Learn from a Fool: Mistakes I Almost Made Last Month

I almost made some serious investment mistakes last month.  While reading various analyst's reports, I came across trading BUY calls  for Bumitama Agri and Golden Agri.  In what was an almost rash moment, I was very close to buying into those shares hoping to make a quick buck that just seemed so tempting to resist.  After all, the upside forecasted by the analysts in their target price suggested that I will get a good return on my investment.  And besides, I had also liquidated quite a fair bit of my other shares.

It was good that I was too busy to think much about it over the past weeks and so I did not enter into any positions.  The prices did go up a little and finally slipped due to expected weak crude palm oil prices.  Apparently, there is going to be an oversupply in the near future and palm oil prices are expected to be low in the near future.

It shows that one should not be too quick to jump into investment decisions based on other people's analysis.  At the end of the day, all forecasts and projections are just anyone's guess.  We can make educated guesses but that is what it remains at the end of the day - just an educated guess.

Ng Teng Fong Family - Singapore's 40 Richest

Ng Teng Fong, born in 1928  in the small rustic prefecture-level city of Putian, located within the eastern province of Fugian, People’s Republic of China was never a stranger to hard work.  As a boy and eldest of eleven siblings he learned early on the value of perseverance.  His parents moved the family to Singapore when Ng was at the tender age of six to pursue a family owned soya sauce factory and grocerry shop.  He worked arduously to contribute to the success of his family’s business as a factory hand and repairman of bicycles for years and as the eldest son, was expected to carry on the family legacy.  Ng Teng Fong however had other aspirations, which to the chagrin of his parents did not involve the soya sauce business.

In 1950, Ng set out to realize his goal of becoming a business mogul in his own right.  What he lacked in formal education he made up for in desire, ambition and internal fortitude.  After a failed provision shop venture, Ng was able to rebound acquiring enough funds to establish his own property development company in 1960.  Under the capable tutelage of billionaire Eliya Thamby, the Far East Organization (FEO) was born and all of Ng’s dreams were finally realized.

A billion dollars is quite an outstanding net worth for any family let alone one person.  The astronomical figure has easily made Ng Teng Fong named number one in Forbes Asia while he was alive. And although rich beyond comprehension, his lifestyle was a complete oxymoron to his financial worth.  Not one to indulge in the flamboyant and extravagant self-deserving life that most billionaires thrust themselves into; Fong lived a rich but humble life.  Although one of the largest real estate developers in Hong Kong, Fong lived in the same house for over thirty years and was known for packing his lunches.  The simplicity of his lifestyle was in direct contract contrast to the fortune he had accomplished.  Perhaps his simple lifestyle was because of his humble means that he was raised, or being in the position of poverty as a young man may have been the reason for his modest living.

As the first of its achievements FEO developed a housing community comprised of 72 terrace houses at Jalan Pacheli in Serangoon Gardens, in Singapore.  These homes, as part of the now exclusive Singapore community, sold for $20,000 each in 1962.  Following closely on the heels of this success Ng ambitiously threw his hat into the hotel arena constructing a $5.5 million Singapore Forum Hotel on Orchard Road.  The first in a very illustrious portfolio of luxury residences the Forum Hotel boasted an Asian inspired experiential experience that is still coveted today.

With the success of that development, the company ventured off into hotels.  From there, his developments continued to flourish, in hotels, residential developments and other endeavors.  And although he was on a steady slope of success, he did nearly go bankrupt when a local institution withdrew credit facilities.  However, with creative financing strategies, he rebounded and maintained his successful and ever growing business in the long run.

Ng established many companies throughout his career and in addition, he would purchase large land opportunities for retain and commercial developments.  He was also aggressive at purchasing land during the property crash in the early 1980s, which later proved to be an intelligent business move. His investments and smart business practices sustained his companies and businesses through downturns.  He became known for his prudence in property and acquiring new land.

