Journey To Retirement (CPFIS) Part 4.1 / Part 7 -- OCBC / SGX

Vested in OCBC using CPFIS in 2015 and somehow almost forgot about this investment only when last year due to the Covid-19 pandemic that I realized I have this investment when organizing all the investment portfolios.  Since then, made a decision to strategically switched out OCBC with SGX.  

The tactical switch was finally completed after months in selling (OCBC) and buying (SGX).  OCBC was vested in 2015 at $10.40/share.  Along the way there was an addition coupled with collecting scrip as dividend.  As a result of that, the eventual holding price was $9.183/share before the tactical switch.  The tactical switch from OCBC to SGX though saw a 8.25% reduction in the number of share, the vested capital was able to reduce by 9.65%.  As such, the holding price of the SGX after the tactical switch was $9.0434/share.

The following reasons were being considered to make the strategic switch.

1.  Stability of the company

Well don't get me wrong, OCBC is not a shaky coporation that can go under the belly easily in time of crisis.  The stability factor is more on the "too big to fall" type.  No matter how financially strong OCBC is, there will be times especially a big financial crisis like the scale of the 2008 GFC that could impact its cash flow with default loans, mortgages, etc.  That was why during the 2008 GFC banks were doing right issue, share placement, offering perferrential share to investors to beef up their cash holdings.  Banks can fall too like Lehman Brothers went bankrupt, Merrill Lynch being acquired by BofA and so on.  Similarly, Singapore banks will have not exception.  The financial risk factor between SGX and OCBC is drastically different.  For sure during a financial crisis, bank revenue and profit will take a severe hit but that cannot be the same for SGX.  SGX gets its revenue and profit from stock market activity.  Though it will be a bear market in time of financial crisis, that might not have a direct relation to the stock market activities.  As long as there is volatility in the stock market, it will attract investors and traders to come in to provide that required revenue and profit.  A Singapore bank can get into trouble and in turn being absored or acquired by another bank resulting in short-term damage but a fall in SGX (getting into administration), the one and only stock exchange in the country, is a very bad reputation for Singapore as a financial hub.

2.   Scrip dividdend

OCBC used to have that and that was how I managed to increase the holding by 9% throughout the investment periods.  SGX is intenting to start one and seeking approval from shareholders in next month AGM.  By strategically switching to SGX allows me to continue the scrip dividend scheme to increase the holding.  

Journey To Retirement (CPFIS) Part 2.1 -- First REIT

It was never a good news on 28th Dec 2020 morning from First Reit.  Its announced a proposed rights issue to raise gross proceeds of around S$158.2M to meet debt obligation which is due on 1st Mar 2021.  The renounceable rights issue is of 98 rights units for every 100 existing units at an issue price of S$0.20/unit.  Normally, rights issue is pretty much a norm for Reits as very often it will tap of unitholders to raise cash to grow its assets.  However, given the saga of First Reit for the past 2 years, a very deep discount and dilutive rights issue just made me decide to divest all of it.

Invested with CPFIS since 2009, holding for more than a decade, collecting annual dividend until the dividend return is more than the initial capital being put in and to divest in such a manner is just speechless.  The first thing I did on 28th Dec 2020 when market opened was just dumped at the opening price of S$0.39 and that's the highest price it can get before plunging to close at S$0.265.  On 29th Dec 2020, it even hit an intra-day low price of S$0.22.  At $0.39 divestment, that net me a capital loss of -12.39% since the holding price was S$0.4405.  However, the dividend collected for the past 11 years gave me a return of +239.05%.  Overall, the investment gave me a net return of +226.66% or annualized +11.36%.  Still not a bad investment despite parting with a capital loss.  Well, that definitely beat the CPF interest rate for a period of 11 years ! 

Was vested at S$0.5096 in 2009 and how did I get the holding price to S$0.4405 ?  Firstly, did not participate in the rights issue in 2010 and since it is renounceable (yes, same as now), instead sold all the entitled rights.  The proceed considered as dividend return.  Next, have been opting for scrip distribution when it has one.  The quantity of scrip collected increased the holding by 15.67%.  This is how the holding price went to a low of S$0.4405.  That's the power of collecting scrip dividend !

