Dilemma with my Personal Account

This is what I do with my personal account. Given that I have a family to feed and capital isn’t infinite, I designate my investments to 2 parts: the risky part and the safe part. They’re mostly in equities and deposits – pretty typical I think for retail investors in Singapore.

The risky part contains some cyclical stocks – stocks that are high beta relative to the broad market, i.e., they run up more when the broad market is performing but crashes further when the market slumps. I have a few penny stocks in there which I reluctantly became a long term investor after the “bets” didn’t exactly mete out and selling out would prevent me from realizing their full potential! (Come on, I don’t think it’s just me!)

The safe part consists mostly of REITs. Having entered those positions from two years ago, it became both a satisfaction and a relief to have them in my portfolio. The distributions and capital appreciation probably made REITs one of the better performing asset classes the last two years.

As average REIT yields got driven down from 10% p.a. from my entry point to ~4.5% p.a. today, surely, the upside must be limited with price ratios looking rich. What should I do? Take profit?

I am seriously contemplating selling out…BUT what do I switch into? Where do I park the cash? Given that this is supposed to be my “safer” stash, I am not about to go risk it with cyclical stocks that could lose 50% or more in a crash. On the other hand, I also don’t want to be the SUCKER FISH with bond yields so dismal and lot size so prohibitive. Even if I have access to leverage, given that we’re almost at the tail-end of the low rates environment, I’m not in great hurry to carry long term (fixed) yields on short term (variable) borrowings. (A seemingly perennial but complacent private bank trade.)

If I leave it in bank deposits to earn 1%, I’ll lose 3% to inflation.

How I wish there’s something else that’s both sensible and palatable!