I started serious Investing Journey in Jan 2000 to create wealth through long-term investing and short-term trading; but as from April 2013 my Journey in Investing has changed to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

Since 2017 after retiring from full-time job as employee; I am moving towards Investing Nirvana - Freehold Investment Income for Life investing strategy where 100% of investment income from portfolio investment is cashed out to support household expenses i.e. not a single cent of re-investing!

It is 57% (2017 to Aug 2022) to the Land of Investing Nirvana - Freehold Income for Life!

Click to email CW8888 or Email ID : jacobng1@gmail.com

Welcome to Ministry of Wealth!

This blog is authored by an old multi-bagger blue chips stock picker uncle from HDB heartland!

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

"For the things we have to learn before we can do them, we learn by doing them." - Aristotle

It is here where I share with you how I did it! FREE Education in stock market wisdom.

Think Investing as Tug of War - Read more? Click and scroll down

Important Notice and Attention: If you are looking for such ideas; here is the wrong blog to visit.

Value Investing
Dividend/Income Investing
Technical Analysis and Charting
Stock Tips

Wednesday 31 December 2008

The Goal of the End Game - Financial Independence

The goal of the End Game is to accumulate enough wealth for you and your family to stop.

Having enough is more important than having more. If you've reached enough, you don't want to be gambling for more. Stop putting your wealth at risk. Stop the gambling and risk taking with investments of any kind. You would finally have enough money and personal power to walk away from the investing game and spend the rest of your life doing something else!

When exactly do you reach the End Game?

When you have enough principal invested safely for your after tax-income to match or exceed your annual expenses on an ongoing basis. This would include budgeting for the lifestyle you truly want.


So I reach there on time and on target or will I be late? Tomorrow is the new beginning ....


"Human beings, by changing the inner attitudes of their minds, can change the outer aspects of their lives." - William James

Who Took My Wealth?

Loss of -34.2% of nett worth. From the high of 93.2% to close at 58.98% for 2008.

Who Took My Weath?

No 1. Success can be one of life's worst enemies. It engenders overconfidence and, as a result, one tends to let one's guard down - in some instances, to the extent of recklessness

I have met my worst enemies in 2007, and failed to recognize them sooner, and thus the downfall in 2008. I have previously survived two major corrections with heavy losses and recovered with even more nett profits. But, this Bear killed.

No 2. Leverage

I use a wheelbarrow to lift more dirt than I can carry by myself, I am employing leverage. Leverage involves using a tool to increase my power. That tool is Contra Trading, the tool of leverage is "no upfront money". Just loaded up.

But, I have put too much dirt into a wheelbarrow, and broke my back trying to lift it. Too highly leveraged, and did not have enough cushioning to hold out and when the market turned against me and forced me into liquidation — game over.

Going forward, I WILL ONLY LIFT dirt with my two bare hands. Trade and survive like an American Cockroach. Eat when there is food to be found, and can survive without water for 1 month and without food for 3 months. Goodbye 2008, Welcome 2009. More food to be found. Cheers.

Sunday 28 December 2008

Propert Investing - doing the math (Part II)

me & my money, invest, Dec 28, 2008, thesundaytimes,

It is always at the back of my mind. If I have a lump sum and without doing any leverage, should I be doing stock or property investing? To be or not to be is the question?

Today, in thesundaytimes, we have this article from the property whiz .

Let look at Syed's property gain as follows:

Bought Sold Capital Profit Total% Years Annualized%
1997 2003 $345,000 $100,000 29% 6 4.8%
1986 1989 $230,000 $100,000 43% 3 14.5%
2005 2008 $430,000 $100,000 23% 3 7.8%

Just doing the math, there is nothing fantastic to shout about on these annualized ROC.

Is this true that on average, the risks of investing in property are understated and returns from investing in property are overstated. I believe so.

The most difficult part in stock investing is the emotional roller coastal ride of watching the value of your portfolio dropping by hours if not by days.

But, not for property as the pricing of residential property is infrequent and informal. Property investors never see red ink on a statement unless it is on the day of the sale. And most property investors never formally evaluate the performance of their investments at all. Imagine if you looked in a newspaper at the price of your home each day, just as you do with the price of your shares. Your attitude to risk would most likely be quite different.

Do you hear the guy going home to tell his wife: "Honey, jialiat liao, our home value drops by 50%". But, when your portfolio value drop by 50%, probably, that guy will say to his wife: "Honey, jialiat liao, you need to cut down your Christmas shopping by 70%".

Some will argue that property value will NEVER drop to ZERO, and companies can go bankrupt. But, surely, there are some blue chips that will not go bankrupt, as govt will certainly step in to rescue them as they are too critical to fail and will cause chaos to the country.

