Great article. Hope you never write about the 60% drop and dividend retraction. Look forward to reading about the 100% increase and how your risk portfolio then increases. You deserve that š
Thank you for sharing not only your process but where you are putting capital to work. Hong Kong is a very interesting place to ponder about investments. Nature is where ideas usually are clearest.
Went to Hong Kong last November. Had a great time ! First time there ! Asian markets will have a lot to offer, one just needs to wait. Contrary to the West, the East gives the corporate sector clear guidance. Now I look around and have a hard seeing the difference given how concentrated western markets are. How do you see the Asian markets playing out ? Do you like Singapore ?
One of the things I like about China, as an investor, is that Beijing is pretty clear about what they set out to achieve and how they are going to do it; this is communicated in their official five-year plans. I recently wrote about how I align my investments in China with those: https://www.cohonglane.com/p/china-15th-five-year-plan
On your Singapore question, yes, I like Singapore and have been investing there for quite a number of years. I focus on REITs and banks. I will consider a few articles on the topic in the future.
Did you get a chance to visit Shenzhen while you were in Hong Kong? Itās a fantastic city. Highly recommended. I go there 1-3 times per week.
Great read Philip. And I note the fact you have been investing over 25 years, therefore have built a significant war chest so to speak. I think a good article would be, if you were at the start of your investing career in the AI age, how you would invest for your next 25 years. Just a thought :)
@Expat Tom, appreciate the feedback. Thanks for the article topic input. I will add the idea to my list of potential future topics as I can see how that could add value. Until then, keep at it.
Great and enjoyable read, Philip! It was particularly useful for me because I want to build my investing dream job in the future, I just haven't got to that stage yet.
Just have a question between your income sleeve and cash reserves: when you get your dividends/coupons and assuming your cash reserves are fully funded, do they increase the income sleeve or go straight to your current account as "salary"? Just wondering what's the flow of funds.
Visited China and HK a year ago and was surprised by how cash reliant HK still is while China is on a whole different level. Recommend the Castle hotel in Dalian if you haven't been there yet.
Thanks @Gustavo Barreto, glad you found it useful.
The answer to your question is that it's fluid for me, no fixed rule really.
The income sleeve is there to keep cash coming in, but as you know dividends and coupons turn up in lumps rather than as a monthly wage. I keep a cash reserve on hand and move that level up and down as I see opportunities, so it's not a fixed reserve sitting at a set number.
Where the cash goes next just depends on what's cheap at the time. If some income names I own have sold off, I'll usually top those up. If the sleeve is already generating plenty, that same cash might go into the growth sleeve instead. And if nothing's worth buying, it just sits until something is.
I hope the above makes sense.
As for your hotel recommendation, I will add it to my list. Thanks a lot! Ping me next time you are in HK or SZ.
Philip although living off my portfolio is still far away from my current state, I found the post as a whole informative and interesting and many points were applicable to me.
Specifically, I loved how you hold what you are confident in and ignore what you haven't looked into properly. In your words: "Not because there is nothing there but because I have not done the work".
Really enjoyed the piece and looking forward to connecting more. Substack is lucky to have authors like you on the platform!
Thanks a lot, Joseph. I greatly appreciate your input. Keep on aspiring to live off your portfolio - I am sure you will get there sooner rather than later.
Once you read more of my work, you will learn that I have strict guidelines on the depth of knowledge I require before sinking hard-earned capital into a company. Iād rather have spare cash than chase a company or market move I cannot fully underwrite.
You are welcome. It not modeled after anything specifically except to suit my psychology and to engineer holding power at the portfolio foundation level.
This seems much easier to accomplish with $2.88M of capital. Most readers will not start from that position to build this portfolio so this insight may have limited reach. Further, maybe I missed it but I didnāt see any positions with sizing you hold in this portfolio that could be helpful to support those with the capital ready to do this.
I do not disclose the exact size of my portfolio, but I do share specific positions and relative allocations, e.g. in the below article where I share that Bank of China (listed in Hong Kong) is 3.2% of the income sleeve.
Very good question. I donāt know the portfolio of Berkshire well enough, but my initial thinking is that itās a hybrid. While it does not pay out dividends, you should be able to estimate the internal yield BH is getting and then treat that part as income. This is similar to what I did with my European Banking ETF.
Counterintuitively, I would position BRK, Fairfax and similar companies as closer to income sleeve, even though they pay little or no dividends. An investor can commit to selling, say, 3% of BRK holdings to build an artificial dividend. This ādividendā will be extremely tax-efficient as it will be split between LT gains and cost. Other similar strategies can be created around BRK, including option-related. I have brought this example to avoid overstructuring of oneās portfolio. I believe there is a difference between managing somebody elseās portfolio, where rigid structuring is unavoidable, and your own.
Such a great read. Youāre definitely preparing for the downside with a 20% income cushion and 2-3 years of living expenses. Hopefully a 60% drawdown never occurs. Thanks for sharing your insights!
