Monthly Report - December 2020

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My portfolio rallied by an overall of +2.5% in the month of Dec-2020 to cap off the year 2020 at +19.9%. While the markets were slightly weighed down by the emergence of a new strain of COVID19 and US investigations into China big tech, the vaccine roll out and finalization of the US stimulus deal helped to pull the market up into the green.

   United ASEAN led the charge at a MoM increase of +9.2%. This is WAY above the KLSE benchmark increase of +4.1% signaling good stock selection by the fund manager. This is followed by Principal Greater China at +4.9% versus its Hang Seng Index increase of only +3.4%. TA Global Tech also enjoyed a +4.3% gain but it is not as good as its XLK benchmark increase of +5.3%. United Global (+3.0%) also slightly underperformed the S&500 (+3.7%). The performances of my major funds have been quite mixed this month.

   Although not as major as in Nov-2020, I am glad Manulife REIT continues its crawl up (+2.7%) in Dec-2020. I do believe this fund has the largest upside potential. Unlike all my other holdings, this fund still has not recovered from the March 2020 crash.

   StashAway was the worst performing equity fund of Dec-2020 at only +1.7%. Although the true MoM increase in USD (investing currency) is about +4.5%, it seems that the weakening USD currency has taken its toll on this fund. It has dropped from RM4.08/USD to RM4.02/USD (about -1.5%) in just the month of Dec-2020.

   My savings this month of only RM1,375 has not hit my target of RM2,000/month. Family birthday gift and celebration has taken a bite of it.

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%). I will be a bit more vigilant in monitoring funds that seem to continuously underperform the benchmark.

Monthly Report - November 2020

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This awesome Nov-2020 month started off with a huge spike in all markets after the US elections on 3rd Nov. All markets viewed the Biden win as a huge boost to future US-Global relations, specifically the US-China relations. After that, the indices continued to crawl upwards on news of successful vaccine trials. My overall fund return rate for the month of Nov-2020 is at +5.3%, recovering back from a 2 month downtrend. My Company Stock (Industrials based in Europe) led the rebound at a +10.4% jump, followed by Manulife APAC REIT (8.6%).

   Now although I am quite happy with the gains from all the funds this month, upon further inspection, it does seem that my funds didn't do so well against their indices; United Global (+7.8%) vs S&P500 (+10.8%), TA Tech (+7.2%) vs XLK ETF (11.3%), StashAway (+6.5%) / Principal Greater China (+2.0%) vs Hang Seng Index (+9.3%). Only the United ASEAN (+6.5%) exactly matched the KLCI Index (+6.5%).

   The biggest clue here is the Principal Greater China (+2.0%) vs Hang Seng Index (+9.3%). All the funds I listed above have quite a lot of holdings in China Big Tech like Alibaba, Tencent & Meituan. Unfortunately, all the shares I have mentioned were in the decline for the month of November 2020 due to sector rotation (big tech to industrials & banks). Because of that, United Global, TA Tech, StashAway & Principal China underperformed their indices.

   My AmBond fund is quite an embarrassing one to talk about. I am taking a risk by holding my emergency fund here and it's painful to see it drop by 0.7% in a month. It is very likely due to investors wanting to take advantage of the market rally and hence aggressively moving out of bonds to invest into equities.

   My savings this month has been quite dismal at only RM1,436 despite not eating out a lot due the COVID19 control movement. My budget was to save about RM2,000/month during these difficult times. The reason for the poor savings was our decision to take advantage of the 11.11 sale. So we loaded up on diapers, milk powder and some new kitchen utilities.

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%).

Monthly Report - October 2020

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The month of Oct-2020 was initially looking like it was going to end in the green. However, the market came crashing down in the final week of the month mainly due to resurging COVID19 cases and uncertainties among investors due to the upcoming US elections in November 3rd. My overall fund return rate for the month of Oct-2020 stands at -1.0%, further falling from the August highs.

   My Company Stock (Industrials based in Europe) suffered the largest drop of -7.6% and it has little to do with the company performance. The EuroStoxx 50 dropping -6% over the month shows that investors are aggressively pulling out of European stocks due to the huge spike of COVID19 cases in the region.

