Friday, December 30, 2011

How did the defensive portfolio fare?

Now let's look at how the elderly couple has fared for 2011 since their investment.

I have included here a sample portfolio for the elderly. This portfolio is a real-life example that I recommeded to an old couple. The shares were bought in mid-2010 and you can take a look at the percentage dividend yield and the returns on invested capital.

A defensive portfolio for the elderly
as at 30 Dec 2011
Stock (No. of shares)Buy at2011 dividendRealised profitUnrealised profit
Cerebos Pacific (2,000) $           4.48 $               640.00 $             640.00 $                 960.00
Popular (50,000) $           0.15 $               500.00 $             500.00 $                 650.00
OCC 5.1% NCPS (200) $       105.00 $           1,000.00 $         1,000.00 $                 460.00
 $ 37,460.00 $         2,140.00 $            2,070.00
% Yield5.7%
ROIC (%)11.2%

Please note that these shares were bought in mid-2010, when the STI index was at 2987.70. The index closed at 2646.35 yesterday. This portfolio gained 11.2% (including dividends) while STI index lost (11.4%). This portfolio beat the STI index by a margin of 22.6%. I would have considered this an achievement.

Remember these points that I have mentioned in my other post.
1.  Value investing is timeless. You can buy undervalued stocks anytime.
2.  A defensive portfolio is able to let you have a good night's sleep. Even during these uncertain times in the eurozone, this portfolio is still able to give the couple a dividend of more than $2,000. 
3.  Buying and holding stocks that are not actively traded can protect your portfolio from the effects of news.
4.  Buy businesses, not stocks. Cerebos Pacific is a company that produces Brand's Essence of Chicken, Popular is a company that is known to almost everyone in Singapore.
5.  Buy a high yield preference shares can almost guarantee every dividend payout at a fixed rate.
6.  Buy at the strike price and not any other price. 

The couple will still be holding on to this portfolio for the next couple of years to enjoy the high dividend yield. Anyway, they are going to receive an interim dividend from Popular in January 2012. Will update on this portfolio at the same time next year. So do keep a lookout.

Happy investing and cheers!

Happy New Year. Let's welcome more good years ahead.

How did Jac fare for his picks for 2011?

This is extracted from my post on 18 February 2011.
These are the companies that I have chosen to invest in.

The companies here are not listed in order of merit.
1. Popular Holdings. Singapore
2. Cerebos Pacific. Singapore
3. Walt Disney. US
4. Starbucks. US
5. McDonald's. US
6. Citigroup. US
7. OCBC. Singapore
8. UOL. Singapore
9. Duke Energy. US
10. Las Vegas Sands. US
Reasons for choosing these 10 companies:
1. Popular is strongest bookstore group in the heartland. Dividend yield can be 6% a year.
2. Cerebos Pacific. High dividend yield of about 7% to 8% per year.
3. Walt Disney. Acquire Marvel to be the company with the biggest number of cartoon characters. Growth stock.
4. Starbucks. Number 1 coffee in US. started to open stores in Japan and India. Opening into single serve area.
5. McDonald's. World number 1 fast food chain. Who does not know McDonald's in Singapore? My children eat their hotcakes or burgers once a week.
6. Citigroup. Growth stock. Balance sheet has improved under the leadership of Pandit.
7. OCBC. Growth stock with dividend yield of about 3.5%. It's growing presence in Indonesia.
8. UOL. Growth stock in residential, commercial and hotels sector. Great leadership Wee Cho Yaw.
9. Duke Energy. going to acquire progress energy to become biggest energy provider in US.
10. Las Vegas Sands. Growth Stock. Building one more casino in Spain.

So how do I fare for the whole year of 2011?
I shall use the share price on 03 January 2011 to gauge the winners and losers.
Let us look are the Singapore shares first.
1. Popular
    Price on 03 Jan - $0.165     Dividend for 2011 - $0.01
    Price on 30 Dec - $0.163     Loss - $0.01

2. Cerebos Pacific
    Price on 03 Jan - $5.25       Dividend for 2011 - $0.32
    Price on 30 Dec - $4.96       Gain - $0.03

3. OCBC Bank
    Price on 03 Jan - $9.41       Dividend for 2011 - $0.30
    Price on 30 Dec - $7.83       Lost - $1.28

4. UOL
    Price on 03 Jan - $4.52       Dividend for 2011 - $0.15
    Price on 30 Dec - $4.00       Lost - $0.37

Singapore blue chips lost 17% for the year 2011, while this Singapore portfolio makes a loss of 8.4%. This portfolio actually beat the STI index by 8.6%.

