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Anonymous

Asked on 06 Dec 2019

How do I diversify my portfolio?

Should I invest most of it with SGX or can I explore US and HK stocks

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There is no one size fits all solutions, but some of the ways to diversify your portfolio include

  • Sector: Don't just buy banking stocks, for example

  • Country/Region: Over concentration into a single country is very high risk

  • Asset type: Don't just have stocks in your portfolio

  • Market cap: Have some blue chips for a certain level of stability, but small cap stocks can also provide much needed growth

These should be good enough to get you started.

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Daryl Liao, Fti
Daryl Liao, Fti
Level 7. Grand Master
Updated on 09 Dec 2019

You can buy various countries ETFS and that will achieve diversification for that purpose.

I used to have a mental block that i should only buy Sg stocks as i could scuttle butt here.

But in recent years i realised the quality of SGX companies are just not there. The market is simply not big enough for them to grow and once they hit a certain size, the founders of good companies start to slow down.

I personally prefer the US and HK market is much bigger and it'd be a better place to start with.

Some resources for individual stocks:

https://www.hkexnews.hk/index.htm

https://sg.morningstar.com/ap/main/default.aspx​​​

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Bjorn Ng
Bjorn Ng
Level 9. God of Wisdom
Answered on 07 Dec 2019

Depends on your personal risk profile. A very general guideline that I read from Hardwarezone when I started investing is to use 110 - your age = % in stocks. For example, if you are 30:

110 - 30 = 80% in stocks, 20% in bonds. As to the breakdown inside, you can also put a mixture of growth investing, value investing and dividend investing. So the idea is not to diversify in all industries and countries, it would just be asset classes where all your assets are the best of the best in whatever they do.

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Jonathan Ang
Jonathan Ang
Level 7. Grand Master
Answered on 06 Dec 2019

I do not purposely diversify based on countries..

If you look at the top 50 companies in SG and top 500 companies in the US, they are worlds apart..

You can be the best in SG, but not best in the world. But if you are the best in US, you are the BEST in the world.

I would want to best the best companies in the WORLD (regardless of exchange) then I would diversify based on different industries.

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I dont personally diversify based on exchanges. I prefer diversifying based on the best comapanies regardless of which exchange they are on.

If you handpick out quality companies, invest in them at the right price and always keep some portion of cash to invest more during dips. Never buy everything in the first tranche, split into 2 or 3 entries to average down cost price

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Eric Ong
Eric Ong, Project Analyst at 8Bit Global
Level 6. Master
Answered on 07 Dec 2019

Definitely explore more countries exchanges. US and HK exchanges have a lot of companies that could grow bigger and faster as their home market is already bigger than Singapore, and a lot of them even venture out of home market and grew even bigger as well.

I personally think diversify in term of sector and nature of the business.

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Choon Yuan Chan
Choon Yuan Chan
Level 9. God of Wisdom
Answered on 07 Dec 2019

Just buy the exchange trade funded (ETF) of the various stock indexes to each particular country. For example USA, get the S&P 500 and NASDAQ ETF, while for HK, its the hang seng index.

You will achieve diverisification magically by buying these 3 counters

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Wilson Nid A Break
Wilson Nid A Break
Level 9. God of Wisdom
Answered on 06 Dec 2019

Diversification by:

  1. Sectors : Energy, Utilities, Consumer staples, Finance, Transportation etc

  2. Geography: Local, US, UK, HK etc

  3. Currency: SGD, USG, GBP, HKD etc

  4. Type: Growth, Dividend, Dividend Growth

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Approaches to diversification:

  1. By geographic region

Will suggest you start off with SGX and once you're comfortable and understand how the exchange landscape works, you can start exploring other exchanges to trade US and HK stocks. You may wish to note that some local stocks have exposure to properties or operations overseas also.

  1. By sector

You may wish to explore a variety of sectors such as the finance sector(banks) and the manufacturing sector(e.g semiconductor) and even REITs(property).

  1. By size

Larger companies(otherwise known as blue-chip stocks) tend to have more stability in price(limited capital gain potential) but a decent dividend yield. Smaller cap stocks on the other hand, have more upside potential when it comes to price but dividend yield may be limited or non-existent. A more risk-averse approach would be to have a larger composition of blue chips in your portfolio and vice versa. ​​​

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You diversify your portfolio by investing in assets across different class, currency, and sector!

This can be done with SGX or across various stock exchange. For a start, I will suggest for you to invest in an exchange that you are most comfortable and knowledgeable in.

If you have time, then consider exploring the other exchange. However, these are often made slightly more difficult as to follow up with the trends, market sentiments, etc.

If you don't have time, invest through a diversified fund for a simliar result. For the same capital, you buy into a properly diversified portfolio across different asset classes.

Here is everything about me and what I do best.

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