For every $2 you donate, OCBC donates $1.

A reader kindly informed me about "OCBC-TODAY Children's Fund" because I am a regular donor to Singapore Children's Society.

This fund has an annual cap of $1.5 million. Of this, $1 million is from the public and $500,000 is from OCBC. If you would like to make a donation to help children in need, then, this is a way to magnify your donations by leveraging on the generosity of OCBC.

"Through the Fund and the programmes it supports, we hope to help as many children grow into confident and useful individuals with high self-esteem, character and discipline. Together, OCBC Bank and TODAY are committed to rebuilding children's lives."

Find out more at: https://ocbctodayfund.sg/

Related post:
The world is full of nice people.

High yielding business trusts: A discussion.

I was sorting out my preparation notes for my presentation at Invest X Congress on Saturday and found an article published in Channel NewsAsia which I printed out on 10 June 2014, just 4 days before the event.

I had meant to share this at the event but I totally forgot about it. It was in my folder all along. Growing old and forgetful. I consoled myself by saying that even if I had remembered, I wouldn't have had the time to talk about it. Anyway, I will talk about it in my blog.

The article was about business trusts and it said that "dividend yield payouts are a key factor to consider."

Then, a consultant went on to say "If you want to invest in business trusts, you shouldn't be looking so much at capital gain... your objective is more dividend yield. Prices do come down, but you actually still get your dividend yield.

"As of today, we're looking at some business trusts giving more than 10 per cent yield, of course at higher risk, but if you think that the risk is manageable, it's actually quite attractive at this point in time."




I wrote a few reminders to myself:

1. Dividend payouts are a key factor to consider, not the only factor. Indeed, it is not the only key factor either. Note that they used the indefinite article "a" and not the definite article "the". We have to look at other factors too. For example, how highly geared is the business trust. What kind of debts does it have and how are they structured?

2. When we invest in business trusts or in any asset with an eye to generate income, we should also keep an eye on possible capital gain or loss. It is possible to have our cake and eat it too which is sweet. It is also possible that we could lose a big chunk of our capital even as the investment distributes money regularly to shareholders.




3. If we say that we still get our dividend yield even if prices were to fall, it would be true if we were to base our calculations on our entry prices. Well, we can do this if it matches our motivation for being invested. However, doing this is not useful in helping us to decide whether to buy more or to sell some. We should look at the yield on our investment based on current day prices so that we can manage our capital more efficiently.

4. Does it make sense to invest in a business trust that delivers a constant dividend yield on our cost while its unit price keeps dropping over time? Could it be that we are taking back our own money? So, is the dividend actually a partial return of capital? So, we have to ask if the business trust is becoming less valuable over time? Prices do come down and even if we still get our dividend yield, we have to ask why.




5. When something is riskier to invest in, we should demand a higher yield to compensate for the risk which we are asked to undertake. How do we know if the yield sufficiently compensates for the higher risk? How do we know if the risk is manageable? Is the investment within our circle of competence to make such a call? So, although the consultant says that there are riskier business trusts available that offer more than 10% in dividend yield which is attractive at this point in time, we have to decide if these are suitable for us.

Motivations and methods in investing.

Understand also that what risk is acceptable now might not be acceptable in the future. So, to make things simpler, it might be a good idea to simply to go for investments which have much lower levels of risk and yet deliver decent dividend yields to shareholders.

When we invest for income, we must have certainty of regular distributions. Ideally, the dividend paid out regularly to shareholders should be sustainable and our capital should stay intact. It is about the investment having good fundamentals and it is about us getting in with a margin of safety.

When we read any investment related publication, it is important to do so with a questioning mind. Don't take anything anyone (including me, of course) say at face value.




Related posts:
1. Invest X Congress: Q&A.
2. Rickmers Maritime Trust: 1 for 1 rights.
3. CitySpring Infrastructure Trust: Rights issue.
4. K-Green Trust: A bad investment?
5. High yields: Successes, failures and the in-betweens.
6. HPH Trust: Storm clouds over a safe harbour?
7. Croesus Retail Trust and Perennial China Retail Trust.
8. Portfolio review: Unexpectedly eventful.

Invest X Congress: The writing is on the wall!

I received many emails after the conclusion of Invest X Congress 2014. I am honestly quite overwhelmed. Many of these emails moved me and some made me laugh. I am sharing a photo which made me laugh so hard that I almost fell off my chair but, first, the emails:

Hi AK,

 

I thought I will 打铁趁热 and show you what I stick on my office wall as a reminder to do better. Thanks for sharing in the Invest X event; looking forward to see you in action again.

 

Regards,

Y

My reply:

Hi Y,

Oh, I remember this slide. I said something like "One look, you can tell not written by me." LOL! ;p

Take away the definite article "the" and we will get:

"Never need to utilise our earned income for expenses."

I zoomed in and when I saw what you added in the bottom right hand corner, I laughed and almost fell off my chair! LOL!

