Since March 2009, global stock markets have staged a remarkable recovery. Around that time, the Straits Times Index stood at 1,512 points. Today the Singapore benchmark index is double that. It underlines the extraordinary resilience of global economies to recover, even after one of the worst financial disasters of our lifetime.
Bernakie signalled the eventual end of the cheap money, his move to cut bond purchases from US$85 billion to US$75 billion a month, investors here are bracing themselves for higher borrowing costs for big-ticket items like homes.
Region faces rising borrowing costs and stronger greenback.
So over the next few weeks and month, take a good look at the stocks in your portfolio. Decide which of those shares was the work of a genius and which was thanks to the bull market. Knowing which is which could help make you a better investor.
When company insiders buy, you should too. If you don't think the smart money is watching what corporate officers and directors are doing with their own shares, you don't know the smart money.
Insiders have access to all sorts of material, nonpublic information about their company's business prospects. They know the direction of sales since the last quarterly report; new products and services in development; the status of pending litigation; whether the company has gained or lost any major customers; and so on.
PUBLIC HOLIDAY PHOBIA
Do you suffer from a dread of public holidays because opportunities to trade have been cruelly snatched from you? Does the prospect of a long weekend fill you with dread rather than joy? Do you look at your calendar and wonder how on earth you are going to fill your down-time without a chance to fill a trade?
It is important to bear in mind that every trade costs money and trading frequently can quickly eat into your overall returns. Warren Buffett once joked that frequent trading is good for your broker but not good for you.
Consequently, it might be better to spend time looking for quality companies that you can buy to hold for the long term. The sign of a quality stock is one that you rarely need to monitor because you should have absolute confidence in its future. And the only time that you might want to look up the share price is when you need to buy more.
Investing, as Warren Buffett once pointed out, is so favourable to the investor that it is a terrible mistake to dance in and out of it based on the turn of a tarot card. But the proof, as they say, is in the (Christmas) pudding.
For example, over the last decade, Keppel Corporation has delivered a total return of over 500%, while SIA Engineering has rewarded shareholders with a return including dividends of around 380%. With those kinids of returns why would anyone want to dance in and out of the stock.
This is the time of year for making New Year's resolutions. And I have four that are guaranteed to make your portfolio bigger, fatter and wider a year from now.
1. SAFE MORE
All investment begins with saving. And unlike the performance of the stock market, saving is something that's under your control. It will also have a significant impact on the long-term value of your portfolio. For example, let's say you've accumulated a portfolio worth $100,000. If it compounds at no more than the long-term return of 11% a year - it will be worth $1,358,000 in 25 years.
Not bad. But if you add $500 a month along the way, it would grow to more than $2.1 million.
2. PAY LESS
When it comes to investing, expenses matter. A lot. Investment costs often get out of hand when markets are soaring and your portfolio is rising. But even then high trading costs, front- and back-end loads, high management fees and other investment costs can eat away at your portfolio like termites in an antebellum mansion. Know what you're paying. Make sure it's competitive. And if you don't know what you're paying, ask. As a rule, more than 90% of retail clients don't know their total investment costs because a) they're often hidden and b) they feel awkward asking. Ask anyway.
3. ASSET ALLOCATION.
Your asset allocation - how you divide your portfolio up among stocks, bonds, gold shares, REIT's, cash and so on - is your single most important investment decision.
4. KEEP A SHARP EYE ON TAXES.
Keep tax-inefficient investments - like high-yield bonds, REITs, utilities and actively managed stock funds - in your retirement accounts. And put tax-efficient investments - like index funds, long-term stock holdings and municipal bonds - in non-qualified accounts. (This is known as your asset location strategy.)
Make yearly contribution to your SRS account to save on come tax. You can invest your SRS money without incurring extra expenses to the bank as compare to investment though your CPF fund.
These four resolutions should form the foundation of your personal investment strategy. They will get you off on the right foot in 2014.
Wishing all a happy, healthy and prosperous new year. God Bless.
As it's the begining of 2014, one lesson is learning to let go of the past. Letting go of the past probably is one of the most important lessons in investing. For some investors, though, it is almost second nature. So for those enlightened investors what has happened before is of no relevance now. What matters is what could happen in the future.
That said, it is never easy to forget the past, because it is always hard to let go of what is old and familiar. That applies not only to old habits and practices but also to shares in our portfolios.
However, learning how to let go is vital if you want to take the first important step to become a better investor. After all, if your limited resources are tied up in patching up what you have, then you are much less likely to look for something else that could serve you better.
My 2013 performance had once again out-performed the STI Index which end flat at 3167. My portfolio in 2013 plus cash had growth by 30%. Since 2009 to 2013 I had outperformed the Strait Times Index for the fifth years.
Being able to outperformed the STI by 30% inspite of the volatile Stock Market is especially sweet. Stock markets last year had been a difficult year. Government introducing property cooling meassures, the uncertainties of ending QE3, QE tapering, worry of the outflow of funds and the likelyhood of increase in interest rate.
The US Federal Reserve's quantitative easing in the last few years has created a property bubble in emerging markets. With the end of QE3 and the eventual increase of interest rate in mind, I had increased my cash holding by selling down my property and REITs stocks.
2nd Liner Property Stocks
For the year 2013 I had sold off my 2nd Liner Property stocks - Roxy Pacific, Hiap Hoe and Metro. For Superbowl and Chip Eng Seng, I had sold off 80% of these 2 stocks.
First REIT and Cambridge were all sold off in April 2013 when these 2 stocks yield fall below 6% as a result of share price breaking new high.
I had reduced my Cordlife share holding bought during 2012. Cordlife in September 2013 had touch new high of $1.43 which had overweight my portfolio. Cordlife is still my core stock.
2013 Buying Opportunities
During 2013 my cash holding average was about 40%. In August 2013 I bought into Straco as my 2nd core holding at average price of 29.5 cts. Straco dividend yield of 4.2%. I bought Biosensors only to sell off at a lost during the year as the company profit margin falling.
In December 2013 I bought Chip Eng Seng average price 69 cts, dividend yield of 5.8%. First REIT bought at average price $1.035 and Lippo Malls average price 39.5 cts, both dividend yield of over 7%.
Below are the stocks I am vested and the average price bought: Bonvest (55 cts)
Chip Eng Seng (65 cts)
Cordlife (60 cts)
First REIT ($1.035)
Koh Brothers (30 cts)
Lippo Malls (39,5 cts)
2nd Chance (42.5 cts)
Stamdford Land (55 cts)
Straco (29.5 cts)
Superbowl (34 cts)