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AK71's simple strategy.

Sunday, September 2, 2012

What is my simple strategy?

按兵不动
 
- Hold our troops; bide our time.

Collect regular dividends and wait for opportunities.

We want to be in a position which would allow us to benefit from market weakness as well as strength. The way to do this is to stay invested in the market and also have a war chest ready.


Opportunities to accumulate will always show themselves but without a war chest, it would be difficult to take advantage of them.

Sometimes, doing nothing is also doing something.

So, as I wait and do nothing, I might have mostly nothing to blog about. ;p

Related post:
To be richer, be comfortable with being invested.


41 comments:

kelvintan73 said...

All the REITs are priced so high now that my war chest is rotting.

Dolly & Zoopy said...

Where is a safe warchest - cash in bank with close to zero interest?

Dolly & Zoopy said...

Where is a safe place for "warchest"? cash in bank?

Ah John said...

that's something bother me too, has cash but don't find any chance to buy. I agree that waiting maybe best strategy now.

AK71 said...

Hi Kelvin,

It is all relative, really. :)

To quite a few friends from the USA, they find our REITs' distribution yields very attractive even at current levels.

This is probably why although many were expecting $1.10 to be a strong resistance for AIMS AMP Capital Industrial REIT's unit price, it overcame that level with aplomb. ;)

AK71 said...

Hi Dolly & Zoopy,

Well, that is one option. ;)

We could also leave the money in a trust account with our stock broker. I know Lim & Tan currently pays 0.5% per annum on my SGD Trust Account, for example.

AK71 said...

Hi Ah John,

I have to remind myself that the stock market will always be there and that there will always be opportunities to deploy our funds.

If there are no suitable opportunities, the best thing to do is probably to continue waiting. :)

Ray said...

Hi AK,

Are you a fan of Sun Tzu?

AK71 said...

Hi Ray,

I have read an English translation of Sun Tzu's Art of War before.

I have watched a period drama set in the Spring Autumn Period which told the story of Sun Tzu and Sun Bin.

I won't say I am a fan but I know of Sun Tzu. :)

SnOOpy168 said...

Hi AK

Thanks for the reminder.

Had taken your advice and been recharging bank account over the past months. Let's hoped that I'll be ready when the time comes.

coven said...

Hi AK

with some Reit prices at an all time high, would u be looking to divest part of your holdings ?

Some of the capital gains profits might be worth a few years of dividend payout

Thanks :)

Gark said...

Too bad my warchest is nearly 3x my stock holdings.. all in fixed deposits waiting since last year... :(

Just couldn't find the right stock to invest. I think I am being overly cautious.

AK71 said...

Hi SnOOpy168,

The stock market is always here. There will be opportunities to make money.

Having our war chests ready, we just have to wait for the east wind. ;)

AK71 said...

Hi coven,

I have a portfolio for trading and I have sold the units here for gains. On hindsight, it was too early, as always. ;p

I also have a core portfolio for income. Units held here are not to be sold unless yields are compressed to levels which are unattractive.

We also have to ask if we have better use for the money if we were to partially divest our investments.

AK71 said...

Hi Gark,

You are 25% invested now. I would say to bump that up to 50%.

Now, which stocks to invest in? It would depend on whether you want income or growth or both. ;)

In the current environment, investing for income has become the more attractive option for many investors.

I have a couple of ideas on my mind now:

There could be more positives for construction companies such as Hock Lian Seng and Yongnam with the new Thomson MRT line announced. They have strong numbers, pay good dividends and their share prices present good value now.

A reader wrote to me about Perennial China Retail Trust. I blogged about this trust middle of last year before its IPO and said it was not a good investment then. It was offered at 70c a unit at IPO. Now, it is more attractive at 47.5c a unit.

See:
Perennial China Retail Trust: Weak debut?

goldmansion said...

Hi AK,
I am curious. May I ask what is your allocation of your war chest?
Do you based on:
1. 10% of your total investment.
2. 1 year estimated dividend collected.
3. 1 year your working salary.
Thank You.

FoodieFC said...

i thought now is e time to buy commodities?

meesiam said...

OKP is also a important player in infrastructure building in singapore

coven said...

Hi for those who are preparing the warchest, CIMB is offering 0.8% interest for a savings account

http://www.thesingaporemarket.blogspot.sg/2012/01/cimb-starsaver-account.html

there is a slight fixed deposit element inside though, without chq books, u would need to accumulate $100 per month (or $1200 per year). For chq books it would be $500 per month :)

I use CIMB to park my excess cash funds currently :)

AK71 said...

Hi goldmansion,

I would like to be 50% invested. So, I should have a war chest similar in size to my total investment in the stock market.

However, I have been buying in the last 12 months. So, I am more heavily invested in the stock market than I should be.

I will have to build up my war chest by halting all buying activities, looking to sell some positions and to continue accumulating cash from all sources of income.

AK71 said...

Hi FoodieFC,

I am not familiar with commodities and definitely do not know how to trade them and make money in the process. You will have to educate me. :)

AK71 said...

Hi meesiam,

I remember a reader asking me about OKP before. Alas, my plate is quite full.

Would you like to share your thoughts about OKP here? Some numbers, perhaps?

