Category: invest_gtmp

[21] %%G9 strengths as Investor #specifically

Posted on by tiger40490

k_investor_selfEval

The more specific/unusual the better. I hope to develop more strengths, and give my kids and younger friends.

  • —  my strengths, half-ranked by importance and rarity/uniqueness:
  • [a] compound return — some insights into projected exponential growth based on compound return
  • [a] eq regime change — some insights into market regime change, which cast doubt on a lot of stock market analyses, including published research papers
  • CPF knowledge — more than most people.
  • favor incremental small amounts in each investment decision. Most people commit too fast too much into risky investments. I made the same mistake many times (FXO, commodities 1997). Small amounts allow me to quickly get my feet wet, without a lengthy due diligence including (for stocks) last-minute news-analysis.
    • Compared to mutual funds, PE etc, I feel ETF/REIT/Stocks support faster, safer learning curve.
  • NAV-erosion of high-yield mufu
  • some observation about U.S. vs non-US stock market
  • SDXQ property — most people don’t realize the low NGRY due to large sqf, perhaps because they don’t care about rental yield.
  • NGRY and haircut — most people barely look beyond NGRY without knowing the magnitude of the haircut.
  • mutual fund annual fee — some wisdom (insight) about mutual funds cf stock-picking
  • my math/analytical skill to compute actual PnL taking into account of all costs + gains known to me. This may not be 100% all-encompassing, but better than the PnL analysis by the lay public. The small costs + gains are small IFF you are (naively) fixated on windfall, but not small when you come to terms with the small return rates.
  • stable burn rate — gives me quiet confidence during my long-term investment planning.
  • [a=academic theories]
  • — Below are not “strengths” per-se, more like preferences or personalities, but each is an important feature that define me as an investor.
  • my focus on current income when most fellow investors focus on total return which is usually dominated by asset appreciation. Though not a strength, this gives me a higher current income for the capital amount.
  • risk appetite (and some limited experience) with overseas properties
  • my aversion towards endowment products

— significance of these strengths? Not to be exaggerated or belittled. I want a fair assessment of the significance of these strengths.

However /tempting/ it is to derive and assign some numeric “value” to each strength, such numbers would likely be extremely unscientific and un-objective. Instead, it’s more useful to ask questions:

Q: Will these strengths grow in significance as my income drops in older age? I am 90% certain.
Q: Will these strengths grow in significance as my asset grows? I am fairly certain.
Q: Will my “worldly” wisdom grow with experience, in this and other domains? I hope so. Look at grandpa.

Investment loss can be devastating, not to be taken lightly.

[15]market timing and conviction #R.xia

Posted on by tiger40490

Update: This 2015 email was introspective and shows a contrast to the 2021 investor in me

  • Nowadays I take calculated risks with rEstate + HY/PE, not with stocks
  • Robinhood MOETF beats all of my eqMufu in terms of fast learning, incremental top-up, trailer fees.
  • I don’t need deep conviction in MOETF
  • I don’t need timing decision in my incremental decisions

— Hi XR (Another blog post. You need not reply.)

I have identified a few stock markets to invest up to 5k each using mutual funds – China, India, Healthcare, Technology…. For US, up to 10k. I feel they all have up trend and can recover fairly quickly.

Now the big question is when to go in. I prefer focused funds as each has its own cycle and therefore somewhat less correlated with S&P. Ideally, I wish these markets were out of sync so the timing decisions are independent. In reality, all these markets are highly correlated, simplifying the timing decision.

So far, I lack the conviction and confidence. As you said, I may need to read up on the economic and market analysis, but reading takes way, way too much time, and most of the info is going to be views and opinions rather than insider insight i.e. experts could all be wrong.

I guess the successful stock market investors (Buffett etc.) take calculated risks. I feel in Asia, the successful investors tend to be property investors. I guess they invest fairly big amounts even when they were small investors like us, which shows their conviction. In contrast, I don’t have the conviction, so my equity holdings amount to a tiny S$20k, and I don’t intend to hold any position for 2Y or longer.

Therefore timing, position size, and holding periods all depend on investor conviction.

Tan Bin

beat CPI-inflation+!losing liquidity : how tough@@

Posted on by tiger40490

Context is long-term parking, such as (but I don’t want to focus on) retirement and 6M contingency reserve (typically 100k).

