Blueprint to build your own STI index - Avg 10yr Annualised Return 12.6%

SGX website provides some good information for retail investors, and one of the few articles published in the website was the report on the 10 year annualised return of the local stocks. The 10yr annualised returns of any stock is a good indicator of how the stock had performed over the last 10 years. If you coupled this with the rule 72, this is a very powerful concept.

The S&P500 10 year annualised returns is around 13.6%. What does this mean? This mean that the amount invested in the S&P500 will double every 5.3 years.

I am writing this article so that my kids, in time to come when they are interested in investing, has something to guide them. 

Below is the table that shows the 10yrs annualised returns for each of the local stock,

Do note that the Capital mall is now CICT.

The last column (index composition) is the weightage of your total fund that you will be investing, the ones with the higher annualised returns will have bigger weightage. You can also choose not to have any weightage at all.

Should you be buying all these now. Of course NOT. You need to value each of the stocks, and buy only when their price drop into the discounted value zone. One of the quick test is using the 5 years avg dividend. At the current price, there are few stocks in the discounted territory.

The avg return from this DIY index is 12.6%. What does this mean?

This means that every 6 years, your invested amount becomes double. Apart from buy S&P500 ETF, here is another alternative to your investing journey.

Magic formula screen for Singapore stocks - 2

Happy Holiday and long weekend to all, it's been more than 6 months since I last posted the Magic formula screen for Singapore stocks. Let's take a look at the results if you were to invest in the list of stocks back then and the returns from these counters now. A slight change to the previous list was I have added SPH to the list.

On the last column, it shows the percentage returns of each of the counter, Green indicates that it is a gain and Red means it is a loss. We are already halfway mark into the year, how does your portfolio perform.

STI - Are we near bottom

STI did not manage to stay above the Jan high of 2897 despite the small rally, and in fact it has been trending below the 10 year moving average since Aug last year.

As I do not have enough data points before 2006, the 10 year moving average starts from 2006 in the graph above. The last time the STI index went below the 10yr MA was during the GFC in 2008. Apart from 2008 crisis, most of the time the STI index has been trending above the 10yr MA. In other words, only when there is "special" drastic event, then it will go below the 10yr MA.
Since investors are suppose to buy low and sell high, looking at the chart, do you think this present an opportunity?

My strategy and lesson learnt

The past few months have been a roller coaster to many investors and traders, the market corrected like no tomorrow and there were many gloom and doom news from the media. At one point, STI went to below 2600. However, the last few weeks, most of the index and counters have recovered with a vengeance.  Looking back, what have I learn from this episode so that I can be a better investor and prepare for the next correction.

Patience
Most of us know to buy low and sell high, but how many of us have the patience to wait before committing to buy. Most of us like to chase when stock price has gone higher, we feel "safe" when many other people are also buying. And we know that most of the time, the result turns out to be disastrous. February was the worst month for most of the stocks, but it turn out to be one of my best buy, as at the point of writing this blog, all my counters are in positive. Due to the price correction, it gives me opportunity to invest in some of the stocks which I have put it in my radar for sometime, e.g. DBS, UOL Capitalcomm and Sembcorp.

 Noise & GUTS
Nobody knows whether it will go even lower in Feb., thus when the opportunity presents, I chicken out initially. It didnt help also when there were so many negative news about the market then. All this turns out to be noise, trying to distract you from keeping to your own investment course and strategy. I relooked at the FA metrics e.g. PB, and all these counters were trading at near low in Feb. With this as base (and for DBS, it gives great confidence that the CEO bought lots and lots of DBS shares), I bought all those counters in Feb., it was not easy, as this has been my biggest purchase in a single month.

Money Management and CUT loss
As mentioned earlier, no one knows if the stock price will go even lower, thus it is important that we do not expand all our bullets or some bloggers call it warchest. I have also keep reminding myself to cut loss, if it has gone down 15%, but a few times, I did not adhere to this rule and learned a painful lesson.