Likewise, property value will NEVER be a multi bagger as the govt will certainly step in to COOL IT DOWN before the country goes into riots.

Look at Hyflux, a $20K company with 3 staff grew into company of market cap of over $1B.

For property value to appreciate, it is true that a GREATER FOOL needs to appear, but it is not always true for a stock as the company can really grow big; e.g. Hyflux. Can the property grow over time????? from 2 rooms to 5 rooms???? No. But a GREATER FOOL must come and happy to pay much more.

Investor is very comfortable in dumping $500K into one property, but, to dump $500K into the stocks will be a nerve breaking experience. Investing in property require probably one off of real hard work, but for stock investing, it is endless chores of stocks picking, and heartbreaking at times when the stock plummet minutes after you have bought them.

So it is ALL IN THE INVESTORS MIND. Finally, INVESTING is still a Game of Strategy and Emotional Management. Choose your best strategy and emotions that fit you. It is ONLY YOU THAT COUNTS.

Other related articles:




Saturday 27 December 2008

So You Think You Can Trade?

You can have anything you want if you want it desperately enough. You must want it with an exuberance that erupts through the skin and joins the energy that created the world… Martha Graham (1894-1991; fierce, innovative dancer and choreographer)
OK — I fudged the title of this post from the TV series called “So You Think You Can Dance?”

Dr. Janice Dorn
The Trading Doctor

Having been a dancer since age 5, I actually thought I could dance! That was before I watched these amazing young dancers battling it out week after week; one by one, falling down, getting up, getting safe and getting booted. The field continues to narrow until, one day soon, the winner will be chosen. These people have talent, training and experience. So what separates the winners from the losers? Passion, commitment and discipline. That is what separates the winners from the losers in dancing, life and trading.

Why do so many people think they can do something with confidence, courage and competence when they cannot? The so-called overconfidence bias and other cognitive (thinking) biases are topics for another day. Today, I would like to focus on the Learning Ladder of Trading.

One day, you get up and realize that you are in a dead-end job, and just sick and tired of being sick and tired. Your buddy has been trading the markets for a few years and doing OK…not great...but getting by. Your buddy's buddy just set up a trading account, paid thousands for software, books and courses, but is not making any money.

In fact, he has lost half of his initial stake. Yet, you hear others touting returns of 100-1000 percent gains a year, and the siren call of greed coupled with the idea that if they can do it, you can do it better, is too tempting to resist. I mean, how difficult can it be? You just buy the right books, get the best software, go to the right seminars, subscribe to the hottest newsletter, and--with the click, click of your mouse--buy low and sell high or buy high and sell higher or sell high and buy lower. No problem. Piece of cake.

So, you announce to your family that you are going to quit your job, become a full time trader, monies will flow effortless into your account and everything is going to change. It all seems so easy, and the seminar people are doing it, so why can't you. You are just as intelligent as the next guy.

This type of thinking borders on the delusional. Just as one cannot wake up one day and announce that one, without any formal education training (including the school of hard knocks) is going to start practicing law or medicine, one does not become a proficient trader overnight. Get over yourself, because it just isn't going to happen.

No matter how many bells, whistles, indicators, seminars and books with which you surround yourself, you have to pay your dues. You must learn that that piece of cake needs to be converted into humble pie, and that the most-successful traders got that way by first getting a Ph.D. in losses.

Trading is simple, but it is not easy. Trading is a skill and an art that takes time, patience, perseverance and courage. Successful trading and investing are skills, which combine both art and science. In order to achieve and master these skills, one must progress on a path, which is mental, emotional, physical and spiritual. For many, this is the most difficult journey ever taken. Start where you are, and understand that it is about the process, that it takes time and that the rewards are worth it if you just keep going with passion. Without passion, why bother?

There are no secrets to success. It is the result of preparation, hard work, and learning from failure… Colin L. Powell

Every trader must climb the four rungs of the Ladder of Learning, and must do this one step at a time. You cannot skip a step, but if you let your guard down, do not continue to study and practice, you can and will fall down a step or two.

What do I mean by the Ladder of Learning and the four steps? In this case (and putting other learning theories and the neuroanatomical bases for them aside for now) I am referring specifically to the four stages of trading competence:
Somewhere in your make-up, there lies sleeping, the seed of achievement which, if aroused and put into action, would carry you to heights such as you may never have hoped to attain… Napoleon Hill

(1) Unconscious Incompetence: You don't know that you don't know, and you don't know what you don't know, a.k.a. ignorance is bliss.

