I was asked to do a “Where would I invest $100,000 today” post recently.
You know how you look at prices going up every day and it doesn’t register.
Then one day you look at the prices and it suddenly hits you how expensive everything is?
Yeah… exactly how I felt researching for this article.
Across the board, prices have gone up significantly in 2021, making it a very tough time for investors today.
Damned if you do…
If you don’t invest, prices may keep going up and you’re losing purchasing power to inflation.
If you invest, the market is at record highs, and there’s a real possibility of correction in the coming months.
What’s an investor to do in times like that?
How to invest $100k in Singapore right now? (2021)
Which is exactly the point of an exercise like this.
It forces you to look at market prices as they are today, and decide based on today’s prices, where does relative value lie?
DBS at $20 is a screaming buy and everybody knows that, but what about DBS at $30?
Rules for “How to invest $100k”?
A couple of ground rules for this exercise:
- 9 Counters Max – A lot of you have asked to keep the portfolio simple and easy to execute. So 9 counters maximum.
- Time period – 3 to 5 year investing horizon.
- No active investment – Active investment is a bonus, not a feature. The main protections should come from asset allocation, not from timing the market.
How to invest $100k in Singapore right now? Where would I invest my money? (2021)
Asset Allocation ($100k)
This was the allocation I came up with:
- Singapore – $30,000
- Ascendas REIT – $15,000
- CICT – $15,000
- China – $30,000
- Tencent – $12,500
- Alibaba – $7,500
- Meituan – $10,000
- US – $25,000
- S&P500 – S$10,000
- NASDAQ – $15,000
- Commodities – $10,000
- XLE – $10,000
- Ethereum – $5000
In Chart form:
Singapore – $30,000
For more Singapore investors, the options available for the Singapore stock market are:
- DBS, UOB, OCBC
- A few Temasek Cos like ST Engineering and SIA
You get what I mean right? 😉
Banks are looking pretty fairly valued right now. They’re an okay buy, but DBS at $30 isn’t exactly screaming value to me.
The Temasek Cos are pretty hit miss. Some names like ST Engineering I do like, but some others like Singtel or SIA will depend a bit more on company execution and macro outlook. So there’s a bit of a risk there.
But the one standout area of value to me – is high quality Singapore commercial real estate.
Investors are still quite bearish on retail malls and office space generally (even the high quality ones), which is great for long term investors like me because I’ll buy more.
At some point in time the COVID impact will start to fade, and as we more into a potentially more inflationary future, I really like high quality Singapore commercial real estate at these prices.
For this portfolio, I allocated:
CICT – $15,000
Ascendas REIT – $15,000
CICT offers a 5.3% historical yield at close to book value now, and offers exposure to best in class retail and office assets in Singapore.
Longer term I’m still very bullish on Singapore malls and offices, and being able to buy in at book value is a good deal to me.
If you want more risk Keppel REIT which we covered last week is trading at a 5.4% yield and 22.5% discount to book.
Ascendas REIT isn’t cheap at 1.3x book value and 4.9% yield, but I still needed the industrial exposure.
China – $35,000
Funnily enough, after the recent tech sell-off, China looks to be the cheapest market to me right now.
Is China Uninvestible?
Now I get that not everyone is comfortable with investing in China.
Some people hold a certain view on Chinese politics, and to them Xi’s China is uninvestable.
And they may be absolutely right.
So if you’re one of these – just skip China entirely. Take the China portion and spread them out among Singapore and US (or commodities or crypto).
My view on China
Personal view here, so feel free to disagree.
I think the CCP isn’t stupid.
They know that longer term, the only way they hold onto power is to raise the quality of life for Chinese people.
And to do that, private enterprise is vital.
Just look at the Soviets for an example of what happens when you let the state have too big a say in allocation of resources.
So I don’t think the CCP is going back into Mao China where private enterprise is shut down.
Rather, I think the short term will be used to consolidate power, implement structural changes, and position the economy for its next phase of growth. Ahead of the 20th Party Congress in 2022, where Xi needs to be elected for a third term.
So short term pain aside, I remain bullish on China mid to longer term.
How to allocate?
China is not an easy market to invest in though.
The stock market is inefficient, retail driven, and many of the best companies are still private.
You can ETF it, and if you do check out our guide here on the best China ETFs (MSCI China for broad exposure or KWEB for pure tech).
