Many times, I have been asked what is the yield on my total portfolio. I have never bothered to answer the question for various reasons and because I don't ever answer such questions, I don't bother to find out what the answer might be.
I know more or less what are the dividend yields and distribution yields of my various investments in my portfolio but I have never really calculated what is the average yield.
A friend recently told me that the average yield of my total portfolio including cash must be much lower and he wondered if I was beating some kind of benchmark. I could see where the conversation was going and I gave a loud sigh.
I know there are some people who are like my friend, who are obsessed with measuring their performance and worried that, if they hold too much cash, they might under-perform the benchmark which in many instances is the STI.
So, consequently, they are constantly on the lookout for assets to put money into in order to prevent their portfolio's performance from declining. It sounds stressful and I am stressed out just imagining this.
I am pretty simple minded when it comes to investments. I use some common sense and ask some questions which I think matter in that investment. If I am satisfied that I am not overpaying and the stock is likely to do pretty well in future, I buy some. Regular readers would know what I have been nibbling on in recent months.
Yes, some of the nibbles have been poorly timed but we can rarely buy at the lowest prices or sell at the highest prices. We can use some technical analysis to provide insights but if we did buy at the lowest or sell at the highest, we were lucky. I believe in holding on to investments that have good bones. Anyway, I sleep well at night because I "eat bread with ink slowly". Remember?
"When stocks are attractive, you buy them. Sure, they can go lower. I've bought stocks at $12 and went to $2, but then they later went to $30." Peter Lynch.
"I buy on the assumption that they could
Frankly, if prices did not come down, I would not have nibbled at anything. I would most probably just be growing my war chest.
Why should there be an urgency to buy something just because cash is going to be a drag on the overall performance of our portfolio?
Is the overall performance of our portfolio so crucial?
It could be to some, I guess.
I told my friend I am probably about 70% to 80% invested. So, I have 20% to 30% in cash. I don't know the exact percentage because I don't measure but it is about there. My investments are generating income in excess of $100,000 a year for me. Again, how much is it exactly, I don't know. I will know at the end of the year.
Even if I were to retire from active employment and not have an earned income, I guess I would be quite comfortable living off just a portion of my passive income. The rest, I could invest with when opportunities present themselves. If there should be nothing I fancy, I would just continue to build my cash position. Even if my cash position should be 50% or more of my portfolio, it wouldn't bother me.
AK is the proverbial frog in a well. There are many things in this world AK doesn't understand but AK knows that he feels good when he has more cash in his bank accounts.
I am not a professional fund manager who has to answer to unit holders who might ask, "Why are we paying you just to sit on so much cash?"
Well, I understand that it could be that my friend and others like him imagine themselves to be pseudo professional fund managers. I understand that but it doesn't mean that I have to be like that. I am just a regular retail investor.
I would like to end this blog post with something Charlie Munger said before but it is probably a bit overused in my blog by now. Hint: It has something to do with some character sitting on something. So, I will end with a couple of quotations from Peter Lynch instead:
"In this business, if you're good, you're right six times out of ten. You're never going to be right nine times out of ten."
"If you can't find any companies that you think are attractive, put your money in the bank until you discover some."
I am not a professional fund manager and thank goodness I am not or I might be kept busy answering calls from irate unit holders.
"Whose money is it anyway?"
(Oops, I think that sounded like a question from a member of the opposition in local politics. Getting a bit mixed up in my old age. Cham.)
1. How did AK create a 6 digits passive income?
2. How did STE married with kids retire at age 44?
3. 5 revelations from a regular retail investor.