COVID year, A Tough Investment year, A Learning year

With 2 weeks to go, I guess it is natural for many of us to go into some reflection moments. I got some unforgettable hard knocks in my investment journey this year that I thought I would share. This is my first post and when I have more inspiration, I may pen a few more to come in the coming fortnight.

First = EHT

Coming on the back of Hyflux, Noble, I should have been more careful with Eagle Hospitality Trust. But the fact that it is a Reit and with DBS as its trustee probably lured me into some form of complacency.

I don’t blame them, I blame myself for being greedy.

I managed to cut some loss and reduce my exposure before their shares were suspended but what remains stuck today is still a sizeable chunk and of course, its very painful. Its a major lesson learned for me.

A costly one but hopefully one that is will remain etched in my mind and constantly reminds me to avoid similar pitfalls in future.

Second = Margin Risk

I was using some margin facility to boost my earning before all hell broke loose when COVID arrived this year.

The sharp drop in STI index caught me by surprise and brought on my first experience with margin calls. Recalling that experience, it was painful and scary. One that I would never want to go through again.

Although the impact was not significant enough to knock me out, it was a wake-up call. It was a nightmare to see my shares being forced sold at cut throat price when I wasn’t fast enough to act on margin calls.

Ruthless and that’s the margin market that I chose to play in !!

Who can I blame – just myself for being greedy.

Today, I still use margin facility to boost my short term liquidity and capture any unusual weaknesses that I see appearing in some shares. But it is a much smaller footprint of my portfolio than what I had at the start of the year. And when I do so, I would get out of my margin position when I get some small speculative gains. I will avoid a long term large margin exposure.

I can now understand why people can be made bankrupt by margin calls.

Like one of our seasoned investment blogger advised, never invest with borrow money. I would echo that especially for new investors to the market.

Third = Be positive that there is always a silver lining

Today, my equity portfolio is still down 5% compared to 31/12/2019.

But I count my blessing that it has not only “survived” the killer punch delivered by COVID but also rejuvenated to a more robust and dividend sustaining portfolio to help with passive income in the years to come.

When the STI collapsed in March/April, everything in the market was in the red. Everything was down significantly, i.e 30%, 50%, you named it. It was a blood bath, the drop was indiscriminate.

Reflecting on that, I am glad today that at the moment I still had the courage to continue to invest in the market and to have faith that things would improve. Believing that the silver lining would be there.

I took the opportunity to change out my lousy stocks to blue chips companies with strong balance sheet that I know would enable them to not long survive this crisis, but also resilient enough to still pay some dividends, thought smaller amount.

In particularly, the local banks, the Ascendas and the Mapletree Group of Reits were my targets and saviors. They helped me a lot in this last quarter to claw back some of my initial losses.

Furthermore, I continue to invest a portion of my active income every month to buy ETFs to build up my index portfolio.

A single company can go bankrupt but a ETF will not – hence, I feel assured to continue investing. The gain may not be spectacular and it is definitely more resilient and stable.

Because of this regular investment, my index portfolio today has grown to be 20% larger than at the start of the year, despite COVID.

Boy, I am really delighted with this!

I think I would stop here with these 3 learning today. I would continue with a second post on my reflection for the year maybe in middle of next week. And it is likely to be about my dividends 🙂

Do have a great weekend. Stay safe and enjoy the present!

Regards,

Warriortan

6 thoughts on “COVID year, A Tough Investment year, A Learning year

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