Going passive: two years on

Finally my portfolio is taking shape. The portfolio was started two years ago and took a painstakingly long time to build because of the limited indexing choice in Singapore (sigh!). I hope to capture what I can remember in building my portfolio. Here goes…

2004

In December two years ago, I was travelling in Indochina. I met a couple from Switzerland when touring Mekong river in Laos. Their reason for year end travel: to avoid the unpleasant wet and cold winter and the Christmas shopping crowd. They said, “December is a time to reflect on the past year and plan for the next.” When I came back from the trip, I looked at my funds and stocks that I have not looked for a long time — what a mess! Time for a portfolio spring cleaning.

At the same time, I started paying attention to posts on indexing and ETF in the old fundsupermart forum (now closed). That led me to another interesting website called “Cost Matters” with lots of indexing info (now closed too). Some articles from that website are archived HERE. I read the articles with fervour and started to buy/borrow investment books in the reading list compiled by “Cost Matters” website.

2005

Convinced by the merits of indexing and passive investment, I bought my first ETF in January 2005. It was Vanguard Total Stock Market ETF (VTI) listed in American Exchange. In the following month, I sold four of my eight actively managed unit trust funds.

At the same time, I started thinking and forming my asset allocation plan. I also started my reading on the investment books listed in “Cost Matters” website, including “The Random Walk Guide to Investing” and “A Random Walk Down Wall Street” by Burton Malkiel, “The Intelligent Asset Allocator” by William Bernstein, “The Only Guide to a Winning Investment Strategy You’ll Ever Need” by Larry Swedroe. I also visit frequently Sgfunds.com forum and Diehards.org forum for advice and new knowledge.

ETF can’t be bought without a broker, and the brokerage rates for US trading in Singapore are so uncompetitive. So I was looking for alternative US-based brokers around mid 2005. This THREAD has really helped me a lot. I almost traded using MBTrading.com at $1 brokerage fee, but later settled on optionsXpress (also see this THREAD) in April 2006 when they opened an office in Singapore. Due to this decision, my subsequent ETF purchase was delayed until mid 2006.

Bonds, the anchor of my portfolio during difficult times in the market, was not given much attention until July 2005. Due to the lack of bonds books for beginner, I started this THREAD to seek advice. Thanks to forumers’ contributions, I decided to hold only investment grade bonds. Following this decision, I sold two funds that hold emerging market bonds from my remaining four active unit trust funds. I also started a THREAD to discuss investment grade bond funds.

Year 2005 ended with only one addition to my portfolio but lots of learning in bonds.

2006

By January 2006, I have already purged all actively managed unit trust funds that didn’t match my asset allocation plan out of my portfolio. I also added REIT stocks in the same month. After deciding to use optionXpress for my ETF purchase in the US stock exchange, I topped up Vanguard Total Stock Market ETF (VTI) and bought Vanguard Emerging Market ETF (VWO) in May 2006.

Around mid 2006, I bought “The Bogleheads’ Guide to Investing” by Taylor Larimore, et al. and “The Only Guide to a Winning Bond Strategy You’ll Ever Need” by Larry Swedroe and Joseph Hempen. Larry’s bond book finally gave me better understanding on bonds and reinforced the idea of using only investment grade bond in a portfolio. I have also finished “The Bogleheads’ Guide to Investing” and like it very much.

In September, I included CPF-SA fund into the portfolio as bond allocation. This puts on hold the purchase of global bond fund as my CPF-SA already made up most of the bond allocation.

In November and December, I added iShares DJ Stoxx 50 ETF for European equities and also added more REIT stock. Following this, my portfolio, after two years of brewing, finally covers most of the asset classes in my asset allocation plan.

2007

Looking forward, I will just invest and rebalance according to my asset allocation plan. Sorry, no hot pick for 2007, hehe…

Stay the course and happy new year.

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2 responses to “Going passive: two years on

  1. Great story. My going passive story started in 2001, mostly due to the Diehards forum and the book “The Intelligent Asset Allocator”.

    Oh yeah, there was the old FSM forum which I participated starting in year 2000 or so. Unfortunately, some forums, including the SG one, are becoming like bazaars for FAs and IFAs alike to tout their wares under the disguise of doing people a service.

  2. Thanks. Looks like we took roughly the same path in going passive – old FSM forum, Diehards forum, “Intelligent Asset Allocator”, among others.

    Hope to read your story in your blog, or may be in a book 😉

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