Where would I invest $100,000 in Singapore right now? (2020)

A couple of readers have asked me whether now is a good time to be investing in the markets.

My view is that with the exception of certain areas that look a big pricey (big tech I’m looking at you), stocks look pretty fairly priced right now, given all the uncertainty.

There are massive inflationary forces in play due to all the money printing and stimulus, and there are also massive deflationary forces due to COVID19 and the demand shock.

For the time being at least, the two forces have cancelled each other out, so we have a period of relative stability. I don’t think this lasts though, so eventually either force will win out.

Whatever the case, there’s no doubt that a lot of big name stocks are significantly cheaper than where they were back in Jan 2020.

So is it a good time to be investing?

Well, definitely better than it was in Jan 2020.

Basics: Where would I invest $100,000 in Singapore right now?

Anyway, to really answer that question, I wanted to share how I would invest $100,000 right now.

Ground Rules

A couple of ground rules:

• Assumes I start with nothing – I’m going to assume I’m starting with no prior investments, and investing completely fresh into the market. I will take prices as they stand today, and with a view to investing the money over the next 6 months.
• Why $100,000? – I like $100,000 because it’s a big enough sum to have proper asset allocation, without having to worry about transaction costs. With a portfolio size like $10,000, brokerage fees do add up, so it’s hard to get meaningful diversification, and a Robo like StashAway or Syfe, or just picking a global ETF (eg. the IWDA), may make more sense.
• Pure investment amounts – This $100,000 is pure investment funds (ie. the equity portion of one’s portfolio), so it excludes any emergency funds / cash / short term bonds set aside for short term use. The right weightage between the equity portion here and bonds / cash can be tailored based on individual risk appetite.
• No more than 8 counters – One of the feedback I got on the All-Weather Portfolio was that it was too complex for the average investor. To take that feedback on board, I’m going to keep this portfolio to no more than 8 counters. This will keep it simple and minimize hassle for investors.

FYI we’ll share commentary on the 2020 crisis every weekend going forward, so for those of you who haven’t signed up for our mailing list, please do – its absolutely free.

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The content here is for informational purposes only and should NOT be taken as legal, business, tax, or investment advice. It does NOT constitute an offer or solicitation to purchase any investment or a recommendation to buy or sell a security. In fact, the content is not directed to any investor or potential investor and may not be used to evaluate or make any investment.

 Do note that this is not financial advice. If you are in doubt as to the action you should take, please consult your stock broker or financial advisor.

How would I invest $100,000 in Singapore?

The broad allocation I would use, is set out below. Read on for my detailed thought process.

• Gold – $15,000
  • GLD ETF – $15,000
• Singapore – $35,000
  • UOB – $20,000
  • MCT – $10,000
  • MIT – $5,000
• US – $30,000
  • QQQ – $15,000
  • JP Morgan – $7,500
  • Exxon Mobil – $7,500
• China – $20,000
  • Vanguard Total China ETF (3169) – $20,000

Why Gold?

So I wanted to include a hedge in this portfolio. I wanted something that was outside of the capital markets, and that regardless of how much money printing the world was going to do, it would continue to retain its value.

I thought about US Treasuries, but frankly speaking, I don’t see much upside there unless the US is going into negative interest rates. I don’t think they will, so I left them out – but if you disagree, Treasuries could definitely be worth a look at.

Anyway, if we leave out US Treasuries, the next best choice will have to be gold.

I’ve been bullish on gold for a while now, and if I am right, I think the real wave for gold is barely even getting started.

Gold is a hedge against monetary stimulus and currency depreciations, and with the way the world is set up right now, we’re probably going to see a lot of that in the next 6 to 12 months.

I put $15,000 into gold for this portfolio. No need to overcomplicate matters, so I went with a physical backed gold ETF being GLD (IAU works too for lower fees). It’s the largest gold ETF in the world, so it has very good liquidity.

If you want something more leveraged, you can look at gold miners. The ETFs are GDX and GDXJ.

Singapore vs Global investments?

Whether to invest in pure Singapore vs globally is a very personal question.

There’s genuinely no right or wrong here, it depends on the kind of investor you are.

For me personally, I think that there are significant headwinds facing Singapore right now.

I penned an article to Patrons recently on this, and the crux is that there are 3 crucial headwinds: (1) Singapore is very reliant on international flows of goods and people which are severely impacted by COVID-19, (2) Singapore is very reliant on old world industrials which again are severely impacted (as opposed to tech), and (3) the easy part of this COVID crisis with big stimulus is over, what comes next is going to be a grind.

The playbook that worked so well for Singapore since independence will need to be adapted for the current world.

As a Singaporean, I hope with all my heart that we succeed. But as an investor, I don’t see that as a risk I need to take when diversification is so easy.

How to split globally?

I also think that the twin engines of the world going forward will be the US economy, and the China economy.

So I will split my money between Singapore, US, and China. Singapore gets the biggest at $35,000, followed by US at $30,000, and China at $20,000.

One interesting thing to point out is that Temasek themselves also allocate to Singapore, China and US as their top 3 allocations. The difference though, is that China is bigger than US for them.

I don’t profess to know why Temasek does this, but for me as a retail investor, I don’t think having China > US makes sense.

China is still earlier in their development phase, so their capital markets are less efficient. This means that active investing and private asset classes are the key to outperformance. That works for someone like Temasek, but for retail investors who have full time jobs to tend to, and who don’t have access to the same private asset classes, it just doesn’t make the same sense.

So for our portfolio, we will allocate more to US than China.