Any plan to use that capital for next investment ?  Well, since 2015 I have been adopting the 孙子兵法 strategic investment method which either require a very low or nil capital, so that sum of money will just sit in the CPF and do nothing.

Journey To Retirement (CPFIS) Part 6 -- MapletreeCom Trust

Strategically added MapletreeCom Trust at $0 cost to the CPFIS portfolio.

This action now ensures the Investment, SRS and CPFIS portfolio all have at least 1 stock invested termed as 奇兵 in 孙子兵法.

MapletreeCom Trust is no stranger stock as it was one of those in the Strategic section of the Investment portfolio which was strategically divested from September till December 2019 (refer here).

This time round MapletreeCom Trust replaces FrasersCom Trust in the CPFIS.  The reason was given in the Mapletreelog Trust with the SRS portfolio (refer here).

In previous round, it took me 4 years to accumulate slightly more than 10% of the intended quantity in the Strategic section of the Investment portfolio.  That was also assisted by the preferential offering during those periods.  This time round, 2 primary objectives that are targeted to achieve.  Firstly, the time frame to achieve that same quantity must be shorter than 4 years.  Secondly, in the previous round a cost of $0.8209/unit was incurred for FrasersCom Trust, this time round is aiming for a cost of lesser than that or the absolute $0 cost.

Journey To Retirement (CPFIS) Part 5.1, (SRS) Part 1.1 -- FrasersCom Trust

Early this month fully divested FrasersCom Trust in both CPFIS and SRS portfolio, inline with the divestment of the Strategic section of the Investment Portfolio (will talk about that in future).

For the CPFIS portion, it was divested at $1.6999 while for the SRS portion, it was at $1.697.  As a result, CPFIS portion achieved a profit return of 105.70% while the SRS portion was 106.48%.  Started building these portfolios in 2015 (refer here) based on Sun Tzu's Art of War (孙子兵法) principle.  For the period of 4 years, this has given an annualized return of 19.76% and 19.63% for CPFIS and SRS respectively.  In order for CPF to achieve that kind of return, even with the help of compounding it needs to take between 10 to 11 years compared to 4 years only for my strategy.  From another perspective, for a period of 4 years, even with compounding, CPF could only achieve a return of 14.75%, about 6.8 times lesser than what was been achieved.

How and why I can achieve that ?  No rocket science involved !

1.  Don't trust easily
The CPF scheme was a very good one when it was first implemented in the early stage of the post-independence years.  However, as times went by, the return just don't make sense or rather justify to me that it is sufficient to combat the forever increasing cost of living and inflation despite all the sings and praises by the Government and Financial Advisers.  All things in this world have both pros and cons.  Should you just trust everything easily, you will forever fail to see the negative aspect and hence missing the opportunity to work out something better.  Take a pinch of salt from whatever the Government and Financial Advisers said about CPF.  One footnote, never trust a politician especially the one has the power regardless whether he/she is a good son/daughter, a good father/mother, a well-liked personal, etc.  They just follow the political party's blueprint way of doing thing.

2. Nothing is free
I was born to understand that nothing in this world is free.  So for all those sings and praises about CPF being risk-free bah bah bah, I totally ignored it.  There is no such thing as risk-free in the absolute term.  Risk-free is just a relative descriptor.  Thus, I work hard in thinking, experimenting, making mistakes and learning from mistakes methods to get better return than CPF.  Yes, while most are still singing, praising and feeling proud that Singapore has this CPF scheme to help them retire, I rather work hard to come out with a better way than thinking that no other method can be better than CPF.  One footnote, the moment you start to think of risk-free, psychologically you are defeated already.  Nothing philosophical about that just Sun Tzu's Art of War essence.

3. Risk understanding and management
As mentioned nothing is absolute risk-free.  One must understand what type of risks is being involved and how to management those.  The method I've used to get that kind of return is also not "risk-free".  The difference is I understand totally what type of risk I will be getting into, derive a strategy to manage it and making it overall a calculated risk strategy.

