Cory Diary : An Insight into DBS CIO Hou Wey Fook

I chanced upon an article about DBS Chief Investment Officer Hou Wey Fook. I have noticed him since his appearance in The Woke Salaryman interview. As an engineer who has excelled in finance, his educational background likely provided a solid foundation. I admire his advice and thinking, so I wanted to do a quick comparison for reference.

Hou Wey Fook's Investment Strategy

1. The Barbell Strategy

   • Income Generators: Assets that generate consistent income, such as Singapore T-bills, government bonds, Singapore REITs (Real Estate Investment Trusts), and Singapore bank stocks for their dividends.
   • Growth Equities: Investments in companies that are innovators, disruptors, enablers, and adapters. These are best-in-class global companies with wide economic moats – competitive advantages that enable them to maintain profit margins and market share in the long term.

2. Measured Exposure in Gold ETFs

3. Additional Retirement Income from CPF SA income for retirement.

4. Well-Diversified Portfolio: Prefers bonds ETFs rather than single bonds.

5. Income and Growth Allocation: 60% of his portfolio is in assets that generate regular income streams, while the remaining is primarily in growth stocks. It is likely that, closer to retirement, the 60% weightage of income-oriented investments will rise further.

6. Universal Life Policy: Acts as a mortgage protector, ensuring that in unforeseen circumstances, his wife and children can continue living in the house without the burden of servicing the housing loan.

7. Drafted Wills: This saves his children from unnecessary emotional stress.

8. Real Estate and Lifestyle: He bought a landed home 20 years ago and owns a Tesla.

My Portfolio and Comparison

It looks like we have a similar strategy regarding the Barbell approach. Recently, I added Russell ETFs and iBIT. These are small positions, but I hope to grow the Russell ETF smoothly, in addition to the similar growth stocks we have. iBIT is an insurance product that seems to match his measured exposure in Gold ETFs.

He is 61, which is seven years older than I am. However, my growth assets are significantly lower at only 11%. I think my allocation is too conservative on the income side and may not be less risky considering the amount of REITs in the portfolio. This is something I need to address.

Regarding insurance and wills for the family, this is something I need to plan for the mid to long term. I don't think I can do much about owning a landed home as he does.

His top investing tips

Time in the market beats timing the market. Frequent traders often fall prey to anchoring bias, a cognitive bias where investors place excessive emphasis on an initial value, and fail to adjust it adequately as they acquire new information about the company or market conditions.  

Conduct thorough due diligence and invest in securities with strong long-term potential. With comprehensive research, investors are less likely to panic over short-term market volatility and make impulsive decisions that could harm their portfolio.

Start investing early, and limit what you borrow. To borrow the words of physicist Albert Einstein, compound interest is the eighth wonder of the world.

Cory Diary

2024-0728

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Cory Diary : Year 2023 Equity Learning Part 2

This is an update on the 2nd part of Equity Performance in Year 2023. The first part is the result. Link here. The Year 2023 XIRR return is 14.6%. For a portfolio that has 50% Reits (fluctuates between 40% to 70%) allocation, the dynamism is quite high (See below chart) . The key learning is how to manage drawdown, and profit from it.

Manage Risk

Reits are investor instrument for cashflow and have sturdy business that protects our investments. Therefore thoughts I have is that we need to minimize and careful when we select Reits denominated in foreign currency or majority returns in foreign rental income. In situation we cannot avoid, we hope to see careful hedging of foreign income and their loan by the Reits if is not natural hedge. 

Hedging for loan rates are a must with size varying to their business situation. Finally, investment sizing or allocation will be key to reduce the risk. With this I will probably add another lens to my current portfolio an adjust accordingly.

How to Profit

Assumingly, we have strong business in the stocks we hold, we could invest each time in bit size when there is draw down, and come out of top later. See picture above on the volatility. Is easy to say but normally hard to execute. To do that, I need to ensure we have warchest, strong reits, not to huge allocation on any single reit to allow upsize and hopefully strong sponsor in such counter. Make sense ?

Cory Diary

2023-01-04

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Cory Diary : Investment Plan for 2024, Navigating Through High Inflation

As I embark on my annual ritual of crafting an investment plan, the theme for 2024 becomes apparent: the persistent impact of high inflation. In contrast to the pre-COVID era's 1%-3%, we anticipate a sustained period of elevated inflation rates.

