Tag: t_w1r1

div: mufu^stock^Reit^ETF #DPR #NAV-erosion

Posted on by tiger40490

 

A mutual fund eats away up to 2% of the dividend yield, in the form of expense ratio. ETF is around 0.5%.

I have never earned real dividend yield above 10% so I am keen to experience it.  The Allinz funds are so fake and manipulative .. /marketing-gimmicks/.

==== DPR (Dividend Payout Ratio) .. is the basis of dividend safety , sustainability and dependability,  the differentiator between stocks (below 60%), ETFs (100%) and mufu (often above 100%)

REITs are required to pay out at least 90% of their net earnings, paid out as dividends. A payout of 70–80% of FFO is the U.S. industry average, regardless of taxable income.

ETFs receive stock dividends and are required to pay them out either in cash or as additional shares to shareholders.

Good dividend stocks have payout ratio below 60%, otherwise flagged as a dividend-safety red flag. I don’t think mufu has these two concepts. High-dividend mufu often need to liquidate (and reduce) NAV to sustain high target dividend. Examples include 1) AllianzHY 2) OCBC Templeton monthly div (I see this fact every month in my OCBC statement!) 3) AGD below. The frequent liquidation requires active management, and might increased expense ratio.

In an unprofitable year, a blue-chip can reach into its deep pockets of cash reserve and decide whether to keep up dividend. The dividend_aristocrats have done exactly that in every down turn. Most mufu funds have no such reserve as far as I know. Therefore, I would not want to depend on a mufu to keep up dividend payout… not dependable.

  • — dividend stability:
  • a good blue-chip including some REITs can maintain dividend amount for decades, based on a healthy payout ratio on the back of robust cash flow
  • an ETF is a simple construct and unable to achieve it if any constituent stock ever cuts dividend.
  • mufu is a complex structure. Whenever a mufu shows stable high dividend, it’s invariably “cheating” with DPR > 100% , by eroding NAV.

— The Aberdeen AGD case study … https://secure.fundsupermart.com/fsm/article/view/rcms222722/invest-in-this-income-strategy-with-regular-paying-dividends-and-potential-capital-gains is another case study. The FSM article claims “As seen in Chart 3, the strategy has also been able to deliver rather consistent dividend yields over the past few years, which at most times hover above 6%.” It sounds like the constituent stocks were generating 6% dividend consistently !?

Highly suspicious when you look at the top holdings — all low CDY and not known for high-yield. So I suspect the 6% dividend payout of this fund is financed by NAV erosion [liquidating its assets, hitting a payout ratio above 100%]. Fund managers do such things really to attract AUM. If the manager doesn’t liquidate assets, then the fund NAV would have climbed faster.

So this fund is probably a growth fund masquerading as a slow-growth income fund.

buy-n-forget→ sleep]peace, focus@work

Posted on by tiger40490

k_babysit4exit

See also

Motivation  — hazards of stock investing

  1. Sleepless night and work distraction are the most serious hazards of ANY online gambling
    • Note tcost/distraction due to pre-trade due diligence is less or a concern.
  2. lost time/energy for workout; overeating induced by active investment
  3. lost time for parenting and academic coaching

These hazards are more stoppable during the due diligence. However, as your position builds up, hazards become increasingly burdensome, unwanted,,,,,, Therefore, Position holding should be a focus for risk management, tcost management.

In div investing, I want to practice buy-n-forget, and collect dividend. Buy-n-forget is my answer, my solution to the challenges.

—  In recreational investing … I want to sleep in peace every night
Q: as my committed amount increases beyond 10k, 20k, how do I maintain that peace?
A: buy-n-forget. steady passive income .. is the ideal I am seeking

ETF can help, since the constituent names are hidden.

— If I must list the G5 derailers for buy-n-forget

  1. #1 factor: size of capital
  2. DYOC above 4% .. in theory can be a shield against the hazards. Note leveraged positions often have negative DYOC.
  3. 100% upswing .. can be a temporary shield against the hazards.
  4. extreme (rare) volatility .. can derail buy-n-forget and cause loss of sleep

— case studies
Q: which past investments caused loss of sleep, loss of focus at work, or affected my workout or diet?
A: 1997 commodities day trading
A: 2013 FX Options

Q: which would become the first stock to cause loss of sleep etc
A: T:US?
A: XOM?

— url of this blogpost

https://tanbinvest.dreamhosters.com/wp-admin/post.php?post=17998&action=edit

DRIP to build snowball@@ #w1r2

Posted on by tiger40490

Compound return fallacy is the bigger framework.

