Merry X Mas looking back

Looking back in the last one year . The Return for this year seems impressive actually is not really as last year we suffer a lost of 6.9%. We need to chase back 10% this year in order to breakeven .

As such CAGR is about 13.89% P.A for the last 7 years.
I aim to have alpha of about 4-6% min per year. Best guess market is entering the third phase of the bull Market or the matured Bull. the last phase is the euphoric bull.

Such good result should not be expected yearly.

Net-worth cross 3M charging ahead.

This year seems to be a good year for us returning YTD as of 24/11/19 @ 27.62 percent.
Last year our portfolio decline 8%

overall our return for the last 2 years average 8.355%

Our CAGR for last 7 years was 14%.

Lesson learn one bad year cost us significant amount of time to recover our losses.

JD losses seems so much that we might need one more good year to bring us closer to the 14% CAGR that we are able to achieve previously.

Negative interest rate .. what i think matters most.

The whole world is talking about negative interest rate and that it would simulate the economy by doing so..  It has been happening to Europe recently and japan decades ago. Will it revive the economy ?

It is hard to say but it certainly makes the people that borrowed money in that zone easier for debt repayment and less likely to go down in my view.

It certainly makes the people in that zone harder to retire as the risk free rate are being shifted and that zone of bonds and assets are all being repriced base on that shift.

In my view, when we shift something there will be a repercussion sometime in the future. A shift in the interest rate will only be a shift as to who is paying for the bill for someone.

Fed fund inflation target rates is set to around 2% , in the past 30 years bonds are paying much higher yield than the target rate. As such the have will enjoy a 2-3% premium on top of the expected inflation rate. So someone is footing the bill for someone in this case the have not is footing the bill.


Now a 30 year bond is selling at close to 2% in some countries negative. So is the total opposite of previously. If this trend were to continue, i expect a shift from the so call less risky assets classes into Stocks in the future this is due to future debt obligations from the pension funds around the world.
The pension funds cannot and should not invest in bonds and hope to meet it's obligations.

Stocks selection is critical going forward as we have entered unchartered water. It means that everyone should be trying to learn a new set of economics where by the formula might not be as useful for this new world.

Let's learn...

 

New All time High

New holding list - Exit Giordano, Vtech holding , Added Charles Schwab, CK assets various rebalancing.

the 2 percent Alpha. (aspired by the 2 cents from Elizabeth Warren)

Wow,  I just reached a new milestone. My financial assets just cross 2.5M.

I have asked my wife to tender her resignation 2 years ago as we are experimenting new stuffs in our life.
You see we have accumulated about 2M in our financial assets 2 years ago.
So i thought that her current job does not make sense for her to continue working as there are time cost for me to fetch her to work and to pick her up from work everyday.  This is due to the fact that we are staying in a not well connected by MRT area to her workplace.

Bo bian - our BTO only cost us 350k (5 room) 7 years ago...

So i did my calculation and i told her let's try a new project, if our net worth drop below than maybe she go back to work lah. Anyway never try never know mah.. If we never try to walk we be on wheel chair now also mah..

Wah it was challenging as our thinking is like the ah siao type.. People will says that you are still young why retire why do nothing etc...


Actually we are not doing nothing, we are using our free time to keep accumulating knowledge we are doing research on stocks and how to allocate our wealth and read a lot of news books about successful people go out walk walk travel see see. is not doing nothing okay...

This bring us to the concept of the 2 percent more alpha ... that we are talking about it today .

You see below is the template of a 10% average return and a 12% average return this is what we hoped to achieve min. Long term average market return is about 8-10% in equities.

going forward this return will be much harder i think due to so much QE around the world that inflate everything.. 

I have been doing average 14% on average last 7 years. If i can do 16% on average going forward wah than hor seh liao ..


The opportunity cost

U see if you accumulated 2.5M of financial Assets (money that can be deploy must be liquid.)
below 40 years old  it make no sense to work if you do not try to see if you can do it a not.

