“Surely you can’t be serious!”
“I am serious! And don’t call me Shirley!”
If you understand that reference, we can be friends.
It’s been 3 months since my first post about this market correction due to COVID-19, so I thought it’s a good time to give a portfolio performance update.
Now keep in mind that 3 months is entire too short of a time to assess the viability of any long-term investment strategy so the current behavior of my portfolio should not be used as evidence that my strategy is working or not.
However, I felt that it will show everybody what a portfolio of somebody significantly invested in the stock market could look like during a time of massive uncertainty and volatility. It should give you an idea of the kind of mental fortitude required when you wish to be invested in equities – the kind of portfolio drops that you’ll have to be OK with and not panic.
So let’s dive into what has happened since my 29 February 2020 post.
Trades
Since the 29th of February, I’ve bought into the market 10 times – with differing amounts. Here’s the list of dates, tickers and what price they were at the time – with some commentary.
| Date | Ticker | Price | Comment |
|---|---|---|---|
| 2-Mar-20 | IWDA | USD 57.22 | After 10% correction |
| 6-Mar-20 | IWDA | USD 57.49 | Same as above |
| 12-Mar-20 | IWDA | USD 50.50 | Another 12% drop |
| 16-Mar-20 | IWDA | USD 45.80 | Another 10% drop |
| 18-Mar-20 | IWDA | USD 45.49 | Same as above |
| 18-Mar-20 | ES3.SI | SGD 2.489 | Normal RSP |
| 15-Apr-20 | IWDA | USD 53.16 | Monthly Top-up |
| 20-Apr-20 | ES3.SI | SGD 2.627 | Normal RSP |
| 15-May-20 | IWDA | USD 53.67 | Monthly Top-up |
| 18-May-20 | ES3.SI | SGD 2.572 | Normal RSP |
As you can see, I attempted to time the market in March (not a good idea) and since I was receiving my annual bonus, I was jumping into the market whenever a large movement was happening.
I knew that the crisis was just starting but wasn’t sure how far and how long the drop would be – so I decided that it would be best to split my bonus up and buy in using a portion every time a large movement happen. The initial plan was to do this buy in monthly regardless of the market movement, but as you can see, I couldn’t resist.
This caused me to buy in when IWDA was around $57 twice, which was about a 10% drop from All Time High. Of course a week or so later, it went down to $50 – where I decided that it was also another great opportunity to get in.
Then the market promptly drops another 5 dollars less than a week later… where I bought in twice at $45 – which turns out to be near the lowest point of $43 on the 23rd of March. I got really lucky – this was definitely not skill.
After that, I just continued to add to my position monthly whenever my salary came in – but by mid April and mid May, the market has recovered significantly all the way up to $53.
So how has the portfolio been doing?
After all of the investments I’ve added to the portfolio during this price movement, you must wonder how the portfolio is doing.
In my last portfolio update in March I showed you this chart of my portfolio Gain/Loss amount:
At the time – same as now – I had no clue where the market would go even though it recovered a little bit such that I was almost back to break even.
Now two months later, here’s what my portfolio value over time chart looks like:
There was definitely a huge dip due to the COVID-19 pull-back but because I’ve been adding to my portfolio during this time and the market has recovered – extremely surprisingly – that my portfolio is now already above the February high.
However, how much of this is the market recovering and how much was just me pumping in new money? Well let’s take a look at the most up to date Gain/Loss chart again:
So I definitely haven’t returned to the gains I had during the all time high of February, but I’m back to the absolute dollar gains that I had in December 2019, not too shabby!
Of course, since I added more funds but my gains are only the same as December, my percentage gain is still lower than what it was in December:
In terms of percentage gain, I’m back to about the October level of 13.5%.
As for annualised returns, it also happens to be at the October level of 9% per annum.
Here’s the combined percentage returns chart that I normally show – updated to the current day (you can get my portfolio tracking template to create similar charts here):
So what does this mean? Is the crash canceled?
Oh wow, that would be amazing wouldn’t it? But no, sadly it probably isn’t.
Although my portfolio is doing extremely well considering the circumstances, it was purely luck that I managed to buy in while the market has been moving down and almost exactly managed to catch the bottom. However nobody could have predicted that the market would have recovered this quickly and this substantially – what with all the unlimited QE and all.
The fundamentals of the market still looks bleak, U.S. unemployment is still exploding, businesses are still shut down, there are riots in the streets due to police brutality, and COVID-19 is still not contained in most of the world. Although, I never claim I can predict the future, my gut tells me that the market has yet to see the worst day of this crisis yet.
However, my gut feeling could also be wrong. A part of me is optimistic. Believing in humanity’s innovativeness and ingenuity, and with hundreds and thousands of smart people all around the world working together on possible vaccines and solutions, this could end soon!
There’s really no way to tell really… but with the way I’m investing, I don’t have to be able to.
