Sep has been a volatile month for the stock market. I’ll talk about the effect it has had on my portfolio and use of margin. These post don’t just serve as a simple update, I also think about how to deploy funds in the short-term. I don’t move money around often, and I believe a few good investment decisions matter much more than many different trades.

Leveraged portfolio

NameBought priceCurrent PriceMarket ValueGain/Loss (SGD)
Temasek 3.625%102.2118.622USD $299,000$55,835
CMZB 7% perp106.85101.748USD $214,000-$13,877
HSBC 5% perp104.499.45SGD $250,500-$12,375
Pimco Income Fund 4%10.089.94SGD $246,000– $3,056
Lifelong Income insurance planSGD $220,000
SumSGD $1.366m$409,692

Leveraged portfolio value at $1.37m, with an underlying asset value of $409,692.

The leveraged portfolio has held up well through the recent market volatility. It’s times like this I’m glad that I diversified into different asset classes. When stocks are going to the moon, it’s easy to throw all the money there. Returns that take a year for a bond to achieve is done in a few days with a hot stock like Tesla. But when those stocks are down, bonds and insurance continues to be a reliable source of income. There are also advantages to be a bondholder, who are much higher the totem pole than stockholders. While stockholders are suffering because their dividends have been cut, bondholders continue to enjoy steady cash flow.

I’m always looking out for ways to increase my passive income. Coco bonds are pretty attractive right now. I leaning towards BNP Paribas’s 5.125% perpetual bond, or something completely different like ESR Cayman 7.875%. You can check out some quick commentary on the bonds I’m watching here. While I am considering Singapore REITs and banks as their dividend yields are decent, I’m hesitant to deploy funds in the Singapore market as the long-term outlook for us is quite gloomy. I don’t think that will change soon.

Stocks

Total value = ~$600,000. Estimated margin used = $80,000

While it has been a turbulent time for the stock market, I’m still up about $140,000 on my margin portfolio. At some point it was up about $210,000, so I’ve had a paper loss of about $70,000 in the last couple of weeks. It sounds like a lot, but when you have a large portfolio, these swings will happen.

Margin trading account

On Tesla, I’m about 15% down. My trading app isn’t smart enough to take into account the effect of the stock split, but my average buy price is $435. You can see how its calculated and the % profit/loss in the table below.

Cash trading account
Number of Tesla shares Bought PriceTotal
20$450$9,007
20$498$9,964
20$457$9,149
50$396$19,780
$47,900
110 shares
Average cost price$435
Current price$372
Profit/loss-14.48%
Tesla tranches and cost price

While I do believe Tesla is a good company and will continue to dominate the electric vehicle world, I was too overconfident. The initial success of my first tranche tempted me to keep buying, and I was sure that they would be added to the S&P 500 soon.

That didn’t happen, and led to a more than 20% decline in their stock. While it’s painful, I still believe in the company and will be holding it for the long-term. The good thing is that my Tesla stock was not bought on margin and was paid using cash. So I can continue to hold even if it goes down 90%.

Nonetheless, it was a mistake to buy in at such a high price point. My emotions when buying it was of greed and fear of missing out. I have generally found that such emotions don’t bode well. It is best to buy when I feel the opposite, which is fear and uncertainty.

I’ve been thinking to reduce my exposure to US tech, by expanding out to Chinese tech like Tencent or the Hang Seng Index. I’ve been watching them for a while and may make the move over the coming weeks.

I’m also glad that my risk management strategies are working. Despite the Nasdaq going through a correction, my margin valuation only dropped a bit from 200% to 193% now. I can probably tolerate another 20%-30% drop before having to dip into my cash reserves.

Margin valuation report

Cash

  • $10,000 in Singlife
  • $20,000 in Singtel Dash/Etiqua
  • $10,000 in OCBC 360
  • $15,000 in CIMB accounts
  • $15,000 in joint account with wife

I still have at least $55,000 in cash. What I can tell you as a privileged banking client is that there isn’t anything else that beats Singlife and Singtel/Etiqua’s offerings. They have a interest rate of 2% – 2.5%, easily beating fixed deposits and money market funds, which are yielding about 1% now. It’s not just the high interest rate, but they have liquidity and can be withdrawn anytime.

Summary

Total portfolio value = $410,000 bonds + $520,000 stocks + $55,000 cash = SGD $985,000.

This includes the $24,000 added from my wife to buy stocks on her behalf. I include it here for simplicity’s sake. You know the saying, my wife’s money is my money. Or something like that.

Stocks will probably continue to be volatile until Nov 2020. The presidential election is the greatest market risk now. It will be hotly contested, and Trump may not give up power. This is driving me to consider investments outside of the US, such as in China, Europe, or Singapore. Perhaps it isn’t such a good idea to concentrate over $300,000 in just three US stocks (Amazon, AMD, Nvidia), no matter how much I believe in them. We’ll see what happens, and I’ll be sure to let subscribers know what moves I’ll be making.

Have a good weekend all!

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