My net realised returns for 2011 was about 4.7% which barely kept up with total inflation. However, it did beat my internal benchmark of 2 x fixed deposits (12 months banks FD rate) interest rate of 0.4%.

Targets for 2012

Thinking ahead for 2012, I believe inflation will still hover around the 5% region, hence I would have to seek to grow my investible networth by 5% for calendar year 2012 just to keep the purchasing power of my networth portfolio intact.

Thus, my target for 2012 will be to achieve an 8% return, i.e. to beat inflation by 3%. Having a stretch target could provide some psychological impetus to seek new ways of new approaches to investing to yield that return. Increasingly, I realise growing my means rather than to rely on passive income would be key because realistic returns adjusted for capital risks would only barely keep up with inflation as my own experience seems to indicate.

I am currently 40 going onto 41 and my theme for 2012 is really on health and wealth. I.e. to keep healthy and to invest more time and energy in exercise and proper diet so as to provide me with the energy and strength to think out of the box to grow my means. I also want to keep up with my daughter who is coming to 4 years in a few months’ time.

I am exploring more on how I can be a semi-active business owner rather than a passive portfolio investor because I simply need to gear up to grow my net worth at a faster rate. A 4-5% portfolio return would need an investible net worth of about $1,000,000 in order to generate $40,000 to $50,000 passive income cash flows.

Tracking my progress online

Some finance bloggers like Musicwhiz post their portfolio online. I won’t be doing that but will start to post month end short statistics on realised investment and semi-passive (blogging) income gains on a % basis to help spur on my efforts to grow my passive and semi-passive income.

This should help provide some accountability and tracking as I would be conscious of the fact that monthly self-examination and accounting is something I would do on this blog.

What are some of your financial goals for 2012?

Share with Panzer in the comments section.

Be well and prosper.

As the year draws to an end with Christmas around the corner, we are only two weeks away from the end of 2011 and the start of 2012.

How has the year been for you in terms of financial freedom?

It has been an interesting one for me and this post will give a short summary of how I’ve fared in livng the principles of financial freedom.

Living Within My Means

Based on my expenses tracking spreadsheet, I end the year with a good sized $xx,xxx savings mainly because for most months of the year, I’ve managed to spend within my monthly income. The year-end bonus will then help to boost up savings for the year.

By now, I’m very used to the concept of tracking all my expenses and have a good idea of where my expenses go and if I’m able to save for the month. As my daughter is approaching four years of age next year, her expenses in fact decline a bit since she doesn’t use up as much diapers and milk powder compared to her first 2 years as an infant and growing toddler.

I’ve also adopted the spend 10-30% of my windfall gains such as bonuses and capital gains. Hence, I typically save 70-90% of my gains for the year. The main big ticket item for me could potentially be a car in 6+ years’ time but by then, a car may not be something I would consider if COE prices persist at current levels as the public transport network would have grown considerably and I should have gotten my class 2B licence by then giving me more transport options.

Saving and Investing

Saving is on track for 2011. Investing has been a mixed bag. Till today, my mark-to-market paper losses on my equities portfolio is -11.30% but my realised capital gains and dividends (net of realised capital losses) is +4.6%. Thus, overall I am showing a -6.7% return for 2011. But I am not too bothered by it because I currently have 63% in equities and 37% in cash and cash equivalents. So I can hold on to my current level of equities and just concentrate on receiving dividends while not taking on too much market risk by buying more shares.

Protecting and Growing My Means

Insurance wise, my coverage hasn’t changed much. When the global financial markets improve, I could consider exiting my investment linked insurance plan and convert to term for next 15 years or so. But current markets are not good and I still have the ability to pay the premiums, so in a way it’s dollar averaging Singapore and Global equities as lower prices. But the mortality charges will creep up as it’s nearing 11+ years for the policy so I may do a review in 2012.

Growing my means has seen some minor improvement. Earned income has increased a bit due to increments. I think my ability to control my expenses helps as there is less pressure to increase earned income although I’ve managed to source additional earned income which is more ad-hoc in nature. 2012 should be the year where I invest more time and effort in my blogging or publishing related income and there are some technology tools that could allow me to scale up content creation and monetising it.

