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QuestionsCategory: Portfolio ManagementPortfolio Position Sizing
April Lo asked 2 years ago

Hi Victor & Rusmin,
I am a student with less than $10k capital in hand. Would you recommend me to invest all of my capital into a single great company (after doing due diligence) or diversify into 2 or 3 companies with equal percentage? 
Thank you. 

Mun seng Lee replied 2 years ago

if you are really very new into investing, my take is just try 1 great company with 1/3 of your capital. Share Price hardly moves in a straight line. you can just simply average down your cost with a second tranche or 3rd tranche. You will sleep better at night. Diversification is good only if you have more capital. Investing is a marathon, just be patient.

April Lo replied 2 years ago

Thank you, Mun Seng, for your recommendation! :)

1 Answers
Victor Chng answered 2 years ago

Hi April,

 

If you are just starting out to invest, it is best to spread your investment. As you may make some mistakes along the journey.

 

Each investment should be at least $3k so that your brokerage fee will be a minimal percentage.

 

 

Victor Chng replied 2 years ago

If you have $10K, you can spread to 2-3 companies. Personally, I will spread to 3 companies.

Jieren Zheng replied 2 years ago

Just to addon, if you are comfortable with Custodian accounts, FSMOne could be a good and cheap way to invest in SG/HK/US markets.

April Lo replied 2 years ago

Thank you, Jie Ren, for your tips! Will look into that as an option (:

April Lo replied 2 years ago

Thanks, Victor!

May I know if it is better to wait for market crash (even though we should never time the market) where there are more undervalued companies to deploy our cash or invest in any good undervalued companies at this time of overvalued market?

Jieren Zheng replied 2 years ago

I am doing the latter now. But frankly, in an overvalued market, it is harder to find ideas, so as long you don’t run out of cash it should be fine.

Victor Chng replied 2 years ago

Hi April,

I will still invest during overvalued market but very selective on the type of companies. I tend to deploy more in undervalued market condition.

April Lo replied 2 years ago

Thanks Jie Ren and Victor!

Jieren Zheng replied 2 years ago

Welcome!

Victor Chng replied 2 years ago

Welcome :)

April Lo replied 2 years ago

Hi, I would like to ask again.

In the module of Portfolio Weighting, you recommended a strategy to deploy 5% of capital which is to deploy 3% first, and if the price drops further, deploy the 1-2%. What do you do with the 1-2% if the share price goes up? Do you continue to add to the position? Or is there something else that you do?

Jieren Zheng replied 2 years ago

It depends if valuations have reduced, rather than share price movements. If valuations are no longer cheap, perhaps you can deploy the cash somewhere else to other opportunities

Victor Chng replied 2 years ago

Hi April,

Jieren had explained clearly on the first part.

The second on increasing your position when the price go up will only happen when the valuation of the company increase and it is still undervalue despite price increase.

April Lo replied 2 years ago

Alright, thank you Jieren and Victor for always clearing my doubts :)

Victor Chng replied 2 years ago

Welcome :)