I attended the last of AK and Friends chit chat session for March last evening and I have to apologise to AK and his panel for being late – too much work to clear which is probably good news to my company’s shareholders. The audience this time were more proactive and I had a good time catching up with the regulars as well as meeting new friends. Special thanks to the brother (I think is Mr. I) for allowing me in.

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Guest Panel

• Jared - Singapore Man of Leisure
• Brian - A Path to Forever Financial Freedom (3Fs)
• Paul

I arrived about 20 – 30 minutes late and AK was already talking about his Asset Portfolio Pyramid. Maybe someone can help fill the gaps on what transpired during the first 20 minutes? The Asset Portfolio Pyramid is very similar to the one AK talked about last week with some ‘upgrades’. I call it version 2.0. Can you spot the difference? [caption id="attachment_107248" align="aligncenter" width="557"] Portfolio 1.0 vs 2.0[/caption] Besides the inverted pyramid which is used to explain that such a portfolio will topple over, did you also notice an extra layer called "cash"? AK also talked about Earnings per Share (EPS) and Price to Earnings Ratio (PER), two key indicators to value a stock. Another indicator mentioned which is commonly used in property counters is Net Asset Value (NAV). Instead of just writing minutes, I will share about my thoughts on the topics discussed and how I relate it to my portfolio. Stocks that were discussed: (Caveat emptor: The list below is not an indication to buy or sell.)

• Acordia Golf Trust
• AIMS AMP
• Ascendas REIT
• BreadTalk
• Centurion
• Croesus Retail Trust
• DBS
• First REIT
• Hoe Bee
• HPH Trust
• Keppel DC REIT
• Marco Polo Marine
• Rickmers
• Sabana REIT
• Saizen REIT
• SembCorp Marine
• Singapura Finance
• ST Engineering
• Starhub
• Wing Tai

I noticed that the audience gets especially excited when the panel starts to share the positives of a stock. I can hear them picking up their pens and writing notes furiously. I too was typing furiously into phone but I am constantly reminding myself that I am responsible for my own money. I learned the hard way so I hope no one falls into the trap of buying a stock just based on ‘hear-say’. Surprisingly, CPF was not mentioned but there was a discussion on Singapore Savings Bonds. You can read more about it here. One of the first topic that was discussed is how to cut loss. The panel was sharing that this will depend very much on the individual’s portfolio and money management. My portfolio:

• Speculative: 5%
• Company Shares: 25%
• REITs, Bonds and Trusts: 30%
• Non-REITs: 10%
• Cash: 30%

Speculative stocks take up 5% of my portfolio. I won’t tell you what I bought but I can share that I buy for silly reasons like wanting to have free movie tickets or I am a fan of the company’s ambassador. I am prepared to lose everything here because I know I will be able to recoup the losses via dividends and I am also setting aside a small portion of my salary each month into my portfolio. Company shares. I am just a 小兵 in my company and I do not have any insider news. I won’t know if there is an upcoming billion dollar project. Neither will I know if they will make more profits than last year. What I know is that I always have work to do. Once work starts drying up, maybe then will I think of selling. REITs, Bonds and Trusts. The panel talked about the margin of safety and entry price. If you are able to enter at a lower entry price, your margin of safety is higher and you will have more ‘breathing space’. I am not sure if I should include dividends. If so, I will have a higher margin of safety. The panel shared an interesting fact about retail REITs - anchor tenants may take up a lot of floor space but they do not contribute to the earnings. Their purpose is to bring in the crowd. Non-REITs. I only have one non-REIT stock which is in the banking and finance. I wanted to ask the panel on the direction of this sector but someone indirectly asked the question for me. The reader was asking about the impact of interest rates (a favourite question) and the panel mentioned that companies in banking and finance should do well with a high interest rate because most of their earnings come from lending money. Cash (War chest). Several “strategies” were discussed, such as OCBC365, Fixed Deposits, Bond Ladder and Singapore Savings Bonds. Regardless of the strategy used, it is important to maintain liquidity. The panel talk about buying when there is blood on the street but when there is blood everywhere, do you dare part with your money that you have painstaking build up over the years? Although I am prepared to, only when the next crisis hit will I find the answer. A reader brought up an interesting point on him being a Macro person and his friend complemented him by being a Mirco person. One of the guest panelist commented that if you can share tons of information on individual stocks at the snap of your finger, you are a Micro person. If you look at the general trends and what is happening around the world, then you are a Macro person. Of course, there may be some who will fall in between. I am a Macro person because I prefer to look at the general trends and directions. Hence I should balance myself by reading more blogs by AK, B etc. The panel also commented that a Macro guy is like a trader. I was ‘stunned’ for a moment, all this while I called myself an investor and now I’m a trader? After some thought it does not really matter what I call myself. As long as I can have a steady stream of income from my investments and rest well at night, I’m satisfied. Several financial/investment terms were discussed and some were alien to me. Scale in, Scale out: I thought it was referring to some bottom fishing technique but is actually a trading strategy. Average down: The process of buying additional shares in a company at lower prices than you originally purchased. Beware that the shares can go to ZERO. Never say never but it has happened to some. Dollar Cost Average (DCA): buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. A reader asked about the difference between DCA and Average Down. The thought process behind it is different. When you average down you want to lower the average price of the shares that you bought but in DCA, you will continue to buy even if the price has risen. Fiscal Cliff: Too lengthy to explain. Only the US can come up with such a fanciful name. Taper tantrum: This is the most foreign to me. It is basically about how the market reacts to the Fed’s actions. I will like to end by looking at my portfolio again. Some readers asked if there is a need to diversify – am I too heavy on REITs, should I diversify into another industry or country, should I buy precious metals etc. I think at the end of the day, if your portfolio meet your expected returns and you can sleep soundly at night, it is all that matters. Once again a big thank you to AK and his guest panel. It was truly an enriching lesson for me.