Tuesday, October 4, 2016

Festina Lente - Make Haste Slowly



A good way to think about investing is to follow the principle of Festina Lente, Latin words for classical greek, attributed to the Roman Emperor Augusts.

To read up about Festina Lente, please visit the Wikipedia link below


I know that some of you will be nodding your heads, while some others will be mumbling, enough with this Greco Latin mumbo jumbo, get to the point.

I had indicated an approach, where I am pivoting towards a ETF based approach for investment from a stock-picking approach.

This was outlined last year in the blog, the link for which is below.


The reasoning for the shift is that 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, what is good for the market is good for me and all I want is to achieve the average market return less costs.

Some of the ETF's which I held as part of this pivot, i.e. the Japan ETF and the Asia Real Estate ETF have been liquidated.

Details of this are provided on Value Buddies

Details of Japan ETF liquidation


Details of Asia Real Estate ETF liquidation


I have over the last eighteen months, slowly increased the ETF component of my portfolio, by liquidating some stock exposure and transferring it to an appropriate ETF.

I am working on a timing model for the ETF entry, but that is still very much work in progress.

So far, the results are satisfactory, but it is very early days yet, as a lot of the satisfactory results could be due to blind luck.

Country / Region
Type
ETF
% Portfolio
Target Weight
Annualized Return
Holding Period (Years)
China
Equity
DBXT CSI300 ETF (KT4)
3.31%
7.00%
-21.28%
1.086
Australia
Equity
DBXT ASX200 US$ 10 (LF1)
3.71%
2.00%
14.17%
0.154
Asia
Equity
CIMB S&P Ethical Asia Pac Opportunities ETF (P5P)
7.68%
2.00%
15.66%
0.049
Asia
Equity
db x-trackers MSCI AC Asia Ex Japan High Dividend Yield Index UCITS ETF 1D (N2F)
2.00%
2.00%
0.89%
1.170
Japan
Equity
Asean
Equity
CIMB Asean 40 ETF (M62)
8.09%
3.00%
-1.94%
0.317
Europe
Equity
Lyxor Europe 10US$ (JC5)
3.29%
19.00%
-1.01%
1.409
Singapore
Equity
STI ETF (ES3)
4.17%
1.00%
-0.07%
1.508
Hong Kong
Equity
Lyxor H.S.I ETF (A9B)
2.95%
2.00%
5.85%
1.137
USA
Equity
Lyxor Nasdaq US$ (H1Q)
11%
USA
Equity
SPDR DJIA10 US$ ETF (D07)
3.74%
12%
2.69%
0.763
USA
Equity
SPDR S&P500 US$ ETF (S27)
6.64%
12%
4.84%
1.055
Asia
Bond
iShares Barclays USD Asia High Yield Bond Index ETF (QL3)
10.07%
20.00%
6.51%
0.128


I plan to wait for at least a year for each ETF, before reviewing the ETF performance and then taking action in terms of addition or not.

The simple rules are 

1) Add to an ETF which is under-performing.
2) Ignore the performing ETF
3) Use Investment addition to rebalance the portfolio weight rather than through active sales, i.e. avoid trying to time the in and out as all I want is global exposure to a set weight

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


3 comments:

  1. Hello Vatsa

    Thank you for sharing your thoughts about the ETF pivot. Some of the ETFs listed are synthetic and have counterparty risk. What are you thoughts about this risk?
    For me, this is one reason why I hesitate to move from stock picking to ETFs, even though I am not particular good at stock picking. I do have some STI ETF, but it lacks country diversification.

    ReplyDelete
  2. Hi Mr.Goh,

    I searched high and low for physical replicated ETF to gain exposure to the market.

    In some cases like S&P 500, Dow Jones, that was not an issue. In other cases, that risk cannot be avoided, at least not on the SGX listed ETF.


    Similarly, CIMB ETF is physically replicated.

    The iShares HY etf is physically replicated.

    The two which are not are Lyxor and Deutsche Bank ETF.

    On Deutsche Bank ETF, you may have seen their switch to Physical ETF.

    https://etf.deutscheam.com/SGP/ENG/showpage.aspx?pageID=261

    The ASX ETF has now switched to physical replication. So, again was not an issue with that.

    The CSI 300 ETF is not physical, it is synthetic, the alternate is to switch to the FTSE China 50, but, here, i wanted the more representative ETF, so, retained the CSI 300 ETF.

    My simple thought on counterparty risk is that if Deutsche Bank or Lyxor collapse, then, we have a good chance of a Lehman moment, which makes their collapse, the least of the worries. Secondly, SGX probably will have adequate safeguards to ring-fence the investment made by SGX investors.

    However, if we wait for a perfect time where all ETFs are physically replicated and low in cost, that utopia will never come, so, better to invest than sit it out

    Regards

    Vathsa

    ReplyDelete
  3. Hi Mr Vathsa, thank you again for sharing. Much food for thought!

    ReplyDelete