Acknowledging the inevitability of economic cycles, we must navigate through the highs and lows while thriving amidst higher inflation. The rate hikes are yet to be fully felt by Real Estate Investment Trusts (REITs), leading to a continued compression of distribution per unit (DPU). Eventually, as these adjustments take effect, tenants will grapple with increased rental costs during contract renewals. This, however, is a gradual process, allowing time to assess the economic landscape before making significant adjustments.

The looming possibility of a recession adds another layer of complexity. As rates potentially decrease to mitigate the impact, there is a crucial time lag in each step of the process. Therefore, strategic planning is imperative to safeguard our portfolios.

Personally, my top choice for this environment is banks. Their adaptability allows them to thrive in both high and low-rate scenarios. While recessions may impact banks, history shows they weather such storms better than many other industries. As long as banks are not directly hit, as seen in past crises like the Asian Financial Crisis (AFC), Global Financial Crisis (GFC), or specific industry collapses like oil, they tend to provide stability and robust dividends, currently at a manageable 50% payout ratio.

REITs, on the other hand, assume a secondary role due to the ongoing DPU risks and direct impacts. Despite a 90% payout ratio, they may offer capital gains potential when the bottom is reached and recession seems remote.

Another intriguing class of dividend stocks includes ventures like Sheng Siong and NetLink NBN Trust. These stocks present opportunities for good dividends based on their unique attributes. Sheng Siong, in particular, boasts a track record of both dividend and capital growth, making it a potential performer in a high-rate environment.

The strategy for the coming year involves allocating resources to protect capital, secure base dividends, and allow room for growth. This includes trimming specific REITs that have yielded substantial capital gains, rebalancing towards banks and non-REIT dividend stocks. Caution is advised when expanding positions in specific REITs or growth stocks. Finally, excess investment cash could be secured in a war chest, which can be parked in interest-bearing instruments such as Singapore Savings Bonds (SSB), Treasury Bills, or other similar instruments in the absence of compelling opportunities.

With that, the current portfolio did some re-balancing. Is not done yet and there are still some funds to deploy as the dividend has been lowered.

Cory

2023-1212

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Disclaimer: The articles presented in this blog reflect personal opinions and are intended for informational and sharing purposes only. Not responsible of errors. Readers are advised to seek professional guidance when making financial decisions and should take full responsibility for their choices.

Cory Diary : Putting in a case for Reit today

Rate Spike

The whole issue of Reits share price being impacted for the past 2 years is due to Rate Spike.The volatility can be seen in Cory portfolio ytd P/L below. The ongoing battle between the yay and nay since the rise of the rate in Year 2022. 

For dividend investor, this is the first time we see significant spike in rate of recent times. Reit contract with different tenants take time to change over the years  therefore the cost of funding cannot be passed down fully to them. Inflation adjustment may also happen on annual basis if is part of contract.

Currently Rate is Peaking in this high rate environment. While rental contract such as Mall Reit could takes 3 years to cover all tenants. This will mean Reit investors will have to absorb the cost of funding differences even with Reit with strong moat. The good news are most Reits are still profitable. We are in interesting time because the irony is those reits with very short term contract will be able to raise their rental cost quickly and are much more nimble to react to rate hike.

Quite a few Reits are much more resilient due to high exposure to local economy in earning S$ and hedging. This shield them significantly while they bid for time. Larger Reits able to realise value in some of their properties with minimal impact to their recurring dpu or even sell in premium to cover the dpu shortfall.

Missing the Trees for the Forest

Interest Rate Trend - Decades is a down trend. While there is many prediction that rate will stay for high and longer, this is not the key factor that impact reits as cost will be passed down to clients in matter of time. However, long term when market stabilized, if that happens, we could see the lowering trend initiated again.

The benefits will be we could see significant rise in reits earning as contract takes time to unwind too and economy could be boosted in lower yield environment again. This is the upper optimism of hope. The fear could be  diving deeper into lower dpu such as the high rate causes recession to the broader economy hence nothing is riskless due to the other spectrum of negativity. 