— stock DRIP… There is widespread brainwash about the miracle snowball of ECP (exponential compound return) via DRIP

  • AA) For example, with XOM (or SPY), my uncle re-invests dividends every quarter. If my aunt chooses to receive dividends but do not invest further, then yes she would get no “snowball”.
  • BB) In contrast, I choose to receive dividends, but later at my own timing[1] invest the same [2] amount into XOM or unrelated stocks [3].
  • BB^AA prognosis ….. if I invest at least the same [2] aggregate amount as my uncle, and at least once a year[1], I won’t lose out to my uncle.

[1] My frequency is sometimes higher sometimes lower than quarterly. I always prefer to time my entry. About half the times, the DRIP default timing is not ideal. If my timing decisions turn out to be inferior to the default, I won’t blame anyone, but this won’t be a valid explanation for the “snowball” or the absence thereof.

[2] The amount I invest is often bigger than my uncle’s tiny dividends. High dividend years are over, so those “snowball” stories are outdated because nowadays the smaller dividends make the snowball growth slower.

[3] Usually, my “reinvestment” amount goes into a stock different from the original stock (XOM in this example), often a stock outside SP500. This diversification is usually beneficial, though it breaks the compound return paradigm. In fact it can beat the compound return snowball.

My uncle’s robot uses market orders, which are inferior to my limit orders.

One advantage of automated (robotic) DRIP is tcost. (Tcost is a different concern in recreational investing.) In view of that, I may need to reduce trading frequency..

— splurge .. Somehow the brainwash theory assumes that most investors who opt for cash dividend would spend the payout. Suppose the typical investor Cody spends $5000/M on average. When $770 dividend received in June, how much would Cody spend in that month? The brainwash theory assumes answer is $5770, because the dividend would feel like a windfall to be spent.

Well, I think the answer for some people is $5000. They save the windfall.

Actually, some investors simply leave the dividend payout in the brokerage account to buy more stocks. If they withdraw the cash dividend, then indeed there is higher chance of spending it.

SG casinoIR: lifestyleCreep “endorsed”by LKY

Posted on by tiger40490

in https://www.straitstimes.com/singapore/in-his-own-words-irs-needed-for-spore-to-keep-abreast-of-the-top-cities, LKY said

The old model on which I worked was to create a First World city in a Third World region – clean, green, efficient, pleasant, healthy and wholesome; safe and secure for everyone… Now we also have to be not just economically vibrant, but also an exciting, fascinating city to visit, with top-class symphony orchestras, concerts, dramas, plays, artists, singers and popular entertainment. These are lifestyles of international professionals and executives who locate in Singapore, working in multinational banks, finance houses and other MNCs… And we want those companies who manage entertainment troupes to include Singapore in their tour of cities around the world.

Q: Are these unnecessary finer things in life?
A: I think LKY would not approve his family members engaging in gambling, drugs, extravagance/decadence lifestyle etc. Those things would cross his baseline. However, he recognizes that many “international professionals and executives” have a high lifestyle. If put in his shoes, I would say there are many sides [wellness, reward/motivation, sustainability..] to this issue, but many of those finer things in life are “nothing wrong” by default.

The archetype of these “finer things in life” — high-end alcohol, tobacco, fancy (unhealthy) food, massage parlor,

signs@gambler: big bets@stocks

Posted on by tiger40490

Speculation/speculator is another word for “gambler”

Get-rich-quick mentality

— timing the (stock) market, as YLZ mentioned.
— reacting to news and sentiment of “retail hot money”
[[ irrational exuberance ]] and my RTS business analyst — “always recovers after down turn”
— short holding period. Day-trading is an extreme example. I like buy-n-hold to collect dividend
— infatuation, esp. in the property market
— gold investors are often gamblers, partly because 1) negative current-income 2) large positions 3) horrible bid/ask spread
In contrast, my colleague Gavin is a buy-n-hold gold investor.

— retail FX and commodity investors are often gamblers, trading news without understanding the fundamentals
I used USD/SGD FX trading for personal currency hedge in mid 2010’s, at a leverage of 1.0. That’s less speculative.

I feel bitcoin is a classic speculative asset.

— keep mortgage unpaid .. One of the most common j4 is to invest in stocks. Basically borrowing bank money to play stocks.
The most experienced stock investor I know, Kun.H, actually paid off his mortgage early !

— Huge enterprises betting big

  • eg: China Aviation Oil
  • eg: Nick Leeson
  • eg: national governments taking a stake in big banks? Not derivatives

— over-sized bets, like one of my young UChicago classmates (probably a rich kid). Many of these kids bet big on FX
I felt bad about my small bets in stocks and mutual funds, but it could be a good thing ! 

The lesser of two evils — I would rather tolerate poor ROTI, rather than betting big amounts.