Now let us see the US stocks
5.   Walt Disney
      Price on 03 Jan - US$37.82       Dividend for 2011 - US$0.60
      Price on 30 Dec - US$37.36       Gain - US$0.14

6.   Starbucks
      Price on 03 Jan - US$33.25       Dividend for 2011 - US$0.56
      Price on 30 Dec - US$46.17       Gain - US$13.48

7.   McDonald's
      Price on 03 Jan - US$76.60       Dividend for 2011 - US$2.53
      Price on 30 Dec - US$100.74     Gain - US$$26.67

8.   Duke Energy
      Price on 03 Jan - US$17.86       Dividend for 2011 - US$1.00
      Price on 30 Dec - US$22.00       Gain - US$5.14

9.   Citigroup
      Price on 03 Jan - US$49.00       Dividend for 2011 - US$0.03
      Price on 30 Dec - US$26.39       Lost - US$22.58

10. Las Vegas Sands
      Price on 03 Jan - US$45.59       Dividend for 2011 - US$0.00
      Price on 30 Dec - US$42.79       Lost - US$2.80

The price for 30 Dec is correct as at 1am Singapore time. There will be some changes to be made the the trading ends in the US.
As for the US side, the blue chips were flat for the year 2011. This portfolio make a gain of 5.73%.

In total, the mixed portfolio has made a profit of 8.33% while the indexes made a lost of 17%. This means that this portfoliio has beaten the indexes by 25%. Consider a job well done for the novice investors.

Although I use closing price on 3 Jan 2011, it does not mean that I buy on that day. This date is chosen for calculation only. In real life, value investors have a personal valuation of the company. We only buy the shares when the stock has taken a beating, else we will just sit back and do not take any action. After the Japan earthquake and the downgrade of US credit, many share has been affected and prices nose dived. That was the time when the value investors took action. 

My personal US portfolio included some shares above, has increased 35.6% in value for the year 2011. I sold my Citigroup shares just before they did a reverse split and I reinvest the money into another stock and I am still holding on to Starbucks. That's the reason why I did not lose any value although Citigroup has lost 46.1%.

My personal Singapore portfolio included some share above, has increased 5.3% in value for the last quarter of 2011. I only started buying Singapore shares in September for the year 2011. That is why I am quite happy with the 5.3% growth in just one quarter.

I am looking forward to increase the value of my invested capital by at least another 15% in 2012. I hope you can do that too. 

In my next post, I will talk about the old couple's portfolio and how they have fared for the year 2011.

Happy investing and have a wonderful new year.


Tuesday, December 27, 2011

Investment is like our daily life

Dear readers,

It's been a month long since I last posted here. Merry Christmas and a Happy New Year to all of you. Hope that 2011 have brought you some good investments.

During the Christmas weekend, I read a post from a friend in her Facebook. 
"Damn crowded, whole world seem to be here — at 112 Katong."

We know that 112 Katong is a brand new shopping mall that was opened just before Christmas. It had attracted a lot of shoppers during the Christmas long weekend.
But how is this related to investment?

Thoughts just ran through my mind when I read the above post. Somehow I just linked the thoughts to investment. Here, I will explain their relationship.

It's in the humans. Nature create humans that like to follow the crowd or follow something new. 112 Katong was just opened and people just flocked there. They did not think of whether it will be crowded or not. They just like to be with the big crowd. Some people may even shop for things there, without comparing prices elsewhere. So, most of the time, shoppers bought things way above the value.

Imagine if you are an investor, waiting for a stock or a property to buy. You see that many people were buying ABC stock or DEF property, the price has been pushed up for almost 10%. You were afraid that price might go higher, so you decided to follow the  crowd and make your purchase, without doing any homework. This is the worst mistake that an investor can make.

