I was chatting with some of the nice at people LP’s Bully The Bear blog and was asking some of the people if they can sleep well at night with the market positions they have taken on SGX on the stocks that they are investing.

It’s an interesting question because when I went through the 2008 crisis, I went through a lot of personal upheavals myself even as the value of my stock portfolio gyrated as violently as a ship caught in a storm of a hurricane. That experience helped me understand more about this whole idea of asset allocation of one’s portfolio and managing one’s cash.

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It’s been quite a while since I last updated my portfolio. This pie chart shows what is my cash/equities position as at 12 May 2011. As you can see, I’m still fairly conservative at this point in time. Partly because 46% of my my investible savings is in cash as it backs up the outstanding mortgage loan that I still have for my home. I.e. I am still carrying on with the loan until the three year lock-in is over as I don’t want to pay back the legal subsidy etc. and my current mortgage package allows offset interest so my interest cost is quite low each month.

My current equities holdings are in the following stocks, the % in brackets denote % of my investible assets portfolio (at lower of cost/market). Note that the sum of % does not equal to 54% equities due to my lower of cost/market conservative mark-to-market practice in valuing my portfolio:

1. Singtel (1%)
2. DBS (10%)
3. First Ship Leasing (1%)
4. SPH (22%)
5. Singpost (3%)
6. UOB (13%)

This is also one way for me to use my CPF monies to pay for the housing loan.

In terms of investment returns so far, I’ve done much less active trading and investment income from capital gains, dividends, interest and some blogging income gives me a return of 1.48% which doesn’t beat inflation but beats fixed deposits returns. As my dividends are not full-year, it’s likely that my investment returns should be able to be above 2% which still doesn’t beat inflation of 5% but is better than fixed deposits without taking undue risks.

Do you keep track of your own investment returns?

How has the first half of 2011 been for your in terms of investment returns?

Share with Panzer in the comments section.

Be well and prosper.

I finished reading the book and it was useful to revisit the concept of 80:20 or the pareto principle in our own lives.

If you haven’t already heard of the pareto principle, Wikipedia explains to you the background. Pareto found the 20% of the population in Italy owned 80% of the land. It is very similar in income distribution, 20% of the people tend to own 80% of the wealth.

Why is the pareto principle applicable to our lives?

Seeing the World with 80-20 Lenses

I’d like to think that the 80-20 principle is a type of lens that we can use to look at our own lives. In our quest towards financial freedom, what is the 20% of things that we do that lead to the 80% of results. At work, what is the 20% of tasks, activities and priorities that get us the 80% of results in terms of hitting outcomes and objectives? In our personal lives, what is the 20% of key conversations and communication that lead to 80% of satisfaction in our personal relationships?

In my current job, I realise that writing useful and succinct reports that covered the key risks and audit observations was key to being effective in my job. Thus, I spend a lot of effort making sure that our reports are well worded, grammatically correct and do many rounds of spell checks using the Word software. At the end of the day, the quality of the reports generated by my team is what stakeholders would read and assess on our effectiveness.

In investing, I realise that the strategy of patiently monitoring blue chips and accumulating them during periods of uncertainty, such as the recent Japanese earthquake and nuclear fears is one that will pay dividends over the next 10-20 years which is the time horizon that I intend to hold on to these blue chips.

At the same time, I am investing in work that prepares me to be an independent director of a listed company in future, by actively participating in the business and risk decisions of the organisation that I am currently a board member.

Using Mental Models and Frameworks

The more I read, the more I realise reading empowers us with more mental models to look at things. Improvement only comes when we apply skills, insights and intelligence to real world issues for progress using the appropriate mental models. The models themselves do not hold the answer, but the insights and understanding obtained by using those models on the data and transactions help us make suggestions that improve how things are being done currently.

The 80-20 principle is an useful mental model to use in our walk towards financial freedom. What other models do you use in your journey towards financial freedom?

Share with Panzer in the comments section.

Be well and prosper.