Largest investments updated (3Q 2019).

It has been almost a year since my last blog on the largest investments in my portfolio.

Since then, in the following months, I added to some of my investments such as 

1. OCBC at under $11.00 a share, 

2. ComfortDelgro at under $2.20 a share 

and 

3. SingTel at under $3.00 a share.





Not much activity on my part, really.

Most of the time, I was just collecting dividends while waiting for Mr. Market to recover from his depression.

When Mr. Market did recover, I waited to see how euphoric he could get.

(To be totally honest, mostly, I was adventuring in Neverwinter but you know that, of course.)

After my recent blog on selling into the rally while staying invested, a reader asked if I could do an update on my largest investments.

I suppose I could.





$500,000 or more:
CPF.

Do I hear laughter?

While the CPF is not an equity and isn't a bond in the purest form, I do consider it an essential part of my portfolio.

I consider it essential as it is the risk free and volatility free component of my investment portfolio which pays a relatively attractive coupon.

I decided to include my CPF savings to remind readers that I am able to take a bit of risk in the way I invest because my CPF savings is a very significant safety net.

Well, for me, it is very significant.

When we invest, remember, we have to take into consideration our personal financial circumstances and not simply ride on other's coattails.

I hope that you had a good laugh.

More importantly, I hope you are also aware that this isn't all a joke.







From $350,000 to $499,999:
AIMS APAC REIT
(formerly 
AIMS AMP Cap. Ind. REIT)

This should not come as a surprise, of course.

My investment in this REIT is already free of cost and there is no compelling reason for me to fiddle with something that has worked so well for so many years.

There has been talk of a takeover of this REIT and, to be honest, I hope it never happens.

Many good income producing investments in my portfolio have been taken away from me and it is difficult to find equivalent replacements.





From $200,000 to $349,999:
ComfortDelgro
Centurion Corporation Ltd.

From being unloved, ComfortDelgro has become much desired by Mr. Market.

I like ComfortDelgro too. 

Even after trimming my investment in this rally by more than 20%, ComfortDegro still stays in the same bracket because the market value of my investment has gone up by more than 30%.

As an investment for income, ComfortDelgro is probably more reliable than Wilmar and its dividend is probably more sustainable than SingTel's.

Having said this, if Mr. Market should have a feverish desire to pay a much higher price for ComfortDelgro, everything else remaining equal, I would probably accept the offer.





Centurion Corporation Ltd. moved into the same bracket as ComfortDelgro because I added to my investment as its share price languished at about 40c a share.

Centurion Corporation Ltd. is undervalued and there continues to be persistent insider buying.

Peter Lynch said that there are many reasons why insiders sell but there is only one reason why they buy.

I like being paid while I wait and a dividend yield of almost 5% is not too shabby.





From $100,000 to $199,000:
Ascendas H-Trust
Accordia Golf Trust
Development Bank of Singapore
OCBC Bank

Ascendas H-Trust will probably be replaced by a new entity and I shared my view about the proposed combination with Ascott Residence Trust in two separate blog posts earlier this month.

As for Accordia Golf Trust, it still has the potential to increase DPU significantly in the next few years and I blogged about this before. 

I am quite happy to be paid while I wait, as usual.

Development Bank of Singapore is doing well and I would like to build a larger position if there is a meaningful correction in its share price.

New addition to the list is OCBC Bank.

This is the result of several rounds of accumulation at under $11.00 a share as I felt it offered relatively good value for money.





As for SingTel and Wilmar, after reducing my exposure significantly, my positions in SingTel and Wilmar are now worth less than $100,000 each.

Not part of my largest investments now, SingTel and Wilmar have been removed from the list here.

If Mr. Market should tempt me with better offers, I am likely to give in to temptation and sell what remains.

Remember, I am just doing what makes sense to me.

Remember, you have to do what makes sense to you.

Have a plan, your own plan.

"We must understand our motivations for investing in the stocks we are invested in.

"The tools we employ and the attitude we have must be appropriate to our motivations.

"That way, we will stand a good chance of doing better with a consistent strategy and this is so both financially and emotionally!"
From: 
Rules for investing in difficult times.




Recently published:
Sell into the rally and stay invested.

Related post:
Largest investments in 2018 (Part 2).

4Q 2018 and FY 2018 passive income.

It has been a pretty long break since my last blog.

