My Index Portfolio outperforms Growth & Income combined

First, let me welcome 16 new subscribers in the last one month. With your support, the total number of subscribes have breached the 100 mark. Thank you very much.

It has been a long while since I blogged about my index portfolio. This article is to share my investment approach via the index portfolio in contrast to growth and income portfolios. In my earlier blog (5% Yield, I did it!), the numbers I used were based on growth and income portfolio. Recap: it was 5% dividend yield but negative 6% loss in capital value (exclude dividend) as this point.

I created the index portfolio last year specifically to hold all my ETFs across equities, bonds and Reits. Unit Trusts are also in. In the January blog, I mentioned that the composition of my index portfolio by asset classes at end Dec 2017 was as follows:

As @ 31 Dec 2017,

  1. Bond = 35% (down 4% from end Q33017)
  2. Equities = 40% (up 1%)
  3. Gold = 5% (same)
  4. Reits = 20% (up 3%)

I also kept the same Targets for the various asset classes as 2017 for 2018, i.e.

  1. Bond = 40%
  2. Equities = 40%
  3. Gold = 5%
  4. Reits = 15%

As at end June 2018, I realised that my index portfolio had became underweight (vs target) on Gold due to declining gold prices (with rising USD) and monthly purchases of Bonds and STI ETF, hence I went into the market to do a once off purchase of Gold ETF.

I also bought Reits ETFs twice in Q2 when I felt that the Reit stocks were soft overall => it is anyway my long term aim to accumulate more index ETFs than individual stocks.

While the Reits ETF has a better spread, STI is not. Our 3 big banks already make up 30% of the index weightage while Singtel alone is 10%. So STI tends to do well whenever these 4 stocks perform. (see references below if you are interested to learn more).

As at 31 July 2018, the make up of my index portfolio is as follows.

  1. Bond = 33% (down 2% from end Dec’17) => Target 40%
  2. Equities = 36% (down 4%) => Target 40%
  3. Gold = 8% (up 3%) => Target 5%
  4. Reits = 23% (up 3%) => Target 15%

I am not too concerned that the ratios at this point are not aligned to my target. I have an arrangement with POSB to buy Bonds and Equities ETFs monthly on my behalf. Hence, these 2 asset classes may catch up with Gold and Reits in the remaining months of this year. We will see.

Performance of this index portfolio

I have been growing my index portfolio rather aggressively, almost 80% compared to end Dec 2017. If it continues at this rate, i will probably doubled the value of my index portfolio. See chart below. (To read the chart, I have taken end Dec 17 value as 100% and index the value of the portfolio over it)

As I mentioned, it is my long term aim more into index rather than individual TOP stocks. I think it is a better way to stay invested and diversify the risks.

Indexportolio

In terms of capital returns, it wasn’t spectacular but it is positive at 1.2% compared to the negative 6% of my “growth cum income portfolios” combined.

Dividend yield is another 1.0%, giving total gain of 2.2% for the index portfolio.

Interestingly it has outperformed my “growth cum income portfolios” combined even when dividend is included.

Maybe this permanent portfolio concept is working better 🙂 …. only time will tell.

Take care folks and have a great investment week ahead.

Regards,

Warriortan

References:

  1. Re-balancing Index Portfolio (pseudo Permanent Portfolio) and Challenges
  2. What Every Newbie Investor Needs To Know About The SGX & STI by Dollars and Senses
  3. The Top 5 Most Important Industries in the Straits Times Index by The Motley Fool
  4. Your Complete Guide To STI ETF (SPDR & Nikko AM) by Dr Wealth
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