It has been many years Cory has been preparing from being retired. Don't get me wrong, I am yet to be retired and I am not that old. However, team development is catching up with me and my passion has been waning recently. The Covid-19 makes management worries and company decided finally to promote one of my senior staff who has been working for me for 18 years to management position. Her promotion is not easy because I have been spending time coaching a few whom declined. I hope they are just being humble.
With this move, I will also be taking some new learning of another group of colleagues who recently lose their manager through attrition. This is in-addition with multi-tasking to help the new manager. I need to spend time to convince her that there is nothing to worry because I will support her as long I could. And it is better for everyone that she has time to take on the role while I am still around collecting money happily. Why I say that is because if the business get whacked or there is business rationalization, I could be on the chopping board, and the team could be impacted.
However, to myself every time I think about such possibilities there is a little unease as well. The sense of suddenly losing monthly income and bonuses. The beautiful constantly increasing Net Worth. The insecurity. This reminds me of why people chasing to buy toilet paper. We cannot change others easily but we can change ourselves. So when the time come, if I am to fall into desperation, I have no one to blame but myself but I aren't going to compete with others to buy toilet paper !
Daughters teach me that life is more than money. I probably bought 10 boxes of Pampers for the elder alone in case the market starts chasing for supply. This are non-perishable items and my thinking is that this is something which I could control and not spoiling the market if I get them before there is any crunch. There aren't so far and unlikely will. But as a father cannot do without Pampers and Milk Powders, I do not want to take the risk fighting over it with others. Neither do I want to be behind the horde just to get a pamper home. So this is the only two items I technically "hoarded" for my kids. Frankly, they use up pretty quick to my surprise. And maybe this also help to send signals early down the supply chain on the needs for greater supply buffers. Talking about vested interests.... that's how we push for more supplies.
So how is my dividend investment plan going ? Last year achieved almost $53k annual dividends. This higher figure is unplanned. Some amount due to the mergers and cash-out from rights issue. For current portfolio, to-date theoretical max $56k. The DPU compute is before Covid-19 so there will be cut however the believe is when this is over the DPU may returns in time. About 70% warchest left to play with which potentially due to this crisis to allow higher target than original allowed by another 30% to 45% more with current market condition. This will still leaves me with ample cash for loan payment for 6 to 7 years parked in SSB and FD mainly. I could reduce this amount but prefer not as it can also be used to pay down loan if needed. We never knows how the markets will move as time goes.
One thing for sure, every month I worked, the better my buffer. If I could hit year end bonus, that will be awesome. I know is annual event. I always appreciate that. Never takes good things for granted.
Cory
2020-0405
Showing posts with label Dividend Investing. Show all posts
Showing posts with label Dividend Investing. Show all posts
Apr 5, 2020
Apr 3, 2020
Cory Diary : Making Mistakes
Investment is a lot about mental challenge on how to control the fear and greed. This is especially so when one put quite amount of his wealth at work and he is no longer young. If one plans to retire on equity, Portfolio Management usually is a must to calm the mind and to generate enough to support expenses.
Another easy but dangerous option imo ( Kia-si thinking ) for me is to hand over this hard earn money to fund manager that is stranger to you. Consider the amount saved is your life saving and moving forward which is very hard for you to recover them when loss. Popular and star manager no count by the way. They are still consider strangers. I rather keep my money in CPF, SSB or FD.
In all my earlier articles on which I am a proponent of portfolio balance so that we can ride through the market sanely. Even with proper portfolio allocation to mentally condition oneself in market down turn, the most we are Neutralizing Effect meaning not benefiting from market down turn. Well the whole idea is to not to get rich but enough through mitigated risk.
However to be on offensive during down turn, we need warchest so as to benefit from economic recovery as market can often be very irrational. This money is best start to build when market is getting elevated and not when is about to turn since no one can get it perfect. And continue increasing the amount till the market turns. This is experience learned. The next problem is when to deploy. We can do stagger across weeks and months. As market is not smooth, is more like small bursts each time. Next we need to consider which counter to buy.
What I did is to look for counters I have high confidence to survive and rebound, and do average down when the gap is quite significant. For example STI was 3300. Today Is 2400. Gap of 900 is easy to decide to average down. Gap of 200 is clearly not enough. Some like to use TA to get to the exact. I think is up to individual and as for me when I have the mood and time. I also take this opportunity to look for counters that I took profit and waiting to return. Some for years. Similarly, I plan to collect them back in stages.
There is a wise man out there who propose to always average down on different counter. I have some agreement with that. So if I am to deviate from this advise, I know what I am going into.
Mistakes
I have been waiting the longest time to buy back 3 of my best return counters of Year 2019 and early part of Year 2020. Ascendas Reit, Vicom and MIT. They will sit nicely in the portfolio. So I manage to do all halfway for each when the price dropped enough weeks ago.
As due to great volatility, I accidentally release MIT back to market again. MIT sits well in the portfolio which often counteract other falling counters. Mistake number 1.
And also due to volatility I decide to take profit on some of the newly acquire Vicom which is a great counter balance in the portfolio. Is greed. Mistake number 2.
Wish that the market is kind enough to give me a chance again. I won't .... .... ....
Just sharing my 2 cents inner feeling ...
Cory
2020-0403
Another easy but dangerous option imo ( Kia-si thinking ) for me is to hand over this hard earn money to fund manager that is stranger to you. Consider the amount saved is your life saving and moving forward which is very hard for you to recover them when loss. Popular and star manager no count by the way. They are still consider strangers. I rather keep my money in CPF, SSB or FD.
In all my earlier articles on which I am a proponent of portfolio balance so that we can ride through the market sanely. Even with proper portfolio allocation to mentally condition oneself in market down turn, the most we are Neutralizing Effect meaning not benefiting from market down turn. Well the whole idea is to not to get rich but enough through mitigated risk.
 |
| 7.x% gap against STI (excl STI feb div) |
However to be on offensive during down turn, we need warchest so as to benefit from economic recovery as market can often be very irrational. This money is best start to build when market is getting elevated and not when is about to turn since no one can get it perfect. And continue increasing the amount till the market turns. This is experience learned. The next problem is when to deploy. We can do stagger across weeks and months. As market is not smooth, is more like small bursts each time. Next we need to consider which counter to buy.
What I did is to look for counters I have high confidence to survive and rebound, and do average down when the gap is quite significant. For example STI was 3300. Today Is 2400. Gap of 900 is easy to decide to average down. Gap of 200 is clearly not enough. Some like to use TA to get to the exact. I think is up to individual and as for me when I have the mood and time. I also take this opportunity to look for counters that I took profit and waiting to return. Some for years. Similarly, I plan to collect them back in stages.
