Finance Smiths

Personal finance apprentices-in-training

Exiting my stablecoin positions and swapping remaining cryptos except for DFI into BTC and ETH

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In the aftermath of the LUNA price collapse, my cash position was running low because I had averaged down on my tech stocks and crypto positions. Based on what I can see from the consequences of the UST de-peg, it seems like regulation is coming hard for stablecoins. I decided to transfer my USDC and USDT holdings from Hodlnaut to Crypto.com, sell them for SGD and transfer the cash out into my bank accounts. Along with the higher than average dividend income to be received this month, it will top up my cash balance to a point where I’m more comfortable in preparing for a possible recession and worsening bear market.

On Coinhako and Crypto.com, I swapped and sold almost all of my remaining crypto holdings into BTC and ETH. Other than de-risk move 1 above by existing my stablecoin positions, this is de-risk move 2 by only having BTC and ETH crypto positions. It’s easier for me to monitor and average down, as well as look out for black swan events that could cause a similar crisis like LUNA/UST. As for my DFI crypto position on CakeDefi, I’m keeping it as my only higher risk crypto holding for possible outperformance compared to BTC and ETH. With these moves, I have reduced my overall number and value of crypto holdings to a level I’m more at ease with for holding long-term without panicking during crisis events.

close up shot of a bitcoin
Photo by Alesia Kozik on Pexels.com

As I try to take a more macro view of my personal finances, my private property purchase last year was financed with a 2 year fixed rate housing loan. So I was able to lock in a lower rate and not be subject to the recent and upcoming interest rate increases. Whether or not a recession/higher interest rates cause a downturn in the property market is not an area of great concern for me at this time. I bought that private property because my growing family needed a home in an area that we want to live in that has all the benefits we were looking for. The private property purchase was in my name only so I mostly used up our cash and my CPF as the downpayment. While it was expensive, I don’t think we over-reached because I didn’t have to liquidate our investments. So we continue to have a portfolio that serves as a financial buffer for worst-case scenarios.

That being said, our lifeline continues to be our jobs that provide us with monthly salary income. It’s the only thing shielding my family from having to drawdown on our investment portfolio to pay the monthly housing loan instalment and ever increasing living expenses. With the heavy decline in value in the tech stocks and crypto portion of the investment portfolio, the financial buffer is not as big as before. Which means our main concern is watching out for a recession that causes job losses. If this happens to us, then it puts our family at real financial risk. Having to withdraw from an investment portfolio that is falling in value due to losses to pay for climbing family expenses is a very bad outcome. For now, as long as we keep our jobs, we can continue to average down on our existing stocks and crypto positions. If we survive this and get to the recovery, then it can put us in a stronger financial position than before. The key is to maintain that income inflow and weekly Dollar Cost Average investment strategy for as long as possible.

What to do when you get smashed

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My last blog post was more than a month ago and I honestly couldn’t think of a more polite way to word the title of my latest blog post. The biggest news is that my wife is pregnant with another boy and gynae visits and expenses started to pile up. My wife and I got busier with work, our boy started falling sick more frequently and is in the process of transitioning from half-day to full-day preschool. Which also means schools fees went up. We started going back into the office even more so transport and time costs increased too.

Right when I’m trying to manage all these family, personal and professional matters, the stock and crypto markets tanked. Much worse and looking like it will be more prolonged than what I have gone through before so my averaging down investment strategy didn’t work well at all. The tech stock market took the brunt of it and the fall was brutal across the board so all of my positions got battered. The crypto market was just as bad and the same thing happened. In fact, a certain crypto position got wiped out and will most probably never recover. Just because everyone is talking about it online, I’m going to name it – LUNA.

I didn’t have a big LUNA crypto position but what I saw in those few days this week made me re-evaluate my entire crypto investment strategy. That’s how much fear it put in me. Not because of the losses I made on my LUNA crypto position but because of how little I could do and how slow i was to respond. I was shell-shocked, reverted to my averaging down investment strategy because that’s what I know before realising the entire thing is about to blow up. By then, I was too late to react and got stuck with the losses. It was incredibly unsettling and really made me think about what I was doing.

shattered pink piggy bank
Photo by Dovis on Pexels.com

It’s not the same with tech stock market. At least I know and understand the reason for why they are going down. I will probably take bigger losses from my positions there despite averaging down but I’m prepared for it because I knew what I was getting into. Besides, there’s a business underlying the stock to analyse and I can still see whether the conditions are deteriorating or improving. Meaning I have time to think, wait, decide to enter or exit. With crypto, your decision making window is much smaller and it could mean the difference between wiping out the position or a subsequent recovery that could multiple your gains even more. The stakes are high either way but the investment risk management framework is totally different between the tech stock and crypto markets.