Entry and Timing
Most of the people might disagree with me, but I feel that the timing of entry is important. It is not a 100% sure win if you use TA to time your entry, but it gives you another perspective of entering the counter. In Feb. when I bought DBS after looking at the chart, the stock price actually went down a little, thus TA is just a guide, that's all. If you are interested in TA, you can read my post on Capitalcomm.

Conclusion
One of the very insightful article from Ms Teh Ooi Ling in Feb., the GDP forms the base for the market, and currently this base is 2510. This was also one of the reason for my purchase in Feb.. In the coming months, I am sure there will be more noise and opportunities will also present itself, will you have the guts to press the buy button.

Source: Straits Times, Aggregate Asset Management

What happened to STI when Fed raised rates?

The market was extremely volatile on past few occasions whenever the Fed meets to discuss when they should raise the interest rates. This is often followed by experts giving their opinions and some even identify the period this year when Fed will announce the rates increase. I find this amazing cause the only person who knows is none other than Yellen herself. 

As there is no question about the impending rate increase in the near future, instead of trying to figure out when it will happen, I think to prepare one's portfolio, it is helpful to know what happened to STI historically when the rates were increased. I came across an article from a fellow blogger, 'A wealth of common sense', who did a study against the S&P 500. You can find his article here. 

Using the same data points, let's find out how the STI had performed. 

From Yahoo.com, I only managed to find STI data starting from 1988, thus the sample size is very small. Although we cant conclude anything from this chart due to the small sample size, it is interesting to note that during the 2003 to 2007, there is a 100% increase. On average, with the 4 rates hike, STI is still positive.

One last observation, I am not sure if this is coincidental, but months after the last rate increased, it was always followed by a correction as shown in the chart below.

Yahoo.com

Time to relook at Chinese market?

This has been one market which many investors have lost lots of money since it crashed from high of 6000 points to low of 2000 points, and many have avoided or stay away from investing in this market. The market which I was referring to is the Shanghai composite index. 

A correction, long overdue ...

Both Dow Jones and S&P500 had not been able to maintain at the previously high level and had started to trend downwards in the past weeks.The past weeks, if you have watched some of the reasons that some of the analysts have given, they are quite interesting, some blamed the europe and Germany potentially going into recessions, China lousy numbers, and Ebola virus (most amusing). Whether these reasons are the cause of the recent correction, one may not know, but in the video clip here video.cnbc.com, a good sharing by Mr. Lim Say Boon, Chief Investment Officer from DBS. He mentioned that the correction is long overdue and that Asia is still cheaper compared to other regions.

One of the indicator which i always like to look at is the VIX index, this is also known as the fear indicator as explained below.

http://www.investopedia.com/terms/v/vix.asp

Relationship of VIX and STI

yahoo.com

Before I go into this, one need to note that the VIX index has risen by about 40% since mid-Sept, is this a concern to you? 

When one google, one is able to find articles on VIX against S&P500 but I was not able to find one for STI. As such, looking at the major data points and major events, I found and as shown above, STI corrects when VIX is above 18. 

The first data point is the Asia financial crisis, VIX index was above 18 before STI crashed from 2415 to 857.

The 2nd data point is the dot com bubble, VIX index was above 20 before STI crashed from 2479 to 1267.

The third one is the most recent one where VIX index was above 20 before STI crashed from 3805 to 1595.

And last week VIX index surged to above 21 points, guess it's time to be careful, what do you think?

I bought stocks during last week's big selloff

For those who had read the CNBC news, this was the statement made by Warren Buffet last week. He did not reveal which were the companies that he had added holdings to. As per his statement below in CNBC, in his usual style, he never like to time the market and he would buy more when the stock price becomes cheaper.

Source: CNBC

In this part of Asia, we had our own problem too, just last week, huge number of protester started the 'occupy central' campaign in Hong Kong due to a reason that we are know and I shall not repeat here.

