Retirement

[Temperament]

Americans like to say, "make no mistake".

Without practitioners where got academics.

Without academics where got practitioners.

But among the academics, there are academics and academics.

Especially investing in the stock markets one can not start investing base on vacuum or air.

Have to choose among the academics what suit one's best in accordance to one's temperament.

Some may favour leverage, some no leverage at all.

Nothing in the investment world is absolute, it all depends on yourself.

Don't agree?

i bought my FH shoebox for rental income without leverage.

Right or wrong, i don't know.

But my temperament likes it this way.

i can sleep soundly at night.

And i can be more choosy to look for "better" tenants.

[tanjm]

All banks do that, until non bank entities like GE Capital started to imitate them to earn big money. And the the old adage - "what the wise man does in the beginning, the fool does in the end" applies again - We all know what happened in GFC2008 when the money markets simply froze and GE Capital couldn't roll over their commercial paper.

Using banks' leverage capabilities is simply akin to borrowing short term - This is because they can simply take it back or request you for additional funds to top up your margin. While earning the returns - dividend payout is long term because even though you know when they will pay out dividends, you can't actually dictate when and how much they do.

Listening to survivors like Temperament is probably boring   But if one understands survivorship bias, then it would probably be useful to take heed of survivors.

Hi weijian,

Though I don't disagree with your views here, there is certainly some flexibility in the trainer's strategy. Leverage can be reduced by selling stocks in the margin account if the broker requires higher margin requirements. REITs have locked in rentals and though they are not guaranteed to pay out dividends, in order to enjoy tax transparency, they have to pay out at least 90% of their earnings as dividends. Of course, the strategy might have problems during crisis period but he had back tested his strategy.

I took a quick look at the screenshots in the link provided. Some of these REITs did not exist 12 years ago, so its unclear what he means exactly by his claim of backtesting for 12 years when the article was written in Dec 2018.

I know someone who in fact had the very same leverage strategy prior to GFC. He lost about 80% of capital by the time it was over. GFC was very unkind to companies that employed leverage (debt) so that penalised REITs and business trusts. Remember, when you leverage up on REITs and the like, your look through leverage (including the underlying debt of the REITs you own) is quite high.

[ghchua]

Hi tanjm,

Yes. It certainly pays to be a bit more conservative. Having gone through GFC, I certainly remembered those days where high yield leveraged funds listed on SGX like Babcock & Brown Structured Finance Fund (now known as Global Investments Ltd), MacarthurCook Property Securities Fund (now known as AIMS Property Securities Fund), Macquarie International Infrastructure Fund (liquidated) etc which got into problems due to leverage at fund and underlying levels. Some stopped distributions altogether, some call for fund raising, some having to sell assets at depressed prices to meet loan repayments, some sell off fund to new owners, some liquidated etc.

In short, most (if not all) do not have a happy ending.

[tanjm]

Hi tanjm,

Yes. It certainly pays to be a bit more conservative. Having gone through GFC, I certainly remembered those days where high yield leveraged funds listed on SGX like Babcock & Brown Structured Finance Fund (now known as Global Investments Ltd), MacarthurCook Property Securities Fund (now known as AIMS Property Securities Fund), Macquarie International Infrastructure Fund (liquidated) etc which got into problems due to leverage at fund and underlying levels. Some stopped distributions altogether, some call for fund raising, some having to sell assets at depressed prices to meet loan repayments, some sell off fund to new owners, some liquidated etc.

In short, most (if not all) do not have a happy ending.

When you have leverage, the Reit doesn’t need to fail. Indeed most reits did not fail. However, the margin call (and you can’t top up) when price goes down is a killer.

[Temperament]

The same logic must have a/some spare tyre in case a tyre punctured while U are on the road (invested).

No need worry about margins call if not on leverage ?
Still need some to a lot of spare cash for rights issue during that time.

i remember there were rights issues for DBS, Capitalmall Trust, and Ascendas Reit (IRRC). etc...

i hesitated to subscribe but in the end i took the risks.

But DBS i subscribed half only because if so many American banks so much biggger could be kaputted, pah, pah leh.....at that horrible time.

So the moral is must have money standby for rights issue even not on margin trading.

No?

[Temperament]

i almost forget at that particular time Fear played a greater part than Greed.

In fact Greed was so ashamed and went into hiding.

This was the time not only must have clear thinking but also summon your Guts who has been lazing around.


Want to try penny stocks companies (growth companies)?

Not me - i think for "insiders only or venture capitalists.

Outsiders definitely disadvantage.

[weijian]

Hi tanjm,

Yes. It certainly pays to be a bit more conservative. Having gone through GFC, I certainly remembered those days where high yield leveraged funds listed on SGX like Babcock & Brown Structured Finance Fund (now known as Global Investments Ltd), MacarthurCook Property Securities Fund (now known as AIMS Property Securities Fund), Macquarie International Infrastructure Fund (liquidated) etc which got into problems due to leverage at fund and underlying levels. Some stopped distributions altogether, some call for fund raising, some having to sell assets at depressed prices to meet loan repayments, some sell off fund to new owners, some liquidated etc.

In short, most (if not all) do not have a happy ending.

When you have leverage, the Reit doesn’t need to fail. Indeed most reits did not fail. However, the margin call (and you can’t top up) when price goes down is a killer.

I like to believe that the next crisis, wouldn't play out like the GFC (even Buffett and Charlie Munger termed it as a "once in a generation" buying event). Though i wouldn't refer religiously to GFC's specific events, but I do notice a similar thread among different crisises in the last 40 years - regardless of the type of crisis, all correlations go to one during the crisis.

Because all correlations go to one, most assumptions and seemingly independent events will hit together. A highly leverage strategy needs consistency to work and it probably wouldn't. We could add some redundancies to the highly leveraged strategy to be robust to non consistencies but then it would be against the concept of trying to be highly leverage in the 1st place.

[dreamybear]

Sad news for 2 financial bloggers ... wish their fathers speedy recoveries.

If I am not wrong, both of them have substantial amounts in their portfolios but were still impacted ...

Not easy to FIRE .... 

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Dealing with the Uncertainties in Financial Independence Pursuit
August 4, 2019 by Kyith

Few things ran through my head currently but I will keep this post on some of the struggles and what I think about these struggles.

In the short span of three months, I have had friends dealing with grief and great struggles.

B wrote about the sudden turned of events when his dad suddenly came down with ischemic stroke while his dad is overseas. Due to that, he would have to shift his plans for financial independence. You can read about it here and here.

My friend Chris also shared a little more about his dad who has to be in and out of hospital recently. We discussed more about his dad situation, twice. Ironically these discussion was during two different funerals for a friend of ours. He had to organize 2 funerals in a short span of time.

I thank both Chris and B for their sharing and we wish both dad a speedy recovery. Their courageous sharing to me is frank. If you have read about their investing, and life experiences, you would be thinking we all got all these money & life stuff figured out.

These experiences just shows that everyone of us is trying our best to figure out the best path going forward.....

If we want a full proof plan before pulling the plug, then this is what they call FAT FIRE. It means you decide to retire but with a cash flow that can sustain your current lifestyle that is not bare-bones.

FAT FIRE is very comfortable. With a lot of buffers.....

More details : https://investmentmoats.com/financial-in...e-pursuit/