Preserving The Nest Egg?

(This post is more appropriate for those investors who are now at the immediate stage with a sizeable amount of UT funds.)

This month started badly, with global market sell-off on the first trading day (for Malaysia) of February, and Hang Seng and HSCEI indices yet to rebound back to their previous levels.

My portfolio, which is heavily in Greater China and Asia markets, dropped and its YTD is now negative, erasing the gains made last month.

Since the portfolio has already achieved its targeted size, I think I should also be more concerned on preserving it, and not only concentrate on expanding and growing it too aggressively.

In short, I think I have to reign in my greediness (kiasu/FOMO), and balance it with a bit of fear and "kiasi"ness of markets sell-off.

So, what are the numbers I should be looking at? How much should I trim from those equity funds in Asia and Greater China regions, such that any further market drops would not affect the total amount too greatly?

I think I should also view the portfolio in terms of ringgit and cents, not only in terms of ratio between Fixed Income Funds and Equity Funds.

Here are the steps I would be taking:

1. Identify the amount I wanted to preserve. (Say XYZ amount in ringgit terms.)

2. Calculate the surplus amount above this XYZ amount.

3. Calculate the total amount (in ringgit terms) in those relevant equity funds (either in Greater China and Asia markets or elsewhere).

4. Calculate the percentage drop that will nullified the surplus amount in (2).

So, at the last step of the above calculations, I had estimated the percentage that those relevant funds have to drop that will chop the surplus down to the preserved XYZ amount.

The percentage is not huge… only about 5%. This means that the Greater China and Asia funds can drop another 5% before affecting the nest egg amount that I wanted to preserve.

But what is the deepest drop that can happen? There was an opinion, I came across last week, that a market pullback or correction would happen later this year and it would be about 15%.

So, if this 15% pullback happens, the total amount in my portfolio would go below the preserved XYZ amount.

So, until this 15% pullback happens, I should be trimming those relevant funds bit by bit, from time to time when the market rebounds… till the calculated percentage in (4) hits 15%.

Cheers.