For this portfolio I decided to zoom in purely into tech – because that just looks the most value right now.
Tencent – $12,500
Alibaba – $7,500
Meituan – $10,000
Tencent, Alibaba and Meituan to me are the FAANG of China. Down 50% or so from highs.
Meituan looks to have the highest growth going forward because there’s lot of room to grow in the food delivery business.
Alibaba is the most tricky because of intense competition from Pinduoduo at the low end and JD on the high end. But it’s also priced into the stock – and don’t forget they hold a third of Ant Financial, which would still prove valuable post restructuring.
Tencent is the latest into the crackdown, and the recent ban on game approvals has hit their stock hard. Their WeChat system is still very valuable though, as is their investment into other China tech names. The games business I *think* will bounce back, but I could be wrong on that one.
I decided to overweight Tencent slightly at the expense of Alibaba, but feel free to play around the allocations depending on your own view.
Not everybody likes Alibaba, so JD or Pinduoduo are perfectly acceptable too. As are Bilibili and Tencent Music for smaller cap tech plays. For fuller analysis on the smaller names you can check out our China Stock Watch.
US – $25,000
The US market is very richly valued now.
Investors from all around the world have poured money into the red hot US stock market – and it shows.
But the warning signs are starting to show – weakening breadth, poor market internals, tightening monetary policy going forward etc.
At today’s prices, I still think you’ll make money with a 3 – 5 year horizon.
But in the short term, there is possibility of some weakness, with a risk of correction going forward.
At the end of the day, you still can’t build a portfolio without allocating to US, so I decided to underweight the US slightly.
I also decided to keep it simple:
S&P500 (SPY or VUSD) – $10,000
NASDAQ (QQQ or VGK) – $15,000
If you want to be more adventurous, you can stock pick growth stocks. Ones that I like include Digital Ocean, AMD, Cloudflare etc. Full list + Investment Thesis on Patreon.
Between the S&P500 and Nasdaq, I allocated more to the tech-heavy NASDAQ.
I think we are in a secular boom for tech, and tech will continue to outperform in the years to come – as long as you can adopt a mid to longer term horizon.
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Commodities – $10,000
Regular readers will know that I think we’re moving into a more inflationary world.
I’m seeing supply shocks and bottlenecks across the board.
Malaysia lockdown impacting semiconductors and forcing car production to stop, rising labour costs because of COVID controls, rising food prices, freight cost soaring etc.
We’ve never had a true supply shock since the 1970s.
Every other recession the past 40 years was demand driven.
The solution – Cut interest rates, pump money in, and demand recovers.
This time around, we did the same. We cut interest rates, pumped money in, and demand soared to the moon.
With a supply chain that cannot keep up because of COVID impacts.
And the result – prices are going up across the board.
I think we’re in the early phases for inflation, and it’s one that worries me a lot.
For a mid term hedge against inflation, I settled on energy:
Energy Select Sector SPDR Fund (XLE) – $10,000
I kept it simple and just went for an energy ETF, but if you’re more adventurous feel free to stock pick, there’s really good value out there in the small to mid caps if you’re willing to go out the risk curve.
Everybody is talking about ESG and renewables, and cutting back on investments into oil today.
But the renewables transition is a 10 year move to me. If everyone is cutting back today, who is going to pump the oil in 2 – 3 years?
The world is setting up for a mega energy shortage, hence my allocation into oil.
Ethereum – $5000
This last one’s a wildcard.
If you don’t like it, feel free to skip and allocate among everything else.
In all my previous $100,000 allocations, I always included some Gold / Silver.
But monitoring the performance of Gold the past few years has led me to realise that something has broken in the transmission mechanism for gold.
In other words – Gold today, isn’t behaving like the gold of old (pre 1970s).
Something seems to have broken for gold post 1970s, and ever since Gold hasn’t been the same.
My hunch is that the unpegging of the USD (and all fiat currencies) against gold immutably changed gold as an asset class – but there’s really no way of confirming this.
Whatever the case, gold today doesn’t work like the gold of old, making it a very erratic asset class.
Because of that, I decided to switch the allocation into crypto instead.
The choices are:
Personally I settled on Ethereum, because I’m more bullish on it versus Bitcoin.
Bitcoin is a store of value. It’s digital gold. That’s about it.
