Where to earn the highest interest for your stablecoins now

As the crypto economy grows and evolves, there are more ways than ever to earn rewards for holding crypto, learning about crypto, or interacting with decentralized finance (or DeFi) apps.

To boost investment yield, long-term crypto traders are using one more way to make money off their investment — crypto interest accounts. In theory, a crypto interest-earning account works just like a regular savings account.

Most banks offer annual interest rates that do not exceed 1% whereas stablecoins interest rates go as high as 4% to 12% annually. Many lending platforms even offer daily interest payouts, enabling investors to earn on compound interest.

What are stablecoins?

Stablecoins are the answer to the calls from early crypto investors looking for a crypto-equivalent to fiat currencies like the dollar or the rupee. It needed to be something that could reliably hold value over time without volatility and allow them to easily transfer that value.

Because of the current financial system, the most used stablecoins are those that ‘peg’ their value to the US dollar.

Top 6 stablecoins in the crypto market — what are they, how they work and why they have governments worried (read here)

Note: All six are pegged at 1:1 to the US Dollar, and reside as tokens on blockchains that support smart contracts, such as Ethereum, Binance Smart Chain etc.


This post is primarily looking across the various online platforms that allow one to earn interest in the 6 best stablecoins (by market value as of Dec 2021), namely:

1) Tether (USDT)

2) USD Coin (USDC)

3) Binance USD (BUSD)

4) Dai (DAI)

5) TerraUSD (UST)

6) TrueUSD (TUSD)

Some of the popular and often mentioned platforms are:

1) Hodlnaut (Click here to see the latest rates)

2) Celsius (Click here to see the latest rates)

3) Crypto.com (Click here to see the latest rates)

4) BlockFi (Click here to see the latest rates)

5) Vauld (Click here to see the latest rates)

6) Nexo (Click here to see the latest rates)

However, before using the platforms, please do your own due diligence. Some of these platforms are relatively new. Do note that trading in cryptocurrencies is risky, please DYODD.

In general, the catch for the high yield is that there is no Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA) insurance. There are not as many regulations. In addition, there is the uncertainty of the firm itself getting into risky lending practices and going belly up. The interest rate isn’t high because the exchange is feeling generous. Rather, it is high because the exchange believes it can earn a higher return by using that cash for other lending practices.

Please refer to the below table (Information updated as of 25 Jan 2022) for the various interest rates offered. The highest rates are highlighted in red.


StocksCafe

FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend / bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Friend of StocksCafe and test out all features for free for two months!

Please follow me at StocksCafe, via my StocksCafe profile page.

Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

Tiger Broker Referral Code:: GPE59H

Sign up here.

Use the above referral code to enjoy the below benefits.

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FSMOne.com

Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).

If you do not have an account, you can sign up here. Please use my FSMOne referral code: P0031127, when you sign up.

Gemini

As stated by MoneySmart on Jan 22, if you’re looking to optimise trading your crypto with relatively low fees, simple-to-grasp expert UI and ease of purchase with Singapore dollars. then the best crypto exchange in Singapore is Gemini,

If you do not have an account, you can sign up here using my referral link. After you have signed up, once you buy or sell US$100 or more (or 100 USD equivalent of your domestic currency) within 30 days of creating your account, your account will be credited US$10 (or 10 USD equivalent of your domestic currency) worth of bitcoin.

Hodlnaut

Hodlnaut is a crypto-borrowing and lending platform that helps investors improve the return on their assets.

If you do not have an account, you can sign up here using my referral link. After you have signed up, you will receive a US$20 sign-up bonus after making a deposit equivalent of US$1,000 in a single transaction on any supported assets within 1 week. Bonus payouts are paid in the same asset deposited. You may make a test deposit of any amount. The deposit equivalent of US$1,000 or more must be completed within one week of the first test deposit.

Shopee

I have been using Shopee for a while and think you will like it as much as I do.

Get $10.00 off your first purchase using my code DARREB52.
Download Shopee now and enjoy hot deals at the best prices! Click here.

Happy shopping!

Posted in Cryptocurrency | Leave a comment

The most underrated key to investing and time for me to revisit it in 2022

I always felt that investing is both simple yet difficult at the same time.

Terry Smith

In the below article, Terry Smith shared his investment strategy, Terry Smith is also known as the English Warren Buffett, Smith joined Barclays as a history graduate in 1974. He became prominent as the UK’s top-rated banking analyst throughout the 1980s.

Terry Smith’s tips for picking exceptional businesses and getting hefty returns (read here)

To quote the article (emphasis mine):

Investment strategy
Smith says investors should have a high quality, concentrated portfolio of 20-30 resilient global growth companies which are held for the long term.

As per him, investors should follow a simple three-step investment strategy, which is-

1. Buy good companies
2. Don’t overpay
3. Do nothing

Warren Buffett - Jeff Bezos

Investing is a long-term prospect, the benefits of which come after many years. Patience, too, is a behaviour where the benefits last a long time. Patience endures temporary hardships for the future reward. Warren Buffett also considers patience – or lack of it – a defining factor in investment success.

There is a saying that investing is more about being patient than being smart. Yes, it takes a fair amount of intelligence to pick good companies, know valuations (and not over-pay). However, I reckon the hardest part (for me at least) is to do nothing. Some people are born with this character trait, while others need to work hard to achieve it.

Put it in another way, it does not take me very long to churn out a ‘buy’ list of good companies, whose stocks I would like to own. I have plenty of time to do that, to study their economic moats, past financial performance, and current/past valuations… it is what happens after I have that ‘buy’ list.

I reckon Charlie Munger said it the best.

Waiting helps you as an investor and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.” Charlie Munger

The story about the 3 monks

Then there is the story about 3 monks. 3 monks were staying in a temple, but all needed to make a trip to another temple. However, the weather during that time was cloudy and rain is imminent. The first monk took with him an umbrella, the second monk took with him a walking stick, while the last monk did not take anything. All 3 monks arrived at the other temple the next day.

The first monk who took the umbrella, arrived covered in mud; while the second monk who took with him the walking stick arrived soaking wet. Oddly, the third monk who took nothing arrived clean, dry and proper. The first 2 monks were puzzled. They have rushed here in the rain (one fell down in the rain, and ended up muddy, while the other braved through the rain without an umbrella).

Both monks questioned the third monk. The third monk simply replied that while on route to the temple, when it started raining, he simply waited at a pavilion, and only continued the journey when the rain stopped.

I reckon we can do all sorts of analysis, planning; but in investing it really pays to be just that bit more patient.

Typically, for most people going about their normal day-to-day tasks, it pays to have a sense of urgency, to not leave things to the last minute. However, in investing, time in the market is more important than timing the market.

Jack Bogle’s market advice: ‘Don’t do something; just stand there’ (read here)

Year 2022: The year to be patient?

The year 2022 is still a blank canvas for me. I don’t really have a concrete plan as to how to invest just yet. It could be due to the various events that have happened in 2021, for instance, the regulatory announcements in China (from the banning on crypto mining, crack-down on private education, escalating property curbs – including the Evergrande crisis, continued crack-down on Chinese techs, the notion of common prosperity, etc)…and the impending rate hikes by the US Fed in 2022.

To put it in another way, there are many known unknown risks. We are aware that there will be 3 or 4 rate hikes in 2022 by the US Federal Reserve but we do not know when and to what extent (how many basis points). We are aware that there is an on-going risk of delisting of Chinese companies stocks from the US stock exchanges but do not know exactly when (and what will be the full extent of it, and what will be China’s actions). We are aware of the escalating property curbs in China which appear to be affecting more developers, and recently Country Garden is in the news, but we have yet to understand the full extent of it. And also, will China continue to insist on its zero-Covid policy in 2022?

Fed’s Harker calls for ‘action on inflation,’ sees 3 or 4 rate hikes likely this year (read here)

China’s property crisis reaches biggest builder Country Garden (read here)

Then there are the unknown-unknown risks. If we can turn back time, and be back in Dec 2020, I am sure very few of us would have anticipated the harsh crackdowns in China on private education, property developers, tech companies etc in 2021. And let’s not start on the Omicron covid-variant or the continuing free fall of Alibaba stock price since late 2020 (after the failed Ant IPO).

Even the brilliant minds in Temasek and GIC probably did not foresee China’s curbs on its US$100 billion private tutoring and online education sector.

China’s edtech assault hits investors from Singapore’s Temasek and GIC to SoftBank (read here)

So yes, given what has happened in 2021… 2022 is really ‘hard to say’ (for lack of a better word). There are just too many unprecedented events.

Tips for myself to be patient

So that brings me to this notion of being patient. I reckon there are some tips in being patient (well at least to me).

Let me be honest with you, I am not the most patient person around to start with (I am not born with that gene). I don’t think I can survive staring and waiting for the wall paint to dry (then again having spent close to 2 years working from home, and on most days alone in a room.. this has given me new meaning to the phrase ‘watching paint dry’).

I reckon I have digressed. As I mentioned earlier, I am not the most patient person to start with. However, since we are talking about investing our hard-earned money here…

“The stock market is a device to transfer money from the impatient to the patient.” Warren Buffett

online shopping waiting GIF

1) Learning from past experiences. Perhaps it is the past (bad) experiences, whereby I have been badly ‘burned’ by being not patient. We are all familiar with the term FOMO (Fear of missing out), and I have my fair share of jumping in quickly for fear of missing out (only to be badly burned afterwards).

Some of my worst investing decisions are made when I am both mentally tired or preoccupied with work, and when I made investing decisions rashly.

2) Valuation: It could also be the fact that from many valuation indicators, the US markets do appear overvalued (from a P/E valuation perspective). Singapore market (from a P/B valuation perspective) appear slightly below or full valued, while the Hong Kong market is undervalued (from a P/B valuation perspective) if we can accept the regulatory risks.

I still believe that if the US markets sneeze, the other bourses will also catch a cold. Well, these days, when the China markets sneeze, many markets elsewhere also appear to be affected.

So with the 3 or 4 impending rate hikes in the US; and high valuation and potential pull-backs… I would say the odds are good that we can find better opportunities moving forward in 2022 and even 2023.

A stock market decline is as routine as a January blizzard in Colorado. If you’re prepared, it can’t hurt you.” Peter Lynch

3) Ways to sock away idle cash while earning passive income. I still believe that in the long term, buying good companies at fair valuation is the way to go. It is also important to build up a dividend income stock portfolio. After all, this is a great way to beat inflation. And raging inflation is now in the news. Idle cash in the bank will just lose its value quicker. So yes, that could be the driving force why some of us rush to invest our idle cash. We just can’t bear to see our hard-earned money value eroded over time.