There is a wise man out there who propose to always average down on different counter. I have some agreement with that. So if I am to deviate from this advise, I know what I am going into.
Mistakes
I have been waiting the longest time to buy back 3 of my best return counters of Year 2019 and early part of Year 2020. Ascendas Reit, Vicom and MIT. They will sit nicely in the portfolio. So I manage to do all halfway for each when the price dropped enough weeks ago.
As due to great volatility, I accidentally release MIT back to market again. MIT sits well in the portfolio which often counteract other falling counters. Mistake number 1.
And also due to volatility I decide to take profit on some of the newly acquire Vicom which is a great counter balance in the portfolio. Is greed. Mistake number 2.
Wish that the market is kind enough to give me a chance again. I won't .... .... ....
Just sharing my 2 cents inner feeling ...
Cory
2020-0403
Mar 21, 2020
Cory Diary : Shocking Covid-19 Impact, Dividend Investing
There is always something new to learn in every crisis. Covid-19 overlapped with Oil price war. Yes, we can also include Trade War as well. The sell-off is so hard ( steeper than GFC 2008) within 2 weeks that Cory feels a bit cheated of his Year 2019 profits.
Maybe there are 2 general ways to handle Covid-19. Easy and hard ways. The hard way will be like Taiwan and Singapore chasing down every soul and leads. Curbing travels and blocking entrys. The easy way is to let the Virus spread through the population killing all the weaks and olds. It will be over in months. Those who survive will have immunity. Obviously if people try the later path, the damage is going to be very hard to accept. This is inhumane but that's Nature way of selections. Some leaders think they could till they find they can't. The medical facilities will be so overwhelmed that no sane leaders can afford.
When the virus first started, the market continues to beat new high. Is a China problem basically. Is only when Europe exploded and invading America shores that everyone woke up to reality. The fall is so steep that not many can react in time. This comes at a time locally when dividend Investing could probably be awarded the holy grail of investing. However on hindsight the writings were in the wall. The ever diminishing yield, all time high reits prices, relatively small or average volume, double digits portfolio growth in Year 2019, .... waiting to be challenged. Many are new investor believers. Quite a few use banking facilities to borrow on margins. They thought market won't be that insane but they do. There is also huge funds sellout that precipitate the falls though to many it does't make sense for the price such as CMT for 6.5% yield ?
What will Cory portfolio plans be is what's the end state goal he likes to have. The first obviously or not for some gurus will be to cut down all hospitality or travel related stocks. So Cory will also avoid transportation stocks despite lower oil prices. The next is all oil related stocks which have been suffering for years. Chances are they aren't coming back near term as quick. Some may not survive. So the risk tag is much higher than others. Cory has SIA Bonds so this is cut due to high risk and cash release for yield. As previously blogged, no more acendas-h tr or Ascott Residence Tr. thanks goodness.
As for banks, Cory has some exposure but will not expand further as digital licenses could do some damage to banking margins. Bad luck on this one as if there is no banks stake Cory would have have get some at good price today. For now, is better to reserve precious warchest in current market for something more definite to rebound strongly and portfolio risk managed.
During this crashes, Reits with high yields tend to crash a lot more like 30%-40% range even though fundamentally they are alright just not as cool as the blues. Yes, Warchest is so important in current conditions. So many fruits are ripe for picking. While cheap can get cheaper, seeing strong reit stocks giving 6.5% seems no brainer to buy. What we have to do now is to grab those with good yields that can survive the downfalls yet fundamentally earning will recover. This may mean more counter expansion which means a plan to reduce counter with low % exposure and build it back later after crisis.
So the question is are we bottoming. Last check, DJIA drop another 900 points just as we thought market is stabilizing. So the earlier plan to conduct multiple purchases across weeks and months continue to make sense. It could be a lifetime opportunity for people who want to invest for yield. But if we is to throw in all bullets, chances are it won't be last bad news. Seriously we don't really know how deep or shallow it can be. People with limited bullets probably wait for upturns.
Cory
2020-0321
Maybe there are 2 general ways to handle Covid-19. Easy and hard ways. The hard way will be like Taiwan and Singapore chasing down every soul and leads. Curbing travels and blocking entrys. The easy way is to let the Virus spread through the population killing all the weaks and olds. It will be over in months. Those who survive will have immunity. Obviously if people try the later path, the damage is going to be very hard to accept. This is inhumane but that's Nature way of selections. Some leaders think they could till they find they can't. The medical facilities will be so overwhelmed that no sane leaders can afford.
When the virus first started, the market continues to beat new high. Is a China problem basically. Is only when Europe exploded and invading America shores that everyone woke up to reality. The fall is so steep that not many can react in time. This comes at a time locally when dividend Investing could probably be awarded the holy grail of investing. However on hindsight the writings were in the wall. The ever diminishing yield, all time high reits prices, relatively small or average volume, double digits portfolio growth in Year 2019, .... waiting to be challenged. Many are new investor believers. Quite a few use banking facilities to borrow on margins. They thought market won't be that insane but they do. There is also huge funds sellout that precipitate the falls though to many it does't make sense for the price such as CMT for 6.5% yield ?
What will Cory portfolio plans be is what's the end state goal he likes to have. The first obviously or not for some gurus will be to cut down all hospitality or travel related stocks. So Cory will also avoid transportation stocks despite lower oil prices. The next is all oil related stocks which have been suffering for years. Chances are they aren't coming back near term as quick. Some may not survive. So the risk tag is much higher than others. Cory has SIA Bonds so this is cut due to high risk and cash release for yield. As previously blogged, no more acendas-h tr or Ascott Residence Tr. thanks goodness.
As for banks, Cory has some exposure but will not expand further as digital licenses could do some damage to banking margins. Bad luck on this one as if there is no banks stake Cory would have have get some at good price today. For now, is better to reserve precious warchest in current market for something more definite to rebound strongly and portfolio risk managed.
During this crashes, Reits with high yields tend to crash a lot more like 30%-40% range even though fundamentally they are alright just not as cool as the blues. Yes, Warchest is so important in current conditions. So many fruits are ripe for picking. While cheap can get cheaper, seeing strong reit stocks giving 6.5% seems no brainer to buy. What we have to do now is to grab those with good yields that can survive the downfalls yet fundamentally earning will recover. This may mean more counter expansion which means a plan to reduce counter with low % exposure and build it back later after crisis.
