2020 Review

 2020 has come to an end and hopefully with it all the woes & tough times we've had.

So how did this year went for me?

My Realized Profit was $10,326.60 or about 5.7% gain from an initial trading capital of $180k at the start of 2020. While this realized profit may seem impressive, I am "struck" with a paper unrealized loss of $13.7k for my SG portfolio below:

A Quick review of my current SG Holdings:

Duty Free International

This trade was first entered over its large capital distribution announced late 2019, I tried to average down only to be struck with a outsized holding of it compounded by Covid19 pandemic. This company had since survived the custom claim which appeal court has ruled in favour, but its worries are still not over with the lockdown of international borders. It has since closed some outlets to conserve cash, its Duty Free edge is also blunted by the Online Shopping's discounts thus its prospects will only return when international travellers return to Malaysia again. I have taken some losses but kept the bulk of holdings, fortunately it has recovered in its price like the other hospitality, airline stocks where it rose from the bottom of about $0.078 to $0.096. I am hopeful this once dividend cash cow still stand a chance with Covid19 vaccines started distribution, based on past new cases waves cycles, by February 2021 the cases should have fallen by then, and maybe by July 2021 the air travel could rose to its pre-covid volume of 50% for its operation to be profitable again.

Hongkong Land USD

This counter was a value trap that I got in when I saw a "financial guru" highlighting this company's deep discount against its NAV, this guru actually advocated a sort of "arbitrage" system by leveraging portfolio upto 200% using margin account / CFD, his system of buy 2x what your cash can afford and earn the spread of say REITs / Div stocks 4-7% minus CFD / margin of 2-3% interests rate. But mid way into March 2020, he announced he de-leveraged down his system as the prices fall likely had force him to raise cash to top up short fall.

Ok I go too far, anyway some of his points are still valid, this counter has been paying annual dividend of USD22c without fail, even during 2008 subprime crisis. So even though I am still deep in paper loss, this is held in my SRS and I intend to hold it for longer term, after all SRS withdrawal is at aged 62 only, so why not hold it till then?

OUE Commercial REIT

During the first "dead cat bounce" I actually traded some counters & made a small profit at the early stages of Covid19, I rotated my cash into this & had since got struck in it. There's also some worries over its Lippo sponsor, as can be seen from the dramatic fall of First REIT. During a seminar back in June 2020, the REIT manager assured of the triple lease arrangement & how they converted hotel to target quarantined individuals, but then the cluster at Mandarin Orchard Hotel which thus far found no lapse in its safety protocols. Still, it may take some time & effort to attract back customers again. Its DPU has been cut almost half in 2020, but this should recover in 2021. Other operations such as its office holdings still relatively resilient though in the near term of 2 years its unlikely to see growth of DPU beyond its pre-covid19 peak.

Nikko AM STI ETF

I have always been trading short terms, and seldom hold an counter beyond 1 year unless like those above when I am forced convert to a long term holder (more like prayer to recover cost). Still, I have become a half convert to Financial Independence Retire Early (FIRE) movement and several of them used a dividend sort of ETFs holding to diversify risk while riding on a region /country / sector / theme growth. My first purchase was through the new Tiger brokerage, which no doubt its cheap at 0.08%, there were hidden fees like interest financing charge when you withdraw your supposed "withdrawal amount available" because your proceed has not been cleared (ie. within D+3). My second purchase was through DBS Vickers Cash top up which charge me 0.12% and deposited into my CDP, this way I get to receive & participate in all the corporate actions. Increasingly brokerages are charging fees for custodian accounts after some cut the commission to 0.12% to try & match, but then cut back on other perks such as money market fund rate / interest rate while charges all sorts of handling fees for receiving of dividend to voting in corporate actions or submission of proxy forms. The brokerage industry is likely to get squeezed by cheaper foreign brokerages like Tiger, TD Ameritrade & Interactive Brokers; dont be surprised if we see some of them merged or closed in 2021.