Base on a yearly return of 10% one can draw down 100k per year which i think more than enough to survive in singapore for 2 pax.. when i have a kid i budget 130k a year lah .... than i squeeze 0.5% more alpha... (thats the challenge for myself)...

one would have 26M by 70. you see the key is that when u have accumulated 2.5M the hurdle rate to breakeven is actually 4% thats why the 4% rules state that to withdraw 4% every year of your financial assets can hardly make you broke if you know how to invest.

The cost of not knowing how to invest... when u have 2.5M to start with ...


you will need to work as if you draw down 100k per year your wealth can last you only 32 years ... with a 1.7% FD rate so the different is like 26M in year 30.. if i do year 40 or year 50 i think we will puke lah but don't need forecast until so far lah ....

so if i were to get a job i need a job that can pay me 100k (drawdown plus the short fall) 26M
in total is about 29M lah round of become 30M .. == need a job that pay me 1.2M a year min as the income from job still need to be tax.


The 2% more alpha...

If you can do 12% average you get 47M instead of 26M another 20M to spend...
seeing the different in the wealth off we go to try to achieve that...

*note my wife will go back to work if our Net worth drop below 2M now we got 3+ that is net worth include car house cpf etc....

We are monitoring our progression ...

the 4% rule

Doing one project known as the 4% rule.


assuming i start the year with 2M.
I withdraw the sum of 4% base on the principal of 2M at the start of every year.

This annuity will keep growing as i did not eat into my principal at all.

assuming average return is 6-8% for Equities.
The long term average return for pure alpha generating should be at more than 10%
my average return for the last 7 years is 14% P.A

If i base on a 6% return by the time i reach 68.

My net worth will still be 5.16M assuming a draw down of 80k every year.

if i do 8% my net worth will be 11M

if i do 10% 21M

so the effort now should be to spend time ensuring that i will juice out the 2% more Alpha than the market as i don't think i can make 5M... in 30 years time thru working.

which is 166k per year. min to 333k per year base on the 6-8% average return from the market.

hopefully this project can last.. anyway just try loh thats life mah..

Sep 2019 portfolio update

Latest portfolio holding - Counter added HKland, Chow Sang Sang, HPH trust counter reduced Starbucks , Johnson & Johnson , Vtec holding  average yield 3.81%

It has been a while since i last reported my performance and guess what ..

We are up 17.07% YTD....



Total assets for equities hit 2.37M so being focus in allocating of assets does help.







Below is a good article from Bloomberg on bill gates wealth allocation for him during 2019.
He had 60% of his net worth in equities. wow , i am glad that i shares the same thinking as him.. i am on the right track than.

June 23th portfolio update.

Last month was a terrible month portfolio was down 10%. This month was a better month up 8.5% year to date.


sold some Disney and switch to Intel in may : 135 : 46.56
sold off all of SBS transit and switch to Banks.
using the new platform stock cafes to track combine with morning stars. some of my European stocks unable to be captured.

overall SBS transit achieved a total return of 37.2% inclusive of dividend for a period of 4 months which was pretty encouraging.

SBS was sold out as banks is seen as a better buy .

IMBBY was added in June as well.

 


















past portfolio return (dividend reinvested) excluding saving .

2013 +18.6%
2014 +18.4%
2015 +17.7%
2016 +5.9%
2017 +15.7%
2018 - 7.9%
2019 YTD + 15.79%
Average 12% 6 years to double my wealth.


Portfolio return including saving

2013 + 32.1%
2014 + 31.4%
2015 + 29.8%
2016 + 15.2%
2017 + 22.3%
2018 - 6.4%
2019 +14.1% (started to consume dividend)

April portfolio update

Month to date increases by 8.21 % in the month of April.

YTD portfolio return hit 18.71% .

