01 Jan 2013 BigFatPurse – Year in Review
Happy New Year!
Before we move forward to live our best lives in 2014, let’s recap some of the happenings in 2013 right here in BigFatPurse.
Model STI ETF Dollar Cost Averaging Performance
This model portfolio invests $500 in STI ETF on a monthly basis. Dividends are reinvested too. This portfolio returned 6.9% between the period of Jan 08 to Dec 13, compared to STI returns of -1.5%. This is because Jan 08 is the start of the stock market crash and hence, STI ETF was considered high in price and spacing out the investment dollars as the market drops will beat lump sum investment. However, during market low in 2009, lump sum investment will beat dollar cost averaging. Hence, as a smart investor, only space out your investment by dollar cost averaging if you think the market is on the high side.
In 2013, OCBC and POSB has introduced their versions of dollar cost averaging investment plans to retail investors and I did a comparison of these monthly investment plans and explained why I preferred POEMS.
Here are the articles related to STI ETF in 2013:
- Comparing STI ETF and Singapore Equity Funds Performance
- STI ETF vs MSCI Singapore ETF
- STI ETF Tracking Error – 4 Things You Should Know
Model Singapore Permanent Portfolio Performance
This model portfolio consists of STI ETF, 30-year Singapore Government Bonds and SPDR Gold ETF and the modelling started from Jan 12. Gold and bonds had a terrible 2013, while STI ETF was pretty flat. From inception to date, Singapore Permanent Portfolio has been flat at 0% returns. Some may doubt the effectiveness of Permanent Portfolio. Casting a judgement so quickly means they fail to understand the concept of Permanent Portfolio.
First, Permanent Portfolio is a capital gains portfolio and not a cashflow portfolio. In other words, the returns from PP comes from buying and selling of the individual components and not by dividends or coupon payments. This means that in peaceful times (without market crashes), there are no buy and sell signals in the portfolio and hence, no profits.
Second, Permanent Portfolio is a crisis lover. Most of PP gains are made during buying and selling during crisis. For example, if gold drops further, say below US$1,000 per ounce, PP may signal to sell some stocks and use part of the cash component to buy gold. Some profits are taken from stocks to buy gold low. And when stocks come down and gold goes up, it will present the next round of profits. PP wishes market crashes to happen more often because more profits can be made. If market crashes happens every year, it is possible for PP to have 20% returns.
The composition of the Permanent Portfolio as at 31 Dec 13 is shown in the chart below. Gold is nearing the 15% re-balancing point. As mentioned earlier, PP investors need to watch for further price drops in Gold and re-balance the portfolio when required.
Here are some of the articles on Permanent Portfolio written in 2013:
- Permanent Portfolio FAQ – Re-balancing, Bonds and REITs
- Tweaking the Singapore Permanent Portfolio – REITs to Replace Gold
- Tracking the Singapore Permanent Portfolio
- How did the drop in Gold price affected the Permanent Portfolio?
- Permanent Portfolio FAQ – Should you aim for higher Bond Yields?
Options Trading 2013
I have been selling options for the entire 2013. It wasn’t easy for the first half of the year as I was getting familiar with it. I have paid the school fees and even now I am still learning new things. I am happy to see that I only have 1 losing month, and at a small cost, in the later half of 2013.
- Jan +$708.75
- Feb +$883.12
- Mar -$567.51
- Apr -$9,072.49
- May -$890.02
- Jun +$1,333.13
- Jul +$471.50
- Aug -$112.50
- Sep +$2,650.00
- Oct +$3,333.13
- Nov +$1,620.00
- Dec +$160.00
As I mentioned in an earlier article, I am positively surprised I could recover the big loss in Apr within 2013. I thought I could only achieve it in early 2014. Hence, the overall returns for the year of $517.11 was good for a first year options selling student. For trading, I always held the belief that it should be done for income. It should be approached as a series of consistent and small wins within short periods of time. It is more important to make a few percentages a month, like what Alex wrote about – Does A 2% Return Sounds Boring To You? Personally I am aiming for at least 3% returns per month from options trading as part of my income. I prefer to structure a portfolio to invest for capital growth.
Hence people should choose investing if they do not need to supplement their already comfortable income. The above two strategies – STI ETF DCA and Permanent Portfolio, are good for those who do not wish to spend so much time researching in stocks. Those who wish to beat market returns, I will always recommend value investing…
We started writing more about our perspective of value investing later part of 2013. Be assured, this will be a focus area in 2014. Meanwhile, enjoy these timeless articles!
- Invest in Assets or Earnings?
- 2 Approaches to Value Investing – Qualitative vs Quantitative
- Discounted Cash Flow Method – 7 Reasons Why It Does Not Work
- 8 Key Financial Ratios That Value Investors Absolutely Must Know
- 7 Stock Selection Criteria for the Defensive Investor
- REIT vs Business Trust, 5 Differences You Must Know
We have made new friends throughout the year and we are pleased to present you the interviews again:
- Eric Kong and Wong Seak Eng, Fund Managers at Aggregate Asset Management
- Andrew Abraham, Money Manager at Abraham Investment Management
- Tan Kin Lian, President of FISCA
- Ashley Lim, Founder of T.Zenith Capital Management
- Dr Tee (Ein55), Investor and Trainer
- Grace Tan, Professional Blogger
- Jeff Tan, Trader and Serial Entrepreneur
- Teh Hooi Ling, Head of Research at Aggregate Asset Management
How I wished I could have read more books sometimes. Here are the ones that we have summarised for you:
- The Trend Following Bible by Andrew Abraham
- Enjoying Mid-Life Without Crisis by Eileen Tan and Ui Wei Teck
- Trim Tabs Investing by Charles Biderman
- Where Are the Customers’ Yachts? by Fred Schwed Jr
- Antifragile by Nassim Nicholas Taleb
- The Prince by Niccolo Machiavelli – 5 Takeaways for an Investor
- 41 Stock Investing Rules by Contrarian Investor, David Dreman
- The Success Equation by Michael Mauboussin
- Gone Fishing with Buffett by Sean Seah
Jon has also crafted a series of quizzes for readers. A good check on your investment knowledge!
- Quiz 1 – General
- Quiz 2 – General
- Quiz 3 – STI ETF
- Quiz 4 – Know your investors
- Quiz 5 – Value Investing
10 Most Read Articles in 2013
Lastly, the 10 most read articles by you :) Thank you for the support!
- Play CASHFLOW Game Online!
- How to buy Singapore Government Bonds?
- Do not buy Critical Illness Insurance
- What is the difference between Cum-Dividend and Ex-Dividend?
- Straits Times Index Exchange Traded Fund (STI ETF)
- Your First $1,000,000 Making It In Stocks by Dr Michael Leong
- Buddha – “When the student is ready, the teacher will appear”
- Singapore Permanent Portfolio Performance
- 8 Key Financial Ratios That Value Investors Absolutely Must Know
- How Does STI ETF Give Out Dividends?
2014 Here We Come!
I was pleasantly surprised by our ability to churn out so many informative articles in 2013. I didn’t realise the amount of work we have done if I had not compile the articles. It was an eventful 2013 and we can’t wish for it to be better. We are going to give you much more and much better educational investing content in 2014! We can’t wait to get started!
Have blast in 2014!