Value Investor?

[specuvestor]

however many stocks one has or even if he buys ETF monthly or yearly, to me, it still would be one investment cat.

Let me explain:

to many folks out there, perhaps some 80% of singaporeans, their HDB forms their biggest asset. This could be worth say 500k to 1m, depending on location and size.

Now,assuming this is fully paid off, if one is talking about his portfolio of $200k, this portfolio could form up anywhere from 20% to 40% of their entire asset.

Even if he has a basket of 20 or 30 stocks consisting of different companies in different industries to manage their risks, we should not forget that 60-80% of their asset is still one thing, ie their home!

Of course, when their portfolio grows to say 5m, this figure will probably dwarf their home cost. Having said that, when that happens, many might give up their HDB for a condo or a small landed in a land scarce Singapore.

Can't agree more. Thats the asset allocation effect. People who talk about buying lowest selling highest IMHO generally dont talk about asset allocation or execution For Singaporeans or Asians in general, force selling a home or buying at peak generally is more devastating than all the stock picks combined

^^ Stanley Druckenmiller pyramid up. Taught so by Soros.

On what he's learned from George Soros: "Perhaps the most significant is that it's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong ... Soros has taught me that when you have tremendous conviction on a trade, you have to go for the jugular. It takes courage to be a pig ... As far as Soros is concerned, when you're right on something, you can't own enough."

This is another allocation effect. You dont have to buy at low but when u are right u average up. Trend is for your friend.

But they are speculators. We have to know who we are before we get confused and get an identity crisis, and then a wallet crisis. I am a specuvestor

[Musicwhiz]

however many stocks one has or even if he buys ETF monthly or yearly, to me, it still would be one investment cat.

Let me explain:

to many folks out there, perhaps some 80% of singaporeans, their HDB forms their biggest asset. This could be worth say 500k to 1m, depending on location and size.

Now,assuming this is fully paid off, if one is talking about his portfolio of $200k, this portfolio could form up anywhere from 20% to 40% of their entire asset.

Even if he has a basket of 20 or 30 stocks consisting of different companies in different industries to manage their risks, we should not forget that 60-80% of their asset is still one thing, ie their home!

Of course, when their portfolio grows to say 5m, this figure will probably dwarf their home cost. Having said that, when that happens, many might give up their HDB for a condo or a small landed in a land scarce Singapore.

I still can't understand why Singaporeans (in general) love property so much*. I've always much preferred equities as an asset class, but almost all my friends talk about having an investment property and "passive rental income".

If this is an asset allocation problem, then many Singaporeans have it - most of their wealth is tied to property and it is an illiquid asset which CAN go down, contrary to what many people may think.

*I've been trying to understand this phenomenon since 2008 when I first starting tracking property news and the property market.

[Temperament]

Economists like to say everything being equal, i think they will choose property for rental income over dividend income from equity. But is it everything is equal? i think the only real difference is FH property will not go to zero if you have paid up and it is really best for a B & H investment. Other than that, there are plenty of disadvantages and many headaches if you can't find a good and trust worthy property agent to manage at least the tenants. And most of all you should treat your rental property as a hotel room after carefully rented out to a "screened" tenant. The psychology is definitely different when you own a rental property compare to stocks.

[CityFarmer]

I still can't understand why Singaporeans (in general) love property so much*. I've always much preferred equities as an asset class, but almost all my friends talk about having an investment property and "passive rental income".

If this is an asset allocation problem, then many Singaporeans have it - most of their wealth is tied to property and it is an illiquid asset which CAN go down, contrary to what many people may think.

*I've been trying to understand this phenomenon since 2008 when I first starting tracking property news and the property market.

They are equity investors are trend-followers, same for the property market. I have seen "value investors" among property market, albeit a minority. Does it sound familiar with our equity market?

I have seen a real case. A run-down terrace house was bought cheaply, rebuilt from scratch, to fully utilize the plot-ratio and space. It was sold later for good profit, within months. It is a value investing, isn't it?

I have seen an ex-classmate of mine, started from HDB five-room, upgraded to EC, than private properties, with a "value mindset", rather a trend-follower. He has done well with the "passive" property investment, on top of other investments.

I am not an property expert, but I reckon the basic principle of value investing, is applicable to property market too. I have always reminded myself to be open-minded, to asset-classes beyond equity, and also those different strategies from mine, although I have to chose one suit me best.

[yeokiwi]

Economists like to say everything being equal, i think they will choose property for rental income over dividend income from equity.

Why is that so?
Dividend income is more predictable that rental income.
Rental income is highly affected by government policies, rental demands and relatively inflexible supply of residential units.
If Singapore government decides to hold the price of the current new HDB flats for the next ten years, the price of private residential properties will not go any much higher. Same with the rental income.

The plan of owning one residential unit and having another unit to rent out for passive income is a Singaporean's dream. But, this dream cannot come true for every singaporean.
Unless we plan to have an equivalent size of foreign labour population in Singapore.

[weijian]

I still can't understand why Singaporeans (in general) love property so much*. I've always much preferred equities as an asset class, but almost all my friends talk about having an investment property and "passive rental income".

If this is an asset allocation problem, then many Singaporeans have it - most of their wealth is tied to property and it is an illiquid asset which CAN go down, contrary to what many people may think.

*I've been trying to understand this phenomenon since 2008 when I first starting tracking property news and the property market.

Simply, it is the leverage, isn't it? 95% of property investors use leverage, while 95% of equity investors don't (making a haphazard guess here). Of course, leverage work both ways but as usual, the losers just keep quiet and you will never hear from them.