So the question is are we bottoming. Last check, DJIA drop another 900 points just as we thought market is stabilizing. So the earlier plan to conduct multiple purchases across weeks and months continue to make sense. It could be a lifetime opportunity for people who want to invest for yield. But if we is to throw in all bullets, chances are it won't be last bad news. Seriously we don't really know how deep or shallow it can be. People with limited bullets probably wait for upturns.
Cory
2020-0321
Jan 18, 2020
Cory Diary : Will the Music Stops ?
Generally most people would agree that every lowering yield drives yield stocks. What happen if when the music stops ? In the year 2008 Global Financial Crisis, CMT my most often used example, price crashes from the high of $2.18 in Year 2007 to $0.875 in early part of Year 2009. That Year 2008, CMT distributed $0.13. In Year 2009, CMT yield hits 11.5% !
How hard is the crash ? 60% drops ! If we include $0.13 dividends, that's about 54% drops. That's why is called Global Financial Crisis.The scale could be a single lifetime event. As mentioned earlier, if one could not walk out of this scenario, they probably have waited outside the market for 10 years already. That's another GFC to oneself and it won't be a single lifetime event.
At today CMT price of $2.60 , the optimistic yield is 4.7%. This is way surpass Year 2007 before GFC prices of yield 6.6%. If we are to judge CMT as too expensive because of Year 2007 low valuation, then we could get our logic totally wrong.
The number one reason is inflation. The other is lowering yield. Look at chart below. Is CMT price today expensive based on simplified inflation consideration on Year 2020?
Still not convince the power of Stable Reits ? CMT is capable of distributing 12 cents this year. Look at the above table again. What the price you would think it should be. Let says a stock market correction resulted CMT price drops to $2.2. That's more than 5 years ago price. That's will be about 3 years of dividends. That's timing if you try to save this dividends. The good news is we don't have to if we ignore timing. Treat it as a time deposits that gives you cash-flow of roughly 12 cents annually.
If we believe in the quality of CMT properties holds and the long term prospect, that Singapore way of life centers around Malls for the next decade, it will be quite difficult NOT for CMT price to return comfortably and more unless we see something seriously happen to Singapore that we would want to hedge and in which case if not, most of SG Stocks could likely be affected and probably our currency in the saving too.
See Chart below of estimated CMT price trend.
Over the long term, the trend is quite obvious. Cory is just doing calculated risk decision making. As in all investment there are risk and the price could drop and we could lose everything. If we look above chart again, near term it could fall towards "Median line".
Or the price could accelerate upwards and form a new gradient line. And which case the new "Median line" could be as below.
Too many people falls for current perceptions and forget about looking into the possible futures could be. And which case the price could be on acceleration path.
And that the 'trick" of the charts. You see what you want to see.
Cory
2020-0118
How hard is the crash ? 60% drops ! If we include $0.13 dividends, that's about 54% drops. That's why is called Global Financial Crisis.The scale could be a single lifetime event. As mentioned earlier, if one could not walk out of this scenario, they probably have waited outside the market for 10 years already. That's another GFC to oneself and it won't be a single lifetime event.
At today CMT price of $2.60 , the optimistic yield is 4.7%. This is way surpass Year 2007 before GFC prices of yield 6.6%. If we are to judge CMT as too expensive because of Year 2007 low valuation, then we could get our logic totally wrong.
The number one reason is inflation. The other is lowering yield. Look at chart below. Is CMT price today expensive based on simplified inflation consideration on Year 2020?
Still not convince the power of Stable Reits ? CMT is capable of distributing 12 cents this year. Look at the above table again. What the price you would think it should be. Let says a stock market correction resulted CMT price drops to $2.2. That's more than 5 years ago price. That's will be about 3 years of dividends. That's timing if you try to save this dividends. The good news is we don't have to if we ignore timing. Treat it as a time deposits that gives you cash-flow of roughly 12 cents annually.
If we believe in the quality of CMT properties holds and the long term prospect, that Singapore way of life centers around Malls for the next decade, it will be quite difficult NOT for CMT price to return comfortably and more unless we see something seriously happen to Singapore that we would want to hedge and in which case if not, most of SG Stocks could likely be affected and probably our currency in the saving too.
See Chart below of estimated CMT price trend.
Over the long term, the trend is quite obvious. Cory is just doing calculated risk decision making. As in all investment there are risk and the price could drop and we could lose everything. If we look above chart again, near term it could fall towards "Median line".
Or the price could accelerate upwards and form a new gradient line. And which case the new "Median line" could be as below.
Too many people falls for current perceptions and forget about looking into the possible futures could be. And which case the price could be on acceleration path.
And that the 'trick" of the charts. You see what you want to see.
Cory
2020-0118
Dec 31, 2019
Cory Diary : Year 2019 Reit Year
We have come to an end in the last day of SGX Trading for Year 2019. For Income Investor this has been nothing but solid. S&P 500 has record year too. But it will be closer to home if we just look at Singapore Reits.
Cory Portfolio has large amount of Reits. And here's Performance tracked throughout 2019. There is some work but also a lot of investing fun provided is in profit ...
Cory Portfolio Table
Year 2019 Realized and Unrealized Profit hits new record. Reits take up 70% of the profit. Just Reit alone the XIRR is 31.7% This is a Reit year. For year 2020 preparation there is some diversification shifts on segments as blogged earlier. Chances are yield compression is harder. For financial planning reason, there will be steps on going more into indexes to hold long term. Hopefully will have the opportunity to do so to allow the portfolio go through next stage of growth.
FTSE ST Real Estate Investment Trusts (INDEX: FSTAS8670) returns 18.8% for the year. LION-PHILLIP S-REIT (SGX: CLR) an ETF has 23.3% including dividend. So anyone who are vested in Singapore Reits will hit this range of score generally unless your pick is bias to extreme. Once again time in market has proven to be really true for Year 2019. If one has sit out, this year will be sorely missed.
Happy New Year !
Cory
2019-1231
Dec 29, 2019
Cory Diary : Dividends 2019
With the year coming to a close, all the expected dividends have been accorded for. Year 2019 seen a number of acquisitions and mergers which has change the expected dividends. Therefore some deliberations made for it. Total dividend for Year 2019 received $52, 299 which is equivalent to $4,358 monthly cash-flow. Cumulative dividends tracked $324,750.
Scrip Dividends
Decided to take up Aims Apac Reit and OCBC scrips which are a good discount. To compute dividend returns two steps were done. First is to register the expected dividends and then replace them with the number of shares given.
Rights
Ascendas Reit issued relatively deep discount of Rights. They were sold off for about $1,700.