Cory

2023-1113

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Cory Diary : Review of Current Reits Position in the Portfolio

There are 10 Reits in the portfolio of varying allocation which together take up about 50% allocation today. The current Top 3 Reits allocation are Ascendas, Aims Apac Reit and FCT. The Bottom 3 Reits allocation are Sabana, United HS and Elite Comms.

Ascendas Reit - Hold to manage size allocation

Aims Apac Reit - Hold to manage size allocation

FCT - Accumulation stage when opportunity arises

Mapletree Industrial Trust - Hold to manage risk allocation

Mapletree Log Trust - Allocation Trend will be lowered due to acquisition

iReit - Hold to manage risk and size allocation

Ascott Trust  - Allocation Trend will be lowered due to acquisition

Elite Comms GBP - Hold due to GB local issue. Monitor.

UtdHampshReit USD - Hold to manage tax and risk

Sabana Reit - Hold to manage risk. Monitor.

Predominantly Foreign Asset Reits

Foreign based SG Reits are iReit, Elite Comms, UtdHampshire. All three therefore has forex exposure and in recent times suffers from reduced income in SGD. On top of this, inflation is relatively much higher than SG and Interest Rates Cost have seen much higher impact on them. Business wise the basic fundamentals look ok though not perfect. They could be a lot worst if they are in US Based Office Reits as WFH in oversea countries likely can be a long drawn normalcy.

While most of the higher allocated Reit positions are well into positive territory YTD, the higher yield Reits are in deep losses. The only consolidation is their relatively smaller allocation in the Reit segment of the portfolio after suffering large capital losses last year as well. This is not surprising due to most of this are mainly foreign assets whom faces much higher cost in recent time.

Industrial/Business Park/Logistic Reits

Ascendas, Aims Apac, MIT, MLT and Sabana are all Industrial/Logistic Reits of varying degrees. They enjoy relatively good business in current environment. Strong Rental reversion in a number of them. Interestingly, the smaller Reits like Aims Apac and Sabana did very well in rental reversion. All of them has a good plan and control of their debts. DPU looks stable.

Retail and Hospitality Reits

FCT and Ascott are in Malls and Hospitality respectively. They also enjoy strong business. With FCT being a Core Reit in the Portfolio other than Ascendas. The strength of FCT is their suburb Malls on well located area. A key necessity meeting and transit points for most commuters and well positioned for daily necessities. Is a Reit that we expect to be able to weather all Emotional Storms from the Market. Recently they have managed to sell off some non-key assets which is quite a positive move in current higher cost interests impact.

Ascott Reit is more a recovery play from Post Covid whom suffered deep impact from lock down and lack of tourism businesses during Covid period. Recent rights issue has been disappointing as we are in current higher rate environment and therefore large asset acquisition do not benefits shareholders. This is reflected in recent poor share price performance.

Overall

Worst time of Reits maybe over for major part of it however there are hangover issues with fundamentally weakened reits that will drive them lower as time passes. For the past 2 years the banks have counter balances the weakness of Reits in high spike rate environment. This help to ride the Portfolio over this volatile period.

Is also time now that I plan to do re-balance my portfolio with the longer term view of their trend. As usual, i will put integrity of the reit managers and their alignment to minority shareholders as utmost importance even though is with the expectation that the sponsor will try to take some off the table for themselves.

And finally whenever opportunity arises, i will tap into some warchest. There are voices out there that the market may turn worst. I will probably adjust my pace slower when tapping new funding. The good thing about all this is that SSB and T-Bills which has grown sizeable for the past 2 years, help to retard my funding release.

Cory

2023-1006

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Disclaimer: The articles presented in this blog reflect personal opinions and are intended for informational and sharing purposes only. Not responsible of errors. Readers are advised to seek professional guidance when making financial decisions and should take full responsibility for their choices.

Cory Diary : Compounding with Dividend Investing

Often the advise is to let you children invest as early as possible. But no one teaches us how to do it for them properly. The problem compounded when we based on investment on our own ability or disability.

Chance n this episode from - Our Rich Journey video - 

SECRET Revealed! Sisters Turn $16,000 to $65,000 in Stocks! Millionaire Family's Money Talk Exposed!

Thought this is quite amazing journey for their kids even when they have forgot about it. Maybe investing is that way !

https://youtu.be/qWp_4rXFWx0

Cheers

Cory

2023-0811

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Cory Diary : This is the One !

