Investing in high yield Asian bonds.

Reader says...
I am in my early 40s, and do active investing on my own.

Recently I was contacted by an agent, who shared about investing in high yield Asian bonds.




I was initially sceptical but it seems that these are very different from mini bonds, and the failure rate has been historically low.

I am thinking of investing about 10% of what I usually invest in the stock market in these bonds.

The main catch is that the investment commitment is over 10 years (i.e. cannot sell for the first 10 years), which seems fine to me, and after that, I am able to decide whether to continue investing or not.

Would you be so kind to share your thoughts please? 

Many thanks.

AK says...
High yield bonds are a nice way of saying junk bonds.

They are junk bonds for a reason and you should be wary of the financial strength of the issuers.

It depends on how much risk you are comfortable with taking and if you think the potential returns justify the risk.




I wouldn't buy these myself and also because there is a strange thing here about not being able to get out of this for 10 years.

Whether regular bonds or bond funds, we are allowed to get out whenever we want, accepting whatever price Mr. Market should offer at that point in time.

10 years is a very long time and with no escape clause, it is either we swim or sink with the issuer.




Another thing is that with interest rates rising, if the issuer does not default, these bonds could be worth much less 10 years later assuming that interest rates become elevated then.

So, in such a scenario, if you do decide to sell the bonds, you might get back less than your initial investment.

Of course, the decision is yours.





You might want to read the blogs listed below and I hope they are helpful to you:
1. Why have bonds in our portfolio?
2. Nobody cares more about our money.

Have a savings plan and invest fearlessly!

Reader says...
Recently, an agent came to me asking me I should get a saving plan.

As she said that people can invest fearlessly is becos they have a saving plan (safety net) if anything to happen, there's still a saving account.





The saving plan is like pay for 5 years then after 15 years can take the money out with interest.

She says the money can be used for my baby education funds or my personal funds after 15 years.

What r your thoughts on saving plans?

AK says...
What is the guaranteed return?

See for yourself if it is worthwhile.

As a guide, Singapore Savings Bond (SSB) pays 2.16% p.a. guaranteed if held for 10 years.

This is a AAA rated sovereign bond.





So, this savings plan which the insurance agent is trying to sell to you must return much more than this to make it worth considering.

1. 15 years is a long time to hold. You will be sacrificing liquidity for a very long period of time.

2. Insurance company is not a AAA rated country like Singapore.








If you want a similar safety net, locking up some money in SSB for 10 years could be the answer. 🙂

(Unlike a savings plan from an insurance company, you will not suffer any monetary loss for early withdrawal for SSB although the returns would be lower if not held for 10 years.)

15 years is a very long time and in that time, there could be a stock market crash (or two) and I would rather have more money to invest with.

So, with this consideration in mind, putting the money in SSB is a better option for me. 🙂







To be fair, such products (i.e. savings plans) are useful to some people.

These people probably have lots of spare cash and are probably not interested in investing in stocks or hard assets.

These people might not be financially savvy and just want somewhere relatively safe to plonk their money.







If you are financially savvy, buy term and invest the rest. 🙂

Related posts:
1. Insurance weakened family's balance sheet.
2. 2.02% interest attractive? It depends.
3. Singapore Savings Bond good or not?

See this month's Singapore Savings Bond: HERE.

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.

Medisave voluntary contribution in 2018.

I updated a blog on the CPF-MA yesterday:

"For those under 65, the Basic Healthcare Sum next year will be S$54,500, up from S$52,000 previously, the authorities said."
Source:
CNA, 16 November 2017





And here are some comments on my Facebook wall:

Reader #1:
Interest $52k @ 4% = $2080.
total $54080
New amount $54500.
Still need to top up $420.

Reader #2:
4% interest will bring the total to $54,000.
Meaning we can only top up $250?





There seems to be some confusion as to how much we can contribute to our CPF-MA at the start of the new year.

So, I am doing a quick blog here on the matter.

If our CPF-MA has hit the BHS in 2017, the interest earned in 2017 will be transferred to our CPF-SA or CPF-OA (if our CPF-SA has hit FRS like in my case).






So, at the the start of 2018, our CPF-MA will have $52,000 only (i.e. the BHS in 2017).

This will allow us to do a voluntary contribution of $2,500 to our CPF-MA (to hit the 2018 BHS of $54,500) at the start of 2018 and get an "ang bao" of $100 for the year.

For anyone who is paying income tax, note that the recipient of a voluntary contribution to the CPF-MA will get income tax relief.