Twin Peak is great, esp the last stretch down to Stanly. beautiful ocean view.
will check out the sequel. Curious of your plan regarding entering and exiting positions in the growth sleeve? i sense there wont be a stop loss since the money is not needed and you can afford the capital loss. will there be any profit taking mechanism though?
Agree on the hike down to Stanley. It's a bit too hot and rainy right now, so I'm holding off during the summer.
As for exiting the growth sleeve, it depends on whether it's an ETF or a single stock position.
For single stocks, if the thesis is invalidated, I exit no matter the P&L. Profits are taken if and when the thesis has played out or the price has gotten way ahead of my fair value estimate. If the thesis remains intact, I might not exit completely, but rather trim the position and take some profits.
The above is just the gist of it, and there are many more details. It might be a topic for a future article if there is demand for it.
Philip, this really resonated with me. One line that stayed with me was āStart from the goal, not the position.ā I think thatās true far beyond investing. Many successful professionals spend years optimizing the position theyāre in without first asking what kind of life theyāre actually trying to build. After leaving my 25-year corporate career, Iāve found that designing the life first changes almost every decision that follows. Thank you for such a thoughtful piece.
I am glad you liked it @Ying Quiet Millionaire Studio!
When I left corporate life myself, it was a very similar realisation. The shift in energy, focus, and purpose was immediate. I haven't looked back or regretted it for a moment.
I wrote a bit more about that decision and what prompted the step away here: https://www.cohonglane.com/p/why-cohong-lane. It sounds like weāve both ended up in a much better place for it.
Thank you, Philip. That resonates deeply. Iāve found the sameāthe biggest change wasnāt my schedule, but my sense of purpose. Itās encouraging to meet others who have taken a similar path and found more clarity on the other side. Iāll enjoy reading your story. Thank you again for the thoughtful conversation.
Great article. Hope you never write about the 60% drop and dividend retraction. Look forward to reading about the 100% increase and how your risk portfolio then increases. You deserve that š
Thanks a lot @Jens-Peter Zink! I certainly do not hope I will experience the 60% portfolio draw down either, but I have to be prepared for it.
I appreciate the moral support š
Thank you for sharing not only your process but where you are putting capital to work. Hong Kong is a very interesting place to ponder about investments. Nature is where ideas usually are clearest.
Hi @Romain Le Berre! You are welcome, glad you liked it. The Hong Kong and China markets certainly are interesting - lots of opportunities.
Went to Hong Kong last November. Had a great time ! First time there ! Asian markets will have a lot to offer, one just needs to wait. Contrary to the West, the East gives the corporate sector clear guidance. Now I look around and have a hard seeing the difference given how concentrated western markets are. How do you see the Asian markets playing out ? Do you like Singapore ?
One of the things I like about China, as an investor, is that Beijing is pretty clear about what they set out to achieve and how they are going to do it; this is communicated in their official five-year plans. I recently wrote about how I align my investments in China with those: https://www.cohonglane.com/p/china-15th-five-year-plan
On your Singapore question, yes, I like Singapore and have been investing there for quite a number of years. I focus on REITs and banks. I will consider a few articles on the topic in the future.
Did you get a chance to visit Shenzhen while you were in Hong Kong? Itās a fantastic city. Highly recommended. I go there 1-3 times per week.
Shenzhen is on my list of things to do ! Went to Macau instead. Change of plans last minute.
Great. Let me know when you are going. Happy to share some ideas of what to see. It's a huge city with lots of options.
Great read Philip. And I note the fact you have been investing over 25 years, therefore have built a significant war chest so to speak. I think a good article would be, if you were at the start of your investing career in the AI age, how you would invest for your next 25 years. Just a thought :)
@Expat Tom, appreciate the feedback. Thanks for the article topic input. I will add the idea to my list of potential future topics as I can see how that could add value. Until then, keep at it.
Great and insightful article.
Glad you enjoyed it, @Himanshu Singh.
Great and enjoyable read, Philip! It was particularly useful for me because I want to build my investing dream job in the future, I just haven't got to that stage yet.
Just have a question between your income sleeve and cash reserves: when you get your dividends/coupons and assuming your cash reserves are fully funded, do they increase the income sleeve or go straight to your current account as "salary"? Just wondering what's the flow of funds.
Visited China and HK a year ago and was surprised by how cash reliant HK still is while China is on a whole different level. Recommend the Castle hotel in Dalian if you haven't been there yet.
Thanks @Gustavo Barreto, glad you found it useful.
The answer to your question is that it's fluid for me, no fixed rule really.
The income sleeve is there to keep cash coming in, but as you know dividends and coupons turn up in lumps rather than as a monthly wage. I keep a cash reserve on hand and move that level up and down as I see opportunities, so it's not a fixed reserve sitting at a set number.
Where the cash goes next just depends on what's cheap at the time. If some income names I own have sold off, I'll usually top those up. If the sleeve is already generating plenty, that same cash might go into the growth sleeve instead. And if nothing's worth buying, it just sits until something is.
I hope the above makes sense.
As for your hotel recommendation, I will add it to my list. Thanks a lot! Ping me next time you are in HK or SZ.