For a long while I have been hoping for a correction so that I can scope in low to expand my dividend size that I could collect annually. What I didn't tell myself is that this could also mean the whole portfolio has to go down with it to fetch it.

Obviously on hindsight we should sell and buy back later before the correction. However I am not qualify to be a god. We could try some but to risk the entire portfolio do requires god mode level. So my take is considering most of the stocks picked are quality stocks of strong sustainable DPU at least in my own perspectives we can just ride it out.

We have gone through Covid, Inflation, Ukraine War, China Tech/Edu Clamp down, China Property Crisis, Tesla/Elon/Twitter Volatility, China Drought, Zero Covid, Rate Hikes, Liz Truss Saga, Weak Yen and Supply Chain issues. Each with severe punch below the belt on the Portfolio and each could be classified as Black Swan Events of varying degree. That's through a len of negativity. And maybe more to come.

Hold on, isn't that exactly what we dividend investors wanted to be able to increase our dividends meaningfully maybe just not so many swans .... ? Last count annual dividend has exploded up by almost 40% with constant minute size injection as the market crumbles. If the absolute number maintained, the annual income could be insane at personal level. That's a golden opportunity for a 10% dent on the portfolio which is cheap vs Global Financial Crisis.

The only real issue I have concern is Right Issue with deep discount and to minimize this there are few ways I need to be prepared for it. 

Namely,

1. SSB

2. Multiplier

3. Cash Saving / FD

As for averaging down, i have been focusing only on stocks that likely will not give deep discount so that we can skip the subscription if needed. Cash is King now and want to use it wisely without added risk. This averaging down routine could be now over since I last blogged on inflation movement which turn out as expected. ( link ). Hopefully we can enjoy the ride back up till year end.

Cory

2022-1114

Cory Diary : How do SG reit performs ?

How do Singapore Reits on average perform so far. Using FTSE ST All for reference, only down about -11% in a turmoil year. 

Now how does S&P 500 performs ? No kidding, down more than -20%.

And if we consider dividends, performance gap is even wider. So is this surprising ?

Using another data point. Looks like Reit still do better long term but this is US.

https://www.fool.com/research/reits-vs-stocks/

How about SG reits. If we stick to "Branded Reits" likely outperform the US reits as a number of them have more than doubled in value over the years.

Cory

2022-1007

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Cory Diary : Jittery Market

Year 2022 Market has been Jittery. The funny thing is the market has been reacting as though they are surprised what Fed will do when they actually knew what it has to do.

There has been many Black Swan events if we are to broadly classify them. Ranging from Ukraine War, Covid aftermath, High Inflation, Extreme Hot Weather, China routs on Tech/Edu stocks, China Property Crisis, World Oil Crisis and to add the emergence of disruptor like Tesla on many fronts that pose to change the landscape of the auto industry.

For Mainly Dividend Investor as in perspective of Cory Portfolio, is like a similar beeps like in past drawn down which is surprising measured despite large growth in portfolio size. ( see above chart on draw down)

There are still a few months ahead but unlike Year 2021, I have not much feel to be in good profit territory for YTD performance. That's fine. We can wait while scoping up cheap stocks in stages. It has been good opportunity to collect.

Will there be cheaper price ? Maybe ... no one knows. I don't have crystal ball but is cheap currently.

Cory

2022-0902

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Cory Diary : Time will Pass - Don't let the correction go to waste

If someone is to tell me when Covid just hit us in early 2020 on the disasters it will ensued after, I would find the going tough. To play back, Covid hits, 2nd Baby, Covid Mar'202 Crash, Covid lock downs, Salary Freeze, Covid Vaccinations, Covid Variants, Ukraine War, Fuel price sky rocketed, High Inflation, Rate Hikes, Property Curbs, ... ... ....

TIME WILL PASS

While is hard to predict the future, we have already progress so far as we take it one bad news at a time. For every damage done, it will Pass. Therefore is important that we Preserve and go through it.

What I do the past week is tallying up my available War chest. Have been buying in bits into dividend stocks so far. Trying to measure up how much each purchase drives the dividend coffer. The buying period is long because I want to see is there major dip or else put some amount Instead into SSB at higher interest rate later. 

