Moving Towards ETFs in This Crisis

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The recent market turbulence has prompted me to make a gradual shift in my portfolio strategy.  Over the past month, I have started reallocating part of my holdings away from individual securities and into exchange-traded funds (ETFs).

Specifically, I sold part of my holdings in Hong Leong Finance (HLF), Mapletree Logistics Trust (MLT), and Frasers Logistics & Commercial Trust (FLCT).  The proceeds were redeployed into two Singapore listed ETFs, namely Amova StraitsTrading Asia ex Japan REIT ETF (CFA) and the UOBAM Ping An FTSE ASEAN Dividend Index ETF (UPD).

One key reason for this shift is diversification.  An ETF holds a basket of securities, which helps reduce company-specific risks that come with holding individual stocks or REITs.  In the case of the CFA ETF, it invests across multiple REITs in the Asia-Pacific region (excluding Japan), thus, its price movements tend to be less volatile compared to holding a single REIT.  UPD ETF also allows me exposure to large dividend-paying companies in ASEAN.  This will indirectly let me gain access to good companies outside of Singapore like Maybank, Public Bank, RHB Bank from Malaysia, PT Bank Rakyat Indonesia and PTT PLC from Thailand.

Another attractive feature is that these ETFs still provide regular income.  As a dividend investor, I value the ability to collect distributions while maintaining diversification.  Both CFA and UPD offer quarterly and semi-annually distributions respectively, allowing me to continue generating income while spreading risk across many companies.


Reducing Exposure to HLF

This is not my first time decreasing my allocation to HLF.  My decision to partially divest HLF further this time was driven mainly by its weak performance and declining dividend attractiveness.  Over the years, the company’s chairman Mr Kwek Leng Beng has often delivered optimistic outlooks during annual general meetings.  However, despite these upbeat statements, tangible improvements in performance have yet to materialise, and the company's road to digitalization seems to be lagging, even behind its smaller competitors like Sing Investment and Finance Limited.

The most recent dividend announcement was particularly disappointing.  With the recent approximately 40% drop in net profit for FY2025 and its dividend yield falling below 4%, the investment case has weakened significantly.  For an income-focused investor, a stock that delivers both low yield and poor performance becomes difficult to justify holding in large amounts.  Therefore, I decided to sell about half of my holdings in order to lower my exposure while still keeping a smaller position.  

If opportunities arises, I may even liquidate all my holdings in HLF to reallocate in other positions.  When and how, I am not sure for now.  I suppose time will tell.


Adjusting the Portfolio for Uncertain Times

With ongoing geopolitical tensions and market uncertainty, shifting part of my portfolio toward diversified ETFs feels like a sensible move for myself.  ETFs allow me to remain invested in income-generating assets while reducing reliance on the performance of individual companies.

While individual stocks and REITs will still have a place in my portfolio, this adjustment reflects a broader effort to build a portfolio that is more resilient during uncertain times.  Diversification may not eliminate volatility entirely, but it can help smooth the journey while continuing to generate a steady stream of dividends.  Moving forward, I believe I may concentrate more on building up positions in ETFs, and individual stocks will be the companies that I have high conviction in and would like to have a larger allocation of them within my portfolio than the ETFs have allocated.  Barista FIRE, here I come...!

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