Friday, 24 June 2016

STI Investing Jun 2016 Update

The last time I updated my STI ETF actions were back in Sept 2015. Below is another update of my buying since then. Buying low sounds simple but it is not easy. But I'm quite satisfied based on the chart below.

Friday, 5 February 2016

Financial News Anecdote (Part II)

As I read the local Straits Times almost daily, it is not hard to come across articles giving forecast and some months later, read another conflicting forecast. Thanks to the internet age, digging up those old articles isn't that difficult.

Read Financial News with a pinch of salt...

(Part One can be found here)

Singapore REITS

Straits Times article headlined "S is for sour in S-Reit returns, says new report", (22 Jul 2015)
The views in this article are by OCBC Investment Research. The article talks about pending interest rate rise, high debt levels of REITS, and falling DPU growth, all of which will lead to loss of capital. Adding in dividends, the total returns will be close to zero. It also advocates "reallocation into high-end developers and real estate players" that are fundamentally sound.

Fast forward 6+ months later..
Straits Times article headlined "S-Reits are safe havens amid uncertainty: DBS", (5 Feb 2016)
S-Reits have outperformed the STI index and and real estate developers YTD. Their debt levels are  "manageable", and trading at "attractive valuations" They are expected to continue their "firm" performance in the near future.

China retail outlook

Straits Times article headlined "In China, online retail spells death for malls", (18 Sep 2015)
The booming e-commerce scene is putting pressure on China retail malls, exacerbated by the high supply of retail space coming into the market. Vacancy rates of the malls are rising all over the country. The article did provide a glimmer of hope at the last paragraph, saying the urbanisation should support the consumption growth.

Straits Times article headlined  "China's consumers leading the way up?" (4 Feb 2016)
There is a switch from an industry-led to a consumer-led economy in China. Retail sales are up 11% in December 2015. Foreign firms like Starbucks and McDonalds are poised to ride on the growth

Friday, 15 January 2016

The STI is falling!

Let's go back in time to 2002...

And in 2008, the worst crash since the Great Depression in the 1930s..

And the most recent crash in 2011..

It seems a no brainer to buy at the points circled in red, as STI just keeps falling. You don't know when the bottom will be reached, just buy blindly. Of course some planning is required as to how much you buy each time. A good guide can be found here.

Seems easy? What about now? Do you dare to buy? Or do you tell yourself the stories that is happening around the world today, like China slowdown, falling oil prices, rising interest rates? What about the past crashes, do you still remember those stories?

You might also tell yourself that this time is different. Of course it is different! Else the market won't crash if it is the same old story (think Greek debt crisis).

But wait, there's more... dividends.

STI ETF Dividends Dividend Yield
based on 2003 purchase price
Dividend Yield
based on 2009 purchase price
Dividend Yield
based on 2011 purchase price
2003 $1.60 $0.061 3.8% - -
2009 $2.50 $0.090 5.6% 3.6% -
2011 $2.70 $0.080 5.0% 3.2% 3.0%
2016 $2.70 $0.097 6.1% 3.9% 3.6%

If you have bought STI during the crash in 2003, your annual dividend yield has increased from 3.8% to 6.1% today, over the past 13 years. You would have got back about half your invested capital via dividends alone.

Finally, I must put out a disclaimer which is past performance is not indicative of future results. Investing is a game of probability, there is no certainty.

If certainty is what you crave for, you would have to settle for the returns of fixed deposits or Singapore Savings Bonds.

Saturday, 26 December 2015

The allure of Financial Advisors

I have to admit then when I first entered the working world, the experience of  sudden "huge" cash inflows monthly can be quite overwhelming. It is also at this stage where most of us will be targeted by Financial Advisors. After all, at that stage of our lives, we had few commitments, were eager to compound our wealth and probably had little or no Financial Literacy at all. The perfect target.

Then there is the feeling of exclusivity of having people managing your "wealth", advising you on which funds or assets to invest in. You are ok with paying a small fee for this service, thinking you are in good hands. Every once in a while, you might also receive updates or reports on the Macro economic situations, which uses terms such as "fiscal cliff", "monetary easing", "hunt for yield" get the idea. Sounds like they know their stuff.

But is it all good really? Well, I have the following questions you could ask yourself about this.