Yesterday US side announced 8.6% Inflation number and luxury home sales dropped 18%. Obviously the Market reflected it. Currently I have Telsa and Msft in US position. Probably less than 10% of the Equity allocation. Even though it was managed down as I take advantage of the strong USD position to sell into SG Cash, the exposure is still quite high. Have a good night sleep last night so aren't going to DCA or increase US Positions.

SGX side, Potential Annual Dividends will hit $67k to-date. Received about $32k+ dividend YTD so far which is way more than previous years even before the month June ended. Seriously, I am not hoping for US market to crash but it works perfect if SG Market does for dividend counters so that I can stretch my dollar for the dividend significantly. 

BITS and PIECES

Meantime I will keep buying in bits and pieces as it looks like the market is on slow rewind.

Cory

2022-06011

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Cory Diary : Interest Rate v Reit Prices

Yield

Reit yield has been going down for past decade or more with lowering interest rates. What this mean is higher Stock Price. This seems a yield spiral which result in yield compression against SSB or Bonds. There needs for a reversal.

The bad way to do this is to have relative lower stock price with higher yield as we can see in past one and half year. Basically Covid impact weakening business fundamental. The ideal way to have much better earning in DPU. How can this happen ?

Currently I can think of 3 and item 1 condition is happening today. There could be more but for interest of time ...

1. Inflation - Yes. This result in higher rental prices provided strengthening economy.

2. Leverage - Higher Leverage will helps including Perpetual.

3. Property - Yes. Increasing Property Price means lower Gearing.

Rental

In short, Reits need to adjust their rental which takes time to happen therefore we could see weakening or flat market due to lagging factor however longer term this will provide better DPU thus stronger Reit prices theoretically.

The problem with this strategy based on past reference is that the lagging factor can last for years and who knows what will happen during this period. We could have recession, major war or another pandemic. touch wood ! Enough of negativity ! There can also be positive news too just that I lack the knowledge to think of immediately that has 100% confidence it can speed up.

What I could is to buy in slowly in small bites investing in strong fundamental businesses meantime.

Why Reits ?

See below - Specifically Singapore. Simply no withholding tax and local knowledge.

Source link

Cory

2022-0605

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Cory Diary : Market Drawdown Logic

Dividend Investing always have the idea that as the stock get cheaper we can buy more shares cheaper. At the same time we get more and more dividends. Capital loss is not meaningful as there is confidence the price likely returns if is not short term even long term we can wait. This is logical when the business fundamental is not significantly impacted and we are still seeing the cashflow coming in to provide dividend. Collecting dividend while we wait is a very happy exercise mentally.

Bottomless Pit

What-if is growth stock that hardly has any dividend ? This becomes tricky in market drawdown. In growth stock, PE can move from low to high gear and back. What this mean is money created out of thin air or vaporize with sentiment as money is not in the pocket literally. Strong companies will not escape punishment even with almost perfect score as people will still focus on the imperfect and blow it off with broad market. People who continues to average down in a down trend market will be suffering for a long time mentally. There is no base support. It can be a bottomless pit as valuation is just a paper exercise till something change the course.

The market is well known to be 6 months ahead. So if rates impact till year end means Early June is the time we re-evaluate our thoughts again. So much on Growth Stocks. Needless to say is not the same logic as dividend investing. Our brain needs to switch a bit on this and timing maybe critical even when we cannot do well on it. As usual exception always applies just in case someone like to shoot my thought.

Cory

2022-0430

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Cory Diary : Russian invasion of Ukraine - Elite Comm Reit

Ukraine has more than 200k servicemen. For Russia with their military power and size to send less than this number of soldier to invade Ukraine, and splitting their army into three routes seems arrogance resulting them failing their military goals so far. And now with Ukraine activating reservists it seems tough for Russia to fight without significant loss of lives even if they win. Putin has started to use cluster bombs, hitting government building with missiles and deploying thermobaric weapons seem steps of desperation. This will be horrific to Ukraine Civilians as such weapons are indiscriminate and a serious war crime. I wonder which soldiers will obey such orders to kill civilians senselessly in this modern time. Even if Russia win is a lose.

Interestingly, the invasion also resulted in 10 Yr bond yield crushing back to Jan level as people rush for safe assets. Reits started to rebound despite Inflation reeling hard. USD creeping up too. The bank prices that have been spiking past months have already entered discount modes. This allow me to kickstart collection but seems I am a little too eager as my position has increased to more than 5% of the Equity Portfolio. I need to hold my gun tighter when the probability or rate increase likely to be strong ?

