Asset Allocation 01 (Jun 09 - Jul 13)

[winston]

TOL:-

With QE2 sustaining the party for the next 8 months, maybe it's time to increase the allocation to Equities, Gold and other Commodities ...

Equities & Commodities: max 40% from max 30%
Gold: max 10% from max 5%
Cash: max 50% from max 65%

The reason for not having a higher allocation to Equities and Commodities, is because I think Valuation is rather high now and it could be an accident waiting to happen ..

[winston]

Asset Allocation For Your Whole Life by William Baldwin

What are the three most important things in investing? Allocation, allocation and allocation. That's gospel in the financial planning business. It's not your stock selection that really matters.

It's the percentage of assets you have in stocks, bonds and cash. A finer-grained version considers allocations to U.S. versus foreign stocks and short- versus long-maturity bonds. Even here, investing is regarded as all about categories.


Career Risk

Your biggest asset is almost certainly one that doesn't show up on your bank or brokerage statements. It's your earning potential.

The simple rule here is: Don't make this risk worse by owning stock in your employer. If the company sinks, you're out of a job and in the poorhouse.

If your employer is offering its own stock as part of your 401(k) plan, reject it. If stock is given to you, sell it as fast as you can


Dollar Risk or Domestic Currency Risk

Another big financial risk that many people run without even realizing it involves outsize bets on inflation or deflation.


Real Estate

Allocate 5% of your investment portfolio to real estate investment trusts. They give you a stake in rental income streams and hold up well during inflation.

Here's a refinement on this concept. Consider what real estate you own outright. If you own one home, putting 5% of retirement assets in REITs is fine. If you own two, cut this allocation to 0%. If you are a renter, put 10% of your savings in REITs.


Spending

An unorthodox view: Your spending habits should influence your investment portfolio. You should look for ways to offset the cost of living.

Do you wince when you pull up to the gas pump in your Escalade? Then it's time to pick up a few oil company shares. Invest as much as you did in the car. Henceforth you can be indifferent to the price of crude.

Getting on in years? Terrified of medical bills? Invest in the Vanguard Health Caresector fund.

This in the end is what allocation is all about.

Says Satovsky: "Asset allocation is not intended to make you the highest return. It's to protect you from the unknown, and from yourself."


http://www.forbes.com/forbes/2010/1206/ ... -risk.html

[winston]

With QE2 sustaining the party for the next 8 months, maybe it's time to increase the allocation to Equities, Gold and other Commodities ...
1) Equities & Commodities: max 40% from max 30%
2) Gold: max 10% from max 5%
3) Cash: max 50% from max 65%

The reason for not having a higher allocation to Equities and Commodities, is because I think Valuation is rather high now and it could be an accident waiting to happen ..

I'm starting to think twice about this QE2. It was suppose to reduce medium term interest rates. Instead, those interest rates have gone up.

And despite Ah Ben shouting loudly that he will continue to have QE3 to QE 10, the market has not reacted at all.

[winston]

Market dont "feel" too hot to me ...

We are supposed to be in the middle of the various tail-winds eg. "January Effect", QE2, improving US economy, strong China growth, China buying European Debts and I dont "feel" anything at all ..

Therefore, I've been raising some cash just in case there's a correction ahead.

I need to also remind myself that prices have rebounded a lot already from the lows of 2007/ 2008.

Some people are very good at buying high and selling higher. I dont think I'm one of them. So I just have to play the game the old fashion way of "buy low and sell high".

Current Allocation: Equities 26%; Gold 7%; Short ETF 2%

[kennynah]

nothing on properties?

[winston]

Ha Ha ... I dont like to invest in properties. The bid / ask gap is very high and I cant sell it whenever I want. It must be because I got burnt buying a property many years ago. After sitting on that property for 7 years, I still lost about 25% of my money excluding the taxes, fees and interest payment.

Nowadays, I only invest in properties through Equities. I currently have exposure to some Commercial Properties and REITS eg. Saizen, Fraser Commercial, Stamford Land as well as some 2nd Tier Chinese Residential plays eg. Minmetal Land.

[HengHeng]

hmm properties are good only if you don't need the money as you treat it as buying a bond.


Asset allocations atm
Properties 40% , cash 25% , 10% venture business, the rest equities and futures

[LenaHuat]

Last year the URA general index surged 17% whilst the STI went up ard 10%. This year equities will outperform properties.

[HengHeng]

agreed , properties aren't as liquid as other asset classes and garmen policies aren't helping

[LenaHuat]

Hi HH
I think the URA index will still inc by ard 8% but stocks by ard 20 to 25% at least. None will beat the hyperinflationary inc in Chinese goodies, some 40%