Nevertheless, building up a war chest is still important. Cash in a way, like patience, in investing, is often under-rated. In times of crisis, cash is king.

It is often during this time of building up a war chest, that I often start looking for ways to sock away my idle cash. I have tried putting them in Singapore Saving Bonds, Money Market funds, P2P loans, using it as a reserve to sell cash-reserved put options, and more recently trying out purchasing stable coins (crypto) and earning higher interests in sites like Nexo, Hodlnaut, BlockFi or Celsius. Not all strategies turn out good – for instance, my experience with P2P loans and Amazon FBA selling in the past did not work out well.

In retrospect, I don’t think P2P loans are worth the time and effort. Did not exactly lose much money, just wasted time and effort.

I also think I am not well suited to sell call or put options regularly (my mind cannot adjust well to leverage snd the time limit/decay that easily).

For me, I am only using a small amount in starting a new strategy of purchasing stable coins. I will probably put more as I get more confident and comfortable with it over time. Nevertheless, crypto investing/trading is risky and is not for everyone. I am not advocating crypto to anyone, pls DYODD.

Crypto Shadow Banking Explained and Why 12% Yields Are Common (read here)

Lending Your Crypto Could Generate Attractive Yields. But How Safe Is It? (read here)

To quote the above article: “The hedge fund, however, needs cash to buy the spot Bitcoin, so would be willing to pay what seems to be exorbitant rate of 12% for the loan as long as it can earn 21%, or a 9% profit, on the trade. The spread between spot and futures has been even higher in recent months.”

I initially wanted to purchase USDC, however, Gemini does not allow that. I am also not keen to purchase USDT (I have a huge suspicion on Tether based on what I read online): I eventually ended up buying DAI.

Top 6 stablecoins in the crypto market — what are they, how they work and why they have governments worried (read here)

In some remote corner of my mind, there is this thought of using stable coins parked in Nexo earning daily interest which can easily be converted to SGD as cash reserves for the occasional selling of cash-reserve put options….just a crazy thought so far. Hmm…. too many dimensions and steps. And yes, need to consider the (gas) fees involved.

Below is from Nexo.

Sure the interests from Singapore Saving bonds (SSB) and Money Market funds are low when compared to the yields from dividend stocks/Reits (or even crypto interests), but well, they are a lot ‘safer’, and it beats leaving the money in the banks. It does not eliminate the feeling of ‘devaluation’ from hyperinflation, but it sure helps to smoothen it off.

So far I have been treating the funds in SSB as my ‘last resort’ fund… when armageddon happens. It is just too lengthy to convert it to cash :p

Well, ultimately, what works for me, may or may not work for you.


StocksCafe

FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend / bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Friend of StocksCafe and test out all features for free for two months!

Please follow me at StocksCafe, via my StocksCafe profile page.

Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

Tiger Broker Referral Code:: GPE59H

Sign up here.

Use the above referral code to enjoy the below benefits.

This image has an empty alt attribute; its file name is image-1.png

FSMOne.com

Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).

If you do not have an account, you can sign up here. Please use my FSMOne referral code: P0031127, when you sign up.

Gemini

As stated by MoneySmart on Jan 22, if you’re looking to optimise trading your crypto with relatively low fees, simple-to-grasp expert UI and ease of purchase with Singapore dollars. then the best crypto exchange in Singapore is Gemini,

If you do not have an account, you can sign up here using my referral link. After you have signed up, once you buy or sell US$100 or more (or 100 USD equivalent of your domestic currency) within 30 days of creating your account, your account will be credited US$10 (or 10 USD equivalent of your domestic currency) worth of bitcoin.

Hodlnaut

Hodlnaut is a crypto-borrowing and lending platform that helps investors improve the return on their assets.

If you do not have an account, you can sign up here using my referral link. After you have signed up, you will receive a US$20 sign-up bonus after making a deposit equivalent of US$1,000 in a single transaction on any supported assets within 1 week. Bonus payouts are paid in the same asset deposited. You may make a test deposit of any amount. The deposit equivalent of US$1,000 or more must be completed within one week of the first test deposit.

Shopee

I have been using Shopee for a while and think you will like it as much as I do.

Get $10.00 off your first purchase using my code DARREB52.
Download Shopee now and enjoy hot deals at the best prices! Click here.

Happy shopping!

Posted in Investing methodology | Leave a comment

Digital Core Reit vs Keppel DC Reit

Data centres are a growing asset class within the REITs space

The drought in the initial public offering (IPO) of real estate investment trusts (Reits) on the Singapore Exchange (SGX) through the later part of 2020 and into much of 2021 ended with the successful listings of Daiwa House Logistics Trust (DHLT) and Digital Core Reit (DC Reit) towards the end of 2021. The former owns logistics assets in Japan, while the latter own data centres in the United States (US) and Canada.

For Singapore retail investors, prior to the listing of Digital Core Reit, their only investment choice for pure-play data-centre Reit has always been Keppel DC Reit.

Why?

To invest in stock markets elsewhere, beyond the Singapore and Hong Kong stock markets would incur dividend tax. This is especially so for the US stock market which has a thriving and big Reit market. Non-resident aliens are subject to a dividend tax rate of 30% on dividends paid out by U.S. companies.

Taxes Tax GIF

For dividend income investors like myself, data centre Reit seems to offer the best of both worlds, being part of a sun-rise growth segment of the digital economy while providing ‘stable’ dividend income annually. After all, data centres are an important component of the digital economy. Its demand is underpinned by the increasing adoption of cloud-based services as well as the shift towards 5G. The pandemic has only accelerated the adoption of these services.

For retail investors who have ‘missed the boat’ by not being an early investor of Keppel DC Reit (eg. during the start of the pandemic or way before the pandemic), they can only watch in dismay at the meteoric rise of Keppel DC Reit share price. See below.

There are also a few other Singapore-listed Reits with data centre properties in their portfolio, namely Mapletree Industrial Trust and Ascendas Reit.

Data Centres represent 52% of Mapletree Industrial Trust AUM (Asset Under Management). The majority of these data centres (49.4% of the 52%) are located in North America, the rest being in Singapore. See below.

Data Centres represent 10% of Ascenda Reit total Investment Properties. In early 2021, Ascendas Real Estate Investment Trust (Ascendas Reit) acquired 11 Europe data centres for $904.6 million; boosting the Reit exposure to data centres to 10% of its total investment properties, from 4%. See below.

The stock prices of Keppel DC Reit, Mapletree Industrial Trust, and Ascendas Reit have climbed since the March 2020 lows.

In 2021, there are other Singapore-listed Reits that have likewise increased their exposure to this growing segment (data centres).

S-REITs with Data Centres Amongst World’s Strongest in 2020 YTD (read here)

With the listing of Digital Core Reit at the end of 2021, Singapore retail investors now have another choice for pure-play data centre Reits. They can now choose between Digital Core Reit and Keppel DC Reit.

Please note that I am currently vested in Digital Core Reit.

Metrics Comparison between Digital Core Reit and Keppel DC Reit

I think both are good Reits, and if one has sufficient funds to diversify and invest in both, why not?

There are many articles pertaining to the review of Digital Core Reit and comparison to the other Data centre Reit (eg. Keppel DC Reit), and I do not think I need to add further to the analysis. Please see below for the key metric comparison between Digital Core Reit and Keppel DC Reit.

In terms of occupancy rate, Digital Core REIT wins on this aspect with a full 100% occupancy rate for its overall portfolio as compared to Keppel DC REIT’s 98.1%. Nevertheless, Digital Core REIT has a much smaller portfolio with only 1 tenant across most of their assets whereas Keppel DC REIT is more diversified with several tenants across most of its assets.

In terms of Weighted Average Lease Expiry (WALE), Keppel DC REIT wins on this aspect but by a small margin. Both REITs do have long WALEs which is a great point to take note of.

Moving onto key metrics, wuth the increase in Digital Core Reit stock price since IPO, we can see that Digital Core REIT has lower PB ratio but slightly lower yield as compared to Keppel DC Reit.

Digital Core REIT also has a very low gearing at 27% as compared to Keppel DC REIT’s 36.2%. Based on the IPO prospectus, Digital Core REIT has debt headroom of US$160m, US$424m, and US$596m before reaching a gearing of 35%, 45%, and 50% respectively. This represents many opportunities for Digital Core REIT over the next 24 months as they start acquiring from their sponsor’s ROFR pipeline.

Beyond the figures…

Beyond the fundamental metrics, I think many articles did not actually address the elephant in the room.

Now, with the pandemic technically still not over, one would expect data-centre centric Reits stock prices to be still resilient, if not rising.

In the US markets, there are a number of data-centre centric Reits, and according to the National Association of Real Estate Investment Trusts (NAREIT), there are only four REITs focused primarily on owning and operating data centres in late 2021. Namely CoreSite Realty, CyrusOne, Digital Realty and Equinix. The biggest is Equinix followed by Digital Realty.

Digital Core Reit is sponsored by Digital Realty, one of the largest owners, operator, developer and acquirer of data centres globally.

Now let us look at their 1-year stock price performance.

For these 4 data-centre centric Reits, in general, their stock price has been (nothing but) trending up for the whole of 2021, although there is a stock price dip for Digital Realty and Equinix on Jan 22.

If you are an investor vested in any of these Reits, good for you.

On the other hand, when we look at Keppel DC Reit share price chart, it paints a totally different picture.

For the most part of 2021, the share price has been trending downwards since Feb 2021. In fact, it is aound 22% down from its peak in Feb 2021.

To add on, Keppel DC Reit assets are spread over 8 countries (not solely limited to Singapore). In terms of the properties’ values, around 43% are in Europe and Australia.

This downward trend is especially glaring when seen from its long term share price performance. Moreover, like I said earlier, the pandemic is technically not over yet. And compared to its US counterparts, the share price performance is even more puzzling.

In fact, over a 1-year period, the share price of Keppel DC Reit has underperformed compared to the share prices of Mapletree Industrial Trust, Ascendas Reit and the STI ETF.

If you visit online forums or posts by retail investors of Keppel DC Reit, it would not be surprising to read many unhappy comments from disgruntled investors who are vested in this once stellar Sg Reit.

Stock markets are forward-looking, and as retail investors, we are all too familiar with the term that past performance does not guarantee future performance. There are many examples of stock darlings that suddenly ‘lose steam’ and subsequently crash or drop indefinitely, leaving current investors holding the bag.

A dive into what caused the price drop

Keppel DC REIT (SGX:AJBU): 5 reasons why its share price is still down and should you be watching? (read here)

I think Tan Zhi Rong from Dr Wealth wrote a good article highlighting the potential reasons on why Keppel DC Reit stock price dropped. You can read his article as listed above.