So how is Europe Properties impacted or mitigated ?

Elite Commercial Trust

Regearing announced. There is some rent reduction in 11 of the 100 properties. A huge relieve to shareholders as they are now extended to year 2028.

"Together with the 31.6% of the total portfolio by GRI currently with straight leases through to 2028 with no lease break options, this means that 78.6% of the leases by total portfolio by GRI(1) will run straight to 2028 without any lease break options"

However there is also some investment required as follow. This could improve the valuation of the properties such that dividend will not take significant hit over the 3 years period if they go via additional loan.

The only risk left which I am personally concern is exchange rate risk on DPU nevertheless is a good deal overall.

Cheers,

Cory

2022-0302

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Cory Diary : Danger of S&P500 Index

The S&P 500 is littered with many instances of long period of down time where investor hold on to zero to very low yield stocks for many years. Examples below on most recent ones.

First Picture is 6 years wait.

Your wait will be extended by another 7 years if you buy in Year 2000 peak.

That's total of 13 years and with only a little profits. Not sure will there be after currency exchange rate ?

For this number of years in Dividend investing stocks, an investor has good chance to double their returns assuming just 5% yield. Currently Market is trading 5.5% yield for strong reits. Not saying S&P500 will repeat this stunt. Just to highlight the danger. Maybe one should DCA or do proper diversifications. Maybe stock picking is a good idea ? The index is still cool. Just be aware what we are walking into as not many can wait even for 3 years.

Pls DYODD

Cory

2022-0206

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Cory Diary : Dividend Strategy doing 4x100 Relay

Compounding dividend by holding stocks long term is kind of straight forward method of investment. However, if one is to change dividend stocks midway while continue to compound, there is potential one can go faster due to market timing opportunities.

An example will be like 4x100m Runners passing baton. There is not much delay other than transaction fees. In fact new fresher runner can run faster speeding up the whole process of compounding. By locking oneself to a single runner to complete the entire compounding journey, matter of time it may slowed down as one will get tired running the entire 400m journey.

The next question will be when should we change runner ?

DPU expected to slow down in next coming years, CEO change not to our liking, Industry shifts, Price Actions / Market Dynamics, Riskier leveraging, Weakening Sponsor, ....

Cory

2021-1105

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Cory Diary : Trading notes in Foreign Markets

Just a quick update on my investment. With recent spike in the stock markets, total foreign shares stand around 13% of the portfolio. One significant milestone is the profit gain ytd matches in % term to the local market finally.

The mix in the portfolio is to compensate the lack of international level exposure and growth. Therefore foreign shares are exactly targeted at this segment. Like in some investors, timing wise my foray in US and Chinese markets aren't really good.

The US market corrected as soon I deployed my first 5% allocation. It takes like half a year to get what I am today. As for the Chinese market, I entered after they were already in deep correction but they just go much deeper after deploying my initial fund. Fortunately, this are in mini steps so the exposure do not rock the portfolio significantly while allows me to buy time to learn. At the same time slowly build the allocation up. In Equity allocation US share value has hits 2/3 of the foreign shares. The strategy is to allow initial outlay of the fund to break even or in profit territory before pumping in more.

What this mean is the Chinese stock allocation increment will be frozen. The US Market has grown from strength to strength. A few hitting 25% gains within the year on average as we average up. May reach a pause now as we now have sufficient exposure. What to do with some of my US cash ?

The bad thing about moving fund around between markets is forex cost. Maybe I should look for some US denominated local dividend stocks. One interesting counter is HongKongLand USD which has been 22 cent dividends for the past few years. This works out to about 4.2% yield. Below the chart.

However the Math do not add up. The stock price has been on downward trend for the past few years, The amount of dividends collected is far below the capital loss.

Another stock I could check is DairyFarm USD. Chart Below.

Unfortunately, it has the same tune. Why would people want to invest in such counters when their stock price has been on quite an amount of decline of recent years ?

To be clear I am doing this without reading their financials and have them filtered out. Mean time my USD fund will remains in cash. Happy Reading.

