Wednesday, February 25, 2015

Portfolio Buy - ETF Strategy - Asia ETF

One of the advantages of having work pressure become very high is to look for a way to simplify other things such as investment decisions.

The original thinking behind this approach to simplifying investment decisions actually is from the Pragmatic Capitalism blog which I read occasionally, a link to which is here below



In gist, the idea is that there is one global portfolio of investments and broadly your investment allocation should be in line with this global portfolio.

Country
Equity Market Cap
% Equity Market Total
Allocation of Equity Portion
Bond Market Cap
% Bond Market Total
Allocation of Bond Portion
Total
51,955
80,191
18,668
35.93%
35.00%
39882
49.73%
49%
3,697
7.12%
7.00%
733
0.91%
1%
3,681
7.08%
7.00%
15700
19.58%
19%
3,019
5.81%
6.00%
2734
3.41%
3%
2,016
3.88%
4.00%
18
0.02%
1,823
3.51%
3.00%
731
0.91%
1,486
2.86%
3.00%
12874
16.05%
16%
1,286
2.48%
2.00%
86
0.11%
1,263
2.43%
2.00%
33
0.04%
1,230
2.37%
2.00%
0.00%
1,180
2.27%
2.00%
985
1.23%
1%
1,108
2.13%
2.00%
63
0.08%
1,079
2.08%
2.00%
0.00%
995
1.92%
2.00%
1919
2.39%
2%
875
1.68%
2.00%
222
0.28%
651
1.25%
1.00%
0.00%
612
1.18%
1.00%
171
0.21%
561
1.08%
1.00%
0.00%
525
1.01%
1.00%
70
0.09%
480
0.92%
1.00%
3690
4.60%
5%
476
0.92%
1.00%
414
0.80%
1.00%

One simple way to do this would be to buy a whole world Index tracker and a whole world bond tracker.
Unfortunately, no such thing exists and perhaps even if it does, one's need to tinker will not allow a person to just invest like that.
Using the above construct, I am investing a portion of my portfolio in this global portfolio.



ETF
% Portfolio
Target Weight
Annualized Return
STI ETF
2.95%
1.00%
8.78%
CIMB Asean 40 ETF
1.21%
3.00%
5.12%
Lyxor H.S.I ETF (A9B)
1.81%
2.00%
20.92%
Lyxor Europe 10US$ (JC5)
2.91%
10.00%
12.22%
SPDR S&P500 US$ ETF (S27)
2.46%
12%
46.76%
iShares Barclays USD Asia High Yield Bond Index ETF
2.50%
40.00%
12.46%

Broadly, the results have been satisfactory.
I am quite confident that
a) I am not good at timing the markets
b) I am not smarter than the average investor, let alone the big professional investors
So, a lot of this performance is likely to be attributable to luck in terms of timing, as I bought Europe on the dips at the height of the Grexit episodes as well as the S&P 500 amid a wave of negative news on the US fed tightening, causing a close to bear correction in the S&P 500.
The eagle-eyed investor would have spotted the home bias, where I should by right have 1% in STI, but instead have put 3% in STI.
I am using STI and CIMB Asean, to net it out at around 4%.
I had space for a China ETF, which I disposed of a while back, detailed below.
http://sgx-stocks-sti.blogspot.sg/2014/11/portfolio-sale-kt4-dxt-china-etf.html

After reflection, I decided to add a 1.5% weight each to Asia in a High Yielding stock ETF as well as a real estate ETF, sort of a bar bell approach, yesterday.
ETF
% Portfolio
Target Weight

db x-trackers MSCI AC Asia Ex Japan High Dividend Yield Index UCITS ETF 1D (N2F)
1.30%
3.00%
Lyxor ETF MSCI AC Asia Ex Japan Real Estate (MT7)
1.16%
3.00%

Over time, I am slowly likely to migrate my direct equity exposure to exposure through ETFs, As always, Make Haste Slowly.
Disclaimer :- 
I am not an investment professional.
I encourage you to do your own independent "due diligence" on any idea that I write about, because I could be and probably am wrong.
Nothing written here is an invitation to buy or sell any particular stock.
At most, I am handing out an educated guess as to what the markets may do.
The market will always find a new way to make a fool out of me (and maybe, even you!).
Even the best strategies of the past fail, sometimes spectacularly, when you least expect it.

I am not immune to that, so please understand that any past success of mine will probably be followed by failures

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