112 Katong will still be there in the next 20 to 30 years. Why do so many people like to follow the crowd? Don't they feel uncomfortable with the crowd? Just like the shopping mall, the stocks will continue to exist as long as the company is still up and running. 

Personally, I prefer to shop in shopping malls on weekdays. Why? So that I can enjoy the shopping experience without squeezing with the others. So I applied the same concept into investing stocks. I look for stocks that do not trade on the top volume list. I look for stocks that people don't like. I look for stocks at my own sweet time and do research on them before I commit to buy. When I have committed to buy the stock, I will wait for it to fall to my strike price before I take action. That's what an amateur investor should do too. 

Also, we compare prices when we do our shopping. Recently, I bought two dozen golf balls that will cost $8 per piece in Singapore. A friend was coming back to Singapore for Christmas, hence I bought through the Internet. The golf balls cost less than $5 per piece. I actually bought at a discount of 37.5%. The same should go to property investment. I bought two, "not so popular", properties in 2010 and sold them for a good profit in 2011. Before buying the properties, I looked at the prices of nearby properties for comparison. Of course, I did not buy the cheapest one, but I bought one that is at a discount of my personal valuation of the property. Investment is just like buying normal shopping items, we tend to compare prices before purchasing them at a cheaper shop.

A good investor enjoys doing homework on the investments that he is interested in. Just like a student will like to do homework in the subjects that he is interested in. It's like purchasing a car. When a person likes a certain car model, he will look for all the reviews, or pictures of the car. This applies to investment as well. Be it stocks or properties, amateur investors should find out more before making the decision to buy.

There are many other examples that investment can link to our daily lives. Our daily habits will determine how successful we can be in our investments.

May the incoming 2012 bring us better investment opportunities.

Happy investing and cheers.

Monday, November 21, 2011

STOCKPILING - the way to maximise growth in your savings.

Stockpiling, what exactly is that? Many billionaires stockpile their shareholdings to success.

You may want to click on the link to see how it is done.

Stockpiling is an Art which requires courage to do it.

In general, the steps of stockpiling are as follows:
1.  Choose a company that you are interested to invest in it.
2.  Read the company's past annual reports and the chairman's or CEO's outlook on future growth.
3.  Make some calculations, so that you can set a target BUY price of the shares.
4.  Strike whenever the share price hits your target buy price.
5.  Save more money, so that you can purchase more shares when there is opportunity to do so, ie. the share price has dropped to your target buy price again.
6.  Update your target buy price annually, or after every quarter after results announcement. As earnings increase, your target buy price should increase and vice versa.
7.  Have enough money in your warchest, so that you can strike whenever an opportunity arises.

Like I said, stockpiling requires courage. You must build this courage in the course of trading shares.

For the past one to two years, I have practiced stockpiling on Popular Holdings. Since two years ago, I have personal valuation of Popular Holdings and I have my personal target BUY price. Every time I received dividends from Popular, I will save them in my warchest, together with my savings for investments. In these two years, there were many opportunities that I have taken advantage of and stockpile my shareholdings. You would have guessed that I have struck during the Japan's earthquake, the US credit downgrading, the current Eurozone crisis, etc.
I am still working hard to achieve my target of owning 2 million Popular shares.

Why is stockpiling one of the better way to grow investment savings?
1.  You just need to concentrate and monitor one company.
2.  It allows you time to save and grow your warchest.
3.  You will not be buying over-priced shares as you already have a personal valuation of the company.
4.  You will earn more dividends in the future, with the increased number of shares.
5.  With the dividends, you will be able to buy more of the company's shares at your target BUY price.
6.  This process of getting more dividends to buy more shares, to receive more dividends, to get more shares goes on and on and on.
7.  There will come a day when you can just use the dividends received to purchase more shares.

The only bad thing about the stockpiling is when you are holding a large amount of the company's shares. It will be difficult to sell all at one go. However, if you know that this company is going to last for the next ten to twenty years and give you good dividends for that period, then the risk to invest is this company is reduced to the minimum.