At this stage of your trading, you are not aware of the existence of, or need for, specific trading skills. You don’t know what you don’t know, including that you have any deficiencies (since you don't know that there are any specific trading skills). Denial may come into play here as well, as you may think that such skills are unnecessary or not useful, and all you have to do is to subscribe to a service or hotline, or jump on the next "hot" pick and money will come rolling into your account. In order to move to the next stage, you most overcome your denial and become consciously aware of your incompetence. Without taking this next step, you will not progress and no new skill will be acquired. There will be no learning. The next step is:

(2) Conscious Incompetence: You know that you don't know, but you are not entirely sure what you don't know.

At this stage, you become aware that trading is a skill, which exists, which is practiced by many and is relevant to your success. You also become aware of your deficiencies in this area by attempting to trade or practicing how to trade. This is the stage in which you begin to figure out how much you don't know. Successful traders will, at some point during this stage of the learning process, make a commitment to learn. They will make a commitment to study, to be teachable and to practice, practice and practice until you know what you don’t know. Now, you are ready to progress to:

(3) Conscious Competence: You know what you know, and you can trade, but you have to think about it.

During this stage, the skill of trading can be performed reliably, consistently and at will. However, you have to concentrate a lot, and think a lot, in order to do it. It is not second nature, nor is it automatic. At this stage, you are open totally to more learning, but you are not able to teach anyone else how to do it. The only way to proceed from this stage to the final stage is to practice more and more until— eureka — one day you have reached the stage of:

(4) Unconscious Competence: You know how to do it, and don't have to think about it. You just do it.

At this stage, the act and process of trading consolidates within the memory and pattern recognition areas of your brain…it becomes second nature. If you are really good at it, you can trade and do other things at the same time (I do not recommend this, however). Certain people at this stage are capable of teaching others, but this is not universal. In fact, it may be more difficult to teach at this stage since the skill has become largely instinctual. It is at this stage when, if someone asks you how you knew to do that, you have to pause, think and say, "I don't really know. I just did it." This is trading mastery.

There is another, final and rarely-discussed stage that is called Conscious Unconscious Competence. Those who have reached this stage are the best teachers, and they are rare and difficult to find. Find one of these people to guide and support you if you really want to learn how to trade.

Champions execute the fundamentals with unconscious competence. That means they've practiced the moves so many times in the past that they can do them almost perfectly without thinking about it. When you can perform brilliantly without thinking, you can perform at a very high level…June Jones (Head Football Coach, University of Hawaii Warriors)

Noble - Getting difficult to play?

Friday 26 December 2008

Tales of fortunes made and lost in recessions

Success can be one of life's worst enemies. It engenders overconfidence and, as a result, one tends to let one's guard down - in some instances, to the extent of recklessness

(Createwealth has met his worst enemies in 2007, and failed to recognize them sooner, and thus the downfall in 2008)


MARKET crashes are the greatest redistributor of wealth. This has been true of previous crashes. But in the current turmoil, there are few beneficiaries, a friend noted. It is more a great destruction of wealth on a global scale so far.

A recession is a good time to start a business as costs are low. Disney, Microsoft, Hewlett-Packard, Oracle and Cisco are some of the companies that were founded in downturns.

Well, okay, some short-sellers may have profited from some of their trades. But many get wiped out in their next trade. Perhaps it is those who are not invested at all and who have the cash to pick through the carnage in the next few years who will really come out ahead. Who knows? Nobody is certain of anything anymore.

A lot of people have been hit hard this time around. There are a few reasons for this. One, prior to this, we've had four years of a bull market where prices had gone in only one direction.

Success, notes a friend, is one of life's worst enemies. It engenders overconfidence and, as a result, one tends to let down one's guard - in some instances, to the extent of recklessness. Economist Hyman Minsky sees the cycle of risk-taking in the economy as following a pattern: stability and absence of crises encourage risk-taking, complacency, and lowered awareness of the possibility of problems.

But even for those who are conservative and have their heads centred and feet firmly planted on the ground, the economics just a few months back suggested that being invested was the right course of action. Then, inflation was running at 5 or 6 per cent and banks' interest rates were at less than one per cent.

For someone who didn't want to have his or her purchasing power eroded, keeping the money in the bank wasn't the most logical of options. Which was why a lot of people are invested - and, worse, a lot took loans to invest. If the borrowing cost was so low, and one was expecting to make a return higher than that cost of borrowing, it made sense to borrow.

Of course, we know now that a lot of people had underestimated or even ignored the risk of trying to earn those extra percentage points of returns.

A friend shared with me some of the horrendous stories of how an enormous amount of wealth was destroyed in the last few months.