Conclusion of SG holdings

All in all, I believe the paper loss of $13.7k should reduce by half in 2021, most (if not all) of the counters above should survive & rise back in the year ahead. I probably move into a more passive approach in 2021, as my past 8years of trading results have shown, sometimes the simpler way of buy & hold index funds actually deliver much better returns. 

If you like to see my detailed transactions in 2020, you can click the png.file below.

My past 8 years or trading results comparison

Lastly, I have diverted SG80k to TD Ameritrade to try out some options strategies in Q4, though there has been some setbacks associated with the wild swings of Alibaba (BABA) ADR. Currently its breakeven with several options due to expire in Jan 2021, as such I will not be sharing much on this for now.

For 2021 ahead

I have completed my Master of Counselling studies this year 2020, so I should have more time though I might devote them to my family & work. In any cases, on the investment front, I am aiming to:

1) Move into ETF passive holding (possibly 50:50 split between ETF dividend style & trading)

2) Generate options income & minor options trade in US

Wish all my readers a better tomorrow in Year 2021! Happy New Year

Disguised Charges by SG Brokerages

Recently brokerages in Singapore has become more competitive after the entry of Tiger Brokers charging 0.08%++ and US low costs brokerages like TD Ameritrade at 0% commission for US and Interactive Brokers at 0% commission for US, 0.08% for SGX. This has driven down brokerage commission charges by several local brokerages such as POEMS to 0.08% SGX and USD 6.88 flat and LimTan to 0.12%-0.18% for SGX and USD 0.07% (not really that competitive actually but it gives NTUC Linkpoints).

However, what drove me to write this post is the disguised charges by SG brokerages that used to be dormant & has started taken effect. These are charges that applied to custodian shares accounts (most of the lower commission charges require you to use custodian accounts where your shares are held in trust with your brokerages, this assure the brokerages that you will have to sell your shares through that particular custodian brokerage where your shares were held).

Most of these disguised charges were previously "waived until further notice" but has started to taken effect in recent months since August 2020.

Examples:

POEMS charge $10.70 for "Cash Offer, Rights Issue, Privatisation Exercise, Merger & Exchange, Cash In Lieu, Liquidation, Redemption of Warrant, Loan Stock or Bonds, Capital Distribution, Tender Sales, Warrant Conversion" which is quite a heavy cost that comes with basically any action that you take as a shareholder, whether its receiving dividend or choosing between scrip or cash dividends. The brokerage now has squeezed itself in between to take a unfair cut out of it, this is regardless if you receive a $10 or $5000 dividend. By the way if its $5,000, POEMS "1% on net dividend subject to min of S$1.07 and capped at S$53.50 (inclusive of GST) + Foreign broker fees and taxes (if applicable)" would ensure it takes 1% at $50, capped at S$53.50.

This compares to other brokerages, like LimTan's Schedule of Charges.pdf 

One can see how ridiculous the brokerage market has become with its charges, the way they take a cut out of our hard earned investments without being a shareholder, I wonder about the "fiduciary duty" that these firms supposed to have. Worse (probably as usual), this happens in stealth, meaning there was never a formal letter or email with any exit options given, these brokerages just happily charged your account's cash away and give you the balance. Had there been a formal announcement & exit option, such as if you wish to avoid these charges, we can transfer them back to your CDP for free? (no? in your dream world maybe).

In any cases, one need to take stocks of your portfolio, if its short term trading, perhaps the lowered commission fees might be worthwhile to use custodian accounts and try to sell / exit before any corporate action's ex-date. But if you are like me or most retail investors who held shares since start of 2020, you probably have some shares "struck" in your portfolio where their market price is lower than your cost price. Most people might think well the company is good, it gives dividend, so lets hold it... 

Yup... until the brokerages come in & take a cut, without telling you (oh its there at our website you see, oh my mother also said one should be act with integrity & communicate transparently too... didn't your mom taught you that?).

