What is a realistic return on value investing?

[CityFarmer]

Thanks for all the valuable feedback, appreciate that.

It does make me wonder why so many people continue to buy unit trust since the returns are poor and there are so many hidden costs.

Worse are the ILPs which add another layer of cost on top of the fund costs to the insurance companies.

Previously unit trust of manulife comes with front-loading sale charge of 5%, and later change to 3%. It is still much higher than the POEMS unit trust, can be as low as 0.75% sale charge.

I did put up direct question to my manulife adviser. How does he think about it? He keep silent and smiling...

[arthur]

Thanks for all the valuable feedback, appreciate that.

It does make me wonder why so many people continue to buy unit trust since the returns are poor and there are so many hidden costs.

Worse are the ILPs which add another layer of cost on top of the fund costs to the insurance companies.

Beside POEMS unit trusts, you may explore Fundsupermart as well as Dollardex.
Both of them have low front-load sales charges.

[shanrui_91]

I am a strong advocator of ETFs for those looking to buy unit trust. ETFs has one of the lowest cost available which will help to boost your return as well as providing diversification for those with limited capital, knowledge and time.

never ever go to any bank to purchase any product recommended as you are likely to be paying for the saleman's commission. The only reason why one should purchase unit trust is that he has acquired the ability to find the best fund manager without even meeting him in person.

[corydorus]

I would like to repeat ... Never ever and ever go the bank to purchase ... unit trust.
Bank Preference shares in SGX maybe a good alternative.

[KopiKat]

Seems like the best way to get good returns is not really stock picking buy & hold but selling and keeping cash when the market is very high and then loading back when the market drops?

Most of my gains came from buy and hold for at least a period of more than 2 years.
The gains typically came from doubling of revenue or profits, increase dividends, realisation of undervalued assets or buyouts. To enjoy these gains, it is necessary to adopt a buy and hold technique since no one will know when the above events will transpire.

Buying at low will improve the odds of outperforming the market return but it is basically a hit or miss action.

However, as I had written, the stock selection strategy will in a way cap your returns over a long period of time. If 15% is desired as a long term outcome, a predominantly blue chips and REITs portfolio is unlikely to see that kind of return over a long period of time.(Can you imagine SPH, SMRT, Singtel growing at 15% annually for the next 5-10 years???)

Of course, there are always exceptions that will prove me wrong.

For Blue Chips, some common characteristics are, Low or No Growth which means they usually pay out most of their EPS as Dividend for a good Yield.

That means, yes, you are not going to get 15% (Dividend + Capital Gains) kind of returns annually. Even 10% will be tough. It's likely going to be in the 4% to 8% range.

BUT, if you are a die-hard fan (that means you die-die must have some in your portfolio and you are very familiar with their biz and have your own sets of valuations) of Blue Chip Yield Stocks, there're always ways of squeezing out some extra % returns from them, such as,

1) If you simply look at the Price Charts for any of the above stocks, it'd not be very surprising to see that many has at least ~10% gap between their Year High and Low. That usually happen during their cd/xd time frame. I'd posted extensively on how I take advantage of this in the SPH thread and if you can successfully do it twice a year (SPH pays div twice a year), a 10% return is not impossible. To get 15%, you'd need to do it more often (taking advantage of market fears and greeds) but if I were to post the number of times I do that in this forum, I'd most likely get a warning / banned for turning this Value forum into a Trading one!

2) Buy during exceptional times of duress (I learn this from my idols like Warren Buffett / Peter Lynch). Every once in a while, the company does something which the market doesn't like - can be either within their control or outside their control and the market punishes the share price. It can feel like an end-of-the-world kind of feeling if you so happen to be holding the stock (as a die-hard fan). Some notable examples over the years are,

a) StarHub - They lost the EPL rights ~3 years back and share price dropped from $2.3x to $1.8x.

b) SPH - They over-bidded substantially (compared to next highest bidder) for Clementi Mall. I can't remember how much the share price dropped but it was easily at least 10% (?).

