Portfolio Review 2015: Portfolio - 22.7% vs STI - 14.1%

After peaking in April, the Straits Times Index fell sharply in two distinct phases (Apr-Jul, Aug-Oct), ending the year at slightly below the 2,900 level, or 14.2% lower than where it started the year. There were many reasons offered for the weak markets ranging from weak oil price, terrorist threats, the end of quantitative easing and the hike in interest rates.

The portfolio lost a staggering 22.7%, making it the third year in a row that I have underperformed the STI. Excluding dividends, it would have lost 24.7%. The biggest percentage loser was KrisEnergy. The stock lost two-thirds of my purchase value because of the oil rout as well as my not subscribing to their rights. The biggest dollar loser was PetraFoods, shedding close to 12K. This favourite of mine is said to be affected by the weakness in sales to its key Indonesia market.

Colex was the only stock to register positive gains given the flight to safety. The garbage collector gained 15.4% the whole year or 3.2K in value. Smallest loser was Hong Leong Finance, losing 11.1% or 2K in value.

There were only 7 transactions for the whole of 2015, mostly at the start of the year. Auric Pacific, Etika and UOB-KayHian were offloaded. Hong Leong Finance and KrisEnergy were new stocks to the portfolio. In December, I added some more PetraFood to my portfolio.

The reality of retrenchments and the importance of emergency funds

There were several rounds of lay off going through the America-based company I am working at. This is because our major clients are hit by the slump in commodities prices. At the same time, there has been an emphasis at controlling costs and so there is the usual reorganisation and where work that can be sent to be done in lower-cost countries are being sent that way. As a result, about 8 people were retrenched in the past two months.

Fortunately, I was not laid off this time, although the spectre does loom. But if I did get laid off, I would be in some trouble. Firstly, I do no have an emergency fund built up. While I have no mortgage to pay off as I am not yet married, if my parents were to suddenly fall ill, my finances will be strained tremendously. Plans for marriage would also have to be scaled down, if not postponed till I find a new job. I would also be in deep human waste if I were already married and had to pay the mortgage.

Bad things tend to happen together. As you are aware, I am fully exposed to stocks. If I were to liquidate my stock holdings to be used as funds, I will be in the red. Retrenchment exercises tend to occur around the same time the stock market slumps.

Therefore, do no underestimate the importance of having emergency funds. Conventional wisdom suggests that they should be 6-12 times your monthly liabilities. These include your normal living expenses, mortgage instalments and even some creature comforts. The reason is that you do not want to be at your wits' end when you are unemployed as this will add on to your emotional stress. Also, having an emergency fund to draw from allows you cushion to seek for a new job, which again may take some time as employment conditions will be bad.

The 4 predictions I made in 2015 and how it saved your portfolio

In the close to 40 posts in 2015, five of them had predictions about the market:

Jan 2015: "2015 will be a good time to buy stocks, when Brent oil price hits USD 45 per barrel"

3/4 wrong but if your entry point was when Brent hit USD 45 per barrel, there should be upside.

A personal review of 2015

I thought it would be useful to review the past twelve months ignoring the portfolio side of things, which has taken a hit. The annual portfolio review will still be carried out at the end of the month in a separate post.

2015 Action Item versus Deliverables

Blog: I intend to blog lesser but have interesting posts of at least 400 words.

Reality: I blogged slightly more than last year mainly because of the postings on my collar bone injury. (35 vs 32 posts). The posts on analysing and predicting the General Elections were the more interesting ones in 2015.

For 2016, I intend to post at least 40 400 words posts and they will contain more photos and charts. 

Investments: I pumped 30k in capital in 2014.

Reality: I pumped 21.5 k in capital in 2015.

Bought more Petra Foods perhaps at a wrong time

After playing contra with Super towards the end of November, I decided to go long on another of my favourite consumer stock, Petra Foods. On the first day of December, I keyed an order for 4 lots and had it filled immediately at 2.37. Due to the Fed hike, I am sitting on close to 1,000 dollars of losses on this transaction. I am currently fully exposed to the stock market with no cash reserves. We are in the eight month of the bear market which I believe started in mid-April 2015. The next 2-10 more months will be on the continued down trend and I believe one more round of sharp correction is in order before we can see any uptrend. The first correction was the rout that started in July and ended at the start of October.

Eleven more days before I can write the review on my portfolio.