A simple way to a double digit yielding portfolio.

Regular readers know that First REIT is one of my oldest investments in my portfolio of S-REITs. 

One of my earliest blog posts said how this was an investment for keeps. 

That was in March 2010. 

Time really flies. It has been almost 4 years.
See:
First REIT: This one is for keeps.






Over the last few years, I made use of opportunities to buy more units of First REIT's. 

These opportunities were in the form of a rights issue and market corrections.
See:
Bloodbath continues and AK71 went shopping!
and
First REIT: Rights issue.






I became an investor of First REIT's in 2007. The price was 75c a unit.

During the Global Financial Crisis (GFC), I bought more at 42c a unit.

When it had a rights issue at 50c a unit, I took up my allotment and even bought nil-paid rights from unit holders who didn't want to fork out 50c a piece for their rights units. 

Those cost me 66c a unit in total.






During a fierce correction in 2011 which people called a bloodbath, I bought more from 74.5 to 77c a unit. 

It was a decision which I used Technical Analysis to help me in, with the belief that there was nothing wrong with the fundamentals of the REIT.


Some may ask why would I buy at those prices which were higher than what I paid during the GFC or rights issue. 

Perhaps, an old blog post will throw light on this.
See:
First REIT: XR and fair value.







As income investors, we are, no doubt, interested in distribution yields. 

With Q4 DPU coming in at 1.97c, the annualised distribution yields on costs now work out to be 10.23% to 18.76% per annum.


Although the unit price of First REIT has retreated from a high seen sometime middle of last year, sharing the same fate of all S-REITs' after a mention of "tapering" by Mr. Ben Bernanke, a unit price of $1.06 today is still 1.37x to 2.52x my entry prices.

Is there any purpose in sharing these numbers with you? 

Well, if we ask what did I do to make these numbers an integral part of financial security for me today, we will have our answer.


Although some might feel that I am revealing a secret, what I am doing is just sharing a process. 





There is nothing sacred about this. It is just the way I think:

1. Know our motivations. Are we investing or trading?

2. If we are investing, are we investing for growth or income?

3. Will REITs help meet our objectives?





4. What are the fair values of the REITs in question?

5. Fair values are most probably subjective but without any idea of fair value, we will not know when to buy and avoid overpaying.





6. Know our investment well and stay updated. Know the strengths and weaknesses. Know the benefits and risks.

7. If we are investing for income, we could still trade around our long position while staying mostly invested. This could enhance returns.


See? Nothing magical. 

Anyone can do this.

Now, some have asked me if they should buy into First REIT at the current price. 

Questions like this are always difficult to answer, for obvious reasons.

Personally, I always like to buy cheaper. 

So, I like to buy a good REIT when there is a discount to NAV and when distribution yield is higher, all else remaining equal.





First REIT's NAV/unit is now 96.64c.


Of course, if people are investing for income, finding the yield acceptable and the fundamentals good, they could initiate a long position in the REIT, bearing in mind the risks involved. 

Don't just focus on what is good. 

Know also what could go wrong and if it is acceptable to us. 

It is only natural that people would have different levels of risk appetite.
See:
REITs: When to buy?







Do the right things and the rights things will have a higher chance of happening for us.


So, is there a simple way to a double digit yield? 

Yes. Not easy perhaps but simple.




Related posts:
1. First REIT: Revelation.
2. Are you ready to come out on top from a recession?
3. Motivations and methods in investing.
4. 3 points in stocks investing.
5. The mystical art of wealth accumulation.

Kopi with Song StoneCold: Getting value out of everything!

Song StoneCold says:
I decided to embark on my path to financial freedom about 5 years ago. So, what inspired me to get started?

I discovered that no matter how hard I worked I would still be a stinking rat in the rat race. Looking at some of my colleagues carrying balls and backstabbing each other just to get a promotion and increment of about $200 bucks truly disgusted me.

Then, I reached a ‘tipping point’ and decided enough was enough! I needed to get out of the rat race!

I started reading thousands of books and attended thousands of seminars. Ok, ok . Maybe just a few hundred books and a few hundred seminars. All these were on investing and financial planning.

To cut a long story short, every single financial planning book advocated living with a budget, recording every single transaction, being frugal and bla bla bla.

Well, some even tell you to forgo Starbucks coffee! Now, imagine the money you can save after the compounding effect! Gosh! 

(AK's comment: Gosh! Talking about me, are you?)

Nevertheless, I decided to give budgeting a try. I tracked every single transaction, everyday. I tried to save money here and there. I was frugal and I seldom bought any luxury items or had a good meal at restaurants. What was the result?

PAIN!

I realized that it was not what I really wanted.