If you find yourself not wanting to be "slaughtered" like some fat hog (I'm skinny with little money btw); there's one option left, that is to submit a formal request to your brokerage to transfer your shares in custodian back to your CDP account where its safe & sound (no charges whatsoever of the disguised fees above). You will need to ensure you negotiate hard, SGX CDP charges only one time $5.35 when you in custodian & you in CDP are essentially same or related. https://www.sgx.com/securities/depository

Be careful, not to be led astray & suffer more cuts with other fees; until they cut you, then you realize it. 

Strategies Backtest

On Vesak Day, 7 May 2020, I kinda reached my own enlightenment "aha" moment when I backtested 2 strategies on STI ETF:

1) Dollar Cost Averaging (DCA)
~ assuming fixed $1000 invested at open of Tuesday either on or after 12th of each month
~ distributions received are either re-invested the next month's Tuesday in one lump sum or "smoothed" over a few months

2) Weekly RSI 31 mark invest half
~ Fixed $1000 accumulated every month along with distributions into capital fund
~ Invest half of capital when 2 conditions are fulfilled:
i) Weekly RSI hit 31 or below
ii) Weekly RSI tick up
once both conditions are fulfilled, half of the capital accumulated will be bought at the coming week's open

If you are interested, you can click here to see the excel I used to manually backtested.

Both strategies were applied over a 7 years and 4months from 2013 January to 2020 April, when most indices recovered somewhat near half of the losses.

In case you are wondering, why 2013, its the period when I started tracking my trades and returns and posted them in this blog. I was reflecting had I used other strategies, what might happen? Is there a better way and so on. After all, even Warren Buffett says if you unsure, just buy index ETF "a portion of United States".

I was pondering what if I bought "a portion of Singapore" instead of my various trading strategies over those years.

The Enlightenment "aha" moment
The results are as follows:
Strategy 2 "Weekly RSI 31 mark invest half" is more superior, it ended on April 2020 (STI ETF price at $2.605) with portfolio of 25,600 units worth of $88,932.08 (including $22,244.08 cash) against injected capital of $84,000. A return of 5.9% over 7years & 4months or about 0.8%pa.

Both strategies reinvest distributions received.

Strategy 1 "Dollar Cost Averaging" with "smoothing" ie. spreading out reinvestment of distributions received instead of all of it in the following month proves slightly better.

"lump sum distribution reinvested" Portfolio of 31,000 units worth was $81,051.30 including $296.30 cash against $84,000 capital netting -3.5% or about -0.50%pa

"smoothed distribution reinvested" Portfolio of 30,800 units worth $81,295.20 including $1,061.20 cash against $84,000 capital netting -3.2% slightly better, and about -0.46%pa.

Assuming one continue to hold STI ETF after market recovers eventually, it should return around 3.5-4.6% annually.

One thing to note, interests earned are excluded, to focus solely on how the strategies match up with my current portfolio and strategies.

Second factor that work against the DCA approach was the $30 of commission fee assuming 0.28% brokerage fee+other CDP charges etc.which totalled a whopping $2,700 over 7years+. While the Weekly RSI approach based on 0.29% as each invested amount is much higher than $1000 each month; the brokerage costs was only $206.42 with only 4 purchases that match the 2 conditions.


The dismal return is due to the fact that STI give more return via dividend and was almost flat in capital gain as compared to other indices like S&P500, Dow or Nasdaq which have been rallying strongly.


Though STI ETF approach is more safe against individual companies which my blog have shown, the likes of Midas, Foreland that become suspended despite their accounting value worth, shows diversification does helps in minimizing catastrophic losses since STI ETF routinely rebalance itself with the most representative 30 companies on SGX.

I think its enough for today, looking at long term using weekly indicators help during times of uncertainty, though one should note weekly RSI did not get the absolute bottom and can be off by 5-10% from the low. Nonetheless, over the longer term, it may be a good idea to mix or buy more during significant pull backs to oversold zone as indicated by weekly RSI.

Good luck to your trading & investment & stay safe during the circuit breaker in Singapore!