We should not expect to see this huge increases going forward.

what was done in April - SBS position was reduced by roughly 1/3 to an average cost of 2.40

55k of loan was reduced.

fully exited Beijing capital airport after the latest financial statement release.

a slight increases in overall banking stocks position

a slight reduction of Apple position

No new counters added.

portfolio Update.

portfolio


Portfolio return increases by 3.84% month to date. Total return year to date hit 9.63%

the transactions that were done in March as below.

1) Reduce Starbucks position near 70 dollars. Recycle the cash into SBS transit at 3.46 to 3.50 level.
increases position for SBS transit. SBS position was up 22.7% after the position was initiated.

March portfolio update

Portfolio year to date return was 6.36%

Actions did on the portfolio for the month of Feb.
increase position for Intel by paring down position in Starbucks.
48.10 >
69.4<

Started new positions on SBS transit after analyzing of most recent quarters of the financial statement. Conclude undervalue with a high conviction of increase in dividend payout for FY 2019.
Rebalancing of banking stocks according to recent financial statements.

Shares buyback good or bad ?

I have seen quite a lot of post that focuses on dividend alone. A lot of US companies do not give out a large percentage of dividend due to the tax law. Thus most of these companies are being shunned away from dividend hunters.

So how then do we determine the shares buyback to be good or bad?

The answer is not very straight forward - I think it should depend on a few factors.

1) Has the company allocated enough CAPEX to widen it defensive moat?

2) Can the capital be used to allocate into some other areas to create a higher return instead of from the shares buyback?

3) Is the buyback below its intrinsic value?

4) Are the buyback using FCF or by taking up more debts for the buyback ?


If the above conditions are met I think a share buyback is good for shareholders in the long run.
shareholders derive their return from capital appreciation and dividend return forming the total return component.

over a 5+ years period, Apple has destroyed  1.73 billion shares. or 26.6% of the initial shares count.
As such in an efficient market. The share price should have increased by 20+ percent over the same period assuming the cashflow produce are the same. If we take the peak price of about 90 dollars in the year 2012  the price is close to double.

Apple current dividend yield is about 1+% before tax. should the buyback continue at a similar pace from the past the total return from buyback and dividend should be in the range of 6-7%

However the above is not so straight forward as the market is very dynamic, constant analyzing the business fundamentals and the financial statement is a must to monitor the stock going forward.

*note I have holdings in the above stock mentioned and the view above should not be taken as a buy call for Apple shares.

Disclaimer

1) This Blog is intended only for the use of personal portfolio tracking and sharing of ideas. All the investment advice or stocks picks shared shall be view as only my personal opinion only. I do not warren the truth or accuracy of the information shared and likewise all investment activities made should be consulted by your personal financial advisor as I do not have an understanding on your investment objective nor your investment Risk appetite as such I shall not be liable for any of your losses whatsoever howsoever should you decide to invest in any investment ideas or stocks discussed in this blog.

Leveraging good or bad ?

Leveraging - is it good or bad ?

In singapore, it is widely accepted that to leverage to buy property is a good move as it is an asset. However when i introduce this concept to buy stocks it is usually being label as dangerous or risky.

Well, personally i think there is no right or wrong answer to the question. one must know which phase in life one is in. One must also consider the phases of the credit cycle at the point of leverage.

Usually in a rising interest rate environment - it is good to deleverage. During easing time it is logical to leverage within your own limit.

Things to consider during leveraging in any assets classes.

1) Cost of funds or interest expense
2) where are we in a credit cycle. (starring of easing or starting of tightening)
3) Forecasted ROI of the assets that will be vested.


1) the appreciation of assets would come in 2 forms Capital appreciation and cash flow return.
The 2 components would form a total return in a given time frame.  Below an example of one of my past allocation on the stocks listed in UK, and ADR in US to calculate total return.

For non financial assets - eg properties.

Gross yield is top line, net yield is bottom line. 

