Before I begin, here's a link to a video I made with Budget Babe. Please support her YouTube channel.
For folks who follow my blog, I'm one of those stubborn dividend investors who invest primarily in Singapore. We have suffered for many years as interest rates have started to increase. But even before 2022, SGX was not a dynamic place to park your money. There's even a word, "moribund," to describe it.
For folks who understand why I'm this stubborn, I am animated by the simple idea that our cyclically adjusted PE ratio remains around 12-13, which gives me a rough estimate of long-term growth, natural growth of over 7%, the bulk of it coming from generous dividends. This 7% does not include inflation. After accounting for inflation, we can expect 10+% per year, but it takes a long time to experience such returns. Markets can experience mean reversion only if interest rates drop over the next few years and MAS starts acting on market reforms. With too many if's and but's, my technique has been a butt of jokes for many years. If it does not come from crypto bros, it will come from Chinese and AI investors.
The critics will change, and we dividend investors will outlive them all.
Still, the mistakes I made this year are pretty legion but tolerable:
a) Interest rates play is not as easy as it looks
Last year, I had some success putting a big chunk of my assets into local banks as I had evidence of our performance when interest rates increased. This year, I tried to move some banking assets into REITS in anticipation of lower rates, but this has been a frustration as DBS continued up and my REIT picks went down. I was cautious and only bought REITs with the lowest beta on STI, such as MINT and FCT, but I think I would do better if I sat on my hands.
This is why I hate trading.
b) China bazooka turned out to be a damp squib
The other dumb move was minimal but very stupid. My trend-following algorithms flagged momentum on China technology stocks, so I took a mere $600 position on CQQQ; it leapt 25% and initially then dropped precipitously. It's actually negative today. I seldom act on ETFs and parked about $500 each on MPACT and CLCT to see whether there is a rebound. I was wrong on all counts, and every position is negative today. The central narrative that China is a communist country that does not respect business acumen and private property remains true today. But let's see how this plays out over the next year.
I don't think SGX investors will see the end of jokes. If we sink lower, we'd be made fun of by folks who invest in Bursa Malaysia, which had an excellent year of IPOs.
But what about actual numbers?
Capital gains-wise, my net worth in SGX (This includes my legacy positions and partly ERM student positions, which are up with IRR of about 3%.) dipped slightly, about 9%, over the past 6 years. Still, I've also directed my funds into SRS, CPF, and home mortgage equity to optimise my taxes over this time. My net worth never really experienced a down year - all this while we spent money as a family with large sums spent on tuition. While Singapore stocks dipped or stayed flat, real estate prices spiked, and CPF returns stayed steady with a slight appreciation of interest rates. This is a testament to the common sense of local dividends investors - most of us have homes that appreciate value and locked CPF funds. We've never been one trick ponies.
So 2024 has been shaping out to be a great year; the market portfolio is up six digits, and I doubt home prices will retreat much, even with cooling measures. I still have this crazy ambition to make every family member in my household a millionaire over the next few years. We're close, but I need just one year for the markets and my business to succeed simultaneously.
If it's not 2025, it'd better be 2026.
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