The key is, during such times, as a die-hard fan who ought to know better that such events have only a very very low % of probability that it'd really lead to an actual end-of-the-world outcome, we ought to be gleefully collecting more of these stocks (after analysing and re-anlysing the financials again). That's where the 15% kind of annual returns are going to come from such boring no growth Blue Chips. Look at Starhub price now, $3.3x, almost a 2-bagger from less than 3 years back! If you include the dividends, then even higher.

[mobo]

This is all very interesting... I am learning a lot

But can I just do an informal poll (I trust participants here are not like the usual big cannon fairies in CNA or HWZ) who here has 10 yrs of investment experience and has managed to make a compunded return of 8% - 10% p.a.

If you have a shorter history perhaps can also state when you started investment and what is the compunded annual return up to now so far?

To start off for myself:

Started Investment: February 2012
Return up to 19 June 2012: -7.4%

Looking forward to more responses!

[Temperament]

Seems like the best way to get good returns is not really stock picking buy & hold but selling and keeping cash when the market is very high and then loading back when the market drops?

Most of my gains came from buy and hold for at least a period of more than 2 years.
The gains typically came from doubling of revenue or profits, increase dividends, realisation of undervalued assets or buyouts. To enjoy these gains, it is necessary to adopt a buy and hold technique since no one will know when the above events will transpire.

Buying at low will improve the odds of outperforming the market return but it is basically a hit or miss action.

However, as I had written, the stock selection strategy will in a way cap your returns over a long period of time. If 15% is desired as a long term outcome, a predominantly blue chips and REITs portfolio is unlikely to see that kind of return over a long period of time.(Can you imagine SPH, SMRT, Singtel growing at 15% annually for the next 5-10 years???)

Of course, there are always exceptions that will prove me wrong.

For Blue Chips, some common characteristics are, Low or No Growth which means they usually pay out most of their EPS as Dividend for a good Yield.

That means, yes, you are not going to get 15% (Dividend + Capital Gains) kind of returns annually. Even 10% will be tough. It's likely going to be in the 4% to 8% range.

BUT, if you are a die-hard fan (that means you die-die must have some in your portfolio and you are very familiar with their biz and have your own sets of valuations) of Blue Chip Yield Stocks, there're always ways of squeezing out some extra % returns from them, such as,

1) If you simply look at the Price Charts for any of the above stocks, it'd not be very surprising to see that many has at least ~10% gap between their Year High and Low. That usually happen during their cd/xd time frame. I'd posted extensively on how I take advantage of this in the SPH thread and if you can successfully do it twice a year (SPH pays div twice a year), a 10% return is not impossible. To get 15%, you'd need to do it more often (taking advantage of market fears and greeds) but if I were to post the number of times I do that in this forum, I'd most likely get a warning / banned for turning this Value forum into a Trading one!

2) Buy during exceptional times of duress (I learn this from my idols like Warren Buffett / Peter Lynch). Every once in a while, the company does something which the market doesn't like - can be either within their control or outside their control and the market punishes the share price. It can feel like an end-of-the-world kind of feeling if you so happen to be holding the stock (as a die-hard fan). Some notable examples over the years are,

a) StarHub - They lost the EPL rights ~3 years back and share price dropped from $2.3x to $1.8x.

b) SPH - They over-bidded substantially (compared to next highest bidder) for Clementi Mall. I can't remember how much the share price dropped but it was easily at least 10% (?).

The key is, during such times, as a die-hard fan who ought to know better that such events have only a very very low % of probability that it'd really lead to an actual end-of-the-world outcome, we ought to be gleefully collecting more of these stocks (after analysing and re-anlysing the financials again). That's where the 15% kind of annual returns are going to come from such boring no growth Blue Chips. Look at Starhub price now, $3.3x, almost a 2-bagger from less than 3 years back! If you include the dividends, then even higher.