After several decades of diversification and expansion Ng Teng Fong had launched his company into the forefront and by 1994 his portfolio was estimated at HK$60 billion in property holdings in Hong Kong.  His expansion endeavors dubbed him the “King of Orchard Road” as he continued to exercise dominion over Singapore’s prime shopping district with the construction of Lucky Plaza in 1978, Orchard Plaza in 1981, Far East Place in 1983 and Claymore Plaza in 1994.

As his net worth continued to ascend into the higher billions, Ng remained grounded.  The Sino Group’s famous developments include the Conrad Hong Kong grand Royal Pacific hotels, Central Plaza in Wanchai and the Centrium in the Central district. He became one of Hong Kong’s largest real estate developers and one of the largest landholders.

Ng Teng Fong’s financial savvy coupled with his aggressive acquisition practices preserved the health of FEO even through several economic downturns.  The patriarch Ng Teng Fong, died at the age of 82 on February 2, 2010 of a cerebral hemorrhage and is survived by his wife, Tan Kim Choo, his two  sons Richard Ng and Philip Ng and seven other children. At his death, Ng was at an estimate 7.8 billion dollars.
Today the estate is estimated to have about a net worth of $9.2 billion with the number one spot among the 40 richest families in Singapore.   His true rags to riches story is one that only dream of accomplishing.  As Forbes Asia richest man, his inspirational professional journey led him to develop over 1,000 properties.  His sons carry on the family business.

Ng Teng Fong left a legacy of hard work, financial prowess and dedication.  His two eldest sons have equipped with their father’s financial savvy and have continued along the same successful current of business.  Philip Ng is an MIT graduate and manages Singapore's interest (FEO) while brother, Richard Ng manages the Hong Kong side of business (Sino Group). Together, they are the coexcutors of their father's estate.  A hospital to be built in Jurong will be named Ng Teng Fong hospital.

My Favorite S-REIT

 

S-REITs are having their limelight in the recent weeks.  With the announcement of QE3 and the low interest rate environments expected in the near term, many analysts are crying out BUY calls for S-REITs.  Kim Eng expects another 11-14% upside for the S-REIT sector due to the low interest rate environment.  Apparently, many pension, insurance and income funds are switching into the REIT sector which provides better yields than bonds.

Of course, I am cautious when I hear all these positive news.  After all, S-REITs have been featured in the past few weeks in newspapers and I know the saying that goes "Buy when people are fearful".  And if people are so hopeful now, perhaps it is a good time for me to sell.

With the increase in S-REIT stock prices over the past few weeks, I have liquidated almost all my REIT holdings less a few.  One of them is my favorite REIT (yes, I know we are not supposed to fall in love with our investments).  But I have grown this emotional attachment to this REIT which I have held for some time.

This is Ascott REIT which I bought some time back. For my August dividends, most of them came from Ascott REIT.  I have bought in and sold out on First REIT many times and looking at the share price now of around $1, I sort of regret that I exited it too early.  With Ascott REIT, I am not certain whether it can rise any further.  But with good earnings yield and dividend yield, I am probably going to keep this REIT in my portfolio for a long time to come.

Long Life a Curse?

 

 Is long life a curse?  With life expectancy going up, we are all sold to the idea that most of us will live long and happy lives.  However, I am wondering whether long life expectancy is a gift or whether it is a curse.

Too often, we have the image of ourselves ageing gracefully and in complete bliss, surrounded by people we love.  But most people (who have elderly at home), will know that this is probably not the case.

As one ages, one's mental faculty also deteriorates.  Not only that, one's physical state also starts to decline. So apart from dealing with health issues, there are also a whole lot of emotional or even psychological issues that can become a source of friction within the entire extended family.

And this has really got me starting to think whether I really want to live until a ripe old age.  I have seen firsthand the difficulties that caregivers face when looking after the elderly.  When the elderly are good in health, it is okay.  

But there are also many other factors that can strain family ties.  An example is:  Who looks after the aged parent?  Will the eldest son or eldest daughter rise up to the occasion?  What if all the children are located in different countries?  How does the care arrangements work out?  And what happens if the elderly is not in good health, or worse still , not in good emotional/psychological state?

