Portfolio Allocation / Management

[shanrui_91]

If I have not taken up the loan, I will borrow from my parents a total of 36k to pay the school fee for 4 years.

Now, I take up the interest-free loan and if I get a 2.5% return pa for the 4 years before I use it to repay the loan I will save up $2250 as compared to a status quo. So I am definitely better off now on the assumption that I can make some return which I have 99% chance if I put in FD or retail bond.

I am debt-averse so I do hope to pay the debt fully before interest rate kicks in.

it gets a bit complicated if you talk about school fee, so a hypothetical generic qns will be easier to understand

"If someone were to provide you with a $36000 4 years interest free loan, what will you do with it? You can choose to repay in full amount before the 4 years are up and you will not have to pay any interest. However, if you fail to repay in full, you will be charged 4.75% interest rate annually.

Will you put it in fixed deposit (ICICI 1.55%) , retail bond (F&N 2.48%) or dividend stock(SPH 5-6%) or in any other proportion? "

[pianist]

IMO, if there's anything to be learnt from the financial crisises, it's that any rerating is usually done by Foreign Funds moving their huge funds in and out of our market. Even now, many a time, I can observe a usually not so liquid stock suddenly come alive with huge volume (either buy up or sell down) over an extended period of time. Most likely some Funds suddenly decided to buy/sell. This is how PE got rerated..

how to spot early when foreign funds are coming in/out?

[karlmarx]

Hi all, need some input on this matter

If someone were to provide you with a $36000 4 years interest free loan, what will you do with it? You can choose to repay in full amount before the 4 years are up and you will not have to pay any interest. However, if you fail to repay in full, you will be charged 4.75% interest rate annually.

Will you put it in fixed deposit (ICICI 1.55%) , retail bond (F&N 2.48%) or dividend stock(SPH 5-6%) or in any other proportion?

4 years is a pretty long time. I will go with one or two stocks to be owned over this period. Market risks are reduced over a long investment time horizon (and good stock picks). Furthermore, your busy school schedule should distract you sufficiently from touching your portfolio, and worse, worrying over it.

[KopiKat]

Hi all, need some input on this matter

If someone were to provide you with a $36000 4 years interest free loan, what will you do with it? You can choose to repay in full amount before the 4 years are up and you will not have to pay any interest. However, if you fail to repay in full, you will be charged 4.75% interest rate annually.

Will you put it in fixed deposit (ICICI 1.55%) , retail bond (F&N 2.48%) or dividend stock(SPH 5-6%) or in any other proportion?

4 years is a pretty long time. I will go with one or two stocks to be owned over this period. Market risks are reduced over a long investment time horizon (and good stock picks). Furthermore, your busy school schedule should distract you sufficiently from touching your portfolio, and worse, worrying over it.

It really depends on yourself ie. how risk averse, how experienced, how confident,... how much time you have.

If it were me during my undergrad days, I'd go for something safer, likely Blue Chip Bonds. But, if it were me now (more experienced and a lot wiser than my study days), I'd definitely go for SPH or other Yield Stocks.

---

IMO, if there's anything to be learnt from the financial crisises, it's that any rerating is usually done by Foreign Funds moving their huge funds in and out of our market. Even now, many a time, I can observe a usually not so liquid stock suddenly come alive with huge volume (either buy up or sell down) over an extended period of time. Most likely some Funds suddenly decided to buy/sell. This is how PE got rerated..

how to spot early when foreign funds are coming in/out?

I have no idea!

I was only sharing my opinion on how stocks possibly got re-rated. The key players in our stock market are not you and me, but rather, the big Funds. So, it's not inconceivable that in most cases, assuming there's no fundamental changes in a listco, why then would it suddenly get re-rated? It has to be due to these Funds through either continued buying up or selling down.

For eg. why is it that as recent as Feb-12, I could buy Starhub @ $2.8x but today, it closed @ $3.45, >20% up? I don't see the other TELCOs enjoying similar gains, so it can't be an Industry wide re-rating. Q1 results doesn't look so fantastic to warrant such an increase. So, how to explain? My recent selling consistently shows the same Counter Parties - JPM and CS. Although I have no proof, I imagine there's a very high chance some Funds are accumulating (they must have done a re-rating for Starhub) and continue to just buy it up. At what price they'll stop buying? I don't know!

[bb88]

I have 3 NCPS take make up total of 42% of my portfolio.
3 REITs total 15%
1 Infra 6%
1 electronic 7%
1 textile 21%
1 property developer 9%

Mostly all dividend (coupon included) paying, mostly dividend play. Cash in bank is about another 30% of my portfolio size.

