1.5 Year Check-Point

It has been about 1.5 years since my decision to embark in early retirement (FIRE for anyone who knows about this).


Since the last time I posted about my portfolio, per the portfolio page, I have made some additional purchases to my investments.

I am currently behind both my investment and saving goals, so I will highlight a few reasons why and how I am going to adjust accordingly.


Firstly, I have made some entrances into Alibaba in the past few months, both at 172 USD and 143 USD, in addition to my original amount of 168.88. This has obviously not been great for my portfolio, especially since the current stock price is atrociously low for a company with such great returns.

Hence, I am buying more. As mentioned,  I will be investing in Alibaba till the end of the year, unless there are some significant and huge changes to their earnings growth.

The recent trade war has hit some of my stock quite badly. One particular one of note is Daimler, which has dropped by nearly 18% since my last two purchases. Some of this has been redeemed in terms of a decent dividend yield, so I will just maintain the level of the stock.

Design Studio was another stock that was hit pretty badly with their loss announcement. As much as I would want this to be a turnaround play, as per Peter Lynch's categorization, I got to admit that I went in at the wrong time for this one. The current price would be a better turnaround price than anything, though I would recommend people against going in with a large sum.

Barclay's is another long term dividend play that I foresee better returns with, what with the return of volatility in the market being ideal for investment banks overall. I am also holding long term on this one.

BUOU Fraser's is a consistent dividend play and will be something I might add on to in the coming months to tide through this volatile times. It's high occupancy rate is ideal for tiding through volatile changes in the market, providing a good and steady source of income.

Ah, Alphabet. Recent reductions in revenue GROWTH as compared to analysts' prediction has meant that the stock price has dropped a few basis points. Not concerned about this, as I am still seeing it as a good play. However, the current trade fears is evident in the stock price, and I will look into purchasing more of this after I am done with my Alibaba purchases of the year.


Savings

So far, I have been trying to save 10% of my salary as liquid cash, so as to provide a safety net for any extraordinary purchases and also as an umbrella in case of any unexpected unemployment (as unlikely as it may be).

My spending has been increasing due to a few responsibilities I have taken up at home and also due to just spending creep overall. I am looking to reduce this especially in terms of taking grab and eating food out. Since my insurance has been paid for the year, I am still looking forward to the bonuses and hopefully a pay raise next year that will be in line with my goal to retire young.

Possible adjustments

Currently, in spite of the temporary drop in my stocks, I am still okay with the overall returns since I started investing. I am taking this drop in the market as an opportunity to buy and hold stocks that I couldn't have gotten just a year ago, and will utilize it accordingly.

Cheers everyone.

A commentary on leveraging REITs with loans

I recently took a look at another blogger that utilized Maybank's 2.88 percent yield loan to leverage on REITs. The idea, in essence, was borrowing cash using the yield loan mentioned above to obtain dividend yields from REITs that will allow one to pay back this loan while accumulating the remainder as fine, hard cash. This blogger had loans in the hundreds of thousands (good lord) making use of this strategy.

Using Mapletree North Asia REIT as an example, one could get a dividend yield of 6.7%, pay off the 2.88%, and be left with a "free" 3.82% yield on your loan amount. That is in essence, making money work for you when you don't even have money.

In theory, that sounds like a fun and dandy idea, so I actually had a discussion with others about this.

Firstly, we have to find out the logic of why a bank like Maybank would be willing to loan out their money for you to leverage, instead of just buying these REITs themselves.

Most banks are regulated in ways such that they are unable to convert all the liquid cash they have into assets, due to certain financial regulations, that while differing in each countries, tend to set a certain percentage of debt to their equity in the form of a capital adequacy ratio. In essence, they are prevented from essentially throwing all their cash into REITs, so it would make sense for them to just loan it out to us poor souls, and just kill us with interest.

Benefit of leveraging in this context

Let's face it. That 3.82% yield is pretty good, considering that it is based off money that you don't own, and the leveraged amount could be 2 times larger than your initial capital ( had a call with maybank but honestly forgot what was the minimum margin ratio required).