Gambatte! :D

Best wishes,
AK

Now, the photo:

I couldn't quite see what was in the bottom right hand corner and so I zoomed in:

LOL!

Certainly gives the saying "the writing is on the wall" a twist!

Thanks for brightening up my day.

Related post:
Invest X Congress: A letter and more photos.

Invest X Congress: A letter and more photos.

I was very touched by this email and I think I got a bit teary eyed, both from reading the email and laughing at the photos. Thank you, SH.

Hi AK,

It was definitely a pleasure to hear you speak last Saturday at the Invest X Congress event.

I brought my mom, your fervent supporter to the event and she enjoyed herself a lot. The only reason she attended the event was because of you. We took the front row seats and of course, I took many pictures of you. Not as professional as the photographers at the event but still, not bad lah.

Enjoy! 

I would like to thank you for being so generous with the information in your blog. My mom reads your blog everyday and ever since she introduced me to your blog, I began to be interested in investing too! That was the turning point that made me decide to go into a career in Finance even though my degree was in Science. Guess whose blog I read before my interviews? Yes, your blog! You've definitely made a very positive impact in many peoples' lives. :)

Cheers!

SH

Aiyoh, too high tech liao.



Strike a pose! Can put on a pedestal or not?



Can audition for "Grease" or not?




Head itchy, how to scratch?

AK making a point. Nah, maybe he was just pointing.

AK swatting a fly?

Pesky fly!

That's it lah! Caught the fly!

OK, no more ice cream!

AK scratching himself?

AK scratching... er... I don't think you want to know.



AK giving directions. "This way to financial freedom."
Er... Look out for the longkangs hor.

Related posts:
1. Invest X Congress: Q&A.
2. Free e-book: Retiring before 60 is not a dream.
3. Free e-book: Don't depend on wage increases.

NeraTel: 6 points to note.

An investor since the middle of 2012, I shared my reasons for increasing my investment in NeraTel by 10x in June 2013 and it is currently one of my most substantial investments in a non-REIT. This is an investment primarily for income but it also has a nice growth story.

Victor Chng from The Fifth Person attended NeraTel's AGM last month and he made the following observations:

1. NeraTel is a high dividend paying company.

2. NeraTel's payment solutions business is growing.

3. NeraTel is increasing its CAPEX.

4. NeraTel's payment solutions are easy to scale.

5. NeraTel's POS terminals accept EZ-Link and NETS.

6. Capital restructuring is highly unlikely as of now.

For the details, please read Victor's article:
6 Quick Things I Learned From NeraTel's AGM 2014.

With already a substantial investment in NeraTel, I am in no hurry to add to my position. I will instead wait for some weakness in NeraTel's share price before deciding whether to buy more.

Related posts:
1. Which stocks have I been accumulating in June 2013?
2. Helping our parents invest their money.

Invest X Congress: Q&A.

A feedback which I received from readers is that they wished I had given them some Q&A time after my presentation. I ran out of time and I think I took some of Rusmin's time too. My bad.


Courtesy of Audrey S. who had one of the front row seats.

Well, good thing I have a blog, right? I received quite a few emails, comments and PMs from old and new readers (mostly old as I think the new ones are still too shy) after the event and you might want to think of this blog post as the Q&A session that we didn't have time for at the event:

Q1. On the importance of an emergency fund.

A1. I said that it is important to have an emergency fund that will cover at least a year or two of living expenses and that if people who were at the event didn't have an emergency fund, they should go home and build an emergency fund first and not be investing now. If the economy should go into a recession, chances are the stock market would see prices tumbling too.

Now, imagine if we should be jobless but did not have an emergency fund. We might be forced to liquidate our investments at low prices. Not a pretty picture, is it? This is especially so when that should be the time to pick up good bargains offered by Mr. Market. It would be quite depressing.

Have an emergency fund and also a war chest. Two different funds. Not to be confused with each other.

Q2. On tipping AK.

A2. In the early days, I used to have a tip button in my blog. I installed it after seeing some bloggers having one in their blogs. I removed it after receiving that $100 tip I spoke about at the event. I don't want to feel obligated to anyone to provide advice because I receive tips from them.

I am not allowed to give advice, anyway. So, that was when I started saying I am only talking to myself in my blog. People who eavesdrop do so at their own risk. ;p

Q3. On income producing assets.

A3. Stocks, bonds and real estate. Actually, there are some very interesting assets which people invest in for income. I read that people actually invest in parking lots as well as taxis in Hong Kong to generate passive income, for examples. We can also find business trusts in Singapore which invest in assets such as infrastructure, ships, ports and cable television network.

No matter what assets we decide to invest in, if it should be for income, we want to be clear that the income is generated by the assets and we want to be sure that income distributions are sustainable. The time period could vary. The reason why I sold my investment in PCRT was because I decided that the income distributions were unsustainable.

Q4. On pyramids and percentages.

