Monday, May 31, 2021

REIT Mergers And Blurred Sectoral Lines: Shall I Go For A REIT ETF Instead?

The period of 2019-2020 had seen some of the big REIT mergers. To name a couple, we had the merger of CapitaLand Mall Trust and CapitaLand Commercial Trust, resulting in CapitaLand Integrated Commercial Trust, and OUE Commercial REIT absorbing OUE Hospitality Trust.

The concept of merger has its advantages. When REITs merge, there will be economies of scale in managing the whole thing, whether on debt management or acquisition of new assets. There is also the notion of size: the bigger a REIT is, the bigger its market capitalization would be, and of course the better its liquidity in the market.


From a retail investor’s point of view, such mergers may blur the lines between the different types of REITs, and with some observers expecting more mergers, the next obvious question will be: wouldn’t it be better to just buy a REIT ETF?


This is an interesting question to ponder, and I can already see two distinct plus points in going this way. The first will be no administrative hassle for the investor when it comes to mergers. Rather than the individual investor counting how many units of the newly merged REIT entity he/she will be getting (and calculating how many units to purchase to make the holdings a round number), the ETF manager would do all these behind the scenes. The second plus point is greater diversification: if REIT mergers bring about diversification of the assets, why not getting a bigger diversified “universe” covering these merged REITs via ETF?


However, going through the ETF way has its minuses, too, and surprisingly they are related to the advantages in the previous paragraph. The main crux is the lower expected returns in investing through an ETF rather than owning REITs direct (though this may not be the case across all instances). Firstly, managing an ETF requires expenses, which translates to the total expense ratio (TER) (and yes, this includes the ETF manager doing the “administrative hassle” as stated above). The TER is calculated as an annualized percentage of an ETF’s assets, and over the long run it may impact returns. Also, the diversified nature of an ETF meant that the returns and yield are averaged from across its holdings.


So, what is the conclusion? As always, my answer would be “it depends”. In investing, there are many styles and methods to it, just like there are different individuals with different preferences and risk appetites. In deciding on whether to go for REITs or ETFs (or both), you would still need to consider other points beyond my abovementioned pluses and minuses.


If you want to be an active investor and have more control, then you can go for REITs direct. If you are a passive investor who just rebalances your portfolio once or twice a year, then the ETF path is good (and save the headache of missing corporate actions related to mergers). The third way is to go for a core-satellite approach, and that is owning both REIT ETFs and REITs themselves, and for this you would need to be an active/passive hybrid investor.


Remember, there is no correct way in investing, for “correct” is a subjective word in this field.

Tuesday, May 4, 2021

A Structured And Holistic Way To Learn Investing: Supplementary

After my post on the above topic came out, I have had encountered numerous queries in this area. The questions were varied, but after aggregating I could group them generally into three categories. There were some which were unique to the individuals’ situations, so I would leave them out.


Category #1: Is it OK to attend courses?


This was the most common line of questioning I got, which I believe it stems from my post’s biasness and impression on self-learning via available offline and online resources.


I do recognize the differences in every individual’s learning styles and methods; some prefer to go through on their own, while some prefer someone to guide them along, and others may want to have a hybrid of the former two.


As emphasized in the earlier post, not all courses are suitable for everyone, as the course structure may have a few assumptions in place, like the participant having some underpinning knowledge of certain topics to be taught. Imagine a newbie who had never invested before learning about fundamental analysis; if he/she has a business/finance/accounting background, that is fine. If not, however, he/she would be confused even by the words “debit” and “credit”.


For my case, I did attend a course to further my knowledge on investing and the things related to it (see here on my experience in attending Nanyang Poly’s Specialist Diploma). In my opinion, the course option would be suitable after you had completed Stage Two, where you had at least mastered the required info needed for investing and be ready on what the trainers/lecturers will be talking about. You can take courses in advancing and obtaining Stage Three knowledge, and/or Stage One/Two to reinforce on what you had learnt and/or fill in the gaps that you may have missed.


Category #2: Different materials telling me different things on investing. Which should I follow?


In our primary and secondary academic education journey, most of us were used to having absolute answers to questions, e.g., 1 + 1 = 2 and hydrogen + oxygen = water. The trouble about investing is that there is more than one way in going about it, and the range of results obtained is infinite.


