Money Management plus Method - I

My old guide for equity holding %:

Straits Time index Tier% Equity holding %
above 3800 90 <10 td="">
3600 80 20
3400 7030
3200 60 40
3000 50 50
2800 40 60
2600 30 70
2400 20 80
2200 10 90
1800 0 100
below 1600

This is an 'off-loading' concept - meaning that when the stock market gets over-heated, we retrieve back part of our capital as war chest and wait for suitable opportunities, eg. when STI drops, to build our position again in equities.

We can use that in conjunction with Technical Analysis rather than blindly 'catching falling knife' when there is a market downturn.

My revised % in a bigger bear market:

STI level Warchest deployment %
above 3500 0
3000 10
2300-2500 25
2000-2200 50
below 1800100

You can adjust the % upward or downward according to your comfort deployment level.

To put things into perspective, we can see from the above chart the various low and high points of STI, Mini bears are drops that went below 3000.

In 2009, at the bottom-most of a post Lehman crisis market, STI reached 1500. This is a point that has not been re-tested in 10 years. Yet, we have not yet reached the peak of the STI that was form before the Lehman crisis in 2007. We can observe that in the past 8 years, STI has been dancing in a frame-like range without any real breakout unlike the S&P500. Simple reason being that those listed companies under SGX lack the kind of growth power and market capital that S&P500 companies have (such as the FAANG stocks). We are also not in direct benefit of quantitative easing and get mostly the spill-over effects, or at times just mirroring the broad market economy.

Perhaps next time I will make another table with reference to S&P500.

Related post:


Here are a couple of methods of Asset Allocation:
  1. Strategic asset allocation calls for setting target allocations and then periodically re-balancing the portfolio back to those targets as investment returns skew the original asset allocation percentages. The concept is akin to a "buy and hold" strategy, rather than an active trading approach.
  2. Tactical asset allocation (TAA) is a dynamic investment strategy that actively adjusts a portfolio's asset allocation. The goal of a TAA strategy is to improve the risk-adjusted returns of passive management investing.
There are more, if you are interested you can check this out
or get your hands on 'The little book that saves your assets' by David M. Darst.

I discovered an interesting blog here which also briefly mentioned the concepts.

Now there's Money, there's Method. The next big obstacle to tackle is Mind.



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