Source: CNN

Let' look at how the 2 markets, Hang Seng and STI, reacted to the events above. 

Source: Yahoo.com

 

In the month of Sept, Hang Seng has corrected of about 9%, while the STI has a minor correction of about 3.5%. Based on any of the valuation indicators, these 2 countries are consider cheap as per the report by The Telegraph. In this report, it has an interested graph which shows where the countries stand. If you have been buying STI ETF as part of your permanent portfolio, does this present an opportunity?

Telegraph

Do you have the courage to be like Warren Buffet and buy into Hang Seng and STI?

Market Watch: STI 9Aug

Happy National Day and happy 49th birthday Singapore. Even though our achievements have surpassed many countries, we are still a young nation. At this juncture, coming to the end of the quarter, let's do a review of how STI has performed over the past 8 months compared to some of its closest partners and as well as competitors.

In the table below, I have tabulated the gain in the index of these countries over the last 8 months.

It is interesting to find:

1. Taiwan is top among these countries
2. Top 3 countries are all chinese related market
3. has the flow of funds move away from Singapore into these other market

With the improvement in the PMI and investors confidence in the Chinese market, are we going to see further uptrend? And would Taiwan and Hong Kong continue to benefit and ride on the uptrend of the Chinese market. 

Market watch: STI 8Feb

Is the selling over or is the rebound sustainable, that's the question that most of us wants to know. Although, STI has recovered a little, the 50d MA is still below the 200d MA. The weekly chart below is also showing weakness, with 10 MA trending downwards. Pivot is at 3105.

On the bright side, the party still continues with VIX below 20. If it goes above 20, one should start leaving before the party ends. :)

Market Watch: STI 14 Dec 2013

It's the year end holiday season and many folks are on leaves or starting their year end break, as such, there isn't much market activities or interesting news. The only ones that is still floating around on and off is still the talk on the QE tapering. This should go on for a while, but from the look of it, it seems that the market is already absorbing some of the potential impact and is not reacting as drastically as it was initially.

Anyway, STI has started its down-trend, looking at the chart below, pivot at 3122, so we are 56 points below based on last closing. Should you be worried, I mean, if you looked at the rectangle, it just means that it's been range bound at about 200 points since June this year. 

Market watch: STI 22/9

After the meeting last week, Fed reserve will continue its bond-buying and did not taper the QE as market has expected. The "good" news send most global markets up and Dow Jones hitting new high again. 

As for our STI, it has also reacted positively and last week it has crossed the pivot value of 3130, the falling rate has slowed down as per the monthly chart below. However, long term, it is still bearish as 50MA is still trending below 200MA.

In CNBC last week, Warren Buffet said that he is having a hard time finding things to buy, does that mean anything?

 

STI heading south .....

11 August, I posted that STI has started the Wave C, and it is heading downtrend. Looking at the chart today(below), this is confirmed when 50MA cuts the 200MA, and this is an indication that the trend has reversed to downward. So are we at the start of the Bear market, well, according to many experts, any index has to correct about 20% to 25% before it enters the Bear zone. At the moment, STI is still quite a distance from there, at this point, it just meant that the trend has changed.

So is it a good time to enter and nimble a little now?

We should not invest against the trend, we should always go with the trend. Any rebound now might be a good chance for you to liquidate those lousy counters as low might be lower eventually. Personally, I will wait for STI to consolidate first after the downward trend slows down. I will also wait for the 10 weekly MA to trend up and lastly, STI has to stand above 3185(pivot point). Once all this is in place, it is then highly probable that STI trends up.

Related post: Sti wave C

STI - Wave C?

Looking at the weekly chart of STI, are we heading to start of wave C?

STI - has the down trend reversed?

After trending down in end of June, STI has been trending up after. Is this up trend sustainable? From the weekly chart, the 10MA is still trending down. However, today the index managed to stay above the pivot value of '3265', can this be maintain the last 2 days of the week or even next week?