AK71 said...

Hi coven,

Thanks for sharing this. :)

meesiam said...

AK
Paiseh... I have not had time to study the co myself yet. But hope this blog helps

http://financiallyfreenow.wordpress.com/2012/09/03/potential-construction-projects-for-okp/

Mr. Robotic said...

hehe AK,

Guess what, I was typing passive income in google search and your blog came up in the search results on the first page!

Congrats!

Cheers,
Isshin

Attagurl said...

Thank you for sharing AK71.

I would like to ask is the 50% investment/50% dry powder combination that you consciously hold all the time? Or is this your holding for this period?
50% cash hold feels very high to me.

AK71 said...

Hi meesiam,

Thanks for the link. :)

AK71 said...

Hi Isshin,

Thanks for telling me. I didn't know this. :)

AK71 said...

Hi Attagurl,

To be 50% invested, give or take 10%, is good during times of uncertainty like now. So, for me, this is not set in stone.

It depends very much on a person's beliefs and risk appetite too.

INVS 2.0 said...

Hi Ak71,

I can't wait anymore. So I sold Sabana at a high profit. :) Next is AIMSAMP when it reaches its max NAV.

Something, someone just has to press the button to bring down the market.

AK71 said...

Hi INVS 2.0,

Congratulations on a handsome gain. ;)

JCK said...

Singapore’s real estate investment trusts, the best performing in the world this year, are luring investors after a shopping spree for properties across Asia gives them a broader stream of rental income.



An elevated view shows the buildings in Singapore's skyline. Photographer: Munshi Ahmed/Bloomberg
.
Singapore’s $38 billion REIT market has returned an average 37 percent in 2012, twice the gains in the U.S., U.K. and Japan, according to data compiled by Bloomberg. Australia, the largest REIT market in the Asia-Pacific region with $86 billion, advanced 24 percent.

Growth among Singapore REITs was led by asset acquisitions and rental appreciation, with total rental revenue increasing 5.8 percent annually between 2008 and 2011, according to property broker CBRE Group Inc. In the first half, Singapore REITs were the second-most active purchasers after Japan in Asia, buying assets in Australia, China, Japan, Malaysia and South Korea, and accounting for 33 percent of acquisitions by the region’s REITs since 2009, CBRE said.

“Singapore remains amongst the last few AAA rated economies,” Priyaranjan Kumar, Singapore-based regional director of the capital markets group at broker Cushman & Wakefield, said in an interview. “Its real estate market has received unprecedented attention from most investors as it’s seen to offer a good proxy for the increasingly recognized strength of the Asian consumer.”

The gap between their yield and interest rates is double that in Australia, according to data compiled by Bloomberg. Property trusts in the island-state offer an average 413 basis- point income return premium relative to 10-year government bonds, while in Australia they average 192 basis points, data compiled by Bloomberg showed. A basis point is 0.01 percentage point.


More here...

http://www.bloomberg.com/news/2012-09-04/singapore-reits-yield-world-s-best-returns-southeast-asia.html

AK71 said...

Hi JCK,

I added this link last night to this blog post, actually. Thanks for sharing it again anyway. ;)

JCK said...

Some more :)

http://www.theedgemalaysia.com/property/219513-remaking-the-s-reits.html

AK71 said...

Hi JCK,

Thanks for the link. :)

JCK said...

AK
It is i who should Thank YOU.
Since early Jan because of your
blog, my investements in Singapore has returned me 30%!

Say ChinaMInZhong!

Whatta RIDE! :)

AK71 said...

Hi JCK,

You are welcome. :)

A portfolio heavy in S-REITs created since the beginning of the year or the end of last year would have done very well, capital gains plus regular income. Congratulations!

Yes, you made a nice 5 figure sum from China Minzhong, didn't you? Haha.. :)

JJ said...

Dear AK, need your adv, MIIF another good dividend counter, worth collecting at present price?

Many tks.... For sharing!

AK71 said...

Hi JJ,

Another reader wrote to me regarding MIIF. The fund's balance sheet has improved a lot over the years and its earnings are robust.

However, the new rules by the PRC government regarding HNE could put some downward pressure on earnings. So, if we are comfortable with a more conservative future DPU of 4.8c to 5.0c (instead of the current 5.5c), at 53c a unit, we are looking at a distribution yield of 9.06% to 9.43%.

We want to remember that the concession given for HNE will end in another 11 years. HNE accounts for some 30+% of MIIF's earnings. So, if the fund keeps the status quo, we could see DPU impacted by a similar proportion when the concession ends finally.

I am vested in MIIF at 30+c to 40+c. At 53c, I am not really interested but for anyone who is considering starting a long position, 53c seems like a fair price to pay if we are happy with a 9+% yield and if we can live with what is happening with HNE.

opal said...

Time to load more if there is a consolidation? Inflation will be hitting us soon if US dollar depreciated. We need to find ways to preserve out savings.

AK71 said...

Hi opal,

For sure, in an environment of near zero interest rates, savers are heavily penalised as their wealth is eroded by higher inflation.

Asset owners and people who borrow to invest in income generating assets will benefit. This is why we have to stay invested.

However, with increased volatility in the market, having some cash on hand is important in order to buy on dips.

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