Portfolio Updates

I have been acting like an ostrich all this while. When I started seeing how my portfolio dropped over 60%, and how my monthly income was barely sufficient to cover what I was losing in my portfolio daily, I stopped looking at my portfolio.

Similar to every other investor out there, I'm subject to behaviourial biases. The fear of regret. It is this similar fear that makes me hold on to my losses, even up till this day.

So just a week ago, I started re-looking at my portfolio to work out exactly how much I've lost. This year alone, I've taken part in 2 rights issues and increased the capital under investment, of which the first rights issue is under water.

I segmented my portfolio into funds/unit trusts, of which I've lost -24% cumulatively since I started investing 2 years back. For my direct investments portfolio (hand-picking stocks), the cumulative unrealised loss was -50%. The latter is alarming, especially as I started investing directly only about a year ago. But they've paid pretty handsome dividends so far, although dividends are not certain. Taking into account realised dividends and realised trading gains so far, the record is -38.5%.

Where do we go from here?

While I wanted to put in trades to cut my losses, I started asking myself what was my goal for investing. It was intended to be for the medium to long term, with the ultimate goal of financing for my retirement. And one thing is for certain, the market is going to recover - it may take 2 years, 10 years or even 20 years. But we all got out of Great Depression, didn't we? How will this be different?

I decided I could stomach an overall -30% loss in my portfolio. Performance, on absolute terms, is frustrating. But I bought during the highs of 2007 and 2008, and have learnt many lessons since then. So I hope this means it's tuition fees well spent.

My strategy for 2009 is to start saving up as much as I can from my monthly income, as well as my dividends. This is to start accumulating as large a cash pool as possible, to take advantage of any mispriced securities. The way to go in the short-term, is definitely not value investing, but trading. Due to the nature of my job, I might not be able to achieve that, but I will continue to buy more of the stocks I'm vested in and which I have high conviction in, to lower my average cost.

Meanwhile, around 30% of my overall portfolio (in market value) are in money market funds. What is most important for everyone now, I suppose, is to save as much as possible for rainy days, especially as pink slips are in abundance lately. However, do not lose sight of the larger goal - take a small part of the savings to invest when opportunities present themselves. I hope to be able to hand in a favorable report card by the end of 2010. When I'm on track with my goals for retirement :)