Tuesday, January 11, 2022

The Mapletree Merger: The Bedokian’s Take

Well, as usual, I am a bit slow in providing inputs on certain events happening in the investment scene. For this blogpost, I shall talk a bit about the proposed merger between Mapletree Commerical Trust (MCT) and Mapletree North Asia Commercial Trust (MNACT), forming the Mapletree Pan Asia Commercial Trust (MPACT).

If you had remembered, we used to have MNACT in our portfolio (see here), but we had divested fully our position (see reasoning here). I had also talked about MCT being the “King of the South” (see here), and the trend of REIT mergers (see here), hence I feel I should write a piece about these two coming together.

 

If one looks at the intentions, it makes sense for this merger to go through: MPACT will be in the top 10 largest REITs in Asia in terms of market capitalization, and with it comes economies of scale in managing debt and acquisition of new assets. Depending on which side you are at, the merger could either be welcoming or unwelcoming for either side’s unitholders, or both if one has invested in the two.

 

Based on some of the responses I gathered online and offline, from MCT unitholders’ perspective, granted that MPACT would be accretive in terms of yield and net asset value (NAV), the price consideration for absorbing MNACT, which is at SGD 1.1949 (close to MNACT’s NAV), may be a bit difficult to swallow for some MCT unitholders as they feel it is too high a premium to pay. Furthermore, there is the impression of the dilution of geographical concentration, whereby MCT investors may not want to have exposure to other property assets overseas.

 

On the other hand, MNACT unitholders, from what I read, may benefit from this deal in terms of seeing their investment going up a few notches to book value; after all, since the second half of 2019 (the unrest in Hong Kong and the subsequent COVID-19 pandemic), MNACT’s price is on a downtrend, and this offer could be seen as a deliverance. However, I do not see this price enthusiasm going on judging from the closing price of SGD 1.08 as at 10 Jan 2022 (or probably due to the likely coming interest rate hikes, which is a REIT’s common bogeyman).

 

The Bedokian’s Take

 

It might not be fair for me to comment as I do not hold these two counters directly (apart from using exchange traded funds), but there are several answers and reactions to this merger, depending on where one is coming from. The points provided in the presentation from the trusts (see under Reference below) are reasonable, and the views in the previous two paragraphs are legitimate, too. 

 

Barring any other macroeconomic factors (yes, that includes interest rates), in my opinion, one should ask the following two questions on whether to participate in the merger: the first would be what the long-term view of MPACT is; if one thinks that there is potential in the retail and commercial property sectors in Singapore AND (emphasis mine) Asia-Pacific region, and their economies in general, then MPACT is a good proxy to go for. 

 

The second question is somewhat related to the first; what the growth potentiality of MPACT is; a cursory check of Mapletree Investments’ mixed-use, office and retail properties located in Asia which are not in any publicly-listed trust showed a number of assets in Singapore (e.g., Harbourfront Centre, etc.), Vietnam (e.g., Saigon South Place), China (e.g., Nanhai Business City), India (e.g., Global Technology Park) and Japan (TF Nishidai Building). These are possible injections to MPACT by the sponsors, not counting those that could be acquired by the trust itself.

 

If the answers to the above two questions are positive, then one might consider going for the offer. Still, further fundamental analysis is required to have a more solidified view of the whole picture.

 

Disclaimer

 

Reference

Proposed Merger of Mapletree Commercial Trust and Mapletree North Asia Commercial Trust (the “Merger”), 31 Dec 2021. https://www.mapletreecommercialtrust.com/~/media/MCT/Newsroom/Announcements/2021/5%2020211231%20%20Joint%20Presentation%20%20Proposed%20Merger%20of%20MCT%20and%20MNACT.pdf (accessed 10 Jan 2022).


Friday, December 31, 2021

2021 Review, 2022 Preview And Bob

Very soon we will see the end of 2021 and the beginning of 2022 in a few hours’ time. In this post, I will share my views for the past year, my opinions of the coming year, and give an update on Bob’s portfolio.

2021 Review

 

As mentioned in the last preview, 2021 was still dominated by the COVID-19 narrative, with a couple more viral variants taking the spotlight; first we had the delta, and now we are going through the omicron spike. There was no global consensus on tackling the pandemic, with some places adopting a zero tolerance, some embracing an endemic approach, and others somewhere in between, but almost all agreed that vaccination is the way to go.

