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3Q 2020 passive income: COVID-19 battle.

Thursday, October 1, 2020

It has been 3 months since my last blog and I hope everyone is well. 


Blogging quarterly is something which is relatively undemanding and I will probably continue to do so as long as it is still interesting for most of us. 

So, please think of this as the new normal. 

If there are blogs apart from the quarterly ones, think of them as "extra service." 

Yes, from that phrase, some can tell that AK has been watching K-drama and reading lots of Korean manga too.

Of course, Neverwinter is still taking up much of my time and "Redeemed Citadel" is the virtual world's latest expansion.
 




The new normal.

This is something we hear a lot of these days. 

Although Singapore seems to have COVID-19 under control now, we should not think that we have conquered it. 

Just look at countries which have experienced second and even third waves of COVID-19 infection.

This tells us that COVID-19 is just waiting to strike again and again if we let our guard down.

The damage caused by COVID-19 to our country's economy so far is mind numbingly shocking and the deleterious effects are likely to persist as the world continues to battle the pandemic which, unlike SARS, has exhibited very strong staying power.

Even when effective and safe vaccines become available, it will take a long time to have adequate number of people vaccinated to achieve herd immunity against COVID-19.

Those of us with adequate financial resources at our disposal will be able to deal with the crisis better.

Still, we should not throw caution to the winds as this crisis is likely to be prolonged. 

How long will the crisis last?

When IATA says air travel is unlikely to recover fully until the year 2024, that is probably a good indication that the crisis could persist in the current form or another.




We should be prepared for more possible downside even as we hope that things get better faster.

Readers who have been following my blog for a long time probably know that I have a sizable emergency fund. 

This emergency fund has yet to be tapped.

Of course, I hope I would not have to tap it but if I must do so, I know the fund is there.

Warren Buffett famously said that he would not operate in a manner "that depends on the kindness of strangers or even that of friends (who may be facing liquidity problems of their own.)"

It is very important to have near money at all times and especially during hard times.

Those without an emergency fund should build one now if they are still able to.

Those without a sizable emergency fund might want to strengthen the fund.

Don't risk economic hardship by speculating on when the economy might recover fully.

Only after being well prepared for possible downside should we think of investing in the stock market.

Even if we have passive income, we should still keep an emergency fund.

There is no telling whether our passive income might be negatively impacted from time to time or, worse, for a prolonged period of time. 

If our cashflow is a like a stream of water, an emergency fund is like a water tank that will dispense life giving water in the event of a drought.



In 3Q 2020, my passive income took big hits and came in much lower than expected as businesses I invested in either reduced dividends paid to shareholders or suspended payouts.

Even so, compared to 3Q 2019, total passive income received in 3Q 2020 increased very slightly due to a much larger investment in IREIT Global and also an unexpected payout by Accordia Golf Trust.

Total passive income received in 3Q 2020 was:

S$ 32,023.29.

This number could have been higher but I accepted scrip dividend from OCBC which reduced the amount of cash dividend received for the quarter.

Priced at a generous discount to what was already a low share price, at $7.81 per share, I had to accept the offer.

In 3Q 2020, I dipped into my war chest and bought more shares of UOB.

This is because I would like to have my investments in all three banks to be roughly the same in size.




There is still some way to go before my investment in UOB is as large as my investment in DBS or OCBC but I am taking it slow for two reasons.

The first reason is because although the stock market seems to have bottomed in March, much of the sharp rebound in stock prices has been lost as realization sinks in that the crippling effects which COVID-19 has on the economy will very likely last for a longer time.

The second reason is because of the rights issue by IREIT Global.

IREIT Global is one of my largest investments which has been made larger as I bought more at 42 cents a unit a few months ago.

The 454 for 1000 rights issue at 49 cents per rights share and also my intention to apply for excess rights means the exercise will significantly drain my war chest.

This must be paid for by 15 October 2020.




Does this mean that my war chest would be emptied by then and that I would not be able to add to my investments in the local banks?

Fortunately and unfortunately, another substantial investment of mine is being monetized and the funds will come in on 15 October 2020.

I am talking about Accordia Golf Trust, of course.

Most probably, some money will also be refunded in my application for IREIT Global's excess rights.

Funds will flow into my war chest then.