I feel among his many points, 2 key points stood out.

1) Failure to meet investors’ expectations

2) Expansion of mandate (which is linked to the Proposed investment in M1 network assets)

1) Failure to meet investors’ expectations.

Investors in general are a pragmatic bunch. After all, there are many other alternative investments / Reits in the market. A lousy year or a lousy quarter can adversely affect the sentiments of investors, leading to drops in stock prices.

Keppel DC REIT did perform admirably in the first quarter of 2021. For the first quarter of 2021, it achieved $42 million in distributable income, up 17.5% year on year.

Similarly, its Distribution Per Unit (DPU) has risen 18.1% to 2.462 cents year on year. With a long Weight Average Lease Expiry (WALE) of 6.6 years, its portfolio occupancy has remained resilient at 97.8%.

However, if you compare this performance to its FY2020 results, it will tell you a different story

In FY2020, Keppel DC REIT’s earnings recorded 38.6% growth in distributable income to $156.9 million and DPU increment of 20.5% to 9.17 cents. This growth is way higher than its Q1 2021 growth, which signifies that Keppel REIT growth has slowed down.

While its occupancy remains high at 97.8%, its WALE has seen a slight drop from 6.8 years to 6.6 years.

In a year, with the tailwind of the pandemic still intact, Keppel DC Reit’s growth appears to be decelerating. For investors used to the stellar growth of the past year, the ‘good’ performance of 1st quarter 2021 appears to be ‘bad’.

2) Expansion of mandate (which is linked to the Proposed investment in M1 network assets)

Maybe I am a bit biased, but I think as an asset class, Reits generally appeals more to the older generation of retail investors (eg. retirees), who look forward to steady and growing dividend income annually. They generally do not like sudden drastic changes as compared to the younger generation who are more into growth stocks or crypto. Well, there is no hard truth in this, just a thought.

The recently proposed merger of Mapletree Commercial Trust (JMCT) and Mapletree North Asia Commercial Trust (MNACT) in a S$4.2 billion deal, has probably resulted in many disgruntled investors (who are currently vested in MCT).

The deal could raise MCT’s leverage, considering MNACT’s weaker leverage profile and the incurrence of incremental debt and perpetual securities to fund the merger’s cash consideration,

With the merger, MCT is no longer a pure Singapore play Reit, namely with the inclusion of: Festival Walk (Hong Kong Mall) and Gateway Plaza (Beijing Office) from MNACT.

Mapletree merger: Moody’s reviews MCT for downgrade, MNACT for upgrade (read here)

Why I am not buying Mapletree Commercial Trust at $1.84 (read here)

Consequently, after the above announcement, MCT stock price has been on a downward trend.

In the case of Keppel DC Reit, on 28 April 2021, with the announcement of the Expansion in Investment Mandate, its stock price started to slide.

With this announcement, Keppel DC REIT would no longer be a pure Data REIT play as it will now include real estate and assets in the digital connectivity sector. Keppel DC REIT’s official reason was that this expansion of mandate would allow Keppel DC REIT to continue to invest in assets with stable cash flows, attractive yields, and accretive returns.

Earlier in my article, I have been using the term pure-play data centre Reit loosely…as technically, Keppel DC Reit is now not a pure-play data centre Reit.

Together with this announcement, Keppel DC made another announcement on a proposed investment in M1. M1 is a subsidiary of Keppel Corporation. Likewise, Keppel DC REIT can be linked all the way back to Keppel Corporation.

With the announcement of its expansion of investment mandate, Keppel DC REIT has signed a non-binding term sheet on the proposed investment in M1 network asset.


For current investors with the original intention of being vested in the high growth data centre segment, they are now also vested in the telecommunication segment. In general, telecommunication stocks like Singtel has not performed well. Although Keppel DC Reit management has indicated that such infrastructure investment will unlikely exceed 10% of its asset. Nevertheless, rules can change again… and well, for an individual retail investor, on his own, he has very little voting rights. And if he cannot change the proposal which he dislikes, he will ultimately vote with his feet (eg. by leaving/selling off his holdings).

I do not have a crystal ball but given the choice…

As highlighted earlier, I am currently vested in Digital Core Reit.

I am unable to predict the future and I reckon there are many moving parts, and narratives could well change in the future. This is especially so for newly listed Reits; there is really not much historical data we can infer from.

With the above points highlighted, there remains one very important factor for dividend investors like me: The sustainability of the dividend payout / DPU – Distribution per Unit (growth).

Pay Me Bitch Better Have My Money GIF

Digital Core Reit is a newly listed Reit, so there is no past performance to speak of. The best we can do is to look at the past performance of its sponsor Digital Realty (and it really is a very strong sponsor).

The dividend growth of Digital Realty Reit has been good (if not stellar). As stated on its website, Digital Realty Reit is committed to a secure and growing dividend. It has 16 consecutive years of growing dividend increase (at 10% CAGR). I will probably be vested in this Reit if not for the 30% dividend tax.

In comparison to Digital Realty Reit, Keppel DC Reit is a relatively young Reit. Keppel DC REIT was listed on 12 December 2014, and it has been paying dividends. Its dividend yield has not been stable (perhaps because it is a young Reit), and the historical trend is far from upward trending. See below.

Digital Realty Reit stated that it is committed to a secure and growing dividend. Can Keppel DC Reit state the same?

Nevertheless, I may be wrong, as past performance is not indicative of future performance.

Is it a coincidence that Digital Realty chose to list Digital Core Reit at the end of 2021 when Keppel DC Reit share price has been sliding for most of the year 2021?

With the listing of Digital Core Reit, and perhaps other future potential pure-play data centre Reits, together with existing SG Reits increasing their exposure into the data centre segment, Keppel DC Reit is no longer the one and only data-centric Reit in the Sg Reit market. In fact, it is not even a pure data-centric Reit. The only pure data-centric Reit in town (Singapore and Hong Kong stock markets) is Digital Core Reit.

There will potentially be more investment options for retail investors looking to invest in this growing sector, and Keppel DC Reit needs to do more to stay ahead.


StocksCafe

FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend / bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Friend of StocksCafe and test out all features for free for two months!

Please follow me at StocksCafe, via my StocksCafe profile page.

Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

Tiger Broker Referral Code:: GPE59H

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FSMOne.com

Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).

If you do not have an account, you can sign up here. Please use my FSMOne referral code: P0031127, when you sign up.

Gemini

As stated by MoneySmart on Jan 22, if you’re looking to optimise trading your crypto with relatively low fees, simple-to-grasp expert UI and ease of purchase with Singapore dollars. then the best crypto exchange in Singapore is Gemini,

If you do not have an account, you can sign up here using my referral link. After you have signed up, once you buy or sell US$100 or more (or 100 USD equivalent of your domestic currency) within 30 days of creating your account, your account will be credited US$10 (or 10 USD equivalent of your domestic currency) worth of bitcoin.

Shopee

I have been using Shopee for a while and think you will like it as much as I do.

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Happy shopping!

Posted in REITS | 1 Comment

Short post for the start of 2022

Happy new year everyone! This will be just a short post.
During the end of 2021, I have been really busy at work, and will also be busy in 2022.

Portfolio (same old same old)

There isn’t much change in my portfolio. Nevertheless, the key change which I will be doing in the early part of 2022, will be divesting from Ascendas Reit and transferring the cash into another dividend counter. I have not really decided on the counter yet. However, I see more promising REITs than Ascendas REIT.

Being a shareholder of Mapletree Commercial Trust, I am not entirely happy with the proposed merger between Mapletree Commercial Trust and Mapletree North Asia Commercial Trust. If I am keen to invest in Festival Walk in Hong Kong and Gateway Plaza in Beijing, I would have already done so in the past, by investing in MNACT.

With the rich valuation of the US markets, I do not foresee much investing in the coming weeks or months.

For months of Oct 21, Nov 21 and Dec 21, I have only nibbled on some dividend counters (eg. Straco, ST Engineering, Mapletree Commercial Trust) as well as the Chinese Tech counter Pinduduo. I guess I was counting on the re-opening of economics (and the subsequent uptick in recovery stocks)… until the Omicron virus derailed it (for now).

Meeting up with friends/relatives

December is usually a month for meeting up with friends and relatives. This year, however, I did not meet up with many, just a few.

Well, being in my mid-40s, I tend to know people who are either doing very well (financially) or those that aren’t. Those doing well would be thinking about early retirement, while on the other hand there are those who are hit hard by pandemic, in between jobs or in struggling in jobs that do not pay well.

On the other hand, there are people who did not even need to work, with their finances well taken care of by their parents. Or there are people near retirement age (or past retirement age), still at the pinnacle of their career… but beyond work, they are unmarried with no kids. They will probably donate most of their savings to charities or to their nieces or nephews once they pass away.

Personally, for me, the industry which I am in (construction), is hit hard by the pandemic. I often heard the news of people resigning from my company. Projects are getting fewer and smaller, and we are tasked with my projects. I do not see many job openings in this industry. Having said that, I guess I am lucky to still have a job.

Having worked from home for close to 2 years, I can see many benefits (and cons) of it. Have heard and read that many companies are permanently adopting this WFH system for a certain number of days per week, with the reduction of office spaces.

Plan for 2022 (Investment)

To be frank, I do not have a very clear plan at the moment. I reckon I am still waiting for the markets to direct my actions.

I will still do some DCA to increase my passive dividend income. I have increased my annual dividend income by 1/3 in 2021 (compared to 2020).


However, I do believe if opportunities pop up in cryptocurrencies, I would probably add a tiny fraction. I missed the May 2021 correction… but am sure there will be another chance.
However call me superstitious, as per my horoscope (fire dragon) reading for 2022, it is not advisable to bet big on risky assets in 2022.

StocksCafe

FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend / bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Friend of StocksCafe and test out all features for free for two months!

Please follow me at StocksCafe, via my StocksCafe profile page.

Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

Tiger Broker Referral Code:: GPE59H

Sign up here.

Use the above referral code to enjoy the below benefits (Campaign Period: 9 August 2021 12:00 – 10 January 2022 12:00 (SGT))

FSMOne.com

Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).

If you do not have an account, you can sign up here. Please use my FSMOne referral code: P0031127, when you sign up.

Shopee

I have been using Shopee for a while and think you will like it as much as I do.

Get $10.00 off your first purchase using my code DARREB52.
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Happy shopping!

40s, I tend to have friends who are doing well (financially) and are looking forward to early retirement in the near future. I am happy for them.
On the other hand, there are others who are hit hard by the pandemic and are still in between jobs, or took heavy pay cuts or struggling in jobs that don’t really pay that well. That is the other spectrum.