Up till last year, one man had $100 million of his worth in only one stock. Towards the end of last year, that stock started to decline. By early this year, the stock was down more than 50 per cent from its peak just a few months before.

The man picked up quite a few additional shares - on margin - thinking that the stock had bottomed and would eventually rebound. Since then, the stock has plunged by another 80 per cent. The $100 million is more than wiped out! The stock is Cosco Corp, which went from 10 cents in March 2003 to $8.20 in October last year - an 82 times jump. It is now trading at less than 70 cents.

Another guy had relatively much more modest means. His net worth was estimated at $2-3 million. He heard from 'reliable' sources that a particular company would be taken over by another at a significantly higher price than the stock's then market price. He bet all he had and, if I remember correctly, also took margin financing to buy that stock. The stock was FerroChina, which has since been suspended because it had run out of money to pay its suppliers and debtors.

One value investor thought Thailand was cheap a few years back. One particular company, a very big one, was trading at 1.2 baht - significantly below its book value. The investor concentrated his bet on that company. And, indeed, the market began to recognise the value of the company and the stock tripled to over 3 baht.

The value investor's portfolio grew to $26 million. In the last year or so, the stock has plunged to below 0.7 baht. The investor is now down some 50 per cent on his original capital.

Another man was shrewd enough to think that the market was overvalued towards the end of 2007. So he got out of the market, and even shorted it. He was happy that the market went the way he predicted. He was the smartest guy in town.

By June or July, thinking that the market had fallen enough, he loaded up on shares. Like the guys above, he too used margin financing to pick up the shares. As we know, the market took an even more severe turn in September and October. He too was dealt a severe blow.

A friend was also bearish about the market towards the end of last year. He had put in some shorts. Then last October, the market went on to hit record highs. He lost his resolve, and reversed his trades and got hit as well.

Another made quite a bit of money in the Singapore market. His confidence grew. He wanted a bigger stage. He bought US shares on margin. US stocks took a precipitous plunge a few months back. He has had a few rounds of margin calls.

A young banker in his late 20s made $2-3 million from the property market in the last few years. He ploughed all the profits into a $10 million property, and took loans of some $7 million. He's now saddled with a mortgage payment of some $30,000 a month.

Many of the real-life examples above show just how lethal leverage can be. In a rising market, leverage is your friend; in a down market, the blow dealt by leverage can knock one out for good.

Perhaps another lesson is to always take some profit off the table. Today, the valuations of stocks are at levels unseen in years, if not decades. 'It is at times like these, when there is a lot of fear, that one can make three or four times return on your capital,' a friend said.

Yes, we all know that. But so far this year, every time one thinks that fear is at its maximum, it moves up another level. And another problem is that a lot of investors have run out of money to buy. A lot of the 'liquidity in the system' before the crisis was from loans; now, that has dried up.

In any case, whether a stock is cheap or not is still debatable. According to State Street Global Markets, its global Investor Confidence Index® for November fell another 1.4 points to a historic low of 57 points. Commenting on the index, Andrew Capon of State Street said: 'Investors face a difficult dilemma. On the one hand, equities are cheap. Using earnings adjusted for leverage and cyclicality, the equity strategy team at State Street Global Markets estimates that the US price-earnings multiple is 26 per cent below its 147-year average.

'These are levels seen only in periods of extreme dislocation such as the Great Depression, World War II and the 1870s. On the other hand, nobody can be confident that this current economic slowdown will not turn out to be just such a period rather than a more typical recession. 'So far, during this crisis, it is the bleakest forecasters who have been proved right.'

Indeed, we are in unprecedented times now. The euro area and Japan are now officially in recession. Even without the US officially joining this unhappy club, countries representing close to 50 per cent of global GDP are now seeing growth contract, noted Mr Capon. Consensus economic forecasts for GDP growth in the developed world have been falling for 16 months and are at 20-year lows.

Growth in the last seven years or so was propped up by debt-financed consumption from the US. And Asia has built up tremendous capacities to cater to that growth. Now, that consumption has contracted because the enormous financial leverage has to be unwound. That deleveraging process and contraction of consumption will drag on for some time because income has also diminished - if not totally disappeared, given the waves of job losses.

In Asia, companies have to deal with all the excess capacities and the vanishing demand. Many companies will go bust. Jobs will be lost, pay cut. In China, the hardship could trigger social unrest. It could be apocalyptic. We just don't know what will happen in the future.

But the fact is that we are now in the throes of a crisis and that itself may colour our judgment. 'Last year, it felt like the sky was the limit; now, it's like we are sinking into a bottomless pit,' said a friend.

