Happy Chinese New Year to all readers! 恭喜发财，阖家幸福！
In the spirit of Chinese New Year, I figured let’s talk about something wealth related.
I received this really interesting question from a reader.
As always – I have tweaked some details for privacy reasons, so any approximation to someone you know is purely coincidental.
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Dear FH,
I feel like while I have been investing for some years now, I still lack a clear strategy/framework.
And while I have had some successes along the way, I have also had major losses, and I am not even sure whether I have been profiting that much from a net basis.
Some details about myself:
-40 years old
-Annual income (after taxes, including bonuses): ~$400K/year (relatively stable job)
-Wife works (salary ~$100k/year)
-2 young kids
-HDB flat (market value 1.2million, remaining mortgage 400k)
-My goal: take a balanced approach to grow my portfolio. I think I can afford to take some risk since I have some years to retirement, but obviously I have to be careful that I cannot go “all in” because I have two young kids. Also, it is possible that in the medium term, say 2 or 3 years time, I may upgrade from my current HDB flat to a condominium (say of around ~$3million), so I have to cater some financial resources for that expense too.
My current portfolio (approximate numbers):
-Cash: $650K
-CPF: OA $70K; SA $210K; MA $71K
-Singapore Saving Bonds: $200K (~3.15%/annum)
-Equities: Current market value around $670K, roughly broken down as follows:
$180K Singapore stocks (DBS, Keppel etc)
$44K US Stocks
$81K China Stocks
$23K Precious metals
$90K commodities
$220K SReit
General questions:
1. In terms of overall strategy/portfolio allocation, what do you think is not ideal or optimal about my current allocation? What areas of improvement should I look at?
2. In terms of specific stocks, I have a few (e.g. AEM, Teladoc) that are down severely by 60-90%. It is my fault for not cutting losses early. But now that I am in this situation, do you recommend that I cut my losses, or just wait it out (for a “miracle”) since it has fallen so much already anyway.
I should maybe add that in terms of objectives, I have been trying to achieve two dual objectives of
(a) constructing a decent dividend portfolio, with the eventual target of $100k/year by say year 2030 (as a hedge against the possibility that I want to do a career pivot 5 or 6 years down the road which could mean taking a temporary income hit),
(b) capital appreciation for retirement nest egg.
But I am not sure whether it even makes sense to try to do both (a) and (b), or whether they are in fact at tension with each other, and i should just prioritize one or the other.
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Track your investment returns – This was a gamechanger for me
Before I actually go into the “meat” of the article.
The comment that “I am not even sure whether I have been profiting that much from a net basis”.
Really jumped out at me.
I don’t know how to put this… but guys… this is 2025.
You absolutely need… to track your investment returns.
Tracking investment returns is like keeping score in a football game.
It should just be a given.
If you don’t even track the score, how would you know if you are winning or losing?
I don’t want to belabour the point – but long and short is that you need to track investment returns.
Currently I’m using Stocks Café to do this, and you can see my review here (screenshot below is an example of how it would look like).
It’s easy and cheap enough to start that you really should if you haven’t started.
If you want something free – Google Finance (or Excel) is perfectly fine as well (but more work as you would have to manually track dividends).
What are my general views on asset allocation?
But coming back to the question.
Broadly speaking, the reader’s net worth is broadly split up as follows:
| Asset Class | Amount (SGD) | Percentage |
| Real Estate | 800,000 | 32.4% |
| Cash | 650,000 | 26.3% |
| Stocks | 670,000 | 27.1% |
| CPF | 350,000 | 14.2% |
| Total | 2,470,000 | 100% |
The point that jumps out of course, is for a family with $500,000 a year salary.
I would have expected significantly higher cash / stocks / real estate positions.
That said there could be a lot of reasons for this – in that the income may only have reached this level recently, or that expenses may have been high before this.
I don’t see this as a problem in any case, since the goal is to focus on wealth building starting from today.
What is the investment objective – and how realistic is this?
The stated investment objective is:
(a) constructing a decent dividend portfolio, with the eventual target of $100k/year by say year 2030 (as a hedge against the possibility that I want to do a career pivot 5 or 6 years down the road which could mean taking a temporary income hit),
(b) capital appreciation for retirement nest egg.
How realistic is this?
Assuming a 5% dividend yield, a $100,000 dividend per year requires approximately a $2 million portfolio to be on the safe side.
So that’s quite a bit to go, given the current stock portfolio is about $700,000.
Yes, there is another $800,000 in cash / Singapore Savings Bonds that can be invested.
Which if fully invested, brings the portfolio up to $1.5 million.
What is the risk appetite of the investor?
That said – risk appetite does not look to be very high because of 2 young kids, and potential plans to upgrade to condo in 2 – 3 years.
So it may not make sense to go “all-in” as you do still want to keep some cash on hand.