Strictly speaking I am not sure should count them in as dividend but since is one-time, and it supports cash-flow, this will be included for this time.
Merger
Ascendas h-tr merged with Ascott Reit. Took profit on half before merger. Remainder will get $2,715 cash. As the de-listing is on 3rd Jan 2020 it won't be counted into Year 2019.
"A-HTRUST Scheme, each A-HTRUST Stapled Unitholder as at the A-HTRUST Scheme Entitlement Date will be paid S$0.0543 in cash and will be issued 0.7942 in Ascott Reit-BT Stapled Units issued at a price of S$1.30 each, in each case, for each A-HTRUST Stapled Unit held by it."
The other merger is between Frasers Com Tr and Frasers L&I Tr. Decided to take profit and exit the counter.
Private Placement
SPH Reit has a private placement and unit holder has early dividend registered however the cash will not be seen till Year 2020. Since is already registered it will be counted towards Year 2019.
For Year 2020, theoretical dividends on current holdings will be $53, 384. This should hits higher with capital injection and DPU growth assuming no market surprises. The far fetched goal will be $60, 000.
Happy New Year
Cory
2019-1229
Decided to take up Aims Apac Reit and OCBC scrips which are a good discount. To compute dividend returns two steps were done. First is to register the expected dividends and then replace them with the number of shares given.
Rights
Ascendas Reit issued relatively deep discount of Rights. They were sold off for about $1,700.
Strictly speaking I am not sure should count them in as dividend but since is one-time, and it supports cash-flow, this will be included for this time.
Merger
Ascendas h-tr merged with Ascott Reit. Took profit on half before merger. Remainder will get $2,715 cash. As the de-listing is on 3rd Jan 2020 it won't be counted into Year 2019.
"A-HTRUST Scheme, each A-HTRUST Stapled Unitholder as at the A-HTRUST Scheme Entitlement Date will be paid S$0.0543 in cash and will be issued 0.7942 in Ascott Reit-BT Stapled Units issued at a price of S$1.30 each, in each case, for each A-HTRUST Stapled Unit held by it."
The other merger is between Frasers Com Tr and Frasers L&I Tr. Decided to take profit and exit the counter.
Private Placement
SPH Reit has a private placement and unit holder has early dividend registered however the cash will not be seen till Year 2020. Since is already registered it will be counted towards Year 2019.
For Year 2020, theoretical dividends on current holdings will be $53, 384. This should hits higher with capital injection and DPU growth assuming no market surprises. The far fetched goal will be $60, 000.
Happy New Year
Cory
2019-1229
Dec 27, 2019
Cory Diary : Real Game in Investing
Has been writing on performance for years. Some years like this year we have good result as in 20% XIRR. That doesn't mean good profits. In good year if we aren't earning good absolute profit we are just like in baby pool ... splashing. That's fine if we are still a baby. The worst outcome is to give a baby large amount of money to swim in the sea !
When Cory is just learning or in the long learning curve years of investing, he understands the needs of baby pool. We need to use XIRR to measure our performance. We then need to progress to swim in larger and larger pools as we gain in experience with saving. So how large is large ? We probably need to go back to why we invest. If is to help support our retirement then the size of investment should be enough to support that. If is partial, so be it due to individual preference.
Talking about size of investment. For a 5% yield portfolio on average 2% growth on a million dollar portfolio. The returns will be $50k dividends and $20k capital gains. For 2%, capital gain is only good to see but not for Cory to take in an inflationary world. If Cory takes it as dividend for cash flow needs, portfolio becomes smaller over time in real term. Again, that's fine if that's the plan. So to put into perspective on the obvious, for a capital of 100K that's 5K annual dividends.
One would think if Cory can have strong performance in baby pool, naturally given larger amount he would do the same performance. Assume same market condition, with much larger pool size, the waves will make the leg shivers, his breathing breathless and his nights cooler. Cory knows because he has makes mistake he doesn't when small.
At the end of the day, Real Performance = Investment Size x XIRR = Absolute Profit or Loss.
So are you an Adult splashing in Baby Pool ? Is ok if we aren't ready. Really.
Cory
2019-1227
When Cory is just learning or in the long learning curve years of investing, he understands the needs of baby pool. We need to use XIRR to measure our performance. We then need to progress to swim in larger and larger pools as we gain in experience with saving. So how large is large ? We probably need to go back to why we invest. If is to help support our retirement then the size of investment should be enough to support that. If is partial, so be it due to individual preference.
Talking about size of investment. For a 5% yield portfolio on average 2% growth on a million dollar portfolio. The returns will be $50k dividends and $20k capital gains. For 2%, capital gain is only good to see but not for Cory to take in an inflationary world. If Cory takes it as dividend for cash flow needs, portfolio becomes smaller over time in real term. Again, that's fine if that's the plan. So to put into perspective on the obvious, for a capital of 100K that's 5K annual dividends.
One would think if Cory can have strong performance in baby pool, naturally given larger amount he would do the same performance. Assume same market condition, with much larger pool size, the waves will make the leg shivers, his breathing breathless and his nights cooler. Cory knows because he has makes mistake he doesn't when small.
At the end of the day, Real Performance = Investment Size x XIRR = Absolute Profit or Loss.
So are you an Adult splashing in Baby Pool ? Is ok if we aren't ready. Really.
Cory
2019-1227
Dec 8, 2019
Cory Diary : Dividend Investing is Boring. Easy ?
Capitaland Mall Trust has been with Cory Portfolio for about 6 years ago. It has been one of the key starter for Cory to learn about dividend investing. The yield is not so great, not bad, stable and well backed. This gives confidence to Cory to mend his ways in the early years of aimless speculative investing.
Below historical data of Cory's CMT Table.
As you can see, starts on Year 2014, took some breaks on Year 2015 and 2016 before it becomes Core Position in Portfolio in Year 2017, 2018 and 2019. Years where Cory P/L is positive is also years Cory holds for long time within the year.
Even on a not so great yield, Cory collected S$33K from it slowly. How much capital deployed ? In/Out trading on some and holding on mains maybe around $50K-$60K. Looks like quite profitable so far. Maybe is not that surprising as dividends act as a good buffer from market fluctuation to trade. To get to know more about CMT here's the chain articles on CMT.
Yes, Dividend investing can be boring. Maybe Year 2019 is different. Well, it is usually boring but often profitable from Cory experiences so far till it is not .... 😨. Investing maybe is that easy. I hope !