Back to what economist Hyman Minsky says about the cycle of risk-taking: stability encourages risk-taking and complacency. But when a crisis strikes, people become shell-shocked and scared of investing their resources.

People also often overestimate the probability of the worst-case scenario after a crisis has occurred.

So, for the optimists out there (if there are still any left), here's an inspiring story.

In 1939, with Hitler's Germany ravaging Europe, John Templeton - who believed in buying into companies at points of what he called 'maximum pessimism' - bought US$100of every stock trading below US$1 on the New York and American stock exchanges.

Templeton's trade got him a junk pile of some 104 companies, 34 of which were bankrupt, for a total investment of roughly US$10,400. Four years later, he sold these stocks for more than US$40,000! Only four out of the 104 became worthless.

Yet another positive spin. A recession is also a good time to start a business. Costs are low. But it is not a good time to do financial deals - that's for a bull market, an investment banker told me recently.

Indeed, in a downturn, established firms tend to cut back on their growth investments to focus on defending their established core activities. That will create niches to be served by smaller companies. And once the start-ups develop to a certain size and the general economy picks up, there will be no lack of big company buyers that are willing to absorb these start-ups into their fold. That fits into the theory of starting a business in a recession and selling it in a bull market.

Well, here are some of the companies that were founded in downturns: Disney, Microsoft, Hewlett-Packard, Oracle and Cisco. There is no lack of examples in the local context as well. The first Sakae Sushi outlet was set up in September 1997. Financial PR, one of the largest investor relations firms in Singapore, was founded in August 2001.

Over the next year, there will certainly be more people forced to work for themselves because they will lose their jobs and not be able to find other suitable employment. And it will be no surprise if some of the talented people now unable to find work in an investment bank or other big company direct their energies towards creating a new generation of successful start- ups, said The Economist in a recent article.

I'm sure we all know of friends who created businesses which are now worth millions of dollars because they decided to venture out on their own after being retrenched. Retrenchment can be a blessing in disguise for some. (I knew someone who was retrenched by ST Aerospace, and today he is running his own business, and rich enough to buy a private landed property. I don't think he could afford it if he had remained as Senior Technician in ST Aerospace)

The key, I guess, is not to lose hope - despite how bleak the outlook may seem now. And if one were to assume risk, let it be with capital that one will not need for at least 3-5 years. In the meantime, be grateful for what you have - be it your health or time with your family.

The writer is a CFA charterholder

Thursday 25 December 2008

Property investing - doing the math

MOST individual investors of real estate have a gut feel about whether they made, lost or broke even after holding their property for a certain period. In reality, few attempt to do the math to measure how well the investment truly performed and whether they were rewarded for the risks they took.

The only ones who are fairly confident of quantifying their profit or loss are the 'flippers' who speculate and deal in the sub-sale market without involving bank loans, rental income and outgoings.

This article takes the reader through two real-life case studies of investing in private residential properties in Singapore over two different time periods. The focus is on getting a sense of timing, time horizon, interest rates, rental yields and rate of returns. The outcome is to help an individual investor assess if real estate investing is worth the risks involved.

Case 1: 1982 to 1991

Not many of us will recall that there was a red-hot residential property market in Singapore in the early 1980s. Condominiums were making a splash and the Central Provident Fund was made available for investment in properties. It's hard to believe but mortgage rates were in the low teens in Singapore at that time. The particular property in this case was in the Pandan Valley area. It was a brand new 1,000 sq ft studio apartment that was launched at $300 per sq ft. The initial tenancy was at $2,500 a month. This translated to a gross rental yield of 10 per cent, bearing in mind that mortgage rates were around 13 per cent a year.

Everything was fine until the recession of 1984. The monthly rent dropped to $900. The value of the condo unit languished at the $200,000 level for the next two years. The gross rental yield fell to a more realistic 5.4 per cent (annual rental of $10,800 divided by prevailing market value of $200,000), almost in line with mortgage rates prevailing through the brief recession.

If the owner had sold the property after holding it for five years, the capital loss would have been massive. However, the property market recovered and by 1991, this studio apartment was sold for $400,000. The owner was not prepared to hold on because of the uncertainties connected with the first Gulf War.

More importantly, the investor decided to use the proceeds to upgrade his primary residence. Intuitively, he was satisfied that he had broken even in terms of cash flow. But he did not know (or care) that his actual internal rate of return (IRR) was only 6 per cent a year for the 10-year holding period.

Incidentally, an opportunistic investor who bought an identical unit in 1987 would have realised an IRR of 34 per cent a year in 1991. (see sidebar).