To start off, my Bedokian Portfolio make-up already differs from other known portfolios like the 60/40, Bogleheads’, etc. Or for fundamental analysis, there are many ways in valuing a company. Especially if you are learning from the ground up, you will find that many authors, writers and bloggers have different methods, styles and means, and their results are vastly different.


Frankly, there is no one ultimate answer in the world of investing, and the reason why is that the factors in play that govern the answer is in a constant flux. Add in different perspectives from various players, it is as random as you can get.


My answer to this category is, after going through Stages One and Two, find one methodology and style that you are comfortable with, and stick to it. It could be from a single source (e.g., 60/40 equity/bond) or a mix like the Bedokian Portfolio (which itself is cobbled from a few portfolio make-ups and investing styles). Tweaks and adjustments are OK as you go along, but try not to deviate drastically from the original, e.g., from 60/40 equity/bond into 50/50 crypto/cash.


Category #3: Do I need to know “everything” related to investing?


The word “everything” here is a cumulation of styles, methodologies, financial instruments, strategies, etc. A couple of examples would be like “do I need to know fundamental analysis if I opt for passive investing” and “do I need to know about options and futures”. Basically, it is a question of whether we need to have every ounce of investing knowledge stuffed in our brains.


While the theories behind learning, knowledge and application warrants a separate reading, I can put it simply in the following “knowledge tiers”, namely:


  • Tier 0: No knowledge of the topic
  • Tier 1: Heard of the topic
  • Tier 2: Understand the topic
  • Tier 3: Able to apply on the topic


Ideally, we should go for Tier 3 in all aspects related to investing, though it is not necessary. Depending on individual preferences, one can get started in investing with just some Tier 3 and others Tier 0. I have met a seasoned investor who knows nothing about option strategies, and I have also seen a passive fund investor with zilch accounting knowledge. Both are currently doing well in their respective investments.


Using the Stages in the previous post, for active investing, my preference would be at least Tier 2 for Stages One and Two to start, and at least Tier 1 for Stage Three going forward. For passive investing, you can afford to go Tier 1 for topics like accounting, economics and fundamental analysis, and Tier 2 for portfolio management and asset classes. 


While I had recommended the basic level of investment knowledge, do not just stop there. Learning, like investing, is a journey, and I hope you could pair these two together going forward.

Sunday, April 4, 2021

Managing Your Family Portfolio

I had just done up a quarterly review of our Bedokian Portfolio, which typically includes a (very) short briefing to my stakeholders (namely my spouse) on the transactions, portfolio performance and goings-on for the past three months. It is also during this time that I distributed the dividend and interest payments received over the past quarter to the respective stakeholders’ share of the portfolio. As you can see, our Bedokian Portfolio is not just solely mine, but also made up of funds from my spouse and my kids.

It is easy to manage an investment portfolio if the monies inside are 100% yours, but it gets a little bit tricky where you are managing not just your own but other people’s monies, too. By “other people”, I meant close family members, so please do not go around and ask your friends, acquaintances or even strangers whom you just met on the train to manage their investments; it is not right, legally and ethically.


Back to topic, for our Bedokian Portfolio, the share of and contributions into it are recorded and segregated according to each of our family members who have a stake in it, yet when it comes to investment decisions and actions (such as buying and selling of securities in the portfolio), these funds are viewed as a common pool. This allows easy management and also ensure that returns and risks are borne equally across based on each family member’s proportion of it.


The above would work if your family members have the same risk appetite as yours and agreed that there would be one person making the investment call. Trust is paramount here. For our case, I would still discuss with my spouse before making a buy/sell decision.


If you are interested in setting up an investment portfolio with monies from your family members, here are some guidelines that I am using which may help you:


Guideline #1: Agreement And Consensus


Even though the contributors to the investment portfolio are close family members, agreement and consensus must be reached before putting in the first dollar. Of course, the notion of “come on, everyone is family, no need for such things” cannot go wrong, but when crisis times hit such as a falling market, things will start to get ugly. To make it more formalized and watertight, come out with a written agreement to reduce misunderstandings and disputes (I did not do this though). In a family-managed portfolio, it is advisable to have only one, or the most two, members calling the shots, taking the role(s) of fund manager or co-fund manager, respectively.