Q: how tough is it to beat inflation, without losing liquidity? Conventional wisdom seems to say “tough”.

Actually depends on country. In the U.S. (am slightly less familiar), CPI inflation is higher than SG, but CD interest (around 2% now) and mortgage rate are also higher than Singapore. HY/PE return is also higher than Singapore. Stocks generate higher return but beware of taxes. Non-rental properties show slower appreciation than in Singapore ! [1]

Today I want to focus on Singapore. I have first-hand experience since 1991. I also discussed with friends. Below 2% is my estimate. For simplicity, I will use 1.9%. Clearly savings and CD accounts can’t beat inflation. There are many safe-n-liquid investments such money-market funds.

— money-market mufu is my favorite and default choice
I have reason to believe MM mufu offers 2%+ compound return.
Even better, there are many competing mufu funds at different liquidity levels (they call it “risk ratings”)
— stocks and rEstate: I have discussed these elsewhere as inflation hedges. Drawback is liquidity.
— CPF : super-safe illiquidity, as defined in my post on liquidity.
Does CPF qualify as inflation-proof? Yes iFF you use my 1.9%. However, if you use the 3% as quoted by DBS seminar, then you need to consider CPF-SA with 4% interest.

Endowment plan: super-safe illiquidity. I won’ t consider them.
— gold? inflation-hedge for the long-term. Poor liquidity as defined in my blogpost.
— [1] Most things show higher price increment in U.S. than in Singapore, but a notable exception is the appreciation of non-rental property outside a few speculative regions attracting hot money.

Rental yield is much higher in the U.S.

Therefore, I plan to buy only rental properties in the U.S.

risk appetite: me imt cohort

Posted on by tiger40490

In asset%allocation: imprecise current snapshot=best, bulk of my asset allocation is risk capital:

  • eg: For stocks, see affluent individuals often favor Funds over stocks
  • eg: for stocks, I pick many unfamiliar or small-cap (risky?) stocks while many peers (Kun.H) focus on a few familiar names.
  • eg: For overseas properties, yes my choices are considered risky by all account.
  • eg: For HY/PE, yes my choices are considered risky by all account.

See the blogpost on risk capital.

how I gauge illiquidity@security explains one of my fundamental attitudes on risk.

My “cohort” includes age groups 10Y younger or older than me.

[23]JB condo

Posted on by tiger40490

— [1] “Instead of windfall, focus on current income with long-term value preservation.”

My main focus ought to be long-term preservation of liquidity value in SGD terms. LZ.Yu pointed out that we may have a very limited resale demand from locals, much smaller than the new-launch demand from foreign investors.

I assume RnF is more in-demand (perhaps from foreign investors primarily). Perhaps location is the best shield.

  • LG-LP: developer reputation
  • LG-LP: rental yield, rental demand
  • LG-LP: political risk, legal risk
  • LG-LP: FX hazard. See below.
  • LG-LP: rental haircut .. running costs

— smell: GRY is below 4%, as poor as BGC after expats left. It’s prudent to rely on local tenant pool.

The small quantum, prime location, proximity to Singapore, diversification benefits, momentum, windfall potential, affordability to locals,,, are insufficient to give me 9% GRY required to compensate for the risks.

— oversupply situation is real in JB, even if exaggerated.

https://www.theedgemarkets.com/article/property-market-stuck-doldrums-even-prices-rise-elsewhere

https://www.channelnewsasia.com/asia/covid19-johor-selling-condo-property-market-malaysia-1838926

— some random misperceptions

  • small sample size .. I only asked two people about KSL reputation
  • over-estimate of the value of “easy access by owner”
  • outdated view of street safety in JB

— lesson from and comparison to BGC

  • FX is the main hazard, even though prime location protects rental demand and resale value. There’s no much we can do about it, except one thing — we can decide to avoid MYS to avoid FX hazard.
  • excellent rental demand
  • “Project” size is much smaller than BGC
  • There are more Singaporeans familiar with JB downtown than with BGC

— diversify my rEstate ptf.. diversify into Malaysia
MYS has some advantages over Khm, Phl or Chn

SG-JB symbiotic relationship is strengthened by Covid and improving, according to R.Teo.

good (low) cost of maintenance… I can be “on the ground”. I can engage Malaysian Chinese contractors.

