By elmads

Table of Contents

1. INTRODUCTION
2. PORTFOLIO
3. COL FINANCIAL PORTFOLIO
   • PORTFOLIO WEIGHTING BY INDUSTRY
   • PORTFOLIO WITH CAPITAL GAINS & DIVIDENDS
   • HISTORICAL RETURNS
   • INFLATION ADJUSTED RETURNS
4. SUMMARY

INTRODUCTION

“I don’t want to be rich, I just don’t want money to be a problem”.

-Myself

Let me explain, we have different aspects of our human well being. Physical, Social, Developmental & Activity, Emotional, Psychological, Life Satisfaction, Domain Specific, Engaging Activities & Work, and Economic.

And with confidence, I assure to each and everyone reading this that we will definitely encounter problems in one, if not all, of these categories of our well being. At the end of the day, problems are and will always be part of our human lives.

Eliminating and preparing for a possible economic/financial problem is what I deem one of the top essential things that I must do, because most of the activities and endeavours we take in our daily lives are mostly directly and/or indirectly tied to money.

• Directly correlated: Food, Shelter, and Clothing
• Indirectly related: Love & Belongingness, Self esteem and Self actualization.

I explained this further, on how money and Maslow’s hierarchy of needs correlate with each other on my blog titled “The Motivation of Life and Money Management”.

The word “Rich” is only based on the quantitative amount of money, while the word “Wealthy” is the qualitative amount of happiness, fulfilment in life and comfortability that money can somehow provide and supplement.

Investing is the path I choose to be wealthy, it is also the path that I know could open a lot more of doors to learnings, growth and opportunity for me today, tomorrow and forever.

PORTFOLIO

This blog is a 4 part series of my portfolio, where I break it down based on my brokerage account in order to have a clearer understanding of its performance and the reasoning behind my investments.
              

Note: I’ll not be disclosing the companies I hold in my portfolio, instead I’ll be showing the industry and sector where the companies belong. My rationale behind this is that, I do not want my readers to just purchase the stock of a company just because I purchased it, or subconsciously be influenced by it. Most especially if you have not done your own due diligence of researching and studying the company.

One of the most important mindset in investing is conviction, if an investor just purely copies someone else’s investment without understanding it and cementing their own conviction, then that could spell disaster for that investor. Like, selling at a substantial loss just because the stock price of the company they copied from others turns south, and they didn’t posses any understanding and confidence of that specific investment.

My focus here is to share how I think and take actions in investing, and also to prove that average individuals, like myself can actually invest, be an active investor if they want too, and gain decent investment returns as well . A high IQ and a lot of money is not required in starting your investment journey. I’ve shared already my initial investing journey on my solo podcast, which you can check it on the link here: “Person Finance & Investing – The Start of My Journey”

Furthermore, the core of making an investment portfolio is always based on our financial goals. We should, as much as possible, have a reason before starting our investment journey. This is also where our own investment strategy will rely upon.

I’ll share to you a popular question that I’ve always encounter from starting investors, “When is the best time to sell my investments?” I always answer this consistently, by saying;

“when you have already achieved the returns, and the amount of money you need, based on your initial reason why you’ve started investing that money in the first place.”

This is into consideration that you already know what type of strategy you are taking for your investments, such as Cost-Averaging, Buy & Hold, Value, Growth and others more. But, if you’ll be asking me when to sell a stock of a company, then the answer I’ll be giving you will be in a value investing perspective. This will be a good topic for another blog.

Moreover, I segmented my 2021 portfolio blogs into 4, which are all based on my brokerage accounts namely; Col Financial, Vanguard UK, Freetrade, and The Overall Financial Asset Portfolio Performance (where I merged my 3 accounts into 1)

Without further Ado, I’ll start with my;

COL FINANCIAL PORTFOLIO

“COL Financial Group, Inc. (COL) is the fastest growing online stockbroker in the country today with over 200,000 customers and Php 62 billion in customer assets established in 1999.

