Friday, January 12, 2018

"Jan 18" - SG Transactions & Portfolio Update"

No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
Fraser Logistic Trust
Ho Bee Land
ST Engineering
EC World Reit

I'm excited to begin the new year with some new addition to the portfolio.

The market has been somewhat kind in this January where it has only gone in one direction and the portfolio also benefited a little from it.

If this is a preview of what's going to come for the next 11 months, then we can really see some serious wealth building there. Of course, if the market keeps valuing the company upwards, there's a serious chance I might cash out and look for other opportunities. But all else, I think they are good enough companies to keep for the longer term.

This month, I have accumulated more on Vicom for 1,400 shares at a price of $5.77. I thought they still represent a decent proposition for an alternative fixed deposit given that their vehicle outlook prospect is improving and I think the decent yield of 4.6% meanwhile would keep me happy in the bay given the lack of other options in the market.

I have also added EC World Reit, a new addition to the portfolio, for a small position of 20,000 shares at a price of $0.77. The Reit is currently headed by Alvin, someone whom I worked with previously and I've known him for a strong and strict personality who doesn't tolerate nonsense. The Reit has an auto reversion uplift to the master leases and are a proxy to the strong e-commerce growth in the China sector. They are currently yielding a decent 7.6% based on my entry price so I'll hold and monitor meanwhile.

Net Worth Portfolio

The portfolio has increased from the previous month of $613,516 to $615,330 this month (+0.01% month on month; +26% year on year).

It's still relatively early days so I am not expecting businesses to flourish overnight and things to change so fast.

It's another round of reporting season to look forward to so it's back to reviewing of business as usual.

Thanks for reading.

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Sunday, January 7, 2018

Debunking The Rule of Thumb About Emergency Funds

It's been quite some time since the last time I talked about something that is related to personal finance so I think it's about appropriate to revisit them in the early days of the year.

The topic related is about emergency funds and it is right at the heart and foundation of personal finance.

Often, we hear about the internet or professional consultants who preach about how importance it is to keep at least 6 months of our living expenses as emergency funds before we can start investing and growing the rest of our funds.

In this post, I am going to challenge that rule of thumb that it's not always necessary and propose that we create more awareness instead about our whole situation.

What is Emergency Fund?

First, we need to comprehend the definition of an emergency fund.

An emergency fund, in my definition, is cash that we've stashed up for savings for the sole purpose of utilizing them when certain events that has a low likelihood of happening hits our lives in order to maintain the same lifestyle that we are currently experiencing.

The key to note here is events with a low likelihood and is not something that we are expecting to happen.

If it is something that has a probability of more than 50% chance of happening, then it doesn't fall under this category and we should be taking action to mitigate the whole situation before it happens instead of bumping it up through emergency funds.

Purpose of Emergency Fund

The purpose of keeping an emergency fund is pretty straightforward.

If I am a sole breadwinner of the household and have the responsibility to pay for my kid's school and other home utilities, then it'll make sense that I should keep a certain sum of money in case life takes a back hit.

What I am debating is if the general rule of thumb of at least 6 months worth of living expenses is sufficient or insufficient in cases like that.

The higher the amount, the more this can be deterring to many people especially:

i.) They do not know how much expenses they are incurring each month;
ii.) They do not know in crisis scenario how much they can scale down;
iii.) The total sum of money can be pretty intimidating to save.

How do we determine how much is enough?

You've heard so many versions of emergency funds that you are confused and do not know exactly how to start.

The first baby step (step 1) is always about increasing awareness and this is a foundation that I believe is more important than keeping an emergency cash.

By awareness, it means that we are fully aware of the surroundings and events within our boundary and control. For example, if I am someone with a background history of illness, then instead of waiting for the event to take place, I might want to proactively seek help by regularly going for medical check-up. I can even take a further step by purchasing the required insurance plan to guard myself against the expenses I might have to pay for the illness. Once this is done, I am able to reduce the amount made for my allocation of health in the emergency funds wallet.

The next step (step 2) is about understanding how much basic necessities vs discretionary are contributing to our expenses.

Many people can quickly compute how much expenses they incur in a month but failed to comprehend where the expense allocation goes to. In some cases, they are left bewildered where the money they spent are being allocated to.