For years I wanted to “buy” Malaysia, so the small price tag is a rare gem, but I need to contend with no-windfall[1] and ccy risk.

I hope these drawbacks are already factored into all JB prices, but I guess many Singaporeans push up the price because they find the psf so low, and they use it as a holiday home.

— ccy risk .. slightly less severe than BGC.
ccy hazard can wipe out rental gain + appreciation
— MOP .. if sg gov doesn’t know it, then risk is low.
— ForwardHazardRate .. I did go through a lot of trouble at Uptown.
— ppp plan needs adjustment .. need to keep 100k outstanding.
— resale restrictions .. after you buy, you may not be able to sell to foreigners (due to Rm1M restriction), so you need to focus on local buyers, who can’t afford.
— accessibility/connectivity .. driving(or motorbike) or Grab. Public transport is infrequent.
— “small unit in prime location, with affordable price tag”
RnF fits the bill, but heavier price tag. See rental yield below.

I have experienced the same at BGC. Prefer a change. With 3BR I can rent to 4 individuals (43R).
— rental yield
https://www.propertyguru.com.my/property-for-rent?beds%5B0%5D=3&property_id=6809&search=true&freetext=KSL%20Residences%20@%20Daya&sort=price&order=asc shows 3BR asking Rm1400+/M. Edward Woo (+60 18 962 2604) said out of every 100 units, up to 40 rented out. Who are the tenants of these 40 units? 15 are migrant workers to Sg; 15 are locals; 5 units used by companies. 

Joan Yee pointed out that CIQ area enjoys better rental demand. However, harder to do 43R.

Q (incisive): how low is rental demand at Daya?
A: Edward said Daya is near downtown and not so bad.

 

Tanko: strategic missteps #home upgrade

Posted on by tiger40490

See also

Most SG wealth management programs require SGD 200k, so I will use this sum as a starting point.  In my mental picture, many investors start with 200k risk capital (typically in their 30’s [1]) and slowly build up to 500k. Along the way, we all make gains and mistakes.

I guess many (90%?) of us become too aggressive too confident too complacent and take on too much risks, almost like gamblers (rather than prudent investors), and hit over-sized losses.

I feel I have been less unlucky so far, but how long can my luck last? I remind myself that my SEA properties may get into trouble.

[1] When I paid $180k for my first HDB, Tanko and ML.J were both surprised. Also, the 2020 OC survey found 2/3 of Singaporeans has savings insufficient for 6M. But this side question is a distraction on the current blogpost.

— Tanko on huge mistakes .. When I described wq.l’s low burn rate with 5 kids, and my $4k/M carefree life, Tanko felt that cash flow can *become* a stressor for himself and esp. for his brothers with modest-incomes, even though they both seem to be as frugal as Tanko. Tanko said they really need to be careful and avoid huge mistakes. I feel it’s very likely (more than many think) to commit huge mistakes due to strategic miscalculation (like a military mis-judgement).

Q1: what big mistakes have I experienced or seen in my family?
A: 1997 trading loss
A: Majestic Village
A: sister’s high personal debt
A: lawsuits like https://1330152open.wordpress.com/wp-admin/post.php?post=15308&action=edit&classic-editor and sister’s ccard debt

Q2: any potential, hidden, missed pitfalls on my path ahead of behind ?

  • buy a luxury car (like 100k), which has no investment value and purely a consumption asset
  • How about my UChicago MSFM investment?
  • buy a luxury residence with low rental yield and high maintenance cost including pTax
  • career change of no-return. I think many techies become managers, unable to come back to hands-on jobs due to age, churn, IV-moat etc. This item is not directly relevant to net-asset, but career longevity is the real bedrock of my ffree, security of family livelihood

— free cash .. is breeding ground for strategic missteps. When you receive a windfall cash payout (inheritance, or selling a website like getrichslowly.org), the free cash is an example. But there are more common examples like bonus…

Many investment advisors start by asking how much free cash you have.

cash -> OA -> SA “top-up” actually prevents Singaporeans from wasting their hard-earned savings on wrong investments, including top schools and luxury private properties.

