As the markets continued to fall these few days, I kept averaging down as long as my price levels were triggered. This time round, a bigger proportion of the S$30,000 invested went into the local markets compared to global markets. Probably because of the severe impact on Singapore of Malaysia closing its borders.
The descent of global markets has been at a slower rate so a smaller proportion of the S$30,000 invested went into them. There is a slight rebound in global markets today so I have taken the opportunity to do an investing cash balance check.
- 1st batch of S$100,000 invested last week
- S$60,000 of 2nd batch of S$100,000 invested this week
- 3rd batch of S$100,000 remaining
- 4th batch of S$100,000 as spare A
- 5th batch of S$100,000 as spare B
As you can see, I have re-designated the S$200,000 of spending cash as investing cash and allocated them as 2 spare batches – A and B. This will be in place for as long as I have a job. If I lose my job, I will change my allocation accordingly.
I have been repeatedly told over the course of these 2 weeks that I’m investing my cash too quickly. You are right, which is why I have slowed down my investing rate by opening the gaps between trigger price levels. However, I have designed this strategy using my limited investing experience because it suits my risk appetite and personal circumstances.
Besides, the market falls have been steep, hence triggering a rapid deployment of my investing cash. I did have to fine-tune my strategy because it wasn’t built for such high rates of market declines. It’s a learning experience for me as well.
I have spent the last 5 years in Singapore building up a large cash balance (50% of my asset portfolio) for this reason. I have to use this bear market or even market crash opportunity to build up the equities proportion of my asset portfolio.
Because this is my first big opportunity to build up a decent investment portfolio in the 1st decade of my career. When my wife is still working and our baby is just 4.5 months old. After this is over, we will go back to focusing on advancing in our careers and doing better in our jobs. Maybe even expand our family with another kid.
Even with ever increasing family expenses, we can re-build our cash balance as long as we have our jobs. Which is why we are staying in the banking sector for now and not taking risks elsewhere in other industries. While we take on more risk in our investments to build up the portfolio, we de-risk by doing everything we can to preserve our jobs as the main source of income.
Banks are very susceptible to recession and can cut jobs just as easily as other industries. However, when it’s not a financial crisis like the last big one in 2007/2008, banks’ nature of business as intermediaries can help them protect jobs if they want to. Because banks are plugged into almost every sector of the economy.
It’s unlikely all sectors of the economy will destabilise and do badly at the same time. Possible but it’s more likely that some parts will do better than others and some parts will do worse than others. The worsening virus situation and low oil prices do present contagion risk in that every part of the economy could be negatively affected. But it would be a global catastrophe scenario and we will not be looking at that yet.
More importantly, banks have built up reserves from the past several years of profitability after learning their lesson from the Global Financial Crisis of 2007/2008. They have the most excess capacity to cut among their staff i.e. contract staff, low-performing and unproductive staff. They also have the highest capacity to automate their processes hence lowering staff costs in general or even shift operations to countries that are low cost centres.
We have done what we can to lower our retrenchment risks by positioning ourselves in jobs that are less likely to be cut in banks. Taking less career risks means we can take on more investment risks. Which is why we are sticking to our strategy of averaging down by investing our cash balance as long as the price levels are triggered.
In time, we will know whether we made the right call. If we did, we would have built a strong foundation for our family wealth to grow in the next decade. If we did not, we will use the next decade to repair our family finances and still grow the wealth slightly. And wait for the next big opportunity to try again.
Lastly, we acknowledge that this is a global health crisis and it’s painful for so many people. However, this is a personal finance blog and I write extensively about how I manage my money at different times. Not writing about the virus does not mean that I don’t care. It’s just not the purpose of why I write on this blog and I apologise if this offends anyone.
We do our part to practise personal hygience, social distancing and no overseas travel. We follow our banks’ BCP split operations plans and listen to the advice provided by the Singapore government/authorities. And we remind our family and friends to keep safe. We empathise with the people who are suffering and we hope that the virus situation improves so that things can get better for everyone.