Just added $5000 into portfolio, bargain hunting!

I couldn’t resist it. I had intended to place most of this latest investment of $5,000 into DBS Enhanced Income Fund. But the crash in the US stock market yesterday (4^th August) and the subsequent crash in Asian markets and the Singapore market today caused me to change my mind. Instead, I placed all $5,000 into equities.

If I had the option to postpone my renovation and move to next year, then I would be using the amount I have placed into the DBS Enhanced Income as well into equity funds now. Instead what I have also done is to switch around $14,500 worth of my Fidelity High Yield Bond Funds into equity funds as well.

Thus, my transactions for today (already placed) are as follows:

Buy Aberdeen Asian Smaller Companies - $4000

Buy Aberdeen Singapore Equity - $1000

Switch sell Fidelity High Yield, buy Fidelity Asian Special Situations. (intra switch) – around $14,500 worth (full switch of all units from one fund to another).

Nevertheless, its times like this when I am glad I do have a diversified portfolio which includes both bonds and funds like the Man AHL Trend Fund. Thus, when the market is high by a drop like yesterdays, then I can bargain hunt. Thus, I am increasing my weightage towards equities.

There wasn’t really any particular event that was driving down the US market. A selloff became a rout and before and the US market ended the day down over 500 points, over 4.3%. Asian markets today are reacting to the drop and faring just as badly, with the STI index down 100 points at midday. As I don’t see any major change in fundamentals, the drop makes valuations all the more cheap and thus it’s an attractive time to enter the market, which I am now doing.

An interesting mention about the Man AHL Trend fund. I must admit I was not very impressed by its performance so far as it trended down since the start of the year. It was a managed futures fund which was supposed to be lowly correlated to equity markets movements or even opposite. However, over the last one month, it was up more than 5%, and I expect that it should do well during this couple of days when there is so much volatility. So, it shows that it can be very useful to be diversified into different assets. Thus, when one category of your assets fall and you want to pick up cheap bargains there, you have the leeway to shift from other assets into that asset. This is just like how I am shifting assets from bonds into equities right now to take advantage of the cheap markets on offer now. The more panic there are in markets, the more we need to keep a cool head and look out for bargains.