Of course, there are always people whom we know that does not even need to work (coming from well to do families), with their parents footing the bills. Or people who are near or well past retirement age, unmarried, with no children, but still at the pinnacle of their career, earning top dollars. They probably will donate their savings to charities or their nieces or nephews when they pass away.

Personally, for me, the industry which I am in (construction) is hit hard by the pandemic. Many people have resigned, and projects are getting fewer. I guess I am lucky to still have a job. With more than a year of WFH, it still feels surreal. I guess it is difficult to find new opportunities in the industry which I am currently in.

I have been hearing and reading about companies permanently adopting the WFH system for a certain number of days per week (eg. every week, 3 days are WFH). I guess with the reduction in office spaces, quite a number of companies are seeing the benefits of doing so.

Posted in Investing methodology | Leave a comment

Daiwa House Logistics Trust vs Mapletree Logistics Trust

This will be just a short post.
Basically, I view Mapletree Logistics Trust (MLT) as a bellwether logistic S-Reit listed in Singapore. Hence, the recent announcement of the Daiwa House Logistics Trust (DLHT) IPO made me think about how it (DLHT) compares to MLT.

Daiwa House Logistics Trust’s (DLHT) public offer will close on Wed Nov 24, 2021) at 12.00 pm. The REIT will commence trading on a “Ready” basis on Fri Nov 26, 2021 at 2.00 pm.

Disclaimer: I am currently vested in MLT.

Please refer to the simple comparison table below.

In summary, the Price/NAV of Daiwa House Logistic Trust appear low. Its gearing ratio should as stated by its CFO drop to 33.1% (read here).

Daiwa’s WALE (by NLA) at 7.2 years is long.

The forecasted distribution yield is high at 6.3% in 2021.

The above-mentioned are all good points.
However, as with all IPOs, there is a lot of unknown (which will be played out in the longer term). Moreover, Daiwa House Logistics Trust’s dividend yield will probably drop once its distribution policy change from 100% to 90% from 2023 onwards.

Let’s go a little further into the details (below).

Geographical Diversification vs Concentration risk

For Daiwa House Logistics Trust’s (DLHT), given its comparatively small portfolio of 14 logistic and industrial properties in Japan, there is a fair amount of concentration risk.

Nevertheless as stated in the IPO prospectus, the assets are well diversified across Japan, located in both Greater Tokyo as well as core regional areas, mitigating concentration risk. These are strategically located properties closely interlinked with transportation and shipping networks


For MLT on the other hand, Japan logistics properties account for only 11.2% of Assets under management and 10% of the gross revenue. That is 18 of its 163 properties are located in Japan.
Nevertheless, as a retail investor from Singapore, I would probably like a significant portion of the assets to be in Singapore (which I am more familiar with). In the case of MLT, Singapore assets account for almost a quarter of the assets under management. Overall, MLT’s Singapore assets portion still account for the major portion of its gross revenue.


In addition, for MLT’s Japan properties, the occupancy rate is 96.2% on Sept 21 (see below).

Tenant base

Pertaining to the major tenants of Daiwa House Logistics Trust’s (DLHT), it was stated in the prospectus that the high occupancy rates across the IPO Portfolio are anchored by a diversified blue-chip tenant base. See below table.

With the exception of one 3PL operator, no single tenant accounts for more than 10% of NPI of
the IPO Portfolio, translating to low concentration risks. Moreover, the tenant base is well-diversified across multiple sectors including 3PL, E-commerce, retail and manufacturing.

None of the top 10 tenants are related to the Sponsor, or to each other. The aggregate contribution of the
top 10 tenants as a percentage of NPI of the IPO Portfolio for FY2020 was 71.1%.

Nevertheless, it can’t be compared to the diversity of MLT’s tenant base. Whereby the top 10 tenants across different geographical locations account for only around 25.4% of gross revenue. See below.

Lease Expiry Profile (by NLA)

Looking at DLHT’s lease expiry profile is fairly decent (see below); with the majority (75.2%) being under multi-tenant assets.

See below for MLT’s Lease Expiry Profile (by NLA). Likewise, for MLT, the majority of the gross revenue is from multi-tenant buildings (67.6%).

I would argue that DLHT’s lease expiry profile is better (which is more backloaded to FY2026 onwards as compared to MLT’s).

DHLT Future Expansion pipeline

In the DHLT’s prospectus, there is the mention of a visible growth trajectory in the future, which may possibly (more than) triple the IPO GFA. The expansion will be via assets in Southeast Asia (namely Indonesia, Vietnam and Malaysia) and Japan. And yes notably, there appear to be no plans for Singapore.

It is like the start of MLT, although it will still be less diversified than MLT (which include assets in Singapore, Hong Kong, China, South Korea, Australia and India). Nevertheless, MLT’s asset mix may change in the future as well.

Final Thoughts

There are many good points about Daiwa House Logistics Trust’s (DLHT).

However, for me who is already vested in MLT, which already have properties in Japan, I do not see any compelling need to further invest in Daiwa House Logistics Trust (other than the higher yield and WALE perhaps).
Nevertheless, ultimately that is just my personal view, please DYODD.


StocksCafe

FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend / bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Friend of StocksCafe and test out all features for free for two months!

Please follow me at StocksCafe, via my StocksCafe profile page.

Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

Tiger Broker Referral Code:: GPE59H

Sign up here.

Use the above referral code to enjoy the below benefits (Campaign Period: 9 August 2021 12:00 – 31 Oct 2021 23:59 (SGT))

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FSMOne.com

Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).

If you do not have an account, you can sign up here. Please use my FSMOne referral code: P0031127, when you sign up.

Shopee

I have been using Shopee for a while and think you will like it as much as I do.

Get $10.00 off your first purchase using my code DARREB52.
Download Shopee now and enjoy hot deals at the best prices! Click here.

Happy shopping!

Posted in REITS | 1 Comment

Thoughts on my Portfolio (Nov 21)

I have not blogged about my portfolio for some time now. I guess it is probably because StocksCafe did such a good job at tracking my portfolio that I do not really need to record it down in my blog.

Nevertheless, I guess I will just like to pause, pen down some of my thoughts for my current portfolio and my plans ahead.

Income Stream

I wrote a post about my thoughts about the importance of income streams from my portfolio at the end 2019.

Income Streams (read here)

I still think it is important. StocksCafe does a great job at tracking the dividend payout (from stocks) and interest payment (from bonds). See below.

Technically, I am receiving more than $2000 per month (on average) of dividends for the year 2021 (from my Singapore and Hong Kong dividend portfolios, and Singapore Saving bonds).

In addition, the total dividend payout in 2021 has already exceeded that of 2020. With Singapore (and the rest of the world) slowly re-opening, I foresee more of the old-economy dividend stocks’ payout to recover and even exceed the pre-pandemic level.

While the focus is on growth stocks (for the past few weeks), I guess like many I am also expecting better days for recovery stocks (within my portfolio). They do help in contributing to the dividend income. In fact, many of these recovery stocks have already trended up in the month of Oct 21.
I have added small portions of Straco, BOC Hong Kong, ST Engineering (and also Mapletree Logistic Trust), to my portfolios.

On another note, with reference to the report by a team of researchers from Lee Kuan Yew School of Public Policy, which stated that a couple with two children (one teenager and one younger) will spend $6426 per month. Even if I exclude housing purchases from the equation (eg. $6128.03), I guess I myself need to continue to contribute in building up my passive income. Although personally, I don’t think as a family of 4 we spent that much.

Some people consider selling Options (on a regular basis) as having an income stream. I personally do not consider that as an income stream. Likewise, StocksCafe does not have a function of tracking premiums received as part of the passive income tabulation.
Nevertheless, I generated a small chart (below) for the 2021 passive income and added in the premiums received from Aug 21 onwards. Nov and Dec 21 income payouts are not in yet, hence I did not include any in the chart. I do not really trade Options often.

Usually, I take very small positions with far-out strike prices and short durations (less than 2 weeks), which also translate to very low premiums. I guess I am just risk-adverse in that way (not much of a trader or technical analysis type).

Branching Out

Now that I have covered the passive income portion, now let’s think about my Story Fund (Growth portfolio). I am not really a ‘purist’ eg. 100% dividend income investor. Part of my portfolio consists of growth stocks.
The barbell strategy by DBS is not new. I do believe that in the long term, I am able to further develop my overall portfolio by adopting a barbell strategy, eg. investments are heavily weighted at both ends of the risk spectrum. This means being overweight on high-growth stocks on one end of the portfolio, while having stable, income-generating investments on the other end.

Although I doubt it will ever be equally weighted as I am more tilted towards income-generating investments. It is not easy, as I essentially like the idea of passive dividend income… however, on the other hand, I also do not want to miss out on the upsides of the growth stocks.

Having spent much of my time from 2019 to 2021 building up the income-generating (dividend/bond) portfolios, I am slowly looking at the growth stocks.

In a way, I am using the income-generating portion as a ‘base’ from which to slowly grow the other portions. Although, almost every month I do reinvest part of the dividends/interests received into dividend stocks as well.

Generally, I feel that valuations in the US Growth stocks are rich, and values can be found in Chinese tech stocks at the moment. Many renowned investors (Charlie Munger, Monish Prabai, Ray Dalio, etc) have waded into this sector in 2021.

Why Mohnish Pabrai Loves Tencent : (I Bought More Tencent Stock) (Watch here)

In recent months, I have added to my positions in Pinduoduo and Alibaba (9988.HK, P/E: 19.61, and seriously thinking about Tencent (00700.HK, P/E: 19.84). However, 100 shares of 00700.HK is not cheap (more than SGD 8000)…. maybe will come down lower :p…. Well, from a fundamental point of view, be it Revenue growth, Income growth, EPS growth … growth stocks such as Alphabet, Alibaba and Tencent are just all ‘green’ (ever-growing). Although I would probably rate Tencent’s growth as better than Alibaba’s (less CAPEX, more aggressive/higher net income growth).

Alphabet’s growth is spectacular (excluding 2017 due to a one-time charge of $9.9 billion for repatriating foreign earnings). However, compared to the mega Chinese Tech stocks, Alphabet’s valuation is higher (P/E:28.65), then again, it is probably due to my own anchor bias.

The Trade Desk and Pinduoduo are still in the early stages … However, revenue growth is good. The Trade Desk is reporting earnings today (8 Nov 21).

Portfolio Performance

The month of Oct 21 has been a good one in terms of capital appreciation for stocks in general, and I am just enjoying the ride up.

I don’t really focus on the capital appreciation portion of my portfolio, partly because most of them are dividend stocks (rather than growth stocks). A good way is to look at the time-weighted rate of return (TWR) which is a measure of the compound rate of growth in a portfolio.