My health is something I need to invest more time in. Due to a ankle injury that is recovering, I realised I should switch to swimming and cycling based activities as jogging has its downsides of wear and tear on knees/ankles. Energy levels are still manageable but I think more fresh air and sunshine would be good. Smiling more would also be helpful as there’s been some recent articles talking about the health benefits of smiling.

Overall, 2011 has been an okay year. Investment wise, performance has been poor as my portfolio achieve net negative return (realised and mark-to-market) but given the slowing down of the US, Europe and global economy, it’s not too bad a performance.

Going forward, I would remain cautious and see investing as a means to get a decent return on my savings whilst continuing to leverage on savings from earned income to drive my investible capital to the desired level.

Be well and prosper.

I attended my second annual general meeting (AGM) of Singapore Press Holdings Limited (SPH) which constitutes 70% of my equity portfolio. It is the single largest shareholding in the basket of shares that I own. Attending a company’s AGM is one of the rare occasions where you as a shareholder can ask questions to board and management of its performance for the year as well as other related topics.

On a more practical level, attending SPH’s AGM allows you to get complimentary copies of the daily newspapers such as Straits Times, Lian He Zao Bao, New Paper and Business Times as well as have a free bento lunch after the AGM.

This Year’s SPH AGM 2011

This year’s AGM was more muted than previous years. Despite the poorer performance due to Sky@Eleven’s revenues drying up due to the project’s completion last financial year, there were fewer questions this year and nothing controversial.

The Deputy Chairman of the Board, Prof. Cham Tao Soon led the proceedings in a calm manner given that the previous Chairman Dr Tony Tan had resigned from the Board to successfully contest the Presidential Elections. This AGM saw Dr. Lee Boon Yang being voted into the Board and also assuming the Chairmanship of SPH from the temporary stewardship under Prof. Cham.

Shareholders queried the losses from the joint-venture businesses and the CFO reported that these were from different businesses across the region that were in start-up phases and hence they were loss making. This I suspect relate to some of the investments in new start-ups since no further information was revealed beyond that there were sound business plans for these businesses and the losses were part of the starting phase.

Another shareholder asked the Chairman for guidance about payout ratios going forward as if the current dividend payouts were sustainable. The CFO referred the shareholders to the historical payout ratios (page 79 of the annual report – 80-90%+ over last 5 years) but did not commit to a specific target.

A question was asked if SPH would consider scrip dividends. The CEO Mr. Alan Chan was of the view that because SPH’s free float was large, it was cleaner to pay shareholders dividend and leave it to them to decide if they wanted to purchase more SPH shares in the open market using their cash dividends. But the Chairman noted that SPH would look into it.

One other shareholder asked Dr. Lee Boon Yang whether he would have the bandwidth to handle the Chairmanship of SPH given that he was also the Chairman of Keppel Corporation Limited. Dr. Lee reassured shareholders that he undertook this appointment only after assessing if he would be able to discharge his responsibilities and he was confident that he would be able to do so with the help of the able senior management of SPH.

Ultimately, all resolutions tabled for business during the AGM were passed and the final dividend payout of $0.17 comprising $0.09 per share final dividend and $0.08 special dividends were passed by the meeting.

General Prospects Going Forward

The Board was understandably cautious in their outlook as the acting Chairman and incoming Chairman’s messages talked about challenging environments going forward. Hence, they basically did not paint a too optimistic forecast for business prospects next year except to point to SPH’s strong financials, human resources available to take on the tough business conditions ahead.

Their performance next year will likely move in tandem to the broader Singapore economy. If GDP growth is marginally positive, SPH’s results would likely still show profits but may not grow as much. Much of its businesses are still fundamentally local retail (Paragon and Clementi Retail Mall), core newspaper printing and magazines. Possibly the main impact on the European crisis would be their financial investments that would take a mark-to-market hit if the global financial situation deteriorates further.

I would continue to monitor SPH’s performance but will likely not make any major move in holdings as it’s a fairly defensive stock and generates decent dividend yields relative to fixed deposits. Its risk and business is reasonably monopolistic although newspaper print business under pressure from the new media and tablet revolution.

Have you attended any AGM recently and what did you learn from it?

Share with Panzer in the comments section.

