Wednesday, January 1, 2020

Year 2019 Portfolio Performance and Dividend Income

Alrighty. The markets have closed for 2019 and it is time to review my investment performance for the year.

Dividend Income


Q4 2019 SGD Dividend Income

Dividends received from my SGD-denominated portfolio in Q4 2019 was an improvement over Q4 2018. Regular readers would know that I have been pruning the weaker counters from my portfolio for over the past 1+ year and substituting them with stronger counters (mainly large caps). This appears to be bearing fruit but I'm not sure how sustainable this is going forward.

Q4 2019 USD Dividend Income

As SG REITs and income stocks have been trending higher and higher, I have been increasingly hesitant to add to them. Instead, I have been placing some spare cash into boring old US dividend growth stocks from 2018 and early 2019. This appears to be bearing fruit now.

I have also received my first dividend payout from the Tracker Fund of Hong Kong in Q4 2019. No graph for my HKD-denominated portfolio this time as it's just one bar on a bar chart.

Q4 2019 Transactions
In the last quarter of 2019, I subscribed to the Mapletree Commercial Trust rights issue (with excess) to enlarge my position in the counter.

I have also chosen to receive scrip dividends from OCBC instead of dividends.

I have accepted the general offer from ISEC. For a holding period of 2 years and 9 months, my annualized returns were 11.20%.

That's all for "traditional investments." In contrast, I have been making plenty of strides into the cryptocurrency markets. For those interested, do refer to this post I specifically made to share what I have been doing in cryptoland.

Performance
For my SGD-denominated portfolio:
Returns for Year 2019: 22.82%
Annualized returns since portfolio inception (March 2015): 10.03%

For my USD-denominated portfolio:
Returns for Year 2019: 4.55%
Annualized returns since portfolio inception (March 2016): 4.88%

For my HKD-denominated portfolio (portfolio started in May 2019):
Returns for Year 2019: 9.15%

Unrealized gains from gold: ~15%
Unrealized gains from silver: slight profits

Unrealized losses from Bitcoin: ~ -10% (excluding dividends)
Unrealized losses from Ether: ~ -30% (excluding dividends)
Unrealized gains from SNX (Synthetix Network Token): ~ 70% (including dividends)

Thoughts on Performance
Generally, I am satisfied with my performance across all my portfolios. When one portfolio or asset class is down, another pulls it up. This is what I have been working on; a diversified portfolio that emphasizes stability and survivability over returns. Come rain or shine, it is dependable, a bastion of strength with layers upon layers of defence.

REITs and income stocks provide me with the cashflow. Cashflow provides me with the liberty to swing for alpha (cryptocurrencies). Gold and cash provides me with peace of mind, a hedge against catastrophic crashes and dry powder to use when wildfires grow out of control and liquidity (pun intended) is scarce.

Camaraderie is important. When HongKong Land, our star player in the USD-denominated portfolio, fell from grace this year, fellow USD-denominated soldiers like BlackRock along with Medtronic did a good job in holding the fort. The larger positions in my portfolio are higher-conviction plays. If they flop, the mid-tier and small-tier positions are there to lend support. A bundle of sticks is not easily broken. They will survive and then thrive.

Note: returns for SGD/USD/HKD portfolios are computed using Excel's XIRR function. In contrast, gold/silver/cryptocurrencies returns are computed as the difference between market price and average purchase price.

Net Worth breakdown
Not much changes to my networth breakdown. Still in the accumulation phase for cryptocurrencies.


Net Worth Breakdown

As per before, "the pie chart depicts the breakdown in my net worth across the various asset classes in percentage (pie chart neither includes my CPF nor my emergency fund). To be conservative, I computed my precious metals allocation at spot price even though I am holding everything in physicals."

Debt Levels
Interest Coverage Ratio: 22.28
Debt-to-Equity Ratio: 0.013

Leverage in relation to overall net worth has been increasing due to my use of credit card to purchase cryptocurrencies.

Current Holdings
After converting all my USD and HKD holdings to SGD at the end of the quarter, the following table shows the percentage of each stock from only the equities allocation of my net worth (arranged in descending order).