I have also been spending a lot less time engaging readers both in my blog and on Facebook.

I know that many readers are not used to this.

However, this will continue to be the case as I devote a lot more time to other activities.

This was something I talked about before and it is the new normal.

So, please don't be surprised if you do not hear from me for weeks (or months) at a stretch in 2019.

Now, with that out of the way, I shall wrap up 2018 with a blog on my full year passive income.







Mr. Market went into a depression in 4Q 2018 and made me too many tempting offers.

Spoilt for choice, with my limited resources, I added to my investments in several stocks in 4Q 2018 even as I sold my entire investment in First REIT.

To understand why I sold my investment in First REIT, please refer to related post at the end of this blog.




Stocks (with hyperlinks to my earlier blogs where available) which I added in 4Q 2018:

1. Accordia Golf Trust.

2. Centurion.

3. ComfortDelgro and SingTel.

4. OCBC.

5. APTT






Due to the fact that I sold my investment in First REIT as its unit price bounced up when it went CD, my 4Q 2018 passive income from REITs reduced.

Readers who have been following my blog for many years might remember that I didn't share details of my passive income from non-REITs until it became a more significant percentage of my total passive income a few years ago.




As my passive income from REITs have steadily declined in recent years as a percentage of my total passive income, I will consolidate the numbers for both REITs and non-REITs, henceforth.

4Q 2018 passive income (REITs and non-REITs):

S$ 38,884.64






As I have blogged about the reasons why I added to my investments in Accordia Golf Trust, Centurion and ComfortDelgro in 3Q 2018, I will not repeat myself.

I also did an update on APTT as its unit price plunged and also explained more in detail during "Evening with AK and friends 2018" the rationale for buying at what I thought was a distressed price.

In the list of stocks above, I have hyperlinked those blogs for anyone who might be interested in reading or re-reading.






As APTT's unit price plunged under 13 cents a unit after it went XD, I took another bite.

Accepting an offer from what I believe was an overly pessimistic Mr. Market, it was quite simply a price I would not have sold at.

Readers who have been following my blog for many years would know how I size my more speculative positions.

With this last purchase, I would stop increasing my position in APTT as I keep it at a size that my passive income could cover within a year or less.

If you do not know what I am talking about, please read this blog from 2014:

How to size our more speculative positions?




Now, I will briefly explain my decision to add significantly to my investment in OCBC.

With interest rates rising, logically, banks will do better.

Already invested in DBS and OCBC at lower prices two years ago, I have been waiting for another opportunity to increase my investments.

In 4Q 2018, I increased my investment in OCBC significantly.

Why OCBC?







OCBC's stock experienced stronger selling compared to DBS and UOBs'.

A back of the envelope calculation indicated that OCBC was trading at a much smaller premium to NAV while DBS and UOB were trading at a richer premium to NAV.

The same back of the envelope calculation indicated that OCBC's dividend payout ratio is about 40% which is very undemanding and is the lowest of the 3 banks.




OCBC also had the lowest PE ratio.

So, I took several bites of OCBC as its share price plunged in 4Q 2018.

The funds from the sale of my investment in First REIT certainly came in handy.

Of the three banks, OCBC just seemed to be a better value for money offer at the time.






Some people asked me for a forecast of what 2019 has in store for the stock market.

Honestly, I don't know.

I cannot predict.

I can only prepare.

Remember?

However, what I can say is that, a bit more or a bit less, I will probably be receiving a meaningful amount of passive income from my investment portfolio.




Regular readers know I really am more concerned with receiving a meaningful stream of passive income from my investments than whether stock prices are moving up or down.

As long as my investments continue to pay me, I am usually quite happy with holding on to them.

The best investments could be those that I don't ever want to sell because they are able to pay me year after year.

Peace of mind is priceless.







How much did I receive in FY 2018?

FY 2018 passive income (REITs and non-REITs):

S$ 188,735.86

On average, about $ 15,727.00 per month.

I was also fortunate to have more capital gains than losses in 2018.


So, 2018 has been a pretty good year for me and I hope 2019 will be kind to me too.





Remember this if you choose this path.

I do not know if stock prices are going up.

I do not know if stock prices are going down.

However, I do know that I am collecting more dividends and the total amount has increased year after year.






Finally, remember that the best time to start is always now.

It is never too late to start walking the path to financial freedom.

If AK can do it, so can you!

