At the FSM INVEST Expo 2019 held on 19 January, I shared about how our FSM Managed Portfolios can help investors build their globally diversified portfolio in an easy way – essentially, just leave it to our portfolio management team to construct a globally diversified portfolio of unit trusts and ETFs, and rebalance as and when necessary without you having to think of when to buy and sell.
Deciding when to buy and sell – that is one of the most challenging things to do for many of us. The emotional journey of taking the step to buy more when markets get cheaper, and to sell from expensive markets and rebalance back to those cheaper markets, is easier said than done. Often we end up doing the opposite – selling when markets tumble, only to start buying back when the signs of a rally are truly in place.
In December 2018, our research team shared our key investment outlook for 2019. The ideas we shared in that article capture the essence of how we view the outlook for this year. In January 2019, our portfolio management team saw valuable opportunities showing up in different markets and sectors globally. One of the strongly held views we hold is the positive outlook for Asia ex-Japan equities. We have held an overweight position in Asia ex-Japan equities (and an underweight position in US equities) over the course of 2018 – something which did not work very well last year, especially if one compares to how the US equities outperformed among the regional markets. It would have been easy for us to succumb to the pressure, follow the herd and cut down our Asia ex-Japan overweight position and hastily add to US equities. We did none of that.
For us, the portfolios reflect our research views over a period of three years and more. In the short term, things may not pan out as expected but we believed back then Asia ex-Japan equities were being unfairly bashed down, while the US equities were getting increasingly bubbly and unattractive from a fundamental valuation perspective. In fact, we believe based on the earnings growth potential for Asia ex-Japan, the regional market (as represented by the MSCI Asia ex-Japan index) should hit a record high by end-2020.
In fact, we added to our Asia ex-Japan position for our Moderately Aggressive and Aggressive portfolios by including a China equity fund – the Fidelity China Focus – in early 4Q2018. We believe the valuation for the China equity market was looking very attractive and we continue to hold that view today.
I also shared at FSM INVEST Expo 2019 how our portfolio management team had included three ETFs that give exposure to specific sectors we like. They are:
- Invesco China Technology ETF (NYSE: CQQQ)
- BMO Hong Kong Banks ETF (HKEX: 3143)
- Vaneck Vectors Semiconductor ETF (NYSE: SMH)
We added these three ETFs into our Aggressive Portfolios, under the supplementary portion to provide extra alpha but at the same time we keep these tactical positions in our supplementary portfolio to within 10-20% of the overall portfolios. My colleagues have covered on the catalysts for the China banks, China technology and the semiconductor sector.
At FSM INVEST Expo 2019, I shared why I am invested in the FSM Managed Portfolios – Aggressive. I started investing into the portfolio for one of my children as I felt it was an easier way to have exposure to a globally diversified portfolio, without having to spend too much time monitoring the performances of the markets and having to rebalance.
The other problem many of us deal with is the timing of when to enter and exit markets; to ensure I don't keep spending time thinking of 'timing', I have a regular savings plan (RSP) in unit trusts (starting from $100 per month), as well as an RSP in FSM Managed Portfolios (starting from $500 per month).
It can be unnerving at times to look at the portfolio's performance (or the lack of it) in 2018 as markets tumbled especially in 2H2018 and 4Q2018, but I keep reminding myself of the 'why' I am invested.
Since I use the Aggressive portfolio for my child's future tertiary education expenses, I have a time horizon of about 20 years ahead, so that certainly gives me some perspectives on why I should stay invested instead of worrying of shorter-term fluctuations.
One tool I use when planning for retirement and education planning is the RSP Calculator.
It helps me to think of the end-goal I intend to achieve. So, let's say, you are also planning for your child's education plan to grow to $200,000 in 20 years' time. An education fund size of $200,000 may seem like a big sum, but we all know that there is this powerful thing called inflation and education costs tend to go up rather than down – and not to mention about living expenses too.
In addition, let's assume you already have $10,000 worth of 'angpao money' for your child (also known as our own very hard-earned money) to invest, and you intend to add $500 each month into the education fund. Based on the RSP Calculator, achieving a portfolio size of about $200,000 in 20 years will then require a return of 4% per year.
Is this 4% per year rate of return hard to fathom and achieve? The answer is a definite yes, if we leave the money into our savings account which may yield around 0.16% p.a.1. Taking a little more risk by having some exposure to safer bond segments (e.g. Singapore-focused shorter-duration bonds) and riskier bond segments (e.g. global emerging bonds), as well as some equities – that may not be such a far-fetched dream, if one can withstand the ever-present and ever-changing volatility in markets and stay invested and focused on our life goals.
Invest profitably & sincerely yours,
Jean Paul Wong
General Manager, FSMOne.com
If you have any comments, feel free to email me at jeanpaul@fundsupermart.com
1 Source: The Monetary Authority of Singapore (MAS) - Banks' savings deposits rate as of February 2019
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