Reflections - My performance investing in Cache Logistic Trust

Recently I liquidated my position in Cache Logistic Trust (SGX: K2LU), with approximately 13.4% realised returns over the past 2.25 years (when simply dividing the overall gains by total principal sum invested). This gives me 5.95% annualised return. On paper, it is nothing to shout home about, but if I break it down to track each batch of units I purchase, I think I can give myself a pat on the back. :)

Breakdown based on per batch purchased

Units purchased	Purchase price per unit (include comm)	Period held (years)	Yield on cost	Overall gain from distributions	Remarks
3700	0.903	2.25	7.64%	17.20%
1500	0.859	1.75	8.29%	14.50%
2300	0.634	0.5	9.92%	4.96%	Rights

Why I bought into Cache Log Trust
- Interest in developing income portfolio and hence passive income

- Interest in raising overall dividend yield of the income portfolio

Comparison to SPDR STI ETF
While I'm doubtful I would have considered purchasing SPDR STI ETF back then (objectively different style of investing), for curiosity sake, I compare my performance to if I had bought SPDR STI ETF instead.

• At sale of my holdings in Cache Log Trust,  SPDR STI ETF is going for 3.60 per unit.
• I assume I put similar amount as the period when I added to my position in Cache Log Trust.

Units bought	Purchase price per unit (include comm)	Period held (years)	Yield on cost	Overall gain from distributions	Annualised Capital Gain on cost	Overall Gain from Capital Gain	Annualised Overall Gain	Total Gain
1140	2.976	2.25	4.95%	11.14%	9.31%	*20.95%	*14.26%	32.09%
450	2.937	1.75	4.63%	8.10%	12.91%	*22.59%	*17.54%	30.69%
410	3.553	0.5	2.98%	1.49%	2.64%	*1.32%	*5.62%	2.81%

* - denotes I have not subtracted the commission from selling SPDR STI ETF

If I calculate my annualised return in the manner I calculated the 13.4% total and 5.95% annualised return for Cache Log Trust, I would have gotten 16.8% total and 7.4% annualised return instead after deducting commission for selling.

Often spoken about is how most investors tend to underperform the market - this is where such a case is demonstrated. Haha. It also demonstrates how a bull market may outperform high-yield stocks.

To be honest though, given my original intended holding period was much longer for Cache Log Trust, the results might be different. Let's revisit this reflection in a few years?

What could have been done better
To be honest, I bought the company for its indicative yield without sufficient studying of the corporate actions and its effects.Yield was indicated at high 9% range after price had dropped from $1.00 so I thought it was a bargain back then. I had not realised share dilution has happened from the private placement. I am just thankful the rights issue (especially the excess rights) has allowed me to recover some capital gain instead of selling on a capital loss.

For the first batch of units I purchased, if I had done my due diligence for the private placement back then, my entry price would more likely be 0.86-0.87.

• I may have decided to purchase slightly more units (probably 3900-4000 instead of 3700). 
• That might also have increased the number of units I got from my rights issue.
• Assuming first batch's entry at 0.865, this would increase my capital gain by at least 110 - another 1.8% total gain and 0.8% annualised gain, closing the gap but still underperforming when compared to SPDR STI ETF.

Additionally,  back at the start of February 2018, there was an opportunity to sell off at 0.865 after ex-dividend, so that is another 4.3% total gain and 1.91% annualised gain. With this additional gain on top of better entry price, I would have beaten SPDR STI ETF, with 19.5% total gain and 8.66% annualised gain.

In Closing

Hindsight is 20/20, but at least I recover from any capital loss there is. Evaluating my performance and reflecting on my shortfall, this is all part of my lesson learnt. Got some work to do on improving my entry and exit for future purchase.

Portfolio Update - 28 April 2018

It's time for another portfolio update!

