The Pause

So the FED has finally curbed its inflation fighting zeal with the overnight lending rate now standing at 5.25%. Does this signal the peak or merely a pause before another march up the rate ladder? No one knows.

But one must remember that the stock market is only concerned with the interest rates. One also takes into account money other factors like the strength of the dollar, the price of oil etc . So my first advice to all investors is, keep your eyes on the big picture.

Think about this, I'm checking out for today.

" I'm out"
Quote made famous at an organisational workshop

Linus

Investing in the high

Just my thoughts about investing in this market high. As you may know, the Straits Times Index and S and P 500 index is now running at their all time highs, stocks running high how does one invest in this booming market.

I'm a firm believer of value investing, there's only so high the indices can go. As such, in selecting stocks,one has to be cautious.The strategy used would follow two principles

1) Select stocks from defensive or anti corelated industries to prepare for the fall. REITs for example, pay a handsome dividend and is generally non corelated. Food stocks are another options, since they are cheaply priced as investors go crazy on commodities and technology and biotechnology.

2) Use bonds. Bonds have been shown to be largely non corelated and are rather attractively priced,with interest rates at their highs.

If one is adventurous, one could always opt for a part of the portfolio in technology to ride the possible boom....but remember the party never lasts forever.

Linus

The REITs situation

Many happy greetings from the administrator in this happy festive period. Apart from the festive gatherings that I will be attending ,several issues occupy my mind.

One of them is the REITs situation in Singapore. Most investors still remember the stunning rise of REITs some months back this year, their prices buoyed by the high hopes brought about by the proposed dividend yields , with an average about 7%. However, the glamour faded just as quickly, with doubts about their financial stability brought about by the rising interest rates. Rising interst rates makes it harder for REITs to service their large debt, since many have to borrow to acquire new properties in order to sustain their dividend yields. Currently,most REITs are just trading slightly above their IPO price. I suspect that there is some support from the annual stockmarket buoyance and optimism at the year end, inhibiting further price declines. even so ,pessimism remains high, with the recent AUSnet (similar entity) trading below their listed price on the first day of trading.

Anyway, one has to keep an eye on the interest rates.No doubt the increase in interest rate has to come to an end but when? Few people know, but my take is that it should be soon since the FED has tightened numerous times with the rate at about 4.25 %. In investment, cycles are present, and this will be no exception.Continuous rate pushing my push the country into recession. Similarly, sentiment is bound to improve when the REITs announce rate hedging techniques which will further stabilise the situation.

But these will not come too soon. The fall has just started and the current stability is merely supported by Dec optimism and the bad results which will result from the overborrowing to acquire new properties will show soon,

Anyway, REITs as a whole,fundamentally, remain a high yield dividend play with the yields much higher than traditional securities with yiels averaging 4%.
Remember, the lower the entry price, the higher the yield.

For now, enjoy your holidays!

Linus

More about deposits

Hi folks,

Guess what, I found something thay may be of interest to you.

Fundsupermart,the online distributor of unit trusts,has come up with a cash management account for all their investment account holders. They are paying an interest of SIBOR- 0.5% this works out to well above 2% .And there is no minimum amount.

I think that it has a rather good advantage over the other products. OCBC has a similar product but it has a minimum deposit of I think 20000 bucks.

Please share any comments, especially if you have experience with this account.

Linus

Investments for the young

If you are under 21 in Singapore and are a budding investor, in all likelihood, you are scatching your head and wondering ," how do I put my money to work for me??". This problem is compounded by the lack of investment education and the many regulations that exist. If you have not already known, MAS law is that people under 21 are not allowed to invest in stocks,bonds or even in unit(mutual) funds, unless on a joint account basis.

With all these obstacles, how does one invest??

It's possible and I shall highlight certain investments that should be considered.

1) High yield savings account

As explained in the previous post, due to the rise in the SIBOR ,banks have been falling over each other to offer more and more competitive interest rates. The 0.125 rate is now passé and one can consider high yield savings account like to iSAVvy ,giving 1.38%, or the eSaver trustee account at 1.28 % .

2) Fixed deposits

Considered the cousin of saving accounts this form of deposit can give greater returns by locking your money up for a period of time. For small amounts, consider the finance companies eg Singapura or Hong leong Finance or certain obscure banks like the bank of east asia.( www.hkbea.com.sg)

3) Joint holding Mutual(unit trusts)

Although you are under 21, you may subscribe to unit trusts if it is done jointly with someone above 21. The categories are plentiful: bong funds, equity funds,balanced funds.
If you lack experience I recommend index funds which typically have lower expenses and track market indices. In Singapore look for the infinity series by the Lion Capital group(www.ocbc.com.sg)

4) Foreign currency fixed deposits

Such FDs pay higher interst rates .For example the New Zealand FD pays about 6% pa for 1 month and the euro about 0.8 % p.a. for a similar tenure.

However, one must remember that this is subject to interest rate fluctuations.

Have Fun!

Linus

iSAVvy account: Really Sav-vy?

Much ado and publicity was generated on the launch of the iSAVvy account . a product championed by Maybank,one of our larger players in our local banking scene. With an interest rate of 2.38 % the first 3 months and 1.38% thereafter,the product promises to be a sweet deal. And this sweet deal is made even sweeter by the 6% interest on interest.

Sounds great?

On first sight , the product promises to be the one that will grow your savings. At 2.38 % , the product could pay even higher than a 3 month SGS bond. And the 1.38% interest is much greater than the 0.125% offered by the other banks.

It looks great on the surface. But when I went to open the account several days back,I realised certain catches.

1. Account closure fee is $30 for the first 6 months and $15 thereafter. So if you decide to take out your money and close the account after a while, the $15 will take a huge bite out of your interest that you received.

2. The account can only be operated using ATMs and internet banking plus phone banking. Branch transactions will incur high charges.

My advice?

Open it only if you want to keep your money in there long term. But it may not be the case ;with the SIBOR going up, banks will be inventing new products with better returns to attract deposits.

The debut

Hi everyone....

First of all, let me welcome all of you to my newest blog.

Let me explain the rationale for this blog. Because of my passion for investment and personal finance,I have decided to set up this blog to discuss all the issues relating to personal finance.

From your saving accounts to the latest hot funds, all will be discussed.

I'm sure that you will find this place informative and interesting.
So I hope to see you around!