[Ray168]

however many stocks one has or even if he buys ETF monthly or yearly, to me, it still would be one investment cat.

Let me explain:

to many folks out there, perhaps some 80% of singaporeans, their HDB forms their biggest asset. This could be worth say 500k to 1m, depending on location and size.

Now,assuming this is fully paid off, if one is talking about his portfolio of $200k, this portfolio could form up anywhere from 20% to 40% of their entire asset.

Even if he has a basket of 20 or 30 stocks consisting of different companies in different industries to manage their risks, we should not forget that 60-80% of their asset is still one thing, ie their home!

Of course, when their portfolio grows to say 5m, this figure will probably dwarf their home cost. Having said that, when that happens, many might give up their HDB for a condo or a small landed in a land scarce Singapore.

I still can't understand why Singaporeans (in general) love property so much*. I've always much preferred equities as an asset class, but almost all my friends talk about having an investment property and "passive rental income".

If this is an asset allocation problem, then many Singaporeans have it - most of their wealth is tied to property and it is an illiquid asset which CAN go down, contrary to what many people may think.

*I've been trying to understand this phenomenon since 2008 when I first starting tracking property news and the property market.

During the good old day when there are no property curb measure, one can invest in property with 10~20% down payment and then leverage balance with bank loan.

For example, say one invest a 2 rooms condo with $600K price tag, he pays $120K for 20% down payment and took $480K bank loan for 30 years @3% interest, the monthly payment for loan is ~$2K.

He then lease it out at $2.5 ~ $2.8K for rental. he will have positive cashflow after condo maintain.

Now assume that everything equal, he owns a fully paid condo in 30 years and now then then condo value likely to be double or more.

So in short, his initial $120K investment 'grow"to $1.2M after 30 years. He collect 100% rental income by then. His CAGR is ~8%.

Above example is simplified version without taking account of initial transaction cost, potential increase of rental (due to inflation), bank interest (might go up or down), and no rental income for some month or revise up/down.

[Temperament]

however many stocks one has or even if he buys ETF monthly or yearly, to me, it still would be one investment cat.

Let me explain:

to many folks out there, perhaps some 80% of singaporeans, their HDB forms their biggest asset. This could be worth say 500k to 1m, depending on location and size.

Now,assuming this is fully paid off, if one is talking about his portfolio of $200k, this portfolio could form up anywhere from 20% to 40% of their entire asset.

Even if he has a basket of 20 or 30 stocks consisting of different companies in different industries to manage their risks, we should not forget that 60-80% of their asset is still one thing, ie their home!

Of course, when their portfolio grows to say 5m, this figure will probably dwarf their home cost. Having said that, when that happens, many might give up their HDB for a condo or a small landed in a land scarce Singapore.

Can't agree more. Thats the asset allocation effect. People who talk about buying lowest selling highest IMHO generally dont talk about asset allocation or execution For Singaporeans or Asians in general, force selling a home or buying at peak generally is more devastating than all the stock picks combined

^^ Stanley Druckenmiller pyramid up. Taught so by Soros.

On what he's learned from George Soros: "Perhaps the most significant is that it's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong ... Soros has taught me that when you have tremendous conviction on a trade, you have to go for the jugular. It takes courage to be a pig ... As far as Soros is concerned, when you're right on something, you can't own enough."

This is another allocation effect. You dont have to buy at low but when u are right u average up. Trend is for your friend.

But they are speculators. We have to know who we are before we get confused and get an identity crisis, and then a wallet crisis. I am a specuvestor

Ha! Ha!
i like. "We have to know who we are before we get confused and get an identity crisis, and then a wallet crisis." A wallet crisis? What a way to say it.
We must always be very clear why we adopt someone's idea. We have to always remind ourself. But that's not to say we can not use Soro's idea. We may if we know what we are doing.

[Temperament]

Economists like to say everything being equal, i think they will choose property for rental income over dividend income from equity.

Why is that so?
Dividend income is more predictable that rental income.
Rental income is highly affected by government policies, rental demands and relatively inflexible supply of residential units.
If Singapore government decides to hold the price of the current new HDB flats for the next ten years, the price of private residential properties will not go any much higher. Same with the rental income.

The plan of owning one residential unit and having another unit to rent out for passive income is a Singaporean's dream. But, this dream cannot come true for every singaporean.
Unless we plan to have an equivalent size of foreign labour population in Singapore.

i think the economy climate that affects the rental market will affect the equity market too. Besides I think you can always find a tenant if you are willing to rent out at or slightly below current market price. Dividends may get cut or even skip a year or two or even more. YMMV.

[Ray168]

Economists like to say everything being equal, i think they will choose property for rental income over dividend income from equity.

Why is that so?
Dividend income is more predictable that rental income.
Rental income is highly affected by government policies, rental demands and relatively inflexible supply of residential units.
If Singapore government decides to hold the price of the current new HDB flats for the next ten years, the price of private residential properties will not go any much higher. Same with the rental income.

The plan of owning one residential unit and having another unit to rent out for passive income is a Singaporean's dream. But, this dream cannot come true for every singaporean.
Unless we plan to have an equivalent size of foreign labour population in Singapore.

i think the economy climate that affects the rental market will affect the equity market too. Besides I think you can always find a tenant if you are willing to rent out at or slightly below current market price. Dividends may get cut or even skip a year or two or even more. YMMV.

Property rental income - you have to do the work or hire someone to rent it out, answer call for maint etc...

Equity dividend - you do nothing and wait for dividend