Risk averse and putting money in STI ETF, REITs or stocks?

Reader says...

Have been reading your blog for some time now and it has been a great source of financial/investment information. Thanks!

I have always been interested in investing but had only started recently after reading your blog and some other materials. 




However, I'm not sure if I'm heading in the right direction and would like your opinion.

I am kind of risk averse hence have decided to start of my investing journey with ETFs, specifically STI ETF. My plan is to buy a lot every month and slowly build up from there. 

But recently I have been thinking if it is worth it to use my spare cash to buy ETFs or should i venture into other products such as REITS or stock. 




One reason for thinking this way is because I feel that since I'm only 28 (okay maybe not really that young), I can afford to invest in more risky products.

Another reason is because per my understanding, ETFs can be bought using CPF monies so it might make more sense to use it to buy ETFs and use the cash to invest in REITs.

I'm considering the following options and would greatly appreciate if you could give some pointers if they are viable. 





I have prepared an initial capital of about $5-10k which I could use and would be able to set aside $500/mth. 

It's not alot but hope it's enough to get started. :)

Option 1: Continue with buying ETF every month and invest the initial capital of $5k in REITs. Read your blog on Aims AMP Reit, First Reit and Saizen Reit and am considering these.



Option 2: Buy ETF with CPF monies and concentrate my investment in REITs and shares (eg SPH, SingTel, etc). Probably 50% on each. Any other recommended apportionment is greatly welcomed.

Option 3: Since my capital is not alot, perhaps it is better to concentrate my investment in blue chips stock and hold.

My purpose in investing is actually for passive income so please share if you have any better alternatives.

Lastly, would like your thoughts on using Standard Chartered online banking platform for trading. 

I am currently using it because of the no min commission fee but am abit skeptical because it would mean that I am actually not holding on to those products I am buying. 

Tried searching your blog on this topic but was unable to find any.

Sorry for the lengthy email and thanks for your time.

AK says...

Welcome to my blog. :)

I never blog about SCB's brokerage because I don't use it. I use Lim&Tan and Kim Eng. 

Frankly, I don't think the savings on brokerage fees is a lot unless we trade often. 

I don't want to say this in my blog because I know I would probably be flamed for saying it. ;p




Buying into the local ETF is a good idea for people who do not have the time or inclination to do stock picking. 


It allows anyone to participate in the health of Singapore's economy.

Long term investors who invest regularly should do reasonably well.

However, we should be realistic and not think that the STI will do as well as it did in the last 20 years or so.

A bigger portion of future performance could come from dividends.





Investing in stocks and REITs require more active management of your portfolio. 

I do not know if this would outperform or underperform the STI ETF.

However, this should beat inflation by a comfortable margin.

How you ultimately apportion your resources is up to you. I won't make recommendations.

However, you must be very sure that your methods match your motivations as an investor. 

You must sleep well at night. 

Peace of mind is priceless. :)

Related posts:

1. OCBC Blue Chip Investment Plan.

2. 13 blog posts for a session in investing for income.

3. Having peace of mind as an investor.
4. Fresh grads or graduating? Think financial security.
5. Tea with Solace: Getting ready for investment.

Position sizing, war chest, volatility, nibbles and gobbles. (What to do as the Yuan devalued and stocks crashed?)

I have been inundated with messages in various forms from readers on how depressed they are or how they are in distress over the state of the stock market. 

There is something I say from time to time and I am pretty sure I have said it in my blog somewhere before:

"Investing in the stock market is like getting into a relationship with another person. If we expect it to be only a bed of roses, don't bother. There will definitely be rough patches."





So, during good times, everyone is happy. During bad times, those who are still able to keep their sanity and even stay quite happy are the ones who have 

1. appropriate psychology, 

2. appropriate money management skills 

and 

3. appropriate investment allocation framework.

Recently, on FB, I shared how a reader accused me of not sharing important ideas on position sizing until quite recently.