Happy investing.

Tuesday, November 1, 2011

Singapore Property : Buy or hold till recession?

Singapore property buying craze has slowed for the past 2 months. Has the cooling measures really taken effect? Although the transaction volume has decreased but the price is still climbing. The cooling measures did scare off the middle income Singaporeans who planned to park their savings into assets like property. Now these people can only see their savings earn less than 1% interest in the banks.

Like I have said in my first book, "Route to successful property investment in Singapore", property investment should be timeless. In fact, any type of investment should be timeless. All these while, I have been trying to convince my relatives and friends to buy some properties or high dividend stocks if they can afford it, but to no avail. All of them gave the same reason, "I will wait for recession to come. Recession is coming."

My question to them is, "How would you know recession is coming?" Nobody knows when recession is coming. When that happens, it will take everyone by surprise. A major recession was here in 2009, which is only 2 to 3 years back. Back then, stocks take a beating, property prices too. But what did they do? They did not invest in anything at all. So when the market picked up in 2010, they said, "Sigh, I have missed the boat."

Investment, indeed, is not as simple as it seems to be.
First, you must conquer your fear of losing the invested capital. The solution - invest a percentage of your savings. 10%, 20% or even 50%.
Second, you must have confidence in your investment. Once you have made a decision to invest in a certain property or stocks, have confidence that it can bring you better interest than the banks.
Third, you must have patience. Investment is a long term process. When you do an investment, look beyond 3 to 5 years.

Back to Singapore properties. Almost all the friends that I have talked to, are waiting for recession to come in the near future. Meanwhile, their savings are still in the banks. Many were also shocked that I have bought two properties in this year. My reason to buy is simple, "These properties are undervalued."
I am still looking around for wonderful properties to buy. However, when you do not like a project, do not buy, even if the property agents keep updating you how many units were left. Buy only when you like the project. I have seen more than 20 new projects and only one that I like and I have bought it, that is Vibes@East Coast. So, don't rush into buying any property.

These two properties were bought with the new rulings. I have to hold on to these properties for 4 years if I want to avoid paying seller's stamp duty. It's fine with me. That's my intention in the first place.

Singapore properties are valuable assets. It may seem to be expensive in general, there may be a few FIRE SALES, where the owner needs money urgently. The current volatility in the stock market may create some good chance for investors like us to strike in an undervalued property.

My personal view: "Our government will not allow property prices to fall more than 10%." So there is not need to wait for recession to come. It may or may not come at all. Strike when you have the bullet$ and when you come across a wonderful property.

Some pointers that may help you:
1. Look for 999 year/freehold properties.
2. Do not rush into buying, if you don't like the house, or project.
3. Bargain with the seller.
4. Get principle approval from the banks first.
5. Buy only when you can afford to hold it in the long term, say more than 5 years.
6. Do not fall into the agents' trap that it is going to be sold out soon. If that's the case, wait for next better one.
7. Initiate BUY only when you really like the place.

Have fun investing.


Thursday, October 13, 2011

SPH: To buy or not to buy?

Headline from Channel NewsAsia: SPH sees 22% drop in full-year earnings.

What is the first thing in your mind?
1) Sell SPH shares now.
2) I will wait for next year and see.
3) Buy more SPH shares now.

Let us find out more about SPH before making any decision.

Singapore press holdings announced their results yesterday. For the full year of 2011, they have earned a $0.24 per share. You can get the results in the newspapers today. Using the closing price of $3.78 yesterday, the P/E ratio is at 15.75, still a reasonable ratio, for a public listed company.

The 22% drop is actually due to the fact that FY2010, SPH shareholders enjoy a one time profit from their property development sky@eleven. If you have read into the actual results that include breakdown of the different segments, you will see that there is actually a rise in net profit.

Their total dividend for this year is $0.24 per share. That is, they are giving out about 100% of their earnings this year to the shareholders. That is a dividend yield of 6.35% for the year from 1 September 2010 to 31 August 2011. Not a bad way to grow our savings.

The question now...

When should we buy SPH?

Jac's answer: When the price has hit below your personal valuation of the company.

