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Monday, September 26, 2016

6 October 2016 - Building Cash Flow From Stocks

This is a shout-out to readers who wished to know more about how to build a passive stream of cash-flow from stock investing and what are the required details to look out for.

On the 6th October 2016 (Thursday), BIGSCRIBE will be organizing a seminar where there will be presentations and open discussions where there will be a couple of financial bloggers on the panelist to share any of the information that we've learned and acquired so far.

Together with myself on the panelist will be Kyith from Investment Moats and Chris from Tree of Prosperity.



There will also be open discussion towards the end where there will be interactions with the audience instead of a one-way presentation.

The event will be useful if you are new to investing or are thinking of approaching stock investing the first time round. Though the agenda is mainly on cashflow, we will be open for discussion towards almost anything that we are able to offer our knowledge assistance on. The objective is of course having a fruitful discussion where we are able to learn from you as much as you are able to learn from us.

The venue can only fit in about 50 pax so I think paypal will block the reserve once the 50 seats are filled up. Fees are at $19/pax which I think is reasonable and mostly used to cover the rental for the premise and perhaps some light refreshment too.

Hope to see you guys there.

Reserve Your Seat Here


Friday, September 23, 2016

Looking Back Is Always Easier Than Prospecting Future Events

The recent news surrounding Swiber default case and Marco Polo potentially operating as a going concern have led many financial bloggers to pen their views on the matter. Many have condemned the act of investing in such companies or asset structure because they seemed "dangerous" or "unsustainable" and the bloggers have come out strong to make their point on the importance of having a sound investing knowledge.

I am going to provide a slightly different viewpoint here.




All of us here knows that investing can either be very easy or extremely difficult, depending on where you stand.

Folks who find them easy do so because they have not yet met with an event that will trigger and tweak their mind into thinking investing is difficult. On the other hand, folks who find it difficult usually do so because they've usually been there at the event, experience and gone through what is needed to survive.

Writing and condemning folks who invest in companies such as Swiber and Marco Polo is always easy after news have surfaced out. Similarly, when we look back at how past recessions have destroyed many lives and families, we look back and think it was silly. For those who did not participate, the magic mantra was always going to be "just hold and buy more, market will rebound back". Never did anyone think that the psychology required to conquer past that difficult moment back then was entirely different than if we look back at it is today.

We may think folks who invest in companies such as Swiber, Ezion or Marco Polo are always dumb, greedy and uneducated. Contrary, we may think folks who invest in companies such as Capitamall Trust, Singtel and Cityneon (I purposely chose this for a reason) are always smart and have done their due diligence. For me, the only difference between the first and the second investors is that the first investor has got all the carrot sticks stuffed up their throats while the second investors are not seeing it that yet. Heck, if you are an investor who bought Singtel at the high of $4.50 and are making a paper loss now, I think that's equally "uneducated" as investors who bought into Swiber bond or Marco Polo, whatever you want to call it.

Prospecting future events is what makes investing difficult.

We can compile many past historical data and come up with our very own magic formula or theory but the fact is that share prices are usually going to react for future events, not historical. 

Folks who invest in O&G companies may be feeling the pain now, but that's only after news have surfaced out that oil as a commodity is struggling. If circumstances happen such that oil was up instead of down, we may look the one that are "stupid" and "uneducated".

The same goes for popular asset class such as investing in Reits. Until circumstances hit the fans, Reits investor may look like a genius knowing they are getting some 7-8% yield on an annual basis. This is not yet even accounting for potential capital gain which will push an investor's return into double digit. But what happens when retail sales goes down, tourism hit by events such as Sars and industrial capacity gone through the roof?

Investing is easy or difficult? Depending on who you are asking at which point in time, I'd say.


Wednesday, September 14, 2016

Recent Action - Singtel

The market continues to wobble down today as it hits a level of 2,800 before bouncing back a little.

I took a chance to nibble some shares of Singtel which I bought at $3.85 for 3,000 shares.




My plan was to stock up some purchases when the index hits a level of 2,800 as part of my nibbling strategy and Singtel quickly came to my attention because of the various decent factors which I met my criteria.

Keppel, SCI and Banks are all strong contenders which I would like to add at some point but thought I’d wait out a bit more to get a better valuation than what they are offering now.

I've never previously owned any telcos in my portfolio so this will be the first time I did that.

The nature of the telcos business generally allow them to generate strong cash flow ability and predictable hence valuation doesn't come cheap as compared to the other industry.

For a diversified company like Singtel where they have a geographical presence everywhere with many different divisions, it gets even more difficult to analyze because you really have to consider the many different aspects of their division and the growth/risk they might be exposed to.

Based on my knowledge of the industry, I am not equipped with skills to do that.

My purchase is based on my understanding that the dividend yields and payout will be sustainable while the company is growing their network and overseas operations through their associates and recent acquisitions they've made which will hopefully boost the company's valuation higher than they are now. 

The recent news surrounding the industry regarding the submission of MyRepublic, AirYotta and TPG to operate as the 4th mobile operator will no doubt hurt the market share of the three telcos. 