	Income Portfolio
	Counters / Assets	Units	Market Price (SGD)	Overall Value based on market price (SGD)	Allocation
1	Cromwell European REIT	1000	0.96	960	6.25%
	Growth Portfolio
	Counters	Units	Market Price (SGD)	Overall Value based on market price (SGD)	Allocation
2	Alliance Mineral Assets (AMAL)	40000	0.36	14400	93.75%
	Cash / Non-Stock Assets
	Counters	Units	Market Price (SGD)	Overall Value based on market price (SGD)	Allocation
3	Warchest	1	0	0	0.00%
	Total SGD			15360	100.00%

Transaction
1) Sold Cache Log Trust at 0.830 to fund my home purchase.
- Overall Gain of 13.3% (~12% from Dividends over 2.25 years)
- Low % from dividends and capital gains as my purchase was not in 1 lump sum
- Participating in the rights issue played a major role in giving me a very slight capital gain, allowing me to recover from my mistake in purchasing at a high price.
- In spite of the rising interest rate, I still believe in Cache Log Trust's long-term prospect, especially when Australian properties are now the majority of its portfolio. A week ago, I briefly covered on investing in REITs during this period of time, along with the flow of smart monies.

2) Withdrew Warchest to cater for home purchase and I foresee not being able to accumulate funds to invest in the market for at least a good remaining part of the year. Much of our income will be tapped upon to pay off credit card bills for the rest of the big ticket items.

Other Portfolio Matters
1) As my activity in the stock market will be greatly reduced for the rest of this year, my portfolio updates for the rest of this year will be set more on a quarterly manner, starting from end of June 2018. This also accomplishes having a regular update schedule for my portfolio while I once again accumulate capital to re-enter the market. When that happens, portfolio updates will probably be more frequent than being on quarterly basis.

2) My home purchase is pretty much the sole responsible reason to liquidate Cache Log Trust, Frasers Logistics and Industrial Trust and Capitaland Mall Trust at this point of time. I can confidently reiterate that otherwise I would still be comfortable to hold these stocks for longer term. Hopefully by the time I re-enter the market, REITs and solid high-dividend companies are at a more attractive valuation (Oei don't kill me ar. Haha).

3) I will probably tweak my portfolio sharing to include passive income as well - this will include yield on cost per stock, on a portfolio level, and on overall view.

Stay tuned!

Origins - How I started my venture into the stock market

Many people started their investment journey in many of their very own unique way. Some developed it from interest in business, some got into it from reading about how people struck it rich through the stock market, or developed a curiosity for it from their peers.

But what about my story? Curious about it? My blog has touched a little in About Myself and my first Reflection article, but never have I covered it in a consolidated article. I feel by sharing this personal account, it might also give some new investors an idea how they could start it off before dropping their hard-earned monies into the market for real.



An interest in secondary source of income
It all started from developing an interest in secondary sources of income back in 2009/2010 while I was serving NS. The seed is sown when I bought and read Adam Khoo's Secrets of Self Made Millionaire. While not my main goal, that was perhaps my very first exposure to investment as I learnt of some basic terms used such as "blue-chip". However, it stopped there and went to hibernate - life went on. I focused on my university education and later on, my work. It was not until mid-July 2015 when thoughts of stock market hit me out of the blue and made me recall this. And then I started getting absorbed into learning more about the stock market.

Learning about investing in stocks
For a good few weeks I was intensely educating myself of the many different terms used in stocks. I immersed myself in websites such as Investopedia, The Motley Fool, Morningstar etc during my break time and off-office hours. I learnt about terms such as Fundamental Analysis, PB Ratio, PE Ratio, Dividends etc. This was also a period of contemplating what my style of investing would be. Being someone inclined to developing a steady stream of secondary income - yep that's right - I felt I leaned towards income investing in spite of such style being touted more suitable for retirees.

I had the option to begin through Dollar Cost Averaging (DCA) via OCBC's Blue Chip Investment Plan. Eventually, I concluded such investment scheme did not appeal to me:

• I had not saw the point in not having the flexibility to control price the exact moment I intend to buy or sell.
•  The commission fee for lump sum investing is more economical.

Next it was thoughts about what would my target be if I did income investing. "How much am I willing to fork out to get $6000 annually?" "I guess probably 5% yield sounds reasonable." This later evolved to 6%+ as I thought it seemed expensive to invest 6-digit for $6000 annual passive income.