We can actually set our own target buy price. For example, if you think that you want to get at least a 7% dividend, then buy at $3.43. If you do not mind the 6.35%, you can buy now. It all depends on your own preference.

Other than the print business, news business, SPH also owns Paragon and the just completed Clementi Mall. These two malls will enjoy close to 100% lease out each year. I am very confident of that. If there is time, no harm reading their results by clicking the link below.

Understand SPH's businesses better and you will know how to give your personal value of the company.

Happy investing and cheers!

Tuesday, October 4, 2011

Should I pay down my mortgage or should I invest my savings?

I received an email from a reader of my book, Route to successful property investment in Singapore. Once again, I want to thank all those who have bought my book for your support. He asked if he should do a partial redemption whenever he has enough to do it, or invest the money? I pondered for quite some time, did a bit of calculation and replied him. I will not discuss about the email. I shall discuss my strategy in this post.

Take for example, a couple who has taken a $300,000 mortgage loan. It does not matter how much is the monthly repayment. The figure that is important here is the interest rate. Let's take the current rate of about 1% per annum. Many will say that I will invest the money since the loan rates is still so low. I can just put in any preference shares that give me 5% dividend and I can beat it by 4%. That is totally WRONG!

First, you must take note that 1% of $300,000 is $3,000. If you have only $20,000 of savings, 5% of your $20,000 invested in the preference share is only $1,000. You are actually paying $2,000 interest instead of $3,000. You are still paying interest on your part. In order to beat the loan interest, you have to make at least 15% profit from your $20,000. It is not impossible but a very difficult target to achieve. And remember, DO NOT try your luck on the gambling tables.  If you pay the $20,000 and reduce the loan to $280,000, the interest will be $2,800 and you are paying $800 more than what is mentioned above. If you are not confident of investing in the stock market, then you may choose to do the latter. You will still be saving 6.7% on the interest to be paid. Investment in stock market carries much higher risks than repaying your own home. In the event that a Lehman-like crisis happens again, buying the wrong stocks may cause you $20,000 and you will still have to pay $3,000 interest. Weigh the consequence carefully before you make your decision.
Of course, if you are confident that you can make more than 15% per annum for the next 5 years, then by all means, invest the money. But the current market condition is not suitable for one to dump their money into stocks. Anyway, invest in your own property is a better and more certain choice, compared to the stock market.

When you have partially redeemed to $150,000, then maybe it is a better choice to invest your money. A 1% interest on $150,000 is $1,500 per year. I believe that if you have $20,000 in savings, a 10% return every year will give you $500 more than your loan repayment. It is not difficult to find a good company that can give us more than 10% returns. You can read my other posts in this blog to find out how.

I will just use another figure to illustrate another scenario. A couple bought a $1 million condominium and took 80% loan. Their interest each year will be about $8,000. How much do they need to invest, in order to overcome the $8,000 interest? Let's just talk about making a profit of $8,000 every year. The highest dividend that I have come across so far, is Cerebos Pacific. Their dividends per year should be at least $0.25 per share. So taking $8,000 divided by $0.25, the couple needs to buy 32,000 Cerebos Pacific shares. At today's closing price of $4.69, they need to have $150,000, just to break even with the interest. If they have $197,000 to buy 42,000 shares, then they can expect to receive $10,500 dividend each year. Not only have they beat the interest, they have an additional $2,500 to reinvest and grow their savings further.

In summary, if you are not confident of investing in the stock market with your savings, it is better to repay the mortgage loan and reduce the interest. Interest rate may differ, but our aim is to invest only when we can really beat the interest of housing loan. Hope each and every one of you find this post useful and recommend your friends and colleagues to take a follow this blog.


Disclaimer: Any investment mentioned here is meant to be illustration only. Every investment involves risks. Readers are advised to exercise their own discretion when investing their own money. Writer of this blog shall not be held responsible for any failed investment made.

Thursday, September 29, 2011

A sample defensive portfolio

As I was chatting with my wife regarding investment and how can we, the small investors, protect ourselves from the current wild emotion of Mr Market. The recent eurozone news triggered the roller coaster effect of the stock market. How are we affeted by that and how can we protect our investment from the effects?