I have more than 2000 blog posts spanning a period of almost 6 years and it was quite possible that the reader might have forgotten more than a thousand of my older blog posts.

Anyway, this was what I shared:

Chatting with a reader in FB, he said that I only started talking about position sizing last year. Why didn't I talk about it sooner? Apparently, quite a few people bought stuff I talked about and some "showed hands", if you know what I mean.


Only last year? I don't think so.







Anyway, I searched my blog's archives and went through the 2,000+ blog posts. I am sure I talked about position sizing from time to time in my blog's early years although I might not call it "position sizing".

Well, my blog was founded in December 2009 and here is a blog post from February 2010:


See: "It is, quite simply, a question of proportion."

Only last year? Definitely not.

This leads me to how I recently had two blog posts which were basically conversations I had with two readers who were feeling rather despondent. They were just two of several emails I received from readers but they are enough to give us an idea of how some investors might be feeling now.






In both of my replies, I advised that they might want to consider "Eating Bread With Ink Slowly."  (See related posts 1 and 2 below.)

I also received messages asking me what am I looking to buy, what am I buying now and whether I am nibbling or gobbling? Well, I have side stepped most of these questions. 

This is a blog, my blog. I am merely talking to myself but people follow my actions and I have been stunned before by what some actually did and, later, said.

Don't understand what I am saying?

Well, it is like someone who decides to get into holistic living but because eating right is the least demanding bit about holistic living, that is all he decides to do. 

Then, he picks what he likes about eating right and it becomes eating wrong. 





Why do some people who eat a bit of junk food now and then look healthier than he does, he wonders?


See what I am trying to say?


I invest primarily for income. Investing for income has provided me with a passive income stream during good times and bad times. It is very comforting and that definitely helps to keep me sane.

I have invested in some stocks which have not done as well in terms of their stock prices but if their businesses are humming nicely and if they continue to pay me, I am happy enough.





I have invested in some businesses which are facing tough times but because I have sized my investments in these businesses according to my own circumstances, even if it would mean a total loss, if it should happen, it would not be a financially crippling experience.

I know what I am buying (most of the time). So, I am quite comfortable even if their stock prices go down and, in some cases, I am even looking to buy more.

So, what have I been doing?

Well, I have been nibbling some of this and some of that. Why? 

With lower prices, some stocks looked more attractive. What if prices were to go lower? 

Then, they would look even more attractive or were you expecting me to say that I would go into a depression?

Of course, prices could go lower. However, prices could also turn and go higher.





Our job is not to anticipate what Mr. Market is going to do although I try to engage in a conversation with my schizophrenic bowling ball from time to time. 

Our job is to have a plan on what to do if Mr. Market should do something. So, if something were to happen, we act. 

We can prepare but not predict. So simple, right? Simple but not easy for many.

Let me see if I can throw some light on the matter.







In market corrections, we might want to nibble if we think stocks look relatively attractive. 

Corrections are defined as declines of less than 20% from the top and prices move higher after corrections. 

What we saw up till the last trading session could be a correction. So, selectively buying made sense to me. 

If prices were to recover and move higher, good for me.

What if it wasn't a correction? What if prices were to move lower and we moved into bear market territory which would be a decline of more than 20%?





Well, then, we would be glad that we had been nibbling and not gobbling. Then, we would be glad that a big portion of our war chest is still intact. 

Our nibbling activities should not have consumed more than a quarter or a third of our war chests.

In a bear market territory where there are plenty of screams and cries of blue murder, where there is plenty of blood flowing in the streets, this is where we might want to sit tight and wait for the dust to settle. 

There will come a time or a few when the quiet returns.







Then, we might want to go and take a look. Of course, if we still have some funds left for nibbling and would like to nip into the streets while the blood is still flowing, that is OK too. 

Hey, who am I to deny anyone their spirit of adventure?