Singapore – $35,000

• Singapore – $35,000
  • UOB – $20,000
  • MCT – $10,000
  • MIT – $5,000

I’ve seen a lot of articles bashing the STI recently. Now I get that, but I think that’s also missing the point.

The STI shouldn’t be compared to something like the S&P500, because it just doesn’t have that same tech component. The S&P500 has about 20% weightage to the FAANG right now, and if you strip out the FAANG, the S&P500 hasn’t really gone anywhere.

The main highlight of the SGX, is for the slower growth, mature yield stocks. Ie. The banks, the REITs, and the Temasek Linked Cos.

So instead of going for the entire index, we’ll just go for exactly what we want.

United Overseas Bank (UOB) – $20,000

It’s a pretty fair tossup between the 3 local banks, and I eventually settled on UOB because on a Price/Book basis, it’s cheaper than DBS right now. UOB is about 0.9x book value, while DBS is close to 1.0x book value.

It also avoids the HK exposure that you get from OCBC.

Ideally, I would like to add DBS too, but we’re constrained by the no more than 8 counters rule, so UOB will suffice.

Mapletree Commercial Trust (MCT) – $10,000

If I had to pick 1 REIT to get exposure to Singapore Commercial Real Estate, it would have to be Mapletree Commercial Trust.

You get exposure to the retail asset class (40% – Vivocity), business park (40% – Mapletree Business City), and office (20% – Mapletree Anson, BAML, PSA Building).

Retail probably isn’t going to do so great for a year or two, but the business park component should offset that to a certain extent.

At its current price of 1.92, it’s at about 1.1x book value.

I don’t think it’s an amazing price right now ($1.5 that we saw in April was an amazing price), but it’s still pretty fairly valued.

Mapletree Industrial Trust (MIT) – $5,000

I needed one more REIT to get exposure to the industrial asset class. It was a tossup between Ascendas REIT and MIT, but in the end I decided to go with MIT because of the data center exposure.

Data centers are hot as hell right now because of COVID driving all that cloud demand, and supply side, data centers took tight at least for the next year or two.

That said, MIT looks slightly pricey, so I only allocated $5,000 to it.

US

• US – $30,000
  • QQQ – $15,000
  • JP Morgan – $7,500
  • Exxon Mobil – $7,500

NASDAQ100 (QQQ) – $15,000

It has reached a point where most of the outperformance in the S&P500 is coming from Big Tech.

So I figured let’s not pretend anymore, and go all-in to the NASDAQ via the QQQ or VGT.

With our Singapore portfolio, we already have good exposure to old world industries, so we really want the high growth, tech exposure here.

This gives us exposure to some of the best names in tech globally, the Facebooks, and Apples, the Microsofts etc, all in one ETF.

JP Morgan – $7,500

I also wanted to get some exposure to the US banking sector.

Unlike in 2008 where banks were the ground zero, this time around, banks look far better positioned to weather the storm.

JP Morgan to me, is probably the strongest US bank right now. It’s been on the FH Stock Watch for quite a while now, and the recent Q2 results looked very strong.

Exxon Mobil – $7,500

I also wanted some exposure to oil.

With all the cuts to oil capex, we could potentially be setting ourselves up for an oil supply shock down the road. And with all that money printing and stimulus, it’s not hard to see oil really flying when the economy restarts.

We may be past peak oil, but I don’t see oil going away so soon.

Either way, with big oil at 50% or more down from their highs, I do like the risk-reward here.

To be honest all of the 4 oil majors (Exxon, Chevron, BP, Shell) each have their own pros and cons, so they’re all fine. I went with Exxon for this list because its US listed and easy to access. BP and Shell are on the LSE and not all investors have brokers to access that exchange cheaply.

Btw for those who need a good and cheap international stock broker, you can check out my recommendations here. For smaller amounts, Saxo is a good choice (there’s an account opening bonus now if you use this link – drop an email to [email protected] for the full steps), and for sums above US$100,000 Interactive Brokers is good choice.

China

• China – $20,000
  • Vanguard Total China ETF (3169) – $20,000

And finally, no portfolio we build will be complete without some exposure to China.

China is tough to get exposure to, so in the end I went with a slightly more obscure ETF.

I really like this one because it gives me exposure to both A and H shares, and is pretty diversified across the big asset classes.

Expense ratio also comes in at an acceptable 0.4%. For those who want something with a little more liquidity though, you can check out the iShares MSCI China ETF (2801).

Closing Thoughts: Lump sum or average in?

For those who are keen, you can check out Patron for my latest full Stock Watch, as well as my personal portfolio breakdown (updated weekly with position changes).

The way I see it, there’s just massive uncertainty over how the next 6 months plays out.

Not only that, there’s a biological, virus related component that is impossible to predict.

Human nature – at least we can understand to a certain extent. But how the virus evolves or mutates – that just can go either way.

Maybe the virus evolves into something that is harmless, and international travel resumes in Jan 2021. Maybe the virus evolves into a more deadly and virulent strain, and we go into deeper lockdown.

I don’t think anyone out there can say with certainty which outcome we’re going to see in the months ahead.

Sure, if you lump sum invest, you could make bigger money, but you’re also just taking a bet that the virus situation gets better, or that the stimulus will hold. That may or may not hold true.

So from a risk management perspective, I think averaging into this market makes sense.

Sure, you may make less money, but this also allows you to allow events to unfold, and commit capital on a regular basis.

Makes the most sense to me at least.

As always, this article is written on 17 July 2020 and will not be updated going forward. You can check out Patron for my latest thoughts, my Stock Watch and Personal Portfolio.

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