SGX - Buy and Hold Strategy that works

Someone asked me about the low cost of my SGX (average cost $2.68).  Yes, I am holding SGX since its IPO days.  I was very busy with my work then and practically brought the stock, kept it and forgot about it.

SGX has complete monopoly on its business and probably the only stock that will not fail.  Although I have set aside an emergency fund, I treat SGX as my emergency fund in my stock portfolio.

After so many years, after many quarterly dividend payouts, and after the recent dividend in October, my breakeven cost for SGX has come down to just $0.81.

So, even if I am not doing anything, and suppose SGX maintains the same dividend payouts, my breakeven cost for SGX will come down to zero within the next three years.  By buying low and keeping SGX over these years, buy and hold strategy does work.

Of course buy and hold strategy will not work its magic so soon if you brought SGX at cost >$10.  And buy and hold strategy will not work on other companies without good fundamentals.  I will write about another of my ex-stocks in the near future that buy and hold strategy failed miserably.

Mistakes to Avoid, #2 - Gambling (Squandering Your Fortune Away)

I do not need to say too much on bad mistake #2.  While you could take a lifetime to accumulate a fortune, you could easily throw it all away by gambling. 

While Singapore's two casinos have started operations several years ago, I am still a "mountain tortoise" or a "country bumpkin" and have yet to step into the casinos.

However, in this tech-savvy world, online gambling is easily accessible to everyone with a computer or a mobile phone.  You do not even need to step into a casino but could access to many gambling sites online.

Worst of all, you could use your credit card(s) for gambling online.  After credit card#1's limit is reached, you could use credit card #2, #3 and so on.  And the pit you fell in is getting bigger and bigger.

Some people may think that they could beat the casino/ betting site by doubling up the bet after each lost bet.  However, there will come a time when a long losing sequence that you will not be able to crawl out of the "doubling-up" hole you created. 

About seven or eight years ago, I won a "guess the score" from a soccer site for English Premier League.  The prize was 100 pound sponsored by William Hill and hence I opened an account with William Hill.  I started to use this account for sport betting.  At first I only bet on soccer, then after some success, I started to bet on Formula 1 and tennis too. 

Money easy comes, and so easy goes.  Less than one month and my account was ran down. Lucky for me, I have managed to snap out of this bad habit and not topping up my account with my credit card.

Today, I applause Singapore Government's plan for new laws to curb online gambling.  Measures include blocking illegal gambling sites, prevent payment to operators and ban advertisement for online gambling.  Gambling is a highly addictive habit and the government should step in to restrict accessibility to online gambling. 

Mistakes to Avoid, #1 - Smoking (Burning Your Fortune Away)

I will post a series of posts that discuss the mistakes that we should avoid in life and on our investing journey.

First, smoking is like burning money and is a habit or addiction that we should not pick up.

1. Cost of cigarettes

Singapore is one of the most expensive place for smokers.  One pack of cigarettes costs between $8 to $15, depending on brands.  For simplicity's sake, I use $10 for calculation: $10 a day becomes a massive $3,650 a year, $36,500 in 10 years and $109,500 in 30 years!  This should be much higher, considering the interest to be earned and the compounding effect.

2. Higher Insurance Premium

A smoker is paying higher premiums for his/her insurance policies.  This is to compensate the insurer because of the increased health risk of the insured person.  But thing done (smoking) cannot be undone, and the insurer will not reduce his premium even if the smoker quits smoking.

3. Increased health risks

Smokers have higher health risks, meaning more money is needed for medication.

4. Harmful to your loved ones

Second-hand smoke is harmful for your family members.  There is no risk-free level of contact with second-hand smoke; even brief exposure can be harmful to health.

Therefore, a smoker is burning away a fortune.

"Robbed" by bank

Recently I placed a sum of extra cash in OCBC bank fixed deposit at interest rate 1.08% p.a.

Today by chance I saw my parent's FD renewal notice from the same bank.  I was astonished to see that the renewed interest rate for another 12 months tenure is just 0.25%.

I called the bank and was told that the 1.08% p.a. interest rate is for fresh fund only.  All existing FDs who are on the auto-renewal option are renewed at 0.25% p.a. 

It is reasonable that the bank offers higher promotional interest rates to attract new funds.  However, it is totally unacceptable that existing FDs are renewed at the pathetic interest rate of 0.25% p.a.