If you want to build big positions, I feel U.S. ETF is safer.

One of the biggest price to pay is peace of mind…

Buffett@market timing: 2meanings

Posted on by tiger40490

k_babysit4exit

Disambiguation of “timing” — It can mean the strategic importance of AA) acquisition price, or BB) price forecast, including prediction of turning points using analytical or math methods.

No one disputes the importance of AA. BB is controversial.

I don’t know how Buffett perceive BB. Value investors are not supposed to time the market(BB). However, in a down turn, there are more bargain opportunities. See the book by Pauline Teo. In my experience, I can see that timing in AA sense (or random luck) is a major factor but there’s not much we can do about it[1], except obvious things like “avoid buying after a climb”.

  • Buffett (AA): “For the investor, a too-high purchase price for the stock of an excellent company can undo the effects of a subsequent decade of favorable business developments.”
  • Buffett (BB): “In the 54 years (Charlie Munger and I) have worked together, we have never forgone an attractive purchase because of the macro or political environment, or the views of other people. In fact, these subjects never come up when we make decisions.”
  • Buffett (BB): “We’ve long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”
  • [1] Buffett (BB): “If you like spending six to eight hours per week working on investments, do it. If you don’t, then DCA [ dollar-cost average ] into index funds.” — no timing please

[1] I can say the same about absorbency for financial numbers. This absorbency is not easy to train. If you don’t have this absorbency, then consider low-cost index funds.

— https://www.cnbc.com/2022/05/03/warren-buffett-why-you-should-navigate-not-predict-the-stock-market.html says

Buffett recommended against obsessing over finding(BB) a perfect time to buy a stock. Rather, the Berkshire Hathaway CEO said, go ahead and invest, and then observe the stock market over time to see if you should buy more of that company’s stock or sell it.

satiation income_level=USD 75k #Newport,SunsetWay

Posted on by tiger40490

See also self-evaluation of life: CSASS

[[Thinking fast and slow ]] includes a whole chapter dedicated “experienced wellbeing”, including a very brief contrast against CSASS. P397 hypothesized that beyond the satiation level of income, you can buy more expensive (pleasurable) experiences, but you are likely to lose some abilities to enjoy the pleasures of a simple life.

Warning — “satiation level” is only in terms of experienced wellbeing [xpSelf, not rmSelf], and doesn’t even imply hard limits on long-term satisfaction, life chances, success (as defined in 4 ways).  This satiation is really about “savoring the moment“.

Kahneman reported that based on 450,000 (450k) responses from thousands of Americans, beyond the satiation level of $75k/Y household income (as of 2011, in high-cost US locations), experienced wellbeing (NOT the CSASS evaluation by the rmSelf) no longer increases. “The average increase of experienced well-being associated with incomes beyond that level was precisely zero.”

(Note in 2011 I happened to live in the U.S.)

This research is relatively new content in a book of well-researched contents. In a 2022 BBC radio program [[money, money, money: Value]], a Yale professor referenced some similar research.

— moving to Newport .. When we moved to Newport, something strange happened to our experienced well-being. My wife probably felt less well off than before, because every other young mother in the neighborhood was better off in terms of education, English, earning capacity, perhaps dressing. Newport feels young, cosmopolitan, and smells affluent. Perhaps she felt not belonging there. I remember visiting my ex-schoolmate HY.Cai in Newport…

There’s another “reason”. The “more expensive experience” refers to the affluent location including clean streets + landscaping (see other blogpost). This enhanced our experienced wellbeing. But I guess we also lost some abilities to enjoy some simple pleasures of life, like cooking, going to a small neighborhood park.

— Similar experience: PandanValley vs SunsetWay/Clementi .. I remember my first visits to SunsetWay (more intense at Clementi).

At SunsetWay, a typical HDB estate, I was able to enjoy some simple pleasures of life like

  • more variety of hawker food, compared to PandanValley
  • cheaper goods in provisions shops, compared to PandanValley
  • much shorter walk to public transport, compared to PandanValley, and easier to reach MRT or Clementi town

— rural HDB estates.. locations unpopular with the affluent. Places like CCK, Yishun, Woodlands further out from MRT. Or perhaps older estates in TPY-Bishan-AMK.

minimize cost@acquisition: 守株待兔

Posted on by tiger40490

Suppose my sister and I both have 5 shares of a cash cow like O:US, but each at a different cost of acquisition. As a consequence,

  • Our DYOC would be different due to that c@a
  • Our margin@safety is different due to that c@a
  • Our dreamland prospect is different due to that c@a

So how do we control the c@a? Most people (eg: LZ.Yu) focus on market timing. Somehow, value investors don’t. In my view, Value-Investing is less about buying low, but mostly about.. buying high only after due diligence and always followed by a retrospective analysis aimed at learning lessons and improving cost@acquisition. Buying high due to impulse or infatuation has no ground and is regrettable.