If the expectations of returns and/or risk appetites among the family members are not similar and aligned in the first place, then it is prudent not to initiate the joint portfolio at all. I had seen and heard of real-life couples and families with each member having their own investment portfolio and not pooled with one another’s due to differing returns expectations and risk profiles.


Guideline #2: Disclosure And Discussion


It is very important to be transparent on everything; family members whom they are, but when it comes to money and funds, everyone will have an interest in it. As I had shared above for our case, at the end of every quarter, I will provide a brief summary on portfolio matters, and at the end of the year, I will share on the recent quarter and the year in general.


It is at this juncture you may want to open up questions and suggestions from the portfolio members after the briefing. Such sessions must be constructive, and not of trivial stuff (unless they are held over coffee or dinner). Things like looking at a particular region/country/sector/industry, some upcoming new securities, or even alternative, cheaper brokerages can be discussed.


Guideline #3: Contributions And Payouts


As the portfolio’s funds are a pooled resource, we need to have proper procedure on this aspect. Recognition of each member’s share of the portfolio is important and must be right up to the nearest cent. Contribution wise, to prevent the issue of time in the money (e.g., “my money is in the portfolio longer than yours, why my payout is lesser?”), a periodic injection is recommended.


While handling payouts, it is best to ask the members if they wished to have an accumulating (reinvesting of dividends/interests) or distributing (receiving dividends/interest in cash) at the get-go. Either way, calculation to the last cent is crucial so as to ensure fairness to all, and if there are instances where rounding has to be done, it is better to state upfront how this is to be handled.


The best time in my opinion to have contributions and distributing payouts would be during the aforementioned briefing sessions in #2 (which I had also stated in my opening paragraph). That is where everyone is around and things can get done on the spot (there is always Paynow), so there is lesser room for arguments.



The above guidelines are, in my opinion, equitable from the point of stakeholders and portfolio administration. As usual of my guidelines, it is not set in stone, and feel free to modify to suit your situations as you deem fit. 

Saturday, March 27, 2021

A Structured And Holistic Guideline To Learn Investing

From time to time, I have had encountered people who were asking on how to start and learn about investing on online forums, chatgroups and amongst my circle of friends and acquaintances. Over time, the two most common answers emerged are to either learn oneself through online and offline resources such as YouTube and books, or to sign up for a course (or a few). 

While I understand the good intentions and advantages behind these answers, both also had their own minus points, too. For the self-learn path, there is a risk of the learner being overwhelmed with information, especially when he/she is new to investing. In addition, the contents may not be curated to the learner’s level of knowledge, so there is this feeling of being “lost” with all the concepts and jargons abound. On the other hand, courses do help in making sense of the topics in a more organized way, but the caveat is that not all courses out there are really that suitable for all individuals. Even worse, some of the courses out there might be fleecing you instead of really helping.


Furthermore, unlike hard sciences where item A and item B will give you item C (e.g., hydrogen + oxygen = water), the realm of investing is not so clear cut. Every factor and variable are inexplicably linked to one another, and there is no way we can get a certain outcome even from combining just two factors/variables together.


As part of my day job involves training, I understand the need to have a structured training program in learning new stuff. However, since investing is not hard science, learning about it does not give you the desired outcome you will get. Therefore, the key approach in learning about investing is to provide the necessary knowledge and techniques to better prepare oneself in the world of investment.


I have cobbled up a structured learning guideline on how to go about investing. Since this is a guideline, it is not a set-in-stone process to follow, but to me this is how I feel it should go and it is also a holistic approach. I would like to emphasize three main points: first, there is no short-cuts in learning, and it is better to be patient in taking time to know more stuff than to just jump into the deep end of the pool. Second, learning does not mean guaranteed results, but at least you are better armed with the knowledge and techniques than others who had no clue on what is going on. Third, learning, like investing, is a lifelong journey, so stay learned and stay invested.


The structured learning is consisted of three main stages. Bear in mind that these stages are not one-way and you are encouraged to go back and re-learn and re-read the topics as a form of refresher and/or provide you with a new outlook at things. If the topics are a bit too complex for you, you can start off with the Dummies Guide series and/or look them up online (Investopedia,, is a good starting point).


Stage One: Economics, Asset Classes, Accounting and Finance


Economics is the basic understanding of why and how the financial markets work and behave. It is the underlying premise and reason on the whole scheme of investing.


