My wife is finally on leave the same time as me and we are taking a much needed break from work this week. She had to dial into some conference calls conveying more information on the ongoing major restructuring at her workplace. There are some new developments that may benefit her but it’s still too early to tell at this stage. Only time will reveal whether she has played her cards right in such a high risk game. This is going to be a long and exhausting battle of survival so she needs to rest and recharge whenever she can.
We have been meeting up with friends & family, running errands, going out as a couple & family, spending time alone doing our own stuff. While making sure we leave ourselves with plenty of time to rest at home as well. It’s not about being productive in what we do when we are on leave but allowing us to take our minds off work and focus on other things. We enjoy aspects of our jobs but they can be overwhelming at times. Too much of anything is bad and it’s all about balance in life. That’s what we keep trying to maintain.
Anyway, I usually start off with a personal update before moving onto the subject matter at hand. After all, it’s a personal finance blog and I like writing down my thoughts and feelings here. I decided to write about this topic because I have been asking myself these questions recently. Should we continue to buy the STI ETFs even though their returns are bad? Or should we divert the associated cash funds (via automatic monthly investment plans and manual trades) into global ETFs that provide higher returns?
When I look at the performance of our portfolio on StocksCafe, it’s obvious that our global ETFs investments are doing much better than our STI ETFs investments. The global economic downturn caused by the Covid-19 pandemic resulted in weak external and domestic demand for goods and services. Given how dependent Singapore is on world trade, this bad performance of the STI ETFs makes sense as it enters into its worse recession since independence. In any major crisis, the biggest worry is whether we are on the right or wrong side of the resulting economic structural changes that occur.
It is unlikely that the world will return to what life was like pre-Covid-19. The same goes for Singapore and the question is whether it can build a new economy in time. After all, the industries that make up our current economy are heavily weighted to the past. I think some of them would recover and thrive in the future. Others could recover but only to survive. While the remaining ones may never recover. The issue is whether Singapore can develop new sectors fast enough to replace those industries whose declines were accelerated by Covid-19.
Our investment strategy involves buying more of the underperforming ETFs. But this only works out if it eventually outpeforms. And this depends on whether the underlying stocks/companies can recover and perform well or get replaced by better performing ones in the future. The global ETFs are more diversified so this is less of a concern. But the STI ETFs are less diversified so this is more of a concern. While it’s still too early to make a call on this, we will be monitoring it closely going forward. If we find that there’s a high chance this underperformance of STI ETFs could be permanent, we will start reducing our monthly cash funds Dollar-Cost Averaging allocation to them in favour of global ETFs.