HUAT AH!

I like. You like?





Related posts:
1. Do online contribution to CPF-MA.
2. 4 ways to beef up CPF savings.

What is our goal and is debt unavoidable?

Reader says...
I am one of those silent readers following your blog and i greatly appreciate your thoughts and wisdom regarding a multitude of issues.

I am currently facing a dilemma of whether to pursue a post graduate education and i was wondering you could knock some sense into me :)




I am a 29yo engineering graduate who developed an interest in finance and was fortunate enough to make an internal switch to a business and financial analyst role within my company.

I was able to pick up the job requirements for my current role but i feel the need to gain more knowledge on the finance side of things and hence i am considering taking up a part time masters in finance.





I would think that this is a form of good debt by investing in myself and having this paper qualification could possibly open up more opportunities in the future but at the same time, this will put me $40k in debt and part of me thinks that this money could be put to use by income investing.

Could you kindly advice what your younger self would have done in this case?

Thank you for hearing me rant.





AK says...
It is very simple. ;)

Ask if this is a need or a want? 

If you need this, go do it even if it puts you in debt.

Having said this, ask if there is another way to get what you want without going into massive debt?

I decided that I needed some knowledge of business when I left teaching to go into sales. 

So, I did a part time diploma in business for about 2 years. (See related post at the end of this blog.)

I didn't have to go into debt to do it.

It probably cost me less than two thousand dollars to do the whole course back in those days.




I decided what I needed was knowledge and learning in a structured manner to speed up the process. 

I didn't need a prestigious degree for my purpose.

So, ask yourself what are you trying to achieve and if debt is unavoidable?
------------------

Although I try to avoid debt in life, it is not because debt is an absolutely bad thing.

Used judiciously, debt can be a good thing if it helps us to generate more income.

Always remember that even with good debt, it is important not to over-leverage because things do go horribly wrong like they sometimes do.





When do we know we are over-leveraged?

There is no precise measure of over-leverage but if we are unable to service our debt for even a short period of time (i.e. 6 months to 24 months) if we should lose our jobs, I would consider us to be over-leveraged.

Of course, this will bring us to another favorite topic of mine which is the importance of having an adequate emergency fund. (See related post #2.)






Related posts:
1. What should I study to be a good investor?
2. How much should we have in emergency funds?

Religare Health Trust to be bought for $966m.

Religare Health Trust's unit price spiked after news that Fortis is seeking to delist the business trust was released earlier this morning.

Surging to as high as 96.5c a unit, it was a 19% increase from the previous trading session in a matter of minutes.





"In an exchange filing on Wed morning (Nov 15), RHT Health Trust Manager Pte Ltd said it has received a proposal from Fortis to acquire all the sale securities held by RHT Singapore's wholly-owned subsidiaries, Fortis Global Healthcare Infrastructure Pte Ltd and RHT Healthtrust Services Pte Ltd.

"The trustee-manager has not declared a distribution for the six months ended Sept 30, as it has not received certain service fees and interest income on the CCDs from the relevant Fortis entities; Fortis is proposing for these to be paid alongside the purchase consideration."

Read article here:
Fortis proposes to buy RHT Health Trust's entire asset portfolio for S$966m





With about 810 million units in issue, if this goes through, a back of the envelope calculation shows that each unit could be getting more than a dollar.

Although it seems that I will be losing another passive income generator, I cannot really complain if it is a more than fair offer.

For those who are thinking of punting, please remember the risk involved.

If the purchase should fail, unit price would probably take a dive back down.




Related post:
Increased investment in RHT by 150%.

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.

How to turn $60K into $332K?

Growing our wealth can be a daunting task especially when our resources are limited.

I think of wealth building as plucking fruits from a tree.

Being a lazy fellow, I try to use as little energy as possible and would go for low hanging fruits.





Why climb higher up to pluck fruits and risk a bad fall when there are low hanging fruits?

I would climb higher up when my tree climbing skill has improved or if there is a safety net to catch me if I were to fall.

Know what I mean?

Hint, hint.

Nudge, nudge.

Wink, wink.





I received this email from a reader:

Hi AK,
Thanks for sharing your knowledge with us young folks.

Saw you previously at investx.

I just did this calculation last night.

I realized if at 25 years old, you put in 40k into your SA and have 20k in your OA. 





Then you do not contribute a single cent from then on. 

Based on 5% interest on the first 40k in your SA, then 4%, and 3.5% on your first 20k in OA, then 2.5%, at the end of 40 years, at 65 years old, 60k would have become $332k.