Example to purchase a 1 million condo inclusive of stamp duty and legal expenses

cash flow out (-1m)

Rental income +3k per month. 

gross yields is 36k/1m or 3.6 percent per month.  (gross yield)

Net yield is to minus the maintenance fee, depreciation if the property is not freehold or 999, agent fee, property tax, income tax on rental income and transition period to find new tenants and replacement of furniture etc...

So the net yield would be lower than the gross yield... usually 1-1.5% (Use higher figure if you are kiasee type like me. If the deal is no good just walk away.....) 

Wait, we can leverage assuming with the new ruling - you only need to put a down payment of 25%

Finance 75% .. (ideally the logic make sense, however, the hurdle rate is around 2+% currently so if you manages to get a net rental yield of say 3.5% and your COF is 2.5% multiply that by 3 you will get a total yield of 3% higher. 

when we used leverage to finance our stocks or housing or cars etc.... it would be good to calculate the interest servicing ratio or interest coverage ratio. 

If one were to borrow money to speed up the process of acquiring something. Always remember there will always be a cost to it. It is hard to justify right or wrong or which formula is best for you. But throughout my life, my debt to equity level has never been more than 100%. ideally one should be working towards the 30% debt to equity ratio. 

Debt to equity of 100% means that - for every 1 dollar you have in capital you should only borrow max 1 dollar. The borrowing includes your car loan housing loan and any loan outstanding. you can borrow more if the interest expenses are cheap. During the QE period, interest rates are very low when your hurdle rates are low, everyone seems to be very smart. you just need to make 2% annual return on a 1% interest expenses to be above water.

I think we are entering a period of interest rate normalization period it is harder to invest as the COF is higher.  

Warren Buffett mention before "Interest rates are to asset prices what gravity is to the apple. When there are low-interest rates, there is a very low gravitational pull on asset prices."

  

Disclaimer

1) This Blog is intended only for the use of personal portfolio tracking and sharing of ideas. All the investment advice or stocks picks shared shall be view as only my personal opinion only. I do not warren the truth or accuracy of the information shared and likewise all investment activities made should be consulted by your personal financial advisor as I do not have an understanding on your investment objective nor your investment Risk appetite as such I shall not be liable for any of your losses whatsoever howsoever should you decide to invest in any investment ideas or stocks discussed in this blog.

Why invest ? - inflation , capital preservation or what ?

Inflation - Most of the time, my clients would be asking me why should one invest? Well, there is a lot of reason but most of the time I would tell them investing would be more for hedging against inflation.

Inflation - what figure do we take?
Most of the time a CPI should be ideal if you are just living day to day. It should give us a long term average of about 2.5% to 3% in Singapore.  However, having the kiasu mentality build within me I would like to introduce another index.

The LGI - 6% 

5.3% average increase (Chanel)

Luxury Goods index
https://www.ft.com/content/dbb9319a-fc85-11e8-ac00-57a2a826423e

(Mind you the Daytona inflation rate is even higher)

So which figure should we take?

Well, it really depends on you? what you hope to achieve in life, what you really want to have in life.

If your target is to live a simple life for retirement, u need to have a return of  about 5% to 6% as 2.5% is the average inflation eg : if your expenses is 30k a year it would likely cost you 31k next year so you need to have assets to generate that 1k extra next year to hedge against it.

there are some financial assets SGS SSB etc. which are mean for capital preservation or CPF -OA, SA etc ... these assets are more for capital preservation instead of Wealth accumulation.

I was once joking with my friends - I was telling them if you ever wanted to get yourself a luxury timepiece or a Luxury bag if all you are doing is just putting money into an FD account. you should most prob just go and buy it the next day as the inflation is way higher than the return you are getting from the interest accrued from it.

So the no risk options are actually the riskier options - you are sure to lose purchasing power. Assuming there is no deflation.


What causes inflation? I think the main reason why there is inflation is that as the income level of individuals increases, goods would increase in value as well especially the wants. The needs should not see a massive increase in prices as regardless of how rich you are you would still eat 3 meals a day (for most peoples). However, the wants are the factors that drive up inflation.


