Tuesday, May 23, 2017

Being Smart or Having Luck In Life and Investing

Is it better to be born lucky or to be born smart? Veteran banker Wee Cho Yaw said that the late former deputy prime minister Goh Keng Swee once told him that it is better to be born lucky than to be smart. This is an abstract from an article on Straits Times which I chanced upon and it really made me think about life. If you did not know, Wee Cho Yaw is the chairman of the United Overseas Bank and United Industrial Corporation in Singapore.

Some people are just lucky while some are smart. How smart we are can be practice and trained while how lucky we are is determined by fate. Is this sentence true? I beg to differ and as written by the Straits Times, it gives us some insight on how our luck can be changed for our lives once and for all.

It is better to be lucky in life

Let's dive in deeper on the topic of luck. I believe luck is a force that is created in our minds. There was a period in my life where I felt I had the worst luck. I was lost, had no opportunities and often failed in many things which I did. Be it in exams or investing, nothing seems to go well for me. Then, I decided I should do something about it to change my luck once and for all.

Did my luck change? Yes it did. Today, I feel I am lucky enough or maybe I just choose to count my blessings. Sometimes life may still not go well but I still choose to believe it is temporary. This is an important aspect for lucky people.

How to change your luck?

Studies have shown that lucky people enjoy certain common traits - thinking positively, seizing "chance opportunities", and adopting a resilient attitude when they encounter a setback. This was what was written in the Straits Times article. This resonates with me a lot especially the part on thinking positively. I realised when I changed my mind to think positively, my luck changes as well.

We've all heard about the law of attraction and how when we think bad things will happen to us, it will indeed happen in one way or another. Likewise, if we think good things will happen to us, somehow good things happen later. I believe this is more of a mindset change which allows us to seize opportunities when the time comes. When we believe that opportunities will come, we will realise when it comes and take advantage of it. But when we believe opportunities do not come to us, even if its right in-front of us, we won't even realise it. That's the difference when we have a positive mindset.

Investing requires some luck

While I do not advocate investing as gambling (which requires a lot of luck to win), however, investing requires some luck too. For investing, we have to understand the business and learn how to choose companies wisely. But, whether a company does well moving forward depends on some luck. How the share price moves depends on whether other investors or big players see the value of the stock. When the value is seen, the share price moves up when investors invest in the company. Also, some companies may just win some big contracts which increases their profits by many folds. There is some elements of luck in this as well.

Do you want to be lucky?

Luck can be changed in our lives. If you want to be luckier, start from changing your mindset. It is the crucial first step to see opportunities in your life. If you are facing setbacks now, see it as temporary. Always believe in the best can change the situation you are in right now. Lastly, think positively. This opens up your mind to take advantage when opportunities presents itself.

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Thursday, May 18, 2017

More Young People Want To Start Investing - How To Invest Successfully?

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.

Photo by: cafecredit.com
Credit: https://www.flickr.com/photos/cafecredit/32899395526/

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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Wednesday, May 3, 2017

CDL Hospitality Trust - Is Hospitality Industry Recovering?

Previously I blog about the hospitality industry and why I think that it may be the next investment opportunity. You can read the post here. CDL Hospitality Trust is one of the hospitality trust stocks which I own and recently it reported its Q1 financial results. Looking at its results, we can know whether the hospitality industry is still on the track to recovery. Some of the hotels they own are Orchard Hotel, Grand Copthorne Waterfront Hotel, M Hotel, Copthorne King's Hotel, Studio M Hotel and Novotel Singapore Clarke Quay.

Hotel Lobby of Grand Millennium Auckland in New Zealand

The hospitality industry, especially in Singapore has suffered quite a bit in recent years due to the poor economic conditions globally. Overall, the hotels revenue per available room (RevPAR) in Singapore has declined to as low as during the global financial crisis in 2007. This has caused the earnings of the companies in this industry to suffer.

For CDL hTrust, net property income (NPI) went up 6.4% in Q1 2017 as compared to Q1 2016. This resulted in the DPS going up 9% YoY. The increase was mainly due to higher contribution from its New Zealand hotel which was up 90.2%. For Singapore, NPI increase marginally by 1.5% only. CDL hTrust has most of its hotels (69.1%) in Singapore so the focus is still in this market.

Performance of Singapore Market

CDL hTrust Singapore hotels' occupancy rate went up from 83.9% in Q1 2016 to 88.4% in Q1 2017 which is a 4.5pp increase. However, RevPAR still declined but only marginally by -0.8%. This is a huge improvement from the -6.9% decline in Q1 2016 vs Q1 2015. It seems like the decline has slowed down and bottomed out.

For the macro conditions of the hospitality industry, STB estimates moderate growth in visitor arrivals of 2% and YTD February 2017 visitors arrival grew by 3.4% yoy with China visitors at the highest. Additionally, a S$34 million investment was recently announced by STB, SIA and Changi Airport Group to strengthen Singapore’s destination appeal and woo business and MICE visitors. This is on top of the other initiatives which I've listed out in my previous blog post.

As mentioned in previous blog post, we can expect hotel supply to gradually taper off in 2018 which we should see a stronger recovery in the RevPAR. CDL hTrust price went up to $1.55 with Price to Book ratio of 0.98. This is at fair value and not too cheap in my opinion. I bought this stock back when it was at PB of around 0.8. Nevertheless, the current yield is about 6.45% which isn't really too attractive for me. A dividend yield of more than 7% would be more attractive for hospitality stocks. I would accumulate more if there are any opportunities to buy a lower prices.

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Monday, May 1, 2017

Croesus Retail Trust - Another Japan Reit Potential Takeover

Croesus Retail Trust is not new to this blog. I've written several articles about this stock since 2013. It has been more than 3 years since I was an investor in this company. How time flies just like that. Investing in Japan Reits was a strategy I embarked on 3 years plus ago primarily due to macroeconomic reasons. Japan was starting an aggressive monetary and fiscal policy plan at that time which I saw the opportunity to invest in companies which owns real estate in Japan.

Just last week, there is a potential takeover which was announced by the company and this sent the stock price up as high as $1. The same thing is happening again which happened to another Japan Reit called Saizen Reit. If we see the same takeover as Saizen Reit, Croesus Retail Trust could possibly be acquired at more than $1 which gives a 5%-10% premium to its price to book value.

This stock has served me well over the years as an income investment. Its dividend was close to 10% in the early years and averagely it gave about 8%+ yield. Many were worried if the yield is sustainable but they have proven that it is. The last time I heard from the management face to face was during a retail investor day. I heard from the management on their strategy to grow the company by doing more acquisitions so CRT becomes an indexable stock which will hopefully drive the stock price up. In the end, they did do what they said. From a portfolio of 4 shopping centres, they expanded to 11 now. They also reassured investors that they will be responsible in delivering the DPU which they did consistently.

Whether it will be acquired or not, it doesn't really matter to me as its still a good investment. For those who are already investors in this company, let's see what happens next.

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