May 9, 2019

Cory Diary : Yield Anchoring

This is the concept I have termed which trying to grasp. A number of us understand not to fall into the trap of price anchoring. What this mean is that there is a believe of specific price of a stock that one is familiar without consideration of fundamental or market changes.

This often happens when one buy a stock  and will not sell even when fundamental has weakened and continues to assume the price will return to purchase price or higher. 

Yield Anchoring is more for dividend investor. Say we use to buy CMT at 5.8% yield. Today the stock price is trading at 4.8% yield, one may view as too expensive. Should we sell CMT ? Can we buy CMT ?

If I am to go through logical thought process. Few things come into my mind.

1. Business Fundamental
Can DPU maintains? Can it grow?

2. Alternative investment
Alternative investment that gives better yield for similar risk ?

3. Risks
Is my personal situation or macro environment considerations.

If we are to think through carefully above, there maybe time I could refuse to buy CMT at 5.8% yield but later on could be all willing to purchase at 4.8% ! 

In current market condition, Interests rate are low. I could view CMT providing stable 4.8% yield for next couple of years with potential of DPU growth. The view that CMT Malls Business are vibrant and domineering leadership in the market. Relatively low gearing which could avoid loan liquidity issue if there are recession. And with property curbs .... investment limited.

This may explains why selected performing Reits and Trusts do well even under trying condition of the market. Will it change ? Sure does. So we need to monitor but usually is not a overnight thing except Trump tweets .....



  1. I think you are more of confirmation bias. When you wants to sell a rising stock, it is always reduce risk, many years of dividends to take upfront, remaining stock to ride the wave etc. When you want to buy back at rising you will find reason like above to justify. This is confirmation bias because the above reasons to buy is valid as well when you want to sell. No offence, just my observations. Maybe you can improve your thought process when selling and buying to reduce such bias.


    1. Not sure why you hold certain assumption. What the article is trying to say is lowering yield does not means we sell and for your classification lower risk. While I do have 50% in Reits and Trusts, I do take profits. I do this on Partial on Ascendas Reit, CMT, all AA reits, all Parkway Life Reit and recently half Ascendas-h Tr.

      To term it as lower risk, we are wearing capital gain hat. This is not dividend investing. There is dividend elements during the period that you would have receive. There is also growth in DPU to consider. Unless you are looking into major recession, such capital gain/loss don't really playout.