Contributed by: Warriortan
1. Setting up my Index Funds Portfolio (IFP)
For those of you who were involved earlier, you may remember that I wanted to initiate an (passive) Index Funds Portfolio -IFP – as a trial for (hopefully) a “stress free type” investment approach and to evaluate if it would match or beat my active portfolio of individual stock selections. An index fund portfolio is made up fully of ETFs.
I am happy to inform that after 2 months, my IFP is starting to take shape.
Inspired by the concept of permanently portfolio, guided by the book, Millionaire Teacher by Andrew Hallam, and added my own ideas, I aim to create my own IFP of the following percentage breakdown between Bonds, Equities, Gold and Reits.
Bonds = 40%
Equities = 40%
Gold = 5%
Reits = 15%
In between them, I have set another overall target for the values of Singapore and Overseas assets in the ratio of 55%/45% to minimise a tendency for concentration risks in Singapore.
2. The breakdown and performance of my IFP now
As of yesterday (17 March 2017), the percentage breakdown of my IFP was
Bonds = 34% (under -6%)
Equities = 26% (under -14%)
Gold = 8% (over + 3%)
Reits = 32% (0ver +17%)
and on an overall basis, it is slightly overweight towards the overseas assets at 58%.
In terms of performance, inclusive of the dividends that I received since the start of this year, my IFP has returned 7%. This is above my expectations given the relatively short period of 2 months only.
Personally, I think this outperformance was because of the recent rallies experienced in all the markets (US, HK and Singapore). Over a longer period, I will be happy with a 5% return year on year including Dividends.
The lure of Gold … anyone?
3. How did I set it up
I have set up a regular monthly investment plan with DBS for it to invest in SGX listed ABF Singapore Bond ETF and Nikko STI ETF. Both of them are Singapore based and in the Bonds and Equities. Hence, without adding other investments into my IFP, I can expect my IFP to balance towards my aspired targets.
I am very eager to see how my IFP will fare against its active competitor – I have done not the full analysis yet. The latter has also done well given the recent rally in the markets.
While the outcome of this “competition” will probably take a long period to know, one benefit that I can already feel is the reduced “stress” level related to not needing to do so much information/data mining, analysis and making tough decisions associated with stock selections. And all these were achieved while still knowing that these index funds are still earning income for me :-).
You may be interested to learn what kind of ETFs can help you build a similar portfolio. Hence, I will share the ETPs in my portfolio with you. I hope this is useful to you as a reference:
|Bonds||ABF Singapore Bond (Singapore exchange)|
|Vanguard Intermediate Term Corporate Bond (US exchange)
iShares S&P Preferred Stock Index Fund (US exchange)
SPDR Bloomberg Barclays High Yield Bond (US exchange)
|Equities||STI ETF (Singapore exchange)|
|ChinaAMC CSI 300 ETF (Hong Kong exchange)|
|HangSeng H Share ETF (Hong Kong exchange)|
|World Index ETF (US exchange)|
|Gold||GLD 10US$ (Singapore and US exchanges)|
|Reits||Phil Div Reit ETF (Singapore exchange)|
|Phil SG RE Income Fund (Philips Unit Trust)|
|Vanguard Reit ETF (US exchange)|
(please note that dividends from US investment will attract a 30% withholding tax, i.e. the money you receive will be 30% less in Singapore)