In order to start understanding our own expenses, it is important that we start tracking down our own expenses for at least a month. It does not necessarily have to be to the dollars and cents and if you're someone who's lazy like me, you can aggregate them by the expense bucket lists. For instance, under my children's day and care, it would include things such as diapers, milk powder, clothing, napkins, baby food, vitamins and things like that. Then I have the education lists which include the school and the other curricular activities.

The importance and objective of doing that is we create more awareness on the overall spent on certain buckets and can eliminate discretionary expenses that aren't necessary.

The last step (step 3) is about determining where the optimal strength are in your household and surroundings.

Married couples always have the advantage on this because we have an extra partner to work with on the strength.

For instance, in my case, I am more comfortable with income creation while my wife is more focused towards savings. In this case, we agreed that we would roll the plan out by investing my income and kept my wife's savings as part of our emergency funds. 

In another case, if you are someone who is stronger in the savings, it also helps that you reduce or eliminate debts in good times so you have more room to mitigate in bad times.

If you are someone who is good in investing, then you can diversify the income so you are less dependent on one.


Often, many people keep so many months of emergency funds without understanding the underlying reasons behind it.

It is seen as an excuse that the plans are well in place when it could just be a lazy excuse to hide certain weaknesses away.

Perhaps proactively reviewing our own checks is a good way to start understanding about ourselves which might just allow us to discover some missing parts that need maintenance before it gets worse.

Thanks for reading.

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Wednesday, January 3, 2018

Investor Sentiment in Today's Bull Market

The new year has started with its first green week and the general sense you get from the market is the people on the street are more optimistic, building up a strong end to 2017.

Sir John Templeton once gave a great quote that says "Bull market is born on pessimism, grow on skepticism, mature on optimism, and die in euphoria".

If you'd ask me which stage do I think the market is right now, I would think that we are at the optimism stage, which is usually accompanied by higher market valuation, higher interest rate, tightening of the monetary policy, increased spending, etc etc. The general consensus is that we are not at the dire stage of pessimism.

The 2D diagram below would probably give an easier visual of the general sentiments of where the maximum risk is during certain stages of the financial market.

If you are someone who is a beginner in the stock market, the chances are you would enter at the point of the optimism, excitement or euphoria because it is simply just too comfortable about listening to all the positive news and outlook out there. From a psychology point of view, it is comforting to do herd investing and follow what everyone is doing, without giving much thoughts about the downside you might be facing.

On the other hand, there are several people who falls under the category of FOMO and they become disillusioned by the fact that the friends and neighbors beside them are getting richer each day, upgrading gadgets, going expensive holiday, and spending more on items. These people waited and waited and ultimately surrendered by the temptation to join in, unconsciously not knowing that psychologically they are not ready and timing wise they are last to the party.

The diagram below gives a view from a 3 dimensional matrices which is simple but more in-depth.

It summarizes this perspective into a simple, unified view of the effects of sentiments on different types of stocks and their valuation level.

The x-axis shows the different types of stocks, from the safest to the most speculative. I think it was determined according to the beta.

The y-axis shows the valuation metrics.

The different dotted lines show the hypothesis in the swing in sentiments during certain market conditions for different beta stocks.

The empirical theory shows that people tend to have high sentiment for low beta stocks with low valuation level and high beta stocks with high valuation level. The argument shows the more speculative the asset class is, the greater the valuation, the easier the push up and thus herd investing. 

Sentiments are higher but may not necessarily wiser.

In the risk based asset pricing models, CAPM, a stock's expected return depends on the risk exposure measured by beta, and the risk premium, which can be measured by the sentiments level on the expected return on the stock market as a whole. Interestingly, when sentiment is high, speculative high beta stocks have a lower returns on average over time.

Ben Carlson did a nice backtest theory on the US market where it shows the average annual returns on investors who invested at the high market valuation high sentiments level across from 1945 until 2017.

The idea is that if you have invested in lower valuations, the chances of you making a higher returns will be more likely in the future. This rhymes with the idea that money is made when you are buying, not selling and that's because when you pay for something that is expensive, the return on investment will be a lot lower if we average that out.

The converse is also true.

If you are buying at a low valuation, then you have more protection in the form of margin of safety that any doomsday scenario will be covered by your cheaper entry. Hence, the likelihood of a higher ROI is more likely to happen.

While the market can go higher with each optimism, it really depends on how ready we are mentally and psychologically to face the battle when it comes someday.

The general sentiments of the market is definitely high, and people are expecting a higher return. It might just come to bite back someday, not when the least you expect it.