This is without doing a single thing. It's actually quite impressive returns.

Cpf is good haha.





“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”
― Albert Einstein

Correction by the reader:

The extra 1% from OA doesn't actually compound in OA. It is credited to SA. So for 20k in OA, the interest 1 yr later is 20500 in OA and an additional 200 into SA.

Furthermore, after 55yrs old, first 30k gets another 1%.

CPF has a lot of intricacies, but in the end, the magic of compounding is still wonderful!




This magic is very powerful!

Make it your friend!

If AK can do it, so can you!

Related posts:
1. Upsizing Oppa AK style!
2. $1 million in CPF by 65?

Short paid by Croesus Retail Trust?

Reader #1 said...
Could I do a check with you regarding Croesus' delisting. I believe all unitholders have received the payout. Did you receive an amount equal to $1.17 x # of shares you owned (which is what i received)?

Cause i thought that the payout should also include the distribution till the effective date of the delisting, but cap at 4.06cents?

Wonder if you know about this?

Thank you very much for reading my email.

Reader #2 said...
Like you, I have bought some Croesus and the cash proceeds of $1.17 per unit has been credited into my account yesterday. As the Croesus' dividend of 4.06 cts was for the 1 Jan to 30 Jun 2017 period, do you know whether dividend will be paid for the 1 Jul to 25 Oct 2017 period? I do recall reading that the latter dividend would be paid.

Btw, I have enjoyed eavesdropping when you talked to yourself about your passive investment in SReits!!! Thank you for allowing the eavesdropping.







AK said...
Croesus Retail Trust completed the sale on time.
They would have had to make a higher distribution to shareholders if they did not.
So, $1.17 per unit is correct.
A DPU of 4.06 cents was made earlier in September, if I remember correctly.

Related post:
Still making money from CRT.

Keeping in touch as I break from blogging.

I have not been blogging for 10 days and I have received several messages from readers regarding this.

I am sorry if I have caused some anxiety for some readers but don't worry, I am OK. Still alive and kicking.




Then, why have I not been blogging?

My blog will be 8 years old this Christmas Eve.

Yes, I have been blogging for almost 8 years.

Surprised? I am surprised too.

I know I enjoy writing and I enjoy sharing ideas to do with personal finance and investment.

However, looking back, I am still surprised by my blogging stamina.




Over the years, from time to time, for various reasons, I have also blogged about possibly retiring from blogging but I have always been able to bounce back pretty quickly from those moments.

What about now?

Well, I just felt like not blogging quite suddenly.

Is there another way to describe this?

Could I share the abrupt feeling through story telling?

What about this?

Suddenly, one morning not too many years ago, I was not able to read the papers as my vision was blurry and I realized that I needed reading glasses.



OK, not quite there but I think some might get the feeling of abruptness.

I am sure some of you might be able to do a better job of describing this feeling.

As for suddenly realizing that I needed reading glasses many years ago, it is a true experience.

People my age or older would know the feeling.

If you don't know what I am talking about, well, when you hit 40 (plus or minus a few years), you will.

You will get a reminder in the mail too because that is when our government tells you to consider getting Eldershield. ;p

Old age.

We can run from many things but not ageing.



So, am I really going to stop blogging this time?

To be honest, I don't know if this feeling is temporary. 

I don't know if I am only feeling a bit burnt out from blogging and that I need some time to recover or if this is a more permanent thing.

If I were to hazard a guess, I suspect it is temporary.

I am still checking my blogs for comments.

I still visit my Facebook page.

I still check my emails.

However, I might not be very prompt in my replies.

I still try to reply to the many messages and emails I get but if you don't hear from me, it could be because I have yet to read your email. 

I don't usually ignore emails from genuine readers.

So, if you wrote to me and did not hear from me for a prolonged period of time, chances are that your email did not reach me for some reason.



For those who want to keep hearing from me but are not following me on Facebook, go to my blog's left sidebar, find the Facebook link and follow me.

I have been updating older blog posts which I feel are still useful to share again on my Facebook wall.

So, you won't suffer from withdrawal symptoms.

Not to worry.

I don't think my time as a blogger has ended and I shall blog again. :)

Largest investments in my portfolio.

In February this year, I revealed the top investments in my portfolio with some indication of their values in dollar terms.

Understand why I decided to share after refusing for so many years by reading this blog:

Investment portfolio and market value.

Then, later in May, I updated the list as I had accumulated a pretty significant position in Centurion Corporation Limited from February.