Reflection Time
So what's next ?  Nothing for me to cheer about on those return but rather time to reflect and examine what has I not done correct for this investment or strategy.  Be critical so that the next round I could improve on it to get even better return.  So during these periods and while waiting for the next opportunity to start again, the capital PLUS the profit will be back in CPF and SRS to earn the so-called "good", "best" and much praise about return.

1. Keeping the cost low
The holding price for the CPFIS and SRS portion were $0.8209/unit and $0.8230/unit respectively.  That cost is not considered low enough if compared with the Strategic section of the Investment Portfolio ($0.2424/unit for 5 stocks combine and each of those 5 stocks all costing more than $1, jaw dropping ?).  A breakdown of how the cost was being incurred during the 4 years period was due to broker's commission, SGX fee, Agent bank's charge for each transaction, Agent bank's quarterly custodian fee and another component which I labeled as variable cost arises from execution.  While the broker's commission, SGX fee and Agent bank's fee can't be avoided and seen as fixed cost, the variable cost portion is something I could minimize to 0 or better still offset all those fixed costs to eventually make it overall $0 cost.  Theoretically, this is achievable and it is also the starting point of my strategy.  Hence, for next portfolio, more emphasis should be placed on this to really minimize the cost, at least do it better than this round.  Minimize the cost, maximize the return.

2. Aggressiveness
I have a targeted quantity (number of shares) for this round of investment.  However, I did not place any time frame on it to reach that quantity level.  For this round of investment, the quantity so far build up is only about 28% of the intended target.  Maybe for this round of investment if given a period of 10 years, that quantity level could be achieved.  Now, using the statistic obtained in this round of investment, it will serve as a guide of how aggressive I need to be in the next round of investment.

3. Timing
Timing to enter or exit the stock market is always the hardest part.  Even with the help of Technical Analysis, it is still a possibility to time it correctly only.  Started building this portfolio in 2015, before the stock market peaked in Apr 2015.  You might say the entrance timing was wrong.  Technically, it is correct but since the strategy I adopted is about minimize the cost and maximize the return, the timing of entrance should not be a key to it.  Unlike timing to enter, timing to exit definitely affect the amount of return I could get.  Thus, for next round of investment, I will aim to start building the portfolio at the "correct" timing (look likely either end of next year or by the quarter of 2021 based on my analysis of stock market so far).  This should help to a certain extend to minimize the cost theoretically.  As for exit, it's a catch 22 situation.  Should I detected the "correct" timing to exit but due to the fact that the portfolio size has not been built up to a point that taking profit becomes meaningful, it doesn't make any sense to exit.  So the exit timing can be considered a handicap.

4. Stock selection
This probably is the head scratching issue.  Ideally, a sound fundamental stock with a good business growth trajectory, a reasonable consistent dividend yield of at least 3.5% (using CPF rate as benchmark) would be perfect.  However, frankly speaking, finding a stock that fit those criteria is just 难如登天.  As a result, I turn to S-Reit for this round.  So far, the decision looks correct.  Hence, for the next round, the question shall be should I continue to stick with S-Reit or hunt for a non S-Reit stock.

5. Portfolio size
I only have 1 stock in both the CPF and SRS portfolio, compared to 5 in the Strategic section of the Investment Portfolio.  Given that both (1 or 5 stocks in a portfolio) I'm also to able to achieve a very good return, the next round for the CPF and SRS portfolio sees no reason to continue to stick with just 1 stock.

That pretty much sum up all the things that need to reflect on and determine what can be improved for the next round of building up the portfolio.

孙子日 : 凡战者，以正合，以奇胜

Lastly, don't ask me detail of how to apply 孙子兵法 to stock investment.  No war generals or CEOs of a company will publicly reveal their strategies.  孙子兵法 is not a book of tactics like those of 三十六计.  It is build on a set of 13 principles and from understanding these principles that eventually derives the strategy to win the war.

