While I review my portfolio fairly often (almost continuously in some respects), it has been a long time since I have done a formal review and set out my thoughts in writing.
At present the private portfolio can be broken down into four categories of assets. From largest to smallest:
1. real estate;
2. directly held equities;
3. funds; and
4. other assets.
I will do a separate post on each category.
In overall terms there are a number of conclusions which I can draw about the portfolio. The most important of these is that it is overwhelmingly comprised of risk assets and the vast majority of those are focused on Hong Kong/China. While this concentration (together with market timing factors) has contributed to the significant growth in the value of the portfolio in recent years, I have to recognise that it also constitutes a material risk to the financial security of my retirement. As I enter retirement, the objective shifts from seeking to earn good returns on my investments to accepting lower returns in order to reduce risks. It follows that I should look to reduce dependence on risk assets concentrated in one economy. Specifically, I should look to add investments outside of HK/China and add some more non-risk assets like bonds to the portfolio. Achieving this additional diversification is one of the key objectives for the private portfolio.
Another element of the portfolio is the use of leverage. All of the properties were purchased using mortgage finance. Most of the properties still carry a mortgage. There are no other borrowings - I do not trade equities, FX or anything else on margin.
As a general proposition, as long as interest rates on the properties remain negative in real terms and lower than the yields on my investments, I should be happy to carry these mortgages into retirement. If interest rates start rising then it will be time to revisit this position. The exception may be the mortgage on my home. I keep changing my mind on the comparative advantages (opportunity to earn positive carry) and disadvantages (cash flow and risk of rising interest rates) on keeping the home mortgage in retirement.
There are more than 50 individual components to the portfolio - individual equities, bank accounts, bonds, commodities, properties, mortgages and other assets. This raises the obvious question about the amount of time needed to manage the portfolio. Do I have enough time to do it properly and do I want to spend that amount of time?
The short answer is that I seem to be finding the time much of the time (even while I am still working) although there are periods when heavier than usual workloads mean that portfolio management time gets cut back or stopped altogether. To date the consequence of the periods when I couldn't find the time has been suspending the search of new investments - inconvenient but hardly a cause of concern. In terms of time spent looking after the existing investments, the properties require very little work, maybe a couple of hours a month checking receipts and making payments with small amounts of additional time being spent dealing with tax forms and issues such as repairs and vacancies. I check for news on my equities almost daily. For the larger holdings, I also read the annual and interim reports in detail. For the rest, I at least read the headlines and will read the full reports if either I have time or there is a potential concern. For the funds and other investments management is more ad-hoc but hardly significant. In short I sort of have the time now and will obviously have more time once I retire. As a final point on the time spent, I find that I actually enjoy reading through the materials - it's more of a hobby than a chore.
Another way of looking at this issue is that having a large number of individual investments is also a risk management tool - the consequences of any single investment suffering a substantial or permanent diminution in value are materially reduced. This is important to me.
As a general proposition I do not pay anyone to manage my assets or to provide advice. All my funds are passive and I do not have a financial adviser. The exceptions are one part of the portfolio under professional management (a legacy of the years when I could not deal in equities) and my MPF fund. The former is not doing me any real harm (returns are modest but still positive) and I will leave it as is. The MPF fund is wealth destroying but since it is mandatory, there is nothing I can do about it.
I see no need to engage a financial adviser. It helps that Mrs Traineeinvestor is financially savvy and supportive.
In short, I am happy with the composition of the portfolio but recognise that there is a need to reduce dependence on HK/China risk assets. I also need to resolve the home mortgage issue.