Asset classes are the various components that make up the markets, and why their characteristics and behaviour will affect one another. Along with asset classes, you can read up on the various sub-asset classes, too, like sectors, types of bonds and commodities, etc.


Accounting and finance are knowing and understanding not just the numbers behind the corporate entities that make up the markets, but also your own situation in terms financial planning.


Stage Two: Securities, Portfolio Management, Fundamental Analysis


Securities, in particular the plain vanilla ones like shares, bonds and exchange traded funds, are the various financial instruments that you can invest in and they are a reflection of the asset classes learnt in the previous stage. 


Portfolio management is about planning and arranging the securities from the various asset classes in order to balance between returns and risk. 


Fundamental analysis is key as you need to delve into the accounts of the listed corporates, perform ratio analysis (this is where accounting and finance comes in useful) and understand how the economy will impact them (economics).


It is at this stage that investing styles and methodology will start to deviate, due to the learner able to understand more of the whole works and also his/her own preferences and risk appetite. Some may like to have only two asset classes, while others may want more. Some may want to go passive investing, some active, and others a hybrid of both. This is the part where you need to find your place and stick to it.


Stage Three: Derivatives, Advanced Reading


Derivatives are another set of financial instruments and I view them as an advanced form of the plain vanilla securities learnt in Stage Two. Things like options, futures, contracts-for-difference, etc. are considered derivatives and a clear understanding is important on how to use them. It is not necessary to use them if you are not comfortable, but at least basically know how they work.


Advanced reading is the step of knowing more and beyond your current level of knowledge obtained from the past two stages, and I have to admit this part will be a bit dry for some as it involves academic and statistical material, and the real nitty-gritty on how certain things work (by things, I meant sectors, industries, geopolitics, etc.). A bit of history is included here, too, as reading up on past happenings in the economy and markets may provide some form of clue of what had happened in the past and what may happen in the future.


There are some side-learning that you can do, too, like how to use the brokerage apps and tools, back-testing your own investing methodologies/styles, or even technical analysis. These can come in at Stages Two and Three, where you can apply these on the topics covered there.


As I had mentioned before, this is just a learning guideline which I hope you will find it useful. Feel free to modify it or do not follow if it is not suitable for you. There is no hard and fast rule in learning, but constant learning and re-learning is important.


Stay learned and stay invested.

Tuesday, February 23, 2021

Bond Yields Rising, Good Or Bad?

If you have been reading / hearing / watching the financial news recently, the term “rising bond yields” is getting commonplace. At first glance, you may think it is good news; come on, who does not like rising yields? However, this is not dividend yield, and a rising bond yield is likely to have an effect in the markets.

Bonds 101


I had written a short piece on bond yields and coupon rates back here. Essentially, bond yield is calculated by dividing the coupon rate over the current bond price. With the coupon amount (or the numerator) fixed, the bond yield ratio will fluctuate according to the changes in the denominator, which is the prevailing bond price.


With this, a rise in bond yield meant the price of bond is falling, and that led to the conclusion that bonds in general are not in favour and are facing a sell-down.


Do note that the bond yields in question are referring to U.S. treasury bonds, which are bonds issued by the U.S. government, and specifically the U.S. 10-Year Treasury Bond yield, typically used as a benchmark. Though it may look insignificant, the bond yield movements do have an influence on the U.S. equity markets and in turn the global economy as a whole.


Why Rising Yields?


The common narrative for the rising bond yield is due to the expectations of an equities market recovery, fuelled by the rapid development and deployment of COVID-19 vaccines. This probably caused a number of investors to sell bonds and start to jump back onto the stock bandwagon.


Another narrative is the expectation of inflation. The past stimulus packages and programs that had helped propped the economy had created a slosh of liquidity across the markets, resulting in equity prices going up, thus sparking a possible inflation scenario. Interest rates, which are seen as a tool against inflation, may be raised after a (very) long period of almost being at zero. Bonds and interest rates are usually inversely correlated with each other, hence the falling bond prices. You can read my post here on how interest rates could affect asset classes.


Though the previous two paragraphs may contradict each other, it is not unusual. A lot of factors are at play and it is difficult to identify the actual root causes that move the economy and markets. It is akin to 100 people playing with a big activity ball: the ball is moving around randomly, with the participants not knowing who had given the biggest push to move at a given direction. The real reason(s) behind are typically revealed at hindsight, i.e., when everything is over and clearer, which by then it is a bit late on the investing side of things.