Journey To Retirement -- CPFIS

10 years ago I opened my CPFIS investment account to start my journey in stocks investing with CPF money.  After a decade, the conclusion I get from those experiences is you can only achieve good return (beating that 2.5% pa on OA) if you do it correctly, that is through long-term fundamental or value investing.  There has been talk on CPFIS is not "fit for purpose", time for review, etc lately.  Frankly speaking, I do not agree to that 100% neither do I object that 100% too.

Like many others I started doing short-term investing/trading from 2006 to 2008 from stocks like Allgreen, HG Metal, K1 Venture, NOL, Saizen Reit, Mapletreelog Trust, Ascendas Reit, Swiber, Parkway Life and SIA Engg.  The result was mixed with some hits and misses.  Net outcome was a 4.19% capital loss (inclusive of dividend).  Then from 2009 till now, probably with improve trading skills and better understanding of investing, I have invested/traded short-term in the following stocks, SingPost, UMS, Ho Bee, United Engineer and Frasers Cpt.  With those I have managed to narrow down the net outcome to a 2.94% capital loss (inclusive of dividend).  Based on that I have to agree CPFIS is not "fit for purpose".

After the loss in 2008, I've decided to change my approach on CPFIS investing, that is going for long-term fundamental or value investing.  STI ETF, First Reit, Kepland, FrasersCom Trust and OCBC are the lists of stocks that I have vested or still vesting.  The outcome (for those that I have divested) was much much better and even beat the 2.5% pa OA return.

1. STI ETF from 2008 to 2015 (refer here and here).  I get a realized annualized capital gain of 1.68%, annualized dividend return of 2.28% and net annualized return of 3.75%, beating the 2.5% pa OA return.

2. First Reit since 2009 (refer here).  The best return I have ever had and totally blown away the 2.5% pa OA return, making that 2.5% looks like mickey mouse.  Mathematically, for this investment, it is impossible to lose money as the dividend collected so far already exceed the capital being put in.  I have been collecting scrip dividend since then until recently when the scheme was terminated.  The scrip has increased my holding by 10.2% so far.  This investment is now on a floating profit.

3. Kepland from 2015 to 2015 (refer here and here).  I have intention to go for long-term for this but the timing was just so nicely timed that in less that 3 months the investment journey ended when it was being privatized, giving me a 25.50% return in less than 3 months.  Beat the 2.5% pa OA ?  Definitely without any doubt !

4. FrasersCom Trust since 2015 (refer here).  This is the one that the investing strategy is totally different from the norm (or tradition) because I used Sun Tzu Art of War investing method (孙子兵法).  Detail of that shall not reveal.  Basically, it involves little capital or no capital at all to hold the stock.  As of now, the holding price is $1.0641/unit.  Going forwards, the aim is to reduce the capital to $0.  I like this method as I can still have cash in my CPF to get the 2.5% pa OA return (as claimed by so many that it is a good scheme) and at the same time get to enjoy the potential capital gain from the stock should I divest in the future.  One stone kill 2 birds.  Beat the 2.5% pa OA ?  Don't even try to argue with me it is not ! haha.  Note, this method is not for anyone !

5. OCBC since 2015 (refer here).  This one nothing surprising as fundamentally I don't think anyone can disagree that this is a good fundamental stock.  My aim is to collect dividend or scrip dividend for the long-term.  Currently holding price after including the scrip dividend being collected is $9.9606.  It is also the only stock in my CPFIS portfolio that is having an unrealized loss (more than 10%)  as of now.  Beat the 2.5% pa OA ?  Definitely not now but can't rule out in the future.

So if based on long-term fundamental or value investing as can be seen from my result and experiences, I have to disagree that CPFIS is not "fit for purpose".

Looking back the past 10 years what I have done to my CPF money, I should be pleased with it as I managed to get it right after learning through mistakes.  Me not a genius in investing or any investment guru but I believed, a strong believer that things can be done if you learn through your mistakes.  So if someone tell me it will be better to leave the CPF money untouched to enjoy the 2.5% pa OA return, I would not argue with you and I will also not agree with you.  CPF money CAN beat the 2.5% pa OA return if you invest it correctly.

