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Creating A Portfolio Like Temasek Holdings

If you can’t beat them, join them.


Singaporeans who are keen to invest in the market but have yet to decide on an investment strategy can consider this idea – forming a portfolio that mimic the investments made by Temasek Holdings (“Temasek”).

For clarification purpose, it is impossible for individuals to entirely replicate Temasek’s investment because the state-owned fund does invest in private companies that are not accessible for retail investors.

Nonetheless, there are ways in to get similar exposure to the companies that Temasek invests in. By doing so, one can technically “free-ride” on the selection criterias made by Temasek fund managers. As the saying goes, if you can’t beat them, join them.

Temasek is a feasible choice for Singaporeans mainly due to the investment mandate, which would include (1) protecting wealth, and (2) having a long-term investment horizon. Temasek is mandated to protect our past reserves. Similarly, Singaporeans would prefer to protect our wealth against inflation.

Read also: 6 Things That We Know About Temasek Holdings From Their Latest Results

How do I start?

We can first start with Singapore based stocks that can be added into the “My-Temasek Portfolio”

Exhibit 1: Sectorial Breakdown of Temasek’s Portfolio

Exhibit 1

Source: Temasek Review 2015

Exhibit 2: Sample Companies Within The Sector Breakdown

Exhibit 2

These are some examples of companies that Temasek has invested in which are tradable on the Singapore Stock Exchange.

How long will it take for me to form this portfolio?

For the average person, it is unlikely that we will have $100,000 in cash to form a meaningful portfolio consisting of these stocks immediately. Our advice is to take your time to save up and buy into the sectorial stocks bit-by-bit, company-by-company. It is possible to form this portfolio over a span of 3 to 5 years.

How do I start choosing my first few stocks?

Choose the companies that you cannot do without. Companies that are critical to the everyday lives of Singaporeans have in our opinion, the lowest probability of crashing and disappearing overnight.

Examples include DBS, SingTel, Comfort Delgro & CapitaLand.

What about the small stocks in the sectorial breakdown?

For wealth protection purpose, we would advocate to have the majority of your portfolio to be invested in larger, well-known companies. If you have additional cash and don’t mind taking some extra risks, you can consider allocating some money to smaller companies.

Do I need to change the percentage within the sector regularly?

You do not need to change it regularly, as you are already spreading your eggs thin into various sectors (e.g. 28% in financial services and 24% in telecommunications, media and technology).

However, if you are following Temasek’s investment strategies, you should review their portfolio exposures annually. Make changes only when there are drastic differences in the exposures (e.g. Financial services decrease from 28% to 10%).

Will I be able to make 16% annually like Temasek?

Temasek’s portfolio has multiple advantages over us. They include, (1) Professional management of assets, (2) Size advantage of SG$405.8 billion in assets, (3) First-mover advantage – into emerging markets and many others.

Therefore, the probability of us achieving an average of 16% total shareholder return (since inception) is very low.

However, as Singapore’s long-term inflation is relatively low at ≤3% per annum, we should be aiming to earn > 5% average total return over a long investment horizon. In our opinion, we do not expect following Temasek’s investment strategies to give you returns less than inflation over the long haul.

As usual, we recommend that you do your own research and seek for proper advice before making any investment decisions. At the end of the day, no one, not even Temasek, can guarantee you that their past performances can be translated into similar future performances.

What do you think of following Temasek’s investment strategies and portfolio? Do share with us your thoughts on our Facebook page.

 

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