Investment advice

[gzbkel]

Hello all

Would like to ask for some advice/opinion regarding my current situation.

I am quite deeply vested in Singapore REITs (about 65% of my net worth).
I have started accumulating about 5 years ago. At the start I mainly invested blindly based on advice of family/relatives, so I am not very familiar with my own investment, until recently.

Recently I started to pay more attention (mainly because I want to retire early), so I started reading books, websites, look at prices and so on.
What I noticed is that REIT has a rather steep drop in price since last May, due to the end of QE tapering talk and also the rise in 10 year SGS yield from about 1.5% to 2.5%.
From what I read, REITs yields usually maintain a "spread" over the risk-free rate (10 year SGS) which is the risk premium. So when SGS yield rise, REITs yield also rise by roughly the same amount, so REIT prices dropped quite drastically in the 2nd half of last year.

What worries me is that some people on the net (analysts, bloggers, etc) are saying that the 10 year SGS yield may rise more to stabilize at about 3.5%. I did some very rough calculations using excel, and I estimate that REIT prices may drop another 15-20% with another 1% price in bond yield (assuming that the risk free spread and DPU stays the same).

So it seems that now is a bad time to invest in REITs, and in fact it may be better to reduce holdings until the 10 year SGS yield stabilizes. So now I must decide what to do with the money if I liquidate some of my REITs.
Since interest rates are rising, I think it is also a bad idea to go into government or corporate bonds.

I think I should go into equities, but I lack experience for value investing right now. I read the posts on this forum with interest, but I think it is a long hard road to get the level of skills required to profit from value investing.
Instead, I am thinking of just buying the STI ETF whenever there is a dip (Like last Sep or this Feb).

I would like to hear your views on the following:
- Do you agree that REITs are likely to drop more? Is it advisable to liquidate part or all now while prices are still relatively high?
- Is it a good idea to invest a lot of money in a index fund like STI? Are there better alternatives for a casual investor?

Thanks!

[Temperament]

i was a newbie once too. who isn't?
After a while, if you manage to survive at least two severe Bear Markets, you will come to realise there are so many ways to invest that can make money. In other words, there is no holy grail in investing. You will find all types of Gurus from day traders to long-term investors making money in the markets.
In other words, you will have to look for your own niche or find your own edge in the market.
My only advice is always think can you survive in the next severe Bear Market?
And not how to make more and more money.
i hope it helps you to understand better about investing in the market.

[CityFarmer]

For the topic on REITs, you might be able to find buddies' opinion with the following thread.

http://www.valuebuddies.com/thread-422-page-29.html

[Temperament]

PLUS get this book from NLB or $.
“Building Wealth through REITs” by Bobby Jayaraman

[Temperament]

Maybe this may be useful too. Whatever it is Caveat emptor.

"Saturday, 26 November 2011
The REIT myth busted
Whatever Reits pay out in dividends, they will take back a few years later in the form of rights issues"
By TEH HOOI LING

Or
http://wealthstory.blogspot.sg/2012/02/r...usted.html

[gzbkel]

Hi Temperament, CityFarmer

Thanks alot for the links and book recommendation. Will look more into it.

Temperament, I do agree that there are many ways to make money.
For me, I am OK with average or mediocre returns. Mainly, I hope not lose money like what your signature says.
Now trying to find a way that suits my personality/skill (or rather lack of skills).

[CityFarmer]

Hi Temperament, CityFarmer

Thanks alot for the links and book recommendation. Will look more into it.

Temperament, I do agree that there are many ways to make money.
For me, I am OK with average or mediocre returns. Mainly, I hope not lose money like what your signature says.
Now trying to find a way that suits my personality/skill (or rather lack of skills).

I am not quality to advice, but let me share a thought.

I am mulling over a topic, what should I advise my daughter on investment, in the future (a very far future indeed)? At the moment, the options are the following, depending on her preference then

If the preference is passive and no time/effort will be allocated. Than may be a ETF seems an good option. Base on the current historical data, the return is approx 10% over long term, and should be sufficient to beat inflation and with a reasonable growth for her.

If the preference is, willing to learn, but a newbie then. Than may be a slightly active approach seems a good option. I will advise her to follow a approach similar as Joel Greenblatt's magic formula. Simply base on few fundamentals e.g. high earning yield and ROA/ROE, and with a reasonable diversification over 30-50 stocks, will do the trick, IMO. The return should be in the range of 20% over long term, if done right.

If I am lucky, or we are lucky, she is gifted for investment, and with great interest to learn, than a fully active approach should be a good option. A return of 30% or above is not unthinkable over long term, with a simple approach of "buy a dollar for 50 cents". The challenges are to make sure the dollar worth a dollar, and she is patience enough to wait for the 50 cents opportunities.

I hope I didn't bore anyone here.

[Temperament]

Hi Temperament, CityFarmer

Thanks alot for the links and book recommendation. Will look more into it.

Temperament, I do agree that there are many ways to make money.
For me, I am OK with average or mediocre returns. Mainly, I hope not lose money like what your signature says.
Now trying to find a way that suits my personality/skill (or rather lack of skills).

I am not quality to advice, but let me share a thought.

I am mulling over a topic, what should I advise my daughter on investment, in the future (a very far future indeed)? At the moment, the options are the following, depending on her preference then

If the preference is passive and no time/effort will be allocated. Than may be a ETF seems an good option. Base on the current historical data, the return is approx 10% over long term, and should be sufficient to beat inflation and with a reasonable growth for her.

If the preference is, willing to learn, but a newbie then. Than may be a slightly active approach seems a good option. I will advise her to follow a approach similar as Joel Greenblatt's magic formula. Simply base on few fundamentals e.g. high earning yield and ROA/ROE, and with a reasonable diversification over 30-50 stocks, will do the trick, IMO. The return should be in the range of 20% over long term, if done right.

If I am lucky, or we are lucky, she is gifted for investment, and with great interest to learn, than a fully active approach should be a good option. A return of 30% or above is not unthinkable over long term, with a simple approach of "buy a dollar for 50 cents". The challenges are to make sure the dollar worth a dollar, and she is patience enough to wait for the 50 cents opportunities.

I hope I didn't bore anyone here.

A return of 30% or above if annulised return is really super, super. Imagine 30% P/A return compounded over 20 to 25 years, wow!
Of course not in a straight line.
So far i have only 8 to10 %. P/A return.
i lost a lot of money too.
i need to pay tuition fees to MR. MARKET.
He won't teach me otherwise.
In fact, i never have a target of return P/A.
8 to10 %. P/A return, i am very happy already because i am a "ROJAK INVESTOR.

[kazukirai]

Hi CityFarmer,

How will you tell which category your daughter falls into?

[CityFarmer]

Hi CityFarmer,

How will you tell which category your daughter falls into?

I will not do so. My daughter will tell me, at a right time, with my help. The right time is many years down the road.

Furthermore it isn't a one-time decision. Transition from one method to another is possible, with changes in preference. As long as one knows the choice made, and sticks with the rules, it should be no issue.