Giving customers the convenient option of auto-renewal, but then renewing their FDs at 0.25% p.a. is practically daylight "robbery".   A lot of senior customers, who may not know English or can't read the small 0.25% interest rate, are not aware of how their FDs are faring.  I wonder how much the bank saves by paying less/fair interest rates to their loyal customers.  My parent's FD has been with the same bank for 25 years and I wonder how much they have been "robbed".

The bank officer said this is bank policy but offered one solution.  My parent could close the existing FD, hold the money for at least one day, then open another FD the next day.  Now the money becomes fresh fund and they can enjoy the interest rate of 1.08%.

I think this small inconvenience is worth it to convert 0.25% p.a. to 1.08% p.a. 

My emergency fund in my FDs are usually transfer out to banks with the current highest interest rates in the market after matured and seldom stay in the same bank for more than two years. 

Readers who know how other banks' policy on FD auto-renewal, please share.  

Good Riddance - CapitaMalls Asia

Finally sold off CapitaMalls Asia.  Although CMA manages a pan-Asian portfolio of about 100 shopping malls in Singapore, China, Malaysia, Japan and India; its share price is very weak.

CMA has been a submarine to me and its price was always below my entry price.  However, I see no value in averaging down because of its pathetic dividend yield of less than 2%.

For some unknown reasons, the price of CMA increases this week and finally surfaces above my breakeven price for the stock.  I took this opportunity to divest CMA and earned some small coffee money. 

CMA may have good fundamentals and may be a good stock in a few years' time.  However, its poor dividend yield does not justify in holding onto the stock.

After I sold CMA, due to the overall market uncertainties, CMA price goes down again.

Nov Fixed Deposit Rates Update - 1.10% P.A.

First some clarifications: Fixed Deposit is not for real investment.  My review on Singapore's FD is limited to S$50,ooo and below; and tenure term not exceeding 12 months.  Fixed Deposit is for parking the emergency fund and allowing immediate access to the fund when needed.  These are also based on the following considerations:

1. Singapore's Deposit Insurance Scheme maximum coverage up to S$50,ooo only.
2. Long tenure term will potentially affect your cash-out value for your emergency fund, as you may suffer a penalty fee for early withdrawal.

Back to the update: Bank of China's 12-months FD rates of 1.12% p.a. has ended.   

The highest interest rate in the market now is 1.10% p.a., offered by 2 banks:

1. ICICI Bank

HiSAVE Fixed Deposit is an online fixed deposit account linked with the HiSAVE online Savings Account and all monetary inflow and outflow of funds happens online from and to such HiSave accounts.  Minimum placement sum for HiSAVE Fixed Deposit account is $1,000.

HiSAVE online savings account starts from as little as $1.  No minimum balance requirements and no monthly fees.

2. CIMB Bank

The promotional interest rate is 1.10% p.a. for 12 months tenure.  Minimum placement sum $25,000.



Please let me know if there is better offer in the market.

My Stock Portfolio @ end October 2013

No.	Stock Name	Lots	Portfolio%	Avg Cost$	Breakeven$	Market$
1	Starhub	5	20.16	3.22	2.87	4.45
2	SPH	5	19.25	3.99	3.61	4.25
3	SGX	2	13.30	2.68	0.81	7.34
4	CapitaLand	2	5.65	3.91	3.69	3.12
5	CapitaMall Trust	3	5.49	1.71	1.22	2.02
6	Suntec Reit	3	4.66	1.52	1.18	1.715
7	CDL HTrust	3	4.52	1.66	1.16	1.665
8	Starhill Global	6	4.40	0.71	0.57	0.81
9	AIMS AMPI Reit	3	4.31	1.61	1.62	1.585
10	SingTel	1.2	4.07	3.21	2.95	3.78
11	HPH Trust	3	2.46	0.90	0.86	0.73
12	CapitaMalls Asia	1	1.83	2.12	2.04	2.02
13	SPH Reit	2	1.78	0.94	0.96	0.98
14	FE Orchard	1	1.78	1.18	0.88	1.96
15	Frasers CT	1	1.68	1.79	1.85	1.855
16	Boustead	1	1.36	1.44	1.45	1.505
17	CitySpring	3	1.30	0.65	0.48	0.48
18	Sing Post	1	1.19	0.875	0.69	1.31
19	FE HTrust	1	0.81	0.93	0.91	0.895

Movement in my portfolio in October:-
Sold:- Nil
Bought:- AIMS AMPI Reit

Dividends collected in October: $320
2013 avg dividends/month: $424.06