In closing, I would say that for those of us who get heart attacks from seeing prices plunging, we are probably more into prices than values. 

It could also be that we have been bad with money management and used up all our war chests too early. 

It could also be that we have sized our positions badly and we are stuck with having too much of one bloody stock (from bleeding and not profanity). 

You know what I mean?





Whatever it is, look at a bad situation as a learning experience and try to do better henceforth.


Alamak, have I been talking to myself again? 

I am so sorry.

Related posts:
1. Feeling depressed about paper losses?
2. Anything uplifting to say as stocks bleed?
3. Nibbles, gobbles, values and prices.
4. Be comfortable with being invested.
5. Managing exposure in investment portfolio.

UOB, DBS, Citibank, HSBC, SG50 notes and the folders!

I was actually quite happy to wait until the fervour dampens before going to get my share of the SG50 notes. Then, a reader posted this on my FB wall:

OMG! Like this also can? Are the folders made of some precious metals? Is our country's budget in such a bad shape that we could not produce more folders? Must we get the President to unlock our national reserves to do this?

Anyway, not to take any chances, I took leave from work and went to a shopping mall where I knew I could find a few of the banks which are doing the exchange of notes.

I went to UOB. "Sorry, sir, we are out of the folders."

I went to DBS. "Sorry, sir, we are out of the folders."

I went to Citibank and got quite an experience.

Bank officer (and let's just refer to him as "BO" for the sake of economy and not because he was giving off some repulsive aroma): "Are you a CitiGold member?"

AK: No. I just want to change some SG50 notes and get the folders.

BO: Are you a Citibank savings account holder?

AK: No. I have a Citibank credit card though.

BO: Sorry, you must have at least a Citibank savings account to exchange for the SG50 notes.

AK: ....... (OMG! KNS! Simi LJ?!)

If I wasn't in such a rush to go to HSBC to try my luck next, I would have given the BO a piece of my mind!

I did a piece for my imaginary GE rally in the last blog post. This time, it is a piece for my imaginary speech in Hong Lim Park:

"The SG50 notes (and the folders) are produced by our country and Singaporeans have priority to get these. The SG50 notes (and the folders) are not owned by Citibank! They are here because of taxpayers' money!

"What do they mean I couldn't get the SG50 notes at their branches because of some house rules they came up with? I just had to produce my IC and they should allow me to get the SG50 notes!

"No wonder people call them "Shittybank". That's it lah. I am cancelling my Citibank credit card. They can stuff the card up their XXX where the Sun doesn't shine.

"If they tidak kamwan to do this, don't. Otherwise, make sure to do it in the right spirit and that is to serve all Singaporeans equally and whole heartedly.

"Simi Shittygold customer or Shittybank savings account customer then can be eligible. Pui! Just because of what happened today, I will never ever be a Shittygold customer!"

Crossing fingers, I went to HSBC. "Sir, please fill up this form and join the queue. Folders are still available."

Wah! WAH! WAAAAH! Happy like don't know what!

I saw people who were already holding two folders in their hands in the queue in front of me. So, it is true that some people just keep rejoining the queues. Alamak!

Then, I heard the teller advising one such person that as it was her second time collecting the folders, she would not be getting the folders the third time. Good on you, HSBC!

After today's experience, HSBC has been upgraded a couple of notches in "AK's Bank Ranking Table". Citibank has been downgraded to a level so low in a chasm that we would need a searchlight to see even a hint of them. DBS and UOB, ok lah, since this is SG50, I "pang chance" the two of you.

Hey, you say simi? Simi nepotism?

So, if you are a Singaporean, don't think you have plenty of time to get the folders. Go and do the Singaporean thing now.

30 minutes in the queue to get these at HSBC.

I just got this SMS from a friend a while ago:

Go and queue now. Now, I tell you. Now! Otherwise, you will have 50 years to repent.

Related post:
Could long queues for SG50 notes have been avoided?