The chart above is a snapshot of my current portfolio broken down by my individual investment holdings. The lack of diversification is something that I am aware of and will be taking active steps to address. For all our learning purposes, I will be sharing why my current portfolio is not optimal and how I intend to rebalance my portfolio to achieve a more diversified portfolio. From a portfolio construction standpoint, it is not a optimal for various reasons.
Firstly, modern portfolio theory calls for a diversified portfolio of bonds and equities that lies on the efficient frontier. The above portfolio is 100% skewed towards equities without any exposure to other asset class such as bonds and gold that offers hedges against equities in times of a downturn.
Secondly, there is no diversification across industries as my portfolio is >90% skewed towards the real estate sector. This means that my portfolio is susceptible to sharp losses in times of a real estate bubble.
Thirdly, there is limited diversification across geographies. 100% of my holdings are Singapore listed companies although it can be argued that there is some form of geographical diversification given that some of my holdings does have assets in other geographies outside of Singapore.
With that in mind, this is how I intend to rebalance my portfolio going forward. Firstly, although I will be looking to add more bonds, I would not be allocating a huge component of my portfolio towards it as we are currently living in an era of negative yielding bonds. In my opinion, I am more inclined to diversify towards other asset classes such as gold and even crypto given the ultra-low returns offered by government bonds. In terms of diversification within the equities asset class, I do intend to invest some of my money in technology companies as I do believe that is where the growth are moving forward.
Given my relative inexperience with investments, I would be keen to hear more about your opinions! Do comment below or drop me an email to discuss.