Journey To Retirement Part 13, (CPFIS) Part 5, (SRS) Part 1 -- FrasersCom Trust

Added FrasersCom Trust at $0 cost via the scrip dividend scheme for cash, CPFIS and SRS investment.  This addition is classified under "Cashless/Strategic" category in the cash portfolio.  The objectives of this type of investment are :-

1. Build up investment of the stock at either $0 cost or just a token of the cost

2. The profit contributed by this stock is used to hedge against the potential unrealized loss in other investment in a worst case scenario

3. Build up wealth for retirement

Executed with Sun Tzu Art of War Chapter 3 — Strategic Attack (第三篇，谋攻篇), the investment so far needed $0 cost and thereby making it a "floating profit" stock for the time being.  In another word, impossible to lose money in this investment mathematically regardless of what the price movement will be.

For cash investment, this is definitely better return than by investing in corporate bonds or the so-called Singapore Savings Bonds or putting money in bank to earn interest rate even if there is a rate hike later on.  More important, the supposed capital that is committed to the investment is still available and could be used in other investment later on or sitting in bank to earn interest, one stone kills two birds.

For CPFIS and SRS, though the interest return is higher than what bank could offer but by all standard is still considered low giving in consideration of long term inflation.  With this investment, the investment continues to generate return and at the same time, the still available capital sitting in CPFIS and SRS account to continue earn interest return.  Another one stone kills two birds benefit.  Many saying of CPF money is invested in risk free Singapore bond, however, the method I am adopting here if plans carefully, will be as risk free as Singapore bond but comes with a much much higher return.

An advantage of this strategy is I totally eliminated the concerns of timing and price to invest in S-Reits which many including analysts are debating when is the correct timing and at what price to start invest in those.

Looking forwards, I have 2 options :-

1. Do not do anything and continue to accept scrip dividend at each distribution to grow the quantity of the stock and at the same time maintain absolutely $0 cost in the investment.  The perfect ideal way !

2. Every quarter upon dividend distribution, will execute Sun Tzu Art of War Chapter 3 — Strategic Attack (第三篇，谋攻篇) to accelerate the growth of the quantity but might face the risk that cost in investment could one day stay at non $0 cost but need a token of capital committed to it.

FrasersCom Trust

Journey To Retirement (CPFIS) Part 1.1 -- STI ETF

Divested at a price of $3.4988 on 22nd May 2015 earning a capital gain of 12.33% and dividend return of 17.09%, giving a total return of 29.42%.  For the 7 years of investing (since 2008), this gives the following annualized returns :-

1. Capital Annualized Return = 1.68%
2. Dividend Annualized Return = 2.28%
3. Total Annualized Return = 3.75%

Technically the total annualized return was not very impressive but managed to beat the CPF interest of 2.5% pa.  In another word, the initial investment in STI ETF was not a total failure.

The reason for divestment was not purely due to believing there is no more upside to Singapore stock market (STI) but rather on a more strategic perspective.  As mentioned earlier, the investment in STI ETF made up bulk of my CPF capital (53%) and hence releasing the fund will enable me to have more options to gather more return (via other investments).  It was a calculated move as the opportunity cost of missing in investing in other stocks weighed much higher than if I continue to invest in STI ETF and wait for the peak.  As nobody know what is the time frame for STI to peak and where is the peak, the so-called missed out return could easily achieve via other investments.

To be exact, I already made the first move in April of my strategic investment using the balance of the CPF money and with the release of the STI ETF capital, I could enlarge my strategic investment in the months ahead. 

Journey To Retirement (CPFIS) Part 3.1 -- Kepland

The result was final, Kep Corp on the deadline 31st March 2015 acquired 95.1% of Kepland share, 0.4% fall short of the 95.5% target to make it compulsory and reward Kepland shareholder the higher offering price of $4.60.  At an offer price of $4.38/share has probably made part of Kepland shareholders in particular the minority to being feel of short change for it given that independent adviser already pointed out that the $4.38 price is "unfair but reasonable".

