Spending for Today

I read a book about real estate investing and it suggested keeping a budget for one month so that one is aware where all your money is going to.  I don't really live by a budget and I will like to think that I spend my money quite carefully.  But having tracked my daily expenditure for this month, I am quite surprised at what I have discovered.  Will probably share a little of my findings when I am comfortable.

Anyway, here is today's spending:

Breakfast (at home) = Nil
Coffee = $2.20
Lunch = $54.00
Dessert+Coffee = $10
Present/Gift = $23
Dinner (at home) = Nil

Reader's Query

A reader read one of my postings and asked whether he could buy some of the stocks that were listed in that posting.

The short answer to his query is "No".

Let me share why I might from time to time share what is on my watchlist or what I have already bought into my portfolio.  It is basically to let readers know what stocks I own and what stocks I am watching so that they know I have vested interest when I am talking about those stocks.  In a sense, I am also trying to get some feedback and thoughts from readers on why they think certain stocks may or may not be good investments.

Spending for Today

Let's take a look at my spending today.

Breakfast = $3.20
Lunch = $4.75
Coffee = $1.50
Dinner (at Home)
Dessert + Tea = $11.60

Total spending for the day is slightly over $20.  Of course, I did not include transportation costs.  But a quick look suggests that all my expenditure went into food.

Ascott REIT - Presentation by CEO Tay Boon Hwee

CEO Tay Boon Hwee of Ascott REIT gives a presentation and gives a good detailed explanation of Ascott REIT's business and how it differs from a hotel and a normal condominium.  Here are the few points that were made during the video:

• Sponsor of Ascott REIT is Ascott Limited.  Ascott Ltd is o world's largest serviced residences owner and operator.
• 7260 units across 24 cities in 12 countries in Asia Pacific and Europe
• Operates under the brands of The Ascott Residence, Citadines and Somerset Residence
• $2.9bil portfolio
• Major shareholder is Capitaland which owns 49% of Ascott REIT

What is a serviced residence?

A hybrid between hotel and apartment.  Provides the comforts of an apartment and essential services one will expect to see at a hotel. like laundry, daily housekeeping and limited F&B services.  

Key differences  lies in the lease structure.  Hotels cater for short term stay ranging from one day to one or two weeks.  Target audience is also the leisure market and the corporate market. Apartment for rents on the otherhand are typically rented out for at least one year.  Serviced residence thus are able to capitalise on the gap, focusing on the long stay segment,  looking at between stays of 1 month to 1 year stay.  The focus is also on the corporate market and not the leisure market.

Ascott REIT's weighted average length of stay is 4 to 5 months.  This provides stability to the REIT.  It is also less affected by the seasonal demands one would expect arising from tourists.

Serviced residences also only cater 1-2 F&B facilities to the guests and not to the public.  They also do not include banquet halls or function room.

Serviced residence comprises studio apartments, 1/2/3 bedroom.  This can be from 30 sqm to even 100 over sqm.  All apartment units come with fully equipped kitchen facilities.

Hotel staff to room ratio is around 1:1

Serviced Residence staff to room ration is around 0.3~0.5: 1

Sources of Income for Ascott

Broadly classified into 3 categories.

Firstly, properties under management contract.  Ascott REIT enters into a management contract with the operator (Ascott) to maange and operate the property on its behalf. A property management fee is paid in return to Ascott. which is tied to gross revenue and gross operating profit.  18 of its properties (mainly located in Asia Pacific) are under this arrangement.

Secondly, are properties on master leases.  Ascott REIT enters into a master lease agreement with the lesse regardless of the performance of the property.  A fixed rental income is given and this provides stability.  This is mainly in Europe (France & Germany), Philippines and Singapore.

Thirdly, are properties on management contract with minimum income.  Similar to the first category except that a minimum income is guaranteed.

[Disclaimer:  Writer owns shares in Ascott REIT]

Three Great Ideas to Spend Your Annual Bonus

It did not seem too long ago that I was writing about what I should do with my annual bonus.  Most people will be getting their annual bonus in December and I thought that it will be timely to look at a few great ideas on how to spend one's annual bonus.

1.  Insurance

Most people are under-insured.  But one should also be careful not to be over-insured or to be overpaying for insurance.  Some time back, I wrote about one of the cheaper if not cheapest insurance plan in town.  It is NTUC's i-term insurance.  I don't work for NTUC so I can't vouch for this plan.  Neither do I own this insurance plan.  But looking at the rates, it definitely looks like one of the cheaper insurance options around.

Another cheap insurance plan one could consider (if you are a national serviceman or woman) is the SAF Group Term Insurance plan.  Just recently, Aviva has increased the maximum coverage from $600,000 to $1million.  Another thing I like about this group term plan is that it gives rebates.  I am currently covered under this plan and am considering whether to increase my coverage.