For my Singapore Dividend Portfolio, the 3-year TWR of the portfolio (in red) still lags behind the STI Index ETF TWR (in orange). Nevertheless, it has been trending up nicely. I am comparing it to ES3: SPDR Straits Times Index (STI) ETF. Please see below.

For my Hong Kong Dividend Portfolio, the 3-year TWR of the portfolio (in red) still lags behind the Hang Seng Index ETF TWR (in blue). I am comparing my portfolio to 2833.HK, Hang Seng Index ETF HKD (not really Apple to Apple since some of the top holdings of 2833.HK are tech stocks like Alibaba Group Holding Ltd Ordinary Shares, Tencent Holdings Ltd, Meituan, Xiaomi Corp Class B).

Nevertheless, it has been trending up slowly (esp, in Oct 21). Please see below.

For my Story Fund. the 3-year TWR of the portfolio (in red) is above the S&P500 ETF TWR (in green). I am comparing it to SPY: SPDR S&P 500 ETF Trust. Please see below.

I would like to spend more time with the family for the rest of the year; and yes, saving up for my parents’ allowance for next year (normally give a yearly amount at the beginning of the year). I reckon it is too late to start planning any year-end Staycation… well shall see.


 

StocksCafe

FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend / bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Friend of StocksCafe and test out all features for free for two months!

Please follow me at StocksCafe, via my StocksCafe profile page.

Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

Tiger Broker Referral Code:: GPE59H

Sign up here.

Use the above referral code to enjoy the below benefits (Campaign Period: 9 August 2021 12:00 – 31 Oct 2021 23:59 (SGT))

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FSMOne.com

Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).

If you do not have an account, you can sign up here. Please use my FSMOne referral code: P0031127, when you sign up.

Shopee

I have been using Shopee for a while and think you will like it as much as I do.

Get $10.00 off your first purchase using my code DARREB52.
Download Shopee now and enjoy hot deals at the best prices! Click here.

Happy shopping!

Posted in Portfolio | 3 Comments

What is your mojo in your quest for financial freedom?

When I have time, I like to read.

Most of the time I would catch up with business news. This is essential especially if I intend to buy stocks at a discount (due to some news which I view as ephemeral).

Personal finance books by Thomas J. Stanley

Beyond business news, I like to read investment blogs and personal finance books. I am sure if you are like me who like to read personal finance books, you would have come across books written by Thomas J. Stanley.

I am sure we have our favourite personal finance books, and I do have my own list. However, what struck me as different about Thomas Stanley is that he made millionaires (themselves) the subject of his study. Perhaps there are other authors who do the same, just that I have yet to come across their books.

I have read the following books:

The Millionaire Next Door by Thomas J. Stanley

Stop Acting Rich by Thomas J. Stanley

In his work, he has conducted surveys of millionaires and decamillioanires (people with a net worth of more than US 10 million). His surveys, go in-depth into their income, their profession/businesses, assets, where they live, to the little personal details like the clothes they wear, the food and drinks they consume, cars they drive, are they married, been divorced before, and their upbringing and beliefs. The study is not heavy on numbers, but rather it delves into the psychology and what fundamentally drives their quest into millionaire status. Nevertheless, he is aware of the magic figures whereby one need to reach to achieve financial freedom, but there are many paths to this goal.

Put it in another way, if Stanley is a researcher and his workplace is a laboratory, the ‘lab mice’ would be the millionaires themselves.

Trending topics

I think for the past few days/weeks, I have been reading a lot of articles from Kyith and Christopher Ng.

How to find your core motivation to be financially free? (read here)

Motivations matter in Personal Finance (read here)

Commentary: Single and secure? Does family life come at the expense of financial freedom? (read here)

How much to LEAN FIRE for parents with two teenagers in Singapore? (read here)

There have been many talks, news and discussion on the topic of how parents (with 2 teenagers) can achieve financial freedom, how one can leave their toxic workplace with financial freedom and what ultimately drives oneself to achieve that goal.


The source of these discussions could be attributed to the report by a team of researchers from Lee Kuan Yew School of Public Policy, which in summary stated that a single elderly Singaporean will need $1421 a month while a couple with teenage children will spend $6426. In addition, for a single parent with a young child, the monthly budget will be $3218.

Another topic is the issue of toxic workplaces and this invariably led to the discussions on achieving financial freedom so that one can leave this environment for good.

To quote Christopher Ng: Seven years later, sick of the toxic workplace I worked for, I resigned without a new offer and entered law school when my family had no breadwinner for four years.

Recently, the production firm Night Owl Cinematics (NOC) saw a spate of anonymous and unverified allegations posted on social media, purportedly showing its co-founder and chief executive officer (CEO) Sylvia Chan being verbally abusive towards one of the firm’s on-screen talents. 

The Big Read: Toxic workplaces more common than we think but when do we say enough is enough? (read here)

The 2 kinds of millionaires

If I can summarise Thomas Stanley’s ideas into 2 very broad parts, at the risk of over-generalising, it is that there are basically 2 types of millionaires/decamillionaires.

Actually, when I first started on my path towards financial freedom, I seldom thought about this. To me, rich people are just rich people. At that time, there are (visual) signs which I generally felt pointed to what defines a rich person. It could be a large private property, expensive continental cars (esp. so in Singapore’s context), a high paying job with a well known MNC, sporting the latest gadgets (by them or their kids), country club membership, etc. These are ‘obvious’ visual clues……Which I felt was unattainable to the (younger) me then.

Then over the years, while reading up more, observing more, and then going through Thomas Stanley’s books… I realised that there is actually another version of millionaires.

The first type:

Generally, they are high-income earners. They could be professionals (eg. lawyers, surgeons, tech specialists), start-up founders, star athletes or actors, talented individuals, top executives at banks, etc.
They typically achieve high net worth and financial freedom at a relatively young age eg. in their 30s, or early 40s. They are also generally big spenders, although their income can more than compensate for it.

There are always exceptions. However, the general reason is probably due to the environment they are in (where they work and where they live). For instance, if you are a top executive at a MNC bank, you would probably be very aware of what your colleagues wear, eat, drive and where they stay. There is a certain amount of peer pressure and the need to keep up with the Joneses.
However, he did mention one exception to the various professions – Teachers. Teachers are generally rich, not due to their high income, but due to their frugality. Probably because their profession frowns upon expensive and flashy apparel, cars, etc. How true that is… well, he did mention he did surveys.

In addition, probably due to the fact that this group generally reach high net worth freedom at a younger age, they generally feel that they can always earn more to keep up with their lifestyle further down the road. Money comes easier at a much younger age.

The second type:

This group of millionaires is what I typically come across in the investment bloggersphere, and in the investment forums like InvestingNote. Having said that, there are also a group of financial bloggers that hit high net worth status at a young age (eg. via crypto investments, growth investing, business owners, etc).

Singapore Investor Bloggers with min. 1 SGD Million Stock Portfolios (read here)

The Five Titans of InvestingNote (read here)

Generally, this second group of millionaires are more common, and in fact, with the right will-power and determination, it is within reach to many. Thomas typically considers people like business owners or even people with modest income under this group. They are generally practical and frugal. They are to him (and as the title of his book), the millionaire next door.

Generally, this group of millionaires are in their 50s, business owners, married to the same partner (not gone through a divorce before).

As a group, the net worth of this group is generally lower than the first group, they take more years to attain a high net worth status and yes, their spending amount is much lower. Thomas puts it that their ability to convert every $1 of earned income to wealth (that sticks) as being much higher than the first group (because they saved much more and invest much more).

In addition, because they reach high net worth status at a later stage (eg. after mid or late 40s and beyond), the frugal habits and beliefs tend to stick. This is so even after they reach decamillionaire status. They don’t all of sudden acquire expensive taste (for the sake of it).. they were happy the way they were in the past and they continue to derive the same pleasures from their usual hobbies or work.

It is within reach to many, because one does not need to have a special talent or have a super high income; it just boils down to the simple act of saving more, spending less, investing more (rinse and repeat) and having great work ethics.

In fact, many of these people are in the so-called unglamorous business, however are themselves, business owners. They could be the boss of a cleaning company, a butchery, laundromat business, etc…. unglamorous could be a good thing, in fact, there is no peer pressure to dress or drive flashy, or live in an upscale neighbourhood.

Nevertheless, there are always exceptions, it does not mean that all millionaire surgeons will fall under the first type, or millionaire owners of cleaning companies will fall under the second type… there are the frugal ‘millionaire next door’ type of millionaire surgeons, and vice versa.

AK from A Singaporean Stocks Investor (ASSI) probably epitomises this second group.

How did AK create a 6 digits annual passive income? (How did AK achieve financial freedom?) (Read here)

To quote: “Hi AK,

I am a new follower of your blog. I have questions which are a bit sensitive if you don’t mind. If you do not answer, I understand.

You said you make mid to high 4 figure monthly salary. 

I estimate $60,000 to $100,000 a year. 

Actually, there is a third group of ultra-rich people. They are the very pinnacle of rich, where they can well afford to spend without having to worry. However, this group is extremely rare. Thomas defines them as a ‘freak of nature”. They are either super talented or own mega listed companies. Often it is the wannabes (or the first group of millionaires) who try to emulate them, by dressing and acting the part.

Motivations

Why bring up these two topics? For example, the trending topics of attaining financial freedom with kids or without kids, leaving a toxic workplace, etc and understanding the mindsets of 2 types of millionaires…

I guess the keyword would be motivation. What is your mojo?

As Christopher would define it – the software (behind the hardware). The hardware would probably be the numbers, magic of compounding via investing and achieving that magic passive income amount.

To quote Christopher:

– What is your core motivation to succeed?

– Does this core motivation align itself with what you think financial freedom is?

It is the software that drives the hardware.

For me, as a parent with 2 kids, it is my duty to provide for the family. And yes, I have my fair share of experience working under unreasonable bosses and client representatives. Yes, there are incidents of shouting, banging on tables, even throwing of files and chairs… Deadlines which were yesterday or last week, phone calls on weekends and ‘invitation’ to urgent meetings Now.

I do not consider myself exceptionally talented, nor is my active salary exceptionally high… that is my current hardware…so my mindset to attaining financial freedom would be more aligned to the second group.


StocksCafe

FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend / bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Friend of StocksCafe and test out all features for free for two months!

Please follow me at StocksCafe, via my StocksCafe profile page.

Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

Tiger Broker Referral Code:: GPE59H

Sign up here.

Use the above referral code to enjoy the below benefits (Campaign Period: 9 August 2021 12:00 – 31 Oct 2021 23:59 (SGT))

FSMOne.com

Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).