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Saturday, December 30, 2017

Things I Look Forward To In 2018

With just over a day before the new year, I think it's about time to sit back and self reflect about what are some of the things that I expect in the new year 2018.

I wanted to originally do a target to achieve in the new year but quickly changed it afterwards because not everything is a target. Some are events that will just happen with the flow of time.

1.) Achieve a portfolio target of 10% returns

Since this is a finance blog, I think it is still something which I must put in mind at the back of my envelope.

I'm still looking to design for a portfolio that can achieve a long term portfolio of about 10% returns. I don't want to really stretch the returns to anything higher by taking unnecessary risks so the strategy is to go for lower beta returns but heavier on capital preservation.

I'm somewhat gingerly confident the current companies in my portfolio can deliver that for me.

2.) Achieve a savings rate of 20%

This has been kept the same for about 3 years in a row now and I'm not keen to change on this aspect and gungho the increase.

I am comfortable with keeping the savings rate at about 20% or $20k capital injection, whichever is higher, and then just allocate the rest of the expenses into building more experiences and nurturing the kids empowerment.

3.) Celebrating 4 years of parenthood

My elder son, Big O, turns 4 next year while the younger one, Small O, turns 1.

It has been a life full of experience all these years with the ups and downs and I would attribute it to another separate posts sometime later.

We have started to send Big O for some kind of enrichment which we think would benefit him in terms of his social skills.

We are also starting to send our younger son to a kindermusik class from next year just to get him exposed to different kinds of music instruments, play and stimulate his right brain before the routine school activity tries to take over the left brain.

4.) Experience the world outside

We belong to the miles camp when it comes to credit card and we typically accumulate around 200,000 miles in a year which also means we are able to cover our long trip travel as a family assuming we take 2 trips a year.

On the shorter trip, we typically try to save on the costs by taking budget airlines.

Already, we will be going for a half month trip in March later across Taiwan and we have plans later in the year to slow travel past Vietnam. When the kids get older, we'll spend our time exploring the Eastern and Western Europe in a much further away trip from home.

5.) Less movies, Less Writing, More Reading

I'm a person that is more visual which is why I have been enjoying movies more than reading.

Throughout the years, I have also attributed plenty of time in writing the blog so I may take some time off these activities to spend more in reading. I also think that slow reading stimulates my mind better and train my patience, which has not been a good strength so far.

6.) Learn a new language, meditate, and Yoga

I've always wanted to learn Spanish and it will be a matter of when not if I will pick this language up one day. I just don't know it yet if I will take it up in 2018, I'll have to figure out the time resources.

I'm also aiming to either pick up meditation or Yoga just to practice on patience and calming the mind. If anyone is interested, I'm good for partnership.

Final Thoughts

This is all events of what I am waiting for it to unfold in the new year and it is nothing ambitious yet really achievable things to look forward to.

I don't know if I'm at a stage where I tend to oversee things much easier or in a more leisurely manner because everything tends to fall in place quite nicely and I appreciate the things that have gone well so far for me and I don't take them for granted.

I hope every readers would have the same good year in 2018.

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Tuesday, December 19, 2017

2017 XIRR & Overall Performance

First of all, apologies for the lack of recent posting as I had just returned from a 2 week work trip overseas followed by a week of holiday thereafter back to back.

As we are winding down this year, I would like to take some time to do a self reflection review of the performance for this year.

While we still have a few trading days to end the year, I really want to summarize and close for this year so that I can already start preparing for the new year ahead, which promises to be another exciting year.

I took some feedbacks from readers when I wrote about the 2016 performance (Link Here) last year and I try to provide as much as I can.

I don't keep a lot of tracking myself personally because most of the information are stored in my personal profile at stockscafe so I'm dependent for most of the parts. 

This is going to be a rather long post, so please bear with me.

2017 XIRR

This has been a rampant year of the bull and we see most indices worldwide goes for high double digit returns which have increased investor's networth value quite considerably.

While the Dow and S&P have returned about 23% this year, our local STI index has also returned considerably well at about 21.81% this year. What this means is that if you are just holding the STI ETF in your portfolio, your returns should track the performance of the STI, which is an incredible good performance and one to be proud of.

Unfortunately, I am one of those who did not perform better than the market as I trailed the index. My returns for this year is still a respectable 19.67% based on the last check of stockscafe as I wrote this post. I reckon the last few trading days is not going to be a lot of adjustment.