COL being the #1 Online Stockbroker in the Philippines prides itself in making investing in the stock market for everyone by sharing its knowledge and market expertise through its user-friendly online trading platform.

This offers access to expert opinion and comprehensive research to help the investor take advantage of stock market opportunities. In addition, continued education is developed through readily available seminars. Dedicated customer support is also provided to guide customers in their investment decisions.” – Taken from their webpage

I started investing with Col Financial back in 2013, with the help and encouragement of my father. I chose their services because my dad and uncle have used Col financial for their stock market investments already. That’s an added trust and confidence on my side. Col Financial have been my broker since then, and my direct investment access to the Philippine market. I actually still have the receipt of my account opening with them, see the photo below.

Just a quick background about the Philippines

The Philippines is located in the South East Asia region of the world and is included in the emerging markets. It is a manufacturing and agribusiness country, doing manufacturing, mining and mineral processing, pharmaceuticals, shipbuilding, electronics, and semiconductors as their focus. Their service sector is growing fast thanks to the BPO driven sector (Business Process Outsourcing).

The Philippine market have now opened up to international investments to spur further growth. Recently, there was a bill passed by the senate allowing 100% foreign ownership of public services companies. This is good news for the markets because this will encourage more capital in flows on these local public services companies. This added foreign capital can be used to expand the their business operations through building more projects, hiring more employees, digitalization, other investments and reinvestments.

Economic analyst forecast a robust growth for the Philippines of around 6% for fiscal year 2022. These are the simple reasons why I’ll keep on investing in the Philippine market. Also, there are certainly greater opportunities in this country, in terms of better investment returns and undervalued companies, not unlike their developed nation counterpart, such as the United States of America. Don’t get me wrong, there are thousand of great companies in the developed countries, but most of them are valued higher than what their companies should be valued for. That’s only in my own opinion, which will most of the time be wrong, but I comfortable with that. I prefer more certainty and safety in my returns rather than having too much optimism of future growth without strong fundamental factors that can cement that projections. At the end of the day, returns are based from the price point we bought and the disparity from the company’s intrinsic value.

My Portfolio Weighting by Industry

1.) Property – My largest holding in this portfolio is the property industry (I am only invested on one company within this industry, then a small portion on REITS).

My reason behind this investment is plain and simple, property has always been an integral part of any economy. Demand will never fade away, but supply for land and property will always be finite. No one in this world can make more land, sure they can make hi-rise buildings, but that’s just it. The more the population balloons, the more demand with less supply will occur.

• My Mistake: No one expected that a once in a generation pandemic will occur back in 2020, which caused closures of most business due to lockdowns. Anything related to property were hit, like rental property operations, malls, hotels and property purchases. This perfect storm caused for most property developers in the Philippines to generate an income way less than their 2019 income levels, at approximately 50% decline. My mistake here is not about investing into this specific company before the pandemic hit (I purchased this business at late 2019), just like what I’ve said, no one could have ever predicted the pandemic. My main mistake here is, I pulled the trigger early without even having enough basic knowledge in reviewing the financial reports and valuations of a company that time. What I did here was “doing by learning”, which is not bad, but I still could have done better, like doing a 3 scenario valuation analysis (Asymmetric Return) and a lot more.

Since my initial purchase in this specific property company in 2019, my returns have still been in the negative territory. As of 2021 year end return, its market value lost -19.00% (including dividends). That’s 2 years of my capital investment being unproductive. The silver lining here is that it pays a dividend of roughly 1.5% of my invested capital on this company.

Probably you’re thinking, “why not just sell it?” well to be fair, the company has a very strong balance sheet which can weather an economic storm, and I bought it at below liquidation value. Meaning, the market capitalization is below the equity (equity = net worth in personal finance) of the company, that even if they go bankrupt (in the worst case scenario, but this is unlikely because this company has a strong balance sheet, low debt and high current ratio), I could still receive my capital that I have invested. Also, I can see further growth for the company within their industry/sector based from their, investments and reinvestments.