In the world of economics and markets, everything is interlinked with one another (see my Economic Machine analogy write-up here), and if one part is affected, the rest would be affected, too, with a range of extents.


So How Now?


The answer is simple and oft repeated: Having a diversified portfolio would provide some protection and returns to your invested capital in different economic and market situations, and also wherever they move to. Inflation? Commodities (especially gold and silver) can help out a bit. Equities continuing the bull run? We have some of it and in the meantime, we can go a bit more into bonds as they are cheaper now. Interest rates rising? We have cash at hand to gain some returns from it.


While diversification should be done first on the asset class level, you can diversify further down the line by regions/countries, sectors/industries and finally to individual companies/securities. Do remember that capital moves between places which either gives the better returns and/or the better safety haven, depending on the weather of the moment.

Friday, February 12, 2021

My Second Endowus CPF Portfolio

This is an affiliated post with Endowus. All views, opinions and research expressed herewith are solely mine. The intended audience of this post is for individuals who are below 55 years old. Disclaimer applies.


A while ago, I had talked about Endowus’ Fund Smart, where you can customize your own portfolio with their curated unit trust funds.


I had just created my second Endowus portfolio using SGD 10,000 (currently processing) from my CPF Ordinary Account (OA) funds, and here it is:


If you have noticed, the three mentioned funds are all equities, and you may wonder why this time I had chosen only from one asset class, since I am a believer of diversification. Well, back in May 2020 when I first introduced Endowus, a reader (thanks, Hello World!) gave me an idea of investing a portion of the CPF-OA with equities, while the remaining uninvested part would grow at CPF-OA’s 2.5%/3.5% returns per year.


I had contemplated in starting an experiment with allocating an initial SGD 10,000 from the uninvested part of the CPF-OA and make this a 50/50 equities/CPF-OA portfolio, and track its performance from there, thus creating some sort of a mini CPF-OA environment. However, it would be a bit tedious in maintaining and rebalancing it, especially with the actual calculation of the CPF interest. Therefore, this investment portion would form a sub-portfolio (along with my earlier Endowus one and vested individual shares/REITs) and form part of the overall CPF-OA universe.


Funds Rationale1


These three funds combined would provide me ample geographical, sectoral and economic development stage diversification. Geographical wise, the United States took up about 33.7%, with China coming in second at around 13.0%. The United States and China were ranked first and second respectively in nominal GDP2, a metric commonly used to measure economy size, and I foresee they will continue to hold sway over the global economy. Their combined percentage of 46.7% is enough to expose the portfolio to the two behemoths, yet there is still room enough for exposure to the other economies, like third largest Japan (5.48%) and other countries like India, Australia, etc.


The sectors and industries are distributed, too, with information technology at 22.25%, financials at 18.38%, healthcare at 8.60%, industrials at 7.53%, and so on. This broad approach has an advantage of lowering concentration risk on any one sector.


For economic development stage, as pointed out in the previous section, 50% and 25% of the portfolio is allocated to developed and emerging markets respectively, with some overlap into both from the FSSA fund. On added note, the inclusion of the FSSA Dividend Advantage Fund, besides the overlapping feature stated above, is also due to the fund’s regular distributions, and its selection of companies based on their potential dividend growth and long-term capital appreciation.


Happy Lunar New Year!


Past performances of the funds stated in this post do not guarantee future results.


Click on this link and get SGD 10,000 managed free for six months (SGD 20 equivalent).


Just for the month of February 2021, you can start investing in Endowus with a minimum investment amount of SGD 888. Click on this link to start! (Terms and conditions: #1 – You must be a new Endowus client; #2 – Create an Endowus account from now till 14 February 2021 using the link; #3 – Fund your account with SGD 888 before 28 February 2021).


1 – Information obtained from the funds’ respective fact sheets dated December 2020 (accessed 11 Feb 2021)


2 – Silver, Caleb. The Top 25 Economies in the World. Investopedia. 24 Dec 2020. (accessed 11 Feb 2021)

Monday, February 1, 2021

The Bedokian’s View Of The GameStop Phenomenon

What a week it has been.