While this final outcome is still subject to IDA’s approval and the funding still in question, this will almost certainly be bad news for local telco players who will have some sort of market share taken away at some point.

Amongst the 3 telcos, M1 will stand to lose out the most given its dependency on pure Singapore earnings. Starhub followed closely behind with earnings forming around 70% coming in from Singapore. Singtel on the other hand, will be the least likely affected due to its diversified nature of the business, both locally and regionally. Singtel’s mobile earnings from Singapore makes up around 11%. 

Post balance sheet after acquiring stakes in Bharti and Intouch deals stand at 1.1x net gearing and P/OCF at 18.5x which I think still offers very decent value play.

The mobile network division has been in a lot of spotlight recently as the telcos are ramping up their capex to improve on their network. Last we've heard is they are fighting it out to become the first operator to operate on a 4.5G network.

The spin-off of the Netlink Trust next year is also a catalyst which I’m looking for since Singtel has a habit of paying out special dividends to shareholders when the right time comes.

Let's hope this works out.

Saturday, September 10, 2016

"Sep 16" - SG Transactions & Portfolio Update"‏

No.
 Counters
No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
1.
IReit Global
73,000
0.74
54,020.00
12.0%
2.
ST Engineering
13,000
3.36
43,680.00
10.0%
3.
Kingsmen
45,000
0.67
30,150.00
7.0%
4.
Ascott Reit
10,000
1.14
11,400.00
3.0%
5.
First Reit
8,000
1.36
10,880.00
2.0%
6.
OCBC
1,134
8.81
  9,990.00
2.0%
7.
Warchest*
285,000.00
64.0%
Total SGD
445,120.00
100.00%

I still can't believe that we are finally in the month of September and heading towards the end of the year very shortly.

This is by far one of the easiest update for my portfolio for a very long time because there is very little activity in the market that I engaged in this month.




The only changes I made in my portfolio this month was the divestment of 2,500 shares of HK Land at a price of US$6.65. This recent upsurge was on the back of the recent equity run this past week due to a poor job market in the US, triggering a potential rate hike delay. What an irony sight. Bad news leading to a higher market. I quickly take advantage of the market irrationality by divesting and going further more in cash.

The sale returned me a decent 11% over a short term period. Again, the intention was always to hold for longer periods but market irrationality means there are opportunities to cash in. HK Land went to surge higher by the time I divested for the next few days. I guess I just have to be satisfied with what I get.




The portfolio continues on an uptrend direction, albeit very slowly, though at least a comfort knowing that the strategy is working out fine.

The portfolio has increased from the previous month of $440,009 to $445,120 this month (+1.1% month on month; +37% year on year). 

The XIRR YTD on the equity has increased this month by standing at 19.8% on an annualized basis. STI continues to go up and down meanwhile and remains at about -0.5% year to date.

The cash portion has now increased to 64% of the overall portfolio. It appears that I failed to get any sort of buying activity in the past 1 month when I queued for Singtel and CDLHT. This will continue to be in my watchlist if they present good opportunities again.

The US market has a bloody red Friday by dropping almost 400 points on the index. Let's see if we can get more opportunities next few weeks to come.

Stay safe everyone.

Wednesday, September 7, 2016

The Evolution Of Personal Portfolio Management

Portfolio management is one of the most important success factor when it comes to personal finance.

As we move through different stages of life, we tend to do different things, pick up certain knowledge and set various goals. Because of the psychology involved, endless changes and unknown factor of the market dynamics, it becomes a very interesting chapter where there is always something to think about. 

This has become something where everyone has a part to play for throughout their life journey and is something where we are able to control within our grasp if we do it properly. 




Generally speaking, everyone started off from the wealth accumulation stage at first where savings take priority because we assume the majority of folks are starting off from ground zero. 

From the moment we are young when we tend to receive occasional red packets or allowances from our parents, some of us will work towards saving these monies and cultivate a good habit. These will continue for the longer duration of our teenager lives where we polish our skills in only buying things that we really need, source for budget tickets when we travel, find movie tickets during weekdays and spend lesser on fine dining luxuries.

When we grow up and join the workforce, the immediate action is to continue saving even more aggressively because this is now the real deal where we have a higher income combined with a lesser commitment, which makes things more dependent on how we shape things up. 

During this accumulation stage, we are also probably thinking of how to grow our money conservatively by investing in certain asset classes which can bring about positive returns which will compound over many years to come. The idea when doing this is to start slow, small and cautious because we were all once beginners and we tend to get carried away with things that we have not experienced in life. If we can just do this, we will slowly but surely be compounding our returns over time positively instead of the other way round, which can be detrimental to our wealth building. I spoke about this in my last written article here.

This is probably also a great time to be focusing on our career path as they are the best bet for what is to come in the future. Even if we have set our goal for an early retirement, we still need the best help we can get from climbing up our career ladder as higher income means higher savings (assuming we can control our expenses) which means higher money for investment which we can use to compound even more. Even if things does not work out eventually with our investment, we have a backup to fall for. There are clear tangible benefits by doing well in our career, especially in the early stages - little doubt about that. 




