Finance Smiths

Personal finance apprentices-in-training

Buy into Dairy Farm International, Chinese tech and consider secured wealth lending

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I have completed the transfer of my ETH holdings from Coinhako to Hodlnaut earlier in the week so they have already started earning interest. Given that DAI is a stablecoin crypto that can also be transferred from Coinhako to Hodlnaut to earn interest, I may start to build up a position in DAI. It’s probably a good way to utilise my excess cash balance in the future since the crypto interest rate is much higher than the bank interest rate. There’s always lots of things happening in the cryptos space and I’m still trying to monitor and understand these developments.

Anyway, Jardine-owned Asian retail giant Dairy Farm International announced its 1H21 earnings more than 2 weeks ago and it was bad. Since then, its share price has fallen significantly. It seems like shopper behaviour during this Covid pandemic is still erratic and given the ongoing restrictions, outlook for the year remains glum. I didn’t have a big position in Dairy Farm International before the announcement but I was consistently averaging down as the share price fell. It has now become one of the major stock holdings in my investment portfolio.

I expect the earnings recovery for Dairy Farm International to start from next year 2022 onwards so I will continue to buy into it if the share price keeps falling for the rest of the year. I don’t have much exposure to this industry sector in my investment portfolio so I’m ok to take a bigger position in it. As long as its Covid-related affecting consumer spending in this area, I have no problem waiting for the eventual recovery. It may take longer than I think but I reckon patience is key for this to pay off.

As Chinese tech stocks and ETFs continue to fall due to regulatory headwinds, I have also been averaging down on my Alibaba and Lion-OSPL Hang Seng Tech ETF holdings. PinDuoDuo is coming close to my target price for averaging down but JD is not there yet. I’m starting to see the value of opening a secured wealth lending facility with Stan Chart Bank. After all, Stan Chart Bank custodises my investments and I have a housing loan with them. It makes sense to collateralise my assets held with them to increase my investing firepower. Especially in the next 2 years when I will have a low cash balance due to multiple major financial commitments on housing, renovation and car.

I have been resistant for the longest time to using any form of leverage to boost my investments. I found it risky and was not comfortable with the way margin calls can blow up my investment portfolio. Potentially undoing years of financial hard work that laid the foundation of my family’s well-being. However, as I observe the way my fellow bloggers have been using leverage to invest, it does seem possible to deploy it in a disciplined and structured manner. I have yet to apply for the secured wealth lending facility with Stan Chart Bank at this time because I have not figured out its place in my investment portfolio and how to use it in a way that complements my current investing strategy. Or should I just get the facility, start using leverage and figure it out as I go?

Updated StocksCafe Portfolio and higher dividend income for 2021

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Happy National Day everyone and I hope you enjoyed the long weekend! The weather has been great so we went to Gardens by the Bay, East Coast Park and swimming pools over the past few days. It’s nice having a public holiday on a Mon because you get a longer rest over the weekend and a shorter work week ahead. If you haven’t noticed the better mood I’m in, it’s also because of the fantastic news that Singapore will start relaxing its Covid restrictions from Tues 10 Aug onwards for the vaccinated.

2 weeks plus ago when Singapore announced we were all going back to Phase 2A (Heightened Alert), it hit me like a ton of bricks. Even when I was feeling down, I had the presence of mind to bring forward the 2nd vaccine jabs for my wife, helper and I. So we can start the 2 week countdown then in the hope that there may be a positive announcement during the National Day long weekend. Given the high level of daily cases, I wasn’t expecting this to happen and was mentally preparing myself for the stay at home grind to last until late Aug. Regardless, we can finally start going out to dine and gather again with our vaccinated family and friends from tomorrow!

In fact, we may be able to start going back to the office to work for a few days each week from next week onwards. I have missed the interactions with my colleagues and it has been difficult working from home. Feels like I’m alone doing my own thing with no idea what’s happening to my wider team and no sense of connection to anyone else. My view is that corporate work is just not meant to be done full-time from home. It needs some level of engagement with colleagues in the office to make it bearable. This has come at a good time for my wife as she starts her new job in another division next month and it’s important she gets the face time in the office. To be more engaged with her team and stakeholders.