What I did ? - I always had a high hurdle rate of more than 6%. Normally my hurdle rates would be set at 10%

The ability to reallocate the cash flow that is being generated by the financial assets or assets channel to him into other assets that meet his hurdle rates would greatly enhance one wealth accumulation phase.

Rule of 72 - if one is able to generate a 10% return annually the net worth will double every 7.2 years.

so a 2 million port will hit 100M in 41 years.

at 12% it will take 34.5 years.

at 14% it will take 29.86 years.

Disclaimer

1) This Blog is intended only for the use of personal portfolio tracking and sharing of ideas. All the investment advice or stocks picks shared shall be view as only my personal opinion only. I do not warren the truth or accuracy of the information shared and likewise all investment activities made should be consulted by your personal financial advisor as I do not have an understanding on your investment objective nor your investment Risk appetite as such I shall not be liable for any of your losses whatsoever howsoever should you decide to invest in any investment ideas or stocks discussed in this blog.

Portfolio 2019 Feb

Investment style - Valuegrowth investment.
Portfolio concentration - not more than 20 stocks at any point.
Portfolio focus - Developed market Global
I have been investing globally now, I am only heavily invested into our local banks for Singapore stocks, most of the blog that is available in Singapore are mostly REITs focus or dividend focus.
My portfolio has a blended yield of close to 4% at today valuation.

YTD return about 5.3%
Let's see how it would perform in next month.

Disclaimer

1) This Blog is intended only for the use of personal portfolio tracking and sharing of ideal. All the investment advice or stocks picks shared shall be view as only my personal opinion only. I do not warren the truth or accuracy of the information shared and likewise all investment should be consulted by your personal financial advisor as I do not have an understanding on your investment objective nor your investment Risk appetite as such I shall not be liable for any of your losses whatsoever howsoever should you decide to invest in any things discussed in this blog. 

Armageddon 2008

2008 - I started my stockbroking career at the worst possible time, I got the license in the mid of 2008. Very soon within 6 months of me joining the industry, my portfolio has evaporated from 350k peak to a low of 70-80k. Most of the stocks I was holding was trading at a very low PE of 3-4X multiple.

Mentor to the rescue - I meet my mentor and my friend in the broking firm I was working in, during 2008.  I could still remember that vicom was below 1 dollar then. I told him to look at some of the stocks that I was holding and asked him to take a look at them as the valuation was very low.

He noticed one thing in common with them all of them are listed from China - all of my stocks purchased than was S-chips they were purchased due to the low valuation. Some of them were even net cash companies. (however, we all know what happened next which I do not wish to illustrate further).

Lesson learned - If the market priced it cheaply it is often cheap for a reason, mispricing would not be there for a long time.

I decided to switch to companies that give solid dividends during the crisis and i had to cut the losses of the shares that I purchased as I was in very early, during the bull market I managed to lose only a small portion of my net worth after all I think the amount of my money put in increases by 3 fold within 2 years if you all have vested into the S-chip than u know what I mean .


I was very lucky then to have met my mentor and also to have switched out to stocks that give out great dividend than Suntec REITs was giving out a 15% yield then. ( i could still remember when Suntec REITs managed to refinance their debts to a lower rate (HSBC) I was confident that the dividend income would hold. I maxed margin then, 3.5 x leverage with income coming in to shore up my credit even more. Margin finance was at 4% to 6% than. Again I was very lucky as I am managing a small portfolio of close to 100k to 200k than with saving at 8 to 10k a month I was not married then and I had very minimum commitment. So the market recovered and my portfolio increases to the pre-crisis level of close to 350k at end 2009.

the recovery was fast and furious and deleveraging was done in 2010. My portfolio has been deleveraged to level at 30% debt to equity level max. Currently my debt level was even lower at
only 15%. debts to assets level.

