Tuesday, September 18, 2012
3 months from June low... Markets are up again!
In early June there was an opportunity to invest into the markets as markets looked bleak with eminent downside risks. This was an exact replication in April 2012 when markets have moved up swifty, with STI surpassing the 3,000 mark in April, before correcting to 2700 levels in June.
Fast forward 3 months later, markets are again in euphoria and STI has rallied 12% (before dividends).
If you look at fundsupermart GM’s portfolio, it has rallied about 10%( with dividends likely to be reinvested at the discretion of individual fund managers).
Do not belittle the dividends from stocks over the 3 months period as many blue chips firm paid the dividends for FY 2011 in July and August. For my humble low 6 figure portfolio, I got a couple of thousand dollars worth of dividends.
I took profit on my entire CPF OA equity unit trust portfolio on Friday, keeping my (cash) stocks portfolio largely intact as I am uncertain if markets would rally further. Unlike equity funds which are largely directional, some of my stocks holdings did not rally much over the past 3 months (eg SPH) or have not reached my target sell price (eg OUE).
Interestingly, as I am blogging, OUE is up 10% today as there are talks of possible asset sale. It is currently trading below book value and there is possible upside if the asset sale goes through. Read today’s AM Fraser report for more insight.
The markets are largely ranged bound since 2011. It seems that technical analysts would have a better return over the past 2 years compared to investors buying and holding for the longer term. My strategy is still to hold a core portfolio (at least 50%) in dividend yielding counters and purchase when markets correct 10% from my last profit taking levels. For instance, I took profit when STI was above 3000 points. If it goes near to 2700 or maybe even 2800 depending on the reasons for correction, I will enter the market. If markets continue to rally to 3300 from current levels, I may enter the market when it falls to 3000 points again depending on reasons for correction. This would ensure my funds are always invested when investors flee the markets and give higher potential upside from entry levels.
However, I do hold directional unit trust funds (which are so much easier to invest without emotions) and individual stocks which I try to control my excitement of watching them going various directions without being overly participative in premature trade executions.
My investment journey at large has been positive mainly because of dividend returns and a conservative mindset. I am happy with 6% P.A returns for my overall portfolio, anything extra is a bonus.
I believe yield counters will be favoured by fund managers (it is already happening) and with low interest rates for next 3 years, dividend returns will outshine stock appreciation yields over longer investment horizons.