 

Despite these, the global markets and economies were experiencing a growth surge as if the pandemic had taken a back seat. Illustrating this point, the S&P 500 index had risen 27.23% year-to-date (YTD) as at 30 Dec 2021, with our local Straits Time Index grown at 9.84% YTD as at 31 Dec 2021. The quick recovery, however, had brought about a supply chain issue on a worldwide scale, with the faster-than-expected rebound of demand and the hard-to-catch-up supply side. This was seen as one of the major reasons in pushing the inflation rate up. All around, the price of items ranging from food and holiday gifts to energy (electricity, oil, etc.) are rising.

 

One more thing, here are the three counters which are representative of my “next big thing” (i.e., cybersecurity, electronic payments and alternative energy respectively), and see how they performed in 2021:

 

HACK: +7.96%1

IPAY: -12.34%1

ICLN: -24.09%1

 

Well, every day is not a Sunday, but do think long term.

 

2022 Preview

 

As usual (again), I would like to give a disclaimer that I really do not know what the future holds. Judging from the current trend, the inflation issue, and the (highly probable) accompanying raising of interest rates by the U.S. Federal Reserve, may dampen the growth of markets and most asset classes (see here and here for more info). There is a silver lining, though, as not all sectors/industries are adversely affected by rising interest rates, such as banks, where their profitability typically stems from the difference between lending and savings rates, and companies in the consumer staple/essentials sectors, where their products and/or services are still used, high rates or not.

 

The next big thing (even so it has been big for the past two or three decades), for at least the next decade, would be China. In the face of a lot of news (not all are good) and the geopolitical situation, China’s markets and economy are worth exploring due to their contrasting features; they may be autarkic in certain areas (e.g., their own technology sector), yet they are considered a major manufacturer for the world. This simultaneous independence, interdependence and dependence of markets, economy and trade, especially with U.S. and European ones, made it a good investment area to consider. 

 

Another talking point for 2022 would be the potential hype of the metaverse. The technologies behind this concept is not new, like virtual reality, gaming, networking, etc. Yet it is the seamless mashing of these, plus the normalisation of being connected from anywhere anytime, meant that mainstream adoption of the metaverse could be possible.

 

Bob

 

As at 31 Dec 2021, Bob’s Bedokian Portfolio had grown to slightly above SGD 80,800 in value (excluding the cash component which is not shown) and gained a dividend amount of SGD 1,817.21. All asset classes (except cash) had shown healthy growth for 2020. Bob will rebalance on 3 Jan 2022 with another SGD 5,000 injection, so stay tuned to his portfolio.

 

Happy 2022!

 

Disclosure

 

The Bedokian is vested in HACK, IPAY and ICLN.

 

Disclaimer

 

 

1 – ETFDB.com, YTD as at 30 Dec 2021 (accessed 31 Dec 2021).

 

Monday, December 13, 2021

Inside The Bedokian’s Portfolio: ETFMG Prime Cyber Security ETF

Inside The Bedokian’s Portfolio is an intermittent series where I will reveal what is actually inside our investment portfolio, one company/bond/REIT/ETF at a time. In each post I will talk a bit about the counter, why I had selected it and what lies ahead in the future. 

Today, I shall introduce a thematic exchange traded fund (ETF) and that is the ETFMG Prime Cyber Security ETF (ticker: HACK).

 

The Everpresent Threat

 

I had identified cybersecurity as one of the sectors to go into back in Dec 2017 after analysing the then-trends and formulating a series of educated guesses, or “guesstimates” as I liked to call them. The field of cybersecurity has evolved from simple antivirus programs and software back in the 1980s to combatting threats from not just the virtual realm (worms, trojans, etc.) but also of human origin, too (hackers, crypto thieves, etc.).

 

The importance of cybersecurity has never been so high now, with malware attacks happening daily, and cryptocurrencies and personal information being the new targets. Just a few days ago, a crypto exchange was subjected to hacking and millions of dollars’ worth of cryptocurrencies were pilfered. 

 

Why HACK?

 

There are a number of cybersecurity ETFs around and all are listed overseas. The top two ETFs in terms of asset-under-management (AUM) are HACK and the First Trust NASDAQ Cybersecurity ETF (ticker: CIBR). Comparatively, HACK is smaller than CIBR in terms of AUM, though both have the same expense ratio (0.6%)1. The main reason on why I chose HACK over CIBR was that the former is more diversified. HACK has a total of 64 holdings2 compared to CIBR’s 363, and HACK’s top ten holdings constituted 24.98% of the ETF2 while CIBR’s is 45.28%3. Furthermore, there are some overlap holdings between the two, such as Cisco Systems, Palo Alto Networks, Tenable Holdings, etc. 

