Tech and much of my portfolio have recovered from the lows of last month. But the high growth stocks in my portfolio are still far off their peaks, and I expect that it will take some time to recover. It’s fine, and I can be patient about their returns. You have to give them time to grow, and not be shaken out by every small thing. Luckily, the stable blue-chip companies have held up well, and the S&P 500 ETF has reached new highs. These have been great supports for the portfolio, even though they grow much less explosively.

Stocks

Overall, most holdings are still far into the green, and I’m overall satisfied with their returns over the last 3 years. Newer purchases such as Corsair, Crowdstrike, and Paypal are still in the red, though much better than it was a few weeks ago. I expect their recovery to continue, just not at the crazy pace it was in 2020. While AMD and Palantir are below what I anticipated them to be, I still have faith that their growth stories are intact and they can easily double over the next few years. Have high hopes for them to help me buy a bigger house once my HDB minimum occupation period is up.

I haven’t done a lot of trading recently as I ran out of money to keep buying the dip, and I have been waiting for the tech correction to be over. It’s likely that I will be a net seller of stock over the next few months as I start to pay down margin again. Selling is very difficult for me. With few exceptions, whatever I sell goes up in price. I sold Apple and Netflix before the pandemic started, which was a big mistake. In more recent news, trading out Facebook and Microsoft for Paypal, Corsair, and Crowdstrike did not turn out as well I have hoped.

My perennial problem is how much cash to hold, or how much margin to use. Right now margin is sitting around 185%, lower than the 250% I usually target, because I kept buying the dip. But I will have to bite the bullet and try to reduce it by at least $100,000 over the next few months. It’s just too dangerous to be using excessive margin for prolonged periods. It’s far more important to survive and have the ability to ride out corrections, rather than to squeeze out every dollar. As long as I hit my 10% target each year, I’ll be more than fine. Even 2% would be quite enough to maintain my lifestyle.

I’m not selling immediately since the Nasdaq has just been through a correction for the last 6 weeks and it should recover nicely over the next few months. Think the worst is over. I’m still optimistic for 2021 to be a positive one for the stock market.

In other reflections, I have regretted not being more disciplined in how I deploy funds. I had correctly built up cash in Dec – Jan 2021, but deployed it a bit too early and also lost about $30,000 gambling on Gamestop. Why I relaxed and had a lapse of judgement was because I had cash on hand, making me more easily tempted. I was also overconfident and impatient, things I have to improve on.

Fixed Income

The fixed income portfolio has been going down, since its closely tied to interest rates. The Temasek bond has fallen in value because interest rates have been rising (which mean bond prices drop). I’m wondering if it makes sense to let it go, as interest rates will inevitably rise as the economy improves, and it seems likely that the price will keep dropping. It’s still giving a nice 9% yield to maturity, and my interest rate of 0.55% is very advantageous. So with leverage it still makes sense, though it’s not as lucrative as it used to be. Again, the logic of borrowing at 0.55% to hold an asset that pays 3.625% makes a lot of sense.

Summary

13 Mar 202110 Apr 2021
Stocks$1.088 mil$1.118 mil
Fixed Income$220,000$230,000
Cash $15,000$10,000
Margin $286,000$293,000
Total $1.037 mil$1.065 mil
Gain from previous month-$168,000$28,000

All in all, a modest gain of $28,000 for the month. Still above a million in liquid assets, which somehow is an important psychological point for me. I’m still fine with it dropping below that as there is a good deal of volatile growth stocks in my portfolio. Just a little more grumbling on my part when we go out to eat, and I nudge my wife towards the restaurants with 1-for-1 deals.

Despite what I feel about the stock market being a positive this year, I will be a bit more cautious as the market could turn sharply once the Fed starts raising interest rates. While it’s probably not on the cards for 2021, early 2022 seems quite possible. The market will start pricing that in by 2021.

On the other hand, will the employment rate will go back to what it was pre-pandemic? I heavily suspect it won’t. Most companies have discovered that with technology and remote working, they just don’t need as many people as they used to. I think travel will restart more slowly than people hope, with all the virus variants and political risks. So I think the U.S employment rate will be stuck at some point. And the Fed will be forced to hold down interest rates because they now tie rates to employment, and not as much inflation. As long as interest rates are low, I feel there are few better alternatives than remaining in equities.

I feel a lot more certain about a rise in taxes than a rise in interest rates. This seems likely to come within a year or so. Both Singapore and the U.S. will have to find some way to recover all the stimulus spent in 2020. Nothing is free in this world, and politicians have been quite open about discussing the need for it. This will be a drag on earnings and the market, though nothing fatal. The U.S market has done just fine at higher corporate taxes than the 28% being discussed now.

So the two risk factors I see are a rise in interest rates and taxes, which may come earlier than what people expect. I’ll be monitoring these closely, as I continue to ride the wave for now.


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