I just have to believe that humanity will overcome this crisis – like we always have – and any other crisis that faces us in the future. If we believe this then having our money invested in the engines of the world economy will ultimately pay off in the long run. If this turns out to be wrong, then god help us all – we’d probably end up living in a hole in the ground somewhere and no money is safe.
Conclusion
The only lesson I want to leave you with after reading this is that you have to think long term. In this investment journey, and being invested in equities, we will face this type of turmoil and market volatility often – and we must be mentally ready for them.
Expect them to happen and ensure that you DO. NOT. PANIC. Under no circumstances should you sell your position unless absolutely necessary.
This is also why the advice is always to invest only money that you will not need within the next 5 years. This could mean a lot of different things to different people.
In my case, most of my cash is invested and I barely have any cash lying around – except a 6 months emergency fund. Why?
Because I know if I have a large purchase coming up in 6 or 12 months, I am fortunate enough to be able to stop investing immediately and start storing the cash for that purchase. If you are not able to do this then you must predict what you will need and keep that cash available in lower risk assets like CD or Fixed Deposits.
You do not want to be in a desperate need for money that you must sell out of your position during a market crash.
If you look at my Gain/Loss chart above, my portfolio basically “lost” about S$110,000 in one month… but then within the next 2 months it “made back” more than S$85,000. In the next 6 months, who’s to say that it won’t lose another S$100,000 or worse? However, I know I can weather this and so I will keep buying as and when I can.
That’s the kind of volatility that you’ll need to be able to weather through and stick with it. Remember to stay the course!
Until next time!
FPL
Thanks for the post. As always good insights. May I ask which broker you buy your IWDA ticker from?
Hey I am using POEMs but I am not saying this as an endorsement haha. It was just a broker I started with and the rates are alright so I haven’t needed to switch.
Heard good things about Interactive Brokers..
Nice update. Question though, why not swrd?
SWRD is perfectly fine! I just started with IWDA and haven’t switched.
Hello, so the markets or the prime ETFs have recovered quickly it seems. I would like to point out 2 things:
1. I am on IWDA+EIMI+AGGG (IWDA is the major of course). However lately there is one ETF to “rule them all” apparently, it is VWCE with TER 0.22%. Apparently it covers whole world and the convenience of having 1 vs 3 ETFs is huge when it comes to rebalancing and simpleness.
2. I did not catch through your posts or I don’t remember whether you have kids. But if you do or if you would have them in the future, do you think it is a good idea to save for their future using some simple ETF portfolio or preferably 1 ETF? Would you pick a separate ETF for each child or just one for making things simpler?
Good luck.
Hey Seb!
Hope that makes sense!
Hi, thanks for sharing your thoughts.
1. So what did you do with your IWDA+EIMI? Did you sell them and switched to VWRA for simplicity? The thing is once the portfolio has already grown, such change would mean paying some significant fees or selling the current portfolio and buying another ETF.
2. Also what do you think about VGVF, it has 0.12% TER and seems to be very similar to IWDA. The major difference is in tracking different indexes MSCI vs FTSE.
3. I was wondering of doing a separate ETF for each child but that would mean like having a 2 portfolios within 1 (mine and kids). I would prefer to not use 2 separate brokers for that purpose.
1. I have not actually changed my portfolio over. Like you said the inertia of staying with what I’ve already invested in is quite strong. I’ve stuck with IWDA and EIMI at this time as I don’t find the extra effort to manage 2 ETF that much of an issue.
2. As for VGVF, I think that’s a perfectly good replacement for IWDA, I’ve also mentioned SWRD which also has a TER of 0.12% and tracks MSCI like IWDA, which is also a good choice. The 0.08% savings would save enough cost to offset the switching cost for me within about 3 years, but I still haven’t switched due to inertia. In the end, you can select either of these and it should be completely fine. If you’re starting out, SWRD or VGVF are perfectly good since you save on the TER.
3. Having different ETF for each child will just increase complexity since you’d have to do separate trades for them and will have issues in terms of minimising your transaction fees etc. My take would just use the same ETF to keep things simple.
Thanks for your thoughts. What do you think if someone wants to switch to VWRA for simplicity and keep the existing portfolio as it is? The only issue is that it wouldn’t be rebalanced going forward. Is there any reason why you have not included bonds as a part of your portfolio?
If you are saying you’ll not sell your existing portfolio, but when you buy you’re only going to buy VWRA, that’s ok!
When you’re rebalancing you can sell the portion of the old portfolio that has gone up and then instead of buying the other portion, you just buy VWRA instead. Over time you’ll have more VWRA compared to the other parts of the portfolio anyway.
I don’t include bonds because I still have quite a long investment runway and I’m still accumulating. It is higher risk for sure and higher volatility, but I want to capture more growth. I have been contemplating having maybe 5-10% in bonds for rebalancing purpose… but I’m still on the fence on that one.