I have included here a sample portfolio for the elderly. This portfolio is a real-life example that I recommeded to an old couple. The shares were bought one year ago and you can take a look at the percentage dividend yield and the returns on invested capital.

A defensive portfolio for the elderly

as at 29 Sept 2011
Stock (No. of shares)Buy at1-year dividendRealised profitUnrealised profit
Cerebos Pacific (2,000) $            4.48  $                640.00  $              640.00  $                  560.00
Popular (50,000) $            0.15  $                500.00  $              500.00  $                  400.00
OCC 5.1% NCPS (200) $        105.00  $            1,000.00  $          1,000.00  $                  (20.00)
 $  37,460.00  $          2,140.00  $                  940.00
% Yield5.7%
ROIC (%)8.2%

This couple was very satisfied with this portfolio which can give them a passive income of $2,140 in the year 2010/2011, compared to only $352 if they put $40,000 into fixed deposit that pays only 0.88%.
The price to buy Cerebos Pacific and Popular shares were calculated using my own formula before recommending to the couple.

Please note that these shares were bought in mid-2010, when the STI index was at 2987.70. The index closed at 2708.13 yesterday. This portfolio gained 8.2% (including dividends) while STI index lost (9.4%). This portfolio beat the STI index by a margin of 17.6%. I would have considered this an achievement.

What are the lesson that we can learn from here?
1.  Value investing is timeless. You can buy undervalued stocks anytime.
2.  A defensive portfolio is able to let you have a good night's sleep. Even during these uncertain times in the eurozone, this portfolio is still able to give the couple a dividend of more than $2,000.
3.  Buying and holding stocks that are not actively traded can protect your portfolio from the effects of news.
4.  Buy businesses, not stocks. Cerebos Pacific is a company that produces Brand's Essence of Chicken, Popular is a company that is known to almost everyone in Singapore.
5.  Buy a high yield preference shares can almost guarantee every dividend payout at a fixed rate.
6.  Buy at the strike price and not any other price.

The couple will still be holding on to this portfolio for the next couple of years to enjoy the high dividend yield. Will update on this portfolio at the same time next year. So do keep a lookout.

Happy investing and cheers!

Monday, September 26, 2011

A 'tough' road to be an investor

What does it really take to be an investor? Route to become one is not an easy task.

Recently, friends have been asking if they should buy more shares or sell their shares during this volatile period. I told them that I have bought some shares and did not sell any of my holdings. They were again confused by my actions. That's very normal. It's human. There's always an element of fear in the current situations.

One friend asked, "Why don't you sell your holdings and wait for the price to go down before buying back?"
Another friend asked, "Why do you buy when the Euro zone is in a mess now? Greece may default and cause another Lehman-like crisis."

The answer I gave to both my friends is the same one. "I do not know if Greece will default. I do not know in which direction will the share price go. All I know is, I have my personal valuation of these shares and they have fallen to my strike price (a discount of my personal valuation), so I opened my warchest and bought these shares."

What if the prices of those shares fall further? Well, I will just buy more. If I can get the same shares at a cheaper price, it means I can buy more of them. Isn't that great?

One way we can invest is to use just a part of our investible savings to buy first. If price falls about 10% more, then we stockpile. If price rises, then we are all happy investors.

Investing is not as easy as buying low and selling high. How do we know how much is low? How do we know how much is high? Do we buy at $3 and sell at $3.10? Not that I know of any investor would do that. A real investor is one that will put their money into a company that can give them comfort to sleep soundly at night. An investor does not put money in the company's shares and hope that the price will increase in the next few days. (That's gambling. It's like putting your money on the gambling table and depend on luck.)

My journey to become an investor is not as easy as it seems. When I first started to buy shares in the stock market, it was like ok, I just buy and hold the shares till the price goes up 10% then I sell. Well, I was wrong. There are just too many traders out there buying and selling shares. I cannot control the direction of the share price. Currently, I am still holding on to these shares and the price has gone up but I am not going to sell them as yet. That's the first lesson I learned. Do not put all your money at one go.