Cory
2019-12-08
Oct 30, 2019
Cory Diary : Making money work for you
Most people work on salaried income. Spend like 9 hours or even 15 hours a day. And If you are in this mode of life and trying to get out from this rat race, there is limited options. One of the popular option is to join the long queue with aunties and uncles and hope to strike TOTO. This seems to be harder than kenna strike by lightning but many aren't deterred by it. Cory sometimes go buy when he is down in morale ... but halfhearted. So even harder to strike. LOL
Uncle Cory thinks he should work on a more viable option. That's to have money. And hatched his plan more than a decade ago by saving money. And then he saw the property bubbles come and go. Stocks market bubbles come and go. Even Fixed deposits "Bubbles" come and go ... Every $100, 000 loses $3, 000 annually to inflation ... ( Cory must be "Rich" .... to let this happen ! ). Are you too ?
After going through Math, Uncle Cory decided to hatch another plan that is really really viable. That's to make money works for him. This time he probably get it right. One of the main reason is that the effort invested is little or using his spare time to learn as Cory needs to work. Of-course Cory needs to have money to Work. He has .... if you remember his first plan. LOL.
That doesn't mean is a linear process as Cory can do in parallel. Amount is never too small. The experience gained and incremental saving will be compounded for the future. However Cory aren't savvy enough to use leverage other than technically the property loan which also means avoid stacking the risk to uncontrollable level.
So as you can see, Cory is kiasi and kiasu. I think most NORMALs are ! So that's what Cory do below. Depending on situation, money is apportioned due to regulation and needs through below.
CPF
Investment is very limited when it is "Sure Win". The obvious one is CPF which are systematically saved and contributed. Is not like we have a choice anyway but nevertheless on paper they have saving, contribution and interests elements build into it. As many would know, is politically not so correct to promote to everyone. Cory has a friend who curse day in and out on it that is not our money and that is a fraud but then he plans to reserve it for his children education. huh ?!
Cory have another friend who is on the extreme end and keep topping up money into CPF till millionaire status however he is a savvy investor, and supporter of establishment. Maybe Life is full of irony and Cory takes is that Investment and political view should not mixed. Cory plan is not to touch them for investment, and optimise enough OA into SA. Maybe some experts got better ideas. Cory is just sharing his current plan.
Bonds/Preference Shares
The next "safer" ones probably are Bonds/Preference Shares on the local banks. Is quite unimaginable they will collapse or write down. However, never say never. Leman Brothers is a living proof. Unique exceptions aside, generally I would assume our local banks are next best things to Gov guaranteed.
Between CPF and above, probably Singapore Saving Bonds (SBB) for more protective funds. Limited to $200 k of 1.7% currently. Not very exciting but good enough for those who are conservative like Cory. However don't get this wrong. The devil is always in the detail and so is goodies. Cory is vested between 2%~2.5% range and is only single digit percentage of his net worth. Most importantly, is money reserve for emergency and loan installments back up which could otherwise by in Fixed Deposits.
Fixed Deposits / Cash
The worst thing to do is too have ample cash in Saving bank doing nothing. Cory typically only needs certain amount for emergency cash flow needs. A large portion of it parked in Fixed Deposits which can earns 1.4% easily. So got this FIXED. You can try other banks .... . Just make sure is really safe.
Equity
Is a path to wealth expansion for those who do not have a really good paying jobs. However, the market is ruthless on those who make mistakes and could set you back for years financially. Cory struggles on who should be in it. Having swim in the shark-infested water for many years and still surviving doesn't mean many can. However, to reach financial independence faster, Cory thinks this is the main path other than building up a business ourselves if we have the right attributes.
This year is especially good for dividend investors due to Cory thinks are the building up of wealth after property curbs and the money printing world wide. Money has to go some where and they end up in stock markets. However this class of investors look for safe investment and REITs and Bonds are quickly identified with.
We know what happens to Risky bonds, and investors learned some big lessons from Hyflux and Swiber that yield is not the primary. Within the REITs universe there is different classes of them too. Again some investors will have to pay school fees if they think all REITs are the same and are only along the line of yields only.
Some REITs are US denominated and from limited experience in US market, is better for Cory to leave this class alone. Life is much more simpler to layman Cory.
Property
One thing Cory learned from his Condo, is location. The $psf shoots up after Top. Leverage to the max as the loan is cheapest. So Cory has more cash to deploy elsewhere but not to spend ! Age matters. Young people can maximum their loan period. Condo maintenance very high ... but renovation is cheap as most is already build-up. At the end of the day, is nice to have a shelter over his head. Maybe Cory needs a bigger head now as he finds his Condo too small.
Philosophy
So what is Cory investment philosophy. Simple lah. Don't lose money.
If we have studied solid "Blue Chip" REITs, the price fluctuations can be quite significant. This may convince some investors that timing matters. While Cory do not disagree to it, what matter is how can to execute them. For example this year REIT returns easily come in with 20% returns. Is a GFC impact to those who stays out in a single year alone create by oneself ! Will the price correct ? Why not. But to hold on to our investment or to re-balance them is another Cory article. A good problem to have.
The mindset for REITs investment is to think it as cash flow. Say 5% yield of initial capital returns. Stock price will fluctuates. Looks for those that can grow. Doesn't matter whether is 0% or 10%. They can be apportion into the portfolio accordingly to risk levels but they all have to be solid REITs and not those that sponsors dumped, mismanaged or have integrity issues. Most importantly the business behinds this REITs are solid or not, and that can build value over time.
Lastly, performance is DPU + Capital Value. How they play around it, we value them appropriately.
Happy Reading and Belated Happy Deepavali 2019 ... sorry ... started to write this piece on that day ... so busy this week.
Cory
2019-1030
Oct 12, 2019
Cory Diary : Why Dividend Investing is so "Exciting"
Remember in my younger days, RM will furnish us with the idea that investment today, 10 years later sure Huat with annual 10% based on past 10 years track record. And they will show you the charts on why so. What they didn't tell you is not in the contract is not guaranteed and the other is that they won't be around few years later to service you or you are't around anymore to bother (touch-wood). The key is don't sell in short term. Probably high sales charge or they will still be around and need to answer to you. lol
Seriously, if I have spare money, I would. Reason being Retailers ask is, "Show me the Money - Sustain-ably". The logic is quite simple. Think of the investment as long term. DPU maintain or increase. This is better than bond already. The cash flow generated covers living expenses. If there is reduction in stock price, we need to look at it in context. Is there fundamental change in the business ?
Next, Trump announced Preliminary Phase 1 deal. Probably due to Biden presidential bid took a hit. The Chinese probably feels a little shaken from it. However, this is far from a complete deals. I doubt it will ever till Trump gets re-elected. What this mean is interest rate will remains low for foreseeable future.
