By now a few people had pointed out something about the Straits Times Index (STI), viewed as the representative of the local equities market; there is not enough diversification and it is overweight on certain sectors.
Let us take a look, shall we?
Fig. 1 - Weightage of the STI1
The three main sectors of the STI are banks, industrial goods and services, and real estate, which constituted a total of 71.61%, quite a heavy concentration there. Banks, which consisted of the big three (DBS, UOB and OCBC), stood at 41.62% of the index, almost half!
Extrapolating this onto the balanced Bedokian Portfolio2, with the 35% equity portion invested only with the STI, 14.57% (35% x 41.62%) of your entire Bedokian Portfolio would be on banks. And if you remembered, this would contravene my 12% limit rule.
Relooking at the link in ...
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