Cory

2021-1014

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Cory Diary : Sep'21 Play

This month is quite tough for capital gain investors. Basically returns shredded quite an amount due to China onslaught of capitalist attributes in Tech, Edu and Prop. And this week we have Energy crisis hitting industrial lands. On America side we have the ongoing foreplay of debt limits which is like never ending story. Think is time they remove it once and for all before we ended up in comatose status.

To be fair, dividend investor got it too in that we probably see more than 2% shredded from our investment value return perspective. If they are core holding, as always riding through it. This aren't our first anyway and it will not be our last. The only consideration is when we can trigger our cheap buys happily.

Dividend Returns

Dividend wise YTD $39,686. Theoretical max $67k for the year. This bring our Dividend Returns to $471, 975 over 16 years plus. In early years, say Year 2005 the dividend just $2492. This stay below $10k for 5 years. Which bring to the point of learning curve hand-in-hand with the compounding effect of returns rolled up. 

Why take such Risk ?

Some people throw most into a super stock. The fact of the matter is if 35% failed, that's mean 35 out of 100 people will be condemned. If 40 stays flat then remainder 25 MAYBE becomes multi-millionaires. This is illogical as life is not 1's or 0's. Many of those 35 who failed can still have very good life without doing this bets.

Portfolio Returns

As for Portfolio returns YTD, the US shares basically cover the Chinese shares losses thanks to Tesla and AMD run up. Which implies the lowered portfolio value is borne by sgx dividend stocks this month and that is ok as the only sure thing is dividend. Maybe not so for those who play heavily in margins.

In net 5.85% Profit YTD after yesterday market falls specifically on Reits.

Cheers

Cory

2021-1002

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Articles in this Blog is personal take and educational purposes only. Reader should seek their own professional help when making financial decision and be responsible for their decision.

Cory Diary : The Secret Trick of Dividend Investing

The Myths

Often people uses DPU as yardstick for evaluation of Reit returns and this is perfect. Obviously nothing matter if the integrity or risk of the Reits are in doubts. If that is the case, why often we see top performer of Reit investor often has low yield Reit ? Many will argue it takes a huge portfolio to achieve the level of dividend needed. That's a huge misconception when one tries to reverse engineer and implied so.

Another key believes is that they buy early in the dividend game, years ago. And so people hope for a big crash before they will consider the same to stretch their dollar. Hello ? did you buy significantly in Mar'20 Covid crash ? If so why is your portfolio still not big ?

Reit Valuation

Valuation of Reit in addition to current yield there is another critical factor which I did not blogged much about and that is price growth. Never mind what's behind that drive it in this article. The essence I want to share is price growth. huh, isn't that blasphemy ? Please hear me out.

In March'21 this year, Mapletree Industrial Trust hits low of 2.52. At this price the current yield is about 5.2% in which DPU roughly 13.2 cents. Some would even say 5%. Not that great and many will ignore it. Fast forward today, less than 5 months later, is now last traded at 2.92 on 7/28. Yield 4.5%.

Now, if we add 13.2 cent and the price delta from Mar to end July of 40 cents, that is 53.2 cents. Now work back the math if we use 53.2 cent / $2.52 = 21% for 5 month works. Think it in yield term this is easily 10 times of March'21, 5.2% yield annualized.

Real Life Example

And this is an example on why I bought Mapletree Industrial Reit this year from Feb to Jul'21 this year. I have a price expectation that it can go higher while I am prepared to wait to collect 13.2 cents annually.  That's the Magic on why Portfolio can compounded fast because is just not dividend even though we are prepared to sit on it. So next time someone tell you his portfolio is small and will take forever to grow, ask him to think again.

I have challenged two huge misconceptions today that most do not know about. And how I grow mine. How much we understand is up to individual. Next, how I know the price has the potential to go much higher ?

That's another Story Telling which sprinkles across in all my articles.

Cory

2021-0729

Articles in this Blog is personal take and educational purposes only. Reader should seek their own professional help when making financial decision and be responsible for their decision.

Cory Diary : Why is Reits affected by Interest Rate

Often we hear analysts or in forum the perception that Increasing Interest Rate will affects the cost of Reits Loans therefore profitability. However the correlations on table below tells a different story that Reits do generally well in high rate environments .  Hope this settle once and for all, the myth or maybe there is deeper issues within.