I also wrote about whether one is ready to take charge of one's healthcare costs and you might want to consider reading it especially if you are a Singaporean.

Of course, before you dive in and go out shopping for an insurance policy, I must caveat that everyone has to do their due diligence.  In fact, during one of the polls conducted on this blog,  the poll results indicated that many people considered insurance products as toxic investments.  Of course, there is nothing scientific in the way I conducted the poll and it is just the opinion of readers.  I also recommend the following articles on insurance:

• Can You Trust Your Financial Planner?
• Surrendering Insurance Policies?
• AIA Insurance Agent Scam
• Beware of this Insurance Agent

2.  Invest

Of course, besides saving up your annual bonus, one could also chose to invest it in instruments that could potentially give you a higher return than the interests rates offered by banks (can someone remind me again what is the interest rates banks are offering again?) 

Most readers should know that I invest mainly for income with capital gains as a secondary goal.  To understand a little more about income investing, I would refer you to some of the previous articles that I have written:

• High Dividend Yield Stocks
• Real Estate Investment Trusts (REITs)
• Canadian Royalty Trusts (Canroys) - do note that this article was written before the tax changes kicked in.
• Rental Property
• Investing in Bonds

For myself, I am looking at a few stocks that pay good dividends.  On my current watchlist are Sabana REIT, Saizen REIT, Ascott REIT, Far East Hospitality Trust, Lippo Malls Indonesian Retail Trust, SingTel, Capitaland, United Engineers.

3.  Pay off Your Debts

This is self-explanatory.  If you have credit card debt, you should be paying that off before even thinking of investing.  The interest rates on any outstanding credit card bills is just too high to justify you not paying off that debt first.  

For others, you might want to consider making pre-payments or full redemptions of other outstanding loans (e.g. auto loan, mortgages).  

Random Thoughts

Have been busy lately so have not been finding much time to write anything new.  And not that there is anything new that I can contribute in terms of financial knowledge to the already booming community.  There are so many high quality articles on newspapers, magazines, blogs, etc where one can find information about investing and personal finance that it is making me re-think what is my purpose in maintaining this blog and whether it is still worthwhile to put in time, effort and energy into something where my contributions are perhaps not worth mentioning.  After all, there are so many other ppl who are much more knowledgeable and who write much better than me.

The amount of emails that I get are also way too many for me to reply and track (so sorry if I have not been responding).  I am too busy to attend any events, market products or liaise with people to exchange links/post guests postings.  Ask any blogger and I am certain they will tell you this is like doomsday for any blog.  But this approach has served me pretty well thus far.  I know blogging is about building a community but I don't really have that much time on my hands.

Because I have been "dry" on new things to write, I have started reading quite a fair bit.  Just finished a book by David Bach on the Automatic Millionaire.Homeowner.( I read another of his books previously on the Automatic Millionaire which is sort of summarised here)  It was really easy to read and I skipped all the parts that were not really relevant to me so managed to finish the entire book in less than a day.

It was written in 2005 before the subprime crisis but the main idea is that we should all aspire to own our own homes rather than rent a home since owning a home is a way to automate savings simply by forcing oneself to save.  Of course, that is assuming that your home value does not drop drastically along the way.

Another idea that I like is that one should try to become a landlord and rent out your house.  It has always been something that I have thought of doing.

The last takeaway I had from the book was the idea of bi-weekly mortgage payments.  The concept is to make more mortgage payments (or pre-payments) so that you pay less interest on the mortgage loans.  Of course, I am certain many people disagree with this approach as they will cite low interest rates in Singapore as a very good reason to stretch out your mortgage loans as long as possible.

Just a quick and short sharing.

Learn From a Fool - Believing that I Can Find a Ten Bagger

I wrote two posts recently about my investment mistakes and some mistakes that I nearly made.  I guess that as one grows older and has a longer time spent in investing, one will certainly make some mistakes here and there.

The next mistake I will like to highlight it a mistake that can perhaps only be described as ..... sheer craziness.

There is perhaps this unspoken dream amongst investors to find that ten bagger stock - the stock investment that will return your investment capital by ten-fold.  That is an alluring argument since most investors start off with a small capital base and to multiply your returns with a 5 to 10% returns seems almost meaningless.  After all, a 10% return on a $1000 investment is only $100 in profits.  Yes, we all know about the effects of compounding.  But in the Singapore stock market, most stocks don't make 10% year in and year out.  They go up 10% one month and drop 20% the next month.  So it is almost impossible to get a consistent 10% return every single year.

But most people still hang on to the dream that they might find a stock that will appreciate in value by 10 times or more.  How many stocks are actually capable of doing that in the Singapore stock market?  Some times, in the blind pursuit of such a stock, many investors throw in lots of money on a penny stock hoping that it will increase in price by ten-fold.

How possible is that?  You judge for yourself.