard for me to even visualise how I want it in my head!

    Anyway, one of the most interesting things that I've come across lately are these updated table from JPM's recent Q1 2014 guide.


    I like the above 2 tables very much, and I have cited older versions of them before.

    Firstly, I find that recent years data are much more reflective of the current real world economy that we are in now. Secondly, I think it is also nice that they rank the asset classes, instead of graphing and spacing them out based on returns.

    Personally, this again speaks to me and reaffirms the proven knowledge and wisdom of asset allocation. Sure, performance is not top notch, but neither is performance at the bottom tier. In fact, it has never been in the bottom 40% of asset classes EVER. For mixed bonds asset allocation, the tactical approach kept bonds in the upper half the entire past 10 years.

    Although asset allocation isn't a stellar performer, it does consistently beats the average, and I suspect that this is due to the benefits of imperfect correlation and also rebalancing. This definitely helps me remember that I shouldn't place all my eggs in one basket!