Random Post #3 – Staying the course

Now that I’ve finally managed to make all of my large initial trades, the time has come for me to keep calm and panic!

keep calm and panic

Just kidding, now is the time to stick to the plan and ignore the noise which is easier said than done. By now everyone knows the famous Mike Tyson quote: “Everybody has a plan until they get punched in the mouth.” — It is critical to stay on target. (Needed to insert some Star Wars reference into this).

Staying the course is possibly the most important aspect of passive investing. Every month or less, checking on your portfolio and looking at the percentage allocations of where they are meant to be, and what they currently are. You have two choices to make – either buy more of the under-performing funds with your incoming salary, or sell off some of the top performing so that you can purchase the under-performing. I’ll give you one other option – do nothing. Even up to a whole year you may wish to just sit it out. There’s a good chance it will correct itself again automatically. There is some quote about markets being schizophrenic in the short-term but in the long-term common sense will prevail.

These are my target ratios:

A35.SI = 36%
ES3.SI = 10%
VDU.SI = 15%
VFV.SI = 35%
Cash = 4%

But this is more what it’s looking like right now:

A35.SI = 33%
ES3.SI = 10%
VDU.SI = 14%
VFV.SI = 34%
Cash = 9%

As you can see, I’ve got more cash on hand than I would like (but it’s also giving me some peace of mind right now). Also because of the recent Oil price plunge, my VFV and VDU have been suffering and have dropped lower than what I initially paid. By the way, I never actually got down to 4% Cash as planned – I am still pending to buy more A35 bonds.

So what will I do from here? First of all I’m going to wait until I get paid next in a few weeks time. Then I’ll re-calculate the situation and top-up with my salary what is currently the furthest off my planned allocations.

At this stage things would need to be quite desperate for me to sell off one ETF to buy back another. Although if markets really dropped by 40%, then I may not have any other chance but to sell some of my bond ETF’s (A35), to re-purchase those equities ETF’s (VFV, VDU, ES3) at a discounted price. Markets being markets, in time they should recover and go on to set new highs. It may take a few years, but this is a long term plan – not a get rich quick scheme. Definitely a get rich slowly scheme though!

Just to be clear, if the price of my equities ETF’s keep dropping, I will simply purchase more of them at a discounted price with my incoming salary (touch wood on remaining employed!). Even if my salary isn’t enough each month to make up the gap, I will continue to do so until my percentages are really way off, at which point I would have to take the more drastic action of selling off some of my bond ETF’s to purchase majorly discounted equity ETF’s. When the market rebounds, it will give my entire portfolio a nice turbo-boost as those cheap ETF’s increase in value faster than what the stable bonds would.

Remember that every time your buy or sell ETF’s you will be paying commission fees to your broker. So unless you are retiring, you really don’t want to sell your ETF’s unless absolutely necessary. I am looking forward to the day when I need to sell some of my equities ETF’s because they have out-performed the bond ETF’s and my salary can’t keep topping up the difference! Being a passive investor means keeping your costs as low as possible, and fees are definitely part of it.

So the lesson is – ignore the noise, and stick to the plan! (And don’t pay too much in commission fees).


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