STE's Stocks Investing Journey

Howard Marks, founder and co-chairman of $122 asset manager Oaktree Capital Management and author of many best selling books ( including the recent one “ Mastering The Market Cycle ”) had just published his latest memo. Latest memo from Howard Marks: Mysterious   <link> “And that brings us to the subject of negative interest rates.  I find them no less mysterious.   The fact that we know what they are  – as we do with inflation and deflation –  doesn’t alter the fact that we don’t know for sure why negative rates are prevalent today, how long they’ll continue in force, what might cause them to turn positive, what their consequences are, or whether they’ll reach the U.S.” In this latest memo titled “Mysterious ” , he starts with a discussion of many possible causes of inflation and the implication of negative rate to our investment and financial institutions, he finds negative interest rates just as baffling and “mysterious”. ...

<Image credit:SGInvestor.io> If you are having more REITs in your portfolio, the chances that you are beating STI is high as most of the REITs are having good "run" so far. Overall YTD returns for FTSE ST REIT Index is 16.5% vs STI of 7.67%. Since I have more than 42% of REITs in my portfolio, quite natural that my portfolio also o utperformed STI by +6.3% with YTD returns of +13.97%. Are REITs Overvalued Now? From a long term trend perspective, valuation for S-REITs looks "rich " as you may see that is very close to +0.5SD trend line , a level never seen since May 2013. You may also notice that the dividend yield for some of the blue-chip REITs been compressed to 4-5% like Capital Mall REIT/ Capital Commercial REIT/ FCT / Ascendas Ind REIT/ ParkWayLife REIT or even Keppel DC REIT.

I would like to share this very good article from SeekingAlpha.com in regard to investing in REITs : Summary REITs are famous for being defensive income-producing investments. There exists, however, a lot of landmines that can lead to massive losses. We explore the most common reasons that lead to large losses in the REIT sector. Finally, we present how we seek to avoid landmines at High Yield Landlord. Generally speaking, REITs are famous for three things: ·          They pay high dividends. ·          They are defensive investments. ·          They tend to outperform in the long run:

image credit to uob.com.sg Sometimes my friends or even relative just wonder how I could survive without working or having “active income” for the past 4 years.   I told them that I have my own “ATM Machine “ that will generate consistent cash flow, quarter by quarter, of course sometimes I can withdraw more money from this ATM and sometimes less.   It has consistently given me the cash without fail even during GFC ( Global Financial Crisis ) , it just a matter of giving out more or less. Yes, it is dividend payout from my shareholding which I’m depending on since 2016 to pay for my monthly expenses and holidays. Of course, I’m not saying is easy to build this ATM Machine, it takes a long time ( very long, almost 20 years for me ) with hard work and saving, investing and reinvesting on the dividend received…taking advantage of the power of “ compounding effect “ as well as spend within your mean ( try to avoid “ Lifestyle Inflation “ ).

Interest rates increase was really a hot topic in the last two weeks since US 10 Years Treasury Note hits above 3% for the first time since 2014. The market also reacts negatively with full of comments on interest risk due to this increase. 10-year Treasury yield hits 3% for the first time since 2014 from CNN Money.com Why everyone is stressing about the 10-year Treasury yield from CNN Money.com “Auto loans, home mortgages, and other loans are tied to the benchmark 10-year yield. Investors fear that higher interest rates could start to eat into corporate profits and also signal that more inflation is coming.” This is why everyone is paying so much attention to the 10 years Treasury Note. Some even talk about “ Inverted Yield Curve “ ….

We do understand that most of the time, " yield"  is the main consideration for investors to invest in REIT and of course other than P/NAV, gearing, interest coverage ratio, asset quality, occupancy rate etc. Other than normal property expenses such as interest & finance cost and operating expenses, the  management fee is also the major cost for a REIT.  How often do we really look at the management fees as one of the criteria in selecting a REIT to invest?