In the above tracking from stockscafe,  I also do not include the amount of cash held for investment. But if I were to take them into account by using the weighted average methodology on the percentage of cash I hold across the months, the returns for 2017 would drop to 17.45%.

Personally, I know most of my circle of friends who had done incredibly well this year so a lot of credit has to be given to them and a good job well done. If you are one of those who did not perform so well compared to the index, I just want you to know I am part of that category and we'll just have to work harder.

Fortunately, I am pretty contented and I do not mind trailing the market for as long as I am on track to meet my personal goals.

On an annual compounded returns since I started investing in 2011, my average annual return is about 17.81%. Again, this does not include the cash component portion and if it were to be included, the returns would further drop. But I am lazy to track all of that now.

On the other hand, the performance of STI since 2011 until today has been about 4.9%. So it's really not a bad thing to be just holding the index and staying vested for a long period of time.

Top 10 Profits Based on % Gains (2017)

This will be the very first time I'm analyzing it this way, which is going a little deeper into what actually contributed to my performance for this year.

As you can see from the table, I actually made some pretty crazy returns from a percentage gain point of view.

Sabana investment in the earlier year (Link Here) came out top of the notch with 53.2% return after a short holding period of 3 months. 

Micro-Mechanics was not too bad coming in second at 48.3%, but I'd be kicking in my head knowing that I could have made 100+% returns have I kept it for a while longer. This year was the year of the semi-conductor and I am kicking myself for that miss opportunity which I should have had with MM. This was a good lesson of keeping the winner in an opportune time when it matters.

Cosco, Jadason, UMS and LMIRT all contributed well too on this aspect.

The point I wanted to make about showing this is that usually a high percentage gain does not necessarily translate into a high absolute gain. At times, they are often being used for content marketing,  boasting rights and misleading the public. If you see clearly from the gains I've made on the high percentage gain, they are all small absolute amount at best and contributed nothing significant to the overall portfolio.

Most of the gains are also realized with shorter time frame, which means I locked it in as soon as possible. This could be for various reasons.

There are also a few people who've asked me if I am invested in cryptocurrency and the answer to that is I do not. 

Top 10 Profits Based on Absolute Gains (2017)

Other than analyzing it from percentage point of view,  I also try to look at it from an absolute gain angle.

This is the part that actually matters more to the portfolio.

The top 10 absolute gains are the stocks that "moves" my networth and it is vital to the portfolio. 

This year,  most of my absolute gains are coming from FLT,  Guocoland,  CDLHT and Ireit.  These top 4 contributed almost 80% of the gains.

Having a bull year really helps to push the market and hence valuation higher.

Top 10 Loss based on % Loss (2017)

I'm going to be transparent with this because I believe there's always something which I could learnt about from this exercise.

Like almost anything in life, I'm going to have the good and bad things so it is now time to detail on the red side.

Comfortdelgro took the number one position in unrealized losses so far and it has been the biggest drag to the portfolio for this year.

It started with me taking a convincing look that the market was pricing it wrongly when it first dropped from $3+ to $2.40+ and that's when I started to believe it looks like a value steal. Obviously,  things start to turn for the worst and have gone south further. If there was anything I could learnt from this is that I didn't act fast enough to cut first and relook at the whole thesis again. Anyway, I feel like the valuation is rather fairly valued at this point, which is why I'm still keeping it as a keep for now.

I managed to do that with Straco,  FEO, Sabana, Katrina and ISO Team and emerge much better out of it.  The first 3 ended up breakeven while the latter they still ended up in a loss,  the amount is very immaterial and I could have made another re-entry once I have established enough justification for a re-entry.

The other unrealized position loss is M1, which I think is still bearable. 

Ho bee is another positing which I am currently sitting in an unrealized losses but am looking to add more to the position.

Top 10 Loss based on Absolute Loss (2017)

In terms of absolute loss, my concentrated strategy means that I usually win big and lost big and I need to ensure the latter is not more than the winning.

Comfortdelgro, M1 and Hobee remain my largest loss to date and they are still in my portfolio list as I am expecting valuation to bottom out.

Networth Portfolio (2011 to 2017)

I do not grow my wealth the way a fund manager grows his funds.

I went through the stage where I am single, a fresh grad looking out for jobs, then getting married, having a kid one after another and then pursuing my master degree and so on. 

What this means is I do experience a volatility of income and it becomes clear to me that there are 3 levers in this life which I would contributed it most important in my life.