Its downside, their returns compared to their equity and their capital invested are not doing well when compared to their competitors within the industry.

• Lesson Learned: Losing money either, realized/unrealized, will always be a part of the learning process in investing. Just never stop learning and improving.

2.) Utilities – My second largest holding (I am only invested in one company within this industry).

The time I bought this company was during the March 2020 market crash. I bought this company at a discount to my computed intrinsic value of the company. I was so happy when the crashed happened because I always have and still has the I conviction on this company, and it also gave me one of the greatest opportunities into buying it at a discounted price.

This business is a utility company that distributes electricity in Manila (capital city of the Philippines) and its neighbouring provinces. Electricity is a necessity that everyone needs even if calamities and economic downturns happen, a no brainer investment. Plus, this company is a monopoly in their industry as it operates on an area where 45% of the country’s GDP is generated, not to mention their great financial health.

• My Mistake: I did not go all in when it hit a significant number based on my valuations. During that march 2020 crash, I told myself that it will go down even further, and I just need to wait. Unfortunately, it did not occur and I missed out buying at that very low price levels. Whew! Nevertheless, my cost basis for this company is still at a decent discount from my calculated intrinsic value.

This company had a 2021 year end market value return of 22.98% (including dividends).

• Lesson Learned: Value cost average, keep on buying the company stock once it hits your buy price (including the margin of safety). Keep on buying on tranches if it keeps on falling down. Personally, go all in if the margin of safety from its intrinsic value is more than 30%.

3.) Telecommunications – My third largest holding (I am only invested in one company within this industry).

I also consider internet as a necessity, all of our access points and transactions are done through internet. Additionally, communication is one of the drivers of growth of any economy, the faster we can communicate from one another, the speedy information arrives, the more actions can be taken, hence more productivity.

Furthermore, there are two companies that dominates the Philippine telecommunications industry. The reason I choose this one from the other is due to their heavy investment in financial technology and technology start-ups. Plus, they have this financial technology investment that has been widely used in the Philippines, which could further increase their product portfolio and revenue. Although at the moment, this financial technology arm is only a tiny portion of the company’s revenue pie, but I am bullish for its future growth and trust its story moving forward. Other than that, both telecommunications company duopolies are actually almost at par in terms of their financial health and profitability.

Oh by the way, there are two telecommunication companies who recently entered the market. I like competition because it spurs thinking and innovation between the competing companies. This will boost growth for them if done right and it is also a plus for consumers as companies battle for a larger piece of the market share. Competition also grants consumer centric approach, but not all the time though. This company I have invested has been reinvesting heavily back into their business in 2020 and 2021, due to competition. They are massively building more tower networks for the 5G push and adding newer plans for the different internet needs of the masses.

• My Mistake: Mid year of 2021, I committed a grave mistake that caused my returns. I had a sizeable amount of money to invest that time, instead of adding it on my existing shares of this telecom company, I diversified and invested it on the property company that I held already. My thinking back then was to equalize the weight of my top 3 holdings so as to diversify it properly. This caused me a lot of gains because this telecom company had a 2021 year end market value return of 77.54% gains (including dividends), while my property company stayed at negative price levels. My total 2021 Col Financial portfolio returns would have been larger if only I placed my resources on it during the time where its stock price was below my calculated intrinsic value, and that was again during the mid year of 2021.

• Lesson Learned: diversification is essential only to some extent, follow your own instinct, back it up with your research and conviction. I had more conviction on my telecom investment, but I prioritized diversification. A committed a mistake of omission.

4.) Financials – I am invested on 2 bank companies.

Banks are essential, they are the custodian of money, middleman of transactions, provides added capital for growth initiatives of businesses which helps economic growth, advices individuals and corporations alike in finances and others more. They are essentially the oil of the gears of the economy, because they handle the capital in flows and out flows, which are needed for various purchases and spending, either on an individual level, corporate level or government level.