 

Looking Forward

 

The global cybersecurity market is forecasted to grow to USD 345.4 billion by 2026, up from the projected USD 217.9 billion by the end of 20214. With the huge prevalence of computers and mobile devices, digital life and virtual stuff, and as long as there are people with ill-intent (whether individuals, groups or state-sponsored), the threat is always there.

 

Disclosure

 

Bought HACK at: 

 

USD 61.00, January 2021

 


Disclaimer


1 – ETFDB.com. Though most of the other cybersecurity ETFs have lower expense ratios than that of HACK’s and CIBR’s, I had shortlisted the latter two due to their AUM size.

 

2 – HACK factsheet. 30 Sep 2021. https://etfmg.com/wp-content/uploads/2019/03/HACK-FactSheet_2021-Q3-1.pdf (accessed 12 Dec 2021)

 

3 – CIBR factsheet. 30 Sep 2021. https://www.ftportfolios.com/Common/ContentFileLoader.aspx?ContentGUID=c2f736cb-ccbf-45c5-9dee-fc2170b5114a (accessed 12 Dec 2021)

 

4 – Size of the cybersecurity market worldwide from 2021 to 2026. Statista.com. August 2021. https://www.statista.com/statistics/595182/worldwide-security-as-a-service-market-size/ (accessed 12 Dec 2021)


Thursday, December 2, 2021

The Bedokian’s (Very Late And Very Short) Review Of Digital Core REIT IPO

By the time you are reading this, you would have left about a few hours to decide on whether to subscribe to the Digital Core REIT IPO, whose application closes at 12:00 PM today (2 Dec 2021).

Several financial bloggers had covered this IPO and their views ranged from good to not-so-good. Summarizing some of the selected good and not-so-good points (which includes mine), here it goes:

 

Why Good?


Why Not-So-Good?

Low gearing (27%)


Subject to withholding taxation risk

All freehold properties

Not-so-new buildings (built between 1972 and 2001, though 5 of the 10 properties had undergone at least one renovation)


100% occupancy

Rental escalation does not keep up with prevailing and projected U.S. inflation rate


Strong sponsor (of data centres)

Top 3 customers provide 78.3% of base rental income (for June 2021)


Data centre a current in-thing


 

 

The Bedokian’s Take

 

Both sides of the argument seemed reasonable and relevant. My answer on whether to apply for this IPO, as always, is “it depends”. The numbers looked relatively alright to me (low gearing, relatively good WALE, reasonable yield), but the REIT is not well diversified to my preference (78.3% of rental income comes from 3 customers as of the month of June 2021, and 76.2% and 76.9% of forecast year 2022 and projection year 2023 revenues, respectively, are from 4 of the total 10 properties). However, I would say the concentrated risk is mitigated by the fact that the data centres are in the Western Hemisphere (read: tech region), and 7 of them are at the coveted tech locations (4 in Silicon Valley and 3 in Northern Virginia). There is growth potential for this REIT, given that its sponsor is having a lot of data centres in their inventory, the main concern would be the type and quality of data centres to be injected.

 

I may not apply for this, but I would keep this REIT under my watchlist.

 

Reference

 

Digital Core REIT prospectus (29 Nov 2021). https://links.sgx.com/FileOpen/Digital_Core_REIT_Prospectus_(29_Nov_2021).ashx?App=IPO&FileID=6328 (accessed 1 Dec 2021)


Friday, November 19, 2021

Rising Inflation? Rising Interest Rates? Both Are Not So Good

Recent economic talk has been centred on two words that has the same first two letters: inflation and interest. These two phrases have a not-so-favourable connotation to a third word with the same said first two letters that you and me are familiar with: investing. 

What About Inflation And Interest?

 

Inflation, as we know it, is the increase in prices and decline of the value of money. Grown at a steady pace, inflation is healthy as it is associated with economic growth. Too much inflation over a given time, however, leads to hyperinflation and this causes prices to rise unchecked and hastened the decline of monetary value.