So someone asked. Can I buy MCT today ? Very hard to answer. 7 years of dividends from this year stock price increase. One thing I feel that is never late to invest. Break up our purchases just to be vested some and then see whether we need to average down or up much later. Maybe choose other Reits ( lol ). Don't fall into yield traps. Not all Reits the same. Who knows MCT share price can take another 7 years of dividends leap again. Realistically, the key is how low a yield we are willingly to accept. SSB is like 1.7% range for 10 years. Your take ?
Fast forward today. Is there anyone really can guarantee good returns after 10 years ? If so, Banks wouldn't need to sell to us. They will be happy to do it themselves. I am sure institutions will be happy to invest too. Why bother to grow an army of RMs to service thousands of retailers.
With Reits that is strong and growing, DPU management has become an expected norm. This will last as long interest rates are low or to be better said, borrowing cost is low relative to earning. Hence the term we hear about Income Ratio (ICR). It has become a performance metric to drive managers too. That's not easy in execution.
Why Maintain or Growing DPU is so important ?
So when someone tells me DPU YoY only up 1%, I am smiling till my teeth drop already. Why ? Ascendas Reit has run up significantly for a number of years. This year "just" 23% YTD excluding dividend. See chart below of Ascendas Reit with Dividend Effects !
To grow DPU or maintain for 10 years are not that difficult to find nowadays as long we have Good and Credible Managers however this is not given though. The thing to overcome is Price Anchoring. Will we pay for something that is 23% more expensive from a year ago ?
Why Maintain or Growing DPU is so important ?
So when someone tells me DPU YoY only up 1%, I am smiling till my teeth drop already. Why ? Ascendas Reit has run up significantly for a number of years. This year "just" 23% YTD excluding dividend. See chart below of Ascendas Reit with Dividend Effects !
To grow DPU or maintain for 10 years are not that difficult to find nowadays as long we have Good and Credible Managers however this is not given though. The thing to overcome is Price Anchoring. Will we pay for something that is 23% more expensive from a year ago ?
Seriously, if I have spare money, I would. Reason being Retailers ask is, "Show me the Money - Sustain-ably". The logic is quite simple. Think of the investment as long term. DPU maintain or increase. This is better than bond already. The cash flow generated covers living expenses. If there is reduction in stock price, we need to look at it in context. Is there fundamental change in the business ?
Next, Trump announced Preliminary Phase 1 deal. Probably due to Biden presidential bid took a hit. The Chinese probably feels a little shaken from it. However, this is far from a complete deals. I doubt it will ever till Trump gets re-elected. What this mean is interest rate will remains low for foreseeable future.
So someone asked. Can I buy MCT today ? Very hard to answer. 7 years of dividends from this year stock price increase. One thing I feel that is never late to invest. Break up our purchases just to be vested some and then see whether we need to average down or up much later. Maybe choose other Reits ( lol ). Don't fall into yield traps. Not all Reits the same. Who knows MCT share price can take another 7 years of dividends leap again. Realistically, the key is how low a yield we are willingly to accept. SSB is like 1.7% range for 10 years. Your take ?
Cory
2019-1012
Oct 11, 2019
Cory Diary : Reits Investment Logics
When Recession comes, most investments will be affected. This applies to Correction as well.
Interestingly, this are one of the best time to buy. The question is what stock to buy and will we buy ?
In the last recession, Reit stocks price like many other non-reit investments are badly hit. STI Index reflects the poor situation too. If we are to use today thinking, and understand how the mechanics of how Reits work, one would wonder how can things can go so bad in stock prices.
Basically, Cash or the lack of it as everyone "Hides" them when is one of the best time to invest. Many is taught about the gearing lesson and the dilution of it. Buying during this period do goes against Human Nature of trying to run away from the problem. Trying to do the opposite differentiates the man from the boys. Cory froze in Year 2008. Not that bad. :)
In 2008, many stock prices cut into half easily. Will this happen in next recession ? Never say never. However, with ample liquidity today. And better understanding by investment communities on Reits. Chances are we won't be able to see such deep cut for the next ... next ... (never mind... Cory no crystal ball). There will always be exceptions.
In essence, the DPU of Reits or in another relative term with current price such as yield, say 5% as an example provides the cash flow to one financials as dividend. Multiply it with say 5 year periods will be 25%. That's a recession depth. To be more precise, there are compounded effect and the gearing component especially on properties. And the growth factor which cannot be ignored as it can double dividend gains over the 5 years period too if we pick our stock carefully, and safely to optimize our chance.
Recession Survival Recipe
1. Able to Survive : Gearing, Loans, Occupancy,
2. Able to perform "V-Shape" Recovery preferred in stock price : Stock Price
3. Continue to profit from the business during this bad days : DPU
4. Strong Sponsor
Not all Reits the same. Cory want to avoid bad surprises and knives cut. The Gem in Reits are not the Yield but the Growth and Stability that it can perform. Yield is the extras.
Cory
2019-1011
Interestingly, this are one of the best time to buy. The question is what stock to buy and will we buy ?
In the last recession, Reit stocks price like many other non-reit investments are badly hit. STI Index reflects the poor situation too. If we are to use today thinking, and understand how the mechanics of how Reits work, one would wonder how can things can go so bad in stock prices.
Basically, Cash or the lack of it as everyone "Hides" them when is one of the best time to invest. Many is taught about the gearing lesson and the dilution of it. Buying during this period do goes against Human Nature of trying to run away from the problem. Trying to do the opposite differentiates the man from the boys. Cory froze in Year 2008. Not that bad. :)
In 2008, many stock prices cut into half easily. Will this happen in next recession ? Never say never. However, with ample liquidity today. And better understanding by investment communities on Reits. Chances are we won't be able to see such deep cut for the next ... next ... (never mind... Cory no crystal ball). There will always be exceptions.
In essence, the DPU of Reits or in another relative term with current price such as yield, say 5% as an example provides the cash flow to one financials as dividend. Multiply it with say 5 year periods will be 25%. That's a recession depth. To be more precise, there are compounded effect and the gearing component especially on properties. And the growth factor which cannot be ignored as it can double dividend gains over the 5 years period too if we pick our stock carefully, and safely to optimize our chance.
Recession Survival Recipe
1. Able to Survive : Gearing, Loans, Occupancy,
2. Able to perform "V-Shape" Recovery preferred in stock price : Stock Price
3. Continue to profit from the business during this bad days : DPU
4. Strong Sponsor
Not all Reits the same. Cory want to avoid bad surprises and knives cut. The Gem in Reits are not the Yield but the Growth and Stability that it can perform. Yield is the extras.