But Ethereum to me is really growing into its own as a distributed global supercomputer, with a massive ecosystem of developers and platforms building up around it.
And once such network effects kick in, they can be really hard to stop.
So between the two, I see better risk-reward for Ethereum today. But again, just me.
For those who familiar with this space, feel free to go into the Altcoins. Solana has been doing ridiculously well of late.
What about Private Asset Classes?
As shared in a previous article, I recently bought more real estate in Singapore.
The residential market in Singapore is tightly controlled by the government, so while you won’t make a lot, you’re also unlikely to lose a lot of money.
But throw in leverage at today’s 1.05% rates, and some inflation going forward, and you have a good case for real estate.
How to pick real estate is a whole article in itself, that we’ll save for another time. 😉
Very Honourable mention to a bunch of other names that almost made it onto the list:
- Europe ETF – VGK
- Small Cap US Tech – Cloudflare, Digital Ocean
- Semiconductors – AMD
- China Small Cap Tech – Bilibili, TME
If you’re interested, you can check out Patreon for my thoughts on each of them.
Closing Thoughts: Not Investing is not a solution
It’s a really tricky time for investors, and I hope the above has helped you guys in your decision making.
Everybody knows valuations are high, but pulling all your money out of the market isn’t really a solution because the markets may just keep powering higher.
And with inflationary pressures making a comeback, not investing is not a solution too.
So it’s really about finding that right balance between risk and return, that works for you.
How much cash do you hold waiting for the next correction, and how much do you go and deploy over the next few weeks? How much protection or hedges do you build into your portfolio, to preserve your returns?
Even for me it’s a tough balance, and one that I work on everyday. You can check out how I did it, and my full asset allocation on Patreon.
What I would say though, is that investing, like all things in life, is not static.
Decide, and execute. But if you realise you’re wrong, just go back and undo it.
Just like you wouldn’t expect a pair of shoes to last you your whole life, why should any asset allocation?
As times change, and as your life situation changes – you should adjust your portfolio accordingly too.
As always – love to hear your thoughts! How would you invest $100,000 differently in Singapore today?
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As always, this article is written on 11 Sep 2021 and will not be updated going forward. Latest thoughts (and my stock watch and personal portfolio) are available on Patron.
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May i ask why the allocation of s&p500 and QQQ at the same time for US stocks, isn’t QQQ a subset of S&P?
Yeah it’s kinda a way to overweight tech in the US portfolio.
FH, overall the allocation sounds quite sensible, thanks. However, I have a few points to make: 1) on China, my view is opposite, ST might have significant rebounce, but mid to LT, I am super bearish. There are so many high frequency indicators suggest a collapsing confidence throughout the economy, and I do believe Xi is trying to replicate Mao’s model fundamentally. 2) on China stock picking, I can’t be disagreeing more on the 3 names you pick, stay away from Internet, pls. Sany, BYD, Hengli, there are many super high quality private companies in China industrial/hard tech space, forget about the Internet. 3) If u don’t invest or reduce China exposure, actually I recommend to consider ETF pegging MSCI ACWI (all country world index) as alternative
Recently Kevin Rudd, former PM of Australia, once the most pro China western politician, wrote an article on Asia society, about China’s future under Xi, worth reading.
Thanks – Will definitely check it out.
Great point – thanks for raising. I concede that I could be wrong on this.
Let me have a further think on this. Perhaps it is like you said, and as investors we should move towards the manufacturing style companies.
There is a hot new book, Red Roulette BY Desmond Shum, I strongly recommend this unprecedented astonishing book to anyone who is keen to invest a significant portion of his/her fortune in China stcoks, read before u place orders, pls
Thanks for the recommendation – will check it out!
“If everyone is cutting back today, who is going to pump the oil in 2 – 3 years?”
Gazprom, Lukoil, Rosneft.
Ok I’m somewhat joking. However in the medium term, it won’t be Western oil companies given the pressures woke activist investors, pension companies and governments are putting on them.
Yeah agreed with this. Which is what is concerning.
I mean I don’t know exactly how it’s going to play out. But I know that in commoditized markets, if you cut investment into new supply short term, and if demand will only drop off longer term, you’re setting yourself up for a massive demand-supply mismatch in the short – mid term.
Hey! Why not MCT instead of CICT? Any reason for that? 🙂
Mainly because of valuations. I like both a lot, but at this price, CICT looks more value to me. 🙂