If I have excess 100K now, how should I invest over the next one year?

If I have excess 100K, how should I invest over the next one year or so? This is assuming I already have consider all factors such as emergency funds and personal expenses to be taken care of and have decided not to pay down your mortgage. This excess 100K is the amount in the worst case scenario even if I lose all of it, my livelihood will NOT be affected, with the exception that I will be emotionally sad because I am 100K poorer.

In the midst of the uncertainty and volatility in the stock market, it is wise to set aside at least 30-40% or 30-40k cash out of the 100K. This cash is called opportunity cash. Some call it “warchest”. This fund will be deployed into the purchasing of shares progressively, in each event when market tanked drastically over the period of next one year or so.
The downside of sitting with huge cash is of course low return. Nonetheless, ask yourself?  In times of uncertainty and crisis like now, do you prefer to be in a position where you have a good cash position or bad cash position? Cash is undoubtedly king during crisis.  

For investors, it is a dilemma to decide if we should invest now or to wait for market to dip further down?
Wall street has been rallying for the last two months with Dow surging from its bottom of 18k+ from end March to 25k+ today. An increase of more than 30%.
My sentiment is that we should continue to buy shares, but in a progressively manner.
The reason is because no one knows what will happen to the stock market tomorrow. Hence, we should not time the stock market exactly when it will hit bottom before deploying all in? Also, if you do not own any shares now, what if “Mr. Market” decide to go against logic and NOT retesting bottom, but continue to rally?  Then your zero ownerships of shares will have no capital gains.
For instance, the central banks pump in more liquidity, follows by the uncovering of a vaccine. In situation like this, the market will be invigorated to find new high.
While buying shares is important, what is more important is to learn how to find good shares at reasonable pricing fortified with sound long term future. The topic of stock selection is a big topic and we shall keep it separate from this article.
Limit 20-30K of the portfolio to shares investment. I emphasize that you should not impulsively invest all at once this 20-30%. Instead, invest prudently and progressively, or monthly (i.e. similar to Dollar Cost Averaging). And perhaps it is also a good idea to keep replenish this basket of fund each month when you have excess monies.
If you invest in this manner, you are protected on both sides. For instance, if market rises and never look back, you will benefit with your equity portfolio, which will have risen. If the market plunges, you still have funds to deploy to buy low each month. And lest us forget that you still have your opportunity cash mentioned earlier to take advantage of the stock market low.

Bonds are basically debts of companies or countries. S’pore government bonds are SGS or SSB, but I do not recommend you to buy now! This is because the yield is very low now. The average 10-year SSB yield is lower than 1.5% now and normally the front years are generally even lower than.
Therefore, you must well keep money in the bank for which several banks offer higher yield in various combinations. I owned SSB myself but it was bought during initial years of inception and carries >2.5% yield.
My suggestion is to peek into low risk, high credit rating corporate bonds. You can decide to immediately plough in 10-20% into these bonds. There is very low risk of you losing your capital with guaranteed yield p.a. if you decide to only redeem upon maturity. That is assuming that the company remain sound financially.
Sound corporate bonds
Capitaland and Frasers offers these bonds. For instance, CapitaMall Trust’s CapMallTrb3.08%210220 and Frasers Property’s FPTreab3.65%220522, with yield of 3.08% and 3.65% respectively.  Note that the security name describes the bond itself. CapMall Trb is with 3.08% yield p.a., expires year 2021, 20th of Feb.
High return, high risk (vice versa)
There are also higher yield corporate bonds such as Aspial, Oxley or Perennial with all have more than 4.5% yield. If you have higher risk appetite, you can consider these higher yield bonds, but bearing in mind that higher returns equal higher risks.
There are also ABF Singapore Bond Index which is an ETF with annualized return of 2%. It comprises of a basket of debts issued by Singapore companies such as HDB, LTA, Temasek etc. It is low risk with AAA credit ratings.
Junk bond risks
Do bear in mind that corporate bonds or bond ETFs are traded in stock exchanges and there are possibilities of not able to redeem at par value before maturity. For example, in situation of stock market crash where companies are affected financially, then their security will trade below par value. Some ill-fated companies can be completely overwhelmed by the financial crisis and enter into bankruptcy or judicial management. This can mean total loss of capital. For e.g. the recent Hyflux case and several oil and gas companies such as Ezra and Swiber during the oil crisis 4-5 years ago. Therefore do exercise caution.
To me, it is imperative to own Gold or Silver or both. This is in view of the high global currency debts of today. 20-25% of precious metals should be included in your portfolio. Gold and silver “normally” go in opposite direction with the equity stock market and this provides hedging to your portfolio.
For e.g. stock market enters extreme bear and your gold or silver enters into extreme bull. Then you can consider to take profit from your precious metals by selling them at high prices. And using the profits then to buy into the cheaper shares. PS: allow me to emphasize “normally” because in exceptional events, price of stock market and precious metals may NOT have inverse relationships.  
For gold, you may want to enter into a smaller position now, because price is at all-time high (>USD 1.7K /oz). However silver price is still affordable (USD 18-19 /oz) and the high Gold-Silver-ratio favours the buying of silver.
Paper Gold and Silver
You can either buy paper gold such as SPDR Gold trust GLD traded in SGX or open a Gold and Silver accounts in UOB.
Physical Gold and Silver
Alternatively, you can buy physical precious metals from companies in Singapore such as Silver Bullion, Bullion Star or UOB. Refer to my previous article, “Buying Gold from UOB Bank.”
Note that now physical metals are more expensive.  My advice is to keep 50-50 paper and physical. To know more about precious metals, refer to below articles:  

Lastly, you can also channel 0-5% of your portfolio into cryptocurrency to take a chance that this technology can potentially replace centralised-controlled currency one day? Two of the most popular are Bitcoin (BTC) and Ethereum (ETH). BTC is currently at USD 9K and ETH 230 per coin.


Recommendation only 
  • Cash 30-40%
  • Shares 20-30%
  • Bonds 10-20%
  • Metals 20-25%
  • Crypto 0-5%

Strictly Example only:
Cash 35K; Bonds 15K; Progressive monitoring: Shares 25K; Metals 20; Cryto 5K
  • Frasers corporate bond – buy 15K
  • BTC – buy 3K. balance 2K
  • Gold – buy 3K gold. Buy 6K silver. balance 11K
  • Shares – buy 3K each month… June, July etc. 

Total buy in June – 30K….Cumulative in July – 36K….. Aug 39K…. assuming no sudden correction of pricing in stocks, metals, etc.

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7 thoughts on “If I have excess 100K now, how should I invest over the next one year?

  1. Hi Rolf,

    Thanks for sharing your thoughts.

    In terms of diversifying into Golds ETF, would it be better to buy GLD listed in NYSE for stronger liquidity?
    However, it seems O87 is trading at slightly lower price so it might also make sense to buy SGX listed.
    Looking forward to your thoughts on this!


    1. Dear James, thanks for dropping by. I think GLD is also traded at NYSE as well as SGX O87. SPDR Gold is the largest with 62B AUM, followed by IAU with 24B AUM. So I guess liquidity should be alright, although I noted that buy and sell vol in both exchanges are low. You should check with your broker also.

    1. Hi tcs,

      Do you mind enlightened in what sense cheaper? Cheaper management fee or because the share price is based on tens rather than thousands?

      GLDM has lower AUM I think?

  2. Yes, 0.18 vs 0.4. However, i dont like SPDR's approach of launching new etf with lower fee than lowering existing etf. Vanguard has better records on this.

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