That is all for this blog.

Till the next blog, mask up, stay safe and keep all of us safe.

If we stay united, we will win the COVID-19 battle eventually.

We are #SGUnited!

Related post:

50 comments:

laurence said...

Quote.
Blogging quarterly is something which is relatively undemanding.......
Unquote.

Wow, the above has to be the Overstatement of the Year, unless surpassed or trumped by something Trump says before the end of the year.
;)

raf said...

Hi AK, thanks for the update. Would be grateful if you could talk to yourself about reasons for not investing in the booming glove stock companies like Top Glove and Riverstone

Pete said...

Wa! finally! we miss your post AK! Do more pls

AK71 said...

Hi Laurence,

Apparently, Donald Trump just tested positive for COVID-19.

I wish him well.

AK71 said...

Hi raf,

I haven't looked and don't have the inclination to look. ;p

“Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.” - Warren Buffett.

AK71 said...

Hi Pete,

No promises. ;)

CupcakedCrusader said...

Hi Ak,

Good to hear from you again. Centurion insider has been accumulating and bought more as the price dropped further. Would it be a good opportunity given the current climate and if fundamentals of the industry have changed.

AK71 said...

Hi CupcakedCrusader,

Centurion has always been well managed and paid good dividends to shareholders.

The insiders are savvy and eat their own pudding too.

If insiders with a significant stake buy more, I would buy too as I believe they have greater clarity regarding the business direction.

However, for now, I should be deploying my limited resources in businesses with stronger balance sheets and which are able to pay dividends with ease.

This is to limit the demands on my resources and also to shore up my passive income which I need as a retiree.

Someone with different circumstances from mine could act differently.

So, you have to decide on your own strategy. :)

nch said...

hi Bro AK71,

With regard to the rights issue of iReits,

Issue price of S$0.490 represents a discount of 32.9% to the Closing Price ofS$0.730 per Unit, and 25.2% to the theoretical ex-rights price of S$0.655per Unit

Currently the counter is trading at less than the ex-rights price of $0.655. Would we be better off just by buying in the market. Thanks.

AK71 said...

Hi nch,

You want to focus on the word "theoretical" and not on "ex-rights price." ;)

Now, if IREIT Global is trading at lower than 49c a unit, I would buy from Mr. Market.

nch said...

Hi Bro AK71,

Silly me, I understand it now, thanks.

Yu said...

hi ak shifu,

how to calculate their new dpu in % after the rights issue??, i want to see if now is the right time to enter
very confuse here

雲罡 said...

Hi AK71!
I have been reading your blog since last year and it is my first time to leave message here. I learn quite a lot.
I find that Frasers Centrepoint Trust is going to provide a preferential offer for existing unitholders at S$2.34 per unit. May I know your thought about this?
Seems several REITS have been more 'active' in this year.
Thank you!

AK71 said...

Hi nch,

No worries.

We miss some things sometimes.

It happens to me too from time to time. :)

AK71 said...

Hi Yu,

The diluted DPU is estimated to be 4.51 cents after the exercise is over.

Just use this to divide by the current market price and you will get the Distribution Yield.

So, if you buy at 62 cents a unit from Mr. Market, your yield is 7.27%, for example.

AK71 said...

Hi 雲罡,

Welcome to ASSI.

I don't have a position in FCT but if you have read my past blogs on REITs and rights issues, you should be able to form an opinion on FCT's rights issue.

Gambatte. :)

fenix said...

Hi Ak.

Good to hear you are doing well.

Starhill Reit has to to 40+ cts level. Have you taken any action?
Have the fundamentals changed or is this a good opportunity to buy more?

AK71 said...

Hi fenix,

Although SGR looks very undervalued now based on discount to NAV, I think the local banks are more attractive investments as they have stronger balance sheets and ability to pay dividends.

You might remember that I sold a large chunk of my investment in Ascott Trust when the unit price rebounded strongly some time ago.

My investment in SGR is roughly the same size as my current investment in Ascott Trust.

I am willing to hold on to these smaller investments which are badly impacted by COVID-19 while waiting for recovery but I am not adding.

Reference:
AA REIT, IREIT and Ascott Trust.

Xiao ru said...