Even as the calendar year 2011 draws inexorably towards a close with two months plus left before 31 December beckons, I realise that if I do nothing now, I will end the year with a realised returns of 4.5%.

In fact, I should not buy any more equities now and take bigger positions on the market because most of my returns will come from dividends — truly a form of passive income.  The more I trade or try speculative punts, the more I risk losses on capital due to market moves south in tandem with the general global negative outlook over European debt problems and possibility of US and world slowdown or even recession in 2012.

Is doing nothing a strategy?

Do or Do Not, There is No “Try”

This quote from Yoda of “Star Wars” reminds us that sometimes we have to take decisive action or sometimes we have to refrain from doing anything. At this point in time, I am about 30% in cash and 70% in equities. I am comfortable with this level because dividends will accrue even if I take no new positions.

In fact, the temptation is to try to squeeze a higher return by risking more capital in the market in line with trying to time market moves. My own internal benchmarks (though set at a fairly realistic and not overly ambitious target) have been met. Thus, as the fund manager of Panzer Funds, I have met my key performance indicator and extract some management fee for paying myself for the investment calls I’ve made throughout 2011.

To do more is to risk capital losses. My returns won’t make me rich. Neither do they make me financially free at this point in time, but they have at least mitigated the impact of inflation against my net worth. That itself is important because the next best alternative is currently returning a paltry 1% or less in “risk-free” fixed deposits (for the first $50k).

My main stream of income to build up investible net-worth to power-up my passive income still comes from my career. As the year-end draws nears, I’ll definitely enjoy some of this passive income as a small reward and to motivate myself to achieve better returns next year.

Multiple-Sources of Income and “Compulsion”

After reading Robert Allen’s “Multiple Streams of Income” and whilst reading Felix Dennis’ “How to Get Rich” book, I realise that growing one’s means beyond earned income is really critical in moving towards achieving financial freedom. The ability to execute good ideas into a sustainable business is critical. I am particularly intrigued by how Felix Dennis uses the term “compulsion” to be rich vs. “desire” to be rich as one of the key differentiating factors on what separates those who are rich are those who are not.

In some ways, I realise that my own journey towards financial freedom has to achieve the status of “compulsion” for me to succeed in my journey. Thus, my habits of recording my expenses, of making sure I live within my means will continue no matter what my level of net-worth achieved.

Increasingly, I am opening up interesting doors towards learning more about funding start-ups with a view of participating in their growth and benefitting like a venture capitalist. This learning would help me identify the key success factors and to hone that ability to gauge if a venture could potentially be a multi-bagger with the right funding, mentorship and partnerships.

In terms of the market, doing nothing i.e. not actively taking positions would mitigate unnecessary exposures to risk.  However, I should take this time to review my life-list, to learn more about being a venture capitalist and to enhance my abilities to generate more income to invest in Panzer Funds for ultimate goal of being financially free.

Are you doing nothing or going to be doing something for the last two plus months of 2011?

Share with Panzer in the comments section.

Be well and prosper.

As part of my strategy to learn more about how corporate annual general meetings are held to beef up my corporate governance experience, I have started making it a point to attend annual general meetings (AGMs) of the companies that I have invested.

So far, I have attended last year’s DBS and SPH annual general meetings and they were useful exercises in seeing how different blue-chip companies conducted their annual general meetings.

Also, one of my targets is to position myself to be experienced and qualified to become an independent director of a listed company when I am near to retirement age as this could potentially provide a second “career” of sorts when my career as an internal auditor may plateau at some stage near the official retirement age in 20+ years’ time.

Key Highlights of the Singapore Exchange Ltd AGM

I won’t repeat the details of the proceedings as they are detailed in the SGX announcements. The CEO’s (Mr. Magnus Bocker) speech is given here while all resolutions tabled at the SGX AGM as well as the extra-ordinary general meeting (EOGM) held immediately after the AGM were passed.

IT Investments and New Areas of Growth

The key initiatives that struck me from the CEO’s speech was that SGX has invested significantly in its REACH IT related initiatives and these investments in IT infrastructure would be yielding new revenue streams going forward. It was interesting to also note that SGX’s revenue is diversified to some extent in that equities trading and related fees which is adversely affected by decline in market volume under current conditions is not the only source of income for the company. Its derivative business is growing in volume and it has seen new members (brokerages) signing up with the exchange.