Caregivers face a difficult, tiring, and mentally exhausting task.  Those who have gone through it will probably know the difficulties.

I now know it when I hear the common phrase used by older people about how they do not want to "burden their children".  

Is long life a blessing or a curse?  What do you think?

August Dividends

Dividends collected for the month of August 2012 is $846.67.  I was kind of disappointed as I thought or had the impression that I would be expecting more for this month.  However, 800 bucks is still a decent sum.    Most of this came from Ascott REIT.

I also sold off Fortune REIT and Cambridge REIT for a tidy profit.

10 Financial Practices to Improve Your Financial Health

Having a healthy financial life is not difficult, it just takes discipline and a little planning. Schools rarely teach personal finances classes, so sometimes adults need to learn the basics of personal finance. Luckily, once the ideas and plans are in place, it will become easy to have great financial health. Here, are 10 financial practices to improve your financial health.

Two Incomes
Many people get a great paying job but use all their money at the end of the month. A way to get over the hump is to have a second job. This can be an easy job 1 day a week waiting tables. Any little extra income is going to a long way in improving your bank account balance.

Debt
Debt is not evil by any means; there are some terrific uses, such as home and car loans. One should be careful to minimize debts, especially credit cards. Credit card debt can carry extremely high interest rates, making them difficult to pay off. Getting ahead is extremely hard when one is trying to make payments to credit card companies.

Credit Cards
With that being said, a credit card can be an enormous asset. Not only can one get cash back with credit cards, but they offer superb protection. It is essential to have a credit card or two.

Vices
Many people enjoy drinking, smoking and gambling. These vices can be extremely expensive and offer remarkably little return. It would be best to minimize vices, as the return on investment is nonexistent.

Credit Score
Getting and maintaining a phenomenal credit score is tremendously beneficial. Anyone looking to get a car, home or student loan, will want excellent credit. Having excellent credit can save a person hundreds a year in interest rates.

Insurance
Make sure to not go cheap on insurance. Many people look to save money by lowering insurance coverage. This is okay if it is done by shopping around. Not having health insurance, or having minimal car insurance can leave one vulnerable in critical times.

Healthy
A great way to save money is to live a healthy lifestyle. Cooking at home and riding a bike instead of walking will save money and improve health. This will also improve ones bottom line with lower health care costs.

Purge
A lot of people have an abundance of junk that they do not need. Anyone looking to get ahead should get rid of excess possessions. Not only do they get in the way, they can also cost money to store. Plus, if you sell your possessions not needed, you will get an influx of money.

Recurring
Watch out for recurring bills; it is easy to forget them. A gym membership here, Netflix there, it adds up. Sit down and go over all of your monthly fixed costs, cutting some of them will be beneficial.

Taxes
Take advantage of tax benefits, such as retirement accounts or write-offs. Billions of dollars are lost a year in tax write-offs. Simply because some people do not include them when filing taxes.

It is extraordinarily easy to improve ones financial health. It just takes a little bit of discipline and organization. The exciting thing is it is easy to stick to better financial decisions once put in practice.

Roger Hammerson writes about finance, self help & more at http://homeownersinsurance.org.

Yale Endowment Fund Asset Allocation

An endowment fund or what is popularly known as a financial endowment is the name given to the money which is transferred to an institution which can differ from academic, to cultural and religious institutions. One of the most common and known names in this category is the Yale Endowment Fund. Yale endowment fund is known as the pioneer in the approach which followed the process of investing heavily in investments like real estate and private equity. David Swensen, in his career spanning 25 years, is credited with starting this

Yale Endowment Fund management.
Asset allocation allows investors to manage risks and their portfolio’s volatility. Portfolio owners can maximize their returns only by allocating their assets appropriately. It is not the funds or individual stocks in your portfolio that count but the manner in which investors chooses to combine the assets and give a proper structure to their portfolio so that they can increase their returns.