Watch this video on what Gurmit Singh has to say about his income and what he would have done differently:





Related posts:
1. 3Q 2018 income from non-REITs.
2. Sold First REIT.

3Q 2018 passive income (non-REITs): AGT.

Some might remember that I reduced my investment in Accordia Golf Trust many moons ago at slightly more than 70c a share.

Since then, Accordia Golf Trust has seen its unit price gone down a slippery slope.

It finally got to a point where I just had to hit the "accumulate" button.

I remember sharing before but I just cannot remember was it here in my blog or during an "Evening with AK and friends" that my own research (with the help of Google Translate) found that PGM, Japan's second largest golf course operator at that time, made an offer to buy Accordia Golf's assets a couple of years or so before Accordia Golf Trust was listed in Singapore.





PGM's offer back then, roughly, translated to a present day unit price of 56c a share.

The offer was rejected by Accordia as being too low then.

Of course, we know that Accordia Golf Trust listed in Singapore later at a much higher price of 97c a unit.

With this in mind, I simply could not resist buying at a price that Accordia Golf's shareholders rejected as being too low or at more than 30% discount to its NAV.





Putting this figure in perspective, a more recent development was the sale of Accordia Golf Trust's parent to MBK, a Korean private equity firm, in a deal that valued the parent at a whopping 60% premium to NAV!

If we give this a moment to sink in, it would seem that Accordia Golf Trust has been hugely undervalued by Mr. Market.

It reminds me of the time when Saizen REIT was able to sell its assets at a premium to valuation.

It reminds me of the time Croesus Retail Trust was sold at a premium to valuation.

To be sure, income investors should be concerned with the stability of Accordia Golf Trust's income distribution as it still has quite a bit of membership deposits which have yet to be claimed.





By my estimate, if redemption remains elevated as seen in the last financial year, DPU could stay at about 3.8c to 4.0c a year and it could take about 5 years for this to be fully purged from AGT's books, all else being equal.

Of course, if redemption should be even higher in some years, DPU could be even lower and if redemption is lower, DPU could be higher but, eventually, membership deposits should be fully redeemed.

This matter of membership deposits is a legacy issue and once they have been fully redeemed, it will no longer be a drag on AGT's DPU but, realistically, it would take some time before this issue is all in the past.






Some might remember that I put forth one reason for reducing my investment in Accordia Golf Trust late last year as the worrisome uncertainty surrounding its loans.

However, they have since managed to refinance their debt with a new 5 year loan and with a lower interest rate to boot.

This is very good news, of course, and has provided me with the confidence to accumulate as Mr. Market remains pessimistic about AGT.





There is intrinsic value in Accordia Golf Trust and once all the membership deposits have been redeemed, all else remaining equal, we could see DPU at around 6c or higher again.

I think a prospective distribution yield in excess of 10% is pretty attractive, especially when we remember that AGT's gearing is relatively low.

We just have to make sure we pay a low enough unit price for AGT.

Sometimes, I forget but I try to remember what Buffett said before:

"Have the purchase price be so attractive that even a mediocre sale gives good results."





The advantage of being a retail investor and not a fund manager is that we only have to account to ourselves.

Unlike fund managers, we don't have to worry about dealing with investors who might only be interested in seeing their investment increasing in unit price, quarter to quarter.

Our actions are not motivated by a need to appease other investors.

In this respect, retail investors are a fortunate bunch and we should not forget this.

However, remember not to ask barbers if we need a haircut and, of course, nobody cares more about our money than we do.





I remind myself from time to time that all investments are good at the right price.

Once I have identified an undervalued investment, and it should preferably pay a meaningful dividend, I buy some.

So, what did I do?

I bought more Accordia Golf Trust at between 52 to 54 cents a piece recently.

Now, all I have to do is sit back, relax and get paid while I wait.

Well, if Mr. Market makes me even better offers, I would probably be buying more.

Reducing investment in Accordia Golf Trust.

I am sharing this conversation which I had with a reader which took place in the comments section of my last blog on Accordia Golf Trust because I feel that it is important enough to share as a proper blog.





csky said...
Redemption of the deposit means the member has cancelled their membership. But non-members can still play but at a higher play fee.

The large redemption for FY17/18 was unexpected as the previous years’ redemption averaged about 20%. They think it could be because this batch of redemption included 2 golf courses that had much higher membership deposit fees than other golf courses.