The question is: Was the investor who held the property from 1982 to 1991 - while suffering the throes of economic upheavals - fairly rewarded for the risks he took?

Case 2: 1996 to 2007

This period in time will be more familiar to most of us. The climax of the bull market of the 1990s came about unexpectedly when the government intervened in May 1996 with anti-speculation measures. Our second investor bought a brand-new condo in District 9, a few months prior to the drastic new housing rules. The 1,300 sq ft three-bedroom unit was acquired at $1,200 psf, or $1.56 million. The first tenant paid $4,500 a month for a gross rental yield of 3.6 percent. The interest rate was 5 per cent a year in the initial period, but steadily dropped to 1.5 per cent in 2001.

Till today, this condo is very marketable and the maximum period of vacancy between tenants was six weeks. The rent fell to $3,000 a month in 2000 for a gross yield of 4 per cent (annual rental of $36,000 divided by the market value of $900,000 in the downturn years).

Other property owners who did not have the holding power were forced to sell at a loss at around the turn of the millennium. Our investor took the lumps and hung on. By the end of 2006, with strong interest for second tier properties, the investment broke even compared to the original purchase price in 1996.

If this unit is sold today, the investor can pocket $1 million after settling with the bank (sales price of $1.8 million less outstanding mortgage of $800,000). The internal rate of return from the date of acquisition now stands at 3 percent a year over 11 long years.

The question is: Should the owner sell now or wait for a more respectable return? What is the appropriate benchmark to gauge if this investment has met the threshold for an acceptable return?

The two real-life cases were selected to demonstrate that timing in property investment is critical. Peak to peak time horizon within a property cycle may result in a lower than optimal rate of return. Investors cannot anticipate external forces that may derail the best laid plans. Speculators know this too well and they have no intention of holding property longer than necessary. It's simply capital gain they chase.

Exposure to real estate is part of a sound overall investment strategy. This exposure may not necessarily be in bricks and mortar (which has no liquidity) and should be beyond Singapore (for diversification). One alternative for liquidity and diversification is to invest in a portfolio of global property shares, funds and Reits. Due to higher risks, the expected rate of return from a well-timed property investment will be higher than a globally diversified portfolio of property securities.

If we assume an average inflation rate of 3 per cent a year in Singapore, then any investment should exceed this minimum return in the medium to long term. Then, there is the risk premium for property: an average net rental yield of 3 per cent and capital gain of 5 per cent add up to 8 per cent a year total return, or 5 per cent a year above inflation.

A useful proxy for the local landscape is the All Singapore Equities Property Index (left). The total return for the period August 1997 to August 2007 was 4 per cent a year. That's a dreadful performance indeed for the long-term investor in Singapore property stocks during this eventful decade. Maybe our Case 2 investor should not feel too badly after all.

In conclusion, investing in residential property provides pride of ownership and a hedge against inflation. Whether it delivers adequate income or capital gains to an investor depends on many factors. In a nutshell, the property investor should acquire a quality product, pay a reasonable price and have the ability to hold for a long enough time horizon to earn the appropriate return.

The property agent, conveyancing lawyer and banker play their part in the buying and selling of the asset. These roles are necessary to ensure a smooth transaction. An experienced financial adviser can offer advice on the required return on investment, asset allocation and risks connected with the property as part of an overall investment portfolio.

Roy Varghese is director, financial planning practice at ipac Singapore. The views expressed are his.

Investing in property may be less profitable than buying shares

Investing in property may be less profitable than buying shares

SHARE markets have generally produced higher investment returns than residential property over the long term.

Theoretically, then, those who rent a property and invest their money in quality shares should be wealthier than those who concentrate on paying off their homes.

However, the discipline of meeting regular mortgage payments and gradually taking ownership of a tangible asset, means home owners usually do better financially than those who rent.

Nevertheless, investing in residential property other than your family home is likely to result in higher risk and lower returns than investing in quality shares.

An economy in which business is performing well is likely to be one in which the property market is also growing strongly.

One of the main reasons shares outperform property over long periods is that demand for property, in a market-based economy, is derived from the success of business.

Of course, the business cycle and the property market do not work in perfect lockstep.

There are periods of economic stagnation in which the property market enjoys a 'catch-up' boom, and periods of recovery in which it goes through a down cycle.

On average, the risks of investing in property are understated and returns from investing in property are overstated.

As a result, investors pour too much money into residential property, forcing prices higher than they would be if investors accounted fully for the potential risks and returns.

