Thursday, December 30, 2010

Malaysia REIT report – December 2010

Doesn't matter if market up, down or flag, our portfolio help us generate positive return which make us sleep soundless at night. The portfolio outperform long term FD rate again for the past 6 months. We received dividend of RM4,550 half yearly. Currently we have total cash of RM4,392 on hand while total market value of our portfolio worth about RM138,845. If we were to sell all our holdings base on today's market value, we should receive cash of RM143,000, return of about 30% base on original investment amount of RM100,000 since Jun 2009.

Our latest purchase on last Aug 2010, CMMT and Sunreit, gave us unrealized profit of about 12% in less than 4 months. Going forward, we do not expect to receive similar return, as the price of the REIT continue to break higher record every months. We hope to see market pull back, as this will provide us good opportunities to buy more share with lower price.

For next coming quarter, we intend to add some consumer related stock, let see if any good opportunities coming!

Saturday, December 25, 2010

How to survive for long term investment

Invest in stock market is similar to sailing, there's no smooth sail, we always face with storm and bad weather, hence our boat or ship is always shaky. While stock market is making it's all time high in terms of index performance, actually not many investor making all time high earning. The reason? I understand from one of my client, because he could not stand with the shaking situation and fear factor, he sold the share too early. Will you jump down from the ship before reaching the destination?

We can not predict the weather and do not know when the storm going to come. Weather forecast in TV quite ofter goes wrong. Similar to stock market investment, we do not know when is the right time to buy or sell, but we can prepare for it. Always ask a question, if a stock price goes down after you buy it, what is your plan? Many people would like to ask, is tomorrow stock price will go up or down? What happen if North Korea start a WAR? If you are a short term trader, not even need to ask if tomorrow market will up or down, as you are trading according to the trend, be it up trend or down trend. If you are a long term investor who plan to buy share in next five years, there's nothing to worry about market's movement, since you are not going to sell the stock tomorrow. In fact, we should be happy if market start to go down, as this will enable us to buy more share with cheaper price. 

The next question, would you choose small boat or big ship? For me, if you able to take risk and sail for short distant, then can opt for small boat. Always monitor the boat's condition, if there's any leaking, change the boat for your own safety. As the time use for repair is very costly and usually is a waste of time, the chances are very high that the boat will sink. Sailing for long distant should choose big ship, as this's not only reduce the risk of facing with bad weather, but also risk of sinking in case of knocking some rock, although the speed might be slower compare to motor boat. 

Similar to investment, it's very hard to predict how's the economy doing in next 5 years and we are not sure if a company can survive for the next 10 years. If you choose a small boat, then need to take extra care and always change the boat if the company turn bad. For me, I prefer Big Ship, the industry's leader for investment, as this kind of company tend to overcome difficult economy situation and also get higher chance for it to continue with business in next 20 years. As long as the Big Ship is moving, a bit slow is not a big deal, as my investment style is not looking for biggest return, but consistent stable return is good enough.

Merry Christmas and Happy New Year!!

Sunday, December 19, 2010

Swimming naked

My friend recently read a book regarding Warren Buffer, he ask me what's the meaning of the quote: "You only find out who is swimming naked when the tide goes out."

This is one of the famous quote in Warren Buffer's Letter to share holder. Few year's back, I also not seem to understand the actual meaning. When I read more books about Warren Buffer, finally I understood the whole story.

The story is, when the tide is up, everything will float, good stuff, bad stuff all float very high. (Even the supper heavy pig will float as well) At this time, if I ask you to point out who is naked, it's very difficult. You can only tell when the tide goes out.

In the investment world, we should try to prevent invest in "naked" company (the problematic company). Especially when tide goes high (Stock Market Index goes high), good stocks and bad stocks all move high and break the record. So do you know how to find out who is naked now? Try to find out how's the company doing (last few quarters when economy not so good) in the past before you invest, ask yourself am I buying at the high end?

Friday, December 17, 2010

The Rich know the power of compounding

Further to my blog of “Invest for future”, take the example of the tables. Let assume investor B start the investment at age 19. For first 7 years, he put $6,000 every year at an average growth rate of 10%. (7% interest plus growth) After 7 years he stop his contribution but let the Principal continue to grow at the rate of 10%.
A second investor, A, start invest at age of 26 (age when B finished with his contribution) A continue to contribute $6,000 every year until age of 50.

The result shows that B who made the contribution early and who make contribution for 7 years only ends up with more money than A who made the contribution at a LATER TIME with 24 years!
The rich know how to use TIME and MONEY with the power of compounding to generate more wealth! That is what we always say, Start early and invest for long term.

You can view my sample portfolio of how to build stable income over years: Malaysia REIT report

Sunday, December 5, 2010

How to choose good stock in share market?

Recently one of my friends asks a question, “Market is quite high now, you see the Index almost reach all time high record of 1500, do you think I should invest in stock market right now?”

This is a typical question, yes; market is highly unpredictable and volatile. Let’s assume short tem stock price will move in 3 directions, up, down or unchanged. Hence, if you say stock price is high and expect it will go down, the chance for you to get it right is about 33%.

Economy will grow, population will grow and the great business will grow big too. Past records show that, banking, consumer product, Energy Company, health cares are growing bigger each year. The idea is to choose the leader in these industries and invest the first 20% of your fund if you afraid too high to invest now. Ask yourself a question, "if the share price of the company you invested going down by 10% in next few weeks, would you going to buy some more?" If the answer is 'NO' or 'NOT SURE', then you are not ready for the investment. If one really understand the great business, the decrease of share price is an opportunity to buy more shares. After all, you are buying the industry leader, why be fearful when stock price going down? Assume you own a great restaurant with a very good business, would you going to sell it if somebody predict the economy is not so good next year or Korean is going to start a war?

Saturday, December 4, 2010

Barbell Investment Style - Part 2

Investment portfolio need balance at both side, meaning we need to buy those stock that can generate good dividend and provide capital appreciation. However, the journey for investment is not simple, usually you need at least 3 years to see the result, no pain, no gain!