Looking for a way to preserve capital and enjoy dividends.

I always say that I don't know everything there is to know. I am not humble. I am just being honest. I am also not a very good investor. Again, I am not humble. I am just being honest.

So, when I get very difficult questions, I like to share the questions and hope that I will learn from other people who might have answers.

Here is a message from a reader:

Dear AK,

Hope all is well with you. I attended the second chit chat session that you organised. If you remember, I was the one who asked you about Malaysian Ringgit. I had some back then and eventually I remitted it out to Sg in US$ as I hope I can make some forex gain eventually.

If I were to ask any relationship managers what to invest in, they will advice that I buy products like bonds or funds that give out dividends. If I were to suggest US bank stocks, they will suggest products like structure notes which band 3 bank stocks and gets too complicating for me. My experience with relationship managers have never been good and most of the time I ended up losing or ended in positive territory after taking interest earned into account.

I am thinking of putting it in stocks and since with US$, I can only either purchase stocks listed in NYSE /Nasdaq or US$ denominated stock in SGX. I have shortlisted a few US$ counters in SGX and am of course leaning more towards the first two that give much higher dividend and perhaps GM. I would love if I can hear your view and advice especially on HPHT.

At this stage, I don't want too much risk and am more into capital preservation and hoping to get good dividends. Please feel free to make any other suggestions.

SGX Hutchinson Port Holdings Trust 9% Mandarin Oriental International 4.33% Jardine Strategic Holdings 0-89% Jardine Matheson Holdings 2.68% HongKong Land Holdings 2.36% Dairy Farm Internationals. 2,64%

NYSE General Motors 4.58% General Electrics 3.5%

Source: Bloomberg.

I had meant to write to you weeks ago but was kinda pei she to trouble you and to pick your brain but I know you have always been most generous with your sharing and so I have finally done it ! Thanks for sparing me some of your time smile emoticon

Second "Evening with AK and friends" early this year.

My reply:

I am sure you gave the matter much thought before converting your Ringgit to US$. I am happy for you.

With regards to your question on what to invest in, I believe you are right to avoid bond funds.

I don't know about the other stuff you asked about apart from HPH Trust. You could do a search in my blog for this and you will see what I think of it.

If you like, I could extract some bits of your message to me and share them on my blog to see what others have to say. I don't know everything there is to know, for sure.

If you are interested in dividends and you want to make sure you are doing it properly so as not to put your capital in jeopardy, you might want to consider signing up for Dividend Machines. See: A second chance to create your own Dividend Machines.

So, if anyone has any good ideas to share, please feel free to do so in the comments section.

Related posts:
1. Second "Evening with AK and friends".
2. Nobody cares more about our money than we do.
3. HPH Trust: Storm clouds over a safe harbour?

Should I sell my HDB flat to fund my condo purchase?

All of us aspire to a better life, to give our families a better life. 

This is only normal.

In Singapore, part of this aspiration to a better life for many is characterised by a desire to live in a condominium with full facilities and security.

For HDB upgraders, they might wonder if they should sell their HDB flats or hold on to them as income properties. 

The case to keep their HDB flats for rental income has been quite strong in recent years due to the buoyant rental market and the very low interest rate environment. 

It would be prudent to ask if such a scenario is going to last?

I replied to a reader who has the same question:

AK said...

You have rightly identified the two main considerations which will help you in making a decision.

1. Interest rates have been very low for many years. 

They could stay low for a while more but they cannot stay so low forever. 

The very low interest rates of the last few years are abnormal. 

When interest rates normalise in future, the logical direction they will go is up.
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2. How much we get in rental income, if any, like many things is a function of supply and demand. 

The oversupply situation in residential properties is not getting any better in Singapore and it will take years to correct (and we are assuming that they would). 

The slower growth in the foreign working population is not going to drive rental demand for residential properties like it did in recent times.

Would you be able to rent out your 4rm flat in Sengkang for $2.2K a month (if you could find a renter at all) in 2017? 

I do know it has been getting harder to find renters in recent months. 

I don't think anyone knows for sure what it is going to be like in 2017.
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In life, I like to go for low hanging fruits. 

I try not to climb trees and if I do, I try not to climb too high up into the trees. 

I go for the benefits which I know I will be able to secure with greater certainty.
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 Leverage is able to deliver benefits to investors if used correctly and if the conditions are favourable. 

The last few years saw households in Singapore leveraging more liberally because of the very low interest rates. 

Things still look OK now but a recent study showed that if interest rates were to normalise and rise by only 2%, 15% to 20% of households in Singapore could become over-leveraged.
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An over-leveraged individual uses more than 60% of his income to service his debt burden. 

So, someone could be using just under 60% of his income now to service his debt burden but when interest rates rise, which they will sooner than later, all else remaining equal, he could end up using more than 60% of his income to service his debt burden.

Reading your email, I get the feeling that your preference is to sell your HDB flat when your condo is ready in 2017 so as to avoid paying a 7% ABSD (and also end up servicing a bigger home loan). 

Well, I would say to keep your ear to the ground and see how things develop in the next two years.

If the residential real estate market worsens and if interest rates go up much more, the case for keeping your HDB flat as an income property will weaken. 






We cannot project current day rates into 2017 and think that things will not change.

Leveraging to fund prudent investments is a good idea. 

Leveraging to fund consumption is generally a bad idea. 







Interest rates have been too low for too long and many people have grown a bit too adventurous.

Best wishes,
AK

Related posts:
1. Buy that second property and pay the ABSD?
2. Should we buy a shoebox unit in NE Singapore?