6 months down the road, I picked up some pointers from the books that I have read and I also saved another sum of money. I thought I was ready to apply what I learned in the book. Again I was wrong. It was really not easy to put that sum of money into the stock market. There was always a fear that what if my calculation is wrong? Why don't I wait a while longer? What if I buy now and the price dropped further? There is always the emotion factor that will affect your decision making.

Thereafter, I decided to sell all my shares in my holdings and came up with another plan. With the cash I have, I put in about half of the money into the company that I have done my calculations. With this, I will not have the worry that I will lose the entire sum of money if company is going bankrupt, and of course, the companies that I have researched are those with more than 20 years in their respective industries. Hence, my worry that the company to go bankrupt can be put behind and I can sleep soundly at night.

This strategy works well for me. I also started to widen my search for companies to invest in. It's all hardwork but I do reap what I sow, and I am satisfied with it. My investment has been growing at more than 15% compounded every year for 4 years. If I can do it, so can you. Now I am able to overcome my fear that I had when I first started.

I always have a stirke price for each and every company that interests me, hence whenever there is a panic sell in the market and the price hits my strike price, I will buy the shares with my savings. My current shareholdings are able to give me a dividend yield of at least 7% each year and these dividends were mainly reinvested to buy more shares instead of spending them.This is the only way to grow savings at double digit rate and beat the inflation.

Investment in properties or in stock markets makes no difference. When they are at a discount of your personal valuation, it's time to buy. So when will I sell my shares? I sell my shares only when I need cash to fund my other investments. For example, I have sold some shares last year to fund my purchase of a property. If there is no need to sell the shares, I would rather leave them in my CDP account and collect the dividends.

To be a real investor, you may want to follow this list:
1. Be patient. When the share price did not fall to your buy price, don't buy.
2. Overcome the fear. Have confidence in your investment. Trust your own judgement.
3. Never time the market. Do not wait for the market to fall further.
4. Do not be too greedy. Buy enough and not too much, make sure that those are the companies that you want to hold for a long time.
5. Sell only when you have found a better investment or when you are in need of money.
6. Reinvest the dividends so that your savings can grow much faster than inflation rate.

If you have insights, please share here.

Happy investing.


Disclaimer: Readers are advised to exercise their own discretion when it comes to investments. All investmets involves risks. The blogger shall in no event held liable for any loss or other damages.

Tuesday, September 20, 2011

The real meaning of undervalued property

There has been a big misunderstanding when it comes to the meaning of undervalued properties. I mentioned in my post on 5 September, , I have bought an investment property in East Coast. My friends and relatives were shocked that I actually bought a unit at around $1450 psf. They were askng, "Why did you buy such an expensive property? Why didn't you wait for the price to drop?"

Then I felt that they had actually misunderstood the meaning of undervalued properties, that I have mentioned in my book, Route to successful property investment in Singapore. Undervalued does not mean low price. The meaning to the word is "value below the real worth".

I would like to emphasise that investment should be timeless. There is no need to time the market. Just take Vibes@East Coast for example, I, too, have a personal valuation of the properties in that area. When I bought this unit, I know that this property can give me rental yield of between 5% to 8%. This was calculated using my own formula. It is not the same formula that real estate agents use. All factors were considered in a short span of time? No. In fact when I went home on that Friday, I went to the Internet to search for the location, using One Map. That was when I realised that it was a good property to invest in. The reasons that I bought this unit can be found in my earlier post. You can click on the link above to take a look.

However, I did not just snap up any of the remaining units. These units do not have good facings. Hence, I just thought, I will just get everything ready and strike when there is a chance to. To my surprise, the agent called to tell me about the re-released unit. That was when I made the decision in a short span of 10 minutes, and bought the unit.

What if there isn't such a case? Well.... I will just forgo this project. It's that simple. Forgo this one and look for the next undervalued one.

When you are looking for a property, have a personal valuation of each and every property that you are interested in. Go around and view showflats and for sale units. Out of the many houses viewed, there must a one or two that are selling below your expected price. Patience is the key to investment.Take your time, do not rush into just any property. Once you stumped upon a chance, open your warchest and strike.

Cheers and happy investing.