Catching Complacency: Why 18% YTD Return Sounded the Alarm

18% Year-to-Date return, and that’s on the back of three consecutive years of above 15% returns!

Achieving this wasn’t down to luck; it came from a series of deliberate, strategic moves:

• From S-REITs to SG Banks: Successfully pivoted into Singapore banks right before the historic interest rate hikes.
• Holding on to Compounders: Held on to iFAST (AIY) and Arista Networks (ANET) despite their price volatility.
• The Opportunistic Catch: Doubled down on Alphabet (GOOG) when the market was terrified that AI would disrupt its search business.
• The Semiconductor Upcycle: Invested heavily in local semiconductor manufacturers long before the broader market recognised their explosive potential.

If such performances don’t boost my ego and make me feel invincible, what will? But it’s precisely at moments like this that I need to be extra careful.

This is exactly when complacency starts to creep in. You can’t help feeling this way — it’s how the human brain is wired to seek comfort after working hard for so long.

The good news?

While we can’t always control our initial feelings, we can recognise them and use our frontal lobe to overrule them.

Before this complacency could take root, I decided to run a quick audit to see just how far I’ve drifted from my original blueprint.

Check 1: Is the 3-Year Cash Buffer In Tact?

In slightly less than three years, I will gain access to my CPF-OA savings.

When I trimmed my Arista position back in April, I technically secured the cash buffer needed to bridge the gap until then.

However, I succumbed to temptation.

I couldn’t resist using a portion of those sales proceeds to add to my positions in Food Empire (F03), Tractor Supply (TSCO), Ulta Beauty (ULTA), and Veeva Systems (VEEV).

A quick check on the ledger shows that my cash cushion is now a tad short.

Breaking my own rule is exactly the kind of complacency I need to guard against, but I’m not losing sleep over it for a few reasons:

• The Budget Buffer: My baseline financial planning always intentionally overestimates my spending and underestimates my passive income. This naturally creates a safety net for minor cash shortfalls.
  
• Ample Time to Top Up: The shortfall is relatively minor, and I have plenty of runway before the cash bucket runs low.
  
• Low Structural Risk: In an absolute worst-case scenario, I would only need to liquidate a tiny fraction of my equities in early 2029 to tide me over for a few months. Even if that happens during a brutal market crash, the overall impact on my net worth would be negligible.

That said, recognising this slip means it’s time to lock down the defence. No more attacking until the cash bucket overflows again.

The last thing I want is to blow a comfortable lead in the final stretch, just like how Egypt threw away a two-goal lead and lost in stoppage time.

Some might argue the game wasn’t fair and the disallowed goal was controversial. It’s contentious, and as a Liverpool and Mo Salah supporter, I was absolutely gutted.

But the harsh reality? The pitch, much like the market or even life, is never completely fair.

Wall Street and institutional giants will always have “unfair” structural advantages and deeper resources, but that doesn’t mean we as retail investors can’t win the game.

To borrow the classic weather analogy again: “I can’t control the wind, but I can adjust the sails.”

My sails right now need to steer me back toward cash.

Check 2: Am I Overly Exposed to Equities?

The next step is evaluating my asset allocation. When I aggregate both my cash and my CPF balances, does my equities portfolio take up too high a percentage of my net worth?

In personal finance circles, a popular rule of thumb is the “110 Minus Age” formula.

At 52 years old, this rule suggests I should have roughly 58% of my net worth in equities, with the remaining 42% parked in safer instruments like fixed income and cash.

As the chart above shows, despite the massive run-up in my stock portfolio recently, only about 52% of my total assets are currently invested in equities.

Even though I am sitting below the textbook “rule,” I am perfectly comfortable with this allocation and feel no urge to aggressively buy more stocks to hit that 58% target.

Always remember: a rule of thumb provides guidance, not a commandment.

At the end of the day, your asset allocation must be tailored to your personal comfort level, investing experience, and unique life circumstances.

In fact, I can already foresee myself completely abandoning this “rule” as I get older.

Let’s imagine I’m 80 years old.

Accordingly, I should drop my equities exposure to just 30%. The reasoning is simple: with my candle burning short, I don’t have the time to wait out a brutal multi-year market crash.

But let’s apply the math to the reality of that stage:

• The Cash Buffer: If I already have 10 years of living expenses tucked safely away in cash and fixed income, or if my passive income easily eclipses my annual expenses, what is the point of holding more cash?
• Generational Wealth: If that capital is ultimately earmarked to be passed down to my children, the time horizon is no longer mine; it resets to their life expectancy.
• A Legacy for Good: Even for those without children, that wealth can eventually be directed toward a charity or cause close to their heart. A permanent endowment thrives on long-term compounding, not cash hoarding.

Financial shortcuts are useful starting points, but blindly applying them might not lead you to the correct destination.

Check 3: Am I Overly Exposed to Semiconductor-Related Stocks?

The strong return achieved this year can be largely attributed to the amazing run by the semiconductor-related stocks in my portfolio: AEM Holdings (AWX), Micro-Mechanics Holdings (5DD), UMS Integration (558), and Venture (V03).

From just about a 12% allocation last December, they now occupy almost a quarter of the portfolio!

The delight felt is naturally accompanied by a sense of trepidation, especially given how rapidly the change occurred.

While I have considered rebalancing, I decided to put that on hold for three reasons:

• The Cycle’s Second Inning: A close look at their latest results and forward guidance indicates we aren’t in the late stage of the semiconductor cycle yet. While supply will eventually catch up with demand, there is still some way to go before that happens.
  
• Dynamic Weighting: Portfolio weighting is dynamic and self-adjusting. In fact, the recent market correction has naturally lowered this sector’s allocation to the current 24%, down from a high of 28% just two months ago.
  
  Moreover, if other sectors do relatively better over the next few years, the semiconductor weighting will automatically reduce without me forcing a sale.
  
• Bypassing Short-Term Cash Flow: With the exception of Venture, the other three holdings are invested using my CPF funds. Any unexpected short-term crash in these stocks will have little impact on my defensive cash buffer.

For now, I am setting a strategic guidepost: if the sector crosses 30%, I will re-evaluate the need to trim. Until then, the ride continues.

Conclusion: Keeping Complacency at Bay

These three quick health checks show a slight shift in the portfolio’s balance, but the overall foundational structure remains stable.

More importantly, I am glad I did this exercise.

Catching my own complacency early, rather than letting it take root, is what prevents irreversible financial damage.

Verdict: No structural fault detected.

Related Posts

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Portfolio Update: The SG Semiconductor Invasion (Time to Sell?)