If you do not have an account, you can sign up here. Please use my FSMOne referral code: P0031127, when you sign up.

Shopee

I have been using Shopee for a while and think you will like it as much as I do.

Get $10.00 off your first purchase using my code DARREB52.
Download Shopee now and enjoy hot deals at the best prices! Click here.

Happy shopping!

Posted in Personal Finance | Leave a comment

Selling options and the Evergrande crisis

I guess sometimes the best way to understand the psychology of how our minds work is to just do a little trial and error experiment.

Iphone, Stocks, Market, Shares, Crash, Recession

The Starting Point

In my earlier post (see below), I was going through my mind of formulating a strategy of selling options as an income strategy.

Thoughts on the income strategy (Selling Options) (read here)

I think if you go through it, I think the key point I was trying to bring across (to myself) is as mentioned at the bottom of the post (to quote):

“However, the main difficulty probably lies in finding that proverbial psychological sweet spot whereby it becomes passive enough, and the income stream more or less stabilised so that we can spend less time monitoring the stock market (and not be overly fearful of any volatility or being too greedy).” 

This image has an empty alt attribute; its file name is pexels-ferencz-istvan-7036396.jpg

Actually with most investments, be it stocks, investment properties, crypto, etc…. if I may (at the risk of over generalising), there are basically two starting points:

1) We may start off with the intention of hitting a min. target by a certain period. To achieve a certain figure as a primary goal, and we would be willing to take on more risks to achieve that goal.

2) On the other hand, we may start off with the intention of creating a system to generate a more sustainable (recurring) amount. It could be a very low amount (depending on our available resources at the point of time), but it is within our risk tolerance, and we are not willing to take on more risks to achieve higher returns.

I see (1) as a more speculative approach, while (2) as a more passive and sustainable approach (or rather invest to within ‘sleep level’). Sure with (2), the rate of growth is not much, more of the slow and boring method.

Let’s take the example of stocks. Within the stock markets there are a myriad of stocks (growth, old economy, various sectors, mega cap,, small cap, etc), ETFs, REITs, etc. There are also various ways to invest. If my primary objective is to reach XXXX figures fast in so and so period, than perhaps followig a slow buy and hold strategy of building up a dividend growth portfolio might not be the right approach. I may allocate most of my funds (if not all) to a few growth stocks (or just one stock), going for a more focussed / concentrated approach, and may need to take on margins to achieve my goal (my ‘KPI’) as fast as possible.

Uncovering The Risks Of Covered Calls And Cash Secured Puts (read here)

To quote the above article (emphasis mine):

If you sell covered options, you should get clear on the type of benchmark you’re looking for. An annualized 20% return from selling covered options is possible but also carries higher risk.

On the other hand, a 10% annualized return from options premiums is more doable and carries less risk. You can also aim for a conservative 5% annual return and take on very little risk.”

Selling options can be accelerated or decelerated at my own pace. However, acceleration typically comes with much more risks.

When I was reading up on selling options (or watching YouTube videos about this topic), I often came across articles or videos with titles such as “I made XXXX amount per month (or XXXXX amount per year) selling options”. On the other hand, I have yet to come across articles or videos with the title “I sold options during a market crash or in periods of extreme volatility and I slept like a baby”. Perhaps I was not searching hard enough. Or perhaps the latter is just plain impossible.

I am sure the former articles or videos will get more views (more eyeballs), as compared to the latter articles or videos. However, the latter is more of what I am truly interested in (if that is at all possible).

Context

Oh yes, back to my earlier point of trial and error. So yes, I did sold some put options (on Chinese Tech stocks) with the intention that if prices do indeed drop to the strike prices (worst case), I would not mind purchasing the underlying shares.

I think different people have different circumstances. So let me just tell you a bit about my portfolio. My portfolio is dividend stocks heavy. There is a small percentage of growth stocks. And I have some cash as war-chest.

So primarily, my investment strategy is a dividend income strategy. However, a few objections moving forward: I intend to increase the proportion of the growth stocks in my portfolio, and to generate income from cash (and if possible growth stocks which I am already vested in).

I am sure we are all aware that Chinese Tech stocks are being ‘hammered’ for the past few months, starting with Alibaba late last year. Depending on how one views it, it could be a call to sell or buy.

Personally, I see it as a buying opportunity although I will refrain from saying it is a ‘throw all in, once in a lifetime’ buying opportunity. As with any correction or drop, I tend to buy in dips over a period of time. For this case, I see it as a long drawn, “unlikely to be resolved quickly” situation.

So that created the framework for me to see if I could incorporate selling options as an income strategy. It also created certain limitations.

Firstly, I have a really low percentage of Chinese Tech stocks in my portfolio (2.8%). See below. Secondly, my war-chest is limited.

Why limitations? There are certain guidelines I created for myself.

I do not intend to sell naked options. Eg. I need to have sufficient cash reserve on hand when I sell put options (Cash reserved put options) and I need to have sufficient stocks (vested) in my portfolio to sell call options (Covered call options). So yes, that sort of limit what I can earn (from option premiums), but hey I want to sleep at night (priority number one).

Given the current market sentiments (fear on Chinese Tech stocks), I tend to focus on the Chinese Tech stocks in my portfolio (Alibaba-9988.hk and Pinduoduo -PDD).

I have three other growth stocks in my US Growth stock portfolio (Alphabet, Mastercard and The Trade Desk). For obvious reasons, I probably won’t look at Alphabet when thinking about selling put options, given the fact that the share price of Alphabet Inc Class A at the time of writing this post is USD 2,844.30. 1 lot of option which translate to 100 shares means I need around USD 284,400 (or around SGD 384, 900) in cash reserve, just to sell 1 lot of Alphabet put option, or 100 shares of Alphabet vested to sell covered call options.

Fortunately 9988.hk and PDD do not need that much cash reserve for 1 lot of options (still within my comfort zone with 1 lot). At the point of writing, the stock price of 9988.hk is HKD 144.30. 1 lot of option= 500 shares (for HKEX listed shares), which translates to HKD 72,150 (or SGD 12,545.83). The stock price of PDD is USD 94.55. 1 lot of option= 100 shares, which translate to USD 9,455 (or SGD 12,796.16).

I also have more than enough Alibaba shares to sell covered call options (eg. min 500 shares), but in general the amount is still relatively low since I don’t really have a lot of Chinese Tech stocks anyway, as mentioned earlier.

However, I see selling options as being complementary to my dividend portfolio. My primary goal and main strategy which I am comfortable with, is still to build up my stock portfolio (bar-bell portfolio with both growth and dividend portfolios) and increasing my passive dividend income.

So with that in mind, I just sold 1 or 2 lots (put options or call options) at any one time, typically for short duration to expiration (eg. 1 week to 1 month+).

The Crisis

I guess the best way to test out any strategy is during a crisis.

Well, I did not have to wait long.. before the Evergrande crisis struck (and at the point of writing this post, it is still unresolved).

Evergrande on brink of collapse: 4 things to know (read here)

In one day (20 Sept 21, Mon), all the counters in my HK dividend portfolio turned red, and so did many of the counters in my SG dividend portfolio. In addition, with regards to the put options which I have sold, the stock price within that day fell really close to the strike prices.

China Evergrande crisis rocks markets across globe (read here)

To quote the article above (emphasis mine):

While Chinese and Hong Kong property groups bore the brunt of the sell-off, the impact was felt across European and U.S. stock markets. China Evergrande, whose liabilities amount to almost a third of a trillion dollars, is facing deadlines this week for payments to banks and bondholders.…..

The Nasdaq closed down 2.2% and the top three decliners were all Chinese companies: Pinduoduo, Baidu, and JD.com. The S&P 500 finished down 1.7%. It was both indexes’ worst day of trading since May.”

There were a few thoughts in retrospect after 20 Sept 21.

1) Selling put options have some limitations.

For myself, as a long term investor, I tend to like to accumulate stocks. Actually a correction or a crisis presents a good opportunity to accumulate more stocks. However, selling cash reserved put options and buying stocks on dips both require the same precious asset / resource – cash. On a long term horizon, between the two strategies, I would much rather buy stocks during a correction than sell options at that time and end up not assigned to the underlying stocks . I reckon the former would be more rewarding moving forward.

“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.” Warren Buffett

“A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful,” Warren Buffett

On a long term basis, since I am still in the process of accumulating stocks, my war-chest level will always be relatively stagnant, while the quantity of stocks in my portfolio should increase. So if my current comfort level allows me to sell X number of put options base on my current war-chest level, it is likely that I can’t increase this number moving forward given my stagnant war-chest level. Having said that, I can start building up my war-chest with the intention of using that as cash reserves or buffers for selling more put options. Eg. two sets of war-chest (1 for buying stocks during dips and 1 as cash reserve for selling put options).

There are articles stating that from a purely yield based perspective, given the same amount of capital, one can achieve a higher yield by just selling options (as compared to the yield achieved from a basket of dividend stocks). However, I reckon, overtime, on a long term basis, the cost yield of a basket of good dividend stocks would trump the yield from selling options (well, I did not go into what is the cumulative amount I can get overtime from these 2 strategies though)…

The Math Behind Making $100,000 Each Year Selling Options (read here)

Which brings me to my second point…

2) With more growth stocks vested over time, selling covered call options seems more viable.

The quantity of growth stocks I have in my portfolio should (and hopefully) increase over a long period of time. Nevertheless, the downside (of selling covered call options) is that I may cap the upside to the stocks if price suddenly move upwards and I did not close the options in time and have to sell what I am vested in (… need to buy back later, hopefully at lower price.. which may not happen anytime soon, and I would have missed the upside, with price continually going upwards).

Note: If you intend to sell covered call options using Tiger Brokers, please remember to contact Tiger Brokers and inform them to activate the covered call feature in your trading account, so that no margin capital is required. Otherwise you may face the issues as per the posts below.

Tiger brokers doesn’t support covered calls. Should I transfer my shares to another brokerage (read here)

3) It would be really hard to sleep if I sold naked options.

It is one thing to sell put options with the intention of buying the underlying (100 or 500) stocks at the strike price while having the means to do so, and it is another thing to sell naked put options to get as much premium as fast as possible while not thinking about the maximum amount one would need to pay to buy the underlying stocks if the stock price does go beyond the strike price. In the case of call options, it would be the case of not having enough stocks to sell (and having insufficient margin).

If I have sold naked put options which are way beyond my comfort limit, especially put options, without sufficient cash reserve when the markets trend rapidly downwards… I would probably find it hard to sleep. Really, the premium is just not worth it. Moreover if I am selling options of US listed growth shares, it is literally impossible for me to monitor the US markets overnight (Singapore time). Prices can fluctuate wildly in just one night…. and there is no way I can predict the outcome or close the positions during market hours.

