Cory Diary : Asset Allocation Review 2019-1014

A month past since I last reviewed my asset allocation. Time really flies.  YTD Asset increased by 21% thanks to equity market in-addition to regular salary income. Manage to consolidate some of my cash to Fixed Deposits which provide quite good 1.4% returns to my surprise. I have been neglecting them .... . With reduced Cash level at 3.8% of Net Worth (see chart) this is probably the minimum I would go for now. There is some timing involves to support Housing Loan payments with added buffers of-course for emergency needs.

With Saving amount hits absolute base line level needs, near and mid term future funds from Salary and Portfolio probably can now be put more into active service or likely building up the warchest further as in Fixed Deposits.

Cory Investment Portfolio YTD increased by 18.4%. Which roughly tally with the profits recorded this year with a little cash injection to top it off. At this point, maybe I should let the fund runs.

Cory

2019-1014

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

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  ?

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

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