A.) The first bank I’ve allocated my capital is a bank that is continuously and heavily investing their capital to completely transition into becoming a digital bank. They understand how the traditional economy will eventually transition into a more, if not fully, digitalized economy or the mix of both. Due to the pandemic, the usage of digital transactions have increased, and people now understand its importance more than ever.

Had a 2021 year end market value return of 86.84% (including dividends).

• My Mistake: I did not commit any mistake with this, but I regret only having a small amount of capital when it was still below its historical and its peers “Price-to-Book Value”. This is a relative valuation that I always use with banks.

• Lesson Learned: Opportunities rarely comes, and if does, take it without any hesitation. The problem is if there’s no buying power. Storing cash for such opportunities is important for situations like this.

B.) The second bank I’ve invested is one of the oldest banks in the country. I only have a small amount of money invested with it.

• My Mistake: This bank has good fundamentals/financials, but I’m just holding it because I bought it at the pandemic lows. There are other companies that I like and simply understand than this. I might sell this holding when I find an opportunity in one of the companies in my watchlist.

Had a 2021 year end return of 40.36% (including dividends).

• Lesson Learned: Learn how to let go, don’t hold on companies just because it went up. Knowing each and every investment is very important.

5.) Consumer Defensive – I am only invested in one company within this industry. An investment that should be a defensive play as supermarkets and groceries are essential even during the lockdowns. Unfortunately with this company, it’s a tad bit different.

The company I have invested in this industry is a supermarket retailer. The problem is they also have Department stores and Hypermarkets (mixed of supermarket and department stores) in their streams of revenue. As the pandemic hit, their department stores hypermarkets go closed, both of it consists approximately 65% of the company’s total revenue. Only their supermarket segment had operated during the lockdowns, which is 35% of their revenue. This caused a substantial decline in their overall income, pulling them into unprofitability in fiscal years 2020 and 2021. Although, I bought the company below liquidation value, has a good balance sheet and is expected to eventually recover. Still, the said recover might take a longer time.

• My Mistake: I should have cut my losses earlier this year, and allocated it on my other top holdings when it was still at my buy price levels. Currently, I am still holding this company, and I am just waiting for further opportunities to reallocate it into a better and undervalued companies on my watchlist.

• Lesson Learned: Cut losses, the story of the company has changed already from the first reason you’ve bought it, or if market conditions could still hamper the company’s growth or recovery.

PORTFOLIO WEIGHTING

I currently hold 7 companies and 1 REIT in my Col Financial Portfolio. I plan to reallocate some of its capital in the future. Below is the comparison of my portfolio weighting.

The left pie graph is the capital weighting excluding capital gains/losses, while the right pie graph includes the capital gains/losses.

• Property – from 37% to 27%, down 10%
• Utilities – remained at 29% portfolio weighting
• Telecom – from 19% to 28%, up 9%
• Financials – from 9% to 12%, up 3%
• Consumer Defensive – from 6% to 4%, down 2%
• Cash – remained the same at 1%

My Property and Consumer defensive company investments both have negative returns on my portfolio, which caused the decrease in the said weighting. While, most of my remaining holdings had a significant increase, which substantially off set the poor performance of my property and consumer defensive company investments.

HISTORICAL RETURNS

This is the historical performance of my Col Financial portfolio since I started investing in 2013. While on the right hand side, you will see the performance of the Philippines Stock Exchange Index, which consists of the top 30 companies in the Philippines based on their market capitalization.

The Average Annual Rate of Return is the average annual amount of cash flow generated over the lifetime of an investment. My aim has always been more than 10% per year over a long period of time. If I’ll be able to do it successfully, then I’ll be doubling the capital I will be investing every 7 years.

Benchmarking is a good practice in investing, this is in order to know how one’s portfolio is doing compared to a specific index. In this case, I compared my Philippine portfolio returns to the Philippines Stock Exchange Index returns.

What happens if you’ve invested 100,000 PHP on my portfolio compared to a mutual index fund that tracks the Philippines Stock Exchange Index? See the photograph below.

