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Cash is no longer best

Panel of experts reverses defensive position and cuts exposure to gold

Gold positions have either been trimmed or sold off following the market rebound after the US elections. Cash levels are now below 1 per cent for all three portfolios, with the money channelled to equities.
Gold positions have either been trimmed or sold off following the market rebound after the US elections. Cash levels are now below 1 per cent for all three portfolios, with the money channelled to equities.PHOTO: BLOOMBERG

The expert panel reversed its defensive position last month after being caught out like many people who opted to build up cash levels ahead of the United States presidential election.

In the 14th part of the series introduced by The Sunday Times a year ago, we look at the performance of the three simulated portfolios last month.

Our investors are 26-year-old communications manager Shona Chee, entrepreneur Getty Goh, 38, who is married with two young children, and retiree Wang Moo Kee, 62.

The Portfolio Series does not involve actual money as it is intended only for illustration and education.

All three portfolios are limited to instruments listed on the Singapore Exchange to keep them simple, accessible and easy to monitor, and to Singapore Savings Bonds, which can be bought via ATMs.

Gold positions have either been trimmed or sold off following the market rebound after the US elections. Cash levels are now below 1 per cent for all three portfolios, with the money channelled to equities.
Gold positions have either been trimmed or sold off following the market rebound after the US elections. Cash levels are now below 1 per cent for all three portfolios, with the money channelled to equities. PHOTO: BLOOMBERG

While there are similarities in the three portfolio holdings, the allocation for each profile differs, depending on the individual's risk-return objectives and preferences.

Each portfolio has a different benchmark that best reflects its mix. Mr Goh's portfolio, for example, is heavier on blue-chip shares, while Mr Wang goes for bonds to reflect his more conservative stance.

The simulated portfolios are constructed by CFA Society Singapore (CFAS) for an ideal investment horizon of five to 10 years. We will track them until the middle of this year.


Ms Chee's portfolio was down 1.07 per cent for the month, trailing the benchmark (0.09 per cent) by 1.16 percentage points.

  • Save & Invest Portfolio Series

  • The Save & Invest Portfolio Series features the simulated portfolios of a young working adult, a married couple with two young children and a retiree over a 12-month period. It guides retail investors in basic investment techniques and on how to build a portfolio in line with their financial goals and risk tolerance.

    This initiative involves the Singapore Exchange (SGX) collaborating with CFA Society Singapore (CFAS) and MoneySense, the national financial education programme.

    The CFAS panellists tracking the simulated portfolios are Mr Phoon Chiong Tuck, senior fixed income manager at Lion Global Investors; Mr Jack Wang, partner at Lexico Capital; Mr Praveen Jagwani, chief executive of UTI International, Singapore; and Mr Simon Ng, CEO of CCB International (Singapore).

    Due to requests from readers, you can now access past articles in the series, as well as monthly portfolio reports, by clicking on the Save & Invest Portfolio Series banner at

Mr Goh's portfolio fell 1.51 per cent, trailing the benchmark (0.77 per cent) by 2.28 percentage points, while Mr Wang's dipped 0.83 per cent, trailing the benchmark (-0.37 per cent) by 0.46 percentage point.

The underperformance was mainly driven by the selection of securities, with the picks in all three equity sub-asset classes trailing their respective benchmarks.

All the Singapore stocks underperformed the Straits Times Index (STI). In terms of real estate investment trusts (Reits), A-Reit and CMT fell more than the S-Reit index. The Asian exchange-traded funds (ETFs) and gold all corrected last month, underperforming MSCI World, whose positive returns were mainly driven by Europe and the US.

The US ETF bucked the downtrend in the global ETF allocation. Only the corporate bond selection outperformed as the sell-off continued in government bonds.


The CFAS made major adjustments to the portfolios early last month to fully deploy the cash.

For Ms Chee's portfolio, it sold off the gold ETF instead of selling half of the position as its size was too small and doing so would have incurred relatively high transaction fees. It also bought into SGX, Singtel, Japan ETF and India ETF and increased the exposure to the US ETF.

The panel adjusted Mr Goh's portfolio by trimming the gold ETF, bought Singtel, First Resources and Japan ETF and increased the exposure to SGX and the India ETF.

Mr Wang's portfolio saw a cut in the gold ETF while Singtel, First Resource and Japan ETF were bought and the exposure to SGX, India ETF and US ETF increased.

As a result, cash levels are now below 1 per cent in all three portfolios.


Looking back, 2016 was indeed a year of unexpected events and, in some cases, unexpected market reactions.

Still, despite the volatility, the US equity market managed to close the year 9.5 per cent higher and emerging markets posted gains of 8.6 per cent. Gold appreciated by 8 per cent and the oil price jumped by 52 per cent last year.

Singapore, on the other hand, seemed to have suffered both on the equity market, albeit slightly, and currency fronts. The STI lost seven basis points last year and the Singapore dollar lost 2 per cent versus the US dollar.

The CFAS panel said it will be carefully monitoring global events in an effort to diversify the risk as much as possible for the three simulated portfolios as political uncertainty will drive capital markets and central bank actions will also remain key.

For instance, if British Prime Minister Theresa May does indeed invoke Article 50 by the end of the first quarter, investors will need to monitor the possible implications of a hard Brexit for trade and other polices.

Apart from a general election in Italy, this year will see presidential elections in Germany and France.

"Investors in Asia will also be watching the Trump adminis- tration's expenditure plans in 2017 and what happens with regulations, taxes and trade relationships," said the panel.

"Donald Trump's intention to withdraw from the TPP (Trans-Pacific Partnership) has already caused quite a stir. Coupled with the rise in the oil price, this could mean that inflation returns, and the Fed continues on its rate-hiking cycle."

For Singapore, the risks that investors have to watch for are clear. They are predominantly geopolitical in nature, given the events in Europe and that Mr Trump's "protectionist" rhetoric could have implications for export-oriented economies such as Singapore.

The panel added that this is where the Government's restructuring agenda becomes increasingly important, although it will be a slow and gradual process.

Full-year growth for last year beat expectations, coming in at 1.8 per cent, thanks to an improvement in manufacturing production.

This was higher than the initial forecast range of 1 per cent to 1.5 per cent but still the weakest an- nual growth rate since 2009, noted the panel.

Apart from global demand and trade, higher interest rates in the US and a continued rise in the dollar also mean investors will need to hedge their currency exposure. The Singdollar's 2 per cent fall against the US dollar over the past year is a case in point.

The panel said: "If the Fed rate rises are accompanied by continually improving growth in the US and supported by strong economic data, this would be good news for equity markets.

"But this would mean the hunt for yield will continue in other markets where policy remains loose and investors will need to hedge currency exposures."

Other central banks, like the Bank of Japan and the European Central Bank, have pledged to maintain their quantitative easing programmes, which means the world will still be flush with liquidity regardless of the Fed.

  • The sixth seminar in the Save & Invest Portfolio Series, which will include a portfolio construction exercise, will be held on Jan 21 from 9.30am to 3pm at the NTUC Auditorium. To register, visit
A version of this article appeared in the print edition of The Sunday Times on January 08, 2017, with the headline 'Cash is no longer best '. Subscribe