Started with SGS 3mth T-shares around 2006/2007 period. Got into NCPS in late 2008, started subscribing to IPOs in late 2010, entered the equities market in mid 2011. So far all buys no sells. Sad to say, all my "equities" positions (less IPOs) are in the red. IPOs are green. Best performing so far is MIT with 27% gain from IPO price but sadly only 4 lots which is kinda insignificant.

My NCPS is returning decent rates of nearly 5% pa and 5%+ on paper capital gain. This is what is largely holding my portfolio up.

Am looking to divest my OCC NCPS in the next 1-2years when the coupon rate gets tied to SIBOR/SOR and let the other 2 run till redemption. I think NCPS provide stable returns to buffer losses so will continue to hold. My intention before entering equities was to invest as much as the stable returns can buffer the losses so that I hopefully get zero return do not lose wealth/capital.

Unfortunately now my paper loss has more than doubled my project dividend returns and yet I'm wanting to take up more position against my initial guideline.

Hopefully my portfolio in the next 2 years will have 20-30% in NCPS, 20-30% REITS, 10-20% of blue chips, 20-30% of value/penny counters, 10% of "speculative" counters.

I think this will provide somewhat reasonable fixed income, buffer against wealth loss, and some potential to yield 10%+. Target to have a fixed income that will cover my "basic expenses" within 3 years.

[Temperament]

{Am looking to divest my OCC NCPS in the next 1-2years when the coupon rate gets tied to SIBOR/SOR and let the other 2 run till redemption.}

Can you confirm NCPS & CPS redemption date? i think these have perpetual redemption date at the pleasure of the issuers. Another words if issuers call for redemption the current bank borrowing interest rate will be lower. Can the borrowing rate drop below zero?

[Jacmar]

Another words if issuers call for redemption the current bank borrowing interest rate will be lower. Can the borrowing rate drop below zero?

The unthinkable can happen:

From Bloomberg-
ECB considers rate cuts to zero or even lower

Move could boost lending by deterring banks from parking liquidity with ECB

[Jared Seah]

It has happened, and will happen again.

We are living in times of financial manipulations.

Some got shocked when someone suggested banks can be a ponzi scheme.

Well, Allen Stanford is one such banker.

Some countries are no better. Keep saying our finances are OK, our banks are well capitalised, but what happened? Now finally admit and ask for bank bailouts.

Once upon a time, some western people believed in the big welfare states with all its wonderful entitlements. After a lifetime of contributions, now under austerity, the promised pension is cut, and heavens forbid, entitlements are being reviewed...

Is this a ponzi?

What more about companies and their promises?

I not negative. I open eyes big big.

[bb88]

{Am looking to divest my OCC NCPS in the next 1-2years when the coupon rate gets tied to SIBOR/SOR and let the other 2 run till redemption.}

Can you confirm NCPS & CPS redemption date? i think these have perpetual redemption date at the pleasure of the issuers. Another words if issuers call for redemption the current bank borrowing interest rate will be lower. Can the borrowing rate drop below zero?

They are perpetual, but callable at issuer's discretion come come certain years and on every coupon payout date thereafter.

I'm comfortable with the close to 5% payout and I was willing to them sit for the long term (10yrs and beyond) when I vested. Even if they do not get called, I can either divest through the secondary markets or hold for the next decade when I would have "broken even". I pretty much believe the 3 local banks would still be around then.

I was slightly regretful that I did not become more financially aware otherwise I would have increased my holdings buying from the markets when they were hitting $80-90 during the lehman period. The yield would had been rather nice.

The reason for wanting to divest OCC was that the 5.1% coupon would be changed to SIBOR or SOR + some percentage would I believe would no longer be interesting. Intending to sell 2 coupons dates before that before the price adjusts to match the yield.

[Temperament]

{Am looking to divest my OCC NCPS in the next 1-2years when the coupon rate gets tied to SIBOR/SOR and let the other 2 run till redemption.}

Can you confirm NCPS & CPS redemption date? i think these have perpetual redemption date at the pleasure of the issuers. Another words if issuers call for redemption the current bank borrowing interest rate will be lower. Can the borrowing rate drop below zero?

They are perpetual, but callable at issuer's discretion come come certain years and on every coupon payout date thereafter.

I'm comfortable with the close to 5% payout and I was willing to them sit for the long term (10yrs and beyond) when I vested. Even if they do not get called, I can either divest through the secondary markets or hold for the next decade when I would have "broken even". I pretty much believe the 3 local banks would still be around then.

I was slightly regretful that I did not become more financially aware otherwise I would have increased my holdings buying from the markets when they were hitting $80-90 during the lehman period. The yield would had been rather nice.

The reason for wanting to divest OCC was that the 5.1% coupon would be changed to SIBOR or SOR + some percentage would I believe would no longer be interesting. Intending to sell 2 coupons dates before that before the price adjusts to match the yield.

If you are happy with your "homework", so be it. Shalom.