The cumulative amount of membership that has yet to be redeemed is shown in the dark grey bar on top of the chart. Which is 11,215 (JPY million) for FY17/18 and it is also reflected under liabilities in their balance sheet.

This membership deposit is an old scheme. The last batch of this old scheme is reflected by the grey bar of 750 (JPY Million) for FY18/19 as shown in the chart. So new members who join now, they no longer has to place any such redeemable membership deposits.





AK said...
Thanks very much for sharing this. :)

These old members who redeemed their deposits can rejoin as new members without having to make any deposit under the new scheme.

Realistically, we should expect deposit redemption to continue to impact distributions in future and, in time, cease altogether.





csky said...
Most welcome ;)

AK, all of their loans will be due in either August 2018 or August 2019. Is this normal? I am assuming they will try to refinance the loans, but it sounds like they are not giving themselves very much time. What if there is sudden financial crunch? And it certainly does not seem like they have enough cash to make repayment of the loans too.

Term loan A ($15,000M) and Term loan B ($15,000) are both due in August 2018. Term loan C ($15,000) is due Sep 2019. Term Loan A has already been extended once (from August 17 to August 18), no mention of them refinancing it again. The report does say they are refinancing Term Loan B with banks.





AK said...
Yes, I was a bit surprised that they extended the loan for one year only.

Now, together with the risk of membership deposit redemption, it looks like they might have too much on their plate.

Although I think that AGT can be a good investment for income, with all the uncertainties, to add to my investment, I would demand a lower unit price as compensation for the risk I would have to undertake.

With this in mind, I think it might actually be a good idea to reduce my rather big investment in the trust.





I will talk about this again in my regular full year passive income report next month.

Related post:
Accordia Golf Trust DPU plunged.

Accordia Golf Trust DPU plunged 32.7%.

I checked my Facebook account earlier this morning and was greeted by a deluge of messages regarding Accordia Golf Trust.

Alamak.

How like that?





Reader #1:
hey AK can i ask you something regarding Accordia's latest results? One thing I didn't understand was, why is the DPU down so much from last year despite the profit and revenue being higher?

AK:
Due to repayment of membership deposit.

Reader #1:
hm I see.
meaning more of its members are withdrawing their deposits, i.e. revoking their membership.

AK:
At this moment, I am treating this as a one off event.
Management said it is unusual.

Reader #1:
yeah probably a large number of it hit the due date for withdrawals or something.

AK:
Probably the case. 🙂

Reader #2:
Hi AK, like to ask you about accordia golf trust. 

In their recent results, they mentioned that "Total distributable income available during 1H FY17/18 was JPY 1,471 million, which was 27.3% lower than 1H FY16/17. 

The decrease of distributable cash flow was due to payment of borrowing upfront fee and unusually large repayment of membership deposit.". 

Any idea what the "unusually large repayment of membership deposit" refers to?

AK:
Members can call for repayment of membership deposits after a lock-up period of a certain number of years.

I am treating this as a one off event since the management said it is unusual.

If I have put all or most of my money in Accordia Golf Trust, this could be depressing.

Since I have a portfolio of many businesses generating income for me, I am able to look at this development with equanimity.

What now?

It is back to K-drama and MMORPGs for me.

Bad AK! Bad AK!




See slides presentation: HERE.

Accordia Golf Trust and lower DPU.

Reader:
Hey AK, what do you make of Accordia Golf Trust latest results? Looks pretty dismal, all important numbers are down. Any positives to it at all?

AK:
eh... you say leh?

Reader:
From the numbers I don't see anything good. But management says that tourism may have a positive impact in mid to long term
And they said there was bad weather, maybe the weather might improve. That's about all the good I could see from the report

AK:
I would ask if the dip in results is due to something more enduring.
If so, the decline would become a trend.

Reader:
True. But difficult to say how much is due to earthquake and bad weather. And how much due to fundamentals. 

