Finance Smiths

Personal finance apprentices-in-training

What I did and felt during the crypto crash

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It has been an intense 48 hours! If you haven’t heard by now, the crypto market started falling before accelerating into a crash. Crypto prices collapsed before recovering some of their losses. It’s the first time I have gone through such a high level of volatility with my investments. I mean, my US and China tech stocks prices can move quite a bit compared to my SG and overseas stocks & ETFs. But wow, definitely not to this extent!

I allocate about 5% of my investment portfolio to cryptos so I treat the S$35k value as a single position even though I’m almost entirely invested in Bitcoin, Ethereum and Binance Coin. The crypto losses are not as bad when I zoom out and compare it to the rest of my investment portfolio. Anyway, I was also averaging down on them as crypto prices were crashing so the rebound helped to offset some of the losses.

As the crypto prices were collapsing, I was shocked by how quickly the value of my investment position was falling. I hadn’t worked out my strategy in a crypto crash because it was my first time going through one. It was a good thing I didn’t have a big position as I learnt how to navigate my first crypto crash. I tried averaging down but because the crypto prices were falling fast, I had to keep buying in with smaller amounts at a time.

It’s different from stocks and ETFs during a market crash when I average down less frequently but with larger amounts at a time. And because the crypto market is open 24/7, you have no idea what’s going to happen when you go to sleep and wake up in the morning. At least the stock market closes after a certain time in the day and it acts as a circuit breaker. Essentially, you get to stop, breathe, think and come up with a better investment strategy the next day.

Whereas in the crypto market, the madness can just keep going and it becomes very difficult to manage your emotions to come up with a viable investment strategy. In this case, I just averaged down until I ran low on cash funds in my crypto account. That was my circuit breaker and I knew it was time to go to sleep and hope for a rebound to stem my crypto losses. When I woke up in the morning, my crypto portfolio had recovered some of its losses but is still down.

As I write this, crypto prices are starting to fall again so I may have to go through the same experience more than once. While I do have investment cash on standby, it’s running low because I used some of it to invest in US and China tech stocks during the recent dip. And I don’t want to over-allocate cash funds to my crypto portfolio because I’m still a newbie at it. It takes time to rebuild my investment cash and learn how to better manage my crypto portfolio.

Running my investment cash down to buy tech stocks

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Looks like it’s back to work from home in the next few weeks for me. I was supposed to be working in the office this week but requested to work from home instead due to the deteriorating Covid situation. Besides, I have been getting tired from working in the office every alternate week so it’s nice to switch back to working from home. I can get more time with my family, run errands and rest & exercise by myself. Without having to worry about transport time and dealing with the office environment. While it’s good for me to stay engaged at my job and catch up with my manager & colleagues in the office, I don’t need to be in the office every day of the week to do so.

I hope the Covid situation improves during this period of time because the step back in terms of restrictions is bad. It seems like we are going backwards in terms of moving forward, which is a sign that the Covid situation can easily escalate once we let our guard down. While it’s not a lockdown yet, there is already going to be some negative impact from the tighter Covid restrictions. Delays in our boy starting childcare, going out less as a family so he’s going to be stuck at home or my parents-in-law’s place for longer, etc. Given how active he is now, I’m sure this does not bode well for our work productivity. Let’s just hope we don’t go into lockdown.

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Anyway, there has been another recent dip in tech stocks and this sell-off seems to be more significant. Mainly due to fears that rising inflation could push the Federal Reserve to tighten monetary policy faster than expected. I don’t care much for the reason why and just saw it as an opportunity to add to my tech stocks position. I noticed that I was averaging down more this time round as some of the tech stocks fell by quite a bit. I was also transferring funds into my OCBC RoboInvest tech-based thematic portfolios. In fact, I even started adding to my Singapore stocks position after the market took a hit on Fri due to the announcement of the tighter Covid restrictions.

Together with my automated monthly dollar cost averaging drawdowns, I actually ran my investment cash balance down to a low level and had to top it up with my savings cash. This is in line with my strategy of lowering the cash proportion of my asset portfolio and it just dropped from 20% to 18% after the investments. I used to prefer to hold a large amount of cash and wait for opportunities to invest in the markets. But I have slowly come to accept that this may not work well for us going forward. As long as we can maintain our jobs, our monthly salaries should continue to top up our cash balance and keep a sufficient buffer for our spending needs and emergencies. Idle cash has too much opportunity costs attached to it now.

End Apr 2021 Net Worth Update

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I updated the net worth figures and portfolio positions on our Google Sheet and blog pages. The numbers are ok as an increase in our Singapore equities portfolio is offset by a decrease in our Overseas equities portfolio. I continued with my monthly Dollar-Cost Averaging (DCA) into the robo advisors portfolios and added some new positions to my US equities and crypto portfolios. Resulting in an overall rise in the value of our investment portfolio and its proportion is reaching 50% of our total assets.

It’s obvious that we are using more of our cash to invest now as its proportion has dropped to 20% of our total assets. My CPF balances had a boost due to the additional CPF contribution from my bonus whereby the cash amount was credited in Mar and the CPF amount is credited the following month in Apr. Its proportion has increased slightly to 25% of our total assets. The remaining 5% is made up of the cash value of our whole life insurance policies and is rather stable.

When the sale of our 2 bedroom apartment is completed this month in May, I expect an increase in the proportion of our cash position and CPF balances. Contributing to an overall increase in total assets and net worth due to the mortgage being paid off. The double payment of rent expense and housing loan instalment will stop after that, easing the cashflow drain so we can better manage the childcare expense that will start in the same month.

Anyway, I was reading a news article about how couples at various life stages and income levels are struggling to enter the current property market because it’s running hot. This has impacted their lives by delaying wedding plans, moving out to a place to live together and starting a family. A buoyant property market causes the people that can least afford it to suffer while benefiting the people that can most afford it. It’s even worse if the parents step in financially to help because their retirement funds are now directed into the children’s property purchase instead of their own enjoyment. Delays in construction works have also worsened the housing supply and demand problem causing the property prices to rise. There’s no easy solution to this as Covid-19 continues to cause manpower shortages.

It’s difficult to break this vicious cycle in the property market unless the Government steps in with cooling measures to do something about it. They need to stop the current low interest rate and loose monetary policies environment from squeezing people out of the property market or saddling them with high household debt due to taking on a large mortgage. My family is financially fortunate enough to be able to rent a big enough apartment in an area we want to live in while we find a way to navigate this tough property market. Even then, it’s sad to hear about the struggles of first-time homebuyers and I hope the situation improves for them.