I want to have a decent lifestyle even before I am financially free, not a lifestyle of frugality, not to live by the ‘suffer now and enjoy later’ mantra’. I want to occasionally enjoy my caramel frappacinno at Starbucks!

Something happened 3 years ago that reaffirmed my thinking. My late aunt passed away at the age of 40 leaving behind a large sum of money for my uncle. She had been frugal all her life to the extent of dividing a packet of chicken rice for lunch and dinner.

In short, she tried to save every single cent possible. She didn’t even buy coffee at the neighbourhood coffee shop, much less from Starbucks. Mind you, she was not poor at all. She was earning a decent monthly salary.

In the end, my uncle used all the money and spent it on another woman. My late aunt's pain became his gain. Sad story. Lesson learned for me.

1) No point being too frugal. We need to enjoy life once in a while and use our money wisely 

2) Suffer now and enjoy later may not happen. Life is unpredictable and at any time we may just say bye bye before we can enjoy life. What is the point of being the richest man in the graveyard?

I am not going to splurge on everything but I decided that to keep a balance is the way to go. I need to enjoy my life while building my wealth through investing. Having investments which generate cash flow will give me passive income while growth stocks will give me capital gain. I will enjoy my life NOW and not later.

After some trial and error, I found that to achieve this I just need two simple steps. 

1) Get value out of everything.

2) Just ask.

It is possible to have a decent lifestyle if you make some small efforts. Below are some of the examples of how I managed to have a decent lifestyle

1) I have many credit cards from different banks. Now if you are poor in financial discipline please don’t try this. This is only for people who pay off their bills every single month. There are many ways different credit cards can give you quality perks. 

For example, Citibank Dividend Card not only gives you cashback for everything you spend on, it even gives you FREE travel insurance when you book your flights using the card. It offers you 10 percent cash back for your Starbucks purchases too.

Then, Maybank's Family and Friends’ card offers you 5 percent cash back at Watson and Guardian. These are the places we will spend money at anyway. So, why not get a better deal. Find credit cards that suit your lifestyle and apply for them. Just make sure you pay them in full every month.

2) If you are a bookworm like me. You can borrow books from the public libraries instead of purchasing them. Recently, I discovered that we can borrow ebooks from the library too. It is hassle free and reading ebooks from my iPad feels so good. If you need to buy a physical book, try bookdepository.com. It offers free shipping worldwide. 

(AK's comment: If you do not mind pre-owned books, they are usually cheaper to buy. Betterworldbooks also ships globally for free and every book you buy helps to promote literacy for the poor.)

3) Once in a while, if you decide to buy a luxury item, just wait for a discount. Be patient!

More often than not, there would be a discount in any shop sometime in a year. I usually wait for the Great Singapore Sale to buy the expensive items that I want. Use your credit card during this period and it often offers more discounts and perks.

If you want to attend a concert or seminar, just Google. There will surely be people who are selling their tickets at a lower price because they cannot attend the event due to some reason. Compare prices in shops and Google to check online.

When you are travelling, you can buy items from the transit area of Changi Aiport. I bought my iPad Air there and saved on the GST of 7%. Many shops in Changi Airport in the areas open to everyone offer waivers on GST too. 

These steps will save you tons of dollars while you continue to enjoy your purchases.

4) Car related expenses. I have no loyalty when it comes to petroleum companies. Which company offers the best price will get my business. This could be through some credit card tie-ups or discount coupons, for examples. Sometimes, loyalty doesn’t pay. We need to get value out of everything.

5) You can still watch movies at the cinema but do it during weekdays. It is much cheaper. You could get discounts with some credit cards. One credit card even offers you free popcorn.

6) Eat at your favourite restaurants during lunch instead of dinner. Lunch is generally cheaper. Again use credit cards to get better offers. Try to have only ice water. Drinks are the most marked up items in the menu. They are not worth it.

Next step is to just open your mouth and ask! You will be surprised how much money you can save by just asking for a discount, free samples, annual fee waivers from credit cards etc. There is no harm asking. If we don’t get it, just look for another shop and move on.

There are so many ways and these are just a few.

What I am trying to say is that it is possible to live a good life at discounted prices.

In the stock market, we look for under-valued stocks. Here, we look for under-valued items. One of my favourite quotes from Warren Buffet is this:

"Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down." - Warren Buffett.

Let us all enjoy a good life while we build our wealth at the same time.

Related posts:
1. 7 money habits of AK's.
2. Free shipping globally!
3. A modern day good life.
4. To be a happy peasant.
5. How rich is rich?
(... do not forget that being happy is more important than the pursuit of money. If we can be happy every day of our lives, we are truly rich.)