 

Interest rates are one of the main tools used by governments and central banks to control the rate of inflation. A rise in interest rates will incentivize people to keep more cash as opposed to spending it since there is an associated yield. Also, it would raise the cost of borrowing and thus, provide a check on growth which is a basis for inflation.

 

Both are part and parcel of the whole scheme of things, and both can generally move and/or affect the economy and market. Notwithstanding other factors and issues, balancing between inflation and interest rates is a delicate act.

 

What Is Happening Now?

 

The current narrative of the situation is that inflation was the result of supply chain issues caused by the COVID-19 pandemic. Pent-up demand and a dearth of supply of goods and services brought about the rise of prices across, and these caused a chain effect across the entire economy. 

 

The Federal Reserve, the central bank of the United States, had announced plans of tapering, i.e., reduction of monetary stimulus of the economy, one of the factors in contributing to inflation. With tapering, interest rate hikes are expected soon by market participants, and when the Federal Reserve starts to increase interest rates, a large portion of the world’s economy would be affected, one way or another.

 

Effects On Investment

 

The problem about these two is that too much of one thing is generally not so good for investors. Too much inflation, and you will get loss of value of your cash, and bond payouts may also devalue since they pay a fixed amount. 

 

Too high an interest rate, your equities and REITs are affected since it raises the cost of borrowing and dampens leveraged growth; bonds are affected as their annual coupon rate may go lower than the interest rate itself and thus become unpopular; commodities are affected as holding them do not provide yield.

 

So how do we protect our investments? Simple. The above paragraphs talked about which asset classes are negatively affected by high (not hyper) inflation and rising interest rates. If we put a contextual mirror to them, you can flip them to see the positive side of things.

 

Still don’t get it? Here it goes. Inflation is good for equities, REITs and commodities, while a high interest rate allows cash to provide yield, generally speaking. In essence, the underlying message that I want to convey is: stay diversified. Diversification is key in protecting your investment portfolio in all kinds of economic weather.

 

One More Thing About Bonds

 

If you had noticed, bonds were unfavourable in times of high inflation and high interest rates, so I guess the next question would be: do we still need bonds in our investment portfolio?

 

My answer (and I am breaking my usual “it depends” rule) is yes. The inflation-interest rate scale is but one of the spectrums that is commonly used and observed in economic situations and market conditions. Bonds are useful in the recession part of the expansionary-recessionary scale in which it is a typical go-to asset class, and it is favoured during deflation in the inflation-deflation scale. Putting it simply, the whole thing is like a multi-faceted radar chart with different axes representing the range of factors.

 

Stay safe, stay calm, stay invested.


Monday, November 8, 2021

Two New REIT ETFs

We have two new REIT ETFs coming up: CSOP iEdge S-REIT Leaders Index ETF (CSOP ETF) and the UOB APAC Green REIT ETF (UOB Green ETF), both to be listed on the Singapore Exchange (SGX) on 18 Nov 2021 and 23 Nov 2021, respectively. With their entry, the total number of REIT ETFs listed on SGX will be five. 

The links to the upcoming REIT ETFs are under References below. In this post, I would like to make a selected comparison between them, and my take of the two REIT ETFs in general.

 

REIT ETF

 

CSOP ETF

UOB Green ETF

Index

iEdge S-REITs Leaders Index

iEdge-UOB APAC Yield Focus Green REIT Index

 

Total Expense Ratio 

(per annum)

 

0.615% (estimated)1

0.85% (estimated)2

No. of Constituents

(based on index)

 

27

50

Geographical Breakdown

Singapore – 64%

Australia – 9%

United States – 5%

Mainland China & Hong Kong SAR – 8%

Japan – 3%

Others – 9%3

 

Japan – 40%

Australia – 36%

Singapore – 16%

Hong Kong – 8%4

Sectoral Breakdown

Industrial – 42.5%

Office – 19.7%

Retail – 18.4%

Data Centre – 7.5%

Multi-Asset Class – 6.9%

Healthcare – 2%

Residential – 1.9%

Hotel – 1.2%3

 

Diversified – 30%

Retail – 29%

Office – 28%

Industrial – 9%

Residential – 2%

Real Estate Operating Companies – 1%

Specialised – 1%4

Dividend Yield 

(latest 12 months)

 

3.96% (as at 30 Jun 2021)5

4.25% (as at 30 Sep 2021)4

 

Fig.1: Comparison of selected factors between the two upcoming REIT ETFs.

