Where to put my money

These seasoned investors, who were featured recently in our pages, explain where they will be investing this year, and why.

Where to put my money

Ms Madeleine Lee says she prefers "growth" assets to "yield" assets. -- ST FILE PHOTO

Donald Han, 49

Managing director at property consultancy Chesterton Singapore

Q: What will you put your money into this year?

With interest rates potentially rising by the end of 2014 or early 2015, there would be higher yield expectations among investors.

There's a lot of value in real estate investment trusts (Reits), especially those with exposure to the local office and hospitality sectors. Both sectors will continue to enjoy high occupancy rates this year - with possibly higher rents for the office sector.

Yields are hovering between 6 and 7 per cent a year, and the majority of their share prices have retreated from the highs last year and are trading at compelling valuations - some even below their initial public offering prices.

For overseas property investments, I'm bullish on London and Tokyo residential properties.

Regional logistic properties, though not glamorous, are fairly undersupplied in Asia and demand for warehouses is fuelled by robust growth in online retailing and e-commerce.

Q: In contrast, what won't you put your money into?

Investing in fixed deposits is akin to lending free money to the bank so that it can make more money out of you. You might be better off buying bank stocks as their net interest income is expected to rise, provided that the provisions for the expected increase in doubtful debts is modest.

As for unit trusts, I'd prefer to do my own active investments rather than leave them to faceless fund managers, who still earn fees regardless of the absolute performance of your unit trust portfolio.

Q: What lessons can investors glean from events in 2013?

Make sure you invest only after doing your homework. Invest in assets that you are familiar with, and those with strong fundamentals. Some investors lost their life savings in the recent penny stock fiasco.

Madeleine Lee, 50

Owner of home-grown boutique investment firm Athenaeum

Q: What is your target portfolio mix in 2014?

Excluding exposure to property, I would allocate 50 per cent of my investments to equities and 25 per cent to short-dated fixed income instruments. The remaining 25 per cent will be kept as cash to take advantage of buying opportunities.

I'm expecting the market to be volatile for the first half of the year, which will give rise to trading opportunities.

Q: What will you put your money into this year?

As we are emerging from the post-global financial crisis years from no or low growth to a period of slight recovery, it's important to work off "growth" assets rather than "yield" assets. I would therefore prefer to put more money in stocks than bonds.

Growth assets are those which benefit from a recovery in world growth - for example, transportation, banks and consumer goods.

Yield assets are those held for income - dividend income, interest income and bonds income. These would not benefit from a recovery in growth and instead might be hurt by a gradually rising interest rate environment.

It is critical to look for stocks with sustainable growth.

Asia ex-Japan was sidelined last year, so valuations have adjusted back to levels where earning expectations are realistic. If you prefer regular payouts, look for yield stocks which offer sustainable dividend yields.

Return on equity of growth stocks must be based on improving sales and better margins, rather than by gearing alone.

For dividend sustainability, companies must be earning free cash flow which more than covers the dividend payout, rather than whittling down their cash reserves. This implies they still have to earn a decent profit.

Q: What won't you put your money into?

I am avoiding stocks in Thailand for now as the political upheaval still has some room to play out. Even after the Feb 2 elections, unhappiness may continue and the Thais have to find a lasting solution to their politics.

In Singapore, there will be no joy in the property sector for at least two quarters as the effects of the cooling measures continue to take hold. At some point, stocks of property developers will be interesting to look at.

Stocks in the United States and Europe performed very well last year, largely due to price-to-earnings expansions rather than real underlying earnings recovery. I won't be jumping into those markets this year until I see some correction. Japan, too, has had its "quantitative easing" period last year and stocks across the board improved with "Abenomics", (as the economic policies of Japanese Prime Minister Shinzo Abe are known). This year, we will see a separation of the wheat from the chaff and Japanese companies with good earnings prospects would do better.

I would avoid exchange-traded funds this year with all these global uncertainties, and rely more on picking the right stocks.

Mano Sabnani, 63

Founder and chairman of media and financial consultancy Rafflesia Holdings

Q: How will you work your money harder in 2014?

My preference is for equities, with a focus on locally listed companies as they are known to local investors. You will also get to meet the management at annual general meetings and get your questions answered or investment criteria confirmed.

