Historical Performance against Benchmark

Decided to analyze my historical performance as compared to benchmark. So took time to gather data from SGX, SPDR and yahoo finance. I am grateful that SPDR actually responded to my request and provided me with yearly performance of SPDR STI extracted from Morning Star Direct. On yahoo finance, I can only get data until 2008. While not ideal, it's good enough for me to do some analysis.

Comparison of Yearly Return

*From 2003 to 2010, data from Morningstar Direct, obtained via SPDR Head of ETF Sales Strategy & Research. From 2011 onwards, data from SPDR STI ETF Semi-Annual Reports.

As seen from the table, out of the 14 years, my cash portfolio did better than benchmark only for 50% of the time; while CPF portfolio fared slightly better, outperforming by 64% of the time. However, if I scope it to the past 10 years, then things do look a lot better. Cash and CPF portfolios outperformed benchmark 70% and 80% of the time respectively.

Comparison of Compound Annual Growth Rate

* Obtained from 2016 SPDR STI ETF Semi-Annual Report.

Due to the good performances of the past few years, I have done better than benchmark in all the periods listed for both cash and CPF portfolios.

If I would to use the same amount of money to buy my cash portfolio, cpf portfolio and SPDR STI ETF on 31 Dec 2007......

* STI ETF prices obtained from Yahoo Finance. Assuming DRIP with STI ETF dividend, with issuing price tied to record date of dividend. Use 10 Jan 2008 STI ETF price for 2007 data point.

STI ETF would only return an average 0.4% annually. Cash and CPF portfolio would have a CAGR of 6.5% and 12.2% respectively. 2008 was the year of market crash due to sub-prime crisis and it definitely has an effect on the return.

Fast forward one year, if purchase was made at the end of 2008 (after the crash), STI ETF, cash and CPF portfolios would have an average annual return of 9.1%, 14.1% and 23.7%. 

Fast forward another year, if purchase was made at the end of 2009 (after the market recovered),  STI ETF, cash and CPF portfolios would have an average annual return of 2.7%, 11.9% and 15.7%.

The story behind the numbers

As seen from the various comparisons, performance in the initial years were mediocre for both cash and CPF portfolios. Both performed below the benchmark. Memory is failing but there were probably lots of short term buying and selling with s-chips a feature in the cash portfolio. 

In 2007, sat down and put on record a goal and strategies for both portfolios. Reading the past posts, cash portfolio was more inclined to growth investing, while CPF portfolio was inclined to dividend investing. 

Things seem to improve after that with CPF portfolio doing much better. So is dividend investing better than growth investing? Maybe but another factor that might have affected the performance is the amount of buy and sell. Due to CPF limit, I basically have only two holdings - First REIT and Metro after 2009. Since then, addition was due to Metro's bonus shares, First REIT's rights issue and DRIP. On the other hand, there is still quite an amount of buying and selling, hit and miss with my cash portfolio.

The next milestone came in 2014 and 2015 when I decided to review my goal and strategies. Not much change to CPF portfolio but I started to purchase STI ETF since 2014. As for cash portfolio, I am shifting from growth focus to a balance of growth and dividend. You can read more about it here. A refinement is made recently and can be found here.

I would think that I have also improved in analyzing a company as I have learned a lot more in the past two years from various investing platforms such as Motley Fool Singapore, Big Fat Purse (known as Dr Wealth now), The Fifth Person, The Edge and various financial blogs.

I have obtained an excellent return in 2016 (mainly due to Best World) and 20171Q, but a 2 years period is probably too short to conclude the effectiveness of the new strategies. However, it does give me confidence to continue on this investment journey.

Ending Note

Goal setting supported with strategies is essential if one wants to be successful in this journey. Going forward, I will continue to review my performance and refine my strategies. 

I believe that my CPF portfolio will continue to provide good return.  I hope that with a more active investing approach for my cash portfolio, its return will eventually catch up with that of my CPF portfolio.

