Save&Invest

Returns boosted by ETFs, bonds

Simulated portfolios registered gains last month despite some market volatility

All the three simulated portfolios tracked under the Save & Invest Portfolio Series remain fully invested and were in positive territory as at the end of the first quarter.
 

The series, which was introduced by The Sunday Times in January last year, features communications manager Shona Chee, 26, entrepreneur Getty Goh, 38, who is married with two children, and retiree Wang Moo Kee, 62.

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

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

There are similarities between the holdings, but the allocations differ depending on individual risk-return objectives and preferences. Each portfolio has a benchmark that best reflects its mix. For example, Mr Goh's is heavier on blue-chip shares, while bonds reflect Mr Wang's more conservative stance. The simulated portfolios are constructed by CFA Society Singapore (CFAS) for an ideal investment horizon of five years to 10 years. Today, we look at how they performed last month.


Mr Paul Ryan, Speaker of the US House of Representatives, not getting the votes to repeal Obamacare, and Mrs Theresa May invoking Article 50 affected markets last month. PHOTOS: AGENCE FRANCE-PRESSE, EUROPEAN PRESSPHOTO AGENCY

PORTFOLIO PERFORMANCE

Ms Chee's portfolio was up 0.81 per cent for the month ended March 31, against 1.44 per cent for the benchmark. During the same period, Mr Goh's portfolio saw returns of 1.24 per cent, against 1.73 per cent for the benchmark, and Mr Wang's portfolio was up 1.01 per cent while the benchmark achieved 1.23 per cent.

Just as in February, the relative underperformance last month was due to security selection in the Singapore stock allocation.

While the Singapore equities selection delivered a positive performance, it trailed the 2.74 per cent gain posted by the Straits Times Index. Performance was dragged down by SingPost (-1.8 per cent) and Singtel (-0.6 per cent), the main laggards.

  • 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. 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 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).

    You can access past articles and monthly portfolio reports by clicking on the Save & Invest Portfolio Series banner at www.sgx.com/academy

The real estate investment trust (Reit) selection also underperformed the benchmark. Both Ascendas Reit and Keppel DC Reit delivered positive returns in the month, but trailed the S-Reit index.

The global exchange-traded funds (ETFs) allocation kept pace with the MSCI World benchmark, as the Asia ex-Japan and India ETFs enjoyed a good month, offsetting negative returns in the United States, Japan and gold ETFs.

Corporate and perpetual bonds bounced back last month, contributing to the relative outperformance of the bond allocation versus the predominantly Singapore government bond index.

The CFAS panel said that the chosen benchmarks that are available do not mirror the simulated portfolios exactly. The benchmarks are theoretical constructs and are not readily investible.

For example, most of the non-Singapore exposure in the portfolios has been obtained through ETFs, for which the chosen benchmark is an All Country Total Return ETF. This ETF includes Europe, but the portfolios have not been invested in Europe consistently. The benchmark does not include gold either, but the portfolios have maintained a position in the metal for a long time.

PORTFOLIO ADJUSTMENTS

The panel made two adjustments to the portfolios last month, replacing SingPost with Venture Corp and including the DBX Euro Stoxx 50 ETF, which was funded by a sale of the Japan ETF in Ms Chee's and Mr Wang's portfolios.

The China ETF position was halved in Mr Goh's portfolio.

LOOKING AHEAD

Last month was bombarded with critical news such as the much-awaited US Federal Reserve rate hike, the failure of the Trump administration to repeal Obamacare, and British Prime Minister Theresa May invoking Article 50 for Brexit. Obviously such events increase market volatility and, as a result, developed equity markets around the globe retreated towards the end of last month.

The panel believes that the global economy appears to be in decent shape, with the US leading the way and Europe continuing to show signs of recovery.

"However, the strong rally in equity markets in the three months ended March 31 - STI was up over 10 per cent - does raise concerns about whether we could see markets consolidate for a period," it said.

This issue was discussed and the decision made to continue to stay invested as the fundamental backdrop was still positive.

The panel added that the risks in the upcoming months will likely be driven by geopolitics - potential protectionist trade policies by President Donald Trump or escalations in tensions with North Korea. It is difficult to mitigate such risks.

"Investors are advised to maintain a diversified portfolio as markets could become more volatile in the second quarter," added the panel.

•The next seminar in the Save & Invest Portfolio Series, which will include a portfolio construction exercise, will be held on April 22 from 9.30am to 3pm at the NTUC Auditorium. To register, visit www.sgx.com/academy

A version of this article appeared in the print edition of The Sunday Times on April 09, 2017, with the headline 'Returns boosted by ETFs, bonds'. Print Edition | Subscribe