Yale Endowment Fund Asset Allocation approach has been received well by many investors. The model has produced great returns for many investors. A look at the Yale Endowment Fund Asset Allocation model suggests that the fund uses simple allocation methods and is yet amazingly effective.

Yale Endowment Fund Asset Allocation model focuses on investing in multi-asset class (including cash, bond or equity), which offers higher annual returns and reduces risk and volatility since the investor does not depend on one particular class of assets. The Yale Endowment Funds accesses the leading private equity, hedge and institutional fund managers, which is what makes them so successful and assures the investors of greater returns.

The Yale Endowment Funds Asset Allocation model relies mainly on the modern portfolio theory. The modern portfolio theory was designed by Professor Harry Markowitz who also won the Nobel Prize for designing the theory. The theory basically portrays how by simply diversifying assets that are variedly co-related with each other, investors can minimize risk and improve the returns from their portfolio.

The Yale Endowment Fund managers focus on five basic principles, which has become the very basis of the Yale Endowment Fund Asset Allocation model. These principles include, investing in equities, as being an owner is much better than being a lender, holding a portfolio that is diverse, fine-tuning asset allocations at extreme valuations and avoiding market timing, investing in private markets that do not have complete information and low liquidity to enhance returns on a long term basis, using managers from outside for all except the most indexed or routine investments and allocating capital to investment organizations managed and owned by people who actually do the investments on their own to minimize conflicts of interest.

Based on these very principles, the Yale Endowment focuses on diverse assets and has always invested primarily in equities. The success of the Yale Endowment Funds Asset Allocation model resulted in other lager endowments following the same model. In a matter of a decade that ended on 30th June 2008, Yale Endowment offered a return of 16.3 per cent on an annual basis to its investors. Yale Endowment Funds increased to 22.9 billion dollars from a mere 6.6 billion dollars in ten years.

The Yale Endowment Funds Asset Allocation model has been consistent in achieving higher investment returns and less volatility owing to its approach of investing in multi-asset class. Therefore, those investors who chose to shun the traditional model of investment and adopted the Yale Endowment Funds Asset Allocation have realized that the application of multi-asset class principles to a portfolio that is based on index is what that can help them in maximizing their returns.

The fund follows the following principles which are being described briefly below:

Increased Diversification, and re-allocation during the period of extreme valuation for the asset classes.

This model was followed for diversifying the endowment fund into different other portfolios for providing a cushion to the losses that might be in the offing for the fund. This model followed a simple principle of diversified portfolio carrying lower risks with higher returns.

Allocation of more funds to equity.

The principle behind this model was that it is always better to own something in return of your investment rather than lending money out as a mode of investment.

Using active managers rather than following an easy method of investment.

Yale actively pursued the policy of active approach of management strategies, with the planning to stay ahead of the market by some percentages year on year.

Hiring of outside investment firms.

This model was followed to ensure that there remains no conflict of interest between the managers handling the fund and the income generated by the fund. To ensure the same, Swensen hired external investment firms and other primary investors for handling the fund.

Increasing the fund allotment to private markets along with non-asset classes.

Non-asset classes or the commodities were added to the fund’s portfolio as it was believed and these commodities provide a better value than the normal equity as this class of investment carries low risk due to their low dependence on the equity and other markets.

Though these principles gave good results to Yale in the beginning but gradually they were criticized by financial gurus and fund managers world -wide. It had a bad year in 2009 with the fund suffering losses and was not left untouched by the financial crisis which had shaken the world market. Still, the consolation remains that though Yale suffered losses during FY09, it had always maintained that most of the fund is invested into asset classes which come with risk along with returns on a comparable table with private equities. Though, it is true that diversifying the fund can definitely provide with the shock absorbers that are required for protecting a fund as big as held by Yale, but still one cannot fight the abnormalities of the market. This fund comes with some important lessons for other big funds while also providing some important insights with small investors though it is advised not to blindly follow these models.

[The following is a guest post]