Shortly after, reading about the success stories of traders, short term trading also piqued my interest, being a potential secondary source of income as well.

The pushing point for me to decide on set up my brokerage account finally came about when the market suddenly took a nosedive on 24 Aug 2015 owing to the yuan devaluation fear.

I thought to myself "why are you guys panicking over the yuan devaluation when it does not affect the underlying health of the business?"

And then true enough, stocks largely rebounded the next day.

"I can definitely make money off such opportunities", I thought. Aside from yet having to develop a suitable mindset to take on investing, that also contributed to deviating my interest from investing and venture into trading.



Itchy Hands
Fancying short-term trading out, I had pushed the idea of long-term investing aside for the time being and begun trying it out. At the start, I got kopi-money on my very first trade. Alas it was short-lived.

I then come across an analyst report on Global Logistic Properties (GLP), mentioning about the Target Price being a good deal higher than its trading price and them issuing a "Buy" Call. The ignorant me did not know the dynamics of the market and the suitable use of analyst calls and then blindly bought into it. I saw it go up a few cents and thought to myself, "Oh yes I'm making money out of this!"

Boy I could not be more wrong as the price soon collapsed.

Panicking, I went out of the counter after taking a few hundred in loss, but silly me then went back in at a lower price thinking it will rebound. I rolled up about $1500 in losses from the counter alone. It was unfortunate

Going forward from then, I continued to try out trading in various counters, many unheard of, and I soon accumulated overall loss of $2800. I could not sleep comfortably for a few nights after taking all those cumulative loss and I discarded the thoughts of making it through becoming a short term trader.

It was the price I paid to develop my ability to stomach fear and panic, and set my threshold for paper losses I am willing to bear for counters I take a long position on.

My first step as a stock market investor - for real
I could not sleep comofrtably after those cumulative loss and I discarded the thoughts of making it through becoming a short term trader. It was then I concluded income investing is probably the way to go and I would recoup my loss via dividends. I bought 5000 units of Capitamall Trust at 1.875 each, seeing how it was slightly under-priced to my eyes. It was 80% income investing and 20% value investing, really. This paid off (unintentional pun) as it helped me somewhat with growing my savings until I finally sold it for my upcoming home.

Fast Forward to the present
While my portfolio since last year have had a major capital appreciation element added by means of investing in Alliance Minerals, and recently liquidating my positions in Capitamall and just today, Cache Logistic Trust (I will bring this up in my upcoming portfolio update again) even now I am still more of a income investor at heart. Nevertheless I saw a point in developing myself in different style of investing and had a desire to grow my funds at a higher rate so that I may accelerate my plan for income investing.

What about my capital losses? I actually reduced my loss significantly with a series of good trades in 2016. While I still sit on a net realised loss from capital differences, my dividend and distribution has gotten me positive realised gains.

Thanks for reading!

My thoughts on smart monies outflow from REITs, Telcos and other defensive stocks

Based on Donovan's analyses, Smart Monies are moving their funds away from Defensive Stocks, REITs and Stocks in favour of banks, commodity, Oil & Gas, energy sector - interest rate rising drives these movements.

This creates strong support for counters they made their entry and then cause them to be bullish, and price weakness on the counters they have sold (hence bearish due to weak holders).

Should you panic then when you find your defensive counters becoming bearish?

First reflect and examine why did you buy these counters. Usually our motive behind buying these stocks is their resilience and ability to provide realised gains in the form of passive income. Capital gain may be part of the goal, but not necessarily the main one.

REITs, trusts and most defensive stocks are reliant on debt/gearing, so indeed it is true that rising interest rates will have some impact. But it's hardly as straightforward as rising interest rate = lower distribution.

For starters, the debt may have their interest rate fixed for a period of years before they have to refinance at the new higher rate (credit rating also plays a part in determining how long the fixed rate lasts).

Then there's also how rising interest rate is the result of improving business environment, and how they will be able to pass the cost on.

B from A Path to Forever Financial Freedom (3F) also talked about these matters regarding investing in REITs.

Shouldn't we then examine company fundamentals instead?