Hi Ak,
How to apply right shares of Ireit through ATM? I tried two times at ATM machine, the applications of right issue not available. I afraid miss the applications. Thanks !

AK71 said...

Hi Xiao ru,

All unit holders should have received the package from IREIT Global with all the details.

The last day to pay for rights units allocated to you and to apply for excess rights is 15 Oct 20.

You might want to try again closer to that date.

Xiao ru said...

Hi AK,
Thanks for your reply, I will try again.
Have a nice day!

Xiao ru said...

Hi AK,
Thanks for your reply, just now I try again, success to apply the rights unit.
Thanks and have a nice day!

raf said...

Please note that if your shares are not held in your name at CDP (i.e. held in your broker's name) then you have to apply for rights through your broker.

Xiao ru said...

Hi AK,
Thanks for your reply, today I tried again, applications for the rights successfully. Thanks a lot!
Have a nice day!

laurence said...

Quote,
How to apply right shares of Ireit through ATM? I tried two times at ATM machine, the applications of right issue not available. I afraid miss the applications. Thanks !
Unquote.

Better call the bank or friends to clarify why you were not able to see the option.
BTW, u must choose Rights Subscription option. NOT Shares Subscription option.
I just did that 2 hours ago on DBS ATM and it was a breeze.

Better do it as early as possible since no one can predict problems that could crop up later to turn things upside down, e.g.ATM faulty, ATM Card eaten up by the ATM, etc.

AK71 said...

Hi Xiao ru,

Glad to hear that.

Good luck. :)

AK71 said...

Hi raf,

Thank you for sharing. :)

AK71 said...

Hi Laurence,

Yes, it should be quite easy at the ATM.

It is good that things worked out for Xiao ru.

Xiao ru said...

Hi Raf, Laurence and AK,
Thanks your kindly advice and sharing. I did it at OCBC ATM already. Thanks all of you! Good luck to all! 🙂

Steven said...

Good to hear from you AK! Hope you are well. Your blogs are always so informative. I hope you can keep posting regularly like in the past. Good luck and stay safe. :)

AK71 said...

Hi Steven,

Glad you enjoyed the blog. :)

I can probably manage regular quarterly blogs and, perhaps, a few irregular or sporadic ones. ;)

Wentworth Scofield said...

Welcome back AK! I have been reading alot more on the comment sections (new normal for me!) to pick into your brain. Since you have reduced blog frequency.

Anyway stay safe and please play dota!

Viknesh said...

Hi,

I've never exercised such rights before and so, have some queries that I hope you guys would be able to assist me with.

I checked my CDP account and confirmed that rights have been issued to me.

I assume I'll have to exercise these rights via a ATM? Using the Rights Application function/feature in the ATM?

Do let me know if I'm wrong.

Thank you.

AK71 said...

Hi Wentworth,

I am not really into PvP and I think that is what Dota is or am I mistaken?

I enjoy soloing PvE mostly but I am quite happy to team up for group PvE content when required.

So, Neverwinter works nicely for me. :)

The comments section of my blog has many hidden gems because it isn't just me talking to myself.

Glad that it is an interesting activity for you. ;)

AK71 said...

Hi Viknesh,

Yes, that is correct.

I did this at a DBS ATM last week.

Perfect. :D

Sennett said...

Hi AK71, just curious why you would subscribe to ireit rights issue when it is both DPU & NAV dilutive to shareholders.

AK71 said...

Hi Sennett,

I decided to publish my reply to your comment in a blog as it could be interesting for other readers too.

See:IREIT's rights issue: Why did AK subscribe?

CupcakedCrusader said...

Hiyah.. Wanted to buy bank shares, but keep on increasing... Tell me how liddat

AK71 said...

Hi CupcakedCrusader,

It is never easy to time the market.

If you read my blog on increasing my investment in the local banks, I started doing it after I determined that the dust was settling and that Mr. Market found a floor if not the bottom on 23 March 2020.

See:
Buying DBS, OCBC, UOB and cheering for IREIT Global.

Since then, I kept adding little by little on any price weakness, particularly UOB which now counts as one of my largest investments although still smaller than my investments in DBS and OCBC.

Prices don't move up or down for prolonged periods in a straight line and although it can be difficult, it is important not to be too affected emotionally.

I cannot tell you what to do but I will probably continue to add to my investment on any price weakness.