Looking back i was really lucky - 1) to have switched out to dividend stocks and also to have income coming in to cushion off my debt level fast. (they was no chance to answer margin call we simply let the house sell us out however when the income came in again the subsequent month the leveraged was by a factor of 2.5X again) .

Disclaimer

1) This Blog is intended only for the use of personally portfolio tracking and sharing of ideal. All the investment advice or stocks picks shared shall be view as only my personal opinion only. I do not warren the truth or accuracy of the information shared and likewise all investment should be consulted by your personal financial advisor as i do not have an understanding on your investment objective nor your investment Risk appetite as such i shall not be liability for any of your losses whatsoever howsoever should you decide to invest in any things discussed in this blog. 

Happy New Year 2019 My investment journey

It has come to a point in my life where I would like to share my knowledge to like-minded people in Singapore.

I hoped my Blog can help people to understand more about investment. 

Who am I  ? - I am in my late 30's this year, I started investing at the age 23 years old I had 14 years of investing experience as of this year and I am still learning.
Investing is an activity whereby the longer you invest in it the better you will become after failing in the mistakes that we had made in the past.

Peter Lynch mentioned that a "guru"  should be able to get 7 out of 10 of his investment right all the time. I am not a guru like Peter Lynch as such I don't think I would be able to be right more than half of the time. However, time is on my side I would love to get to close to where a "guru" would be able to achieve with the power of time.

Me in my 20s - I came from a very humble background, my family taught me to be thrifty and to save the money from my monthly job after graduating from a local poly. like most other Singaporeans, after serving my NS I began looking for a job. I had accumulated about 30k at the point I started working. The accumulation came mostly from working part-time when I was 14 years old  (fast food restaurant). I could still remember the pack of Marlboro (Philip Morris) cost me $2.40 then only to be inflated to close to 7 dollars for a 10 stick pack now. (yeah I know no more 10 stick pack).  Then the turning point came while I was studying for an external uni course my dad passed away while I was 25 years old I had no choice but to cease the program as we do not want to spend a big portion of it on the school fees. The funeral and hospital bills itself wiped away some of my saving. After which I reckon that by saving it was very hard for me to be well to do.

I am very fortunate that during that time Google was available to me - So I google around to understand how people got rich. Then I came across Mr. Buffet, after doing some research I think the only way to financial freedom is to invest in other people successful business at a reasonable price or to start a business of myself.

Investing in businesses - to leverage on mispricing concept to be given by the market.

I feel that it was not hard to buy stocks and so the journey began. I am very lucky to start investing in a very easy year from 2005 to early 2008 it would be hard not to make money. I invested in companies like China sky, Hongguo, fiber chem, China Hongxing etc all the S -chip. By combining with margin plus saving from my salary I was able to achieve a portfolio of close to 350k at the peak of the cycle.

In 2008 - my ex-boss asked me to head a division in southeast Asia, I declined the offer as we were unable to settle for the remuneration package. knowing that I would not go far if I stay in the company I decided to do a career switched.

In Mid 2008 - I got my trading rep license and had been a Remisier ever since.  In my current job, it gives me a view of how peoples react to emotions and fears. I got more than a thousand clients now. We always heard "to buy when others are fearful", that is easy to say but hard to practice in reality. A handful of my clients did that but most does not.  Most of the clients are fearful when others are fearful. Not only that they might cause you to be fearful when they are fearful. haha ... Investing is simple but not easy.


The greatest fear of my life........ to be continued....

Disclaimer

1) This Blog is intended only for the use of personally portfolio tracking and sharing of ideal. All the investment advice or stocks picks shared shall be view as only my personal opinion only. I do not warren the truth or accuracy of the information shared and likewise all investment should be consulted by your personal financial advisor as i do not have an understanding on your investment objective nor your investment Risk appetite as such i shall not be liability for any of your losses whatsoever howsoever should you decide to invest in any things discussed in this blog.