Stock Name
Percentage
Hongkong Land
8.5
AIMS APAC REIT
7.83
Frasers Centrepoint Trust
6.67
OCBC
6.27
Parkway Life REIT
6.06
DBS
4.72
Hong Kong Tracker Fund
4.48
Mapletree Industrial Trust
4.27
SPH REIT
3.91
BlackRock
3.72
First REIT
3.66
Mapletree Commercial Trust
3.49
Thai Beverage
3.25
SGX
3.23
SATS
2.77
Singtel
2.46
Capitaland Mall Trust
2.24
Medtronic
2.24
ST Engineering
2.16
Capitaland
2.05
Raffles Medical
1.87
Japan Foods
1.82
Frasers Property
1.54
JM Smucker
1.54
Frasers Commercial Trust
1.51
Dairy Farm
1.41
Sheng Siong
1.13
Frasers Logistics & Industrial Trust
1.13
Welltower
1.01
Riverstone
0.84
Kraft Heinz
0.79
General Mills
0.66
Hormel Foods
0.56
Abbott Laboratories
0.21


BlackRock joined the top 10 stock holdings due to its 2019 good performance, kicking First REIT off the list.

That's all for now. Thanks for reading!

Non-financial updates coming up next!

Friday, December 20, 2019

Q4 2019 Cryptocurrency Allocations

The end of the year is upon us soon. This is the time when bloggers turn pensive and begin to pen their reflections. In order not to clog up my upcoming year-end review post, I will be detailing my crypto transactions for the quarter first.

In this quarter, I initiated a position in Synthetix Network Token.

Synthetix Network Token

For those who follow blogger Got Money Got Honey on his blog and twitter account, Synthetix Network Token would no doubt be a familiar name to you.

synthetix network token degenspartan

Look at the above screenshot. The number of times I muttered "simi sai" (what is this shit) under my breath when I view his twitter posts is uncountable. Where got 122% dividend yield per annum one? How come got free lunch in investing? Where is this supposed free lunch coming from?

It was not easy trying to wrap my head around the Synthetix Network Token. I had to read their whitepaper multiple times before I could get a basic understanding of how it works. Even then, I still think my understanding of it is at a superficial level. Well, at least I understand the risks inherent in the system now.

How do you get the juicy yields? First, you need to stake/lock-up Synthetix Network Tokens (SNX) in the mintr application to qualify for the rewards. However, in doing so, you create "debt" (awkward phrasing by their team, I know). The more SNX locked-up and debt you create, the more rewards you qualify for. Yes, you cannot lock SNX but choose not to create debt; it's not an either-or thing.

What is debt? Synthetic assets serve as the debt in their system. For example, people new to the system normally mint synthetic USD (sUSD), which is a proxy for the US Dollar, by locking up their SNX. Other synthetic assets include synthetic Bitcoin (sBTC) and synthetic Ether (sETH). Their exchange also accommodates fiat currencies and commodities. For example, synthetic Japanese Yen (sJPY), synthetic Australian Dollar (sAUD), synthetic Gold (sXAU), synthetic Silver (sXAG), etc.

There is a limit to how much debt/synthetic assets you can create. Currently, the collateralization ratio is set at 750% (e.g. for every $750 worth of SNX collateral, you can mint $100 worth of debt/synthetic assets). If the ratio is not maintained above 750% because the price of SNX falls, your rewards are forfeited until you top-up your wallet with enough SNX to bring that ratio above 750%.

Still with me? I did my best to simplify things, lol.

Let's introduce two characters to understand how the rewards work.

Xiao Ming buys $750 worth of SNX and uses it to mint $100 worth of sUSD.

Da Ming buys $750 worth of SNX and uses it to mint $100 worth of sBTC.

Assuming that there are only two participants in the system, the total "debt"/AUM of the system is now $200, with Xiao Ming contributing $100 or 50% of the AUM and Da Ming contributing $100 or the other 50% of the AUM.

Let's say Bitcoin doubles in price while USD remains flat. Following this change, the total "debt"/AUM of the system grows to $300.

To withdraw your SNX collateral from the system, you are required to pay back the debt/synthetic assets in proportion to your initial contribution to the pool. As stated above, each individual contributed to 50% of the AUM at the start. With the increase in the overall debt/synthetic asset pool to $300, each individual has to pay $150 worth of synthetic assets before they are able to withdraw their SNX from the system. Hence, Da Ming's profits come at the expense of Xiao Ming.

That's Synthetix in a nutshell. I have left out plenty of details as it is a complicated system with high risks and high rewards and I do not want to reveal how I am going to position myself such that I am closer to the hypothetical Da Ming's position than Xiao Ming's position.

In terms of risk management, I have capped my exposure to Synthetix Network Token to a lower-middle size position. I have also overcollateralized above and beyond the 750% collateralization ratio.

The interesting thing is that SNX is standing strong in this current crypto bear market. Maybe the ~1.xx % dividend yield per week/fortnight serves as a price floor? If the price increases a teeny weeny bit more and stays there, SNX will be the second double bagger in my portfolio (not including the accumulated ~10% dividend yield I have received over the past 2 months). =D =D =D

In this quarter, I initiated a position in RealT tokens.

