Author: Managing Your Money

Blog #25 An Idiot’s Guide to Investing

Most people are not investors even if they say they are. I make this claim from many years of interacting with people I know and also from volumes of academic research into investor behavior in a field that is now called behavioral finance. To invest is to put money in something where the odds are in your favor. This is opposite of gambling where you know the odds are highly against you, but you choose to gamble anyway for the hope of quick riches. Gambling-like behavior is pervasive in the stock market, my focus in this blog. When an “investor” bets...

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Blog #24 Let’s Goal!

There’s nothing worse that investing with a clear sense of direction. Without a clear investment goal in mind, you may end up just holding cash (the default asset for many people) or tread in and out of the stock market like a short-term trader. Cash is an expensive asset to hold in the long run. For example, an inflation rate of 4% a year cuts the purchasing power of a dollar by half after 18 years. Stocks provide higher real returns than either cash or bonds but unfortunately, many investors of stocks do not hang on long enough to...

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Blog #23 Financial Literacy and Investment Attitudes: Getting the Basics Right

Cash and property are the two main asset Singaporeans own. Cash is an expensive asset to hold in terms of the opportunity to generate wealth for big goals such as financing one’s retirement. And unless you own more than one property, it is best to view the one property you have as a consumption asset. Equities is an asset class that can provide the high average returns needed to build retirement wealth, or any large amount of future wealth for that matter. As we shall see, the average Singaporean fights shy of this important asset class. A recent survey of...

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Blog #22 A REIT Nightmare

In my previous blog, I showed that S-REITs as a group have delivered exceptionally returns compared to the Singapore stock market. But take note of the important qualifier “as a group”. The returns of S-REITs shown in that blog reflect the performance of a diversified index of all S-REITs. The performance of a single REIT or even a small group of REITs can be very different from that of a well-diversified portfolio. The story of Sabana REIT serves as a cautionary tale of what can happen if you put all your eggs in one reit basket. The full name for Sabana REIT...

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Blog #21

REITs offer a liquid alternative to physical property, both in terms of income and ease of transactions (buying and selling). After all, REITs already own a clutch of income-producing properties, the bulk of which are distributed to shareholders. And unlike physical properties, you can easily buy or sell shares of REITs on the stock exchange on any business day. In this blog, I intend to give you a historical perspective of the performance of Singapore REITs (S-REITs). While past returns do not guarantee similar returns in the future, we can’t ignore history either. My period of analysis is from August...

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Blog #20

Can’t afford to invest in property?  Don’t want the burden of a huge mortgage debt, yet envy the rental income that property owners enjoy?  You are not alone. But the good news is that there are alternative way to get exposure to property: Without a huge capital outlay Without having to borrow property loan Earn steady rental income, and Enjoy potential price appreciation How? By investing in property stocks and/or real estate investment trusts (REITs). Property stocks are shares issued by firms whose main business is to develop and sell properties, while REITs are firms that own income-generating properties. Rents...

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Blog #19

Part of the allure of property as an asset class is that with every dollar of your own capital and an 80% mortgage loan, you can pretend you own 100% of the property.  So, if the property’s value rise by 10% over a year, you earn a windfall profit of $5 (10% x $5). And you can brag to your friends that you made return of 500% ($5 over $1) in just one year. Leverage or borrowing money to own an asset is the name game in property. Of course, borrowed money has to be repaid (with interest). There...

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