AK:
You will have to make a judgement call 😉

Reader:
I have small position only so I think I'll hold for now , at least the dividend is good

AK:
If we are investing for income and if we got in at a lower price, this fits. 🙂


...unfavorable conditions during the year resulting in lesser operating days as
compared to previous year:
• 1H FY16/17: Earthquake in Kyushu (April 2016); Typhoon (August and September 2016);
Heavier rains (June 2016)
• 2H FY16/17: More snowfalls (February 2017)

See presentation:
http://accordiagolftrust.listedcompany.com/newsroom/20170525_183557_ADQU_RRL9A22VE4KR13RC.2.pdf

When we invest in Accordia Golf Trust, we have to be prepared for some possible fluctuation in revenue and I said this in 2015 too: 
http://singaporeanstocksinvestor.blogspot.sg/2015/11/accordia-golf-trust-dpu-of-232c-and.html

Buying Croesus Retail Trust and Accordia Golf Trust?

Reader:
I am very interested in your views on Japan. I don't have any investment in Japan because everyone tells me the population is shrinking and the economy is dead. However, you seem to be doing well investing in Japan. I regret not investing in Saizen. I feel like investing in Croesus and Accordia now. Any advice?

AK:
Nope, I don't have advice for you. You could search my blog for my views on CRT and AGT if you like. The related post at the end of this blog could be a start. Know that these are investments primarily for income. Know what you want and see if these do the job.

Throwing some speculative flavor into the spin here. Bad AK! Bad AK!

Related post:
(Added CRT at 78c and AGT at 51c.)

2016 full year passive income from non-REITs (Part 2).

UPDATE (20 Jan 17):
When I shared my full year results for non-REITs last year, I wondered if Religare Health Trust (RHT) might be privatised. Then, with Accordia Golf Trust's (AGT) sponsor being bought over by Korean investors, MBK, many asked what is going to happen to AGT? A reader, betta man, shared this with me:

https://www.smartkarma.com/insights/accordia-golf-agt-sp-high-conviction-family-office-favourite

There is nothing wrong with speculation as long as we know we are speculating. Me? I am quite happy to hold on to my investment.
-----------------------------------------------------------------------------

As promised, this is Part 2 of a very long blog post. If you have not done so, read Part 1: HERE.
Let us start this blog post with some gossip. Wah! Is Religare Health Trust going to be delisted?

You say, I say, they say. Hmm. ;p

Anyway, three big things happened in the non-REIT space for me.

1. A big thing was receiving a much larger than usual distribution from Religare Health Trust (RHT) which I initiated a long position in sometime last year at 88c a unit. The special dividend (which gave me a yield of almost 30% based on cost) came from them disposing a share of an income generating asset due to regulatory requirement. Including regular distributions this year, RHT has been a very rewarding investment for me. I am quite happy to continue holding on to my investment in the Trust as it continues to generate income. 
See this chat with a reader:

2. Another big thing that took place in the non-REIT space was the internalisation of Croesus Retail Trust's management. There was a rights issue because of this. I took up my entitlement and also applied for excess rights. The rights units were priced at slightly under 80c a unit (and will enjoy a distribution yield of almost 9%). The size of my investment in the Trust increased by almost 6% as I took advantage of the exercise.

3. The third big thing is the offer to privatise ARA Asset Management at $1.78 a share. This is likely to be concluded by the middle of next year and based on my entry prices, I would get to enjoy reasonably attractive capital gains of 35% to 78% although I would miss the regular dividends.

As I had a fixed deposit maturing and with the much lower interest rates offered by the banks this year for fixed deposits compared to last year (1.1% per annum at UOB for 13 months, for example), I decided to buy more ARA shares at $1.71 a share in late November.

I believe that this is possibly an arbitrage opportunity which could give me an "interest rate" of about 4% over a period of, maybe, half a year. 

It could be higher because ARA pays dividends twice a year and another payout could happen in April or May. If it should happen, I could see a DPS of 2c to 3c if the privatisation process is not completed by then.

Of course, to be realistic, there is a chance that the offer might not be accepted as I know some shareholders feel that the offer of $1.78 a share still undervalues ARA. 

In such an instance, I would be quite contented to hold on to my latest purchase to receive regular dividends (for a 3% dividend yield based on a DPS of 5c or about 50% of EPS) as I also believe ARA is worth more and that its shares should trade at a higher price. 

Delist or stay listed, I am happy with ARA either way.

Total dividend income from non-REITs in 2016: 


S$ 105,641.29


This translates to S$ 8,803.44 per month.

Apart from dividend income, regular readers know that I used to trade stocks more actively. Earlier this month, I revealed on my Facebook wall as well as the comments section here in ASSI:

Source: A wealth building strategy that has worked for AK.