You’re initial 100,000 PHP in 2013 will be worth 303,909.77 PHP in 2021.But, if you’ve invested that same amount of money on a mutual fund that follows the PSEi (Philippines Stock Exchange Index), then the amount would be roughly around 122,539.39 PHP. That’s a whopping 181,370.39 PHP difference from my returns to the PSEi.

Just to add, my returns are not stellar, I feel that I just got lucky with it to be honest. I have trillions more of things to learn. There are actually a active Filipino investors who have been doing monumental returns yearly, like more than 15%, I’ve even seen someone who did more than 50% just for his 2021 returns.

Nonetheless, what matters is that we focus on ourselves, into becoming our best investor version of ourselves. This is in order for us to reach our investment goals either at our expected timeframe or better, earlier than expected.

Furthermore, below is a deeper breakdown of my returns showing my each year’s dividend gains, capital gains and the accumulated amount of money I have invested. What I did for the “amount of money I have invested”, I added the previous years to the current year. For instance, if I’ve invested 1 PHP in 2013, then 1 PHP in 2014, what I placed in the amount of money invested in year 2014 is 2 PHP (adding the current year to the previous years). So, for my 2021 “amount of money invested”, that’s the overall accumulated capital I’ve invested since year 2013.

As you can see from the above graph, compounding interest is doing its wonders. It’s true that the more you are able to invest, the larger will your returns be. To give you context, 10% of 100,000 PHP is 10,000 PHP, while 5% of 1,000,000 PHP is 50,000 PHP.

Nonetheless, what people do not understand about the power of compound interest is “TIME”. Investing a small sum of money consistently for decades is a million times better than investing a large sum of money just within 10 years.

Just like what Morgan Housel said in his book, the Psychology of money. He stated there, that Warren Buffett’s skill is investing but his secret is time. This is him pertaining to the reason why Warren Buffet has been able to accumulate massive amounts of wealth all through out his investing career.

This is also the reason why the popular saying “The best time to invest was yesterday, the second best is today” is 100% totally, utterly and undeniably true. (That’s a lot of superlative adjectives already to emphasize my point! haha!)

If you want to understand more about compound interest and simple interest, you can check out my blog titled “Simple & Compound Interest”

INFLATION ADJUSTED RETURNS

One of the reasons why we need to invest is to supersede inflation, because inflation is the hidden thief of our hard earned money. The above photograph is the real returns of my portfolio and the PSEi when inflation is factored in.

Overall I have 3 tiered goals for my returns;

1.) Minimum 10% on my returns, better 15%, best is more than 20%

2.) Beating the average index returns over a long period of time.

3.) A consistent beat on inflation.

To sum it up

The returns I’ve accumulated from 2013-2019 is just due to pure luck, because I never had any intermediate knowledge about investing during that time. I was just doing peso cost averaging on companies where, I purchase their products and services, and also that I know will always have demand for it. Plus, I consider myself fortunate because during that time period, the Philippines was doing well economically that’s why the market also did fairly well. Then, from late 2019 onwards, that’s where I started studying and researching about active investing, most especially value investing. The principles and strategy was just in sync with my personality.

Nevertheless, I still have trillion more things to learn, improve and hone in this investing journey of mine. I will always make a lot of mistakes, but I’ll try to make sure that these are the mistakes of omissions rather than commissions. Also, a kind of investing mistake where, If I’m right I’ll have massive returns, and if I’m wrong, I’ll only have not that large of a decline in my over all returns.

I hope you’ve learned something out of this and enjoyed reading it. Next week I’ll be posting my Vanguard portfolio performance, where I still invest and practice cost averaging methods via mutual index funds.

Let’s go INVEST!!!!woot woot!!

Knowledge is my Sword and Patience is my Shield,

elmads

This blog is for informational purposes only and not a Financial Recommendation. Not all information will be accurate. Consult an independent financial professional before making any major financial decisions.