You will build a scenario sheet that runs one geopolitical shock through each of your holdings.
You can now trace a shock through its channels and name which of your holdings sit in the path. This exercise puts a number on it. You'll pick one shock, run it through every holding, and add up what it might do to your portfolio in Singapore dollars. The answer won't be precise, and that's fine. Its value is that you'll have thought it through on a calm day, with your rules beside you, instead of in the middle of the headlines.
Allow about thirty-five minutes. You'll need your holdings and their values in SGD, plus the risk dashboard from lesson 2.8 for comparison.
Pick a shock that moves prices through one main channel, so the effects are traceable. Good choices are an oil price spike, new export controls on chips, a sharp rise in the US dollar, or a jump in tariffs between the US and China. You can use a past event as the template or make one up, but write it down precisely: "Oil rises 40% over two months after a supply disruption in the Gulf" is usable, while "trouble in the Middle East" is not.
Marcus chose a made-up oil shock: crude up 40% in two months, with inflation expectations rising and central banks holding rates rather than cutting.
Create a tab called Scenario. One row per holding, with these columns:
Holding, value in SGD, main channel, likely direction, estimated effect in percent, estimated effect in SGD, and a note on why
Fill in the first three columns from what you learned in this module. The channel is how the shock reaches that holding: energy costs, inflation and rates, the US dollar, supply chains or regional growth. If a holding sits in more than one channel, pick the strongest and mention the other in the note.
This is judgment, not calculation, so keep the estimates rough and round. Use what you know about each holding: its beta from lesson 2.4, its duration from lesson 2.5, its sensitivity to oil from lesson 4.2.
Here is Marcus's sheet, all made-up figures. His world ETF, worth S$91,000, gets minus 6%, because higher oil and stickier rates weigh on shares broadly, partly offset by energy producers and by any rise in the US dollar: minus S$5,460. His SGD bond fund, S$30,000, gets minus 2%, because inflation worries push yields up a little and its duration is 6.5: minus S$600. His STI ETF, S$20,000, gets minus 4%, as regional growth slows: minus S$800. His bank shares, S$16,000, get minus 5%, because of credit worries on energy-linked loans and a weaker region: minus S$800. His S-REIT, S$12,000, gets minus 7%, because higher rates hit REIT valuations: minus S$840. His SGX chip supplier, S$8,000, gets minus 8%, as equipment orders slow: minus S$640. His US chip designer, S$15,000, gets minus 10%, because its value rests on distant profits and rates are up: minus S$1,500. His T-bills, S$10,000, get zero.
Add the SGD column. Marcus's total is minus S$10,640, or about minus 5.3% of his portfolio of roughly S$202,000.
Now put that number beside his risk dashboard. His one-month 95% Value at Risk was about S$12,900, and his expected shortfall about S$17,300, from lesson 2.6, Value at Risk, expected shortfall and fat tails. So this scenario is roughly the size of a bad month in his history, not a once-in-a-decade event. That matches intuition: an oil spike on its own is painful but not catastrophic for a diversified portfolio.
Then read down the rows. After the world ETF, the two largest losses, the US chip designer and the S-REIT, came from the same exposure: higher rates applied to long-duration valuations. And his bank and STI ETF lines moved together, as his correlation matrix had warned.
The last step is the one that matters. Write down, now, whether this result calls for any change to your rules.
Marcus wrote: "An oil shock of this size would cost me about S$10,600, within what my dashboard says a bad month looks like. It doesn't call for a change. If it happened, I would rebalance only if my equity weight fell outside its band, as my investment policy says. The one thing it shows is that my bank, STI ETF and REIT holdings move together on rates and regional growth, and I'll set a combined limit for them when I write my risk rulebook in module 11."
That's the model: the total, the comparison with your own risk measures, the decision, and anything you learned for later. Notice that he didn't decide to sell anything. Deciding in advance is what stops a real shock from turning into an improvised trade.
A finished sheet has every holding on its own row with a channel, a direction, a rough size and a reason, a total in SGD and in percent, and three or four sentences of decision. Now build yours for one shock and write the decision before you close the file.
Build the scenario tab for one shock, total its estimated effect on your portfolio in SGD and write whether you would change anything.
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