DCA is mindless robo-investing. DRIP is same on a smaller scale. I believe their c@a is inferior.

— tip: beware of the tendency of impulsive trader and infatuated trader
— tip: commission .. is crucial in my “system” using small orders. So I put aside Kun.h’s advice to “accept commission costs as negligible”.
— tip: fractional trading .. has become crucial in my “system”, esp. when price moves after my buy. See impulsive trader
— tip: use limit orders patiently sitting away from the market price (守株待兔), esp. for illiquid, slow-moving stocks. When the price moves, it tends to jump.

I believe many HFT shops deliberately use limit orders and exchange rebates.

I think Booth’s DFA used limit orders on small cap stocks to create a c@a advantage.

How about tcost@acquisition for a recreational investor ? LG2

stable div^ fractional@growth_stock

Posted on by tiger40490

If I must choose Between stable dividends and fractional shares of growth stocks, I still favor stocks showing stable dividend.

Unlike most small investors, I want “cash cow assets” producing dependable current income for several financial needs like family support, and to supplement my salary, and enhance brbr . Rental property is the archetype of cash cow. Even when NAV (resale valuation) drops, rental income keeps coming in. In equities, Utility stocks are the closest thing.

With the hot growth stocks, I indirectly hold a lot of fractional shares via the funds I bought. One share of an ETF or $1000 of a mufu hold lots of fractional shares, due to the fundamental nature of these products.

Some examples

  • WNS
  • Twitter
  • Moderna
  • Baba, JD.com

— Drawbacks with low-dividend growth stocks, in bad times (or good times)
Background: I prefer to periodically cash out some small (fractional) quantity of shares for the reasons stated in the beginning. Fractional liquidation might be comparable (a poor cousin?) to periodic dividend payout.

  • when a growth stock has fallen but I need some cash … it’s hard to convince myself to liquidate 1.1%. No such agony with a dividend stock, whose business model supports stream of dividend, which meets my financial needs.
  • liquidating a productive asset .. psychologically or effectively, each time we would be liquidating some 1.1% of a productive asset. It feels stupid, unwise, and adds to the reluctance and burden of due diligence. In contrast, dividend stocks are cash cows and we never need the agony to kill the cow to get the milk. Echoed on [[Living off Dividends in Retirement]]
  • one of the key drawbacks is the loss of sleep and focus at work. (See buy-n-forget→ sleep]peace, focus@work: avoid 0-div ) This risk is reduced by consistent dividends, which helps me achieve buy-n-forget.
  • due diligence @ each sell= burden …. You have to endure due diligence each time, regarding when and how to cash out some amount. The current income thus produced is unstable, inconvenient, stressful….If you happen to be busy with work, family member, illness or any major decision, then you don’t want the extra job with the due diligence. Echoed on [[Living off Dividends in Retirement]]
  • timing/window …. each time we worry about missing the best window to liquidate some (albeit small ) quantity of this grow stock.
  • Tax Lot accounting …. is a non-trivial “extra job”.
  • Fractional shares don’t support limit orders. Some growth stocks are too big to sell in one whole share.
  • pre-clearance .. each time you need a pre-clearance. If you forget it, you run the risk of compliance violations

lure@bccy, ##saferAssets

Posted on by tiger40490

Fact: I’m spending more time reading/blogg about bccy. Years ago, I diddn’t bother, then I blocked out the “radiation” of news story from friends and mass media.

I feel bccy trading is dangerous, comparable to gambling, addictive gaming, and speed driving. However, it’s increasingly difficult to stand back and stay detached.

I tell myself no to try even a small amount. The small amount could increase my confidence. The experience could easily lead to additional, bigger investments, but (most parts of ) the bccy /ecosystem/ is fundamentally flawed in many ways. Given my conviction about the flaws, I will not want to open the pandora’s box.

— Compare: Speed driving gave me a false sense of confidence. I learned from experience that it felt “not so scary” to drive at those speeds, but my experience was very limited and probably misleading.
— Compare: HY/PE… The earlier “successes” give investors confidence, and many of these investors would increase their commitment, at their peril
— Compare: Cambodia rEstate .. earlier “successes” increased my confidence, which led to dangerously high concentration in Phnom Penh. This thought has prompted me to compile a ranking of my assets by safety/resilience against swan events:

  1. cpf, SGD and USD cash
  2. hdb home
  3. Beijing house
  4. BGC, despite the weak currency
  5. U.S. stocks including 401k
  6. thePeak