High Frequency Trading and Circuit Breakers

The Exchange was also moving towards high frequency trading and it was mentioned that the velocity of our market in relation to market capitalisation was about 60% well lower than 200% of European bourses and 400% for NYSE. Hence, SGX was moving to facilitate this but would implement the rules, regulations and “circuit breakers” before allowing this to happen. The CEO talked about a 12 month or so timeframe for this to happen so we may see the start of such high frequency trading occur perhaps in the following financial year.

The first resolution was held up for quite a while because one of the shareholders asked about circuit breakers to be implemented as well as querying the SGX on some dubious market transactions near close of market on specified counters. One other shareholder was harping on why SGX needed 48 hours notice for appointment of proxies when the Companies Act did not require such notification but the company secretary Ms. Joyce Fong explained that almost all companies had this requirement in the articles of association and it was more for ease of administration as they needed to cut-off the date of appointment of proxies as their internal audit needed to verify the proxies information prior to the AGM.

Holding AGMs in other countries

Another shareholder asked if SGX would be doing something about companies listed in SGX that had their AGMs outside of Singapore. The CEO and Chief Regulatory Officer Ms. Yeo Lian Sim answered that they were looking into this as currently companies listed on SGX which were domiciled in other countries still had to hold their AGMs in Singapore unless their laws required them to do so in their country of domicile.

Decline in EPS

Another member also queried the acting CFO (Co-President) MR Muthukrishnan Ramaswami on the declining trend of earnings per share which the acting CFO explained was not due to dilution of shares but more due to overall earnings impacted by the worsening market conditions especially affecting the trading volumes for equities as well as capital expenditure (CAPEX) for IT related initiatives which occurred in “Steps” or were lumpy over the years.

ASX-SGX Merger Failure

Members also questioned the wisdom of the ASX merger and spending $18m on related expenses but the Chairman Mr. Chew Choon Seng explained that hindsight was 20-20 and that both boards of SGX and ASX as well as managements of both entities thought that the value-creation from the merger would benefit both companies’ shareholders. However, the CEO explained that the merger happened during a period of political change in Australia which eventually resulted in the failure of the merger due to political pressure.

Overall, the Chairman handled the meeting well and was fairly open with shareholders even if some of them went somewhat off tangent in their questions that were not directly related to the resolution to be voted. It was interesting to note that during the AGM, electronic polling was carried out so shareholders were able to vote for every resolution.

However the number of active votes held by shareholders at the AGM amounted to less than 3 million shares against 190+ million held by institutional shareholders so the outcome of the resolutions were never in doubt as the shareholders voting could not do much.

Eye-Opening Experience

It was an eye-opening experience to listen to the key management (CEO and acting CFO) as well as the Chairman explaining the context to what we could read for ourselves in the financial statements of the company. One could also see if the CEO and Chairman were at ease or put off by the questions from the shareholders. I thought that both acquitted themselves well and shareholders queries were addressed and some leeway was given even when the questions were not directly relevant to the resolutions.

Whilst I know that my vote counts for very little, it still counted because instead of using a show of hands method, the resolutions were decided based on a poll which put in record the number of shares voting or against each resolution.

Retail investors made their unhappiness with the Chairman’s renumeration of $750,000 plus car and driver with almost half of those active and present in the AGM voting against it. But the resolution was carried since the retail investors clout was not substantial.

I feel that attending AGMs are a way to gain fundamental analysis knowledge about a company. While management and Chairman of the company may be biased in trying to spin a positive story, their explanations and answers to queries help put some context into the numbers and activities of the company involved.

All in all, taking leave to attend the AGM was worth my time and anyway, I have to clear my last year’s leave by end of December 2011 or it would lapse.

I know Musicwhiz attends AGMs, does any other one of readers here attend AGMs?

Share your experience with Panzer in the comments section.

Be well and prosper.

As an auditor, recommending automation and increasing the efficiency of business processes are some of the things that I work towards on a day-to-day basis. Automation and having templates makes life easier for the 80% of things that we do that achieve 20% of the results.

