Bryan has learnt from his mistakes through self-knowledge. NextInsight photo.

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I LOST about $300,000 playing contra in the stock market in 2007. It was money I could afford to lose but I still felt rotten about the loss. (Later in this article, I will give you details about my bad experience)

I have thought hard about my mistakes, and I have made a big change in my approach to investing.

Over many months recently, I took a close look at REITs and became convinced that this is the kind of investment I have knowledge about and confidence in.

The dividend yields of some REITs are very attractive to me as the prices of the REITs had been bashed down more than 70% in the market downturn. Their net asset values were also far higher than the stock prices.

In April this year, I accumulated a lot of different types of REITs. I now have spent $250,000 of my own money and another $184,000 from my $250,000 margin financing facility.

As you know, the market has been rallying. My investment now has a gain of about $200,000, which means a return of 80% on my cash! (This gain includes $62,800 in dividends that I have received or will be receiving as the stocks have gone ex-dividend recently.)

I am a mortgage broker and I am comfortable with investing in property-related stocks, such as REITs. I can check rental rates, I can pose as a tenant. It’s real investment as I have something to fall back on.

Currently, the stock market is giving me better returns than investing in physical properties. But when the sentiment improves in the physical property market, I will move my money there.

I will sell my stocks, including REITS, if they jump high enough. I think I understand the risk of being too greedy.

*Does not include dividends totalling $62,800 

I believe only physical properties can held for a longer term. Property investments yield rental and there will be housing demand from expatriates.

The property market has improved but I don’t think it’s time for me to re-enter it. It will pick up strongly when banks increase their maximum loan close to 90% again for the second property. Now it’s only 65-70%.

Easier financing and investor sentiment will go hand in hand. My philosophy is: Buy property when the sentiment gets better – instead of buying based mainly on factors such as amenities, location next to MRT station, and en-bloc potential.
 
Now I will tell you about my mistake in 2007 and what I learnt from it.

Bryan, 30, at the poolside of his condominium home, The Springs, in the Novena area. He will be getting married in two months' time. NextInsight photo

Lost big-time on Jade

I was naïve. It was my very first time playing the market. I had made money in my mortgage financing business and some property investments.

I started by playing the penny stocks, such as Armstrong, Rowsley and Atlantac. The one I made hundreds of thousands of dollars on was Jade Technologies.

I went in and came out of Jade as it climbed from 12 cents to over 50 cents. There were stories of how it would go into various profitable ventures. 

I became greedy. Then the stock collapsed all the way to 3 cents and, boy, was I burnt. I didn’t know how to cut loss quickly. I stubbornly held on. I would say I had naïve thinking.

This is the stock I lost the most on. Now, I believe only in stocks which have solid fundamentals. 

If a stock has negative news, or a number of negative developments, I will also avoid it. An example is a certain company which has reported 94% drop in its profit recently, and is going for a rights issue.

I have become allergic to stocks with bad news.

Abalones are an expensive delicacy to the Chinese but Oceanus is starting a fast-food chain selling abalone meals to the masses in China.

I want steady dividend plays with lots of upside in capital gains.

There is a non-REIT I now hold: Oceanus, which I bought on May 13. This business is very scalable. If I am not mistaken, the company has grown its abalone population to 150 million already and will not stop there.

Abalones are a delicacy for the Chinese people, who see it as a sign of prosperity and luck. I have bought shares of Oceanus at 25 cents each.

The money came partly from the over $100,000 I have pocketed from selling off Yangzijiang Shipbuilding and Suntec REIT in just two weeks.

By the way, I have a trading portfolio, and I have buddies to discuss trades with. I have learnt a lot also from my interaction with my clients. Most important, I have learnt a lot from reflecting on myself and my mistakes.


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Bryan Ong is director of BC Group, a leading mortgage broker in Singapore. To watch a Channel News Asia programme on him, click www.bcgroup.com.sg

Bryan Ong can be contacted at 6401-5678