Wednesday 29 February 2012

Insurance is essential

To achieve financial independence, insurance will form a critical piece of one's financial armour. The keyword here is protection.

Life is like a box of never know what you're gonna get. Critical illness may strike and inevitably inflict a heavy toll in the painstaking built up of investments and savings. Also, if one were to pass away suddenly, it would be totally irresponsible to leave your loved ones struggling on their own.

A responsible man thus must always channel whatever resources he has into obtaining sufficient protection even before embarking on the road to accumulating wealth via investments....on a personal note....this is my number one golden rule in financial planning. It is plain stupidity to argue that one should channel all resources into investments as soon as possible to take advantage of the higher yield. Insurance is never a creature of is the armour to protect loved ones from the harsh and cruel events that fate may deal on us. 

Interesting facts about an asset management company called AVI as per below....guess which stocks they purchased on the SGX last year?

Asset Value Investors (AVI) is an employee owned asset management company. Our primary goal is to achieve the long-term growth of our client's capital through the management of a global stock portfolio. We strive to be a premier investment firm providing consistently superior performance by identifying valuation anomalies and focusing on investing where the market price does not reflect the estimated intrinsic value.

Our distinct value oriented and low risk investment approach, which has been in place for nearly 25 years, is to find undiscovered value among high quality assets.

AVI - investment philosophy

  • Buy companies on substantial discounts to net asset value
  • investment holding companies on wide discounts
  • companies with a strong balance sheet and good quality of underlying assets
  • seek anomalies
  • under-researched situations
  • situations where the underlying assets are not recognized or are misunderstood by the market
As at 31 August 2011 Funds under management total over £1.6 billion ($2.6 billion).

Answer: Macquarie International Infrastructure Fund.  (Note: Current dividend yield of 9.3%)

Monday 27 February 2012

Wilmar reported 56.9% rise in 4th quarter net profits

Wilmar International Ltd. on last Wednesday reported a 56.9% rise in fourth-quarter net profit largely due to improved performances of its oilseeds and grains business, and contributions from its new sugar segment.

Net profit for the quarter ended Dec. 31 was US$500 million, up from US$318.6 million in the same quarter a year ago, the commodities trader said in a statement to the Singapore Exchange.
Revenue for the period rose 26.7% to US$11.5 billion from US$9.09 billion
Surprisingly, market chose to punish Wilmar and it's price plummet  from S$6 to S$5.070 all within 1 week. Actually regretted not selling off Wilmar at S$6....

One of my colleagues actually asked me why I hold Wilmar when my strategy was dividend yield focused. Wilmar is never a dividend yield play. It was a result of putting trust in analyst buy recommendation last year which resulted in investment at the peak of prices.

Moral of the story: When analyst recommend buy, it is time to sell.

Right now, can only suck thumb and wait to sell it off at a good price (Target: S$5.80) and re-invest the proceeds on higher dividend yield counters.

Returns as of Feb'12 Year to Date

Return on investments as of 27 Feb 2012

Sunday 26 February 2012

How to build recurring dividend income

If one can generate 7% of dividend yield, for every S$1K, there will be S$70 produced.
If one can generate 7% of dividend yield, for every S$10K, there will be S$700 produced.
If one can generate 7% of dividend yield, for every S$100K, there will be S$7,000 produced.
If one can generate 7% of dividend yield, for every S$200K, there will be S$14,000 produced.

The trick lies in building up the principle amount invested. Once it reaches 6 digit, the return starts to get enormous and the snowballing momentum becomes unstoppable once the dividend itself gets reinvested. S$14K is close to 3 months bonus for many middle income folks out there! The power of simple compounding and that is before we even consider the effects of capital gain or future growth in dividends yield.

Portfolio-Feb 2012

Current allocation of investment portfolio of S$180K.

Importance of Financial Independence

Many people talk about reaching financial independence. Everyone dreams of attaining sufficient personal wealth to live indefinitely without having to work actively for basic necessities....and enjoy the freedom to do whatever one likes without slogging like a slave for the boss. The truth is most will remain chained to their sucky job.

Ever since I joined the workforce ( 8 years back), I have decided that the rat race is not for me albeit I do enjoy some of the work I am doing. The only way out is take action and take the giant step out to invest your money. Many of the people around me (my relatives, colleagues, friends) view such an attempt as extremely high risk and virtually impossible. Over the years, I have learned many invaluable lessons from investing. Have also put my faith in various financial advisors who claimed they are able to beat the market by over 20% (average) annually but turns out their assertions are all lemons and suffer heavy losses. The Global Financial Crisis in 2008 also lead to a wakening in terms of the intricate workings of the property and stock market.

These experiences led to the creation of an investment philosophy that has delivered a net return of at least 8% per annum over the past 2 years, mainly through the creation of portfolio of dividend yield stocks combined with capital accretive potential stocks.