Interest Rate Impacts

A well managed Reits will pass the cost to tenant. A too drastic increase within a short period do affect Reits short term as majority of tenancy agreements are still in force but that's not the argument here. Some Reits have build-in rental escalation tied to sales and inflation. Nevertheless, cost is able to pass down to tenant mitigating the impact.

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Yield Compression

What we know is that when investing in Reits, we looks for yield therefore it is logical that we compared it to other products to decide is it worth the risk or seek better returns. In the scenario movement of Interest Rate upwards, it can cause Yield compression. This make us less willing to invest in Reits unless the yield improves further therefore lowering the stock price.

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Competition Examples

Singapore Saving Bond (SSB ) gives 1.5% annualized (each year) for 10 years. Say the rate doubled to 3% and this allows SSB to give higher rate say 2%. Some people who invest in a Reit logically will switch to SSB considering it is basically riskless to capital. Reit price will naturally falls as there will be more sellers.

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In situation of no good alternative, REITs price will generally rises with strong economic and stability as investors are willing to take larger risk. Another comparison though not necessary guaranteed is CPF giving 2.5% and 4% to CPF OA and CPF SA respectively. Though riskless, there are limitations and restrictions.

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Not all Reits are the same. Some Reits risks are insane. Be careful of Yield Traps and Pitfalls. However, if a Strong Reit is unfairly sold down, remember to "Koi Durians" ! This differentiate Veterans from the Green as Fundamentally, the business unchanged.

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If you are interested to know more about Reits. Try this books !

Making your Millions in Reit

Passive Income from Singapore Reits

Singapore REITs as An Asset Class

Playing the REITs Game

You could be well on the journey to Financial Freedom like me. But please DYODD.

Cory

2021-0725

Articles in this Blog is personal take and educational purposes only. Reader should seek their own professional help when making financial decision and be responsible for their decision.

Cory Diary : Equity Allocation Jul'21

iReit Global

Recent change includes the long awaiting Preferential Offering (PO) finalized. The excess allocation result is kind of surprise yet not. CDP share has more than 2700% excess allocation in term on original rights allocation. This is in consideration that share size is minuscule.

On Custodian account side which is where main bulk of iReit shares are, it is slightly more than 100% excess allocation again in term of original rights given. If we have applied for double the excess, there is likelihood we would have got it as well based on others feedback. This is a surprise. On hindsight, which is a bitch, PP is quite small relative to PO. Well sometimes it takes experience to get through. And then proceed to shade a little off the portfolio to right size the exposure assuming the trading price maintains.

SGX

Is on the tear again. Blogged many times on the significant undervaluation. It has keep growing. Unfortunately we couldn't chase as valuation is an Art especially so when we have sizeable exposure already. It is also one that provides the balance factor on different market sentiment days. It has the potential to grow to join the big 5 of the portfolio allowing more diversification and stability needed to compensate on smaller bond size.

Allocation

Bond investment reduced to 11% but in actual there is expansion in CPF allocation which is not part of this scope. Any interests on Bond/CPF can read ( Here ). Reit allocation lowered to 48% despite recent PO. This is mainly due to reduction of Aims Apac Reit from recent run up. I was second guessing potential rights issue which I have no plan to take up hence the change but on second taught there is possibility of merger which has been rumored for a long time.

We have seen good gains of the portfolio this year. However, there is still room to grow till the end of the year as it has laggards such as Malls and Industrial Reits which will benefit from the recovery of Covid-19 despite hiccups. Maybe we will see 15% allocation if all stars aligned.

Dividend Returns

Dividend generation at sustainable level for the portfolio hits 60k. ( If we leave as it is without injection and say 2% growth, and some dividend growth as well, we will see 4k more dividends each year. This is rough estimate as we need more data with time to get the trend right. The formula will be portfolio value x 2% growth x 5% yield + 2% growth x annual dividend. ) Some injections will push the annual dividend increases to 5k. What this mean is it will take 7 to 8 years for dividend to grow to 100k annual on conservative estimate if we let the portfolio runs on with limited intervention. However, the portfolio which has been living on 7% annualized returns for past decade. So it can be done in 5 years or less. A long stretch goal. Wishful thinking ?

Cory

2021-0722

Articles in this Blog is personal take and educational purposes only. Reader should seek their own professional help when making financial decision and be responsible for their decision.