My kids’ portfolio outperformed their Dad’s (8 Oct 2010)

My kids’ accounts are doing pretty well right now. Both are now well in the black when they were in the red last year. Funny, how a strategy of not looking at an account at all also helps investment decisions. In fact, I am not sure if I should be ashamed or not, but their portfolios are doing better than my own! They are up 13% over 3 months, and 24.3% over 1 year. My own portfolio, which I manage more actively, is up 11.5% over 3 months, and 17.8% over 1 year.

To be fair though, I must defend that my own portfolio has bond funds, while theirs is 100% into equity funds, and all of it into just two funds, one Asia equity, the other, Singapore equity. But, the good thing about managing a portfolio where your kids couldn’t care less how you manage it, is that I adopted a much more passive strategy. No active management, just add on some money into the same two funds maybe once or twice a year (usually around Chinese New Year Time or their birthdays).

This means that despite all the volatility this year, they didn’t try and time the market in any way, they didn’t go in or out, and they didn’t have any hot picks or such. (Unless Asia is considered a hot pick). Maybe because it was meant to be truly long-term investment, their Dad (me), also resisted trying to do any of the kind of fancy portfolio allocation, market timing, favorite research picks either. But because it was meant to be a really long-term investment, I could afford to go 100% into equities, confident that any market cycle correction would even itself out.

To be fair also, it would have been hard to pick the best-performing market and funds each quarter. Let’s take a look at the 3rd quarter which has passed. It was an excellent quarter for most markets in general. The five best performing markets (all in Singapore dollar terms) within this quarter (based on the 22 markets we track) were as follows:

Thailand          +23.2%
Indonesia        +15.0%
Australia          +14.5%
Brazil               +13.8%
Korea              +11.8%.

So, if you had a single country fund investing into any one of these markets, you would be very happy. Investors placing money into Japan on the other hand, would have been sad, despite the strength in the Japanese yen. The Japan market, based on the Nikkei 225 index, was the only negative market in 3Q, down 0.1%, in Singapore dollar terms.

Ultimately though, have a diversified portfolio, have a good investment strategy, and be disciplined. Even though we have had everything from a Euro financial crisis, China tightening, to the shadow of a US double dip recession (which didn’t) scaring investors, most markets are in fact up for the year. Earnings will carry us into the next phase, but don’t get too greedy. I am bullish and wish I had more money to invest into markets, but despite that, I will still strive to maintain a balance between my bond funds and my equity funds. So, if as we predict, equity funds go into a big bull run, then at some stage, I will still be disciplined and take some profit out from my equity funds, and place them into my bond funds. (And I will probably end up underperforming my two kids’ portfolios over the next two years!)