Portfolio Update Apr 2020

It’s about time to look at my portfolios and do an assessment of my net worth

Stocks

I have done ok in stocks. I made mistakes in selling Nvidia, Activision, and Facebook, which have since gained over 10%. Like most, I anticipated there would be another drop.

It wasn’t a total loss as I used some of the proceeds to buy up Microsoft and Johnson & Johnson. I thought these would do better in a post COVID-19 economy. I also try not to be too hard on myself as I know I should always keep some reserves.

Margin account. Long-term holdings
Cash account. Recent buys

Bonds and Fixed Income

  1. Temasek 3.625%

2. Credit Suisee 5.625% perpetual

3. CommerzBank 7% perpetual

4. HSBC 5% perpetual

5. Pimco Income fund 4% yield

My bond portfolio is static and it will be for quite a long while.

While I have really tried to deleverage by selling my coco perpetual bank bonds, market is not giving good prices. These bonds have fallen about 12% on average, so with leverage of 3x, the loss is over 35%. I estimate that I have a paper loss of over $100,000 on my bank bonds. I realise now that it will take a while to recover. This is my biggest investing mistake.

I don’t even benefit from the lower interest rates, as my brokerage increased their own spread. There is nothing I can do as I’m locked up for now.

Still, the bonds haven’t stopped their dividends so far. I think the risk of these bonds defaulting is still low. Governments are guaranteeing loans, so that means less loans will go bad, and capital adequacy ratios will be adequate. Banks are seen as part of the solution and not the problem as it was in the Great Financial Crisis.

It will cause a financial crisis for Europe to allow their banks to fail. However, if the recession drags on, all bets are off. That is still my biggest worry.

Right now, some of my stocks go towards my margin account, which keeps the margin valuation high. Currently it sitting at around 177%, which is some ways from the 140% margin call threshold. I can still pledge over more shares from my cash account, which I might do once I have bought all I need.

Cash

I have about $60K in USD, spread over several different accounts. I may deploy more, but no more than half. With my leverage on, it is very foolish to be without cash.

I also have 1 year of expenses in SGD, so I’ll survive.

Looking forward

I don’t think I’ll be adjusting my portfolios very much. If things go down, I buy more of the same things. If things go up and I don’t buy anything, that’s fine too.

I have been thinking for a long time if buy and hold is good or going in and out is better. I have tried both, and it is really impossible to know how the market will turn. I have held on through the bad times, selling just when the stock went to the moon. I have also held on to shit stocks which went to zero. Since I can’t decide which is better, I’m leaning towards just holding, just cause it saves me trading fees and time.

Fear is by far the best indicator to buy. When the newspapers have headlines of a crashing market, buy.

Fear is not enough though. You need holding power. It is quite likely that after you buy, things still keep going down. That is part of the process. To have holding power however, you must have been ok to not have a substantial part of your cash not generating returns. You were not greedy and didn’t go all in.

I don’t really see myself as the owner of my portfolios. It is meant for my family and son when I pass away, for their financial security. I do invest it to generate a return for our daily expenses, but I don’t ever want to touch the principal.

I must not be greedy and I’ll keep a decent safety buffer.

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