   Manulife APAC REIT also got destroyed over the month of Oct-2020 by -6.9% as investors get jittery about the rise of global COVID19 cases. The two countries where this REIT stock heavily invests in (Singapore & HK) have seen almost no increase in COVID19 cases this month. However, investors may be looking at the impact of the rising global COVID19 cases to both these countries that rely heavily on international trade.

   United Global which primarily invests in USA saw a dip of -3.1% which is very close to the S&P 500 October dip of -2.8%. I'd say the main catalyst for this drop is the lack of fiscal stimulus and the uncertainties of the upcoming US elections. While US has also saw a rise in COVID19 cases, its percentage rise is not as great as Europe. That and I don't think COVID19 cases does a lot anymore to affect investors in the states.

   TA Global Tech drop of only -1.7% is quite welcomed if we compare it to the XLK ETF which dropped -5.0% over the month of October. I commend the fund for doing well to minimize downside loss. It is the same case for United ASEAN which went up by 0.7% but the KLCI index dipped by -2.0%. Great performance by both these funds despite their mooted gains/losses.

   By far the biggest winner for the month of Oct-2020 is Principal Greater China with a 5.0% gain. The fund did exceptionally well compared to its benchmark (Hang Seng Index gained 2.8% only). The gain is mainly due to the speedy economic recovery in the Greater China region as they have properly gotten the COVID19 situation under control. China has been reporting only double digit daily new cases and they are all imported. In fact, the larger weightage in Asian stocks compared to the US helped the StashAway portfolio to stay afloat with a modest 1.4% increase. 

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%).

Monthly Report - September 2020

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As I have (unfortunately) predicted, Sep-2020 was a month of pullback for the global market. It was inevitable after enjoying 5 months of non stop growth. My overall fund return rate for the month of September 2020 stands at -3.2%, essentially reversing all gains made in August 2020. 

   The United ASEAN led the pullback at -6.7% most likely because small & mid cap companies tend to over-react to market movements, especially to down trends.

   I am quite happy that the Principal Greater China only retracted by -2.4% considering that the Hang Seng fell by -6.9% and the Shanghai Composite dropped by -5.5% in the month of September. In fact, this fund also beat my China-heavy StashAway fund which dropped -4.9%. The drop in Greater China stocks were mainly attributed to the deteriorating US-China relations with US imposing restrictions and bans on SMIC, TikTok & WeChat.

   United Global dropped by -3.3% which actually beats the benchmark of the S&P 500 index that dropped -3.9% in September. Aside from the overdue correction, the drop in the S&P 500 was mainly due to the lack of financial stimulus by the US government.

   Although Manulife REIT is still my overall worst performing fund, it only dropped by -0.6% this month. APAC REIT was never a popular stock with investors during this COVID19 season so there was never an issue of overbuying in the last 5 months. Hence, this fund never needed much correction.

   My company stock suffered a hefty pull back this month (-4.7%). Half of it is actually due to the weakened EUR against the MYR.

   I made a bold move by transferring my 6 month emergency fund (RM45k) from the RHB Cash (money market fund) to AmBond (bond fund). I have been contemplating this for a while and decided to just take the jump this month. With the constant OPR cut, money market funds in Malaysia are only returning 1.9%, barely enough to keep up with inflation. My cash kept in money market funds is actually depreciating in purchasing power! So I decided to take a bit of risk by placing my emergency fund in bond funds which has historically made about 4% - 5% p.a.

Forward Strategy:

I will continue to Value Cost Average (VCA) into my funds, keeping them at a fixed weightage (instead of a fixed monthly contribution amount). The revised weightage I have gone with is 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%).

Monthly Report - August 2020

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The overall fund return rate for the month of August 2020 stands at a healthy +3.3%. This has also improved my overall IRR (annualised) rate to a respectable 6.2%. However after 5 months of solid gains, I have a strong feeling that a pull back is imminent.
   The TA Global Tech Fund leads the way this month with a strong 9.5% return suggesting that big tech has been the main catalyst for this month's charge. This run is also strongly correlated to United Global (6% return) which also consists of mainly tech stocks.
   Despite 'only' returning 4.8% this month, the United ASEAN actually did incredibly well compared to its ASEAN benchmarks during this COVID recovery. The TWR% of this fund (44.7%) thus very closely matches that of the darling TA Global Tech (49.3%), which says a lot.
   Principal Greater China has returned a modest 2.8% this month. This fund actually did very well in the first week of the month but started to stumble due to the China-US tensions.
   My worst performing fund, Manulife REIT, only gained 0.2% this month just due to the massive beating taken by real estate due to COVID19. That said, I have channeled most of my additional savings this month into this fund based on the "buy low, sell high" mantra.
   My company stock suffered a minor pull back this month (-0.2%) which is likely caused by the overheated rally in the month of July alone (13%).