That's why i say i am a "Rojak" investor. And i can tell you it's quite difficult to practise as one. The most important after all is said, are common-sense , patience and your psychology make-up.
And now i like to add in a reminder even WB, the late John Templeton and many Greats- use "Market Timing" (read opportunities) after using all their expertise weapons - "value & fundamental investments". This is after all using common-sense, patience and psychology. NO? Then it's only my 2 cents worth. O. K.

[CityFarmer]

For Blue Chips, some common characteristics are, Low or No Growth which means they usually pay out most of their EPS as Dividend for a good Yield.

That means, yes, you are not going to get 15% (Dividend + Capital Gains) kind of returns annually. Even 10% will be tough. It's likely going to be in the 4% to 8% range.

BUT, if you are a die-hard fan (that means you die-die must have some in your portfolio and you are very familiar with their biz and have your own sets of valuations) of Blue Chip Yield Stocks, there're always ways of squeezing out some extra % returns from them, such as,

1) If you simply look at the Price Charts for any of the above stocks, it'd not be very surprising to see that many has at least ~10% gap between their Year High and Low. That usually happen during their cd/xd time frame. I'd posted extensively on how I take advantage of this in the SPH thread and if you can successfully do it twice a year (SPH pays div twice a year), a 10% return is not impossible. To get 15%, you'd need to do it more often (taking advantage of market fears and greeds) but if I were to post the number of times I do that in this forum, I'd most likely get a warning / banned for turning this Value forum into a Trading one!

2) Buy during exceptional times of duress (I learn this from my idols like Warren Buffett / Peter Lynch). Every once in a while, the company does something which the market doesn't like - can be either within their control or outside their control and the market punishes the share price. It can feel like an end-of-the-world kind of feeling if you so happen to be holding the stock (as a die-hard fan). Some notable examples over the years are,

a) StarHub - They lost the EPL rights ~3 years back and share price dropped from $2.3x to $1.8x.

b) SPH - They over-bidded substantially (compared to next highest bidder) for Clementi Mall. I can't remember how much the share price dropped but it was easily at least 10% (?).

The key is, during such times, as a die-hard fan who ought to know better that such events have only a very very low % of probability that it'd really lead to an actual end-of-the-world outcome, we ought to be gleefully collecting more of these stocks (after analysing and re-anlysing the financials again). That's where the 15% kind of annual returns are going to come from such boring no growth Blue Chips. Look at Starhub price now, $3.3x, almost a 2-bagger from less than 3 years back! If you include the dividends, then even higher.

Hi KopiKat, you are back. Having "school holiday" with your kids?

This theory behind the approach is rather simple, but the "practical" part needs skills.

- Skill of identify the good slow-grower (or no grower) which can remain resilience with the "end-of-the-world" news. This will ensure you are not catching a falling knife, but a falling gold bar

- Skill of having insight of the "slow-grower (or no grower)", to determine the price to "rotate" and lock-in the profit. You may not want to exit a stock thinking it is a slow-grower, but it end up a fast grower.

I am a strong supporter of the approach, and i am practicing it, and hopefully will be as successful as KopiKat

[KopiKat]

Hi KopiKat, you are back. Having "school holiday" with your kids?

Haha.. good to be back and happily doing my switching routines!
A bit sad I wasn't around for the recent stocks sale. But, there'll always be ample opportunities with the rest of the PIIGS.

I am a strong supporter of the approach, and i am practicing it, and hopefully will be as successful as KopiKat

Be careful.. I only post the successful ones as examples.. Hee...

[CityFarmer]

Hi KopiKat, you are back. Having "school holiday" with your kids?

Haha.. good to be back and happily doing my switching routines!
A bit sad I wasn't around for the recent stocks sale. But, there'll always be ample opportunities with the rest of the PIIGS.

I had managed to collect more during the last cycle. I agree, there is never-ending story of PIIGS, at least for the near future.

I am a strong supporter of the approach, and i am practicing it, and hopefully will be as successful as KopiKat

Be careful.. I only post the successful ones as examples.. Hee...

YMMV, understood