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SAVE & INVEST PORTFOLIO SERIES

Track Shona Chee's Portfolio

Shona Chee, 25, wants to start financial planning early to grow her wealth

A risk-profiling exercise suggests that Technical account manager Shona Chee has a balanced risk profile but the 25-year-old asked to have a more conservative portfolio to start with until she is more confident and knowledgeable about investing.

The asset allocation of Ms Chee's customised portfolio reflects that of a moderate risk profile with 36 per cent in domestic equities, 21 per cent in global exchange-traded funds (ETFs), 8 per cent in Reits and the balance in bonds.

The CFAS advisory panel said: "Given her young age and needs for principal guarantee, the risk profile of Ms Chee should be moderate. As such, there is a balanced allocation between bonds and equities."

Each domestic equity is kept at 5 per cent to 10 per cent to diversify concentration risk.

The panel added: "Reits give excellent yield and are a natural hedge against inflation, and global ETFs will give an excellent diversification from the domestic market."

The portfolio is limited to Singapore Exchange-listed instruments to keep it easy to monitor, simple and accessible, except for Singapore Savings Bonds, which can be bought via ATMs.

During a meeting where Ms Chee met with the advisory panel to understand how her portfolio was constructed, she expressed her preference for some exposure to the healthcare sector due to the greying population and rapid expansion for medical tourism.

The panellists selected the six stocks for Ms Chee's simulated portfolio as these companies have excellent business fundamentals with capable management and strong balance sheets to weather downturns. 

One plus point is that their dividend yields are between 4 per cent and 6 per cent a year. Furthermore, they are generally defensive stocks, which augurs well in a depressed market environment and are not over priced.

Panellist Jack Wang said: "Most of them are consumer staples, meaning that even if the markets are not doing well, you will still need them."

He added that typically, a portfolio should have five to 20 stocks. Too few and it introduces concentrated risks. Exposure to any company should not exceed 20 per cent. If you are more conservative, the exposure should be capped at 10 per cent per stock so that a drop in one share will not affect the entire portfolio.

The portfolio is constructed to deliver "decent" but not tremendous growth. The aim is not to risk your principal and to achieve a reasonable rate of return via thorough analysis of the instruments.

For Ms Chee's simulated portfolio, the panel is looking at annualised returns of 5 per cent to 7 per cent per annum.

The panellists will track the portfolios fortnightly and may consider rebalancing them if the allocation is out by 5 per cent, subject to the dollar value.

Mr Wang encourages Ms Chee to use this opportunity to understand her own investing psychology, for example, to monitor how often she checks on her portfolio.

The rationale for stocks selection is covered in this article, while the other instruments will be covered in greater detail over the next two Sundays.

Meanwhile, you can check out SGX StockFacts (www.sgx.com/stockfacts) as a tool to analyse SGX-listed stocks. And do look out for details of the first seminar on the Save & Invest Portfolio Series on Feb 20 from 9am to noon at SGX, which would be available soon on www.sgx.com/academy.

Please send your queries on this series to lornatan@sph.com.sg.


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