Saturday, February 9, 2019

Revisiting The Three REIT ETFs

A while ago, I had written about the three locally listed REIT ETFs here, so this post is some sort of a follow-up. To recap, the three REIT ETFs are the (my short form in brackets) Philip SGX APAC Dividend Leaders REIT ETF (Philip APAC), the NikkoAM-Straits Trading Asia ex Japan REIT ETF (Nikko-Straits Trading) and the Lion-Philip S-REIT ETF (Lion-Philip).

For this blog post, we shall see what would be the weightage of individual REITs and the sectors if we decide to buy all of the REIT ETFs, in equal share numbers, for our investment portfolio, based on the latest fund information.1,2,3

REITPhilip APACNikko-Straits TradingLion-PhilipOverall Weightage
CAPITALAND MALL TRUST3.6810.2010.007.96
ASCENDAS REIT4.6510.008.207.62

Fig.1 – Weightage of individual REITs (in %). REITs that are common in at least two REIT ETFs and among the top 10 holdings are selected.

SectorPhilip APACNikko-Straits TradingLion-PhilipOverall Weightage
HOTEL & RESORT0.962.308.103.78

Fig. 2 – Weightage of REITs by sector (in %). Only top 5 sectors are shown.

Based on the above two tables, we can see that, if the three REIT ETFs are combined into one, Capitaland Mall Trust is the highest holding at 7.96%, with Ascendas coming in second at 7.62%. The biggest component, which is the retail sector, is slightly above 35%, with industrial coming in second at around 21%. However, this status does not remain stagnant as the weightages do change from time to time, though mostly not by that much. If you know some “Google-Fu”, you can check out the weightages from past fund information documents.

A lot of discussion points can be generated based on the above numbers, ranging from the superficial (e.g. which ETF to go to for an all-rounder sector coverage) to the complex that involves looking deeper at various degrees and from different dimensions (e.g. the high concentration of retail REITs in the ETFs, and how shopping habits and the impact of electronic commerce could erode their returns). I would stop at here for now, and I hope at least the above numbers can spark some analysis of your own.

1 – Philip SGX APAC Dividend Leaders REIT ETF. Product Info Sheet. December 2018. (accessed 8 Feb 2019)

2 – NikkoAM-Straits Trading Asia ex Japan REIT ETF. Factsheet. 31 December 2018. (accessed 8 Feb 2019)

3 – Lion-Philip S-REIT ETF. Fund Information. December 2018. (accessed 8 Feb 2019)

Saturday, February 2, 2019

SPDR GLD ETF Lot Size Change

OK, I may be “WOLS” (internet-speak for being slow on the news), but I would like to highlight that from 14 Jan 2019 onwards, you are able to purchase the State Street Global Advisors SPDR Gold Trust (or better known as the SPDR GLD ETF) in lot size of 5 shares, down from the previous lot size of 10.

According to an announcement by State Street Global Advisors on 10 Dec 20181, this reduction allows “…more Singaporeans, including Central Provident Fund (CPF) Investment Scheme members, to efficiently invest in gold…”. It also emphasized that gold “…historically acted as a portfolio diversifier, particularly during times of market volatility”, which I agree as I am a believer of diversification.

So what does this mean for The Bedokian Portfolio investors? There are two issues which I will mention here.

Issue #1: Bedokian Portfolio Starting Amount

In my eBook, I used the SPDR GLD ETF as the basis to determine the starting amount for The Bedokian Portfolio2. Taking the ETF closing price of United States Dollars (USD) 124.693, and the exchange rate between USD and Singapore dollars (SGD) of 1.30854(both information as at 1 Feb 2019), one SPDR GLD ETF share is about SGD 163.16. If you have decided to allocate 5% of your Bedokian Portfolio to commodities, under the old 10-share lot, you would need to fork out SGD 32,632 (SGD 163.16 x 10 x 20) to start the portfolio (before any transaction costs and commission fees).

However, with the new 5-share lot size, your starting portfolio can be halved to SGD 16,316 (SGD 163.16 x 5 x 20). 

Issue #2: “Overshooting/Undershooting” Risk

My eBook also mentioned about the deviation tolerance of the asset class allocation5. For asset classes with 5% to 10% allocation, a deviation of 2.5% is acceptable. So in this case, if you allocate 5% to commodities, rebalancing is not necessary unless it goes below 2.5% or above 7.5%.

Depending on the size of your portfolio, when your commodities allocation goes below (or above) the thresholds stated in the previous paragraph, rebalancing with a larger lot size may mathematically cause the portion to go beyond the other limit. For example, if your commodities portion is at, say 2% of your portfolio, and by purchasing 10 SPDR GLD ETF shares, the allocation may go up to above 7.5%. A smaller lot size would reduce this “overshooting/undershooting” risk.

