Finance Smiths

Personal finance apprentices-in-training

Using the Nasdaq correction to build up our technology stocks position

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I have been patiently waiting for a Nasdaq correction since the start of this year 2021 to build up our technology stocks position. As the Nasdaq stock market dip became more significant over the last 2 weeks, we have been gradually investing into US technology stocks and ETFs such as:

  • Sea Ltd
  • Nio Inc
  • Palantir Technologies
  • Unity Software
  • PayPal
  • Invesco QQQ ETF
  • Ark Innovation ETF
  • Ark Fintech Innovation ETF

We also transferred cash into our OCBC RoboInvest portfolios that have technology based ETFs for investment. As of today, the size of this technology stocks position is about S$50,000. We maintain a large cash balance to invest during such stock market dips but there is no need to rush into building up our technology stocks position quickly.

After all, their prices could continue to fall further and we can use up more of our cash to invest then. If the technology stocks rebound from here, then we would have a sizeable position in play to benefit from the future growth of these companies. The key with investing is not to rush but to take our time to capitalise on any opportunities that surface.

We don’t plan to use any margin facility as we don’t do leveraged investing. It’s a strict rule that we follow and we maintain a large cash balance for this reason. The upside reward just doesn’t justify the downside risk to us. As salaried employees, our monthly income ensures that we have cash for investment. And we stick to only investing the cash balance we have built up. Not with cash that we don’t have. While a salary is regular and good to have, it’s not as easy to scale up without putting in much more time and effort at work at your job.

As we get older, it becomes easier to lose our jobs so the salary may not be as replaceable as we think. Which means that having the residual risk (no matter how small after all the risk management you can do) of your margin portfolio being wiped out by black swan events (difficult to predict their occurrence by nature) presents a much bigger danger to our financial position. Simply because we may not be able to generate enough income going forward to replace the lost investment portfolio value.

It’s interesting because we already had this line of thinking before having a kid. But it was only after our son was born that we realised how important financial risk management is to the family. We can deal better with smaller gains than bigger losses. The more dependents you have, the tougher it is to be objective and risk-taking when it comes to investing. Anyway, our recent technology stocks investing activities have thrown off our asset allocations. We are now weighted more heavily towards our investment portfolio with a smaller proportion of cash. Just something for us to take note of and monitor.

Bought the dip on SG & tech stocks and cryptos

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Late last week and earlier this week, there was a dip in the stock and crypto markets. Some of the SG stocks on my watchlist such as Sembcorp Industries, Singtel, CapitaLand, Dairy Farm and ComfortDelGro fell and I picked them up. Likewise for the US stocks and US ETFs on my watchlist such as Palantir Technologies & Unity Software, Invesco QQQ, Ark Innovation and Ark Fintech Innovation. I also transferred some funds into my OCBC RoboInvest portfolio. My cryptos portfolio is spread out across several types (Bitcoin, Ethereum, Binance Coin, Ziliqa, Stellar Lumens, etc) so I bought small amounts of each.

All in, I invested about S$15,000 to buy this dip in the stock markets. It’s not much because the dip is not significant and just an opportunity to use up my idle cash to build up my investment positions. Plus I don’t see a need for me to get too aggressive on minor dips. There has been a slight rebound since so I have just gone back to waiting on the sidelines. And letting my weekly automated Dollar-Cost Averaging do the regular investing work for me. Anyway, with my bigger investment portfolio, the dividends I’m receiving these few months should be higher than the same time last year. I’m hoping for a more sustained economic recovery so that 2021 can be a better year financially and work-wise than 2020.

2021 goal for cash position

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I set up my OCBC RoboInvest Future World Portfolio last week with the minimum investment amount of US$1,000. I’m going to hold off on setting up the OCBC RoboInvest Gen-Z Winners and China Growth Portfolios until next month just to spread out my investments more over time. Just because I had already met my monthly Dollar-Cost Averaging (DCA) investment amount target for OCBC RoboInvest this month just by setting up the Future World Portfolio.

The user interface is simple and the top-up (additional investment with minimum amount of US$100) process seems straightforward. I noticed that OCBC RoboInvest allows for fractional ownership of the units in the ETFs the Future World Portfolio is invested in. This is important for a DCA investing strategy since it allows for a low minimum top-up amount of US$100 while ensuring it can be used to buy fractional units across all the ETFs in the portfolio if necessary. Fractional ownership is something I cannot achieve myself if I had invested in these ETFs manually via the online trading platform I use. And I would have to commit a bigger capital outflow each time I made an investment.

Anyway, back to my goal setting for 2021. I have already written about my 2021 goal for our investment portfolio, which includes ETFs, individual stocks, bonds, robo-advisors and cryptos. Next up for this post, I’m writing about my 2021 goal for cash. As of end Dec 2020, our cash position is S$480,000. It was much higher at the start of 2020 and went down significantly due to an aggressive capital deployment strategy to invest in the bear market and subsequent recovery. I don’t foresee us investing as aggressively this year unless there’s a market crash. But we would still be investing more than compared to previous years as we look to increase the returns from our investment portfolio.

I would be setting another stretch 2021 goal for our cash position to grow it by S$70,000 to S$550,000 by end Dec 2021. This would require a high savings rate along with the high investing rate. Difficult to achieve when our salary income is fixed every month and the household spending is going up with the upcoming rent and childcare expenses. I may receive a small salary increase and annual performance bonus in Mar as well as higher investment income this year. But I’m not sure how much this will help so we just have to keep trying.