RealT


RealT is an ethereum-based company that offers tokenized US Real Estate to investors. Each property is owned by a LLC, with token holders of that particular property owning that LLC. Rent is paid daily in the DAI stable coin (1 DAI = 1 USD) to token holders.

The properties are based in Detroit, so some caution is warranted. As a result, I have sized my position to the absolute minimum.

In this quarter, I bought a couple of Gods Unchained booster packs.

Gods Unchained

Gods Unchained is an online trading card game. However, its underlying assets (the cards) are traded on the ethereum blockchain as tokens. There are multiple benefits to tokenizing game assets on the blockchain. First, it creates transparency as to the supply of a given game asset; gamers could verify for themselves whether the game developers have inflated certain assets. Second, the assets remain your property even if the game company cease to exist. Third, the sprouting of new game companies that use existing assets belonging to you may earn royalty income or confer in-game advantages in new games.

Consider the following hypothetical scenario where you are the owner of the "Iron Man" token.


You have bought the rights to it in a Marvel game. Somewhere along the line, there is a collaboration between Marvel and Capcom, producing the game Marvel vs Capcom. Oh look! Your Iron Man token got used by them.


Oh? What's this? Lego is collaborating with Marvel for a Lego Marvel game? Hey, that's Iron Man again!


The results for my Gods Unchained "investment" so far are mixed. Some of my cards fetched more value than the booster packs that I bought them for while others turned out to be flops. Compared to my "investment" into Axie Infinity, Gods Unchained is definitely a much better option as it has an active and thriving community.

In this quarter, I bought an Ethereum Name Service (ENS) domain name.


The rationale is to flip them for capital gains. ;)

In this quarter, I added to my positions in Bitcoin, Ether, and DAI.

I have closed my DAI lending positions on Compound Finance and dYdX exchange as lending rates have cratered from 6 - 12% yield per annum to 1.5 - 2% yield per annum due to the inflow of liquidity into these decentralized lending/borrowing protocols.

I have shuffled my DAI into MakerDAO's DAI Savings Rate for a fixed 4% yield per annum.

Thanks for reading!

Friday, October 25, 2019

Q3 2019 Portfolio Update

Time flies and another quarter is over. I haven't really been paying attention to the traditional financial markets. Instead, I have been spending more time reading up on the improving fundamentals of the cryptocurrency market and its associated risks.

Dividend Income


Q3 2019 SGD Dividend Income

For my SGD-denominated portfolio, Q3 2019 dividend income registered a slight fall compared to the same quarter of the preceding year. This is to be expected following my partial divestment of Singtel in Q2 2019 (see here). I foresee that changes to my forward SGD-denominated dividend income to be minimal. The REITs and income stocks that I am eyeing are on the high side and I am not willing to add to them.

Q3 2019 USD Dividend Income

For my USD-denominated portfolio, dividends received hit a new high again when compared to the same quarter of the preceding year. This is mainly due to capital injections over the past 1 year and some dividend growth during this period.

Transactions
In this quarter, I added to my position in HongKong Land at a PB of 0.34 following the huge drop in price due to the Hong Kong protests. Looking back at my old posts, the last time I added to HongKong Land was in Q4 2018 at a PB of 0.37. Regular readers will know that HongKong Land is one of the pillar stocks in my equities allocation. Still, I'll be looking to add to my position after doing some crude form of risk management (e.g. add to other positions to dilute the significance of HongKong Land in determining my portfolio returns).

I added to gold (jewellery) as a gift to my mum and silver (fortunately before the run-up in precious metal prices).

I closed my position in QAF at a 42% loss (after including dividends) over a period of 2 years and 4 months. A combination of "I don't think I want to wait for their primary production business unit to turn around", "QAF is just a small position in my portfolio (0.69% of equities allocation, based on Q2 2019 post)",  and "alternatives with better risk-reward profiles are currently available on the market" contributed to my divestment of QAF.

I guess it is very obvious by now what "alternatives with better risk-reward profiles" refer to.

Hence, in this quarter, I added to Bitcoin, Ether, DAI, and USD Coin (USDC).

Salient points regarding the Ethereum Blockchain
Blogger friends and readers have asked for my take on cryptocurrencies ever since I first mentioned it in my last quarter's update. Now, this is no easy thing to write. Should the post be comprehensive or lighthearted (I have a lighthearted post on Ethereum here)? Should I trace out the history or just share what's new in cryptocurrencies? As I eventually will have to tackle this topic, I think it is high time to do it here, albeit in an abbreviated form with plenty of missing pieces for readers to investigate on their own if they are curious enough.