While my overall portfolio risk management framework still worked in that losses from the tanking tech stocks and crypto positions did not cause an unrecoverable hit to my investments, I have to assess what I did wrong and learn from it. This is going to be even tougher now as I deal with ever increasing family, person and professional matters especially with another boy on the way. I better get my act together now while my wife and I are still in our 30s. As we go into our 40s, I’m hoping for an improved approach to this as I gain more investing experience. Now I get why they say bull and bear market cycles shape the investor. Surviving and thriving each cycle means you live to fight another day.

Recovery in end Feb 2022 Liquid Assets

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Russia has invaded Ukraine and they are now at war. It’s unbelievable to me what has happened in the span of a few weeks since my last update on the blog. I’m not going to comment any further on the Ukraine crisis since it’s covered everywhere on the media. I just hope that things will improve and the world can come out of such a terrible situation.

Anyway, I will move on to what I know to write about as I just updated my Google Sheet numbers as of end Feb 2022. I was expecting another big negative hit when adding up the various positions to get our cash, securities, robo-advisors, cryptos, CPF-OA and Liquid Assets values. They went down significantly last month and I was thinking the Ukraine crisis will surely push them down further.

To be honest, it did not turn out as bad as I thought it would. The underperformance in one asset class (stocks and ETFs) was outweighed by overperformance in another asset class (cryptos). I guess the diversification in our investment portfolio is working to some extent. Here is the end Feb 2022 Liquid Assets breakdown.

selective focus photography of sunflower
Photo by Brett Sayles on Pexels.com

Cash: S$22,000 (-S$10,000 and -31.25%)

I was averaging down on my tech stocks & ETFs and cryptos positions even more so than last month as markets fell. I used up much more of my cash buffer this time around. I still have enough cash to pay for my mortgage, rent and daily expenses but I’m living on a monthly cashflow basis now. Our salary income is keeping us afloat by replenishing our cashflow every month. Otherwise, I will run out of cash by the end of the month at the rate I’m investing.

Securities: S$816,000 (-S$2,563 and -0.31%)

My securities value still fell for the month but the drop is much less compared to the previous month. Regular capital injections to average down on my existing positions and a late recovery in stock markets helped to cushion the fall. I will continue to average down where there are opportunities but I’m pacing my investing cash utilisation rate so I don’t run out before my next salary income is credited.

Robo-Advisors: S$109,500 (+S$2,940 and +2.76%)

The automated funds transfers into my robo-advisor accounts for investing is finally starting to show results. Most are still in losses because I opened them last year before the stock markets tanked. I’m ok to leave the Dollar-Cost Averaging investment strategy in place since it works better in a bear market.

Cryptos: S$204,700 (+S$31,900 and +18.46%)

My efforts to divert more of my available cash funds here and apply both Dollar-Cost Averaging and Manual Averaging Down investment strategies are starting to pay off. The late rebound in the cryptos market also helped to improve the performance of my portfolio. I also changed my approach to target specific cryptos with long term potential by taking bigger positions in them. Previously, I was taking smaller positions in too many cryptos. The portfolio looks more focused now and this makes it easier for me to monitor and invest my cash in fewer but larger existing positions.

CPF-OA: S$147,800 (+S$400 and +0.27%)

While we received our monthly CPF-OA contributions, most of it went into paying off the housing loan and robo-advisor account for investing. The increase each month will be minimal going forward except for certain months where the CPA-OA contributions from annual bonuses and interest for the year are credited.

Liquid Assets: S$1,300,000 (+S$22,677 and +1.78%)

With the cryptos portfolio propping my liquid assets up, I’m finally back at S$1.3m. Which is my starting point last year after completing my private property purchase. It’s an expensive housing choice relative to our income and cost us most of our cash balance. Something we have not recovered from. But I hope it becomes a home that my family will enjoy living in and is worth the price we paid for it.