One of the key templates that have helped me in my journey towards financial freedom, especially with regards to making investment decisions has been my poems tracking Excel workbook (spreadsheet). The name does not give a full description of what the spreadsheet does, it in fact has worksheets for the following items:

1. Investment returns
2. Speculating calculator
3. Balance Sheet
4. Financial calculator

Decision Support for Portfolio Management

Investment Returns

This worksheet helps to track all my income streams from capital gains, dividends, interest and others such as advertisements from blogs that I author. It really allows me to have some sense of what is the actual income I derive year to year, month to month from the vairous income streams. It also allows me to compute my realised gains for the year from my portfolio although it is not using the XIRR calculation but gives a rough gauge of my investment performance for the year.

Speculating Calculator

This allows me to quickly compute the potential gains/losses from taking buy/sell positions on equities in SGX. It has helped me compute fairly quickly the risk/return trade-offs for shares including brokerage and other fees. This is useful as it eliminates fuzziness on the actual gains or losses made when I buy/sell shares.

Balance Sheet

Arguably the most important sheet when it comes to cash or money management. This allows me to compute mark-to-market gains or losses and to know how much of my investible net-worth is allocated among cash and equities as well as my overall networth as represented by cash, equities, CPF accounts, cash-surrender values of insurance policies etc.  I would consider this my personal dashboard about Panzer Incorporated. What is my networth at any point in time can be computed here.

Financial Calculator

This helps me to compute present value and future values of cash flows. I use this less nowadays since my positions are more settled now. My current comfort level is not to have more than 80% in equities. That gives me a cash buffer of 20% of my networth which is helpful as an emergency fund as well as for me to sleep well at night.

Know What You Know

The benefits of this spreadsheet is that it acts as a decision support system to help me decide fairly quickly to buy/sell those equities that I’ve been tracking in my watchlist. It also gives me a sense of how much I can afford to allocate to be invested in the stock market and how much I should keep in cash to provide myself with the margin of safety for emergencies and other unforseen cash needs.

How do you make your own decision when it comes to buying, selling or doing nothing in the market?

Share with Panzer in the comments section.

Be well and prosper.

As more and more little grey hairs develop on my head and as less and less hair are left, I start to see some similarities in my career as an internal auditor and my approach to investments.

In most careers, one starts at the bottom rung of the corporate ladder and slowly works himself or herself up through gaining experience, doing the actual work and learning the ropes of the trade, business or profession. I started out as an audit officer who was the lowest rank for degree holder. I prepared working papers, drafted audit programs for my audit supervisor to review and carried out the detailed audit procedures myself. There was no-one to delegate to and that was how I learnt my internal controls, auditing and interviewing skills and basic draft management letter observation writing.

After two years of doing the “grunt” or ground audit work, I was assigned as a team leader (audit supervisor or audit senior) in a small team and supervised two staff but also performed some of the audit procedures. Thus I did slightly fewer audit procedures as some time was allocated to manage the audit deliverables, draft audit reports and liaise with the auditee on the conduct and progress of the audit. I also reported upwards to audit manager on the status and progress of the audit.

My career brought me to different work settings but what struck me from my various roles was that either I did the work myself or managed the work. As my experience grew, I realised that doing the actual work while important was less valuable than being able to manage the work and its outcomes and to “run” the operations. Rewards and credit flowed more to managers (who plan and direct) than actual staff who did the work.

In my current role, my team does most of the actual audit procedures and the first draft of the audit program. My value-add is to review the audit program to ensure that it meets the audit objectives and to get the audit plan cleared in the first place by senior management and the Audit Committee. Thus, I am managing and planning the work more than doing it myself. I still join my staff for client entrance/exit interviews and perform mostly supervisory, review and quality assurance on the work of my team. I also train my staff in building capability for them to deliver on their audits. For example, I personally coach my team a lot in using computer-assisted-audit tools as I had prior experience running those tools in the earlier part of my career.

How does this parallel my own journey towards financial freedom and my investing style?

Manage Your Portfolio by Focussing on Outcomes

The key difference in my investing approach that I learnt from my career development is to focus more on the big picture and get outcomes instead of running the operations. This means that I focus on achieving a good return on investments on my net worth under investment and not engage too much into going in/out of the market.