Then next examine the reasons for the institutional investors selling off such counters. Sometimes institutional investors sell off not because the prospect is gone, but because they have their own restrictions to work with hence having to rebalancing their portfolio, something us retailers need not worry about to such extent.

If anything, the price weakness can present opportunity to enter at a better price and hence better yield-to-cost (provided the company in question isn't experiencing a decline in its fundamentals lah).

If got concern of catching a falling knife, maybe DCA loh.

Market is cyclical, and smart monies will eventually flow back in anyway. Think about it: if they really are gloomy about it, they would exit in larger positions and this will cause even larger panics.

Having said all these, Donovan's analyses are pretty good - but I felt like offering a counter-view regarding these.

I guess what I want to put across is...

Just keep calm and invest according to your own set of criteria and goals; end of the day, make money can already. :)

CPF Musings

Figure I want to do a write-up on CPF after thinking about its usage and my planning for long-term goal.

First, let's start with reviewing the benefits we receive in CPF.

Benefits

• CPF-OA gets a 2.5% guaranteed interest rate.
• CPF-SA, CPF-MA and CPF-RA gets a 4% guaranteed interest rate.
• First 60k in CPF gets an extra 1% interest rate, of which up to 20k is contributed by CPF-OA.
• CPF-RA will get an additional 1% on top of the first 60k
• We can transfer funds in CPF-OA to CPF-SA (however this will not be tax deductible.). This is irreversible.

Next we look at some limitations we have for CPF

• First 20k in CPF-OA cannot be used for investment.
• Only 35% of the funds in CPF-OA can be used for investment instruments barring gold or gold ETF.
• Only 10% of the funds in CPF-OA can be used for purchasing gold or gold ETF.
• First 40k in CPF-SA cannot be used for investment.
• Any CPF grants taken will be subjected to also compounded interest needing to be paid back to CPF Board when returning the amount (e.g. selling your home which you took a proximity grant for).

CPF-OA and CPFIS
It is mentioned most investors loses money or is unable to beat CPF-OA's 2.5% interest rate using CPFIS to invest their CPF-OA money, and that if one is not confident of outdoing the CPF-OA interest rate or is generally risk-averse, it will be better to park the money in CPF-OA.

It is still my opinion, however, to have a CPFIS Account set up so as to be ready to take advantage of any bottoming of the market (risk management to limit downside).

Remember, the general rule of thumb is still the amount of effort, time and risk management put in is proportionate to your rate of returns.

If one is confident he or she will no longer touch your CPF-OA, he or she can consider topping up CPF-SA to earn in that extra 1% of interest.

Using rule of 72 (divide 72 by the percentage of interest you get annually to approximate the amount of year taken to double the initial amount), an amount subject to the 5% interest rate will compound to double in ~15 years.

Time is a resource and compounding should be put to work as early in your life as possible (within reasons).

Myself personally, although I have just started out on my investment journey, there is a few reasons why I would like to take more control of how I get returns on CPF-OA money.

• I enjoy a do-it-yourself  approach.
• I strongly believe I can get a better rate of return than 2.5% based on my risk tolerance for my CPF money. This is especially crucial as I would like to beat inflation rate.
• I would want to have the flexibility to put funds back into my CPF-OA after I used up my CPF-OA balance getting my first home.

(Of course, bearing in mind I sold Singtel shares from my CPF-OA, if it weren't for the HDB purchase, I would have hold for at least a few years as I remain confident it will remain resilient amidst the Telco fears. Haha.)

Come end-May I will see my CPF-OA zeroed out and unable to accumulate any more money as it will all go to mortgage unless I see performance bonuses over the years. I do not intend to top up my CPF with cash either. Guess beyond all that, I can only hope to get the top ups from reservist. :P

CPF-SA

With CPF-SA, besides the interest rate being already decent, we are much restricted in the instruments we can invest, not to mention most of the instrument you are allowed to use probably will hit nowhere near 4% rate of return or the reward-to-risk ratio loses out. Let's look at the instruments one can invest in using the CPF-SA (link here). There's next to no reasons to using your CPF-SA monies to invest.

One thing's not sure though - I'm very sure relying on CPF alone is not going to go well for retirement planning.