Hey everyone,

So, a reader sent me their portfolio recently and asked what I thought. Of course, quick disclaimer, I got their permission to share my take on it!

Overall, I gave it a 6/10. And I want to walk you through my reasoning because a lot of the issues I flagged are ones I encounter constantly.

Now, that’s not just in this portfolio but among many Singapore-based (or even Asia-based) investors who are doing the right things BUT in the wrong structure.

Here's what they've got. Age 30, working in tech.

VOO: 35%. QQQ: 24%. VEU: 19%. Bitcoin: 14%. ETH: 7%.

At first glance, it looks alright. Globally diversified with a solid core. But the crypto exposure did really stand out (not in a good way!)…at least for me. Overall, there are four relatively “easy” things I'd fix. Let’s go through them.

All three ETFs here (VOO, SPY, VEU) are US-listed. That matters more than most people might think because of big T - Tax.

Without a tax treaty between Singapore and the US, dividend payments from these funds get taxed at source.

The upshot is that 30% of every dividend payment gets withheld by your broker before anything lands in your account. That’s not just for US-listed ETFs but all US-listed securities, i.e. stocks.

And the bigger your portfolio grows, the more you're exposed to US Estate Tax on top of that. Remember, US Estate Tax is only charged on your estate upon death but the implications are real.

For US-listed securities, known as US “in-situ” assets, any holdings above US$60,000 are taxed at 40%. When you’re building up to your first million, it might fly under the radar of the Internal Revenue Service (IRS) in the US but once you enter $1 million+ net worth range, it’s not something that should be taken lightly.

That’s because enforcement from the IRS can be much more stringent once we’re talking about amounts in the millions. And just because you’re based in Singapore (and have no links to the US) doesn’t mean your estate would be beyond the reach of US authorities.

The fix isn't complicated. CSPX or SPYL for VOO. CSNDX for QQQ. The ex-US side takes a bit more thought on the UCITS side but I'll get to that.

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The S&P 500 Index already contains the Nasdaq-100's biggest names (aka Big Tech or the “Mag 7”). When you hold both indexes via ETFs, you're not adding diversification, but you're just adding more of the same.

In other words, you’re supercharing exposure to Apple, Nvidia, Microsoft, Amazon, Meta, Alphabet, and Tesla. This portfolio holds all of them in two places at once. The result is that nearly 60% of the portfolio is effectively a concentrated tech bet, whether that was the intention or not.

If you want heavy US tech exposure, then everyone is well within their rights to own it. But don’t overcomplicate and replicate. Instead, try to do it deliberately.

VEU is a solid fund. It covers developed and emerging markets outside the US, which is the right instinct. But at 19% against a 60% US tech position, the diversification effect is pretty limited.

For the UCITS version: XUSE covers developed markets ex-US but leaves out emerging markets. To get that EM exposure you'd add EIMI and decide your own split between the two.

The more important question, though, is whether 19% is actually the allocation this investor wants or just what was left after everything else.

It seems like an afterthought more than anything and, in a time of increasing uncertainty about the US, being truly global in our portfolio allocation shouldn’t be underestimated.

This is the one that stood out straight away. A whopping 21% across Bitcoin and ETH is meaningful (now I’m sure there are investors out there with much, much more). I'm not one of those “don’t hold crypto at all costs” individuals but position sizing does matter.

And at over one-fifth of the portfolio, it’s meaningful. Crypto has historically dropped 60% to 80% in deep drawdowns and has taken years to recover. At this allocation, that kind of drawdown pulls the whole portfolio down with it.

Bitcoin has only been around since 2008 so there's limited data on how it behaves across full market cycles and different macro conditions. Sure, it might work out. But it also might not. The position sizing should reflect that uncertainty.

In other words, don’t put money into crypto (even the reputable ones) that you aren’t prepared to lose. My general range for an alternatives allocation sits in 5% to 10% range (and perhaps 15%). But when I say "alternatives, I typically refer to gold and REITs, not crypto.

There's no defensive exposure at all. No gold, no bonds or anything that tends to hold its value when equities sell off hard.

Crypto, despite feeling like a separate asset class, is highly correlated with equities during downturns, particularly tech. So in a proper risk-off environment, this portfolio gets hit across the board at the same time.

At age 30, you don't need a lot of defensiveness and a long runway normally evens out those declines. But even a small position in gold could change the character of the portfolio in a drawdown.

This is a portfolio that's mostly doing the right things but in the wrong wrapper. The investor is in the market, they've got some global exposure, and they've made a (big) call on crypto.

For me, there are four changes to make:

6/10.

Want to see more portfolio reviews like this? Hit reply and let me know — I read every email.

— Tim

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