MakingCent$Meet

Tweaking my portfolio to prepare for the unexpected

Keeping things simple leaves more time for investment in friends, family, other pursuits

If there was anything I took away from the tumultuous year that was 2016, it was this: Life is unpredictable.

Trite, I know. But after all the shocks we had to bear witness to last year, you have to agree this trusty cliche has never been truer.

For me, the dictum has two corollaries. Life is unpredictable. So, best prepare for the worst. So, cherish what you have in the here and now.

And it follows that my New Year's resolutions (because surely you knew that was coming) are, first, to invest more time and energy in people and activities that truly matter to me and, second, to strengthen my financial portfolio.

Since this is after all a column about investing, let's focus on the second resolution.


Markets are unpredictable. The US market did not nosedive, as was expected after Mr Trump's win. Instead, the New York Stock Exchange on Dec 8 saw its best day since the presidential election. PHOTO: AGENCE FRANCE-PRESSE

I wrote in this column last year about how I reviewed and revamped my insurance portfolio, so in that regard I am all settled.

This year, I plan to focus more on my investment portfolio.

The markets, like life, are unpredictable. I have learnt the hard way - thankfully without having lost any money, but still sorely having missed out on gains that could have been - that I should not try to time the markets.

I have not suddenly become wealthier with the dawn of a new year, so I do not intend to pour a lot more money into my investments. Rather, it's about asset reallocation.

When I last reviewed my portfolio, early last year, I decided to concentrate my investments in Asian stocks and bonds.

The rationale, at the time, was that the United States market was too expensive, having risen steadily and hitting fresh records again and again for more than five years.

Surely, US corporate earnings would not be able to justify and sustain this level of euphoria.

Surely, the market would decline as investors grappled with a presidential election and impending interest rate hikes.

Surely, the market would nosedive now that Mr Donald Trump has been elected.

Surely, a major correction was due any time now.

Surely.

The markets, like life, are unpredictable. I have learnt the hard way - thankfully without having lost any money, but still sorely having missed out on gains that could have been - that I should not try to time the markets.

So strengthening my portfolio in 2017 will mean diversifying while continuing with a dollar-cost averaging approach.

That means putting the same dollar amount into the investment each month, so that when prices fall - maybe that Wall Street crash will happen this year, now that I'm actually taking the plunge - I buy more, and when prices rise, I buy fewer.

And diversification has never been easier, with an increasing number of affordable avenues for investors.

Fundsupermart, via its new FSMOne website, allows investors to trade bonds with an outlay of as little as $1,000.

It also offers a robo-advisory service that will help you build, monitor and adjust your portfolio based on your risk appetite, for a management fee of 0.35 per cent or 0.5 per cent a year, depending on your portfolio's risk level.

At the moment, FSMOne cannot trade stocks and exchange-traded funds (ETFs) on the Singapore Exchange, but the firm's parent company, iFast, is waiting to become an SGX trading member and, once approved, will be able to offer this service.

That is something I'll be looking out for in 2017.

Another step I plan to take this year is to put money into a Supplementary Retirement Scheme (SRS) account which I can then use to invest.

The SRS complements the Central Provident Fund scheme, enabling members to contribute varying amounts to it as often as they wish - subject to a yearly cap - before Dec 31 each year.

A recent newsletter from personal finance comparison platform Singsaver.com.sg noted three benefits.

"Firstly, your SRS contributions count towards your tax deductibles, so you instantly save money," it said.

Indeed, it is a dollar-for-dollar tax relief. Each dollar contributed to the SRS reduces one's taxable income by the same amount.

"Next, you can use your SRS monies for investment, giving you a chance to beat the inflation rate and reap higher returns," Singsaver said.

There is quite a wide range of investment options for the SRS, including shares, unit trusts and fixed deposits. Investment returns are accumulated tax-free too.

Lastly, at age 62, the earliest draw-down age allowed, only half of your SRS monies will be taxed.

The great thing about these simple goals I've set is that I can plan my portfolio allocation early in the year and that's pretty much it. These are meant to be long-term investments, so I don't plan on touching them often, save for the occasional review.

The rest of the year, I can focus on the more important investment in my life - that in my friends and family and meaningful activities.

I am always happy to hear from readers of this column, so tell me: What are your New Year's resolutions?

And on a final note, Happy New Year, dear readers.

May life sometimes catch you unawares, but never unprepared.

A version of this article appeared in the print edition of The Sunday Times on January 01, 2017, with the headline 'Tweaking my portfolio to prepare for the unexpected'. Print Edition | Subscribe