Five myths about property investment hold sway in every boom:

- Property values are not as volatile as share prices;

- Property prices never fall;

- Property prices might fall occasionally, but never as far as share prices;

- Property prices rise with the cost of living, so investment in property always keeps you ahead of inflation; and

The only way to lose money on property is to buy real estate in a declining population centre, or a house on the main road.

So why are property risks understated?

Property seems easy to understand, so investors may have a perception of control. Property has the ability to elicit an emotional response unlike shares or bonds, which lack the sense of substance and permanence that attracts people to property.

Just as important, the pricing of residential property is infrequent and informal. Property investors never see red ink on a statement unless it is on the day of the sale.

And most property investors never formally evaluate the performance of their investments at all. Imagine if you looked in a newspaper at the price of your home each day, just as you do with the price of your shares. Your attitude to risk would most likely be quite different.

Returns achieved from property are also generally overstated, which has the effect of further narrowing the risk/return trade-off for the asset.

Indexes that measure property market performance generally capture only the increase in the sale price of existing dwellings, but fail to take into account major developments in a nation's housing stock.

Share investors can effectively 'buy the market' and participate in its long-term performance because of the ready availability of accumulation indexes that are net of costs incurred in achieving gains.

Investors cannot 'buy' the return of the residential property market like this, because the sales measures available are gross of costs such as construction outlays.

In practical terms, investing in residential property has it own risks, not unlike investing in a single stock. While these risks can be mitigated through research into location, the quality of the property and so on, opportunities for broad diversification and protection of a residential property investment portfolio are more restricted.

The one main advantage of investing in residential property is that individual investors with time on their hands have a greater ability to add value to their investment.

For many people, buying a family home is their one truly effective means of saving.

But for the amateur investor, who does not wish to become a property investor, investing in a residential property is likely to be expensive, more time-consuming and riskier than investing in a well-run, diversified share portfolio. And it will probably yield a lower return too.

Arun Abey and Andrew Ford
Sun, Oct 28, 2007
The Sunday Times

Tuesday 23 December 2008

Noble - Got it back @ 0.96

Gone fishing at Batam for 2 nights and now back to Market to fish for Noble. Oh, got a catch @ 0.96. Hope for a biggie. Cheers!

Wednesday 17 December 2008

Noble - consolidating or breakout coming?

I won't make the same MISTAKE

During the lunch break, one guy wearing a T-shirt with his back facing me with the words "I won't make the same MISTAKE" sitting directly opposite my table.

Hey, it is disturbing and reminding me of the repeated mistakes that I have made that leading to big losses in 2008. I have already chopped off all the five fingers on the left hand. Any more same mistake, I got to chop off the toes now as I can't probably chop off the fingers on the right hand while still holding a chopper.

Really no more same MISTAKE!!! Cheers.

Noble - Santa filled the Noel Socking @ 1.11

Noble again provided weekly allowance.

Round 4 (1st Half): ROC 14%, 8 days
Round 3: ROC 7.1%, 8 days
Round 2: ROC 31.6%, 20 days
Round 1: ROC 16.3%, 28 days

Tuesday 16 December 2008

Noble - consolidating?

Trade successfully for a Pillow Stock

It is my dream to trade successfully for a series of wins and to get a pillow stock, and slowly over time to build up a portfolio of pillow stocks to become a bed for me to sleep soundly and have nice dreams.

Hope that in 2009 this dream will come true. Cheers.

Saturday 13 December 2008

When it comes to Money Management - irrational behaviour?

A 45-year-old widow - believed to have lost HK$5 million of her late husband's insurance money in Lehman minibonds - was discovered on Thursday night trying to kill herself, local media reported.

Irrational behaviour - dump all eggs to buy one Golden Goose to lay golden eggs and hopefully to grow into a Golden Cow.

Having lunch with a colleague, she has about $200K saving and thinking of dumping into property next year. Wise investing or irrational behaviour like dumping all eggs to buy one Golden Goose to lay golden eggs and hopefully to grow into a Golden Cow.

The couple is working with two pre-school kids. Wise investing strategy? Hope so. Going forward. How bad and how long will this recession last? Nobody can be sure of staying employed or future earning will not be cut. Once cut, it will unlikely to be restored.

Their kids are growing up and entering school soon, their family expenses are going up, and will ever be increasing until their kids start working. Saving is going to be harder and not easier.

Expenses on kids will be the biggest single household expenses going forward after their residential home.

With $200K, and using leveraged Golden Goose to lay eggs and hopefully to grow the Golden Goose into Golden Cow. Wise investing?

The big difference between stock and property investing is the risk and leverage factors. Stocks are always riskier as company can go bankrupt, but it can be mitigated through money management by not exposing any one counter to more than 5% of your capital or portfolio value (periodically, taking off some profit to re balance the portfolio.