For me, the price of $4.38 has given me a return of 25.50% (holding price $3.49) in less than 3 months.  Not a bad return given the fact that I wasn't a "long-term" investor in Kepland that have hold it for years.  However, I do have mixed reaction to the outcome of the privatization.

As a Kepland minority shareholder, there is definitely a feeling of being short change for the offer.  The $4.38 offer price happens to include the dividend of 14 cents/share also.  Given the fact that should I not accept the offer and sold it off in open market, I could fetch a price of $4.55, which is another 4.87% of return I could get.  The failing to achieve the 95.5% level is quite a mystery as Kep Corp already signaled it has no intention to continue listing of Kepland even if it fails to hit the 95.5% compulsory level and yet shareholders still holding out for what ?

On the other hand, also being a Kep Corp shareholder, I'm more than happy of the outcome.  Failing to hit the 95.5% level means Kep Corp has literally save something like S$155m in privatized Kepland.  The benefits of Kep Corp privatizing Kepland (mentioned before) will go ahead.

A chapter has closed for Kepland investment though was a rather short one (less than 3 months) with a gain of 25.50%.  Now my focus will be on the next property stock.  Reasons on why picking on property stock already specified in my previous analysis.  What I am looking for at the next property stock should have the same basic fundamental to Kepland like regional exposure, diversify projects in residential and commercials and the financial strength in the short-term to ride over the bearish property market.  In fact I have short-listed a few of them and just waiting for the right time and price to invest in it.  My immediate target is of mid-term time frame (few months to 3 years) but will review then when the time is right whether to convert to a long-term basis (meaning prepare to ride through the next down turn of economy cycle).

Journey To Retirement (CPFIS) Part 4 -- OCBC

Recently an advisory committee has came out some CPF flexible schemes to improve on the CPF system in which the Government has accepted the proposal and should be implementing those.  After reading once, twice and even the third times, I still couldn't really figure out how those flexibility could benefit me in the long run.  As far as I'm concern "if I do not understand upon first glance/look and required complex and sophisticated type of critical thinking to fully understand then it is definitely nothing good to me".  With that, I have decided to stick with my trial, tested and workable method -- invest all the CPF money in stocks !

So far I have a Reit, an ETF and a property stock in my portfolio and with the money I still have, I could roughly add in another 1 or 2 depending on the price of the stock.  As much diversification as I wanted in my portfolio the sectors that are lacking are Finance and Transportation.  Transportation stocks (ComfortDelGro, SBS Transit, SMRT and VICOM) have been on a roar since the plunge of the oil price and that make them very unattractive at the moment in term of valuation (even with the dividend yield included) and that left Finance sector as my only choice.  Banking stocks in term of absolute amount is not cheap (to get 1000 shares) and my CPF OA does not have enough amount to pick up 1000 share of it (since majority is being vested in STI ETF).  Fortunately, with the introduction of the new board lot size of 100 share from 19th Jan 2015, this has given me an opportunity to buy into the bank stocks.  Of the 4 banking stocks (DBS, UOB, OCBC and Hong Leong Finance), I decided on OCBC for the following reasons :-

1. A dividend yield of more than 2.5% what CPF Board gives.  According to latest annual dividend is 36 cents/share and that translates to 3.46% yield (with reference to $10.40 price).

2. It can provide good potential capital appreciation in the long run.  US Fed will hike interest rate and that will benefit Singapore banks as a whole and further more should Singapore Government starts to ease property cooling measures and the banks will get to benefit in term of loan growth from the developers.

3. Its regional exposure.  OCBC has exposure domestically and in ASEAN.  While exposure in ASEAN is a must to have given that ASEAN economic integration is going to take place end of this year but this is not enough to grow the bank.  With the acquisition of Wing Hang bank, it now has a footing into Hong Kong and China.  Hong Kong is one of key Asia finance center and China is the world 2nd largest economy (probably will elevate into 1st next) and this will serve well to grow the bank regionally.  In fact OCBC was only one of the 3 local banks not to have exposure in Hong Kong and China before the acquisition of Wing Hang bank.