Cory
2019-1011
Oct 9, 2019
Cory Diary : All in Our Minds
There are many times I am asked to take profits. Reason being people has the conception that cash is the safe harbor. A rest point before we venture out again. This mindset is not wrong when one trades for a living especially speculative short trade.
Post today is I hope to share how Cory thinks from another perspective. Often we hear people make so and so $Xx,xxx but then lose it all or worst in negative. The angle I do is to treat profit earned as part of base capital in every new year.
Let's say I started with $500k in 2018 and ended with $580k. That's 80k profits. In Year 2019, I will treat $580k as my new cost structure (or base capital) thereby zero-out my profit. Why we do this is to overcome the human weakness of "Feeling Rich" and lose them back to the market.
When we do this long enough, for some reason cutting loss is more a mechanic nature rather than a pain-in-the-heart. Interestingly, we could also sell a stock at say $1.50 near end of Year 2018 but buy them back in Jan 2019 at much higher price sold earlier. Is like hyped on a Jan market trend trading mechanism. Fortunately, I do't this often ! Cory aren't crazy but it does happen sometimes .... ... ...
Since Cory Portfolio is ignited on every first day of new year, safe harbor has no meaning from previous year trades. Therefore, Cory result is often Year-to-date (YTD) meaning is the measure of Profit or Loss from 1st Jan base to current date figure. This keeps Cory on toes and not feeling rich. Historical past year trades are just for "Glorification" use only, nothing else.
If Cory feels the market going to crash like 2008 GFC, he can relieve all his counters as he wanted but that's not because he has make enough profits. There is no relevancy between getting out-of-market and having make or loss enough.
Is all in our minds.
Cory
2019-1008
Post today is I hope to share how Cory thinks from another perspective. Often we hear people make so and so $Xx,xxx but then lose it all or worst in negative. The angle I do is to treat profit earned as part of base capital in every new year.Let's say I started with $500k in 2018 and ended with $580k. That's 80k profits. In Year 2019, I will treat $580k as my new cost structure (or base capital) thereby zero-out my profit. Why we do this is to overcome the human weakness of "Feeling Rich" and lose them back to the market.
When we do this long enough, for some reason cutting loss is more a mechanic nature rather than a pain-in-the-heart. Interestingly, we could also sell a stock at say $1.50 near end of Year 2018 but buy them back in Jan 2019 at much higher price sold earlier. Is like hyped on a Jan market trend trading mechanism. Fortunately, I do't this often ! Cory aren't crazy but it does happen sometimes .... ... ...
Since Cory Portfolio is ignited on every first day of new year, safe harbor has no meaning from previous year trades. Therefore, Cory result is often Year-to-date (YTD) meaning is the measure of Profit or Loss from 1st Jan base to current date figure. This keeps Cory on toes and not feeling rich. Historical past year trades are just for "Glorification" use only, nothing else.
If Cory feels the market going to crash like 2008 GFC, he can relieve all his counters as he wanted but that's not because he has make enough profits. There is no relevancy between getting out-of-market and having make or loss enough.
Is all in our minds.
Cory
2019-1008
Oct 6, 2019
Cory Diary : Reits Comparison
Often we have a list of Reits in our radar. The more savvy one may probably just choose one. To mitigate risk, I tend to have them with different proportions. The question will be how do we apportion them.
Here today I have 4 of them to think about. Namely, Ascendas Reit, Mapletree Ind Trust, Frasers Com Trust & iReit Global. As usual my investment decision is agar-agar. They are all quality reits in my opinion.
There are few key notes in my head. Singapore is near recession whereas US market are still relatively strong. AR has weakening AUD earning - Australia exposure. MINT recently has rather good bargain on US Data Centers in-addition to what they have. Stronger USD helps too. Ascendas has future earning from Grab building and recent Australia acquisition. AR is largest locally. MINT may have impact from HP Inc downsizing concern as this maybe a risk depending on their BTS lease term with the company.
Overall, I would think MINT yield should be lower (correction) due to better quality earning. And I will be ok to pay more than A Reit. This thinking could change with time though.
How about Frasers Com Trust ? There is some concern in the market whether they can maintain their DPU. However their major was resolved with space able to be rented out to google. There is still risks from Microsoft. Overall the risk is reflected in their higher 6% yield compared to AR and MINT.
With recent blogged iReit in the limelight by famous blogger, the market was moved by it due to low trading volume. There are also other bloggers who are not so positive about it. Nevertheless at 7.6% yield there is some market concern. Is pure Germany play and rather concentrated in a tenant. I have 2.5% allocation currently.
Maybe ratio of AR 12% : MINT 9% : FCOT 6% : iReit Global 3%. This will stagger my yields and risks in REITs.
Make sense ? Now wait for some correction to drive towards the percentage. Those that exceed probably I will put a hold instead.
Cory
2019-1006
2019-1006
Sep 7, 2019
Cory Diary : All Time High !
6th Sept 2019 is a bit special in the morning hours. Cory Portfolio reached an All Time high (ATH) profits (updated for privacy) when just recently reported returns. Another 12.8% gain. This is the result of a few key stocks reaching all time high (ATH) as well. Before we start congratulating, as soon portfolio hits ATH, the market turns for the worst and ended up lower than it started .... sian ... ....
With funds still available, I am browsing through 5 stocks of interests in which 3 has hit ATH that day. The other two I may mention them some other times due to limited time. So for today, they are namely FCOT, Ascendas Reit and Mapletree Ind Tr.
FCOT - Hit $1.7 but ended lower $1.64. A -3.5% down swing for the day. Seldom we see such movement as large as that day. One of the key reason is the 1.7 psychological level. The other is ATH. As is Friday, people starts to take profit.
The fundamental of FCOT has improved with Google on-board. And with other facility ready for contributions, we could see growing DPU. There are few concerns on the sustainability of the DPU. I have optimistic view. Even in t he event of reduction, the yield is good in this time of market. The only area i need to manage is exposure. Cory portfolio has 7.8% holding.
Ascendas Reit - Another ATH counter that day. Hits $3.21 before coming down $3.14. Swing of 7 cents is quite a lot in absolute figure but not really for a 3 dollar plus stock in percentage term. -2.18% from opening. The volume looks alright.
Year 2019 we see a good trajectory of the stock price due to it's size and stability in returns. Since GFC the stock price has been on a tear. One way up. A 3 baggers excluding dividends. A sure bet so far. The yield is about 5% and Cory Portfolio has 7% exposure.