I realise that to achieve returns that beats twice fixed deposits or at least keeps up with inflation (i.e. 4-5% per annum returns), I should not be trading but should consider taking big positions in 2-3 key stocks and manage them. The managing part is to understand more the underlying businesses of these stocks and to monitor their operating and financial performance. The dividends that accrue from them will come without me having to actively trade in/out throughout the year.

Just like I do not do as much of the detailed audit procedures that I used to do when I first started out in audit, I should manage key entry points where I have decided that a bluechip is worth investing in and at what price would reflect a suitable entry level for a decent yield.

The risk of investing in equities or stocks and shares is the urge to get in/out of the market. That is what some would call a “gambling” or “trading” approach.

The older I get, the more I realise patience and putting in the groundwork to understand the companies and businesses is important. Also cash management to not put oneself under pressure to sell when the market is unfavourable is critical to being able to survive market volatility.

Management is not being hands-off

A common misconception is that managing means taking a hands-off approach. My own approach to managing my teams has been to set clear objectives, to clarify with my team along the way but leave them to do the actual work in accordance to the plan unless there is significant change in scope or risk arising from our audit fieldwork.

I am hands-off in that I don’t repeat my staff’s audit procedures as my staff is experienced. But I do check key inputs and working papers and review and edit thoroughly the audit reports. But sometimes, small things do slip and I need to review even more thoroughly my staff’s work to ensure that quality assurance is there.

Managing is to take a step backwards to look at the overall picture with respect to objectives and outcomes. Aligning the two throughout the audit is key towards achieving what we set out to do.

Are you managing your own investments or financial freedom journey or just doing the day to day things of buying/selling?

Do you have some overall direction and strategy that allows you to manage your portfolio?

Share with Panzer in the comments section.

It’s an interesting question because when I went through the 2008 crisis, I went through a lot of personal upheavals myself even as the value of my stock portfolio gyrated as violently as a ship caught in a storm of a hurricane. That experience helped me understand more about this whole idea of asset allocation of one’s portfolio and managing one’s cash.

Fundamental Rule of Investing: Don’t Put All Your Eggs in One Basket

Living within our means, saving and investing as well as growing and protecting our means remain the fundamental tenets of financial freedom. The key towards investing is knowing how much to invest. There is no perfect answer but I am guided by the above rule of not putting our all our eggs in one basket, i.e. do not invest 100% of your savings into one asset class.

My own rule of thumb has been to be invested in the market but my longer term aim was about 50-75% in equities and 25-50% in cash and cash equivalents. Currently I am about 82% in equities and 18% in cash. This is a more aggressive portfolio stance compared to my pre-crisis 50% equities: 50% cash about 1-2 weeks before this downturn occurred.

The key to having money in equities and being able to sleep well at night is to buy into good quality blue-chips with solid business fundamentals despite what is happening in the market. To that aim, I’ve increased my holdings of SPH to it being the single-largest stock that I hold. Whilst some might say I’m putting all my eggs in SPH well it’s true if you believe in holding a basket of different stocks for diversification. But the current downturn hits virtually all stocks across the SGX.

Diversification by Asset Class

Hence, my diversification is more in asset allocation, i.e. I avoid having 100% of my savings in equities at any one point in time. My current 18% cash buffer is more than 3-6 months of my monthly income or expenditure and allows me to know that immediate and short-term (within the 6 mths) cash needs are taken care of.

My only debt is a small amount of housing loan that is paid via CPF and is a fraction of my total investible savings. I’m exposed to market moves but I am thinking more of long-term and holding on to my SPH for dividends then to constantly find out ways to generate better than inflation (4-5%) returns of my savings.

Noways I sleep much better because I can hold, intend to hold and will hold until this storm subsidies and focus on the underlying business of SPH. Yes, dividends are not guaranteed but from my own understanding of SPH plus attending AGMs, I am of the view that this is better than putting money in savings at 0.10 to 0.30% or even in fixed deposits of up to 1.0%.

Increasingly, I look more towards dividends from stocks rather than from realised capital gains from trading as dividends tend to be more sustainable that trading gains.

Ultimately, each of us has to decide for ourselves what is our strategy with regards to asset allocation and what type of diversification that we are trying to achieve. There is no perfect asset allocation or formula, up to individual to decide based on their own risk-return profile and how well they can sleep with the amount of capital or savings being invested in the market.