The Ethereum blockchain has been improving by leaps and bounds, even as the price for Ether trends in the opposite direction. One particular use case that has emerged is Decentralized Finance (DeFi). With this development, ethers and other ethereum-based coins are not held solely for capital gains or losses anymore; coins could be used to participate in a nascent alternative financial system.

For lenders, yields on DeFi platforms are fairly generous. To put this in proper perspective, the risk premium above the risk-free rate is telling enough. These platforms are new, untested, and have yet to suffer a catastrophic failure. For borrowers, DeFi advocates would generally tout the less onerous interest rates compared to traditional borrowing tools like credit cards. I do not engage in any borrowing through DeFi, so my sharing in this area is limited.

I am also quite surprised that the majority of people are not aware of stable coins. Stable coins are cryptocurrencies whose prices do not fluctuate. Critics of cryptocurrencies are often quick to point out that the volatility of cryptocurrencies make for very bad currencies. This is where stable coins come in. It facilitates the transaction of goods and services at a fixed price. Two of the more commonly used stable coins in the DeFi environment are DAI and USDC.

USDC is created by CENTRE, a joint project between Coinbase, a centralized exchange, and Circle. 1 USDC is both backed and pegged to 1 US Dollar (USD). USDC could be purchased at exchanges like Coinbase. Monthly audit reports on the US dollar reserves backing the USDC could be found here on CENTRE's website. The risks associated with using USDC are mainly counterparty risks (if you do not trust Centre, their regulators, audit numbers) and regulatory risk (e.g. authorities adopting a stricter stance against it).

DAI is a decentralized stable coin backed by Ethers. DAI could be obtained through one of two ways: (1) pledging ethers as collaterals to mint DAI, or (2) purchasing DAI minted by others that are sold on the secondary markets. Through a complicated process, 1 DAI is maintained at 1 US Dollar (USD). Hence, DAI is backed by Ethers and pegged to USD. However, there have been occasions where the peg to USD broke. This is one risk that DAI holders should be aware of.

Two of the DeFi protocols which I have been using to earn interest on my stable coins are Compound Finance and dYdX.

Compound Finance functions as a money market fund within the cryptocurrency universe. Cryptocurrencies deposited (both volatile coins as well as stable coin) are lended out to borrowers who borrow through the same platform. Lenders lend to an aggregated pool of a particular asset (e.g. USDC) and it is from this pool that borrowers borrow from. The interest earned from borrowers are spreaded across all lenders regardless of whether their portion of the asset pool have been borrowed. Borrowing from the platform requires overcollateralization. This protects lenders as the borrower's collateral could be liquidated to repay lenders once it falls below a certain threshold.

I have a token sum in the dYdX protocol for diversification (not all eggs in one basket!) and risk management. Other than that, my knowledge of the protocol is superficial.

The dangers of using decentralized services include bugs, hacks, administrative privilege risk, price oracle risk, and liquidity risk.

Besides using decentralized services, I use centralized services as well. Specifically, I am on Crypto.com's Earn program, earning interest from lending out my Ethers.

The main risks associated with using centralized services are hacks, the fear of founders running off with the deposited assets, lack of transparency (compared to DeFi protocols), withdrawal delays/issues, and uncertainty about the sustainability of the centralized service's business model.

I shall stop here for now. There is simply too much to share about cryptocurrencies.

Net Worth breakdown
Compared to Q2 2019, precious metals allocation increased from 22% to 25% mainly due to the run up in precious metals prices. As I am in the accumulation phase, cryptocurrency allocation increased from 1% to 4%.


Net Worth Breakdown

As per before, "the pie chart depicts the breakdown in my net worth across the various asset classes in percentage (pie chart neither includes my CPF nor my emergency fund). To be conservative, I computed my precious metals allocation at spot price even though I am holding everything in physicals."

Current Holdings
After converting all my USD and HKD holdings to SGD at the end of the quarter, the following table shows the percentage of each stock from only the equities allocation of my net worth (arranged in descending order).