One More Thing…

The above two issues are based on the investor’s preference to start off and rebalance with the SPDR GLD ETF listed in the Singapore Exchange. However, these issues will be moot if you decide to get the SPDR GLD ETF from other markets. Yes, it is the same ETF, and it is listed not just in Singapore, but also in the United States, Mexico, Japan and Hong Kong6. Again as stated in my eBook7, you can buy one SPDR GLD ETF share in the United States market, thus bringing down your portfolio starting amount to a very affordable level. In addition, the overshoot/undershoot problems during rebalancing will be greatly reduced.

A caveat though, if you wish to invest your CPF savings, you could only get the SPDR GLD ETF from the SGX, not from overseas markets, as per CPF regulations.

With all the talk on gold, and since it is a good omen topic in the coming festivities, The Bedokian would like to wish you a Happy and Prosperous Lunar New Year!

1 – State Street Newsroom. SPDR Gold Shares Halves Board Lot Size on Singapore Exchange. 10 Dec 2018. (accessed 2 Feb 2019)

2 – The Bedokian Portfolio, p72-73

3 – Singapore Exchange. (accessed 2 Feb 2019)

4 – US Dollars (USD) to Singapore Dollars (SGD) exchange rate for February 1, 2018. (accessed 2 Feb 2019)

5 – The Bedokian Portfolio, p82

6 – GLD SPDR Gold Shares. (accessed 2 Feb 2019)

7 – The Bedokian Portfolio, p73 

Sunday, January 20, 2019

Bond Yield Correlation And Use Of Macroeconomic Data

With the bond yield talk recently, I had done up a simple statistical research on the relationship between the United States (U.S.) 10-year treasury yield and our Singapore Government Securities (SGS) 10-year bond yield. Using annual average yields between the years 1998 and 2018, here are the results in Fig.1:

Fig. 1 – Annual average yields of U.S. 10-year treasury and SGS 10-year bond between 1998 and 20181,2.

Looks closely related, doesn’t it? To give the relationship a number, I had derived the correlation between them with all the data available, and that is 0.799.

So what does this mean? Statistically speaking, the U.S. 10-year treasury yield and the SGS 10-year bond yield are quite correlated with each other (close to 1.0), meaning that there is a positive relationship between them, though I have to stress that correlation does not imply causation.

So In What Way These Data Are Useful?

According to the Bedokian Portfolio’s fundamental analysis model, such macroeconomic data belongs to the economic conditions tier3. While all these data can be overwhelming, we can classify them as general knowledge that can be fetched from the back of our brains in an instant. 

For example, it is known that the US Dollar and gold have an inverse relationship, so when the price of gold goes up, we will know that the value of the US dollar will go down, and vice versa. Using the bond yield example, we can assume statistically, if we see a rise in U.S. 10-year treasury yield, we are expecting to see a rise in the SGS 10-year bond yield as well.

Though this “instant general knowledge” is useful, we have to take note of two related issues. The first is confirmation bias, which is interpreting information that confirms one’s preconceptions. A good way to mitigate this bias is to update yourself with new data, so as to check the relevancy of your general knowledge.

The second issue will be the ceteris paribus clause, which means “other things equal” in Latin. You could find out more on ceteris paribus in my post here.

1 – Macrotrends. 10 Year Treasury Rate – 54 Year Historical Chart. (accessed 19 Jan 2019)

2 – Singapore Government Securities. SGS Prices and Yields – Benchmark Issues. (accessed 19 Jan 2019). 1998 is the earliest data available for the 10-year bond yield.

3 – The Bedokian Portfolio, Chapter 11 – Fundamental Analysis

Saturday, January 12, 2019

Stay Focused, Stay Calm And Stay Invested

Speaking about volatility; just three weeks ago, there was talk of doom and gloom in the markets, with the Straits Times Index (STI) nearly touching the 3,000-point mark on Boxing Day. As of today, the STI closed at 3,198 points, almost a 7% increase.  Along the same time period, the S&P500 had recovered some 10%; from 2351 to 2587 (before the U.S. markets opened on 11 Jan 2019).

Looking back during the two weeks that straddled between 2018 and 2019, quite a number of fundamentally sound companies’ share prices were at a low, which meant buying opportunities. However, we are able to make this observation and conclusion on hindsight. If we were able to turn back the clock and time-travel back to that fateful fortnight, do you think we could still make the buy call confidently?

This brings up the oft-mentioned trait about the financial markets which I harped on like a broken record, and that is no one is able to predict the future correctly. Sure, one can get it right some of the time, but no one can get it right all of the time. During the Christmas period and the run-up to the New Year, with the indices heading south, there were strong expectations that they could go further down, and very few would think they could go up. Some may had bought in, while others kept their reserves at hand, waiting to swoop at even lower prices; I guess the former group has won this round. To be honest, for myself I had only bought into one counter this round, and only after careful deliberation (and no, I did not buy in at a low).