To me, recurring income is good but a good night sleep is more important.

I Have Been Selling Naked Options For Income – Dr Wealth (read here)

How I Blew Up A Full Year’s Salary In My Trading Account (read here)

4) I realised that perhaps selling options with longer durations of 2 weeks to a month as compared to a few days to 10 days are perhaps better .

Sure with shorter duration options, I get to collect premiums more frequently. However, with shorter duration options, to achieve decent premium I will be forced to choose strike prices which are much closer to the stock prices.

The risk of the options being exercised will be higher, as there isn’t sufficient duration for the effects of time decay to work. I also noticed that I looked at the stock prices more often (than I preferred).

5) If I am already in the profit, and the option is left with only a few days to expiry and the stock price came very close to the strike price, it might be better to just close the option.

In gist

After thinking through, writing down my thoughts, going through the post again, it is apparent that it is possible to earn some premium (XX or XXX amount) through options monthly. To increase this amount is also possible. However, it will not be fast and should not be fast.

It takes time to build up a war-chest or build up the quantity of (growth) stocks in my portfolio, and by choosing options with longer durations I don’t get premium as often (and overall monthly premium amount ought to be lower). It can’t be fast.

Perhaps to use an analogy… selling options is like “A game of Poker + Selling Insurance”.

Like stocks & poker, it can be said that one is dealing with odds (as what Howards Mark would like say). At certain point in time, the odds will tilt in your favour.

In addition, options are often bought by traders as a tool (hedge) for their positions in the markets, and on the other end, the option sellers are like sellers of insurance. And like being the insurer in the stock market, there must be sufficient liquidity when a crisis happens.

To be able to sleep well at night is more important.

There is this phrase from Tiger Brokers that is catchy, and I sees it every time I enter into its desktop site, see below: Money Never Sleeps.

Well, personally, I don’t really like that.


StocksCafe

FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend / bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Friend of StocksCafe and test out all features for free for two months!

Please follow me at StocksCafe, via my StocksCafe profile page.

Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

Tiger Broker Referral Code:: GPE59H

Sign up here.

Use the above referral code to enjoy the below benefits (Campaign Period: 1 Sept 2021 – 30 Sept 2021)

FSMOne.com

Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).

If you do not have an account, you can sign up here. Please use my FSMOne referral code: P0031127, when you sign up.

Shopee

I have been using Shopee for a while and think you will like it as much as I do.

Get $10.00 off your first purchase using my code DARREB52.
Download Shopee now and enjoy hot deals at the best prices! Click here.

Happy shopping!

Posted in Options, Portfolio | 4 Comments

Thoughts on the income strategy (Selling Options)

This will probably be a short post.

I am still sorting out my thoughts (on various topics). Selling Options being one of them.

Options Income Strategy: How To Earn 10% Consistently (read here)

New income strategy

Selling Cash Secured Put Options

Late last month (Aug 21), I wrote a post about how to use Tiger Brokers to sell put options.

Step by step guide to selling Put Options using Tiger Brokers (Desktop version) (read here)

I think it is a good way for dividend income investors like myself to add on this to be part of my income strategy (potentially). I have been experimenting with it, but the trial period is not long. As there wasn’t much I can do in such a short period of time.

My thought at the moment is how to incorporate this to be part of my ‘off the mind, can sleep well at night’ income strategy.

For me selling put options is like an extended version of buying stocks using the Limit Order option rather Market Order option. In my case, occasionally during market corrections, I typically like to set my buy price for the day using the limit order in the morning, and hope that prices through the day drop to that level so that my orders are filled. In a way, it is like ‘low-balling’ and hoping for ‘bargains’ on a daily basis, although typically the next day, prices will drop even lower… hahahaha

So now with selling put options, I can do this ‘Limit Order” trade for extended periods / much longer durations of a week to months, while getting paid premiums.

The thing about selling put options (and call options), unlike traditional dividend income investing, is that one does not need to have the cash on hand first to receive the (profit) premium immediately once the trade is done (Perhaps up to what the margins allows). Instant gratification perhaps? Herein lies the tricky (or dangerous) part, what is preventing me from over committing myself… I can literally sell many put options, without necessarily having the cash available to exercise (and buy) the shares if the stock prices drop to the strike prices’ level (which technically is not a bad thing if that is the stock I am aiming for).

Yup, in other words, how to ensure I don’t get too caught up with greed, and take on more than I can manage.

Michael Douglas High Quality GIF

I view options as a complementary means to add on to the dividend income stream.

My intention is not for it to overtake (my dividend income) or be a major part of the passive income stream. Nevertheless, it has the potential to.

Typically one requires years to have a big enough war-chest to build up a sizable dividend stock portfolio to get reasonable dividend income. For options trading, with no need for initial cash outlay to get the same (or more) income, one can simply enter into more option trades.

Currently, with the volatility with the Chinese Tech stocks, I have selectively sold a few put options for stocks which I currently own (eg. Pinduoduo and Alibaba) and do intend to own more of. My personal take is that current prices present value long term, and if prices drop further it is even better (to buy more). For Alibaba (9988.hk) I have sold a put option with a longer expiration duration (eg. 1 month), while for Pinduoduo (PDD), I have sold a few options with shorter expiration periods (eg, 10 days).

Selling Covered Call Options

I will probably try this out, provided I have the stocks on hand to sell (if the stock price eventually reach the strike price).

Kelvin did a good explanation on the Wheel Strategy (watch here)

Others might call it the Strangle strategy.

Short Strangle (Sell Strangle) Option Trading Strategy Explained (read here)

Basically for the same underlying equity, I sell both a covered call option and a put option. So technically I can collect premiums from both the options (thereby increasing my income), but I will have to hope that the stock trades within the range of the strike prices of the call option and the put option. If the stock price drops to the strike price of the put option (before the expiration date), I will have to buy 100 shares (or 500 shares in the case of HK listed stocks) at that price. If the stock price rises to the strike price of the call option (before the expiration date), I will have to sell the stocks (100 shares or 500 shares in the case of HK listed stocks) at that price.

Technically, it is ‘safe’ if I do have the stocks on hand, by selling covered call options. The worst case scenario is that I have to sell the stocks at the strike price, and the stock price continues trending upwards, and I miss out on the gains. On the other hand, most people do not advocate selling naked call options, and neither do I (eg. if one does not have the required stocks on hand to sell if the stock price does it hit and go beyond the strike price).

My only slight aversion to this strategy (of selling covered call options) as a long term investor (and collector of stocks), is that I am capping the upside of the stocks I have on hand. Sure I can always buy back (if prices drop below what I have sold it at), but well, kind of a hassle, esp. for volatile Chinese tech stocks, and it might take a long time for it to happen (if it happens).

Unlike selling put options, there is actually a more defined ‘limit’ to how much I can do. Since I can only do it with those stocks that I am actually vested in.

Note: If you intend to sell covered call options using Tiger Brokers, please remember to contact Tiger Brokers and inform them to activate the covered call feature in your trading account, so that no margin capital is required. Otherwise you may face the issues as per the posts below.

Tiger brokers doesn’t support covered calls. Should I transfer my shares to another brokerage (read here)

Finding that balance (between Stocks and Options)

Typically, I would do regular monthly DCA (Dollar cost averaging) stock investing when I receive my salary.

Depending on the market situations, I normally add on to the current positions in my stock portfolio. Normally I will do that early in the month when I receive my salary.

For this month, I held off buying stocks…. but eventually did purchase some, when it is near the options’ expiration dates.

I reckon I needed more cash reserves if I am selling put options.

In addition, I have to remind myself that I am still in the process of building up my stock portfolio, and especially the dividend income machine (must not forget the Sg listed and HK listed dividend counters). Currently, to me, HK listed counters actually offer value from a long term perspective and Sg counters have been going strong. I have also added to my position in Alibaba (9988.hk) at the current low stock price.. even though I have sold Alibaba put options at even (much) lower strike prices (yeah, sort of a low ball price).

In the long term, it is still important to have a solid stock portfolio (built up over many years).. be it growth or dividend counters. Over the long term, the eventual cost yield of a portfolio consisting of strong dividend growth stocks would be hard to beat.

Trial and error

I guess, with any investment, it takes time to hone our own risk tolerance (from getting our feet wet to testing the parameters).

Even if we do elevate investing on our list of priorities, the time we have to devote to investments is likely to be extremely limited. Or, the fact may be that we just don’t want to devote much time to our investments…..

Certain categories of investments are specifically designed to operate as income producers.

In the book, The Smart Investor’s Money Machine by Bill Kraft, one such strategy to generating regular income is selling options.

There are income investors who are solely trading options (or their investments are mainly into options). Eg. the major part of their passive income is from trading options.

I can see the cost / time benefit in doing options. Technically, converting volatile growth stocks into income plays.

Well There It Is Jurassic Park GIF

If done correctly the annual/monthly yield may even surpass traditional dividend stocks.

However, the main difficulty probably lies in finding that proverbial psychological sweet spot whereby it becomes passive enough, and the income stream more or less stabilised so that we can spend less time monitoring the stock market (and not be overly fearful of any volatility or being too greedy). Eg. I probably have to accept lesser premium while choosing a much lower strike price (for put options) or higher strike price (for call options), with a shorter duration to the expiration date (a week to a month max).

Yes in other words, coming to terms with the lower risk exposure and the less than possible premium. Ultimately, different people have different risk tolerance, what works for others may not work for me.

Selling options as mentioned earlier has the potential to increase my income exponentially and even overtake my dividend income. However, if I over commit and built a ‘house of cards’ by taking on too much options than what I have on hand eg. the cash reserve (put options) or vested stocks (call options), there will be a day when this ‘house’ collapse, and when stock prices move against my planned strike prices.

At the end of the day, I might just feel that selling options as an income strategy is not for me, or I may just be a very inactive seller of options (super small time) if I don’t think the risk reward is worth it, considering the fact that leverage is involved. I probably can’t rest well at night if I have more than 2 options at anytime, preferably just 1 or none (within the comfortable limit of my cash reserves). So I don’t see it as a major contributor (or game changer) to the income strategy.

My personal take at the moment is that the traditional buying and holding and building up a dividend portfolio is still my preferred option. At the very least, in times of distress, the pain is not amplified (and that allows me to think more rationally).


StocksCafe

FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend / bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Friend of StocksCafe and test out all features for free for two months!

Please follow me at StocksCafe, via my StocksCafe profile page.

Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

Tiger Broker Referral Code:: GPE59H

Sign up here.