Although I enjoyed some capital gains from a few trades this year (and the most recent trades being in DBS as its share price rose significantly for a few weeks), it is due to an emphasis on investing for income that has ensured further improvement in my financial health.

On this note, I will now say something about APTT because it seems that many readers were attracted to APTT by the relatively high distribution yield of 10% and bought into it. Now, many of them are worried because the unit price plunged.

If we know the value of a stock, we would know if the price makes sense. If we didn't know the value of the stock, we would never know if the price makes sense. If we don't know this, price movements would make us emotional.

I said before that APTT's past DPU of 8c was unsustainable. Although the management reduced DPU to 6.5c, I said that it might be more prudent to have a DPU of 4c which, I felt, was more sustainable. That was because 4c would be closer to APTT's EPS. 

At 37.5c a unit, I decided to add to my investment in APTT recently. I know what some people might ask and here is my answer: 

I don't know if the unit price will decline further but if it should, knowing what I know and all else being equal, I would probably be buying more.

Investing in APTT, we are not investing for growth. We want its income generation ability. If you thought you were investing for growth when you got into APTT, you might have the wrong tool. 

Know what we want to do and use the right tools.

For those of us who invested in APTT for income, ask if anything has happened which has damaged its ability to generate income significantly and, if something has happened, is the damage long lasting? Then, do what you have to do.

Know what am I going to say? 

Yes, if AK can do it, so can you!

HAPPY NEW YEAR!

And I hope you have found my blogs this year to be inspiring and helpful on your own journey towards financial freedom.

Let me know if I should continue talking to myself next year. ;)

LOL. From my FB wall (1 Jan 17).

Related posts:

1. 1H 2016 income from non-REITs.

2. Breadtalk, OCK and QAF.

3. Made $1m investing for income.
4. 2016 FY income from S-REITs.

Outlook for 2017 

(by OCBC Investment Research):

While the overhang from Brexit and the US presidential election is over for now, heading into 2017, we expect continued weakness in oil-related stocks, softness in the property sector and higher impairment charges for banks to be some of the factors that will dent investor confidence in the Singapore market. While interest rates are likely to head higher, we believe the hunt for yield is not completely over and investors are still likely to accumulate quality high-dividend stocks. We expect banks to report low- to mid-single-digit earnings growth, and the outlook for the residential property sector is still soft after numerous quarters of decline and with no clear pickup in demand or selling prices. The oil and gas sector is still saddled with refinancing issues as well as a lack of orders and earnings. The telecommunications sector is also facing the threat of a new player.

-----------------------------------------
Watch from the 22nd minute for the discussion on Singapore banks:

STE says to see crises as opportunities and accumulate.

I am happy to publish another blog post by a fellow investor and one of ASSI's more prolific guest bloggers, STE:

“Creative Destruction”
and
The Business Cycle

“Millions saw the apple fall, but Newton was the one who asked why.” By Bernard Baruch .

 “The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions.” By Seth Klarman

We have seen market move and swing viciously since mid of last year due to event such as “Yuan devaluation “ , “Oil and Emerging Market crisis “ , “ China’s Debts and Shadow Banking issues”  and the recent one “ Brexit “.

All these event has created huge market volatility and because of investor’s psychology swing together with these market news … we have seen the index swing up and down wildly.

One need to always remember that “"Psychological create 90% market”as quoted by Andre Kostolany.

Whatever things involving “people “ … it tends to be “ chaotic and messy “ , for me .. stock market looks like this :

Nowadays, Stock Market became more intricated and complex due to fast moving news by click of second and much intergrated / connected world by IT revolution in recent years.

News move in Nano-second and always being “magnify “to attract viewers’ attention or increase subscribers …

     

Some of the event may have long term impact on the market but some are just “ noise “ which affect the stock price in short term … but even for those major event , remembered that market always move in cycle and “mean reverting “ eventually .

Joseph Schumpeter, an “Austrian Economics “ coined the phrase of  “ Creative Destruction “ and also written great books like “ Business Cycle “ / “ Capitalism ,Socialism and Democracy “.

According to him , “Creative Destruction is the essential fact about capitalism “ and he gave example like “ blacksmith  being wiped out by factory , the car superseded the horse and buggy, and corporation overthrew by proprietorship “..