Stock Name
Percentage
Hongkong Land
8.54
AIMS APAC REIT
8.13
Frasers Centrepoint Trust
6.70
OCBC Bank
6.25
Parkway Life REIT
5.85
DBS Group Holdings Ltd
4.59
The Tracker Fund of Hong Kong
4.52
SPH REIT
4.10
Mapletree Industrial Trust
4.06
First REIT
3.87
Thai Beverage
3.27
BlackRock Inc
3.27
SGX
3.14
SATS Ltd
2.72
Capitaland Mall Trust
2.43
Singtel
2.35
Medtronic PLC
2.22
Mapletree Commercial Trust
2.18
ST Engineering
2.16
Capitaland Limited
1.97
Raffles Medical Group
1.91
JM Smucker Co
1.66
Frasers Property Limited
1.63
Japan Foods Holding Ltd
1.62
Dairy Farm International Holdings
1.59
Frasers Commercial Trust
1.50
ISEC Healthcare Ltd
1.34
Welltower Inc
1.19
Frasers Logistics & Industrial Trust
1.16
Sheng Siong Group Ltd
1.06
Riverstone Holdings Limited
0.89
General Mills Inc
0.69
Kraft Heinz Company
0.69
Hormel Foods Corporation
0.56
Abbott Laboratories
0.21

Top 5 positions remained the same, with HongKong Land swapping places with AIMS APAC REIT for the top spot.

Debt Levels
Since I've started dabbling in leverage, I have been paying closer attention to my debt levels. Currently, my modified "interest coverage ratio" and "debt-to-equity ratio" is as follows:

Interest Coverage Ratio: 31.32
Debt-to-Equity Ratio: 0.009

With the modified "Interest Coverage Ratio" representing the total amount of cash on hand (excluding emergency funds, interest income, and dividend income) divided by the total debt payable and "Debt-to-Equity Ratio" representing total debt payable divided by equity (what I own outright).

Compared to the previous quarter, there are slight improvements to both metrics as I have been using more cash to pare down my debt levels.

Emergency Fund
As a result of increasing my allocation towards cryptocurrencies, I have been contributing lesser to our shared emergency fund. The perennial question which I never seem to be able to answer is on the sufficiency of the emergency fund. Is 7 months' worth of emergency fund (assuming liberal spending) sufficient? I really wouldn't know. Hence, there has been some slight guilt on my part for re-allocating funds that could have been placed into the emergency fund into investments instead. Or maybe I am just overworrying on my part.

Capital Allocation Thoughts
With the bleeding cryptocurrencies market, I will be looking to add to volatile coins and lending only a portion of them out. The idea is to replicate the concepts underlying the two charts at the top of my post; building up a snowball of dividend income from different currencies.

On the other hand, I have capped the amount of stable coins in my portfolio. After some discussion with my non-crypto investment blogger friends, it made me realize that, while the yield is good, there is downside risk if the peg breaks. No upside and possibility of downside is not a good combination to possess.

In terms of equities, I will most probably be adding to my existing positions.

Work
I had a serendipitous surprise when my bosses took fragments from various pieces of my work and incorporated them in an in-house research publication. While not as glamorous as a peer-reviewed journal publication, it still is a good boost to my CV. Funny how I would be dying for such an achievement a few years back; today, happiness was merely a momentary bleep.

My priorities have changed.

Recognition for social science publications? Nah.

Pivoting into data science and/or STEM publications (and the accompanying higher remuneration)? Yes Yes Yes!

Studies
Now that the new semester has begun, I will be directing my energies towards this area. Math-heavy modules are no joke!

I have been picking up web development and Solidity programming (Ethereum programming language) informally whenever time permits.

Yes, Enreitch is still chugging along just fine. I've got some ideas to overhaul Enreitch and give it a facelift, but it requires that I step up my programming competency.

Readings
My friend LP expressed his disappointment when I shared that the "Readings" section in my last quarter update may be a one-time thing, lol. I will attempt to keep it alive and try to make it a permanent fixture in my quarterly updates.

In this quarter, I completed the following books:

- Death's End by Liu Cixin (Final book in the Remembrance of Earth's Past Trilogy)
- The Redemption of Time by Baoshu
- Ball Lightning by Liu Cixin
- Waste Tide by Chen Qiufan
- Invisible Planets, edited and translated by Ken Liu
- Kappa Quartet by Daryl Qilin Yam
- The Effective Executive by Peter Drucker
- Barbarians in the Boardroom by Owen Walker
- Business Networking by Will Kintish

This time round, non-fictions are represented too. :P

Special shout-out to Liu Cixin's Ball Lightning which was mind-blowing. Chen Qiufan's Waste Tide was a very good read as well!

First time trying out fiction by Singaporean writers; Daryl Yam's Kappa Quartet had quite a surreal feel to it.

Gaming
All work but no play makes Jack Unintelligent Nerd a dull boy right?

The long-awaited game that was on my gaming watchlist, Children of Morta is finally out!



Besides Children of Morta, I have also been playing Dead Cells.



Thanks for reading!