Much of the dependencies has to be accounted for when I started building up my career years ago when this becomes a lever for me to accelerate the path to a financial independence. What this means is the greater I can compound and leverage on this lever, the faster I can generate the capital and put it to good use. 

The other lever has got to do with the building up of habit for savings.

While it may seems pretty obvious that we need to spend less than what you earn, it is actually not that easy until we get that habit designed in our mind and body. You'd be pretty surprised to find that there are many people who spent most of their income and left with no savings at the end of the day.

The final lever is our ability to compound the money through investing. This is done through building up years of competencies in the area of interest where we would excel most and the experience accumulated over the years would count over time.

All things equal, crazy amount of capital + high savings rate + great compounding = financial stability

I believe for as long as we excel in 2 out of the 3 levers, we can be successful.

There are different bloggers who accounted for different ways to compute their networth. My good friend, LP from Bullythebear shares his not too long ago here.

For me, it includes pretty much my equity portion and cash for investment.

I do not include my emergency funds, home equity loans, CPF, gold, other currencies, insurance and 1 month of working capital use. I also excluded my wife and children's portion in the investment as I wanted to track them separately.

I've been using this way of computing my networth since I started this blog, so I'm more comfortable with this.

As much as I had trailed the market returns for this year,  I still think 2017 was a successful year for me as not only my networth continue to increase,  but this comes at the back of higher expenses this year (second kid,  hospital fees and school tuition fees onboard).

I'd like to see that continuing into 2018 so the next post would probably see me gearing up for some of the goals and achievement I'd like to achieve in 2018.

Finally,  I'd like to wish everyone a great Xmas to all readers as we began winding down towards the new year. 

How has your 2017 returns been so far?

Thanks for reading.
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Friday, December 8, 2017

"Dec 17" - SG Transactions & Portfolio Update"

No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
Fraser Logistic Trust
Ho Bee Land
ST Engineering


We are finally at our final month of the year.

I also did some window dressing to the portfolio going into 2018, knowing that I will be busy in the month of Dec. In fact, I was just back from work traveling this week and will be flying again for holiday next week, so I think this will be my last portfolio update for the year before I round it up with my overall xirr portfolio return updates after I come back from my holiday.

From portfolio movement, you can see that I trimmed away some of the companies such as FEO, Straco and Sabana Reit out of the portfolio after their recent financial results which does not meet my expectations.

For Straco, the untimely cut in their visitors arrival due to limit on their Xiamen Aquarium means that growth expectations will need to be reconsidered again. There are still expectations about Straco M&A some time in the future but I decide to allocate the funds elsewhere.

For Sabana, their recent strategic announcement news meant that I would need to reconsider the thesis, especially nos that they are restructuring the organization with new management and faces so I have also decided to allocate my funds elsewhere. 

I added more Ho Bee Land into the portfolio as I believe this is still a nice sector play which has not been fully appreciated by the market yet. Going into the commercial sector up cycle, I think Ho Bee will benefit massively for the next few years, and with more cash in their hands, I think another acquisition in the UK is on the table. 

I also added ST Engineering after they had secured a record contract which would almost secure an EPS for this year and next of about 16 cents. Given their pattern of paying out almost 90%, a 15 cents dividend would translate into near 4.7% on this company, which I think is decent enough for my grade equity bonds. 

I also added more Comfortdelgro after they plunged into recent 52 weeks low. This is a company which I am still comfortable with its value and proposition so it's a slow add for me as they get cheaper.

There was news about its strategic acquisition with Uber for the LCR stake on their rental business. Collaboration like this usually benefits the incumbent party more but without further detailed information, it will be difficult to distill if this is a good collaboration. On the surface however, it appears that it will result in more bookings for the Comfort driver since users are now able to book using Uberapps which means more revenues for drivers.

The portfolio ended the year with $613,516 which is down from the previous month. I've been struggling to keep up with the trend since the beginning of the second half of this year and the stagnant movement of the portfolio has mostly sum up the whole situation. 

In terms of cashflow,  I was able to add more to my position as I received my AWS this month and savings rate continues to be strong as I continued to allocate them into some companies that I believe in.

In my next update,  I will break down my overall 2017 xirr performance in detail with specific breakdown of the profits and losses in the company that I own and the lessons that I've learnt out of it from this year.

Happy holidays!  

Thanks for reading.
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