Wednesday, November 30, 2016

My simple stock market buying and selling plan

I have used Excel spreadsheet to list a few listed companies in the Singapore stock exchange.

My selection criteria are very simple.

I choose those companies that pay consistent dividend, and I know the business well enough.

After I have selected my stocks of about 10 companies, I list down the buying price, holding price and selling price.

This is very simple to do.

I will buy when the dividend yield is 7%, sell when the dividend yield is 3% and hold when the dividend yield is 5%.  However for large banks, I am comfortable with buying at an yield of 5%, hold at 4%, and sell at 2.5%.

That means when the average dividend for the past 5 years is 7 cents, I will buy the stock at $1, sell when the share price reaches $2.33 and hold the stock when the share price is $1.40.

The reason I buy at $1 is because the dividend is 7 cents, and that means 7% return.

The reason I sell at $2.33 is because the dividend is still 7 cents, and that means I get only 3% return.

The reason I hold when the price is $1.40 is because the dividend yield is 5%.

That means I buy the shares at $1, and when the share price keeps on going up until $2.33, I will sell.

If there is a change in business environment, then I will sell at any price, even at a loss.

This simple and clear stock market strategy contains both entry and exit price. 

Tuesday, November 29, 2016

Learn investing to gain freedom from slavery of work

Money is a nice thing to have, and a must to have in this world.

When you learn investing, you will experience the miracle of seeing your money grows.

You will gain the freedom from the slavery of work too.

Work by itself is enriching, and satisfying, but when you need to work for a living, work is slavery.

If you can choose to work when you want to work, and stop working when you do not want to work, that is freedom.

You have the freedom of choice only when you have money to give you such freedom.

Saving money alone cannot give you such freedom.  That is because the interest rate from saving account is always lower than inflation rate.

You need to learn investing to make the money grows faster to free you from the slavery of work.

Monday, November 28, 2016

Small investors can achieve better returns than mutual fund managers

Small investors can, and should, achieve better returns than mutual fund managers.

That is because you are not bound by the mandate of the fund.

The mutual fund managers do not have the freedom to liquidate all assets, and keep all cash when they know that the market is heading for a major crash.

They have to keep invested because of the mandate.

They cannot keep 100% of the fund in cash. 

When the mandate allows them to invest in big companies, they cannot sell the big companies and invest in small companies.

The mandate allows them to sell the shares of big companies, but they have to buy the shares of another big company.

They have to stay invested all the time, and keep a small portion in cash to meet withdrawals by the unit holders.

Everyone knows that you have to sell at the peak to lock in profits, and buy at the bottom.

If you are not allowed to sell, you will face paper loss when the market crashes by 75%, and your portfolio of $1000 becomes $250.

Tuesday, November 22, 2016

New businesses fail because of expansion

Many new businesses do not fail because they cannot get sales.

Many new businesses fail because they expand too fast.

The reason is very simple.

When you have a factory that makes and sells $2000 worth of goods every day, you need $1000 for raw material and other fixed expenses.

The suppliers see that you are new, and require you to pay in cash or give you 30 days credit term.

The customer requires you to give 60 days credit term, or else they will buy from others.

You must have enough cash for 30 days, or else your business sinks.

If you keep on getting sales, and you must make $20,000 worth of goods every day, you must have enough cash flow to buy the raw material and pay the overtime of your workers.

You start to take bank loan.

If the customers delay payment by one or two more months, and you run into cash flow problem, and default on payment, your business sinks.

That is why fast expansion is never good. 

Wednesday, November 16, 2016

Life cycle investing is not for everyone

If you talk to any of the professional advisors, they will tell you about the life cycle investing.

They will say that a young person should invest aggressively.  That means most of their money in the stock market.

An old person should have very little or zero asset in the stock market.  An old person should have the money in bond or in cash.

This is the famous life cycle investing.

However, this life cycle investing is not for everyone.

Imagine asking Warren Buffet, Donald Trump and all the rich and famous to park their money in bond or cash just because they are old.

Life cycle investing is the message sent by the investment world of experts, but you have to make conscious decisions for your own investing decisions.

That is not to say that you reject the concept.  Many people do the exact opposite.

They dare not invest in the stock market because they think it is risky.

When they reach middle age, and with little knowledge, and a lot of greed, they enter the stock market.

They lose out big.  They wipe out 20 years of saving due to their greed.

Tuesday, November 15, 2016

Singapore Press Holdings Ltd (SPH) is getting attractive

The share price of Singapore Press Holdings Ltd is getting very attractive.

It has been on a downhill trend, especially since the announcement of the retrenchment started.

In fact, the rumor started it.

Everyone in Singapore knows that the core business of Singapore Press Holdings Ltd is not doing well.

Many people are not buying newspapers.

They do read news, but they read freely online or they collect free newspapers from the MRT stations.  Those who have time on hand will go to the library to read.

They just are not interested in paying for newspapers.

However, SPH is a diversified company with three segments: Newspaper and Magazine, Property, and Treasury and Investment.

The property segment appears to do rather well.

