Asset Allocation 01 (Jun 09 - Jul 13)

[kennynah]

Hi all, I'm new in this forum. This is my first post!

How do you allocate to "strategic" and "tactical" portfolio? Can a same stock be allocated to both portfolio? what criteria you use separate the two?

Or

"strategic" portfolio were pick using fundamental analysis, some stocks or commodities which have been beaten down badly, you see mostly bad news on newspaper about these stocks and commodities, but fundamentally there look cheap. So you buy them and keep for longer term, wait for these bad news turn to good news?

and "tactical" portfolio were pick using technical analysis? looking for breakouts? these are the stocks and commodities that are looking good in newspaper and analyst reports, So you trade them with stop loss?

welcome lithium...

i dont suppose anyone could scientifically quantify what would be a good mix of "strategic" and "tactical" portfolio. how an investment portfolio should be setup is dependent on several motivations and they could be just as personal a choice.

for example, someone in the early 20s vs an old retiree of 60s...the risks appetite of the two should be markedly different as with their investment capital sizes. age and capital size are but just 2 of a myriad of reasons for one to adopt different approaches to investment.

it is perhaps more prudent for one to understand one's needs first before committing to a certain investment portfolio... one that can derive the goals of investing.

[lithium]

ok...let me participate...

i will use 100 units as my total worth of assets...

a very ball park breakdown

Assets
-------
Singapore Portfolio 75 units (70% less liquid, 30% more liquid)
US Portfolio 25 units (100% liquid)

Liabilities
---------
Nil

Breakdown of US Portfolio - Futures, Options and Stocks exposure
----------------
Options : 50%
Futures : 40%
Stocks : 10%

Options trader! Dude at the fast lane! Life must be exciting!

[kennynah]

this above allocation has since changed....

i wouldnt describe trading options as "exciting"...but rather, a game of "patience"

[lithium]

this above allocation has since changed....

i wouldnt describe trading options as "exciting"...but rather, a game of "patience"

What options are you trading? Highly leveraged? Care to share your experience? Are you trading full time?

[winston]

After dicking around with many allocation and rules, I'm back to my 80/20 rule.

As I dont like Bonds, Properties and Futures, it makes my life simpler.

So my Allocation is between Cash and Equities

Vision: I hope to be 80% invested at the bottom of a market just before it turns upwards and 80% in Cash at the peak of the market before it crashes ..

[lithium]

After dicking around with many allocation and rules, I'm back to my 80/20 rule.

As I dont like Bonds, Properties and Futures, it makes my life simpler.

So my Allocation is between Cash and Equities

Vision: I hope to be 80% invested at the bottom of a market just before it turns upwards and 80% in Cash at the peak of the market before it crashes ..

But winston, why do you need to keep at least 20% in cash at all time? What is it for? Usually it's 80% equity, 20% bonds if you are aggressive. And sell 100% to cash only when you are able to predict the TOP.

[kennynah]

this above allocation has since changed....

i wouldnt describe trading options as "exciting"...but rather, a game of "patience"

What options are you trading? Highly leveraged? Care to share your experience? Are you trading full time?

i trade in stocks/index/futures options...

it is debatable as to whether options is a highly leveraged vehicle....i see it as a manageable tool

i usually do not buy or sell naked options positions...rather i usually deal with spreads, this limits the risks...or use options as a hedging tool or an income generator..

i manage my own trading activities...

[winston]

But winston, why do you need to keep at least 20% in cash at all time? What is it for? Usually it's 80% equity, 20% bonds if you are aggressive. And sell 100% to cash only when you are able to predict the TOP.

I always like to have 20% Cash ready for Special Events. It could be for Placements, IPOs etc.

When there's an opportunity, I want to make sure that I have some liquid cash for it.

And also, I know that I would not be able to pick the top and bottom of a market, so having some extra cash would be useful ..

[lithium]

Options is definitely a level higher and deeper in the world of trading. I will learn this in future, after I graduate from simple share trading first

[winston]

The five primary asset classes are stocks, bonds, cash, real estate, and commodities.

You should have a well-diversified portfolio that includes all five of these asset classes. If you're older, you need more bonds and cash for the income and safety. If you're younger, you need more stocks and real estate. You have more time and can afford to speculate.

And no matter how old you are, you should own some commodities. These are hard assets that can protect your wealth as the dollar is devalued by the government printing press. You should start with physical gold and silver, in your possession.

And there should also be an energy component to your commodities holdings. I don’t see the economy recovering quite yet. But when it does, there will be a significant increase in the demand for energy - particularly oil. This will cut into the weakening supplies and drive prices up.

I don’t try to predict the markets. But I do my best to take part in the biggest long-term trends. The ultimate demise of the dollar and rising demand for energy are two trends you can bank on.

Source: Michael Masterson, ETR