Seeking advice on portfolio

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#1
Hi all,
This is my first post after reading ValueBuddies over the past 2weeks. Need your advice on the below

1) I'm 38yrs this year, married with 2 kids (9 and 7)
2) Already brought insurances for all 4 of us
3) Also had set aside 12months emergency funds

Current portfolio...
- I only started stock investment in Feb 2012, and had been reading forums/books and attending seminars for the past 1 year
1) HDB fully paid and rented out at $2200
2) A freehold Condo (outstanding load $720k), rented out at $3300
- staying with my parents currently, monthly maintenance + Rent $3000
3) Stock : $50k
4) Silver : $10k
5) Cash available for investing : $230k
- Will set aside $100k aside as opportunity fund (had been waiting for the market correction since 2012)

Thinking of using the remaining $130k to diversify my portfolio
- My understanding is corporate Bonds investment needs $250k, so the amount is insufficient

Is there any other low risk alternatives that I can look at?
- My main objective is to receive some stable dividend/income, without putting too much risk to the capital, while waiting for the stock market correction
- Is Bond ETF/Fund a suitable option?

Thanks for the advice, in advance
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#2
I wont give you any stock tips since you have done a considerable amount of studying for the past 1 year but i can share with you what not to do.

Bonds are "a terrible investment" right now, Berkshire Hathaway Chairman and Chief Executive Warren Buffett told CNBC Monday (6 May 2013). He recommended holding a comfortable amount of cash but otherwise investing in "productive assets", and called having a set asset-allocation strategy "silly." Bond prices are artificial right now given the Federal Reserve's purchases of $85 billion a month, "and when that changes, people could lose a lot of money."... I think it's silly— to have some ratio like 30 or 40 or 50 percent in bonds. They're terrible investments now.

The interesting thing about investment is most people ignore advice given out by warren buffett. In the world of investment, why would anyone not take the words of buffett seriously... i am always puzzzled
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#3
(28-05-2013, 10:37 PM)safetyfirst Wrote: I wont give you any stock tips since you have done a considerable amount of studying for the past 1 year but i can share with you what not to do.

Bonds are "a terrible investment" right now, Berkshire Hathaway Chairman and Chief Executive Warren Buffett told CNBC Monday (6 May 2013). He recommended holding a comfortable amount of cash but otherwise investing in "productive assets", and called having a set asset-allocation strategy "silly." Bond prices are artificial right now given the Federal Reserve's purchases of $85 billion a month, "and when that changes, people could lose a lot of money."... I think it's silly— to have some ratio like 30 or 40 or 50 percent in bonds. They're terrible investments now.

The interesting thing about investment is most people ignore advice given out by warren buffett. In the world of investment, why would anyone not take the words of buffett seriously... i am always puzzzled

I beg to differ. Not everyone has the one in billion talent that buffet has. So for him, of course bonds are bad investments now. But for me, I have bought bonds since 2010 and have found that they give much needed cash and stability to portfolio. Of course if I bought all equity, probably would have done even better by 3-4% annualized but I did not foresee liquidity driven rally so strong...

And yes, bonds are 30-40% of portfolio but they give me substantial piece of mind as they cover my expenses annually.
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#4
Cschua Wrote:This is my first post after reading ValueBuddies over the past 2weeks. Need your advice on the below

1) I'm 38yrs this year, married with 2 kids (9 and 7)
2) Already brought insurances for all 4 of us
3) Also had set aside 12months emergency funds

Current portfolio...
- I only started stock investment in Feb 2012, and had been reading forums/books and attending seminars for the past 1 year

WARNING: LONG POST

First of all, you should identify your investment goals. Are they:

1. To fund the children's university education;
2. To provide for retirement expenses for you and your wife;
3. To leave a legacy for the children to inherit;
4. Something else; or
5. Some/all of the above?

