Hedging With 3 Different Investment Strategies

 

As I have written in an earlier post, by the time you “realise” you can or cannot beat the market, it could be too late.

Therefore, my preference is to adopt various approaches and I have somewhat settled on 3 for 2017 and hopefully, all of them will work out well beyond 2017.


1. 15HWW Permanent Portfolio

This has been in place since 1 Jan 2017 and I will reveal what it’s exactly made up of in the next post.

But basically, this will be quite a passive and relatively stress-free way of investing. Buying into broad instruments and rebalancing when a certain threshold is being breached so that the concept of “buy low and sell high” is maintained.

Target: 5% annual returns

Most backtests of such permanent portfolios show returns >6% but I will be much more conservative and with the strong likelihood of a much lower volatility than the other two strategies, I will be satisfied with 5%. Hopefully it isn’t too difficult as the cash already returns 2% in interest and the bonds another 3% in coupons.

2. Personal Picks

As outlined on this page.

I know I mentioned about a year ago that I would probably stop picking stocks since it was getting increasingly stressful with a higher capital base. But that didn’t actually stop me from buying shares of HK Land, DBS Bank and Singpost in 2016, just to mention a few companies.

I am beginning to get a better grip of myself and I do enjoy the thrill of picking some stocks from time to time.  As long as I maintain the quantum to $10,000-$20,000 for each stock, the benefits do seem to outweigh the cons.

Target: 8% XIRR returns 

Since XIRR does not account for the cash drag, I believe this strategy needs to outperform the permanent portfolio by at least 3% to make it worthwhile in the long run.

And as there is a strong focus towards companies that pay out dividends, the yield of the portfolio should be at least around 4% which should already help to cover at least half of the required returns.

3. BFP Picks

In September 2016, I decided to subscribe to Big Fat Purse’s database and I have since been attempting to mirror their portfolio.

Basically, my aim is just to execute and buy their picks at a similar price. It has not been wholly successful as I realise that because of liquidity issues and “anchoring bias”, I tend to procrastinate when I am unable to buy at the same or lower price. Thus, I have missed out on a few stocks which have ran up.

Hopefully, with more time, I would be able to replicate their portfolio better.

Target: 10% XIRR returns 

The returns would include currency appreciation and deprecation since the portfolio does contain overseas stocks.

And because of the higher fees involved and of course, the subscription fee, I would expect a 2% outperformance as compared to my personal picks. I am pretty sure the folks at BFP will not find my expectation too unrealistic.


So from now on, the monthly update will cover all three of these portfolios and let’s see if the targets can be met. =p

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2 thoughts on “Hedging With 3 Different Investment Strategies

  1. SM

    Hello 15HWW, looking forward to your sharing of the permanent portfolio. I am thinking of going into investment tool which provide stable albeit lower returns myself too. I was recommended ETF and is curious on what other tools are there. 🙂 btw, there are many investment website/courses out there, what made you chose to subscribe to Big Fat Purse?

    1. My 15 HWW Post author

      Hi SM,

      Firstly, Big Fat Purse do not promise unrealistic sky-high returns. Furthermore, I have taken a look at their returns from their stock selections and they have outperformed the index a fair bit. Moreover, the fees I managed to negotiate for subscription was rather reasonable.

      I hope the above is an adequate answer for you.