When you invested in stocks, most likely you are investing your own money to make money. When you lose, you lose your own money and that is all.

When you buy property, most likely you will be leveraged and you are using somebody Else's money to make money. When you cannot pay up, and since it is not your money, the lender is going after your blood to make sure that his money is safe.

When the tide is high, the beach looks so beautiful and the sea water so clear. When the tide ebbs and becomes so low, the sea water becomes so muddy, and the beach now looked so dirty and ugly. You will be sorry how you have ended in this beach.

So one has to decide the right strategy: To have an Investment Strategy of 20 Ugly Ducklings, and hopefully a few of these Ugly Ducklings will turn into some Beautiful Swans or one Golden Goose that turns into a Golden Cow.

Finally, it is ROC over a particular time frame that counts. Probably, the attractiveness in Property Investing over Stock Investing is that you can afford to be lazy and there is no need to watch the Market and property as an asset class is relatively safer.

It is damned tiring and heartbreaking to watch your portfolio dropping each day.

But, hey when your valuation of your property or your car drop, you feel okay leh.

Strange behaviour hor???


I hope she will understand what I am telling her. Probably, by looking at her facial expression, she may think that I am a Heartlander and know nuts about property investing.

Thursday 11 December 2008

Noble - still in up trend?

Wednesday 10 December 2008

Noble - breaking resistance?

Tuesday 9 December 2008

Is STI nearer or farther away from 1200?

To wait for 1200 or to jump in at the next correction.

Like a man who once saw ten rabbits coming out from a hole to chew at juicy grasses near the hole. He quickly approached the rabbits with a small net hoping to catch some, but the rabbits saw him coming and quickly jump back into the hole.

Later, he went back home to prepare a huge net to catch the rabbits. This time, he stood near the hole and waited patiently for the rabbits to come out of the hole. If the rabbits appeared, he would then scoop them up with his huge net. But, alas, he waited each day, but no rabbit came out of the hole.

Many days has passed but still no rabbits so he waited and waited ...

Noble - Looking at Exit, where?

Life of a Trader is hard. After getting onto the HIGHWAY, now have to look EXIT or may get crushed again.

Noble- Got @ 0.965 for Round 4

Bought @ 0.965 after waiting for Christmas Sale which somehow did not start early

Wednesday 3 December 2008

Noble - another day of waiting

What is Wealth? I am not Rich nor a Millionaire

Wealth as measured by time

Wealth has also been defined as "the amount of time an individual can maintain his current lifestyle for, without any new income." For example if a person has $1000, and their lifestyle dictates $1000 per week of expenses, then their wealth is measured as 1 week. Under this definition, a person with $10,000 of savings and expenses of $1000 per week (10 weeks of wealth) would be considered wealthier than a person with $20,000 of savings and expenses of $5000 per week (4 weeks of wealth).

The difference between income and wealth

Wealth is a stock that can be represented in an accounting balance sheet, meaning that it is a total accumulation over time, that can be seen in a snapshot. Income is a flow, meaning it is a rate of change, as represented in an Income/Expense or Cashflow Statement. Income represents the increase in wealth (as can be quantified on a Cashflow statement), expenses the decrease in wealth.

If you limit wealth to net worth, then mathematically net income (income minus expenses) can be thought of as the first derivative of wealth, representing the change in wealth over a period of time.

Sustainable wealth

According to the author of Wealth Odyssey, Larry R. Frank Sr, wealth is what sustains you when you are not working. It is net worth, not income, which is important when you retire or are unable to work (premature loss of income due to injury or illness is actually a risk management issue).

The key question is how long would a certain wealth last? Ongoing withdrawal research has sustainable withdrawal rates anywhere between approximately 3 percent and 8 percent, depending on the research’s assumptions. Time, how long wealth might last, then becomes a function of how many times does the percentage withdrawal rate go into all the assets. Example: withdrawing 3 percent a year into 100 percent equals 33.3 years; 4 percent equals 25 years (My Targetted Wealth); 8 percent equals 12.5 years, etc.

This ignores any growth, which presumably would be used to offset the effects of inflation. Growth greater than the withdrawal rate would extend the time assets may last, while negative growth would reduce the time assets may last. Clearly a lower withdrawal rate is more conservative. Knowing this helps you determine how much wealth you need also. Example: you know you will need $40,000 a year and use a 4 percent withdrawal rate, then you need to use 5 percent and therefore need $800,000, etc. This simple “wealth rule” helps you estimate both the time and the amount.

Finally, I am not Rich nor a Millionaire. Know the difference.
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