Recently, I received a comment that I haven’t posted anything regarding Asset Allocation. I guess I have yet to do it… So here it is!
My personal asset allocation as of October 2011.
For those who are not familiar, CPF stands for Central Provident Fund which is the savings/retirement account which all Singaporeans have to contribute to. It is similar to EPF in Malaysia and 401K in the US. Employers have to contribute based on a set ratio to employee contribution and all contributions are not taxable. The CPF money can be used in stock investment, unit trust/mutual fund investments, property investment, medical expenses, insurance and most importantly retirement.
I know there are a lot of portfolio theories which prescribe some sort of Bond to Equity ratio for Portfolio depending on your risk preference and age. However, I can’t be bother with bonds at this point of time due to a few reasons.
1. Corporate bonds require a large minimum sum for investment
2. Government bonds at this point have very low and unattractive yields
3. I still believe that equities beat bonds in the long run, since I am setting up a portfolio for the long run, makes sense to have equities instead!
I also do not have any investments in any rare metals such as Silver or Gold. The primary reason I don’t invest in them as I consider them speculative as they do not provide any source of income. You can read more about this at Dividend Stocks vs Gold.
The cash stated in the portfolio consists of emergency cash and investible cash. I make it a point to keep aside at least 6 months of my income to cater to any emergencies. Any other spare cash is basically more investible cash which I can deploy in stocks or properties. My stocks consist of my Singapore, Malaysian and US stocks which were listed in my previous postings.
My property values are based on Net Asset Values. What it means is that I take the Market Value of The Property and deduct the current outstanding loan on that property itself to determine the Net Asset Value. It’s basically my equity net worth in properties. Assets are heavily weighted against properties at the moment as I bought most of my properties during the 2008/2009 period and they have appreciated significantly since then. I do realize that a large chunk of my portfolio is in fixed assets, so I am actively trying to invest more of my income into liquid asset such as stocks.
What’s great about this portfolio is that I derive Passive Income from my stocks through dividends and my properties through rental, hence growing my assets a bit at a time while I do the things in life that matter to me.
For further reading, you may be interested in: