Sunday, September 16, 2012

Investment Strategy Review: Portfolio Construction

I believe that in managing our portfolio, we should treat it like running a business. Like any properly run business, there should be clear strategic plans to define the business and set the direction for growth. This also helps us make sense of what we are doing with the business and make better informed decisions with regard to management of the portfolio. I have already defined certain rules for my portfolio construction in a previous post. In this post, I shall look at the overarching strategy in my portfolio construction to better structure my portfolio and facilitate decision making.

Improvising from a concept I learnt from investing in unit trusts, I will divide my portfolio into core and non-core assets. Core assets refer to companies which I see potential long term growth and returns. These are companies which I have no intention to sell and will hold on to them as long as their fundamentals remain sound. Non-core assets refer to those that I purchase based on their short to medium term outlook, where the stock seems to be value for money and there are near term catalysts to be exploited. I will further elaborate on these 2 asset classes below.

Core Assets
Under the core assets, I have set aside 3 main themes for driving long term growth for my portfolio. The first is a dividend with growth strategy. These are typically assets that yield 3-5% dividend yield with some growth potential. They are generally more stable and have regular and predictable dividend payouts. The next 2 themes are based on Asia's growth story in the next 2 decades. The 2 key growth drivers are of course China and India. For China and India, I mainly focus on broad retail consumption and property themes. These themes are broad based and will generally grow with the economies of the 2 countries as compared to niche sectors which I may not be familiar with. The breakdown of my core assets based on the 3 themes are listed below.
  • Dividend with growth 
    • Boustead SP
    • ST Engineering
    • Kingsmen Creative
    • STI ETF
  • China Growth
    • CapitamallsAsia
    • Capitaland
  • India Growth
    • Ascendas India Trust
Non - Core Assets
Non-core assets are investments that I purchase based on certain near term catalysts or attractive pricing of the stock. I am prepared to sell off these assets more readily if the stocks have appreciated substantially or if I see better value elsewhere. These are also stocks I will consider selling if I need to raise funds to top up my war chest.
  • Non-core Assets
    • Ascott Reit
    • OKP
And that basically outlines my investment strategy for portfolio construction and management. I will continue to build up my portfolio based on these broad classifications and review the strategy from time to time. I am also looking to inject property into my assets in the mid-term over the next 2 to 3 years.

1 comment:

  1. Managing your assets carefully will bring good fortune to you and your business.
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