Investing FOMO and Questions from Readers

The FOMO-ness of Investment Ideas

This is going to be a very general post but it might help you to re-think about your investment philosophy and road the financial abundance.

I noticed a trend happening among most investors. When there are too many companies to research, they like to get themselves involved in all of the research. Precisely so, their time/efforts get spread out too thinly and no one can juggle many investment ideas at all.

This what I termed as Fear of Missing Out (FOMO). It paralyses you instead. That’s the worst situation you can be in.

Do you feel fearful that there won’t be any more good ideas around the corner? You’ll be surprised, time after time, quality companies are around us. As long as you have the network, you are able to gain access to good investment ideas.

Many people thought that by researching more companies, they might get better. While that is true, you need to know what makes a quality company… then spend time researching it. If you do not know what you’re doing, by researching aimlessly, you’re going nowhere. You need to know your direction, hence a framework is important. There are so many ideas that get thrown to me on a daily basis, but do I get myself involved? I remain committed to my current research ideas.

I wasn’t like this when I first started. I wanted to research every single company. You would imagine, I ran into the problems I described earlier.

I was stretching myself too thin and I was achieving nothing.

I was blessed to have a coffee session with a very shrewd investor with a net worth of >50mil. Throughout the session, I realised he’s so relaxed and he doesn’t have any fear of missing out. He said blankly that his secret of becoming wealthy is to do it slowly and be very focused. Be very deliberate and focus on each company, understand it then decide whether to buy or sell or not research at all.

It boils down to… having FOCUS.

‎The successful warrior is the average man, with laser-like focus
– Bruce Lee

Which are the companies that you want to focus? Which are the companies that are designed to give you the best form of returns over the extended period of time? Are you spending 4 hours researching into an idea that you will invest for 2 years, or an idea that you will invest for >5 years? What is your investment returns on your time spent?

All of us need to think about it carefully. Hence, investing in quality companies give the most outsized returns, you are able to hold these companies for an extended period of time and make 5x and more.

Do you guys remember the story of Alice in the Wonderland?

A young girl called Alice was feeling bored. As she notices a white rabbit with a pocket watch run past. She got very curious and followed it down a deep tunnel into a hall with various lock doors.

Alice followed the instructions given on the table, then she grew to the size of the room. After that, she cried and the room became flooded.

Later on, Alice was being led by the white rabbit and ran into an odd pair called Tweedle-Dee and Tweedle-Dum which was a waste of the time.

Throughout the movie, after meeting cheshire cat and caterpillar, she still did not manage to find her way out. Most of the places Alice went did not yield any rewarding conclusions. Soon, she grew frustrated and just wanted to go home.

I think sometimes, we are just like Alice in our investment journey. While we’re focusing on a certain investment idea, a white rabbit drops by and tells us of an investment idea. So, we dropped what we’re looking in, and move on to the next thing. After a while, we realised, we did not achieve much.

Again, the key is having focus.

Readers Questions

I tend not to do one-to-one replies anymore because the Q&A is not scalable at all. I rather do my Q&A on a blog where it is able to reach out to more people and it benefits more people. Though I must emphasize that I am not qualified, I am just an investor who managed to reach my targeted portfolio size by the age of 27.

Answer: I think REITs are very good way to enjoy passive dividends. When our government mooted the idea of REITs, it really benefited Singaporeans. For REITs, I tend to look at aggregate leverage, portfolio occupancy, the historical track record of distributions, sponsor, price-to-book. Some good REITs are Ascendas, and FraserCentrepoint Trust.

For selling PUT options, I focus heavily on the fundamentals of the company and I have the cash set aside to take the stock when it is exercised. A seller of single PUT option is making a promise to purchase 100 shares of a company at a fixed price. In return, the seller of the PUT option gets a fixed amount of cash flow.

Because I am more familiar with the companies and the valuations they should be trading, I tend to sell weekly options. You get the most premium per day. However, for new PUT option seller, it is advisable to sell monthly options. The risk is minimised when you know when you’re doing. I also prefer to sell PUT options during times of heightened volatility.

A week ago, I sold 6 put options of JD.com at a strike price of 25. The volatility is high also because of the impending earnings release.

The premium I’ve gotten is $0.32 * 6 * 100 = USD 192.

In my portfolio, I have 20% cash, so I set it aside for opportunistic put options.

Answer: Dependings on who is your broker. If you’re using local brokerages such as CIMB, MayBank, etc, they have a multi-currency where your dividends are parked. The currency is same as the currency which the company paid. You have the option to convert it back to SGD or keep it there. There will be interest income earned on it.

For example, if I received HKD $52,000, I can choose to keep it there. Subsequently, when I want to buy HK stocks, I can utilise the HKD in the multi-currency account.

So the question lies whether do you intend to buy companies from that particular market? If the answer is no, always convert back to SGD so you can take the money to grow the money elsewhere.

For the lowest fee brokerage, I suggest to you to use FSMOne. It is available for Singapore, Hong Kong and USA. I think Malaysia and UK access is coming by the year-end.

Answer: For First REIT, they have exposure to Lippo Karawaci who contributes 80% of their rental income. Moody’s, a credit rating agency, has downgraded Lippo couple of times. Its latest credit rating is B3. I find it very dangerous to have a huge tenant contributing 80% of the income.

First REIT’s full year balance sheet

32.4/116.2 = 28%. Taking the total trade receivables dividend by trailing 12 months of revenue, it is 28%. It is unusual for a REIT to have huge trade receivables.

To achieve grow your wealth, you need 3 things. Time. Rate of Returns. Capital.

I started young by building my own clothing business but it was not earning money fast enough. Then, I chose to hone my investment skills in my teenager years. I did not have much of childhood but I learned a lot in the business world. I started young, I sought out the best investment books to guide me, and I started off with $23k. It was my money made from my clothing business and my savings.

Value investing is simply buying a great business at a sensible price. Sometimes, people are too fixated in the share prices and that’s where they lose sight of really focusing on business performance. As long as you choose a good company that’s growing well, you should not be afraid of waiting for the reality to materialise in the share price. Two of my selected stocks went up 100% this year. I wasn’t focusing on the returns, I was focusing on the business.

To get cash flow, either increase your own income or reduce your spending. I find increasing income to be more sustainable.

Answer:

You have to ask yourself what is the monthly expenses you will need to live comfortably. If single, I think $3,500 as passive monthly income is good enough. If married, maybe $8,000 is more realistic.

$3,500 monthly is equivalent to $42,000. I think it is realistic to achieve a 5.5-6% dividend yield in Singapore’s context. Working backwards, you need capital of $700k.

6% of $700k gives you $42k which is $3.5k per month. Of course, you may get a higher yield of 8-10% during a crisis which may reduce your required amount of money.

If you have $50k of capital right now, keep it simple, to grow it to $700k in 10 years, you need a yearly average of 30.2% returns compounded. Simply head to CAGRCalculator and try it out.

I buy my stocks for capital appreciation, if they pay dividends, it is a bonus. But I am not focusing on the dividends aspect now.

If the company retains more money, able to reinvest it to grow the business, I think it is a wiser move as compared to paying out dividends.

Conclusion

I shall end here, I’ll post more questions next time. Catch you guys around the corner! Captain Marvel is coming out soon!