As we grow older, there will be a shift in priority from wealth accumulation towards wealth preservation over time. 

The general idea here is to reduce more volatile asset classes such as equities and increase in more predictable asset classes such as cash and graded bonds. 

The rule of thumbs to use here is holding cash/bonds equivalent to the age we are in that year. So if I am 31 year old for instance, I should ideally be holding a minimum of 31% in cash/bonds in my portfolio, everything else equal. 

The reason for doing this is diversification and as we grow older, we can probably take lesser volatility as age and time is a finite resource. The odds of every asset classes imploding at once is a lot lower than the odds of a single asset class imploding. 

The evolution of the personal portfolio management will continue to change as we become better over time and find one that best suit our profile. The importance of it cannot be under estimated and everyone should take them with a pinch of seriousness if not already by now.


Thursday, September 1, 2016

Beware The Dark Side Of Compounding

This is going back to the basics 101.

All of us are aware why compounding is one of the wonders of the world. 

By now, most investors would have known the effect of compounding over time and how they can exponentially grow their wealth to incredible amount, if done correctly. 

Compounding returns which are positive year after year feels great, especially in an environment where the market allows us to do so. But too often we get attached to statistics and numbers and thereafter starts to erode our euphoric emotions that allow us to somewhat extrapolate the same returns over the next 40 years. Is that realistic?

This is exactly how insurance agent attempts to sell product because it just looks too attractive 40 years down the road and often folks fell for such thing.




Dark Side Of Negative Compounding

The dark side of compounding is often neglected as folks tend to focus towards the part on success and brushed aside the part on failure. 

Negative compounding - a reversal concept of the dark evil side of compounding.

This type of compounding can play a big part in slowing down and to a large extent destroy our attempt to grow our wealth. 

Credit card charges is one of most immediate example I can think of that applies in our daily lives.

While there are benefits associated with it, it charges exorbitant interest rates for folks who fail to pay the charges on time. The interest amount may be minuscule and ridiculed at the beginning but over time it can add up to quite a substantial amount.

The same goes for folks who invest in the stock market thinking they can earn a decent 3 - 4% over the next 40 years.

The truth is there are many who lost money in the stock market and erode their wealth over time. To put it simply, these group of people are probably not ready and would be better off growing their wealth via other means.

The next time you get excited over compounding, think of what it can do on the reverse. Beware on the dark side of compounding.

Friday, August 26, 2016

Dividend Income Updates - Q3 FY2016

This is a compilation of my Q3 quarterly update for this year.




The previous 2 quarters can be found here and here.

The theme for this post will be outsourcing and we will look into how we can do that to our advantage. 

There are many companies that are outsourcing their transaction or operational tasks to a cheaper location. 

The objective is very clear – to achieve an overall costs savings which would benefit the company and ultimately shareholders in terms of bottomline earnings. 

I recalled when our company was tasked to migrate a few of the activities a few years back, almost one-third of our staff was retrenched and had to pack their bags. They were basically either deemed too expensive or redundant or both. What might seem so plausible at first has become a nightmare when there are inefficiencies counterproductive during the hypercare period. This lasts for the next year or two before it becomes more stabilized. 

As employees, we can never take things for granted. There are so many variables that can take our retirement dreams away from us. 

Redundancy is clearly one of them, especially as our wages become more expensive for the company over time while the contribution do not keep up with the wages. 

When we are being made redundant, we can almost forget about extrapolating our income all the way until retirement. Most of the times, we do not have too much influence over this other than continuing to upgrade our skills. 

Accident is another which can dampen our hopes. While the probability of an accident happening is clearly small, this is a black swan event which cannot be underestimated. 


Dividend Investing

Dividend investing is not the only strategy for success but gives us an additional option to have something controlled within our means (it is better than not having one). 

They work the same way as the interests received in our banks or the rental we get from our landlord. 

In essence, we strive to make money works harder for us instead of having ourselves work harder for the money. Well, we do need to put in extra effort at the beginning and perhaps maintain a certain level of effort after that, but the idea is that it’ll get better from there on. 


Dividend Income Q3

My dividend income has not been stellar these past few months.

While dividend investing remains my main strategy for the long run, there are a couple of opportunities which I am eyeing on. In the meantime, I'll just have to depend on the rest of the equities which are giving me the dividends.


CountersAmount (S$)Ex-DatePayable Date
Ireit2,321.40 29-Aug16-Sep
CCT658.5026-Jul25-Aug
ST Engineering650.0018-Aug30-Aug
Kingsmen450.005-Sep19-Sep
Ascott229.0026-Jul24-Aug
OCBC204.003-Aug18-Aug
HK Land204.00*17-Aug12-Oct
First Reit168.8021-Jul26-Aug
Total 4,681.70


The total amount of dividends for Q3 is $4,681.70.



This will bring the total amount of dividends received year to date to S$15,586.

I am not expecting much for Q4 since the majority of the companies I owned will not be paying quarterly dividends regularly like the Reits.

In this case, the dividends will go directly to the warchest position which I am still accumulating.

How did you fare for your Q3 dividends?


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