I’m cautiously optimistic that things are looking up but I don’t want to get my hopes up. Just be happy with Singapore taking steps forward instead of backwards when it comes to Covid restrictions. Anyway, my better mood translated into finally working on something I have been procrastinating for the longest time. My StocksCafe portfolio has not been updated for several months now. I stopped out of laziness, general sense of frustration and didn’t see the point of doing so anymore. Well, this has changed. After exiting our DBS DigiPortfolio and OCBC RoboInvest investments, we are only left with StashAway as our robo-advisor account. And they recently re-optimized their investment portfolios i.e. changed the mix and proportion of ETFs in them.

With all the manual investments I have been making on our Stan Chart online equity trading accounts slowly come to a stop as markets rebound, I felt it’s a good time to enter all of these transactions on StocksCafe at one time. Bring it up to speed as a reflection of our total investments. While my son was taking his afternoon nap, my wife was catching up on her TV series and my helper was having her lunch, I sat down for 2 hours at my dining table (also doubles up as my work from home office desk) and updated my StocksCafe portfolio. I was happy to notice these 2 things at the end of the exercise.

Firstly, our total investment portfolio is still above S$1m and it may stay this way after I complete the downpayment of the private property purchase the month after next. This would act as our financial buffer while I rebuild the cash balance from savings using our salary income. I may take this opportunity to continue investing monthly and keep a much lower cash balance compared to before. I’m changing my investing approach to a more aggressive one as my my previous high cash balance strategy was too conservative and it only paid off because of the Covid V-shaped crash and recovery.

Secondly, our expected dividend income for 2021 is looking to be much higher than our dividend income received for 2020. Singapore has lifted the regulatory caps on the local banks’ dividends and they have resumed their higher dividend payouts. Other Singapore companies are slowly recovering from the Covid crisis and their dividends are gradually increasing too. The same thing is happening at a global level so dividends from our overseas ETFs and stocks are going up as well.

With the passive income and gains from my dividend stocks & ETFs, it has given me flexibility to take larger positions in growth stocks & ETFs and cryptos. I’m still in an overall gain from the latter despite the recent big hit to Chinese technology stocks & ETF. Not forgetting that the recovery in the cryptos market helped to offset this. I’m still working out the right mix of exposures in our investment portfolio because different sectors can be useful hedges against each other depending on the economic conditions.

Anyway, I’m hoping the recovery in banks’ profits this year will translate into better salary increases and bonuses next year after our performance reviews. They were bad last year but we stuck with our banks and it would be nice to be rewarded. I don’t think I will be changing jobs since my wife just changed her job again after getting a new role from the restructuring. Good to give her some stability at home and financially so she can focus on her new job. I’m looking forward to the gradual re-opening of economies and borders as all of us find a way to navigate out of the Covid hole and move forward!

Averaging down on stocks and cryptos

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It’s frustrating but Singapore is returning to Phase 2 (Heightened Alert). We managed to squeeze in a few dining-in gatherings over the last week and a half so we did get to catch up with some friends. But it’s a disappointing turn of events to lose that so quickly after just opening up not long ago. I’m not happy about this and we are trying to come to terms with it. Since we can’t go out much for social interaction and gym exercise anyway, we decided to bring forward our 2nd vaccine jab earlier to later this week for my wife & I, and early next week for my helper. Might as well use this time to wait it out at home for the 2 weeks after the 2nd vaccine jab to pass so we can be considered fully vaccinated.

Not surprisingly, the Singapore stock market fell on Mon and will probably continue to do so the rest of this week. The same applies to stock markets globally that are also falling as countries struggle to cope with the Delta variant. I have only been selectively averaging down on some of our Singapore stocks, Chinese tech stocks & ETFs that have dropped more significantly. Though the latter is due to the increased regulatory scrutiny and restrictions by the China government. With my limited cash, I can average down probably up to the point of this market dip becoming a correction. If it becomes a market crash, I will probably run out of cash by then. But only at this point will I start to explore the possibility of opening a margin facility to take on secured loans (by pledging collateral such as stocks) for the purpose of purchasing shares.

As for cryptos, I would say the market correction is becoming a crash and I have been averaging down on my crypto positions. I don’t have enough cash to make big purchases but neither do I have enough conviction to do so. While I still believe in the future of cryptos, this doesn’t translate into me investing large sums of money into it. There still has to be some level of position sizing in accordance with the proportion of each asset class in our investment portfolio. I’m managing it for my family and I can’t afford to take on too much risk for the sake of generating returns. But cryptos are too important to be ignored and I can’t afford to be too risk averse and not generate sufficient returns.