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.

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

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.

Year	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.