Monthly Report - September 2020

View this post on Instagram

A post shared by butainvestor (@butainvestor) on Oct 14, 2020 at 4:51pm PDT

Comments:

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

View this post on Instagram

A post shared by butainvestor (@butainvestor) on Sep 1, 2020 at 6:54am PDT

Comments:

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

View this post on Instagram

A post shared by butainvestor (@butainvestor) on Aug 3, 2020 at 6:25am PDT

Comments:

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.

Monthly Report - Jun 2020

View this post on Instagram

A post shared by butainvestor (@butainvestor) on Jul 1, 2020 at 5:38pm PDT

Comments:

All funds except for P2P Lending and Bitcoin saw a month on month increase at an average rate of 2.6%. Referring to the "TWR Annual" column, almost all equity sectors have returned to pre-COVID19 levels except for real estate (REITs). Its recovery is not as spectacular as its other counterparts but it is getting there.

   Principal Greater China led this month's rally at 9.6%. It has done very well to shrug off the set back in May 2020 due to the Hong Kong democracy scare. In fact, its TWR has now surpassed other FSM mutual funds, except for the heavyweight TA Global Tech.

   The United Global Quality rally should have been a lot higher but was slowed down due to a bump in the COVID19 recovery road in USA. After prematurely declaring victory over COVID19 and reopening, the cases spiked again in the US the following week. The fund took a tumble when it was announced some states were going back into lockdown.

   United ASEAN has somewhat of a muted increase (0.4% only) which could be due to the overheated rally in the month on May 2020 (26.6%).

   I received a 2% dividend from my company stock this month (~RM500). In the name of diversification, I have reinvested it into StashAway instead of back into the company stock.

Forward Strategy:

No change in minimum monthly investment allocation, i.e. RM1,500 into FSM Mutual Funds and RM500 into StashAway. Any additional saved cash will be added into the same funds.

Monthly Report - May 2020

View this post on Instagram

A post shared by butainvestor (@butainvestor) on Jun 1, 2020 at 5:31am PDT

Comments:

All funds except for P2P Lending & Principal China saw a month on month increase as more countries are reopening from the COVID19 lockdown. We see an average rally of 4.5% this month with United ASEAN leading the way. That said, there are major countries where the COVID19 situation is actually worsening like Russia & Brazil. However, my funds have no weight in said countries.

   Due to China's recent approval of a new security law over Hong Kong which could potentially threaten HK's democracy, a few of the HK weighted funds suffered from hampered gains. These could be clearly seen in Principal China and to a certain extent, Manulife REIT & StashAway.

   Wait, StashAway? Investing in Asia? So they made a big move to reoptimize its portfolio some time in the middle of May. The previous highest risk allocation of 88% US & 12% EU has suddenly turned into 40% US, 40% Asia & 20% Gold, essentially shifting their focus from west to east. Reason for this is StashAway foresees that the USD may lose its value as a result of their aggressive Quantitative Easing measures (i.e. money printing). They cited that the USD depreciated 21% against the RM between 2009 & 2011.

   Manulife REITs is still in the deep red because real estate (Retail & Hotel) took a major hit from the COVID19 lockdown. Fallen rents and rise in vacancies have reduced the profitability of REITS. It may take a while before this fund can re-enter the green zone.

   The decrease in returns from P2P Lending is expected. More borrowers are struggling to make on time loan repayments as the COVID19 lockdown takes a toll on their business. A lot of them resorted to restructuring (lengthening) the repayment schedule and some barreling towards default.

   It is nice to see that my overall Money Weighted Returns (MWR) sitting pretty at 4.1% p.a. which is above my modest target of 3% p.a. (Fixed Deposit rate). Best part is, the economy has not fully recovered yet so we could see an even more respectable MWR in the coming months.

   The higher net cash flow this month is due to (1) undertaking of home loan moratorium and (2) lower spending as a result of lock down. The additional RM3,000+ fund has been fully invested into StashAway.

Forward Strategy:

No change in minimum monthly investment allocation, i.e. RM1,500 into FSM Mutual Funds and RM500 into StashAway. I will also continue to take up the moratorium and inject the additional RM3,000 cash into my investments.

   I am not happy with StashAway's recent decision to hold 20% Gold ETF (GLD) in their portfolio. This is definitely not in line with my "full aggressive" goal and I could be potentially missing out on any huge gains during these volatile times. However, I will continue to stay invested. On the sideline though, I'm considering to get myself registered with an international broker in case StashAway's re-optimization proves to be.. sub-optimal.

Fund Report - StashAway (May 20)

View this post on Instagram

A post shared by butainvestor (@butainvestor) on Jun 1, 2020 at 7:44pm PDT

Fund Description: 

StashAway is a Malaysian robo-advisor app which allows me to access index funds in the NYSE. I am currently invested in the most aggressive portfolio hence why you see a lot of sector-specific funds.

Comments:

StashAway made a big move to reoptimize its portfolio some time in the middle of May. The previous allocation of 88% US & 12% EU has suddenly turned into 40% US, 40% Asia & 20% Gold, essentially shifting their focus out from USA (more specifically the USD). Reason for this is StashAway foresees that the USD may lose its value as a result of their aggressive Quantitative Easing measures (i.e. money printing). They cited that the USD depreciated 21% against the RM between 2009 & 2011.

   So how does refocusing investments in Asia help us against the potential USD depreciation? Let us take a NYSE-based ETF that deals in RMB (China). Currently, RMB100 can only buy USD10 worth of ETF in NYSE. After the USD has depreciated, the same RMB100 will be able to buy USD15 worth of ETF in NYSE. The 50% in depreciation of USD does indeed decrease the value of the ETF but it is offset by the 50% purchasing power of the RMB. Compare this to a pure NYSE-based ETF investing in US markets, there is no other Asian currencies to help hedge against the USD depreciation.

   I am coming to terms with their decision to move the portfolio from West to East however, I am still in disagreement with the 20% gold holding. There are a few reasons to this: 

1. It does not align to my goals to hold a fully aggressive portfolio
2. As the economy recovers from COVID19, this GLD holding is essentially missing out on the rebound
3. It feels like they are buying GLD at a peak as investors begin to regain confidence in the stock market and divest from safe haven assets.

   It is definitely not helping their case as every fund made month on month gains EXCEPT Gold. Anyway, I am exploring the possibility of opening up a foreign brokerage account and directly investing in ETF from the NYSE. That said though, it is not looking very promising i.e. very complicating because Malaysia does not encourage the use of foreign brokerage.