A4. I spent quite a bit of time talking about the graphic that looked like a pyramid because I felt that it is something important that income investors like myself should have in mind. Being able to compartmentalise investments is helpful in guiding our behaviour towards each investment, actual or potential. The question which I have been asked has to do with percentages since I mentioned that I would not have more than 2 or 3% of my money at the top of the pyramid which represents "aggressive" or "speculative" positions. So, what about the other layers in the pyramid? What are the percentages? I would say that it depends on the individual and his motivations.

Like I said during my presentation, if he is more of a speculator, then, the graphic for him could be an inverted pyramid. For someone who is more into growth stocks but who still believe in having plenty of cash to take advantage of opportunities, then, his graphic could look like an hourglass. Remember the population pyramids we learned in Geography classes in secondary school? You get the idea.

Q5. On Marco Polo Marine.

A5. I had an investment thesis. A sound one too, I believe. If all things had remained the same, the thesis would still be valid today. Of course, things changed over time and with only a schizophrenic bowling ball, I was not able to see the changes before they happened.

For anything positive that has a greater degree of predictability or certainty, I would allow a greater exposure to it in my portfolio. If there is a stronger element of uncertainty, then, I would trim my exposure. It is one way I manage risk. So, this was why I moved my investment in Marco Polo Marine from the "growth and income" section of my pyramid upwards to the narrower "growth" section. We could even suggest that it has a speculative element with its purchase of a jack up rig scheduled for delivery in December 2015. So, logically, it had to become a smaller investment for me.

Q6. On Starbucks, Bangkok and bras.

A6. I was told by a female reader who flashed the "V" sign at me that she was not flashing a victory sign at all. I misunderstood her. She was trying to tell me that I made an inappropriate comment about saving money. Which comment was that?

I made a joke about using money saved from not buying Starbucks coffee to fly to Bangkok to buy cheap and good bras. To all the ladies who were wounded by this joke which was apparently in very bad taste, my most sincere apology.

You can tell that I am truly remorseful because I have not sent out an email to the media stating that I had sacrificed myself to raise awareness of how we could save money and how ladies could use the money saved to buy cheap bras in Bangkok to save more money. Sounds Royt? ;p

Q7. On CMT.

A7. CMT is very well run. There is no question about it. At $1.97 per unit, we are looking at an annualised yield of 5.2%. It is also trading at a premium of 15% to its NAV of $1.71. "I would sooner buy a great business at a fair price than a fair business at a great price." Warren Buffett. To me, buying REITs is almost like buying real estate. I won't want to pay more than the NAV. At NAV, perhaps, it would be good to get some, everything else remaining the same.

Finally, if you went for the event and if you want to find out about the stuff that I could have shared if I had more time, contact me to ask for my presentation slides. I will tell you how to get the slides. Then, use the slides as a guide and search for the relevant blog posts in my blog. It will probably be similar to reading an e-book but with a bit more work required on your part. ;p

More Q&A found in the comments section of this related post: Invest X Congress: Closing thoughts.

Yummy, yum, yum lunch at $2.20!

What? AK's lunch costs more than $1.00?

Shocked? Stunned? Surprised?

I took these photos before I started eating:

Egg tofu, carrots, potato, taupok, stewed cabbage, spring onions and anchovies on steamed rice.

Looks good? A bit too oily but that is to be expected from food bought from canteens.

Forgot to bring lunch to work today. Left it on the kitchen table. Growing forgetful in my old age. So, decided to pack food from the canteen.

I guess $2.20 is not too bad.

Now, my taste buds feel a bit tingly. Must be from the MSG.

What? No drinks? Of course, I had a drink. Water from the water fountain at work is free.

Related post:
Yummy, yum, yum (60c) breakfast.

Atas Sunday breakfast and some nagging.

Too early. What? Woke up at 7am today, a Sunday morning. Too early. Yawn.

I tried to go back to sleep but it is a state of "I am tired and want to sleep but not tired enough to really fall asleep now". I don't know if you know what I am talking about but it is frustrating.

Anyway, I woke up early to have breakfast with my family. We went to town for breakfast and to celebrate Father's Day.

Here are a few photos of my breakfast today:

Broccoli, cauliflower, waffle, hashbrown, soon kueh, carrot cake and baked beans.

Porridge with peanuts, spring onion and shallots.

Fruit yogurt from Germany.

A bit different from the usual stuff you would expect me to blog about, I guess. Atas or not? Surprise!

I gave my dad a big red packet, the second one this year. First one was for his birthday earlier in the year. I gave my mom a big red packet for Mother's Day too. However, no matter how big the red packets are, they will never be enough for all that they have given me.

I also gave my dad a bit (or it could have felt like a lot to him) of nagging about being prudent with money. Personal finance is not one of his strengths. Well, I like to think that I nag because I care. That was what my mom used to tell me when I was a boy. Mom's fault. LOL.

OK, I am going to try going back to sleep. Yawn.

Enjoy your Sunday!

Related post:
Passive income: A higher purpose.