For the past five trading days, the markets were dominated by just one counter that had by now became a buzzword. And within this short frame of time, a few results were seen: a hedge fund had to be bailed out, some traders (may) have become millionaires and even prompted a U.S. congressional query into the whole scheme of things.


And what is the underlying counter that created all these?


That’s right, it is GameStop (GME), a brick-and-mortar retail chain specializing in selling video games, game consoles and their accessories.


While I do not want to delve into the mechanics of whats and hows (e.g., short squeeze, gamma squeeze, etc.), since they were explained by a lot of sites and blogs recently, I would like to briefly focus on the whys, which are somehow related to one another, and my take on the whole thing.


Why #1: The Power Of Social Media


Influence by social media is nothing new. A number of people and groups are taking to social media platforms to spread and peddle their news, campaigns, causes, goods, services, hobbies, etc. Social media, with its ease of spreading the message to the masses, coupled with underlying and simmering issues and frustrations at hand, may easily create a change movement. These changes may be brought about by either through peaceful, violent or anything in between, means.


According to sources that I had read, the GME issue may have its origins on a social media platform Reddit, namely a subreddit forum called “r/wallstreetbets”. Like most social media, news spread fast and wide and before long, “r/wallstreetbets” membership had swelled to about 7.3 million members when I last saw it.


Why #2: Democratization Of The Markets


Granted that trading platforms had existed in the form of smartphone applications (or apps) for quite some time, the entrance of affordable brokerage services (e.g., low to zero commission, offer of fractional shares, etc.), reduced daily activities attributed to the COVID-19 and lower cost of borrowing (or margin) due to near zero interest rate had probably caused a huge interest in the stock markets.


Add in the power of social media ingredient in Why #1 to the whole recipe, this had created what we called “democratization of the markets” where the deemed “power” of the markets, once seen as the domain of institutional investors, is now “shared” with the ordinary folk on the streets. Imagine the abovementioned 7.3 million members, each with a trading account and executing in concert, is a force to be reckoned with, and we have not counted other iterations and/or clones of “r/wallstreetbets” which are springing up on other social media platforms.


Why #3: Us Versus Them


Again, based on what I had read, the GME issue had evolved into another cause, which to put it casually, the institutions versus the retailers. There were some posts and opinions that pointed to the hedge funds, who were blamed for allegedly causing the financial crisis back in 2008/2009. Others felt the markets were unfair as it tended to skew favourably to the large institutional investors rather than the small retail investors (hence the welcoming of the democratization described in Why #2). With these thoughts in their minds, some felt this was one way of getting back at them.


This point was further exacerbated with the decision to restrict or halt the trading of GME shares (and some others) by a number of brokerages on 28 Jan 2021, which fuelled further the feeling of biasness of the markets, though some brokerages explained that the restriction or halt was due to their required posting of additional collaterals with their respective securities clearing houses. Most brokerages, however, did lift the restriction or halt after one day.


The Bedokian’s Take


After seeing the events unfolding, the first question anyone would have asked oneself would be “why did I not go into GME?”. The second question would be “if I had known, I would have bought 1,000 shares back then and I would be semi-retired by now”. Last but not least, “will GME’s run continue?”


Frankly speaking, no one has the foresight to see it coming. Even if someone had seen it, some analysis and due diligence would have been done and the person’s “guesstimate” was accurate on this count. For GME’s case, the catalysts came in the form of new gaming consoles, namely the Playstation 5 and Xbox Series X, and an ex-CEO of an online pet supply store becoming a substantial shareholder. Even so, the price went up to about USD 18.xx on 31 Dec 2020. The later “discovery” of the number of GME’s shares being shorted more than its actual inventory had given some acute observers an opportunity. What happened next, as we know it, is history (last week).


The whole GME phenomenon led to some stating it as market manipulation, while some mirrored it to the Dutch tulip mania back in the 1630s. Shouting buy and sell calls over social media is not uncommon and they had been doing them for a long time, but this time the amount of concerted and unified effort, plus the massive numbers involved, made the big difference compared with the rest.


Now, as I had mentioned in Why #2, other platforms are trying to emulate “r/wallstreetbets”-like setups and calling on others to buy up other counters. However, putting into context of a mania in general, social media is but one of the means of transmitting information, albeit it is faster than word-of-mouth or print. As an investor, you must learn to filter out the noise while doing fundamental analysis, and this may assist you from being sucked into the mania.