I suppose if realistically, they manage to keep up the $500,000 salary and save $300,000 a year (which leaves a generous $200,000 for expenses a year).
In 5 years’ time they would save $1.5 million – which combined with the current stock portfolio amounts to a $2 million dollar portfolio purely from income / savings alone (and even before factoring in any investment returns).
If you look at it this way, then the goal is achievable purely based on job income, and then the investment returns are purely a bonus.
So all of this needs to factor in when deciding what is the risk level of risk to run.
General views on asset allocation? What would I do in this scenario?
That said, it’s easy to be an armchair critic and all.
But if I were in a similar situation – would I run a fundamentally different asset allocation from the below?
And you know what? – Maybe not.
You could nitpick and say that the cash / Singapore Savings Bonds allocation is too big, and that more money should go into risk assets.
But big picture wise.
If you’re already on track to hit your financial goals purely on the basis of job income.
And with 2 young kids and thoughts about upgrading to a condo in the near future.
I would actually say the focus should be on maintaining the income, and not taking on excessive risk exposure with the investment portfolio.
Ie. Preserve the income at all costs, and play defensive with the investment portfolio.
But hey – that might just be me being conservative, and personality does factor in as well.
If you’re the kind that can function in a 9 to 5 at tip top condition, and come back and invest aggressively and not lose sleep if you’re down 20% on a $2 million dollar portfolio.
Of course that would call for a different (more aggressive) portfolio.
What about the asset allocation within stocks?
Within the $650,000 in stocks, this is what the asset allocation looks like:
| Asset Category | Amount (SGD) | Percentage |
| SREITs | $220K | 34.5% |
| Singapore Stocks | $180K | 28.2% |
| Commodities | $90K | 14.1% |
| China Stocks | $81K | 12.7% |
| US Stocks | $44K | 6.9% |
| Precious Metals | $23K | 3.6% |
| Total | $638K | 100% |
And yes okay, I know that this is me being armchair critic and nitpicking.
But I think if it were me, and given the goal to build wealth and then transition into a dividend portfolio in 5 to 6 years.
I think there is too much emphasis on REITs and Singapore Stocks in this portfolio.
I personally would probably shift a larger allocation into US stocks for higher capital gains potential.
Are US stocks too risky today?
The drawback of course, is that US stocks are very, very expensive today.
You can see how the S&P500 has gone on a monster of a rally:
While the P/E for the S&P500 is at record highs – nearing the highs last hit during the 2000 dot com bubble.
Investors are caught between a rock and a hard place
So what’s an investor to do in times like that?
Buy US stocks are record high valuations, and hope they go even higher?
Or buy non-US assets and run the risk of lower returns?
To be absolutely fair – if you look around the world every other country has their own problems too.
I wrote a lengthy article for FH Premium subscribers on this this week, so do sign up if you are keen.
The gist is that:
Europe is stuck in structural stagnation, and I don’t see that changing any time soon given the way their political systems (and leaders) are set up.
China is still in a deflationary spiral (for now), and yes I have my views on whether that will change going forward, but until there are concrete signs of meaningful stimulus, you want to be careful with position sizing.
Singapore stocks meanwhile – yes the banks had a monster of a run in 2024 up 40% excluding dividends.
But at current valuations, can Singapore bank stocks still go on another 40% move up from here?
I mean it’s not impossible (which is why I have exposure), but you also want to think about the probability of that happening.
And REITs.
Had Harris won I probably would have had a very different view on REITs.
But with Trump winning, the next few years make me nervous about inflation and where long-term interest rates may be headed.
And of course – higher long-term interest rates are not good for REITs.
Whatever the case, with REITs it’s fairly clear that this is not the 2010s regime of low inflation / low interest rates anymore – which removes a huge structural tailwind for REITs.
Some exposure is okay as a yield play.
But I would say the goal with REITs is more for yield, and less so for aggressive wealth building / capital gains. I personally would think of them more as bonds than equities.
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What are my general views on the stock picks – dividends or capital gains?
The reader did also send me a list of stocks with his rough risk exposure.
Generally speaking I extracted the Top 10 names below to give some flavour of the exposure.
I don’t want to comment too much on single stocks otherwise it may come across as financial advice.
You can refer to the FH Stock / REIT watchlist for the single name counters that I am keen to add.
| Name | Percentage |
| INVSC DB COMMODITY INDEX TRACKNG ETF | 9.82% |
| DBS | 7.94% |
| Keppel | 6.88% |
| StarhillGbl Reit | 6.76% |
| ISHARES BITCOIN ETF | 6.27% |
| Mapletree PanAsia Com Tr | 6.03% |
| CapLand Ascendas REIT | 5.39% |
| SIA | 5.22% |
| EXXON MOBIL ORD | 5.10% |
| Keppel DC Reit | 4.37% |
Is the investment portfolio too concentrated?