If the REIT one purchases appreciates in capital gain, it can also be quickly sold off for extra cash on top of the "free "3.82%".

Now, what are the risks then?

Risk(s) of leveraging REITs

Firstly, 2.88% is pretty high. The potential upside may not necessarily be justified by the risk one takes when entering these positions.

Maybank, and other institutions that provide this service, retain the right to select what REITs they will allow you to purchase with the leveraged loan. This also means that at any time, if they find that the REIT no longer fulfills the criteria for their AAA rating ...
They will just remove it. What this means is that the financial institution now has the right to ask for their money back. In the event that you can't cough up the cash, it will either use the cash that you have to hold in the margin account (per the ratio) or if you are using other equities (other REITS as an example) to leverage off on, to pay for the outstanding balance. This will be on top of you holding a sub-AAA rating REIT, which would most likely be due to it suffering from some management issues.

Essentially, what this means is that one takes on the risks in two ways : the risk of the REIT's capital value dropping, and also being forced to sell/liquidate equities and cash to maintain the margin call.

Not a fun thing to happen.

Which brings us back to the other blogger. I noticed that he hasn't been posting for awhile now, and got curious about some of his/her holdings. Some of the REITs he has bought has depreciated nearly 50% or more in value. The margin calls triggered were probably not fun.

Conclusion
The main essence of this is that in investing, unless one goes for the Singapore savings bond, there is no risk-free option.  It is more about taking risk proportionate to one's expected returns.

If one wishes to utilize this, it would be prudent to look at the safest REITs, instead of just the ones that have the highest yield. Also, the amount leveraged should never be a large sum.

On the topic of failing

More a personal thought than any.

I recently have been going through some difficulties at work and also in my personal life. It was not fun to check on my stocks and see a huge drop either. Sometimes it feels like my goals are not being achieved as much as I want them to be.

Such is life though. Last year, I had a cute little nephew joining the family. Today, my brother in law sent a video of him trying to stand up and walk. He would take a few steps and proceed to fall flat on his face. With my brother-in-law's encouragement, my nephew smiled, picked himself up and continued trying again, taking a few more steps every single time, and finally walked to his dad.

What happened to failing and trying again. Isn't that how we learn?

I need to remind myself of that, both in my life's journey and my financial goals, to learn from my mistakes and to be better.

Reminder to buy the boring ones

Stocks can be exciting. Who would not want to buy Amazon and watch it climb with its stellar growth? Autonomous vehicles, so exciting (yes I am shooting my own foot here.) Netflix and chill anyone?

In all seriousness though, I have to remember one of Peter Lynch's adage here. One must remember that many a time, the most boring companies are the ones that can earn the most. I am looking into my portfolio again to see if there are better and more boring stocks to buy. Excitement into stocks tend to drive up prices, whereas the sheer boredom of what a company sell can often times be perfect; Boring companies are honestly what earns money a lot of the time, and still keep on the down low while doing so. One then can swoop in and hopefully get a ten bagger.

I have to remind myself of that too.

October Updates

The past few days has been a terror in terms of the swift downslide of stock value. My portfolio was hit pretty hard, especially with the foreign exposure from Alibaba, one of my favorite stocks.

Alibaba had dropped from a high of $210 to an astonishing low of $143 yesterday, causing the overall portfolio of my stocks to drop significantly. I wouldn't deny that it stopped me in my tracks for awhile.

However, I remembered the old adage to buy when others are fearful, and looked into Alibaba again. While there have been some changes that might affect its rockstar growth, the stock value at such a low gives a great opportunity to enter into it again. I have increased my shareholdings there by 33%, and will buy perhaps even more once I have more holdings. Should there be an even bigger downturn, I will take the opportunity to load up on Alibaba for the rest of this year, as previously mentioned.

Other consideration for purchases are adding into Fraser's, and into Design Studios. I still believe that Design Studio is a great play going forward, but I would rather add more into Alibaba at the moment.

Cheers.