  1. Is the advisor a true friend of yours that you have known for many years?
  2. If the answer to the above question is no, is there a conflict of interest if the advisor's monetary gain is achieved by making you invest and maintain a sizeable investment portfolio, irregardless of the portfolio's performance? In other words, the advisor makes money irregardless of whether you make or lose money.
  3. Is your investment decision based on just a few meetings with the advisor and by him showing you some of the funds that had made money in the past?
  4. Lastly, the most important of all, did the advisor show you his company track records of how actual client portfolios, net of fees, performed in the past? AND benchmark the performance to anything at all?
By answering the above questions above, I believe most would have realised they are letting the advisors handle and manage their money purely by faith. Faith in that their investment portfolio will turn out well in the future. What is the basis of this faith really?

As Jon from BigFatPurse has said in the last few paragraphs of his post, Financial Literacy (the lack of it), compounded over time can lead to loss of tens or hundred thousands of dollars. One can no longer afford to ignore it because one "finds it too complex to understand".

Hope this article can inspire people to take some concrete actions towards improving their financial literacy.

Sunday, 20 September 2015

My own STI ETF investing update

Sometimes people asked me if I implement the POSB BCIP, which I advocate, and my answer is no.

This is because I know that I am conditioned to buy the STI ETF when it falls, but I cannot say the same for others who are new to investing (and usually these are the people suited to index investing). Below shows the different points at which I bought the STI ETF in 2015:

Although my plan is to invest roughly once every month, you can see that there were no purchases during mid April to end June. And there were 3 purchases within the span of a month in mid Aug to early Sept alone.

If the STI undergoes further correction, I'll expect myself to be buy more. So I do hope in the near future, there are opportunities to accumulate the STI at even cheaper prices.

Friday, 17 July 2015

Time to abandon the Permanent Portfolio?

I have invested in the (modified) Permanent Portfolio for slightly over 3 years now. And I'm considering abandoning it.

Don't get me wrong, it is not that I am giving up or that I no longer believe it works. It is because I have found another strategy that should give even higher returns.

Even if the Permanent Portfolio works as it should, it generates an average compounded returns of 9%. However, the other strategy generates 15% returns, based on backtested data as well.

As this strategy involves investing in US equities as well, and currently, the US market is at the 3rd highest CAPE ratio in the 130-year history (27.1 at time of writing), I am waiting for a correction to happen before I make the final decision. If that happens, I can also see for myself what happens to my Permanent Portfolio.

I'll wait...

Friday, 10 July 2015

Insurers Participating Fund Performance

I remember a few years back when buying insurance policies, there are two illustrations of the Cash Value of the policy, depending on the Insurer's Participating Fund (a.k.a. Par Fund) investment returns of 3.75% or 5.25%.

Currently, it seems the industry standard has lowered the illustration for returns of 3.25% and 4.75%.

As the the Cash Value of these illustration can only be realised only if the underlying Par Fund achieve at least those returns, I set to find out the past performance of the different Par Funds for the more common insurers.

First, I present the Par Fund's Expense Ratio, extracted from

2011 2012 2013 2014 Average
AIA 0.12% 0.13% 0.10%
Tokio Marine 0.12% 0.11% 0.10%
Great Eastern 0.21% 0.22% 0.23%
NTUC Income 0.153% 0.147% 0.160%
Manulife 0.17% 0.17% 0.17%
Prudential 0.27% 0.27% 0.26%

Next, I have collected the individual year performance of each insurer's Par Fund and obtained the following cummulative performance from beginning of year 2005:

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 CAGR
AIA 100% 101.7% 108.2% 114.9% 102.0% 115.4% 123.7% 124.8% 137.1% 138.4% 3.68%
100% 113.2% 130.8% 146.8% 121.6% 146.0% 155.8% 154.7% 171.0% 175.0% 186.3% 5.76%
100% 105.0% 113.8% 126.2% 112.0% 122.6% 130.7% 132.7% 145.7% 151.0% 4.68%
NTUC Income 100% 106.8% 118.3% 131.0% 116.5% 130.4% 138.1% 136.9% 148.6% 151.1% 159.3% 4.21%
Manulife 100% 103.5% 119.8% 131.1% 119.8% 139.7% 149.9% 148.5% 164.4% 162.8% 5.57%
Prudential 100% 107.4% 122.2% 133.0% 101.2% 124.9% 133.9% 134.1% 148.9% 156.6% 165.9% 4.59%