A brief history 4 – Mistakes and Lessons learned

As mentioned, I did not become a guru after gaining some financial knowledge.  I still make mistakes and in the process of becoming a better investor.  These are some of the biggest mistakes and best moves I made from late 2003 to 2005.

1) Selling of CAO at a price of $1.28 and $1.87 in Feb/Mar 2004.  The price has rocketed without reason.  The fundamental remained the same.  At $1.28, I sold it to lock in some gains.  At $1.87, it has tripled to my purchase price and the PE was more than 20 x (I can’t remember the actual figure) which I feel that it will not be able to sustain.  Even though the price went to $2.7 later, I remembered I did not feel bad at all because the market is reacting irrationally.  I am glad that I have sold this stock before it crashed due to their trading loss.

Lesson learned: When the price shoots up too far from its fundamental without any news, release it.

2) Making a loss of $300 on Integra2000 in Mar 2004.  It’s a small loss but an important lesson.  I’ve speculated that the company will report good results and hence give me a good return.  How wrong I was.

Lesson learned: Do homework before investing.

3) Making a loss of $1200 on AGVA in Sep 2004.  I was influenced by other analysis of the stocks and did not look into the business mold.  Also, I bought because I am familiar with the brand.  The company was affected by an increase in raw material price and could not pass the cost to its customers as their products do not sell at a premium.

Lesson learned: Familiar brand does not mean a thing.  Do no rely on others’ analysis.

4) Making a total loss of $3000 on UFood by Dec 2004.  I was influenced by Wallstraits analysis of the company.  The company has indeed done well from 2000 to 2003 and has been shareholders’ friendly with their generous dividend.  Due to an increase in pig price, the company suffers and both top-lines and bottom lines went south.  Management has not been forthcoming and the sale of shares my insiders sent the sentiment of the down.  As the fundamental did not improve, I still hold on to the shares, hoping for it to turn around.  I finally decided to let it go as I have no confidence in the management based on their actions and their inability to keep their promise on setting up a webpage.  Currently, I still think the share is cheap but opportunity cost and the lack of transparency of the management makes me decides to invest in PFood instead.

Lesson learned: When fundamental of company is not doing well, look hard into the cause and divest the shares instead of hoping for turn-around if there are no such signs.

5) Selling Celestial NF at a loss of $400 in Dec 2004.  The company has big expansion plan but market did not react positively to it and with CAO scandal, Chinese companies were not doing well.  I am impressed by their expansion plan and know that if their expansion plan goes well, their earning will grow.  However, I made an emotional decision to cut loss instead of hanging on to the shares.  My 5000 units would have given me a gain of $5000 by last week price.  I have let this four-bagger goes too early.

Lesson learned: Believe in your own analysis!6) Selling TPV and locking in gain of $1150 in Aug 2005.  I read up a report on TPV and after going through their annual reports, was impressed by their progress over the years.  The only worry that kept me back was their low profit margin.  Their prices move in Aug 2005 and at $1.12, the company was still valued pretty cheaply.  However, I let the fear of the margin overcomes me and decided to sell it.  With my confidence of the LCD market moving forwards and also how the company has progressed over the years, I should have hold to my shares and I would have another $4000 unrealized profit based on the recent prices.

Lesson learned: If valuation is reasonable with sustainable high growth rate, don’t rush into selling.

7) Making a loss of $1800 with SMT by Feb’ 06.  SMT has always been an undervalued stock.  Till now, the only reason I can come out with that SMT is undervalued because of its high debt.   I have held on this stock for more than 2 years and its price has been dropping with flat profit over the 2 years.  I decided to let it go because of pretty flat performance and it is a low profit margin.  This is not a company which I feel grow into a major player and I bought it simply because of its low valuation.  Is my decision correct?  Only time will tell.

Lesson learned: Valuation is not everything.

A brief history 3 - A new look at stocks

Through some idle chat with my brother and his friend, I have got to know this website Wallstraits.com in Aug 2003.  It was a turning point of my investment journey because it is from here that I gained valuable insights of investment.  I gained valuable financial knowledge and through the sharing of various forum members, I decided to read up more on investment.  Initially, I started with library and before long I was purchasing books on investing.