4. It has lot of other non-financial investment and should that been divested this will be good to shareholders.  The latest in which they are keen to offload is United Engineers.

5. It has a strong insurance arm, Great Eastern and that is something the other local banks lack

6. Scrip dividend.  OCBC has been providing shareholders the option of either getting cash or scrip dividend since the 2008 global financial crisis and with scrip dividend, am able to perform compound investing.

Despite banks being the backbone of the nation economy, that doesn't mean they do not have downside risk at all.  When the nation economy dives into recession, banks will be the first to get hit by credit crunch (loan default).  That is the downside risk one must bare in mind when investing in bank stocks.  Like the other 2 local banks (DBS and UOB), OCBC has been through couple of bad times in the past 2 decades, 1997 Asian financial crisis, 2001 dotcom bubbles burst, 2003 SARS and the 2008 US sub-prime global financial crisis.  Like the other 2 local banks, OCBC is also able to bounce back and strengthen after each crisis.  That is some comfort and confidence when investing in Singapore bank stocks.

Vested this month at a price of $10.40 and thanks to the new board lot size, I managed to get a small pie in it.  At the price of $10.40 I reckon that it is not dirt but it is also not overvalued either.  The willingness for me to invest in this price is ability to start small quantity (due to the reduce board lot size) and practice compound investing by taking the scrip dividend option.  In fact, as I have the intention to divest my STI ETF investment, I will able to get back majority of the capital once that is divested and this capital (at least portion of it) will be reserved to buy more of OCBC when it becomes dirt cheap (in the case of recession).  While waiting for that opportunity to come, having a small position and start compound investing is never a poor strategy.

OCBC

Journey To Retirement (CPFIS) Part 3 -- Kepland

Bought into Kepland at $3.49 less than a week when it went on a trading halt followed by the news that KepCorp offered to privatize it at a price of $4.38/share or $4.60/share if it is able to obtain at least 90% of acceptance.  Out of a sudden, assuming the privatization will be successful (and in no way it will not be), the gain of my Kepland investment becomes +31.81% (with reference to $4.60) in the shortest ever time for my whole investment journey.

The reasons of buying into Kepland are :-

1. Strongly believe Government will start to ease property cooling measures this year and like any other property developers, Kepland will stand to gain and that is where the capital appreciation of the investment will come in.

2. Like Kepland's strategy of developing both commercial and resident property to provide diversification in the vertical domain.

3. Kepland is one of the few big name developers that have projects around the regions, Singapore, Vietnam, China, Indonesia, Malaysia, Thailand, Philipines, Myanmar and India.  That is diversification in the horizontal domain.

4. It never fail to give out dividend annually since 2001 and on average giving out at least $0.10/share of dividend per annual.  That will translates to at least 2.87% of dividend yield with reference to $3.49 and that is higher than  what CPF Board could offer of 2.5% per annual.

However, the news of privatization has a mixed feeling for me.

On one hand you feel happy that the investment will get a return of +31.81% in less than a year and that translates to an annualized return of +31.81%.  That figure is very impressive for any long term investment.

On the other hand, the privatization means I will lose to gain in the long-term.  Property market has on a decline since the 7 round of cooling measures and no doubt property price might still have a little more to decline but the downside is pretty limited for now.  Further decline will hit the threshold and resulting in property market crash, sending Singapore economy into recession and that is something the Government will not want.  The onus of property market rebound is there and that is where I believe I have picked the bottom of the property stock and will get the reward when property market actually rebound.

As a result of the privatization, I have no choice but to shortlist another property stock to be in my portfolio.

Journey To Retirement (CPFIS) Part 1 -- STI ETF

Vested in 2008 at an average price of $3.1073 before the market plunged to below 1,600 due to the global financial crisis.  I have an intention to purchase STI ETF due to the following reasons :-

1. It is practically a "no-brainer" stock as the price performance just tracks the performance of the STI index and in the longer-term, stock market will always move higher than lower.

2. The diversification it provides as it consists of the basket of STI index component stocks and in a way it diversifies away the downside risk of just holding a single stock.

