Cory Diary : Asset Allocation - Mid Year '21

US Market is up last night. So I could see a few more Ks into my equity valuation today. Tesla reported strong volume increase shipment however news of a fire on a new tesla model broke out too. So coincidence. A check on my mobile app shows PE 680 with a Market Cap of 654B. 52 Wk high is 900 and current stock price is 678.90. Therefore 32% down from peak. People who has stayed the course since 2 years hits 10 baggers even with this correction and so is Elon Musk wealth.

For most people who is not running a business and drawing monthly salary to grow wealth, will need to active manage asset to reach financial goals. This is not saying bosses no need. However for average people, we need to find ways to utilize our asset and invest safely as they are hard earn money. Again not saying Elon money is not hard earned. Not investing basically put our retirement at risk. And the first step is to know our asset and the strategy we go about it on each stage of our wealth.

There has been some updates on asset allocation recently. Net worth has increased since last update so we need to view it with that in context. ( link )

1. Property Asset has recent transactions which ascertain the valuation

2. Consolidation of free cash to investment account

3. Emergency cash in Fixed Deposits but reduced.

4. Gov Securities reserved mainly for housing installments backup

5. Bonds reduced further

With above changes, cash saving allocation has reduced to 5.1%. Over time if there is no major change to living capital needs in percentage wise, it should get smaller with time. There is not much to do in CPF/Pension, Property Net value and Insurance allocation wise.

Total up equity, bonds and gov securities, they cover about 50% of asset in which more than half of which are gains or non-salary returns. The important part is not the gains but the future cash flow that it can generates for retirement. 

The Problem

The current investment account size can drives for a few years of expected dividends increase or allow one to increase in growth stocks that could earn multiples. Is it worth the cost to park so much here as War Chest for major correction use ? Let say dividend share each year 5% return. For 3 years will be 15% returns. Will there be a major correction within or right after 3 years ? Needless to say it has to be more than 20% correction to worth the while. Maybe even 25% minimum for one to take the risk as well.

People tend to be blind-sided on Equity Investment portfolio returns and forgot about idle cash impacting overall returns which is not measured. Moving idle cash to investment account therefore is a logical move and then assign some measure to it. Will need to think through this. What should the typical opportunity fund size be ? Maybe one should deploy the fund in stages whenever there is opportunity in the market and not due to major correction.

Cory

2021-0703

PS. 51 on countdown to 55

Articles in this Blog is personal take and educational purposes only. Reader should seek their own professional help when making financial decision and be responsible for their decision.