 

A Note Before We Proceed

 

Before I begin to pen down a conclusion, I would like to bring in the existing three REIT ETFs, using the same factors in Figure 1.

 

REIT ETF

Phillip SGX APAC Dividend Leaders REIT ETF6

NikkoAM-Straits Trading Asia Ex-Japan REIT ETF7

 

Lion-Phillip S-REIT ETF8

Index

iEdge APAC Ex-Japan Dividend Leaders REIT Index

FTSE EPRA Nareit Asia ex Japan REITs 10% Capped Index

 

Morningstar® Singapore REIT Yield Focus Index 

Total Expense Ratio 

(per annum)

 

1.16%

0.6%

0.6%

No. of Constituents

 

30

28 (as at 31 Mar 2021)

27

Geographical Breakdown

Australia – 52.09%

Singapore – 34.39%

Hong Kong SAR – 10.84%

 

Singapore – 75.4%

Hong Kong SAR – 15.3%

Malaysia – 3.5%

India – 3.5%

China – 1.2%

Thailand – 1%

(as at 31 Mar 2021)

 

Singapore – 100%9

Sectoral Breakdown

Diversified – 41.67%

Retail – 27.7%

Industrial – 13.16%

Office – 12.38%

Others – 2.41%

 

Retail – 36.3%

Industrial – 30.5%

Office – 12.7%

Diversified – 11.4%

Hotel & Resort – 3.3%

Specialised – 3.2%

Others – 2.2%

(as at 30 Sep 2021)

 

Industrial – 35.7%

Retail – 32.8%

Specialised – 9.6%

Diversified – 6.1%

Healthcare – 5.8%

Office – 5.6%

Hotel & Resort – 1.2%

Residential – 0.7%

 

Dividend Yield 

 

4.27%

5.22%10

4.56%10

 

Fig.2: Comparison of selected factors between the three listed REIT ETFs.

 

The reason why I brought all the REIT ETFs in is because we need to have an overall view of the REIT ETF landscape in SGX before making the call. As displayed in Figures 1 and 2, there are similarities and differences between the five, along with it some pros and cons are expected.

 

The factors shown here are typically used (but not exhaustive) by investors (myself included) in the selection of ETFs to invest in for a certain asset class (in this case, REITs). As to which factor to place emphasis on would depend on the individual; some may go for geographical and sectoral diversification, while some may just look at total expense ratios, and others would place importance on the dividend yield as a barometer for future payouts, etc. You could also have a weighted score across the factors and from there determine which to go for.

 

The Bedokian’s Take

 

Coming back to the two ETFs, the decision is dependent on the individual investor himself/herself. If one is convinced on the green theme, then having the UOB Green ETF is key, ceteris paribus. Another plus point for the UOB Green ETF is the high percentage of Japanese properties, which for the other one (and the existing three) are relatively much lower, thus a somewhat good proxy in Japanese market exposure.

 

In terms of geographical diversification and a higher proportion in industrials, the CSOP ETF would be the choice, also considering the seemingly lower expense ratio. Therefore, as per the typical reply in a Bedokian Portfolio blogpost, the answer is “it depends”, but this time it would be on yourself, the individual investor.

 

If your portfolio is large enough and want to have a diversification of ETFs, then there is no harm in getting both (or all five), too.

 

References

 

CSOP iEdge S-REIT Leaders Index ETF (http://www.csopasset.com/sg/en/products/sg-reit/etf.php)

 

UOB APAC Green REIT ETF (https://www.uobam.com.sg/sustainability/solutions/uob-apac-green-reit-etf.page)

 

1 – CSOP SG ETF Series I, CSOP iEdge S-REITs Leaders Index ETF prospectus p69-70, 28 Oct 2021. http://www.csopasset.com/sg/pdf/resources/sg_reit_etf/e_sg_reit_etf_30.pdf (accessed 6 Nov 2021). Percentage is derived based on stated current and/or known % p.a. and includes management, trustee and other fees and charges.

 

2 – United ESG Advanced ETF Series, UOB APAC Green REIT ETF prospectus p12-13, Oct 2021. https://www.uobam.com.sg/web-resources/uobam/pdf/uobam/sustainability/solutions/uob-etf-prospectus.pdf (accessed 6 Nov 2021). Percentage is derived based on stated current and/or known % p.a. and includes management, trustee, valuation and accounting, registrar, audit and custodian and other fees and charges.