3. It return an annual dividend.

While the intention to invest in STI ETF was there but unfortunately the price was not what I have in mind but rather was "forced" to buy into at that price.  That was because in 2008 CPF Board implemented a new rule that was all CPF ordinary account must set aside a minimum of $20,000 before you can use the money in the CPF OA to invest.  To prevent the lock up of that $20,000 I have to invest in something before the rule kicked in.  STI ETF unlike other stocks is unable to use up the whole of CPF OA moneny (other stocks have a limit of 35%) so that was the natural choice.  Without any doubt, this investment occupies almost 50% (to be exact 47%) of my portfolio in term of capital injected as it used up all of the CPF OA money then.

Soon after global stock markets nosedive and STI was of no exception and my investment practically dropped by more than 50% before global markets staged a rebound.  Knowing the fact that global financial crisis will recover and global stock markets will rebound in the longer-term, I wasn't bother about the paper loss.

As of now, with reference to closing price of $3.43 on 13th Feb 2015, this investment provides me a total return of 27.21% (10.12% of capital return and 17.09% of dividend return) and that translates to an annualized return of 4.09% for the 6 years I have invested in.  Not really fantastic return but nevertheless it still beat the mere 2.5% CPF OA can provide.

Though STI ETF gives the diversification advantage over single stock but there is still downside risk too.  The downside risk will be when the sponsor of the STI ETF goes bankrupt and I would have suffered capital loss for it.  It will not be 100% capital loss as so far I have managed to get back 17% of the capital through dividend.  The probability of the sponsor goes bankrupt is relatively small but not to the extend of impossible.  So that is some calculated risk I have to factor in when I invested in it.

Technically speaking, I do not have the intention to hold onto it forever.  It is not like any other stock when you talk about fundamental and you divest once you sense that the fundamental is no longer worth the continuation.  STI ETF basically is investing for the cycle of market tough and peak.  Hence, after 6 years of bull market, what more upside can you expect ? I am monitoring for opportunity to divest it at the moment.

Journey To Retirement (CPFIS) Part 2 -- First REIT

Another milestone achieved, more than 100% return on dividend !!!

Vested in First REIT in 2009 at average price of $0.5096 using CPF (this is NOT the one on my long-term investing portfolio).  Since it is using CPF money the intention is pretty clear -- just put aside and collect dividend until retire.  I only update the performance of it every quarter during dividend collection time and surprisingly, just found out during this recent update that the dividend return has already hit 173.58% with respect to the initial invested capital (should have hit 100% mark a few quarters back just that I overlooked it).  What's the significant of it ?

Mathematically, it is impossible to lose money in this investment as the dividend itself already recoup all the initial investment capital.  As such, whatever I am holding is purely floating profit.

Am able to achieve this within a period of 5 years is rather surprising and the main reason for so should be due to :-

1. Able to purchase at a low price, probably near the bottom of if I am not wrong

2. First REIT since the global recovery of 2008 financial crisis is able to continuously generate increasing revenue and hence distribution.  As of latest according to its FY2014 earning dated 15th Jan 2015, it is distributing 8.05 cents per annual back to unitholders and that translate to 15.8% (with reference to my holding price) return pa in term of dividend.

3. In 2010 it did a right issue but I did not subscribe to it and hence after I sold the entitled rights, the sale proceed was credited as dividend and that helped to boost up the dividend return.

Given the fact that I already got back all my initial invested capital through dividend return, the next step towards investment is to aim for capital return.  In order to do so, I have decided from the latest distribution I will convert all the cash distribution to scrip distribution.  In another word, I am increasing the quantity of my holding without putting in any single money.  Why scrip dividend ?  Reason is clear -- Compound investing !

Every quarter my holding will just keep multiplying up regardless of how the stock price will change.  Since my initial invested capital is already guaranteed back, I will have nothing to loose regardless how many quantity I will be holding.  By compounding investing, it is also the fastest way to get that capital gain within shortest period of time.

Through dividend I recoup all my invested capital and through compound investing I will be going for capital gain, this is what I called investment in both horizontal and vertical domain !