Max Allocation to a Single Sector

hwckhs

Senior Member
Joined
Apr 13, 2012
Messages
1,071
Reaction score
935
There is a rule of thumb not to allocate more than 4-5% to a single stock so as not to create concentration risks. But, some people overweight certain sectors (eg. tech, bank, REIT) with a few stocks or an ETF. While respecting the 4-5% limit per single stock, is there any guideline on the limit per sector?

I am talking about long-term/retirement portfolio, not side trading kind of portfolio.

Personally, I have 15% allocated to REITs. What's yours? And, what sector limit do you adhere to?
 

hound297

Supremacy Member
Joined
Aug 20, 2007
Messages
6,583
Reaction score
2,529
SGX will classify REITs as "Real Estate" sector instead "REIT" as a sector on its own. That said, I have around 70% in Real Estate (they are all REITs + business trusts) and around 30% in "gas and infrastructure" and "network installation and mainteance" combined. The former being keppel infra trust and later being netlink trust. I snapped up keppel infra trust back then when their Australian subsidiary was in trouble and people started selling. Netlink trust I went in too late after it hits $0.92.

I am trying to diversify but I only started investing in 2018 so I will need some time to build up portfolio.

But given the current circumstances, I would likely be putting even more into REITs due to the wuhan virus trashing the prices. Those REITs that are fundamentally sound but has high price to book ratio had became cheaper and I feel like now is a good time to go in.
 
Last edited:

hound297

Supremacy Member
Joined
Aug 20, 2007
Messages
6,583
Reaction score
2,529
Also, I think industry is not the only thing you need to diversify. You need to diversify the business model too. SGX classify REITs as a business model instead of industry (and rightfully so!). My portfolio is now 50% REIT and 50% business trust structure.
 

MikeDirnt78

High Supremacy Member
Joined
Jun 16, 2002
Messages
47,623
Reaction score
8,163
If you want to limit yourself to 4-5% for a single stock, you might as well just buy the ETF or index.

No point holding 20-30 individual stocks. You won't be getting much alpha.

The portfolio returns will most likely follow the returns of the index.
 

hwckhs

Senior Member
Joined
Apr 13, 2012
Messages
1,071
Reaction score
935
@hound297, thanks for sharing.

If you want to limit yourself to 4-5% for a single stock, you might as well just buy the ETF or index.

No point holding 20-30 individual stocks. You won't be getting much alpha.

Majority of my portfolio are in stocks and bond ETFs. I also like properties, but instead of investing in private properties, I use REITs instead (15% allocation).

I am not seeking to beat the market. The SREIT ETF would have been good, but I don't like the management fee and the manager (their website is seriously lacking compared to the NikkoAM or SPDR). So, I end up using 5 major REITs (across sub-sectors) as a pseudo-ETF. I have no other direct stock holdings other than these 5 REITs.
 

limster

Arch-Supremacy Member
Joined
Oct 31, 2000
Messages
11,423
Reaction score
2,432
I started my REIT portfolio way back in 2009 when there wasn't any REIT ETF.

So I'm sort of managing my own REIT ETF with 10 counters (down from 12 due to mergers).

There has been one local study (reported in businesstimes) done that indicates that adding REITs to a portfolio improved return and that has been my own experience with REITS (and many local bloggers).

Some say the study used a time period that favoured REITs, but my response is that I have been searching for data using a different time period that shows the opposite, that adding SG REITs has been bad for your portfolio but I haven't found such data yet!

Malkiel, in my edition of Random Walk Down Wall Street , advocates adding REITs to an index-linked portfolio too! =:p
 

MikeDirnt78

High Supremacy Member
Joined
Jun 16, 2002
Messages
47,623
Reaction score
8,163
So, I end up using 5 major REITs (across sub-sectors) as a pseudo-ETF. I have no other direct stock holdings other than these 5 REITs.

The combined performance of your 5 individual reits will likely track the returns of the reit etf in the long term.
 

hwckhs

Senior Member
Joined
Apr 13, 2012
Messages
1,071
Reaction score
935
buffet said diversification is for people who dont know what they are doing

I agree. Diversification protects against ignorance but reduces return. Pros and cons. It depends on what type of investor you are or want to be. (I'm a novice.)

The combined performance of your 5 individual reits will likely track the returns of the reit etf in the long term.

Yes, I think so. Indeed, that's what I want - broad-based REIT exposure.
 

assiak71

Master Member
Joined
May 3, 2018
Messages
4,643
Reaction score
43
@hound297, thanks for sharing.



Majority of my portfolio are in stocks and bond ETFs. I also like properties, but instead of investing in private properties, I use REITs instead (15% allocation).

I am not seeking to beat the market. The SREIT ETF would have been good, but I don't like the management fee and the manager (their website is seriously lacking compared to the NikkoAM or SPDR). So, I end up using 5 major REITs (across sub-sectors) as a pseudo-ETF. I have no other direct stock holdings other than these 5 REITs.

You can wait and see whether syfe offers a 100% reits portfolio without ARI. I have feedback to them asking for this.

You can feedback too so that they see demand. For other info on syfe reit+ see its thread in Money Mind

With regards to your qn. I think forget about overweighing a sector. Either go big or go passive global market cap
 

hwckhs

Senior Member
Joined
Apr 13, 2012
Messages
1,071
Reaction score
935
You can wait and see whether syfe offers a 100% reits portfolio without ARI. I have feedback to them asking for this.

Thanks for that. But, I'll probably stick to my current method. I am a bit wary of robo-advisors as they are somewhat untested. For now, I find the REITs corporate actions (acquisitions, rights issues etc) interesting as learning experiences and I like getting my hands dirty. Perhaps, if I get tired of these hassle, I can switch to an ETF in later years.
 

assiak71

Master Member
Joined
May 3, 2018
Messages
4,643
Reaction score
43
Thanks for that. But, I'll probably stick to my current method. I am a bit wary of robo-advisors as they are somewhat untested. For now, I find the REITs corporate actions (acquisitions, rights issues etc) interesting as learning experiences and I like getting my hands dirty. Perhaps, if I get tired of these hassle, I can switch to an ETF in later years.

See the syfe reit+ thread. They are working on tracking the iedge s-reit 20 index. And if they offer 100% reits its as good as a etf
 
Important Forum Advisory Note
This forum is moderated by volunteer moderators who will react only to members' feedback on posts. Moderators are not employees or representatives of HWZ. Forum members and moderators are responsible for their own posts.

Please refer to our Community Guidelines and Standards, Terms of Service and Member T&Cs for more information.
Top