My unbalanced bar-bell portfolio

The concept of barbell investing as mentioned by DBS is not new.

To quote the below DBS article:

“Barbell – the winning strategy

Build barbell portfolios with exposures at two ends of the risk spectrum. Seek secular growth themes like Digitalisation and Millennial consumption on one end; income-generating assets like REITs and corporate bonds on the other.

Maintain a barbell strategy

In 1Q19’s CIO Insights “Tug of War”, we advised investors to adopt a barbell strategy in the way a portfolio should be constructed. We reaffirm this approach.

To recollect, a barbell strategy refers to being heavily-weighted at both ends of the risk spectrum. This means overweighting high-growth stocks on one end of the portfolio, while loading the other end with stable and income-generating ones.”

2Q19 Outlook: Lift to Win (read here)

Personally, for me, mine has not been a ‘balanced’ portfolio in that sense. Being more defensive in nature, my portfolio is mainly loaded with more stable income-generating ones such as REITs, banks, aerospace & defense, consumer discretionary, utility stocks, bonds, etc.

To make it simpler, by default, the growth end of the portfolio consists of 3 stocks listed on the US markets (namely Alphabet, Mastercard and Pinduoduo). So basically the below chart would make the low weightage of these stocks more evident. So yeah, the US Growth stock end of the portfolio is heavily underweight.

The current strategy moving forward is to slowly add to the growth end, through DCA funded by both my active income and from the passive income from the dividend generating stocks.

The recent correction in the US markets has allowed me the opportunity to nibble into a bit of the Alphabet stocks.

Stocks appear to be experiencing a textbook correction as payback for an August overshoot rally (read here)

I am wary of stepping too far away from my circle of competence. And I must admit that the sense of FOMO (Fear of Missing Out) is always present given the huge run-up in tech stocks. If I do not understand the business well enough, and if I sense that the valuation is way too high.. I will stay out of it.

Why Valuation Matters for Snowflake Investors (read here)

Is the electric car company named after Nikola Tesla a fraud? Not that one, the other one (read here)

While US tech stocks seem to be having correction, a number of SG Reits are powering ahead (eg. Parkwaylife Reit, Mapletree Industrial Trust, Ascendas Reit, etc). In addition, a number of lower yield Reits have taken the opportunity to expand their portfolio with the expectation that the transactions will be yield accretive (not difficult considering their current low yield).

FCT to pay $1.06b for remaining 63.1% stake in AsiaRetail Fund (read here)

Singapore’s Ascendas Reit to acquire Sydney property for $122m (read here)

KEPPEL REIT BUYS SYDNEY OFFICE PARK ASSET FROM GOODMAN FOR A$306M (read here)

Business Time 19-20 Sept 2020 (Reits (September 19-20, 2020))

Nevertheless, historically when income investing is considered, the odds are really on my side. In the today’s article titled “The income edge in the stock market” by David Kuo (read here), he mentioned the following:

“If we invest with a 10-year time horizon in mind, the chances of losing money after a decade is 25 percent. When dividends are included, it is cut to just 2 percent.… To put that into perspective, if we put our money into shares every month for 10 years, we would be making 120 separate deposits. Of those discrete investments, only two would be lower after a decade. With the odds so overwhelmingly in our favour, why would we want to miss out. Additionally, the more often we invest, the greater could be our chances of success.”

I personally don’t consider my take home pay as high. With the Covid-19 pandemic, my company has taken the step to implement wage freeze across the board (actually even prior to the pandemic, the company has already been not doing well financially). Hence, while I can do my best at work or look for better opportunities, financially what I can do now for my income, is to take little steps to build up the passive side of it.