Mapletree Ind Tr - Yes, this is another ATH stock. High $2.39 and close $2.34. The plus of this is the growth and US Data centers. If we think is at high price, the stock is also on one way up since IPO 2010. While we could see correction in any stock hitting 1 year of DPU, it will likely takes a bad market for 2 Years of DPU. During this period, a year could have gone by buffering the capital loss. This can applies to all above mentioned stocks. Cory Portfolio has 8.4% exposure in it.
Are you ready to hoot or go for another waiting game ? For Cory now, question is whether he is happy with the yield for the risk. Most importantly to treat it always as a new purchase and overall portfolio view.
The risk is from the angle we need to look at whether the STI and Banks will be on a new uptrend as they are quite resilient that day.
Cory
2019-0907
With funds still available, I am browsing through 5 stocks of interests in which 3 has hit ATH that day. The other two I may mention them some other times due to limited time. So for today, they are namely FCOT, Ascendas Reit and Mapletree Ind Tr.
FCOT - Hit $1.7 but ended lower $1.64. A -3.5% down swing for the day. Seldom we see such movement as large as that day. One of the key reason is the 1.7 psychological level. The other is ATH. As is Friday, people starts to take profit.
The fundamental of FCOT has improved with Google on-board. And with other facility ready for contributions, we could see growing DPU. There are few concerns on the sustainability of the DPU. I have optimistic view. Even in t he event of reduction, the yield is good in this time of market. The only area i need to manage is exposure. Cory portfolio has 7.8% holding.
Ascendas Reit - Another ATH counter that day. Hits $3.21 before coming down $3.14. Swing of 7 cents is quite a lot in absolute figure but not really for a 3 dollar plus stock in percentage term. -2.18% from opening. The volume looks alright.
Year 2019 we see a good trajectory of the stock price due to it's size and stability in returns. Since GFC the stock price has been on a tear. One way up. A 3 baggers excluding dividends. A sure bet so far. The yield is about 5% and Cory Portfolio has 7% exposure.
Mapletree Ind Tr - Yes, this is another ATH stock. High $2.39 and close $2.34. The plus of this is the growth and US Data centers. If we think is at high price, the stock is also on one way up since IPO 2010. While we could see correction in any stock hitting 1 year of DPU, it will likely takes a bad market for 2 Years of DPU. During this period, a year could have gone by buffering the capital loss. This can applies to all above mentioned stocks. Cory Portfolio has 8.4% exposure in it.
Are you ready to hoot or go for another waiting game ? For Cory now, question is whether he is happy with the yield for the risk. Most importantly to treat it always as a new purchase and overall portfolio view.
The risk is from the angle we need to look at whether the STI and Banks will be on a new uptrend as they are quite resilient that day.
Cory
2019-0907
Sep 1, 2019
Cory Diary : Dividends Shortfall
For those who miss my Aug Performance Report. Here you are.
Cory Portfolio Resilience
With the recent sales of Singtel and Mapletree NAC Tr, estimated dividends by year end will be reduced (updated for privacy) . This means potentially Cory Equity Portfolio may collect slightly lesser than Year 2018 despite bull year for Cory portfolio. Alamak ! Without saying it will be some distance from expected (updated for privacy) target..... sigh !
Portfolio yield is at 4.6%. This is mainly due to STI ETF and Bonds/ Preference shares holding the values down which has seen significant expansion as I try to lock my happy returns to safer harbor. Another possible reason is that there are additional stakes in some counters which do not have dividends for the remainder of the year. One for yield, the other speculation.
Will gather some bullets and re-balancing. Hopefully I can do some magics to fix the issue.
Cheers
Cory
2019-0901
Cory Portfolio Resilience
With the recent sales of Singtel and Mapletree NAC Tr, estimated dividends by year end will be reduced (updated for privacy) . This means potentially Cory Equity Portfolio may collect slightly lesser than Year 2018 despite bull year for Cory portfolio. Alamak ! Without saying it will be some distance from expected (updated for privacy) target..... sigh !
Portfolio yield is at 4.6%. This is mainly due to STI ETF and Bonds/ Preference shares holding the values down which has seen significant expansion as I try to lock my happy returns to safer harbor. Another possible reason is that there are additional stakes in some counters which do not have dividends for the remainder of the year. One for yield, the other speculation.
Will gather some bullets and re-balancing. Hopefully I can do some magics to fix the issue.
Cheers
Cory
2019-0901
Aug 26, 2019
Cory Diary : How far can capital appreciation go for yield stocks ?
Take a peek in latest chart ... link.
In case link broken in the future .... here's the chart which show an excellent chart on forward dividend yield.
Using Indonesia, Singapore has 47% capital appreciation to go. 38% using Japan yield as a reference. In a market of overflowing cash, ever lowering yield is way to go.
Of-course this is still dependent on which stock we choose as the data is broad average. Some companies can still perform major screw-up. Will you be net buyer today ?
Reits hold very well so far in the market.
Cory
2019-0826
Aug 21, 2019
Cory Diary : Ever lowering Yield Reality
To Cory, every lowering yield has been a key phenomenon for decades as i blogged earlier. Looks at this chart 1. Federal Fund Rate has been going on since 1980s. That's almost 40 years of trend. Recessions precipitates whenever there is locality inflation (not shown in chart).
 |
| Chart 1 : FFR, Treasury Yield and SP500 |
Let's look at another interesting chart 2. What happen with increasing effective federal fund rate. We probably have yields inversion.
 |
| Chart 2: Effective FFR and Treasury Yields |
From read above, Interest rate is closely tied to managing inflation. With increasing rate, there is potential of recession. The overall trend for the past 40 years have been decreasing rate as long we keep inflation in checks. Ever lowering rates have been driving SP 500 direction up generally.
This could explain why there is no rational reason for Fed to raise rates unless we see high inflation. Low rate means money to fund cost of business is low therefore driving employment I think ! So who want to go against that ? Will we see even lower yield (meaning high reits prices is here to stay ? ). Why not ? I aren't going to bet against a 40 years trend.
What this mean is that the more we delay in investing yield income asset, the income we have will be lesser in the future. So do we still want to take profit or should we let our investments continue to fund us ? The only time I think is practical to get out is when we really have major recession like 2008. This is like lifetime event. However, even if we didn't sell, is still a small beep on the ever lower yield trend and high stock prices after.
Key takeaway from my read
1. Ever lowering yield is the trend. Meaning lesser dividend income if we invest later.
2. Inflation drives Interest rate
3. Low Interest rate drives economy
Let me know your thoughts
Cory
2019-0821
Subscribe to:
Posts (Atom)