Hi, I am still thinking about the children approach. Adding their saving part on top of my saving, does not feel “dedicated”. Adding separate ETFs will just increase the complexity as you wrote and it will affect the general overview of my portfolio holdings. What do you think about DBS Digiportfolio? I am thinking whether it is a good idea to dedicate this product for children’s savings. The 0.75% management fees sound within acceptable range it seems?
Hi Seb! I am not very familiar with the exact investment details of the DBS digiPortfolio but they mention that the Global Portfolio is making use of UK-based ETF, though I’m not clear which ETF they are using and whether they make use of a passive investment approach or not. Do keep in mind that the 0.75% fee charged by DBS is in addition to the fund-level fee of the ETF. So if the ETF themselves are already charging 0.20%, then the 0.75% is charged on top of that. Your total fee paid is around 0.95% in that case – so it’s not super cheap.
You could explore other robs-advisors that charge slightly lower fees. I know that some charge around 0.5% on top of the fund-level fees, and that could shave the cost down a bit more.
The benefit of using DBS digiPortfolio or other robo advisors is the ability to invest in smaller amounts without transaction fees. However this also depends on how much and how often you’re going to be doing the investing for your kids. If you’re investing large amounts each time, then DIY using a separate ETF is better, but if you’re doing smaller amounts each month then robo advisors are cheaper due to transaction fees. However in the long term, you will be paying more in the management fee. So you’ll have to choose based on how you think you’ll end up doing the investments.
Hello Fire Path Lion!
With 17 August price near a all time high, i find it hard to buy monthly at those kind of price near pre covid-19 times.
What have you been doing with your spare funds for the past few months and will you continue to invest the same once your spare salary comes in?
Or are you keeping it in cash for your war chest and buy as the market dip?
Thanks and cheers!
Hey Isaac! I can see why you’re worried, prices feel like it should not be this high given COVID’s impact on the economy, but I’ve continued to keep adding funds to my position. When I receive my salary for this month, I will be buying in again. I think trying to time the market is not a useful exercise and it’s best to get funds into the market as soon as we can.
Of course, this is assuming that you will NOT need these funds for the next 5 to 10 years. So make sure you have enough in your emergency funds and any large purchases you think you’d need to make within the next few years are already covered. You do not want to be forced to sell your investments for money in case of emergency because then you’re out of options and may need to liquidate your position when the markets are down.
If you have an investment horizon of 10 years or more, the funds you invest this month or next month will only make up a very tiny portion of your investments and this COVID situation will seem like a blip in comparison. Hope this makes sense!
You are very lucky when you got your bonus and the market drops. And you managed to fully utlise your bonus which is great!
Now i have a lump sum of money. wonder if i just heck it and just invest the whole lump.
Just wondering if that time in March you did not managed to fully invest your bonus which you have break into pieces, what would you have done?
Hey Isaac, yes I was definitely lucky that the stock market drop and bottom coincided so closely to when I received my annual bonus! Of course, at the time everybody also believed that the market will continue to go down – even today many people (including myself) feel that the market is over valued and that a second correction is in order “soon.” However, the reason why I continue to invest as much as I can is still the same – nobody really knows what will happen in the stock market. I’ve recently received my August salary and I’ve put 85% of it into the market immediately when it is now at another All Time High. Could it go down tomorrow? Sure… but since this money isn’t needed in the next 5-10 years, it’s more likely that I’ll make a positive return. I will continue to do so (put 85% of my salary in) for the foreseeable future.
Of course, as I mentioned, I also have an emergency fund already set aside (about $30k worth) that should be able to last me more than 6 months to live comfortably if something goes wrong, so there is cushion built in – which allows me to be more risk-taking with my income.
Keep in mind also that if you do choose to wait for another drop before getting in, it may not drop as much as you’d like – you’ll have to face the same question “is this low enough? Will it go lower? Or will it go up and never come back down again?” – and there will be no way to tell. If I keep fixating on this, I’ll never feel comfortable jumping in. It’s like 4 years ago when I started investing… many people were saying that the market has been going up for such a long time that it will crash “soon”. If I never got in then, I would have waited. Then when the market tanked in end 2018 a lot of people still didn’t get in because they thought it could go lower, but the drop only lasted 1 month, and they missed the drop (I also missed it but that’s because I happened to have no cash then… had to pay for a wedding, haha.)
So my take is that, if you have the cushion and you know you don’t need the money in the short term – the best time to invest is now and keep investing until you need the money.
May I ask which platform you use to purchase IWDA/SWDR ETF on LSE?
Hi Hazel! I’m currently using POEMs but I can’t say for sure if they are the best best. I just use it because the fees had been reasonable and I’ve been using it way before I started on FIRE journey so I just stuck with it.
any chance for a 2021 portfolio update? Would love to see what finance bloggers are doing with their money. lol
Definitely! Hope to put that out this weekend! Stay tuned!