— pattern: big mistakes are often related to unreasonable desires

  • eg: if you have a 3k/m burn rate, but buy a 2M luxury residence (as in HK, Beijing or SG), it wipes out 50Y Fuller wealth in one go. This one mistake can sink you into low ground, and end your peaceful ezlife.
  • eg: a branded college would cost 300k. Two kids would cost USD 600k or about 20Y Fuller wealth.
  • eg: a school district home also costs a lot more than a regular home by $300k, but the extra $300k is often seen as investment.
  • eg: if you start taking drugs it could ruin your life
  • eg: if a married person starts having affairs, it could ruin a peaceful life, though many stories seem to present it as non-consequential.

y U.S.investment product returns higher than in SG

Posted on by tiger40490

Remember the Allianz Income Protector and Energy12…

  1. I guess it has something to do with the stock market. Most retail investment products in the U.S. are benchmarked against the stock market. If a product’s return is consistently way below stock market return, like average 4%, the product will not be launched, or will not survive.
  2. Another reason is income tax. Most of the investment returns would be taxed at 25% or higher.

Chn A^B shares #common nlg

Posted on by tiger40490

oth risk .. This knowledge is like general knowledge, not for interview, not for personal investment, but can help my education effort for my kids.

https://www.ubs.com/global/en/asset-management/insights/china/2019/stock-connect-china-a-shares-faqs-equity-investing.html is a FAQ. https://research.ftserussell.com/products/downloads/Guide_to_Chinese_Share_Classes.pdf is a pdf showing a table.

China A-shares trade on the two Chinese stock exchanges, the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE). Historically, China A-shares were only available for purchase by mainland citizens due to China’s restrictions on foreign investment.

Gary believed China ADR stocks are correlated with China index much more than SP500.

— Chn A-share ETF .. I think the exchange fee and broker commission on both entry and exit is likely higher than the FSM fee.

Also need to find out how to use interactive brokers…

— currency and other defining features
China A-shares are only quoted in RMB, while B-shares are quoted in foreign currencies, and are more widely available to foreign investors. On the Shanghai Exchange, B-shares trade in U.S. dollars. On the Shenzhen Exchange, B-shares trade in Hong Kong dollars.

Some companies opt to have their stock listed on both the A-shares and B-shares market. Due to the limited access of Chinese investors to B-shares, the stock of the same company often trades at much higher valuations on the A-shares market than on the B-shares market.

— retail vs institutional investors
China A-share markets are dominated by retail investors. Therefore, China’s A-share markets can be volatile.

SSE and SZSE are both more retail-driven than HKEX.

— issuing entity .. A/B/H shares can be issued by the same entity. I think N shares too (on New York exchanges including OTC), but am not 100% sure.

Most of my China stocks are N-shares including the OTC  stocks.

Due to access control, I think the onshore market has some kind of correlation among the stocks, driven by China retail investor[1] herd instinct. The H-shares and N-shares have correlation among them, driven by the investors [2] on these (more open) markets. [1] and [2] are probably two distinct groups.

There’s also some correlation between 2 market segments.

— indices.. There are many indices for the various market segments. JustEtf.com compares index performance figures over 1Y (or 3Y). You can see the indices are quite different.

best China index? You can collect the count of tracking ETFs for each index. The most popular index is MSCI China.

Gary singled out FTSE A50.

CNY^CNH #common nlg

Posted on by tiger40490

[i = Impressive knowledge pearl ]

  • [i] the “H” in cnH initially referred to Hongkong
  • For many years until 2010, China government constrained the onshore USD/cnY within a narrow range, essentially pegged. Nowadays the range is wider but still more controlled than the offshore version.
  • [i] in 2010 cnH was officially launched under the auspices of PBOC and HKMA. I would say, that at that juncture, FX trading in USD/cnH switched from underground, unofficial to official.
  • Compared to cnY, the cnH is traded in offshore markets (HK/SG/LDN….), is more market-driven, less controlled (by government). Greater volatility is seen in cnH.
  • The offshore USD/cnH rate is almost always slightly higher than the onshore USD/cnY, but the spread is usually within 1%

Like all central banks, PBOC can and do influence the strength of cnY in popular paris like USD/cnY, EUR/cnY. I think PBOC has an easier job of influencing its own currency than other central banks do, thanks to capital control in China. PBOC can also influence the offshre cnH but by design cnH is less controlled.