Since this blog was started back in 2013, I realised there are more and more young people who wants to start investing. Back then when I first started out learning how to invest, I went to many seminars in search for the answer on how do I make my money grow. Many of these seminars were preview sessions for a more expensive course which they would sell later. Many of them were conducted in small offices which seem really scary now when I think back.
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Attending The Right Investment Seminars
Its also very weird that I was often the only or few young people in the sessions. Fast forward to now, there are so many investment courses which are available. SGX started its own SGX academy which has quite a few good courses for beginners as well as experienced investors. I've personally attended a few of them and most recently the SGX-CFA investor conference. This was a half day conference which talks about the current macroeconomic outlook followed by a session on the basics of investing. I was surprised the whole NTUC auditorium as packed fully and about half of them were young people.
I also attended the SIAS Singapore Investment Week where I also saw more young people in the auditorium. I guess the long periods of low interest rate in the bank and also the pressure of the high cost of living has pushed young people to find ways to make more money. Young people are also more savvy now where they read widely and know the importance of investing at a young age.
If you're new to investing, you can consider SGX academy courses and also SIAS courses. Some of them are really useful to learn about investing.
Getting into the Wrong Investments (Scams)
Before I continue further to talk about the investment strategies, knowing the wrong investments and avoiding them is crucial to investing successfully. There are still scams out there which many people fall into.
Most scams can be identified by the high returns they give which is unsustainable. There is a saying that if it sounds too good to be true, it probably is. Some of the most noticeable scams include investing in gold, overseas property, oil, land and many others. Some may appear very genuine so the trick is to ask as many questions as you can. After asking, we can check whether the company is on the investor alert list on the MAS website
here and then check whether the people promoting the investments are regulated by MAS with a valid MAS representative license.
More recently, I'm concern with the rise of binary options and even have some readers email me on my opinions on binary options trading. There is a recent article on Straits Times on "
Avoid getting burnt by binary option scams". As written in the article:
"The Singapore Police Force said it has received more than 40 reports from investors, including finance executives and retirees, who have made complaints over losses in trading binary options. Together, they have lost more than US$1.7 million (S$2.4 million) to unregulated binary option trading platforms.
The police issued a warning last December advising investors to check the lists compiled by the Monetary Authority of Singapore (MAS) to find out which investment service providers are regulated.
Last month, the MAS cautioned investors about the risks in trading binary options with unregulated platforms. It considers such options risky and speculative, and sometimes fraudulent."
There is definitely some problems here which we should all take note of. In any case, as long as I don't understand how an investment works, I will never touch it no matter how attractive it seems to me.
Spending too much on Investment
While there are people who fall into scams, most people "spend" too much on their investments which causes their returns to diminish over time. This is an important point and some people may not agree with me on this.
There are many products out there in the market and most are marketed by sales persons. Because of time constrain, sometimes we buy products which are recommended to us because the interest is more than what the bank offers. Some of these products are insurance endowment plans, whole life plans, investment link policies and unit trusts to name a few. While there is nothing wrong with all these investment choices, there is always a price to pay for putting our money with someone else.
Investing in some products above have high fees averaging about 3%. There are other simpler ways to invest like buying into low cost funds such as index funds. Examples are the Vanguard index fund which tracks the US stock market index. We can get this through standard chartered brokerage account and also buy the US index ETF directly from the US stock market with a US brokerage account. These funds mostly charge only a 0.15%-0.3% fee. This is a 2%+ difference in fees. With just a 2.5% difference in fees, it can take 4 more years for our money to double on a 5.5% return as compared to a 8% return. In 30 years, it can make a huge difference.
My Investment Strategies
Over the years, I've found the strategy that suits me. It is very important to find a style that suits yourself so it means other people's method of investing may not be applicable to you even if they have done is successfully. There is no one single method when it comes to investing.
Over the years, I've taken a lot of risks, scaled back and took lesser risks and then find a balance for my investments. I got my financial situation in order also, increasing my income, buying adequate insurance and making sure I manage my risks well.
All in all, the investment portfolio achieved consistently about 10% XIRR on average for the past 4 years. I invest primarily in blue chips companies and REITs. Currently, I own stocks in the retail sector even though the retail sector seems to be gloomy. In Singapore, Capitamall, Suntec and Frasers centrepoint are the 3 main operators of malls. I've been an investor of these Reits for quite some time now and this is more for the recurring income stream. Next, I diversify into overseas stocks such as Croesus Retail Trust which owns Japanese shopping centres. Also, I have investments in the hospitality industry which I've added more in recent months. I am believing that the hospitality industry will recover in 2018. You can read my post on hospitality stocks
here. Other than that, I also have investment in commercial office Reits, property stocks and also in F&B production.
Before I select a stock, I look at the macro economic trend that is happening. I love to analyse business and read up on what is happening in the world. An example is how I invested in Japan Reits when there was an aggressive monetary policy back then which will benefit asset prices. Interest rates will only get lower and asset prices increases. Rent prices will increase too which really benefitted the Japanese Reits.
After looking at the macro trend, I will look into the individual companies to read their annual reports and how they do their business. From reading the annual report, I can sense how well the management runs the business, look at their business strategy and how well they are managing their cashflow. If needed, I will attend any sessions which the management holds to hear from the management myself. From the way they talk and answer questions, sometimes we can get a sense of the direction and whether they are really capable.
The final step will be to look at the valuation. We should never buy a stock when it is overvalued. Some simple ratios to use are PE and PB which I use most of the time. I will look at gearing ratio or debt to equity ratio also which is the debt level of the company. Whatever ratio it is, the most important thing is to understand the concept behind it. PE of 10 means nothing if we do not understand the business and how the profits are derived. Finally, i will also look at dividend yield and whether they are sustainable in the long run. This is primarily for reits. For growth stocks, dividend yield don't really matter if the company is reinvesting the profits to expand the business.
Investing shouldn't be a holy grail thing in itself. If we keep on trying to find the one successful way to invest, we will be wasting a lot of time. To me, investing also shouldn't be too complicated. I like things simple and if the business is too complicated, I rather stay away. I have to read and be able to understand the whole business before I put my money into it.
Hope this short article gives some light on how I invest my money and that it helps you too. I do not think I've learnt everything about investing after the past 8 years of investing. There are just too many businesses out there and its impossible to understand everything. This blog was started out of a passion to reach out to people on the importance of financial planning and investing. After close to 4 years of the blog existence, many things have happened. Some of my values towards financial planning have changed also. To be honest, what lies ahead is unknown to me. If you ask me am I afraid of the future? I would say yes I am. What I can do is to continue to strive on and keep on believing for the best. May we continue to be happy and live a positive life no matter what happens.
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