To add, I had encountered some cases of panic selling, liquidating their shares, only to see it rising back up just days later. I guess the willing (and lucky) buyers were the ones that I mentioned in the previous paragraph.

So what is next? That is a very good question, but unfortunately I do not have a very good answer. I can give some good advice, though, and that is stay focused, stay calm and stay invested.

Tuesday, January 1, 2019

2018 Review, 2019 Preview and Bob

I had written something similar on the last day of 2017 (see here). I felt from now on, it would be a good tradition for me to write an annual review, preview and of course, about our dear friend Bob. So here it goes for this round.

2018 Review

If 2018 was a roller coaster, it would be a hell of a ride as compared to 2017 which was just a normal uphill climb. The S&P 500 Index fluctuated heavily between 2350s and 2920s this year1. For the Straits Times Index, it went to as high as 3610s and as low as 2960s2. A lot of factors had attributed to the volatility of the markets, but the main ones most people point to were tariffs and the related trade wars, and the rise of interest rates.

A year ago I had mentioned that I would look into cybersecurity, payment solutions and alternative energy. Using three United States (U.S.) based ETFs; HACK for cybersecurity, IPAY for payment solutions and ICLN for alternative energy, the year-to-date returns as at 31 Dec 2018 were +6%3, -0.12%4and -9.39%5respectively. They are still relevant in my opinion, as I foresee they are long-term trends rather than short-term fads (see here for my article on trends and fads). Do your due diligence and analysis before committing. 

2019 Preview

If using the trade wars and interest rate hikes as basis, I would expect 2019 to be less volatile than 2018, provided that full resolution is achieved between the United States (U.S.) and China on trade issues, and the U.S. Federal Reserve adhere to its two-rate-hikes as announced6. Overall, 2019 will be a challenging year for the financial markets, local and overseas, therefore it is advisable to adopt a diversified portfolio stance and be prudent in your fundamental analysis.

In my humble opinion (and educated guesses), technology will continue to make inroads, especially on the disruption, artificial intelligence and blockchain areas. If you wish to venture further into them, do perform analysis on which sectors/industries will benefit from their development. You could use my associative investing method (see here) as a guide.


Compared to 2017 (+12.13% XIRR), Bob’s Bedokian Portfolio did not fare well for 2018 (-1.94% XIRR), though he had collected SGD 909.64 in dividends. Bob knows that his investment horizon is long term, so this “down” is just a kink in the journey. On 2 Jan 2019 he will inject another SGD 5,000 to the portfolio, so watch out for this space in the next few days.

That’s it for me. Wish you a happy 2019!

1 – Yahoo Finance. S&P 500 Index. (accessed 1 Jan 2019)

2 – Yahoo Finance. STI Index. (accessed 31 Dec 2018)

3 – ETFMG Prime Cyber Security ETF. (accessed 31 Dec 2018)

4 – ETFMG Prime Mobile Payments ETF. (accessed 31 Dec 2018)

5 – iShares Global Clean Energy ETF. (accessed 31 Dec 2018)

6 –Transcript of Chairman Powell’s Press Conference, p2. 19 Dec 2018. U.S. Federal Reserve. 31 Dec 2018)

Tuesday, December 25, 2018

Is There Blood Running In The Streets Now?

The above line was derived from the famous quote by John D. Rockefeller (or some say Nathan M. Rothschild) which goes “The way to make money is to buy when blood is running in the streets”.

The colour of blood is red, which is also the same colour to denote a down market or securities price. The phrase “blood is running in the streets” could metaphorically mean the entire market is red, and/or a lot of investors/traders had “bled” their capital, incurring huge losses.

It is at this time when market panic sets in and equities are at a depressed price, oversold by investors to move their capital to other asset classes and safe havens. It is also at this time that bargains can be sought. Being in the same asset class, majority of equities will suffer the “drag-down” effect, including those that are fundamentally sound. This covers the “the way to make money” part of the quote.

The recent equity market decline has sparked several indications of a bear market looming. The United States (U.S.) Standard & Poor’s 500 (S&P500) index had fallen about 12.8% year-to-date (YTD, i.e. from 2 Jan to 24 Dec 2018)1, and the U.S. Dow Jones Industrial Average (DJIA) declined 12.2% YTD2. On the homefront, the Straits Times Index (STI) had dropped 11.1% YTD3. And at the time of writing this, the Japanese Nikkei 225 index had fell 5% intra-day. Quite dramatic falls, I would say, but does this warrant a blood on the streets scenario?

We shall take a look using two groups of indicators: the market Price-to-Earnings (P/E) and Price-to-Book (P/B) ratios, and the Chicago Board Options Exchange (CBOE) Volatility Index (VIX).