Forward Strategy:

Some well performing funds like the United Global and StashAway were starting to fly off the handle due to its huge returns and constant DCA. In order to prevent it from happening further, I have decided to cease Dollar Cost Averaging (DCA) and instead deploy a Value Cost Averaging (VCA) method. 

   Basically, I have come up with a system whereby my cash savings for that month will be strategically distributed to each of my funds so they always maintain a fixed weightage. The weightage I have gone with is as follows; United Global Equity (22.5%), StashAway (22.5%), TA Global Tech (20.0%), United ASEAN (12.5%), Principal Greater China (12.5%) and Manulife REITS (10%) 

Analysis - Using Personal Loan to Invest

The calls from my bank to push for personal loan is getting a bit out of hand these days. 

I guess with the record low lending rates nowadays, banks need more volume of retail loans to make up for the dip in profit. The sales pitch would go something like the following, "Get a personal loan right now at record low rates (5% p.a.), invest it all into stocks which are right now averaging more than 5% p.a., and PROFIT. Best of all, you are locked in at the record low rate for the rest of the repayment period!"

As a bored engineer with nothing better to do, I thought it will be a good idea to put that thought into excel. So in this first scenario, I am going to take up a RM 100,000 loan at a fixed rate of 5% p.a. for a 10 year (120 month) tenure. This RM 100,000 will then be placed lump sum into a bond fund that returns me 6% p.a. Theoretically, that should give me a net earning of RM 1,000 (1% of RM 100,000) at month 120. But is that the case though?

From the projection above, we see that at the end of the 120th month, this portfolio would end up at a negative RM 20,000. So what is the problem here? The issue stems from the RM1,250 fixed monthly repayment that has to be made on the loan! With normal investments, the interest compounds on top of the principal. 

However, in this 'scheme', the principal is continuously reduced from the monthly repayment of the loan. The interest is not given a chance to properly compound. So the next question would be, what is the required return of investment to have it break even (return zero) by end of the 120th month? The answer is 8.57% p.a. See below:

That is right. To break even on a 5% p.a. personal loan, we will need the investment to return 8.57%! This figure is multiplicative as well, i.e. to break even on a 10% p.a. personal loan, we will need the investment to return 15.8% p.a.

I guess what I learned from this analysis is that if I ever think of borrowing money to invest, I better be damn sure the investment makes a much larger return than the loan rate.

Monthly Report - July 2020

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This has been a very good month for all my funds. Every fund saw a month on month increase at an average rate of 6.0% mainly due to the improving sentiment on the COVID19 recovery.

   United ASEAN led the the rally this month with 18.6% mainly due to the huge spike in its glove stock holdings (Supermax & Top Glove).

   Principal Greater China continues to make a consistent recovery at 9.3% this month. While there are several reports of resurgence of COVID19 cases in some other countries, China cases remains under control. With that, its economy is able to grow at a stable rate. 

   Consequently, StashAway, which has most of its ETF concentrated in Greater China also enjoyed a healthy 6.9% monthly growth.

   United Global, which is heavily weighted in US stocks, has a modest 5.5% growth this month. The S&P500 suffered a comparatively volatile 2% growth this month as the COVID19 situation worsens in the states.

   Manulife REITS is the only fund still trying to claw its way back to green but its slow recovery benefits me as I am able to continue purchasing it at a discounted rate.

   I was working on my legacy planning this month and realised that there could be issues with passing over my Bitcoin holdings to my nominee. For that reason, I have decided to exit all my position in Bitcoin and transfer them over to something more 'legit' (StashAway).

Forward Strategy:

A slight change in the investment allocation into FSM Funds. I will now allocate RM300 to each of the 5x FSM Fund (still totaling up to RM1,500). RM500 will still be allocated into StashAway. Any additional saved cash will be added into the same funds.