As I am an dividend, I am more interested in the dividend history.

SPH pays dividends twice a year.

The payment in May is consistently at 7 cents.

The payment in December includes a dividend of 8 cents and whatever special dividend declared.

The special dividend is the one that is not fixed. The current year special dividend is 3 cents, down from 5 cents in the previous year.

For conservative purpose, I assume that there will not be any special dividend in the future.

That means I can only rely on 15 cents of dividend every year.

Given the fact that SPH has a solid business and has not made a loss, it is all right to expect that the core dividend of 15 cents to be sustainable.

My expected yield is 5%.  At this rate, I am willing to pay just $3 for the share.

If I lower my expectation to 4.5%, I will buy when SPH reaches $3.33.

It will be long wait for SPH share price to drop till $3.

It is not impossible, though not likely to take place within the next two months.

Monday, November 14, 2016

She refuses to buy when it costs one cent more

When my friend asks for advice in stock investment, I ask her to check the price of a few great dividend stocks.

These stocks have a great track record of consistent dividend payout.

The dividend payout has been the same for the past few years.

In this case, the only decision she has to make is in the buying price.  At the current price, the dividend payout is about 6%.

She takes a look at the price chart for the past year, and decides on a buying price.

When the price is just one cent higher than her target price, she does not want to buy.

As a result she waits for months, and still let her saving sits in the saving account.  The money is earning interest at the rate of 0.05%.

Sometimes I wonder if I have wasted my time with people who simply are not interested in stock investment.

Thursday, November 10, 2016

Always invest for income, not for quick gain

If you want to get richer, always invest for income.

Never try to invest for quick gain.

There are some people who like to find the best penny stock, so that they can make a few thousand dollars in a day.

This is not really an investment.  It is a speculation.  To be it more bluntly, it is a gamble.

It does not matter whether you are talking about the stock market, real estate or other investments, as long as you bear in mind that you are investing for income, you will gain slowly and surely in the long run.

For example, you buy a rental apartment for rental income.  You invest for income.

If the property price improves, you can sell the rental apartment for a gain.  If you choose not to sell, you can still gain from the rental income.  This is the reason why investing for income always works.

Monday, November 7, 2016

The bank is willing to help you get richer

Banks are willing to help you get richer even though most of us think that the banks help rich people get richer.

That is the reality.

The reason is that the poor people do not want to know and learn about the different services of the bank to get rich.

As a result, the rich are the ones who make full use of the banks.

They know to get advice by asking their bankers.

The poor does not even want to ask the bankers, because they do not trust the bankers or they think they know everything. 

You never see the poor people approaching the banker when they want to buy house.  They never think that bankers can help them find the best value house in the area they want. 

Even though the bankers have a selfish interest in whatever answer they give you, most of the times they give good advice.

They know that it is important to make their customers richer so that they have repeated business.

Thursday, November 3, 2016

Alternative investments generally do not produce income

Alternative investments refer to investments outside stock, bond, and property.

Gold investment is one example of alternative investments.

It is a good hedge against the devaluing of US dollar, and against inflation.

However, you do not expect gold to produce income.

You gain a net profit upon selling the gold bar at a higher price.

Most alternative investments do not produce income.

Some of the exotic alternative investments include art investing, fine wine investing, oil exploration, numismatic coins and forex trading.

You need to have expert knowledge or expert guidance in order to succeed in alternative investments.

Wednesday, November 2, 2016

Basic knowledge about real estate investment trust REIT

Real estate investment trust REIT is a great dividend investment.

When you buy a unit of Real estate investment trust, you are buying a piece of real estate.

When you get the dividend from REIT, you are collecting rent.

The difference between a landlord and an investor in REIT is that the landlord has to maintain the building.

That means the landlord has to arrange for repairs and whatever little tasks that all landlords must do.

The building or the house is in the name of the landlord.

When you buy real estate investment trust, you are a part owner of the company that owns the building.

The company functions like the landlord. 

You do not have to wake up in the middle of the night to arrange for plumber to repair the leaking toilet because the maintenance team in the company does that.

You, as the part owner, collect the profit from rental income after paying off all the expenses.

In the context of Singapore, there is another big difference.

If you are a landlord (as in you have a second house for rental), you have to pay income tax on the income generated from your asset.

REITs are exempted from corporate income tax when they pay out at least 90% of the profit.  You, as an investor, do not need to pay income tax from the investment return.

Tuesday, November 1, 2016

Turning liabilities into assets is an art

Most of us cannot get out of the rat race because we have more liabilities that suck money than assets that bring income.

The problem is that we have the potential to turn liabilities into assets, but most of us hate to do that.

There are many ways to turn liabilities into assets.

If you have a car, you can call up businesses in your region. 

You can offer to advertise their businesses with your car.  It does seem weird to drive a car that advertises for insurance sales or plumber service.

However, as long as the advertising brings in money for you, you have successfully turn a total liability into an asset.

You can do the same thing with a room in your house.

You can rent out the space to a tenant or to a company as storage space.

This will bring income to you, and help you pay off the mortgage faster.