Your answers will determine the time horizon for your investing and the amount of loss you can stomach. And remember that most people have LESS risk tolerance than they think. Everyone says they can take some loss, but they will only know their true risk appetite in a bear market.

Also, you need to consider your earning power relative to your net worth.

If your earning power is high relative to your net worth, you can quickly bounce back from losses. If not, you may not be able to tolerate losses.

Also, if you are willing to risk losses (and permanent downgrades in standard of living) in exchange for the possibility of vastly increased net worth, you can take more risk.

If you have not considered any of the above, you should probably put your money in the bank until you have figured out WHAT you want your investing to achieve. Talk to a financial planner if you haven't already done so. Consider using a fee-based planner so that they don't have any incentive to sell you products.

Just pay for advice, it's a one-time cost and will at least help you think about your financial goals. A commission-based planner will only make money by selling you stuff, so whatever they come up with will involve them selling you stuff, when sometimes the correct thing for you to do may be to NOT buy anything at all.

As for your investment questions:

One year of experience is too short to safely invest a meaningful portion of your net worth on your own. Starting in Feb 2012 means you have only experienced a bull market, which makes things all the more dangerous because you have not yet suffered through a bear market.

$50k of exposure is probably too much unless you are willing to suffer significant losses while you improve your knowledge. $50k in a major ETF (STI, HKSE, S&P etc) would probably be a more sensible place if you insist on having stock market exposure while you learn.

Your best investment right now is knowledge. If you have not already done so, buy and read The Intelligent Investor, a book endorsed by no less than Warren Buffett. I have this book (hardover 1970 edition) and it has paid for itself many times over. I daresay that for a reader who is willing and able to apply its principles, it is worth far more than its weight in gold. Even if it sold for $1,000 I would call it a bargain, but you can buy it in the bookstore for less than $100. Or borrow it from the library for free. But if you are serious about investing you should buy a copy, because you'll read it again and again as the years go by.

If you can combine time, knowledge and experience, you can find investments that have superior risk/reward ratios i.e. "low risk, moderate return" or "moderate risk, high return". Without all three, however, the "low risk, low return" maxim applies i.e. if you do not want to take too much risk, you must also accept a low return.

Until you can easily read and understand financial statements, and can arrive at a reasonable idea of what an investment (whether stock, bond, property etc) is worth, the best place for your money is probably the bank. You have some experience investing in property. Aim to at least reach the same level of comfort with stocks before you take meaningful exposure on your own.

As for bond funds my $0.02 is: Just say NO. The reason is that bond funds do not EVER hold bonds to maturity. In order to maintain an average duration, they continually buy and sell bonds. This means that when interest rates go down, the bond funds will get capital gains as they sell their bonds. Conversely when interest rates go up the bond funds will incur capital losses when they sell their bonds.

Interest rates are very low now. If interest rates go up during the period you own the bond fund, you are very likely to suffer losses. The longer you hold the bond fund, the more likely that rates will rise during this period. You can't sell AFTER rates go up because the bonds will already have lost their value, you have to sell BEFORE. But do you have a crystal ball? I don't.

In contrast, when you own a bond directly, even when interest rates rise and the bond declines in market value, you can choose to hold the bond to maturity and get repaid in full. So if you want some income and nominal protection of capital (which means guaranteed losses after inflation), yes you can buy bonds directly. But do not EVER buy bond funds unless you are prepared to take interest rate risk (risk of capital losses), or you are specifically buying a junk bond fund, in which case the returns will be highly correlated to the stock market i.e. you are buying for capital gains and not income/safety at all.
---
I do not give stock tips. So please do not ask, because you shall not receive.
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#5
maybe you can consider dollar cost averaging on the STI ETF?

Since you have 130k, a simple DCA plan would be to buy about 10k (3 lots) worth of STI ETF per month for the next 11 month, overall you get a decent average price and prevents you from timing the market.