Use the above referral code to enjoy the below benefits (Campaign Period: 1 Sept 2021 – 30 Sept 2021)

FSMOne.com

Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).

If you do not have an account, you can sign up here. Please use my FSMOne referral code: P0031127, when you sign up.

Shopee

I have been using Shopee for a while and think you will like it as much as I do.

Get $10.00 off your first purchase using my code DARREB52.
Download Shopee now and enjoy hot deals at the best prices! Click here.

Happy shopping!


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Posted in Hong Kong Shares, Investing methodology, Options | 2 Comments

Retire early with a child… beyond the math.

I read Kyith’s post below and felt that it is a well written piece. Much like his style of breaking down the numbers to show us that financially it can be done.

Can You Retire Early if You have a Child? (read here)

Personally, being a father of two kids, and having have older colleagues with children (or acquaintances at work with kids themselves)… I guess as with most topics personal finance related, it simply goes beyond the numbers.

There is the ‘personal’ before the ‘finance’.

Please let me share my ‘2 cents worth of’ thought.

Hmmm… how to describe it?

It is like learning to drive. We have the theory test and the practical test, then actual driving on the roads. In theory / practical test…. everything seems logical, and people go by the rules, but ask any long time drivers (or taxi drivers), actual driving is nothing like that (esp. during rush hour traffic).

It is like investing in the stock market, when we think about market crashes, we think about how we would need to face our family at home when we think about the “losses”, rather than the factual aspects or fundamentals of the companies we are invested in. How to tell our spouse and kids that the kids’ varsity fees went up in smoke, or the planned year end vacation is going to be cancelled. It goes down to be very core of how we feel and our psychology.

Investing is more akin to an Art than a Science. A good book on this is “The Psychology of Money: Timeless lessons on wealth, greed, and happiness” by Morgan Housel.

Like how my director (in her late 50s with two school going kids) actually said to me…”In terms of figures, yes we can retire (actually by my own estimates, way beyond for her case), but it is not easy when we have kids.” Her husband is also a director in another company. They lived simply and has more than enough (money wise).

Like any doting parent, she wants the best for her kids.

Put it in another way: She is not talking about the numbers in their bank accounts or the value of their investment assets.

Having a child in essence is a risky investment from a pure financial point of view, because at the end of the day, we do not know if we would have any returns. Who can guarantee that your/my child can be financially stable after they complete their tertiary education (if they do make it there in the first place), and even if they are financially stable, they are not obliged to give us allowance. In some cases, parents continue giving financial aids to their children long after they reached adulthood.

Personally, if I am looking for a retirement plan, I think investment properties, bonds, dividend stocks or annuity work better.

Sorry, your kids are not your retirement plan (read here)

There is actually a section in the book “The Millionaire Next Door” by Thomas J. Stanley and William D. Danko, where they talked about Economic Outpatient Care provided by parents for their children (Chapter 5).

When we talk about our children, emotions cloud our judgement. When we think about how to bring up another human being….. for lack of a better word, it’s complicated (…. I even have problems dealing with myself). A child is not a lifeless object/asset like a car or house, which we can discard and buy new ones. We watch our children grow from hapless infants to full grown adults. With the increase in life expectancy, many will be around to see their children grow old.

Heck, some people even get emotional when they talk about their prized cars, apartments, collectables, watches, etc…..

We can ignore our cars for years, and they will still ‘love’ us back. A quick visit to the workshop and your car will be purring like a kitten and with a quick polish, shiny like new. Ignore our kids for a month… see what happens.

Remember Veruca Salt in Charlie And The Chocolate Factory?… Thinking of her sends me the chills.

It is simpler when kids are young, when we do not know their capabilities out there in the real cold hard world. If we have more than 1 young kid, when planning our will then, we can tell ourselves that we will be fair and spilt our wealth equally among our kids. However, often (as stated in the book), once they grow up… some parents would end up passing most of their wealth to the kid(s) ‘who need them more’ – in Thomas and William’s words: “Economic Outpatient Care (EOC)” or parental subsidies.

However, is that really the right choice?

Parents feel a strong need to provide kids (weakened by years of supports) with more EOC. Even after the children are all grown up.

However, it is like enforcing the strong rather than the weak. Those who lack financial discipline get most or more of the wealth / financial supports.

I guess not all things are black and white, or rational… humans have their irrational sides. It is harder when the thinking is entrenched from young.

Hypothetically, think of this example- imagine yourself walking up to a good class bungalow, and some kid (boy or girl) is standing behind the gate. Ask him whose house this house belongs to? In his mind, it is HIS house. In some way, that is not wrong (it is his family’s house) but more correctly, it is his parents’ house. As a kid gets older, society tends to expect him to fend for himself and get his own place. However, a person’s mentality (from young) is hard to change.

Or let’s view it from another angle: After many years, this same kid (who happens to be the only child) grew up and is now seated beside his dad who is now old and dying. Lying on his death bed, his dad told him, for the first time, that the bungalow and all the family assets will be donated to some charity. How would this kid (now an adult) feel about that? Would he resent his dad for giving away what is ‘rightfully’ his to some total strangers? In one night, in his mind, his net worth probably went from 7 or 8 figures to zero. Why is there resentment?

richie rich GIF

Having said that growing up in a wealthy family does not necessarily make someone a financial failure.

Thomas tells a story of a lady called Sarah (in a section called “Cinderella Sarah”). She is the child who thinks independently and in her case ‘defiant” from her father’s perspective.

Richard Ng Says His Wealthy Father Had 4 Wives And Smoked Opium With Bruce Lee’s Dad (read here)

As parents, we can give our child the best education, but to instill courage and the resilience to overcome failure is a different ball-game. Which I think is more important.

Money can’t buy that.

Some kids are born with the resilient character, some need more push and upbringing. Some may never ever acquire it (fact of life)… and parents (often those busy with work throughout their life) may end up blaming themselves for it. A product of their upbringing perhaps (or lack of it)? Kids don’t choose their parents, likewise, can we as parents foresee or choose our own children’s characters?

With money, it is not impossible to get the best tutors and the best tertiary education. Parents with money can ‘helicopter in’ and delegate the task to others. However, to make it in the real world, it takes more than that.

Yes, successful parents can ‘pull strings’ in the business or corporate world, ask their business partners / top management colleagues to lend a helping hand to their children’s businesses or careers.. but in the long term.. is this going to be beneficial?

How many times have we heard of stories of parents spending big bucks to give their child the best overseas Ivy League education, only for the child to forsake the degree / education / career path. Some still require EOC after that.

Richard Low Took 3 Loans & Borrowed Money From Friends So His Daughter Could Study In The US (read here)

revenge of the sith GIF by Star Wars

Parents with investment properties may think that it is only right to pass on their properties to their kids. However, have they considered how their kids would think / feel once they live in such environments? If these kids are not financially capable and disciplined…being surrounded by people who actually have the income / ability to live the lifestyle there, how much dependency would this lead to?

Yes technically the kid is (with a stroke of the pen) a multi-millionaire (asset rich). The freehold condo itself is worth that. However, he /she may not have the high cash flow (income) to afford the ‘lifestyle’.

The wisdom of passing wealth and properties to the children (read here)

To quote the above article: “When I was pregnant with our first child, I was curious to know how PAW (Prodigious Accumulator of Wealth) parents avoid the fate of producing UAW (Under Accumulators of Wealth) children.

I looked for the answer in Thomas Stanley’s 1996 book The Millionaire Next Door: The Surprising Secrets of America’s Wealthy. I was convinced to create a “self-imposed environment of scarcity” – by adopting a thrifty lifestyle and living well below one’s means.

The practice is not for everyone, especially in a society that encourages higher consumption with higher income. It only works for people who truly enjoy a simple life and place non-monetary things over material possessions.”

Would this lead to a further lifestyle trap?

joneses BC By George | Media & Culture Cartoon | TOONPOOL

To keep up with the Joneses?

With a high end condo, ‘naturally’ (as what the mass media tells us) one would need a top notch TV with quality sound/entertainment system.

A TV / entertainment system like that looks out of place in a spartan living room. Let’s not forget the quality and easy on the eye ID renovation (with marble flooring, quartz finishing, German branded kitchen equipment & cabinetry.. right off the cover page of the recent ID magazine.. hey your neighbours have them too right?… and since you have done up the living room and kitchen, why not the toilets?… they need to go with the whole theme right?).

With the neighbours sending their kids to independent/international schools, would you want your kids to go to some neighbourhood schools? How would your kids feel if they see the neighbours’ kids with the latest iPhones or iPads? And your kids rushed to tell you that the neighbours just came back from a 2 week Europe vacation (Oh…Daddy / Mummy, we would love that too..). How can you deprive them of the trip?… Come to think of it, didn’t the neighbours just went to Disneyland California a few months ago?

Would you want to be seen in a second hand 8 year old Mitsubishi Attrage in the condo car-park while your neighbour who is a Senior VP at JP Morgan drives the latest model / top end brand new Audi?

Rinse and repeat, next week, next month, next year, the same thoughts, conversations and requests.

Jewel: Parking Tips | Highway

And if you (and your spouse) do not have the income to afford these, who can you turn to?

Personally for me, I am aware of enough examples of adult children receiving EOC from their aging parents (some are my relatives, some are people whom I known from work). Some of these adult children are even parents themselves (and they are jobless, relying on financial help from their parents). Parents in their 60s, 70s, 80s still working, while their 20s, 30s, 40s, 50s year old sons / daughters are not. Why is that even news worthy or surprising?

Yes, it is important to know the numbers on what we need to be able to retire. Don’t be a burden (to them). However, we must not forget to instill the resilience in our children for them to make it out there on their own.

Imagine, while you are enjoying your FIRE at the beach with a cocktail in one hand, your handphone on the table next to you rang. It is your grown up son (or daughter) on the line. He tells you about how he is struggling to pay off his debts and making ends meet, and having less than enough to live the life he ought to be living. From his tone you can sense sadness and desperation. Yes, the numbers work (for you), you can FIRE. However, at this moment, does the cocktail in your hand still taste as good as before?

Time flies… but in some obscure corner of your mind, you can still feel and remember the times you spent with your child (in happier times).. Yes, how fast time flies and how big he has grown… but to you, your child will always be your child (whether they are in their teens, 20s, 30s, 40s…). When he sees you, he will always call you daddy/mummy.

In addition, you/I might think this way, but our spouse (or our own parents / parents-in-law) may think otherwise. Lots of variables which are not within our control. My belief is that the only person who I can truly control is myself (even this.. with the many mental biases which I myself may not even be aware of… it is hard to say).

For some, parenting is a full time job or rather lifetime job… Literally. It ends when they are at their death beds.


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