2021 Review of Portfolio

 This will be a review of my holdings this year.

1)      Performance of Individual Stocks Portfolio

 

My stock portfolio rose 14.7% in 2021, over-performing STI ETF (13.2%). My return was as high as 23% in mid-June 2021, lifted by bullish sentiments in HK small caps. However, it was pulled down in 2H 2022 by China stocks listed in HK

Year	% Returns	STI ETF (incl Dividends)
2019	8.4%	9%
2020	3.6%	-8.6%
2021	14.7%	13.2%

 

Probably, I should not be comparing to STI ETF, as my portfolio has mainly shifted to non-Singapore stocks. (In 2020, Singapore stocks are still half of my portfolio.) I guess that I will stick to the comparison to STI, since I have been comparing to it for many years.

 

 

2)      Position Sizing

 

Excluding odd lots, I have 19 open positions in my individual stock portfolio. Moving forward, I think my stock portfolio will have fewer than 19 position, as I prefer more concentration in stocks that are good businesses.

	Number of Stocks
At end 2016	21
At end 2020	39
At end 2021	19

 

 

3)      SRS, ETF (VWRA) and Non-Stock Portfolio

I have other stuff besides my individual stock portfolio. It comprise

·         SRS account (mainly STI ETF and a few stocks which I don’t trade much)

·         ETF (VWRA)

·         Bonds – mainly Singapore Savings Bond (SSB) and Astrea IV-VI Bonds listed in SGX

·         CPFB accounts

·         Cash

 

4)      Approx 60-40 Allocation

 

I have sticked to approx. 60% stock to 40% non-stock portfolio allocation.

I wanted to reduce my cash allocation to more bonds. However, I do not want to buy into bonds ETF in environment where interest rates are expected to rise in future. I will put more cash into SSB and money market account next year to earn higher interest rates.

 

5)      Net Asset Growth

 

I started keeping track on my net asset since 2014. My net asset has been growing annually.

 

The 2021 increase in net asset is driven by stock portfolio returns and my wages this year.

 

2021 Review Part 1

Strategy Re-set

2021 is a year where I reset my investing strategy. I reset my strategy in 2012 to be more diversified. In 2021, I reset my strategy to buy quality business and own them for many years. This is still works-in-progress, as I still own 20 stocks currently.

My number of stocks owned should continue to decline over-time

Re-Thinking about Losses in Market

I used to fret a lot about losses. Now, I still fret but hopefully lesser, as I re-frame my thoughts. The re-framing is -- If I own a quality business that is growing annually, it does not matter if the business is priced lower or higher today. Because I am not looking to sell it. 

If the business is priced much lower, with no detioriaration to its business quality, the market is offering me a chance to buy more at good price.

Cash/Equity Allocation Matters

I reviewed my allocation from 2014 onwards. My cash allocation were around 20% in 2014-17. If I had invested higher proportion of cash into equities, I will be richer now. Hence, I should strive to lower my cash proportion.

Currently, my cash proportion is still quite high at 14%. Hopefully, I can reduce them to 10% in 2022.

Owning Great Business for many years

I read Nick Sleep's letters recently. The key takeway is on owning great business for many years to let the compounding work. Another takeaway is owning business who are quality capital allocators. 

Extract from the letters: "The biggest error an investor can make is the sale of a Walmart or a Microsoft in the early stages of the company’s growth. Mathematically, this error is far greater than the equivalent sum invested in a firm that goes bankrupt."

"The “super high-quality thinkers” are our best guess of those firms whose shareholders could abdicate their right to trade stock (allocate capital themselves) sure in the knowledge that their capital will be well allocated for years to come within the businesses. This list is a group of wonderful, honestly run compounding machines. We call this the “terminal portfolio”. This is where we want to go. The question is, why is this list not the same as the current Nomad portfolio?

This is not an easy question to answer. But let us return to the church analogy for a moment. When we think about companies, the over-riding analytical consideration is the quality of the business and quality of management’s capital allocation decisions. The longer investors own shares the more their outcome is linked to these two metrics."