Monthly Report - July 2021

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July 2021 mainly saw two halves of my portfolio at odds with each other. The earning seasons in USA has brought a lot of my funds into the green - United ASEAN (+2.9%), United Global (+2.5%), Manulife REITS (+2.5%) & TA Global (+2.3%). However, all that was badly hampered due to the regulatory rampage by the Chinese government on local big tech players. Two of my Greater China heavy funds fell hard - Principal Greater China (-4.2%) and StashAway (-3.7%). It was a hard enough of a fall to keep my July 2021 portfolio gains humble at just +0.4%.

   The KLCI continued its dip down -2.5% this month due to the rising local COVID19 cases. Hence, the United ASEAN did well to end in a respectable +2.9% gain. It is a welcomed change as this fund has been quite the underperformer this year (compared my other funds). The combination of the new delta variant and relatively slow vaccination rate in this region has dampened recoveries compared to its peers in Greater China, Europe & USA.

   The TA Global (+2.3%) grew in tandem with its benchmark XLK ETF (+2.48%), slightly bogged down by its Chinese big tech holdings.

   Despite the Principal Greater China being the worst performer this month (-4.2%), I do have to commend it for being able to stay well ahead of the Hang Seng index which fell -9.9%.

   Savings was great again this month (RM2916) as the spike in local COVID19 cases has put a significant downer on my spending mood.

Forward Strategy:

I will continue to Value Cost Average (VCA) into my funds, keeping them at a fixed weightage as follows; United Global Equity (20.0%), StashAway (20.0%), TA Global Tech (20.0%), Principal Greater China (15.0%), United ASEAN (12.5%) and Manulife REITS (12.5%).

Analysis - StashAway Reoptimization (July 2021)

StashAway Malaysia has decided to conduct another round of portfolio re-optimization amidst the changing environment. You can read their original article here but to sum it up, they believe that while the U.S. indices are skyrocketing right now, it does seem that inflation in the U.S. is starting to speed up from its current figure of 5.4% p.a. in June 2021.

   To paraphrase a page from the "Intelligent Investor by Benjamin Graham", when inflation shot above 6%, stocks stank. The stock market lost money in 8 of the 14 years in which inflation exceeded 6%; the average real return for those 14 years was a measly 2.6%. While mild inflation allows companies to pass the increased costs of their own raw materials on to customers, high inflation wreaks havoc - forcing customers to slash their purchases and depressing activity throughout the economy.

   So StashAway Malaysia has decided to re-optimise the aggressive 36% portfolio as follows:

• Consumer Staples (XLP), Energy (XLE), REITS (VNQ & VNQI), Precious Metals (GLD) & US High Grade Bonds (AGG): These stock types have historically proven to perform very well (vs the stock market) in times of high inflation. You will notice they are commodity or 'basic necessity' type of stocks.
• Australia (EWA): What better way to capture commodity returns than investing in a commodity-exporting country?
• Small Cap (IJR): This is more to do with capturing the momentum rather than the inflation returns. Value stocks have been in the shadows of growth stocks for a few years. Now that value stock is back in the spotlight again, they foresee this to trend for quite a while to make up for lost times (vs growth stocks).
• China Tech (KWEB): This is more to do with capturing the potential rather than the inflation returns. With a population of 1.4 billion, rapidly growing economy and laser focus on becoming a technology superpower, it only makes sense to keep invested in this ETF.

As for my opinion, I don't actually have one. I mean, I am pretty glad that they did not give up on KWEB despite their horrible run in year 2021. KWEB is a high risk, high reward ETF which I don't mind holding on for a while. As for the overall strategy, it does makes sense but only if their prediction that the inflation will continue to rise to uncontrollable levels comes true.