Centurion has turned out to be a pretty good investment. Read the update in this blog:

Centurion's pricing power.






It is now almost the end of October and things have changed yet again.

1. The decline in QAF Limited's share price makes it a smaller investment for me. It is not as large as it was before. So, it is no longer in the list.

2. The sale of Croesus Retail Trust has been completed and income distribution has been made to shareholders. So, it is removed from the list.

3. The heavy accumulation of SingTel's stock, increasing my exposure by several times, pushes it into the list.






The updated list:

From $350,000 to $499,999:
AIMS AMP Cap Ind'l REIT

From $200,000 to $349,999:
ACCORDIA Golf Trust
SingTel
FIRST REIT

From $100,000 to $199,999:
ASCENDAS H-Trust
WILMAR Int'l
Centurion Corporation Limited






Although Centurion's stock price has gone up quite a bit and I have not reduced my investment, it isn't quite enough to push it into the $200,000 bracket.

Income distributions from my investments this year is likely to end on a high note due to bumper distributions from Croesus Retail Trust and Saizen REIT as both got delisted. 

I will blog about these towards the end of the year when the income from all my investments are received.

Related post:
1. SingTel and Netlink Trust.
2. Croesus Retail Trust.

The gain will outweigh the loss.

I try to put some effort into coming up with creative titles for my blogs and I am quite pleased with this one. 

Pun upon pun. Rather fun.

After attending "Evening with AK and friends", some overweight readers became more interested in losing weight than investing for income. Ha ha.

A reader just wrote to me to say he has lost 3 kgs since he started dieting almost 3 weeks ago. 

I am very happy for him but I also told him that weight loss will slow down over time and, if he keeps to the diet, when the weight loss stops, that is when his body is telling him that he is at his ideal weight which should be healthier.

He could cut himself some slack then. 

One cheat day a week? Why not?

I see many overweight people trying to lose weight by hitting the treadmills in the gym or jogging along the PCN. 

They shouldn't be doing that.

Doing high impact exercises wears out the knees and overweight people will put a lot more stress on their knees. 

This is why for people with knee pain, losing weight helps a ton (pardon the pun).

Lose weight through dieting first. 

Then, consider doing some jogging.

Of course, regular readers know that my preference is for stair climbing.

I climbed 50 floors last night, jogged for 15 minutes and still enjoyed an evening walk. 

Nothing too strenuous. 

Just keeping myself physically active.

How to lose weight fast?

Avoid carbohydrates. Out with rice, bread, noodles, cookies and other stuff like that. 

Definitely, throw out sugar. 

When we take carbohydrates, it should be in the form of vegetables and fruits. 

Most of the carbohydrates is in the form of fiber and will not be retained in the body. 

Of course, there is sugar in fruits but they are naturally occurring. 

However, in the early days of your diet, you might want to choose berries, green kiwi fruit, green apples and pears, for examples, instead of mangoes, pineapples, durians and papaya, for examples. 

The idea is to go for less sugary options. 

Or you might want to eliminate fruits altogether for the first few weeks.

Don't avoid fats. Take good fats like extra virgin olive oil, extra virgin coconut oil and butter. Our body needs fats to function.

You could supplement your diet with Omega 3 capsules too. 

This is something I do because I don't take fish everyday.

Don't buy low fat food because they are usually filled with other stuff to take the place of fats. 

Just look at evaporated milk being sold at the supermarkets, for example. 

I would buy the full cream version and not the filled or low fat versions.

However, to lose weight, avoid milk for a start. 

It is because of the milk sugar.

Take enough protein. The guideline for a sedentary person is 0.8 gram of protein for every kg of body weight per day.

Take enough protein to maintain our muscle mass. We want to lose fats but not muscles. 

If your body weight is 60 kgs and your lifestyle is sedentary, you need 48 grams of protein a day, for example.

A medium size egg gives us about 7 grams of protein, for example. A small egg weighing 55 grams, about 6 grams of protein.

If we throw out the yoke which contains all the nutrients and eat only the white, we will get about half the protein.

I eat the whole egg.




Being fat is the reason for many health problems and with a sedentary lifestyle it is very easy to become obese if we are not careful with food.

Some of my meals in recent days:

Spinach, eggs, butter and olive oil.

Chicken, coconut oil and spinach.

Salmon, butter and olive oil.

I always add turmeric powder and black pepper because they are good for the joints. 




They are supposed to have other health benefits too if you are into Ayurvedic studies.

The gain will outweigh the loss.

Related post:

Food bill grew but weight reduced.