Save & Invest

Choice to move cash back to equities pays off

Positive returns for all simulated portfolios as global markets rally in the last month

All three simulated portfolios achieved positive returns last month, with performance boosted by the decision to move cash back to equities before the global markets rally.

The Save & Invest Portfolio Series features communications manager Shona Chee, 26, entrepreneur Getty Goh, 39, who is married with two children, and retiree Wang Moo Kee, 63.

Introduced by The Sunday Times in January last year, the series does not involve actual money as it is intended for the purposes of illustration and education only.

All three portfolios are limited to instruments listed on the Singapore Exchange and the Singapore Savings Bonds. 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.

Mr Goh's portfolio is heavier on blue-chip shares, while bonds fit Mr Wang's more conservative stance. The portfolios are constructed by the CFA Society Singapore (CFAS) for an ideal investment horizon of five to 10 years.

PORTFOLIO PERFORMANCE

Ms Chee's portfolio was up 3.2 per cent the month ended Oct 31, beating the benchmark by 0.57 percentage point. Mr Goh's was up 4.48 per cent, beating the benchmark by 1.23 percentage points, while Mr Wang's portfolio advanced 2.30 per cent, 0.17 percentage point ahead of the benchmark.

"The decision to deploy the 20 per cent cash and move back to equities last month paid off, allowing the portfolios to benefit from the rally in global markets in October," said the CFAS expert panel.

It reversed the decision in August to lock in some profits and raise cash levels to 20 per cent to reduce risk exposure in all the simulated portfolios. That proved to be the right move then.

Security selection across all categories, apart from the global exchange-traded funds (ETFs) allocation in Mr Wang's portfolio (both gold and Europe underperformed MSCI World), helped to contribute to the outperformance.

The panel noted that the Singapore equities allocation was driven by strong performance in Wing Tai (11.1 per cent) and Thai Beverage (8.9 per cent). Both Keppel DC Reit (3.8 per cent) and A-Reit (3 per cent) outpaced the broader S-Reit index (2.4 per cent).

  • The 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 two-year period. It guides retail investors in basic investment techniques and shows 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 in the series, as well as monthly portfolio reports, by clicking on the Save & Invest Portfolio Series banner at www.sgx.com/academy.

Asian equities - Asia ex-Japan (5.5 per cent), India (7.2 per cent), China (5.4 per cent) and Japan (5.9 per cent) - all helped the global ETF selection beat MSCI World (2.5 per cent).

The bond selection outperformed due to gains by retail corporate bonds and bank perpetuals, compared with the bond index which was up 0.1 per cent.

ADJUSTMENTS

The panel decided to sell off First Resources in all three portfolios, and to trim the Wing Tai position in Mr Goh's portfolio as the position size had grown to over 10 per cent of the portfolio.

Furthermore, it trimmed the gold ETF in Mr Wang's portfolio to allow the addition of other equity ETFs. The sales proceeds were channelled to various equity securities to maintain the overall equity allocation.

For Ms Chee, a China ETF was added to her portfolio while for Mr Goh, the Netlink Trust, A-Reit and Keppel DCReit positions were boosted. An Asia ex-Japan ETF and China ETF were added for Mr Wang.

MARKET DEVELOPMENTS

Global markets finished October strongly, brushing off unnerving events such as the North Korean missile crisis and Catalonia's bid for independence from Spain.

Developed market equities (MSCI World) gained 2.5 per cent (all returns stated are in SGD terms) last month and 12.7 per cent year to date. Emerging market equities gained 4 per cent in the same month with year-to-date returns of 24.6 per cent.

During the same period, the STI performed well, gaining 4.8 per cent. Strong results from the manufacturing sector helped Singapore's economy grow 4.6 per cent in the third quarter from a year ago, beating the median forecast of 3.8 per cent.