How has your own experience been in being able to sleep peacefully in this turbulent market?

Share with Panzer in the comments section.

Be well and prosper.

I guess today will be known as a somewhat “black” Friday for the STI plunging 112.23 points (3.61%) to 2,994.78 points. This follows massive losses on Thursday 4 August 2011 on Wall Street for both the Dow Jones Industrial Index (-512.76 points / -4.31%) as well as the broader S&P500 indices.

My own experience about investing in equities or stocks and shares is that truly, it is a random walk in that one is unable to consistently predict the price movement of individual securities. My own stock picks that generate winners have been largely due to blind luck plus a little bit of common sense and my losers have largely been to my own lack of understanding of the psychology of investing/trading as well as my own inexperience.

Investing vs Trading

Since my foray into equities investing in 2003, I’ve slowly discovered the difference between trading and investing. Today was one of the few opportunities where I increased my exposure to the market by being contrarian. I moved from 50% equities : 50% cash to 75% equities : 25% cash.

The significant investment was in SPH which I think is a good long-term stock to hold partly due to its business with significantly monopolies in print media and mainstream newspapers and magazines. It’s property business from rental of retail malls is also something that is not too directly affected by the European debt worries or even slowing down of US economy. Most of its business is derived from Singapore operations and while it’s profitability does hinge on the general economy of Singapore, it is less correlated to US or European debt problems.

While the potential for capital gain for this stock is much less than say for UOB, it is somewhat less volatile and its fundamental business is sound under most economic conditions.

I increased my holdings partly because I know my own investing style, I am not a day-trader who can monitor the markets long-term and rely on technical analysis to time the market regularly and consistently to make money through trading. Instead, I monitor a small group of blue-chip stocks and specifically buy when it’s relatively under-priced relative to its value and business.

I ask myself, did the fundamental business of SPH change when Fukushima happened and bought a bit more then. I also asked the same question now given the sharp drop in US market and came to the conclusion really nothing fundamentally has changed with the business so the general wave of selling bring this stock towards a price that I am comfortable to buy. In the short-term, there is no guarantee that the price I bought is the lowest but the potential dividend yield based on my average cost is very decent compared to what I can do with my investible savings now in fixed deposits or other money market instruments.

Win/Loss Only Time Will Tell

This purchase basically will help me increase my dividends as part of my passive income instead of from capital gains which is difficult to sustain. I can just adopt a hold strategy and monitor the share and especially the dividends which will be coming by the end of the year.

This deployment allows me to take a “break” from active market monitoring and I will just do the occasional punt for fun rather than for serious money. My serious money is still from my day job but I think this investment will help me keep up with inflation relative to what I can get in other asset classes that I’m familiar with.

How did you fare on 5 August 2011 in the market?

Share with Panzer.

Be well and prosper.

It’s been quite a while since I last updated my portfolio. This pie chart shows what is my cash/equities position as at 12 May 2011. As you can see, I’m still fairly conservative at this point in time. Partly because 46% of my my investible savings is in cash as it backs up the outstanding mortgage loan that I still have for my home. I.e. I am still carrying on with the loan until the three year lock-in is over as I don’t want to pay back the legal subsidy etc. and my current mortgage package allows offset interest so my interest cost is quite low each month.

My current equities holdings are in the following stocks, the % in brackets denote % of my investible assets portfolio (at lower of cost/market). Note that the sum of % does not equal to 54% equities due to my lower of cost/market conservative mark-to-market practice in valuing my portfolio:

1. Singtel (1%)
2. DBS (10%)
3. First Ship Leasing (1%)
4. SPH (22%)
5. Singpost (3%)
6. UOB (13%)

This is also one way for me to use my CPF monies to pay for the housing loan.

In terms of investment returns so far, I’ve done much less active trading and investment income from capital gains, dividends, interest and some blogging income gives me a return of 1.48% which doesn’t beat inflation but beats fixed deposits returns. As my dividends are not full-year, it’s likely that my investment returns should be able to be above 2% which still doesn’t beat inflation of 5% but is better than fixed deposits without taking undue risks.

Do you keep track of your own investment returns?

How has the first half of 2011 been for your in terms of investment returns?

Share with Panzer in the comments section.

Be well and prosper.