CyC said...

Hi Ak. I just got intro your blog by my brother. I'm at mid 30s which like to start investing.

Any tips advise what to invest or putting money in CPF in OA/SA is better choices which have better interest and using CPF OA to invest ?

AK71 said...

Hi CyC,

Welcome to ASSI. :)

Your brother might not have told you that AK doesn't give advice.

Not allowed to. ;)

Anyway, if you read my blogs on CPF, you will see that I consider my CPF savings as the investment bond component of my portfolio.

See:
CPF is all we need unless we are very rich.

CPF is risk free and volatility free.

To use my CPF savings to invest, I must be satisfied that the alternative compensates me sufficiently for any risk and volatility that comes along with it.

As you are new to ASSI, you might be interested in the following "e-books" which compile various blogs here:

1. AK the investor in 7 chapters.
2. Building a cornerstone in retirement funding.
3. Survivability and opportunity in times of distress.

Gambatte! :D

Hongjin said...

Hi AK

For beginner investors, can you advise how do u slowly build your investment knowledge to where u are today ? There are so many info out there and it is difficult to extract what would be good knowledge to help us make better investment choices. Would love to have some insights from u :)

AK71 said...

Hi Hongjin,

Sorry to disappoint you but I am not allowed to give advice but I can talk about things in general.

I always say it is never my way or the highway.

All of us must know what we want to achieve and find our own way.

So, knowledge is probably the most important thing to have and this includes self knowledge.

Gain knowledge.

Know what we want and we will know what we need:
What is our goal and is debt unavoidable?

Are we going to be trading or investing or even speculating?
Getting started in stock investing and trading.

I like to take a holistic approach and keep things as simple as possible:
Financial security in Singapore plain and simple.

In a nutshell, have a plan, your own plan:
Have a plan, your own plan.

Gambatte! :)

AK71 said...

This could be an interesting read for some:
Investors eat crusty bread with ink for peace of mind.

and also:
Recommended books for FA and TA.

Hongjin said...

Thanks AK for the fast reply and great wisdom.

I think I lack the discipline to read widely (like reading the full annual reports and investing articles) because of my family commitments, 3 kids to raise:(

But long term gains > short term pains.

Can definitely squeeze 1 h per day to read up. Hard work, time allocation and questioning the experts should be my way. Hopefully I can discover my own way soon.

AK71 said...

Hi Hongjin,

For sure, all of us have our own circumstances to consider when deciding on the path to take.

Fortunately, there isn't just one correct path but there are many to suit different people.

Being a father is not easy in Singapore with the relatively high cost of living here and it will probably get higher.

These blogs could make for interesting reading:

1. A young father of two says money not enough.

2. In my 40s and married with kids. What would AK do?

3. Get the most out of ASSI as we embrace financial security.

Hongjin said...

Hi AK

thanks for the links once again.

Will u care to share you opinion about multiple payouts ci plans ? Because if one got a ci and gets a payout from his ci plan, the plan will no longer be in force. And recurrence of ci especially cancer is sometimes common. It may not be something that our passive income can cover.

AK71 said...

Hi Hongjin,

I had a blog on this too:
The best insurance in life revisited.

I believe we need CI coverage especially when we still need our earned income (i.e. when our passive income is insufficient.)

CI coverage is valuable but most relevant when we have to stop working due to the illness.

Hence, this blog:
Is early critical illness insurance necessary?

In the case of multiple payouts CI plans, I am not so sure.

It sounds like having insurance against the possibility of being dealt a really bad hand of cards in life.

I might only buy something like this for a term when I have dependents and if I have a history of recurring critical illnesses in the family.

Hongjin said...

Thanks AK

Really appreciate your wonderful insights. Your blog have opened my eyes to managing my finance much much better.

I like your idea of using passive income as a form of insurance. That makes perfect sense. My passive income is still a little noobie magician working on its compounding craft. but the market recently have allowed my little friend to level up :)

Awaiting your next blog entry then. Thanks again and enjoy your gaming !

AK71 said...

Hi Hongjin,

Just me talking to myself about my little ideas, of course. ;)

I like that you think of passive income as a magician as just like compound interest it can indeed deliver seemingly magical results. :)

May all of us level up! :D

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