Nervy but Good Start to a New Year, so I Sold and Strengthen my Warchest

First full trading week of the year has come and gone. What a week!

The missile attack by Iran on US bases in Iraq on Monday was a “bombshell” (pun intended). Market went down sharply at the start but surprisingly, it recovered by the end the day. Volatility was written everywhere in the market.

If you had gotten something at the bottom on Monday, then congratulation! Your courage is rewarded 🙂

woman sitting on cliff
Photo by Jordan Benton on Pexels.com

After that, market went higher from one day to another and by end of this week, STI is up about 1%.

My equity portfolio only gained 0.25%, significantly under-performed STI. I am not surprised by this as Stockcafe analytics has shown over the last one/two years period that my portfolio has only 50-60% of STI’s volatility. The maximum drawdown (defined as the maximum observed loss from a peak to a trough of a portfolio) is also about 50% of STI. It is a less risky portfolio than STI. It doesn’t gain as much but conversely, it doesn’t lose as much.

Is this portfolio good? No straight answer. It depends on your investment objective. For me, who tends to be more risk adverse, this is ok.

Well, I didn’t try to get anything at the “bottom” on Monday. At that moment, I felt that it was too risky as war between Iran and US seemed to be just at the doorstep. Over the next few days as sentiment turned more positive, I actually took the opportunity to sell into the market strength and reduce my exposure to some “growth” stocks. I took about 2% of my portfolio out of the market.

You may be curious why … my rationale is as follows:

Given the volatile situation in Middle East, US-China trade war, Wuhan’s mysterious disease, BREXIT and other events globally, I felt that there is a chance that one of these uncertainties may create a black swan event (but a more extended one unlike Monday). And when it happens, I would like to have a good warchest to be able to draw on to purchase solid “income” stocks and add on to my passive income.

This is my gut feeling – will it happen? I don’t know but I want to be ready. If market continues to strength, I may continue to sell.

Changing topic a bit … as I am typing this, I was glad to see the results from SPH Reit. It showed good stability and certainty in dividend distribution that is supported by a strong balance sheet. The slight growth in DPU from 1.34 to 1.38 cents was a nice bonus. Looking forward to receiving SPH Reit dividends in the coming weeks. I have been a shareholder of SPH Reit since it was first listed and I plan to hold on to my current holding in the foreseeable future. Will I add more? I will wait ….

So, did you take advantage of the market situation this week? Happy to hear from you and learn from you.

Thanks.

Regards

Warriortan

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