Managing Your Value Investing Portfolio
Building your value investing portfolio can be an interesting art because different value stock investors may have different risk appetite for returns and risks at different life cycle. To me, managing investment portfolio is just like practicing the Sun Tzu’s Art of War to strike a balance of consistent income from dividend stocks vs. high capital gains from growth stocks. Many retail investors fail their stock investments because they rely on their gut and intuition which very often may not work well at all times.
Why Value Investing To Consider STI ETFs?
1. Investing in STI ETF can generate dividends
As you may know, STI ETF take reference from the performance of the STI top 30 constituents. Both SPDR STI ETF and Nikko AM STI ETF paid out the dividends to the Funds which are withheld until the date of distribution. Recent dividend pay out is based on half yearly, i.e. around mid Feb and Aug 2016. Even with the consideration of expense ratio (~0.28% to 0.3%), the historical analysis of STI ETF performance over a period of 10 years is still quite encouraging. The annualised returns of STI ETF over the past decade is approximately around 7-8%.
It is important to note that not all ETFs pay out dividends e.g. SPDR Gold ETF.
2. Investing STI ETF means risk diversification and lesser investment risk
While value investing is about buying an undervalued stock with good fundamentals at a margin of safety, the investing of ETFs as part of your value investing portfolio can reduce the risk of a sudden underperformed value stock which has lost its original value proposition due to some unforeseen circumstances. During economical downturn, certain industries may get impacted while the other industry sectors may not. This
Value investing is a process that you have to trust and exercise your discipline to a large extent. You will have occasional stocks that do not work out, but if you focus on finding value, over time your value investment portfolio will work out better than average. You should focus on value and not exactly the price of a stock before entering the stock market. Likewise, you can adopt a more disciplined approach to invest STI ETF on regular basis and continue to review your value investing portfolio on quarterly basis. For me, ~ 20% of my investment portfolio is an ideal position sizing for my holding of STI ETF units.