I would add that the Top 10 names make up 63% of the portfolio, which is decent.
Generally speaking you want the number to be between 50 – 70% of your portfolio.
More aggressive investors will want a higher concentration, more defensive investors will want a more diversified portfolio.
Really depends on what you want.
When to cut losses when you are down on an investment?
The final question is on cutting losses:
2. In terms of specific stocks, I have a few (e.g. AEM, Teladoc) that are down severely by 60-90%. It is my fault for not cutting losses early. But now that I am in this situation, do you recommend that I cut my losses, or just wait it out (for a “miracle”) since it has fallen so much already anyway.
Most of the time when readers come to me with a question like that, I suspect they already know the answer, they just want confirmation.
And my answer is always the same.
Holding onto a stock that goes down by 60-90% is unforgivable, and frankly just poor risk management.
If your fundamental thesis on a stock is wrong, you should have sold the stock when you realised you were wrong.
If your fundamental thesis on a stock is right, and yet price is down by 20% or more from your buy in price (or whatever your stop loss level is), you probably should have sold the position from a risk management perspective anyway – while you reevaluated your decision making.
But now that you’re already holding onto a loss position – what next?
A big mistake many investors make is to be overly fixated on the price they bought a stock.
To me that is an absolutely meaningless number.
I would say completely ignore your buy in price.
If you bought at stock at $100 – just forget about that.
Look at the stock at its current price today – say $10.
And ask yourself – would you still buy the stock today?
If answer is yes, then it is clear what you should do.
If answer is no, then why are you still holding onto it.
How I see it?
The way I see it, the moment I buy a stock I forget about the buy in price.
The stock at which I “bought” the stock, is the current market price.
Any time I am not happy, I can get out at today’s price.
Any time I think current price is too cheap, I can add more.
Closing Thoughts: What would I do in this position?
Coming back to the question.
Big picture wise, I can completely understand the train of thought for this investor.
With this kind of income and salary, most of the financial goals will be achieved simply through the passage of time alone – via income and savings.
So what to do with the investment portfolio becomes a personal choice.
If you are very aggressive about wealth building – you would run an aggressive portfolio and try to get even richer.
If you are more conservative by nature – you would run a more defensive portfolio, because hey even if the investment returns are 3% (which you get via T-Bills), you already achieve your financial goals simply via income and savings.
There’s frankly no right or wrong here.
If this were me?
I think I largely run the same asset allocation, but I would up the exposure to US stocks.
And I would invest the new disposable income, while still keeping a meaningful cash buffer.
But I would love to hear what you guys think.
What would you do differently in this position?
This post is written on 31 Jan 2025 and will not be updated going forward. My latest views on markets, my Stock watchlist and full Personal Portfolio, are shared on FH Premium.
I’m not sure but I just can’t relate with this type of financial position that he is in. I would say that earning almost half a million yearly is definitely not what most people can relate to.
Hard True sia….
Exactly!
That’s true for most of us. But quite a few young professionals are now in this type situation, many unencumbered by the need to support a family.
Hahaha, always helpful to understand different perspectives? I’ll try to do another with a lower level of income too.
S$400K p.a. with a S$1.5 million portfolio is obviously a good place to be. I think the allocations described above are too complicated (that’s just what I think). My own strategy would probably firstly involve maxing out my CPF and SRS, and conservatively investing (the investible part of) that in index funds, bank shares, REITs, ETFs and T-bills. Assuming this lucky person still has about S$300K left over (after income tax), say S$200K of that is going to go on living expenses for them and their family, that would give say S$100K p.a. to be invested. I’d split that 50:50 between Singapore and the US market.
For my Singapore investments, I’d allocate say 10% to building up a safety fund into Singapore Savings Bonds (S$10K pa until I hit the current S$200K max), and invest the rest in banks and REITs or into the STI ETFs. For the US market I’d split into 3 or 4 well-chosen ETFs plus a small amount into one of the gold ETFs. I’d also re-balance every 3 or 4 months.
With this type of simple strategy (and adjusting the amount invested along with inflation) it should be easily possible to achieve financial independence by the age of 55.
That’s interesting, appreciate the sharinv very much.
Not an expert but I agree that his income, savings and family situation would call for defensive investing. I would consider dollar cost averaging into the world index ETF and S&P500 or buying the dip if savvy. Also I would also allocate more into tech.. too much commodities and REITS I feel.
Fair enough. Ultimately does go back to investor risk appetite + how savvy.
With everything so expensive now but still possible to go up higher, safest is to buy on dips and have an automatic trailing stop loss to track rise in prices but automatically sell when start to drop.
Also, good to buy things that already going up and will go up more when things finally crash – e.g. Gold, US Treasuries of longer holding period that have high interest rate worth holding till end of term (and have the added bonus that may go up in value when economy tanks and Fed finally cuts interest rates)
Thanks – appreciate the sharing!