I'd continue to spread my money across a range of stocks in different sectors, and pick them based on value investing. I'd also hold on to a cash reserve of at least 20 per cent of my portfolio, as it will allow me to buy stocks cheaply should the market take a sharp fall.

Q: What factors should investors be mindful of this year?

The economies of developed countries, including the United States, Japan and Europe, will strengthen their recoveries this year. But their stock markets have already risen substantially, especially in the US where indices are trading at all-time highs. The Japanese market climbed by more than 50 per cent last year, on the back of Abenomics and optimism rising to one of its highest levels in decades.

I expect the US and Japanese equity markets to undergo a substantial correction in the first half of the year before the uptrend continues. That means that you should not rush into these markets now. Wait for a sizeable pullback and for the stocks to be trading at more attractive levels.

Bond markets are overstretched and likely to correct as interest rates rise in the US with a ripple effect felt throughout the world.

Q: What won't you put your money into?

I would avoid physical property, especially in Asia, including China, Indonesia, Malaysia and Singapore. Japan could be an exception as the property market there has not really moved.

Q: What lessons can investors glean from events in 2013?

While timing the market isn't easy, you should not rush into stocks based on trading volumes or bullish rumours which can be hazardous. This is evident from the sudden fizzling out of the penny stock rally on the Singapore Exchange.

Vanessa Tan, 33

Author, entrepreneur and founder of corporate training firm Vanessaism Inc

Q: What will you put your money into this year?

Properties will continue to be the main instrument of investments for me and my husband.

We have been out of the Singapore property market since 2009 and we're monitoring the effects of the potential oversupply of private and HDB units in Singapore, as well as the effects of the cooling measures here.

Bucking the trend, we entered the property market in Makati in the Philippines in 2010 when many Singaporeans weren't looking at it. Property prices there have risen about 30 per cent since.

While there are investment opportunities in the Makati area, you should exercise caution and invest with excess cash you do not need in the next five to 10 years.

My husband and I, along with some close friends, continue to hold on to our foreclosure properties in the United States, which have appreciated by about 30 per cent in value in the last few years.

Q: What won't you put your money into?

I won't go for any get-rich schemes or deals that seem too good to be true. You should stick to your investment philosophies or instruments you are comfortable and familiar with. Don't hurry to see a return on investment. I'm a believer of Warren Buffett's philosophy of being careful when others are greedy, and being greedy when others are fearful.

Q: What lessons can investors glean from events in 2013?

Since September 2009, eight rounds of cooling measures have been introduced to ease the rise in property prices driven by excess liquidity in the market. Do not rush into the market because you don't want to lose out. Such behaviour is motivated by fear and greed.

Take the time to do your due diligence and plan your investments according to your life stage, risk appetite and how much you can afford to lose if things don't go according to plan.

Ang Hao Yao, 41

Full-time investor

Q: How will you make your money work harder for you this year?

I'd continue investing in listed Singapore-based companies.

Today, The Straits Times Index (STI) is at levels similar to that in late 2010.

However, in the last three to four years, Singapore's infrastructure has developed significantly as the population continues to rise.

I feel that the stock market would therefore eventually catch up with the economic growth gained during this period.

Moreover, the STI is still much lower than the highs of 2007, of between 3,800 and 3,900.

Q: What is your target portfolio mix?

It would have 45 per cent of my assets in property, another 45 per cent in stocks with the remaining 10 per cent as cash. For my holdings in stocks, at least half should be in counters that pay reasonable and regular dividends.

On the property front, at least half should be in investment property or stocks, with my residence making up the rest.

I would put at least half of cash equivalents in products which yield a return - be it from bank deposit interest or interest from short-term bonds.

Such a structure would enable the portfolio to provide me with a regular return for my retirement.

Q: What investing advice do you have for those who want to beat inflation?

Staying invested in assets that generate long-term returns such as equities or real estate is a good way to beat inflation.

For example, gold fell substantially last year, so I would hold on to some gold as an alternative to cash.

Q: What lessons can investors glean from events in 2013?

Do not be affected by speculation on the actions of central banks. Investors should stay the course and invest when valuations of assets are attractive, rather than make decisions based on what central banks would or wouldn't do. This led to good buying opportunities last year caused by the fear of the Fed tapering.

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