This does not mean my investment reaps fruits immediately but with the new knowledge, the stock market finally makes sense to me.  It is from this point that I believe that investing in company’s share is a mean of an alternative income for me which will assist me in gaining my financial independence in the future.

It is from this point that I move away from price movements and more towards business analysis and learn how to value a company, to invest in a business that has the potential to grow in the future.

Of course, there is always an argument between technical analysis and fundamental analysis.  I decided I am not smart enough and do not have time to track prices everyday and hence will stick to learn how to analyze a business and make investment based on that.  Also, I preferred a bottom-up approach in investment instead of a top-down.  This leads me to diversify all my unit trust investment in cash by April 2005.

Like I mentioned, I am still in the learning process and till end of 2005, my CAGR from 2000 is only a paltry 2.5%.  Yes, it’s definitely higher than bank interest but it’s nothing exciting.  Also, I am still prone to purchase/sale due to my emotion.  I believe one reason is that I do not know enough of the company I am purchasing to have the confidence to hold it longer.

I started purchasing stocks using my CPF account too.  The initial reason is that I still do not have too much cash to invest and there were opportunities that were too good to give up.  I am more conservative with my CPF investment because it earned an interest of 2.5% per annum.  So the company I invested in must be a blue chip with good dividend or a company with proven track record and has huge potential to grow.  I will analyze the individual companies later on.   The return from my CPF account had been good, with 25% in unit trust (due to a 35% limit on stock investment), it has returned me a CAGR of 9% since 2001.

If I tracked my return using NAV, my cash portfolio returned a measly CAGR of 2.3% till 2005 and my CPF portfolio returned a CAGR of 20.9% till 2005.  Looking at the CAGR for my CPF portfolio, it does make me think whether I should invest in unit trust or just concentrate on stocks.  Of course, the only reason I invested in unit trust is simply because of 35% limit.  So should I speculate my CPF in other funds, or should I stick to an index fund?  Points for me to ponder.

A brief history 2 - Venturing into stocks

I started investing in stocks in Apr’ 2000.  I am interested in this alternative way to earn money.  Again, I know nothing of stocks but was amazed by the lack of price movement when I read good news about the company in papers.  I remembered mentioning to a friend that to win the game, it is more important to know the psychology of the mass than the earning of the company.

Thinking back now, that’s quite a good observation.  After reading up, I still feel that understanding the psychology of the mass is important.  Or should I say you can make use of opportunities which surfaces when the mass reacted in an irrational manner.

Being new to the game, I was excited and with little knowledge, I traded a lot.  Locking in small profits; selling when the price drops.  I simply go by my gut feelings, thinking that it has gone down a few days and it was at this price two weeks back, and place a bet that it will go up.  Looking back now, these were such irrational behavior.
Luck was on my side I guess.  My portfolio has been erratic instead of going down all the way, such that I only made a loss of $1000 by end of 2002.  A much better performance than my unit trusts.

I have also started investing my CPF in 2001.  Again, with little knowledge, I made a paper loss of $2000 in 2 years.

Still, I was a loss sheep, not knowing anything how to make a consistent profit.  In a way, I was lucky that I do not have much disposal income for me to speculate and I was discipline enough not to go into debt or use money that I need for my daily expenses to play.

A brief history 1 - In the beginning with Unit Trust

I started investing after I graduated from NUS in June 1999.  I do not have any knowledge on investment but still went ahead to purchase GE insurance-investment plan.  This was followed by a purchase of UOB unit trusts, the highly popular Telecom unit trust which had appreciated 60% from its launch.  This was followed by another UOB unit trust Euro S.C since it was just launched and its prospect seems attractive from the promotional pamphlet.  These two UOB unit trusts turned out to be disastrous; I could not remember when I cut my loss but it’s a $2000 lesson and I was at a loss and blame it on my luck.  Yes, I am more of speculating than investing.