A fund of my own
Posted by lowem,
Wed Oct 24 13:18:00 UTC 2007
When you start investing, usually you might start with a number of shares in some company that you somehow pick out, among the thousands of choices out there. Some time later, you might buy a few more shares, in a few more companies. Then you'd have a portfolio.
What happens if you continue, and buy yet more shares, until you find yourself holding shares in some 10 to 15 companies or so? At this point, you will either find yourself owning a complete mess, or you will find that you have started your own little mutual fund.
This is the point where I currently find myself. Excluding about 20 stock exchange and commodity indices and 6 currency pairs, I am tracking 38 stock symbols, out of which I own 19.
Personally, I find it amazing that I have gone so far (2-3 years) without having anything resembling a plan for asset allocation, although in my defence I am happy to say that I do have something of a strategy, which goes something like this : route all available firepower to the junior resource sector, lower shields to minimum, and charge ahead at maximum warp speed! Yes I know, that's crazy, and it's a wonder I haven't been blown to smithereens yet.
So, what is an aspiring fund manager to do? I have read quite a bit of the literature regarding asset allocation strategies : by country, region, sector, market cap, by value versus growth. But first, the most basic, most simple question : what is my current asset allocation like?
For that, I went to Google Docs and created a new Google spreadsheet. I used the GoogleFinance functions to enter price and market cap, and added my own data, including share symbols and number of shares owned. After that, I added categories and a formula to determine whether a particular company is small-, mid-, or large-cap. From my point of view, I defined small-cap as a company with a market capitalization smaller than $300 million, large cap as larger than $3 billion, and a mid-cap as being in between. Add to that 2 pie charts, one for asset allocation category and one for the small/mid/large cap division. Voila. And while the markets are running, the figures automatically update in near real-time. Very cool. The only minor issue is that I had to enter the currency exchange rates manually. I hope Google will later let me add automatically updated figures for USD/SGD and CAD/SGD. That would be nice.
So, what do I have? Without being too specific about it (and it keeps changing anyway), I have roughly 30% in uranium companies, 30% in hybrid/multi-resource companies, 20% roughly divided more or less equally between gold, silver, oil and natural gas, and the rest has gone equally into energy income trusts and cash holdings. Incredibly, that's quite close to what I should be aiming for, with just a few tweaks needed - maybe a little less uraniums and a little more income trusts would do it.
The market cap is another story altogether. I have a whopping 80% in small caps. That's, how shall I put it, borderline insane, though it *is* consistent with my strategy so far. Which has led to some spectacular successes (300% gains), and some equally spectacular blow-ups (80% losses). Perhaps I might want to dial back the aggressiveness a little bit. I maintain that the better juniors still have the best chance of the explosive upside that I crave (100%, 200%, 300% or better), but maybe that could be balanced by having some larger caps in the mix, but still within the resource sector. With peak oil, peak food, peak *everything*, and an ever-expanding money supply, the entire strategy remains, as it has been, resource-centric. Something like a 50-20-20-10 (small-, mid-, large-cap and cash) mix might do it.
So there. I have a fund of my own now. I have an overall theme, an asset allocation strategy, and I know what needs to be done next. If this were to be a commercially available fund, it would probably be classified as narrowly-focused, high-risk, sector-specific, with a risk rating of 10 out of 10, and the fund literature will mention something about a massive exposure to the Canadian dollar.
Exactly the way I want it.
Onward! :)
