Objective for 2024 was to add more Reits for as long as valuations are attractive (i.e. > 95% occupancy and good location and >7% yields). However it did not happen in a good way and I only managed to add 1 Reit because valuations were not attractive.
The most tragic news for my portfolio was for Prime US Reit dividend to drop 90% y-o-y, and that's after already dropping a good half a year earlier. They had to sell properties and borrow more to raise money. They also changed their CEO who had been in a job for a year. His job was tough to begin with because interest rates remained high, valuations dipped for US commercial properties, so the business model for US Reit which was to borrow low and earn the difference did not work but it was at the same time hard to change when you are neck deep in debt.
I continued to recycle a few issues of SSB until the rates fell and I thought that it was more of a deliberate process than luck. I can look back and thank my younger self for the 3.21 - 3.47% p.a. for the next 9 years.
For the whole year I only bought
Mapletree Pan Asia Commercial Reit (Apr)
Stocks I sold:
SIA Engineering (Feb) - fully exited all my positions
Stock valuations remain expensive. The risk premium of stocks over treasury bonds is still in the same 1-2% range like last year. The only reason I can think of is that there is just too much liquidity in the market and the money has no where to go. However, stock valuations may remain expensive if we accept that asset inflation had already set in all over the world.
The big question is when should I swap my lenses so that I don't lose out on investment time in market, and still safeguard the downsides? And my answer to that is that it depends on how much warchest I have to hedge my downsides. In the current market, if my warchest is 30% of portfolio (total stocks, funds, SSB, FD), I will probably still sit out. This is what people term judgement, where there is no right or wrong answer.
Unfortunately my "managed funds" are all still losing a lot of money. Neither did I add nor cut loss because these were supposed to be long-term investment funds, so I will just have some faith in these investment specialists.
Although my portfolio has been positive, I also do not feel like I can call myself an "investment specialist". There is always this thought at the back of my head that says I have a track record to have better returns than the investment specialists I am paying now, but another thought sitting further behind my head that says that the runway is still long and it is still too early to conclude if I am really getting better returns in the long term.
My objective for 2025 will be to more actively trim the underperforming stocks in a market rally to return money into my warchest to capitalise on the next market downturn.
The income chart is becoming boring. This year's passive income was $20k/year or $1.7k/month, which was lower than last year because of the absence of one-off dividend payouts in Singtel and a drop in Reit dividend and a drop in interest income because I repaid a part of my mortgage in cash. Yield is 5.5%. Not fancy, not fantastic, but could have been as bad as my investment specialists' returns.
My daughter asked me how I earn "so much" from passive income. I was trying to nudge her to put in more effort in her studies so that she does not end up working as a cashier or waitress earning just $2-2.5k/month. To motivate her, I shared with her that my passive income is already what the cashier or waitress earns, and I put in fewer hours to achieve the same income. Being lazy, she was interested in this lazy approach to earn money without much work, and after a long explanation, she gave up because behind every $1 earned is hard work, hard work from my younger self to earn, save, invest, hard work by my present self to earn, save, invest, and hard work by my future self to continue to earn, save, invest, and maintain all these accumulated wealth so that everybody can live a life we can associate with quality and meaning.
Behind the chart of wealth accumulation, what is not seen is earned income, and I only realised how directly related it was when I was explaining to my daughter. If I plot my earned income onto the same chart. I saved my first $100,000 after working for 7 years, which is the same year when crossed $5,000/month income and since then there has been no looking back. In that first 9 years of investing journey I wasn't making any money. One theory is that compounding effects take 17 years at 4% p.a. to have an effect. However, I believe that the compounding effect can't start unless the base is substantial, which I was at $100,000 at year 9. There is no magic, the only way is to earn more when you are younger, save more when you are younger, and do not make wealth destructing decisions as you age wiser. However with all the inflated cost of living and property prices, the $5,000/month in today's dollars is probably closer to $8,000/month, and $100,000 base is closer to $200,000.
Long story short:
If student: study hard, get a higher paying job. Whatever your passion is, try to align it with a high pay job and work towards learning the skills to enter that job.
If already working: look around and see which job pays more, and has a higher salary cap, and work towards getting that sort of job.
If can't get that better job: meet more old friends to get more ideas how they navigate life, and leverage on your network of friends, or friends of friends.
If have kids: ensure they set their goals for higher paying jobs, then they can give you more pocket money next time!
Life's very tough chart - x axis maps to boring chart investigating journey year
