2020 - Year of Awakening

Year 2020 will be a memorable year for all due to the covid pandemic, it has impacted almost every aspect of one's life and has changed perspective of many, whether in daily life, investment, career, family, etc. Whatever it is, continuous learning and adapting to changes are the most important lesson in life.

2008 financial crisis has taught me to only invest in fundamentally strong companies and ever since I have been avoiding highly geared companies and those weak in financial position and cash flow. I have also started to invest in REITS for recurring and stable dividend income as well as what is known as value stocks with strong free cashflow and reasonable (>4%) to high(>6%) dividend yields. I must say I had enjoyed a smooth sailing without much volatility and performed portfolio re-alignment once a while.  

Now year 2020 has changed what was thought to be rather resilient stocks. Few important lessons I learnt:-

• The pandemic has accelerated the change in business model and adoption of technology Eg retail & office REITS once thought to be stable are affected badly, even the weaker healthcare Reits such as First Reits is hit extremely bad. In addition, during the pandemic many Reits tried to built up their cash reserve by reducing dividend, some were even doing cash call/rights issue, not only I didnt get the dividend I used to receive, I need to utilise my reserve to avoid dilution :(
• My portfolio was heavy on value and income stock. Some value stocks that look cheap when I bought them, looks even cheaper. I am referring to Chinese banking stocks - looked cheap then with good dividend yield, now even cheaper. The hard truth is these stocks are perceived to be low growth stock. When times are bad, bank face high default risks, in addition, these state controlled stocks are vehicle used to support and save other businesses when times are bad. Hence, they do not have the total freedom and theirs' deep value become deeper. 
• The anti trust law and propaganda happening everywhere has resulted in disruption in growth of technology giants. More so in China where policy dictate whether a person or a company still has the future once perceived to be very bright. Alibaba/ANT serves as good reminder not to bet big in a single Chinese stock no matter how bright the future looks.     
• Reinforced my own preference all this while - avoiding airline stocks whether economy good or bad. I always think this industry is a very tough industry with fierce competition, highly impacted by fluctuation in oil price, highly geared.. yes, I may not understand well about this industry but I just do not have faith in them, May be I always thought of Malaysia Airline as an example.  

What have I changed in 2020:-

• accelerated my learning and adoption of ETFs - which I find suits me quite well, more diversification, less volatility and seems able to achieve reasonable growth in the long run
• reduce exposure to a specific country, hence reducing risk of a particular currency devaluation
• realignment between income, value and growth stocks to achieve a more balanced portfolio 

I am happy that there are some good picks in 2020 eg Eita, HLInd, Frencken and Tech, Income & Growth ETFs as a result of the realignment, of course partly due to luck as in the case of Eita for its bonus issue exercise.

No matter what crisis or events, it will still recover. Therefore, we just need to ensure we or the stocks we invested survive the shock, then everything will be fine.

Wishing all of us a safe and fulfilling 2021.