P/E & P/B Ratios

Let us take a look at the current P/E and P/B ratios of the S&P500, DJIA and STI:


Fig. 1 – P/E and P/B ratios for the S&P500, DJIA and STI (source: Bloomberg as at 25 Dec 2018)

P/E ratio wise, if based on the conventional number 15, we can infer that the markets are relatively cheap. For the S&P500 and DJIA, with technology and healthcare equities (typically high P/E sectors) taking up 35% and 28% of the indices respectively4, it can be said that they are at a bargain now. On the P/B front, however, the S&P500 and DJIA are still overvalued by conservative estimates, while for the STI on a whole is close to 1.


The VIX, or sometimes called “The Fear Index”, is an indicator used by many investors/traders to gauge market volatility. A high VIX signifies high volatility (and of course, the accompanying fear). It is mathematically calculated with a combination of call and put options on the S&P500 component equities, and I shall not delve further into this (for more information, you could read the white paper from the Reference links below).

The VIX had spiked recently, from 21.63 to 36.07 between 10 Dec and 24 Dec 2018, a 66.8% rise5. There were spikes in VIX’s history, including the GFC period in 2008, the Eurozone crisis in 2011 and the recent one back in February of this year due to a flash crash. 

Most of the spikes do not last long; the longest spike was during the GFC and it lasted from Aug 2008 to about June 2009. Many people have different VIX thresholds to signal a buy call, like 25, 30, 35 or even 40.

The Bedokian’s Take

The P/E, P/B and VIX are just a few indicators that can be used to determine if there is really a massive bloodletting out there, though it can get very subjective. There are other parameters to look out for: geopolitical situations, interest rates, regional/sector performance, and of course other asset classes such as bonds, REITs, commodities and cash. 

One way to determine buy-in is to use the “10-30 Rule” which I had highlighted in my ebookto gauge an entry point/price for an index ETF or equities. Another way is to see if an index and/or share price had gone to its 52-week, 2-year or X-year low, though I would caution this method and I recommend an extensive fundamental analysis to be done along together. Lastly, do adhere to the principles and guidelines for a diversified Bedokian Portfolio (or any of your preferred portfolio allocation) while doing all these.

Brace yourselves and get ready for the storm.

1 – Yahoo Finance. S&P500. (accessed 25 Dec 2018)

2 – Yahoo Finance. Dow Jones Industrial Average. (accessed 25 Dec 2018)

3 – Yahoo Finance. Straits Times Index. (accessed 25 Dec 2018)

4 – S&P Dow Jones Indices. (accessed 25 Dec 2018)

5 – Yahoo Finance. CBOE Volatility Index. (accessed 25 Dec 2018)

6 – The Bedokian Portfolio, p119-120


Sunday, December 23, 2018

All About Price: Buyer/Seller Remorse and Premorse

This is part of my intermittent series on price, one of the most important and commonly encountered considerations in investing and trading. In this post, I will touch on a common psychological experience that most, if not all, of us had gone through; buyer/seller remorse and premorse.

Buyer/Seller Remorse

Buyer/seller remorse, in the context of investing/trading, is an emotion of regret that is felt after executing a transaction. The most common question stemming from this remorse is “Did I buy/sell at the right price?”. Such feelings will get amplified if a buyer buys at a price, only for it to go down lower later on, or for the seller, to sell at a price, only to see it going higher afterwards.

Buyer/Seller Premorse

Yes, there is this thing called buyer/seller premorse (OK, I made up that term, but I find it appropriate for the occasion). It is when one has set a buy/sell price, and seeing the buy price going lower (or the sell price getting higher), he/she will adjust the buy price lower to get the most bargain (or adjust the sell price higher to maximize profit), only to see it not transacted by the end of the trading day. Worse is, on the very next day, the price does not go back to where you want them to be. Ouch.

It’s A Jungle Out There

The financial markets contain a myriad of individuals and organisations transacting securities at a furious pace, and each one of them has a different target buy/sell price. Value investors will use their different valuation methods to transact; traders will use volume and trend to enter/exit the markets; and some will just use their gut feel and press the buy/sell button (while praying for hope). 

With all these goings-on, you would need to possess either tremendous skill or sheer luck to buy at the lowest or sell at the highest at any given period.

Preventing Remorse And Premorse

For buyer/seller remorse, the best way not to think about it is to be forward looking. A decision was done and there was no way to reverse it, so rather than wasting time brooding over it, it is better to start thinking about your future investment/trading plans and strategies. Treat it as an experience and just move on.

For buyer/seller premorse, you can come out with a range of prices based on your fundamental and/or technical analysis. Once this range is set, stick to it until the transaction is done or there are some situational changes that you need to recalibrate the range.

There is no right or wrong price to enter or exit. Either way, if you think that the price you bought at is a bargain or the price you sold at is a profit, then be content with it.

Merry Christmas!

Check out the other post in my All About Price series.