 

3 – Presentation of CSOP iEdge S-REITs Leaders Index ETF: Riding the Wave with S-REITs Leaders by FSMOne. 12min 16 sec mark. https://www.youtube.com/watch?v=zqudA-BIn8I (accessed 6 Nov 2021).

 

4 – iEdge-UOB APAC Yield Focus Green REIT Index. 30 Sep 2021. https://api2.sgx.com/sites/default/files/2021-10/iEdge-UOB%20Factsheet_Final_4.pdf (accessed 6 Nov 2021).

 

5 – iEdge S-REITs Indices. 30 Jun 2021. https://api2.sgx.com/sites/default/files/2021-07/S-REIT%20iEdge%20SREIT%20Indices%20-%20Factsheet%20June%202021.pdf (accessed 6 Nov 2021).

 

6 – Phillip Capital Management. Phillip SGX APAC Dividend Leaders REIT ETF Product Info Sheet. 30 Sep 2021. https://phillipfunds.com/wp-content/uploads/2021/10/Phillip-SGX-APAC-Dividend-Leaders-REIT-ETF-Product-Sheet.pdf (accessed 6 Nov 2021).

 

7 – NikkoAM-StraitsTrading Asia ex Japan REIT ETF. https://www.nikkoam.com.sg/etf/asia-ex-japan-reit-sgd (accessed 6 Nov 2021). All data in the respective column are from the site itself and downloadable content from the site, unless otherwise specified.

 

8 – Lion-Phillip S-REIT ETF. https://www.lionglobalinvestors.com/en/funds/lion-phillip-s-reit-etf/index.html#dashBoard?fcode=LEPF (accessed 6 Nov 2021). All data in the respective column are from the site itself and downloadable content from the site, unless otherwise specified.


9 – Geographical breakdown is based on the country of listing of the ETF constituents, not that of the constituents’ assets.

 

10 – Data from dividends.sg. 7 Nov 2021.


Monday, October 25, 2021

The Best Time To Plan For Retirement Is Now

When I first stepped into the working world, I had encountered billboards and advertisements emblazoned with slogans sounding like the blog post title and showing a picture of a man/woman in a graduation gown and/or a young-looking office executive. Back then, being young (and foolhardy), retirement was the last thing on my mind. Come on, there is still at least another 30-plus years to go for me before reaching that stage, and I will think about it “when the time comes”.

Yes, that “time” came just about seven to eight years ago for me, at where I was nearing the halfway point of my working life. Suddenly, that slogan made some sense. The very essence of those messages was hiding in plain sight all along, and it took me that long to realise it. That essence is the power of compounding.

 

Power Of Compounding

 

Most of us had learnt the formula of compounding during our math lessons, which is:

 

Final Amount = Principal x (1 + Interest Rate) ^ Number of years 

(Assuming annual compound)

 

In school, this formula was used typically for calculating bank interest or final bank deposit amount after a certain number of years, but it works well in knowing how much one is getting after a certain period with a definitive rate of return. Hence, the formula can be modified to:

 

Final Amount = Principal x (1 + Return Rate) ^ Number of years

 

The ^ sign is the “power of”, which itself is a very powerful (pun intended) arithmetic function. Adding one to the “power of” would bring a huge jump in the overall result, as shown:

 

2= 4, 23 = 8, 24 = 16…

 

Naturally, if the number of years is larger, the final amount would be larger, too. Coupled with pictures of young people in the mentioned billboards and advertisements, it all made sense now: when one is young, the number of years to retirement is a lot, and factoring in compounding, you are likely to end up with a larger final amount than those who started off much later.

 

A Race Between Two Individuals

 

Taking the concept of compounding up a notch, let us have two individuals who are of the same age, X and Y, and a financial product P that generates 5% returns a year. X started investing in P when he was 21 with an initial amount of $10,000 and contributed $5,000 per year for the next 10 years. Y started investing at age 40 with the same initial amount of $10,000 and contributed $5,000 per year for the next 20 years. By age 60, X ended up with $338,852 while Y finished with $200,129, despite the latter contributing more than the former1. The result showed that compounding works best with a longer time horizon, which works well for X, so it pays off when one invests at a younger age.

 

Clearly for my case, I am Y in the story above. But fret not, for I am giving you this advice:

 

The best time to plan for retirement was 20 years ago. The second-best time is now.

 

Go for it.

 

1 – The Bedokian Portfolio (2nd Edition), p68-70