Philip although living off my portfolio is still far away from my current state, I found the post as a whole informative and interesting and many points were applicable to me.
Specifically, I loved how you hold what you are confident in and ignore what you haven't looked into properly. In your words: "Not because there is nothing there but because I have not done the work".
Really enjoyed the piece and looking forward to connecting more. Substack is lucky to have authors like you on the platform!
Thanks a lot, Joseph. I greatly appreciate your input. Keep on aspiring to live off your portfolio - I am sure you will get there sooner rather than later.
Once you read more of my work, you will learn that I have strict guidelines on the depth of knowledge I require before sinking hard-earned capital into a company. Iād rather have spare cash than chase a company or market move I cannot fully underwrite.
Sounds like a Family Office version of old Buckets of Money. Thanks for sharing...
https://www.forbes.com/sites/robertberger/2020/08/02/the-bucket-strategy-is-broken-heres-a-better-way/
You are welcome. It not modeled after anything specifically except to suit my psychology and to engineer holding power at the portfolio foundation level.
This seems much easier to accomplish with $2.88M of capital. Most readers will not start from that position to build this portfolio so this insight may have limited reach. Further, maybe I missed it but I didnāt see any positions with sizing you hold in this portfolio that could be helpful to support those with the capital ready to do this.
I do not disclose the exact size of my portfolio, but I do share specific positions and relative allocations, e.g. in the below article where I share that Bank of China (listed in Hong Kong) is 3.2% of the income sleeve.
https://www.cohonglane.com/p/one-bank-two-prices
Okay thanks
Which sleeve does a company like Berkshire Hathaway belong to?
Very good question. I donāt know the portfolio of Berkshire well enough, but my initial thinking is that itās a hybrid. While it does not pay out dividends, you should be able to estimate the internal yield BH is getting and then treat that part as income. This is similar to what I did with my European Banking ETF.
Counterintuitively, I would position BRK, Fairfax and similar companies as closer to income sleeve, even though they pay little or no dividends. An investor can commit to selling, say, 3% of BRK holdings to build an artificial dividend. This ādividendā will be extremely tax-efficient as it will be split between LT gains and cost. Other similar strategies can be created around BRK, including option-related. I have brought this example to avoid overstructuring of oneās portfolio. I believe there is a difference between managing somebody elseās portfolio, where rigid structuring is unavoidable, and your own.
Exactly. Good mechanical approach.
Such a great read. Youāre definitely preparing for the downside with a 20% income cushion and 2-3 years of living expenses. Hopefully a 60% drawdown never occurs. Thanks for sharing your insights!
Thanks for your kind comment and feedback, Michael. I am glad you enjoyed the piece.
Simple, elegant, and makes nothing but sense.
also love that view above repulse.
@T LI, thanks for your kind comment.
I am glad you liked the piece and my shot from above Repulse Bay. I can highly recommend the Twin Peak hike from Hong Kong Parkview to Stanley!
If you are interested, I also wrote a sequel to this piece (the photo is from the famous Dragonās Back hike in Shek O):
https://www.cohonglane.com/p/how-i-benchmark-my-portfolio
Twin Peak is great, esp the last stretch down to Stanly. beautiful ocean view.
will check out the sequel. Curious of your plan regarding entering and exiting positions in the growth sleeve? i sense there wont be a stop loss since the money is not needed and you can afford the capital loss. will there be any profit taking mechanism though?
thanks vm
Agree on the hike down to Stanley. It's a bit too hot and rainy right now, so I'm holding off during the summer.
As for exiting the growth sleeve, it depends on whether it's an ETF or a single stock position.
For single stocks, if the thesis is invalidated, I exit no matter the P&L. Profits are taken if and when the thesis has played out or the price has gotten way ahead of my fair value estimate. If the thesis remains intact, I might not exit completely, but rather trim the position and take some profits.
The above is just the gist of it, and there are many more details. It might be a topic for a future article if there is demand for it.
make sense. thank you for the response. i would be interested to read that piece if you ever get to it.
Philip, this really resonated with me. One line that stayed with me was āStart from the goal, not the position.ā I think thatās true far beyond investing. Many successful professionals spend years optimizing the position theyāre in without first asking what kind of life theyāre actually trying to build. After leaving my 25-year corporate career, Iāve found that designing the life first changes almost every decision that follows. Thank you for such a thoughtful piece.
I am glad you liked it @Ying Quiet Millionaire Studio!
When I left corporate life myself, it was a very similar realisation. The shift in energy, focus, and purpose was immediate. I haven't looked back or regretted it for a moment.
I wrote a bit more about that decision and what prompted the step away here: https://www.cohonglane.com/p/why-cohong-lane. It sounds like weāve both ended up in a much better place for it.
Thank you, Philip. That resonates deeply. Iāve found the sameāthe biggest change wasnāt my schedule, but my sense of purpose. Itās encouraging to meet others who have taken a similar path and found more clarity on the other side. Iāll enjoy reading your story. Thank you again for the thoughtful conversation.
You are welcome. š