You can also choose to spread it wider, example like one purchase every 2 months.
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#6
All advice are subjective and coloured by one's expectations, experiences and prejudices. So pls evaluate what you receive here with care.

To me, what you invest needs to at least cover inflation, which in Singapore is about 4-5%.

For that purpose, bonds does not cut it for me. I'm not very well versed in bonds but I noticed most of them seldom go above 3-4%, unless you invest in higher risk bonds which defeats the purpose of buying bonds in the first place.

And now, bonds are over valued and returns at historical lows which has led many, including buffett, to state that bonds are simply a bad idea right now.

ETFs are an ok option but you should be satisfied with average returns from the broad index. If that's fine with you, then go ahead. It usually beats inflation by a few %, which to me is still not what I'm looking for.

Looking at your two properties and cash pot, I would argue that you are comfortable enough to at least invest in blue chips. True most of them have seen a big run up in prices this year but there are some that are not in the dangerous overheated territory.

Pick carefully and watch them with an eagle eye. I don't think the correction is around the corner yet and opportunity cost is too high to sit this rally out.
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#7
(28-05-2013, 10:01 PM)Cschua Wrote: Is there any other low risk alternatives that I can look at?

Not sure if it is feasible but maybe topping up of parent's CPF?
I suppose they would be able to withdraw it yearly if they are old enough to be not on minimum sum scheme? Any buddies knows whether this is doable?
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#8
I always noticed Singaporeans seem very rich, but plenty earn their wealth through properties, thanks to MBT past policies as well as growth of Singapore since 1965.

We can also safely assume that properties capital appreciation would not be as tremendous as before given both political reasons as well as the universal law diminishing returns.

So what's next? Stocks.
However typical Singaporeans seem far less knowledgable in stocks and only have that backward biased view of "I bought property for 50k 30 yrs back and now worth 500k". So therefore properties must be good always even if they are located in some unknown land.

Anyway, what I'm driving at is the low hanging fruits have been plucked and now it's up to individual efforts to make a difference in one's portfolio returns.

Otherwise, I can forsee more scams alike the Gold Guarantee will have their sucker ploys succeed in face of ignorant but rich old Singaporeans who succeed only through properties.

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#9
(28-05-2013, 11:09 PM)greypiggi Wrote:
(28-05-2013, 10:37 PM)safetyfirst Wrote: I wont give you any stock tips since you have done a considerable amount of studying for the past 1 year but i can share with you what not to do.

Bonds are "a terrible investment" right now, Berkshire Hathaway Chairman and Chief Executive Warren Buffett told CNBC Monday (6 May 2013). He recommended holding a comfortable amount of cash but otherwise investing in "productive assets", and called having a set asset-allocation strategy "silly." Bond prices are artificial right now given the Federal Reserve's purchases of $85 billion a month, "and when that changes, people could lose a lot of money."... I think it's silly— to have some ratio like 30 or 40 or 50 percent in bonds. They're terrible investments now.

The interesting thing about investment is most people ignore advice given out by warren buffett. In the world of investment, why would anyone not take the words of buffett seriously... i am always puzzzled

I beg to differ. Not everyone has the one in billion talent that buffet has. So for him, of course bonds are bad investments now. But for me, I have bought bonds since 2010 and have found that they give much needed cash and stability to portfolio. Of course if I bought all equity, probably would have done even better by 3-4% annualized but I did not foresee liquidity driven rally so strong...

And yes, bonds are 30-40% of portfolio but they give me substantial piece of mind as they cover my expenses annually.

Agree, to each his own Smile circumstances and needs will differ from person to person.

For my own portfolio, i would prefer to keep 3-5 years of cash to meet all my liquidity/ short term needs, and the rest in equities. The low upside and high downside in bonds just make me nervous
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#10
actually taking the other side of the argument, i.e proponent of corporate bond: given uncertain macro backdrop and slow global growth, it's nice to have 2% to 3% coupon every year, and knowing that u get 100% of your money back in 3years
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