And by Wikipedia , according to Schumpeter, the "gale of creative destruction" describes the "process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one". If  you are interested on “Austrian School of Economic thought” , you may refer to this link ..   ^{https://en.wikipedia.org/wiki/Austrian_School  and further reading on works from “Austrian Group of Economist like}  Ludwig von Mises  and Friedrich Hayek .

Same for other crisis , eventually , people will need to move on and market will not even remember those crisis e.g Oil crisis in 70s , Asian Financial crisis , Dot-com bubble and the latest GFC caused by Housing bubble .

Look at above chart on Dow Jones since 1884 ,, market gone through many cycles and even with 2 “world war “ and various bubble & panic .  GFC in 2008 may become insignificant if we look at this chart in long term …

BUT ,,, one may argue that as investor ,, we may not have such longer time to go through the market …well , that’s fair enough !! One may need to look at shorter time frame and react to our own investment cycle / need accordingly.

For me , as per previous blog post , I will only use one chart  and react to it accordingly to adjust my portfolio allocation from time to time. That’s the “ Linear Regression Chart on market and Mean Reverting concept “ , by doing this , I hope to avoid buying high when market is in “euphoria “ and taking advantage on situation when market is in panic and over-react.

As rules of thumb , we must also avoiding those “highly speculative and  hot stock “ in the market and be realistic to our “ expectation of return on investment ”.

Also , as I mentioned before on the “Fallacy of Indexing “ … when we talk about long term index return of 8-10% … it is base on average  of very long time frame … in shorter time frame ,, index could swing by +/- 20-30% easily .

There is also “ survivorship “ biases on the stock component in the index… for those stocks who have destroyed by business cycle and lack of innovation (e.h NOL/ Noble ) been taken out from Index and new one being added . I guess this is also part of the process of “Creative Destruction “. When the old one being destroyed and disappear in the Index , the new one being added and continue to create value for the Index. 

“ Crisis = Opportunities “

If we look at  Singapore’s context ,,, market has also gone through many cycles with up and down … if one could take advantage on one or two of these crisis ,, it could really shortern our time to achieve F.I.R.E.

< I have not added the latest event on BREXIT ,,, it may turn out much more serious or may not in the list at all … it is anybody’s guess . I think>

< Credit goes to one of the bloggers who have created this table , which I have forgotten from where I got this >

For the past 20 years , market have corrected more than 9 times which have resulted negative return of -20% to -62%. This is to show that how often and crisis prone our market is.

“ Linear Regression and Mean Reverting “

My investment strategy for coming years remain the same …where I will take advantage when stock index gone down to 2500 level +/- and start to accumulate war chest again when stock rebound from that level .  Please ensure to keep some cash buffer if index went down to 2200 ( which is equivalent to crisis level in 97/00/08 ).

As mentioned earlier , market will be much more  volatile due to “flooded liquility “ couple with psychology effect due to “market NEWs ( noise ??)  “ .

Let’s tighten our seat-belt and ready for this “bumpy ride “ !!!

< Dividend update >

"Do you know the only thing that give me pleasure ? It is to see my dividend coming in …" John D Rockefeller

YES! This is most important event for investors who have invested for “passive income “ ….regardless of market volatility ,,, dividend income continue to flow in …

Total dividend collected for  1^st Half 2016 = $102,426 .  (my methodology of calculation is different from AK as I did not include the privitazation return from Saizen as “dividend “ ,, instead , I would treat them as “ return of capital “).

** Total dividend increased substaintialy in 2 Qtr 2016 due to more investment in 1^st Qtr 2016 on some of the blue chips by taking advantage of the market turmoil during early 2016 . Also, partly contributed by better div from Accordia Golf Trust.

Lastly , allow me to re-quote below which I have quoted before : by Warren Buffet in 1999

Stock have always come out from crises “Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”

After year 2000 , stock market have experienced another 2 major crises i.e Dot-com Bubble in 2000 and GFC in 2008 … but yet .. Dow Jones stand at above 17,000  while watching at the episode of BREXIT crisis unfolding .

Happy Investing and stay focus on your Long term Investing strategy, hope & wish all could achieve F.I.R.E soon!!

Cheers!!

---------------------------------
AK:
"What does F.I.R.E. stand for? Make a guess. I did and got it right! I so clever. Ya, I know. AK is so shameless! Bad AK! Bad AK!"

Related post:
STE's investment strategy.