Perpetual bonds....a good investment for those who are young?

Majestic12

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a next crisis is coming yet you are telling me to put my money in hong leong shares? if the crisis is as bad as what you said, then hong leong would probably drop to $1. Do you know what happened to hong leong during the lehman crisis? it dropped from $4 to $1.7. It has not recovered to its pre-crisis level.

during this sort of crisis, cash is king. this money is for me to buy hong leong should it drop to $1. all my pref shares are giving 4-5%. it will probably drop to 80 during the next crisis. i will be much better off holding onto pref shares and perpetuals now.

i am not saying hong leong or any other stocks are a bad buy now. what i am saying is whatever you buy, there are pro and cons. if you are to choose the extreme conditions, everything will look very bad or good.

now that you mentioned hong leong, i will put it in my watch list and consider buying it in the future since it does meet my expected yield of 4%.

agree 1% fd is rubbish. but it beats cimb starsaver 0.8% and posb savings 0.05%. i am already quite committed in bonds and shares. i will not put this money down unless the situation becomes quite extreme.

You gotta learn to read - I did not suggest buying equity.

How is 1% for an FD rubbish? Everything is relative and what you give up in yield, you reap in security.
 

Keverus

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What about someone who puts $1.5mil in not in FD but just as cash in bank.

$1.5 mil may be a lot to you and me, but to some people, it may be just a portion of their assets. Everyone needs a portion of their assets to be liquid, in case of any emergency. Putting into FDs is not a bad option for assets that has to be liquid. Put in there, if need, take out the money, at most lose interest. The opportunity cost is just the 0.05% from normal savings account. Maybe that person intends to use that $1.5mil for other hefty investments 1-2 yrs down the road? property?
 

dork32

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$1.5 mil may be a lot to you and me, but to some people, it may be just a portion of their assets. Everyone needs a portion of their assets to be liquid, in case of any emergency. Putting into FDs is not a bad option for assets that has to be liquid. Put in there, if need, take out the money, at most lose interest. The opportunity cost is just the 0.05% from normal savings account. Maybe that person intends to use that $1.5mil for other hefty investments 1-2 yrs down the road? property?

fully agree with this guy. though i dont have 1.5mil, i do not believe in putting everything in investment. i believe in holding some cash. the best option of holding cash is fd or cimb starsaver. I do have cash in both.
 

dork32

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It is almost one year since the last post, so i thought it is nice to revive this thread.

for those that predicted a rude awakening for me, i am still waiting for it. In the mean time, i have collected more than $6000 from the dividend from the stuff that is supposed to kill me. the return is close to 5% and the prices of the shares hardly moved. this is suitable for a lousy trader like me.

some of you recommended sti etf. it was 3.2 then. it fluctuated much more wildly compared to the preference shares from 2.98 to 3.43. it is now at 3.35. you would have collected 8.8 cents of dividend and have a capital gain of 15 cents. this is a 7.4% increase which is better than i have achieved with my preference shares.

But i do not have to suffer any paper loss throughout the last one year. if you have held on sti etf, you would be in the reds during feb this year. again as someone that is lousy, i would have entered the market near its peak if i had bought the etf.

I will continue to hold these as a defensive part of my portfolio despite all those that predict that the price will collapse. i will come back one year later on this post to show that i am still alive (or dead).
 

Rmondo

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$1.5 mil may be a lot to you and me, but to some people, it may be just a portion of their assets. Everyone needs a portion of their assets to be liquid, in case of any emergency. Putting into FDs is not a bad option for assets that has to be liquid. Put in there, if need, take out the money, at most lose interest. The opportunity cost is just the 0.05% from normal savings account. Maybe that person intends to use that $1.5mil for other hefty investments 1-2 yrs down the road? property?

Even fund managers also tend to hold a portion of their assets in cash. If you are fully vested in investments, then how are you going to be able to take advantage of opportunities if they open up?

Another scenario would be, if within the next year there is a crash, whose going to be laughing? The guy who is fully vested or the one who has a war chest to buy stocks on the cheap?

While the mantra is always don't time the market, holding cash has its merits. And Keverus has a good point, the sum of money is relative. $1.5m can be the equivalent of say $10k or $100k for another person. You have to look at it in totality.
 

focus1974

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For young people.. don't need bonds... since your income most probably will outpace your tiny investment amount. You can withstand the drop in equities value as you can continue cost averaging into it during bad times.. and you have a lifetime ahead.

If you buy bonds when young.. i think you will regret when old..
I got a friend who's father had $2mil in the 1990s.. the father thinking of retirement put in bonds(right choice since he's retirement) and he draw the coupon to feed the family.
Anyway.. the father died and he got the money in 2009... it was still $2mil .. when most people who invested in equities (even half of the $2mil) would probably ahve gotten more than $3mil out of it.

but the $2mil leveraged into 2-3 properties.. will be worth $6-10mil today..

So .. i think you need to learn ASSET ALLOCATION... There is a time for putting into stocks, bonds, properties and cash.

I believe research shows 90% of your returns come from asset allocation, not individual stock picking.

but if you dont want to do asset allocation, then do the index ETF investing like Shiny says.. very sound.

I wished I had done it in 2009 ... instead of individual stock picking .. coz my results underperformed that of an index (not including the dividends).
 

Shiny Things

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So .. i think you need to learn ASSET ALLOCATION... There is a time for putting into stocks, bonds, properties and cash.

I believe research shows 90% of your returns come from asset allocation, not individual stock picking.

but if you dont want to do asset allocation, then do the index ETF investing like Shiny says.. very sound.

Weeelll... actually I'm all about asset allocation as well, because I know it makes a huge difference to your returns. Your "90%" number you quoted is pretty much right. It's just that my rule is simpler than most. I always bang on about "110 minus your age in stocks"; for the average investor that's a good asset-allocation rule.

Usual disclaimer - normally it'd be "100 minus your age", but you don't want to be getting long too many bonds at all-time lows in yield. So I guess that technically is asset-allocation methodology, it's just not hugely aggressive: not like "now I'm all in bonds!" or "now I'm BOLIVIAN long stocks!" or "sell all my stocks and bonds and get me 500% leveraged long property!" or "OH MY GOD SELL EVERYTHING GO TO CASH".
 

dork32

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did i say all my money is in bonds? Of course, i do allocate some of my funds elsewhere. i do hold some sti stocks but not the etf. i feel some of companies in sti quite sucky. i prefer to pick and choose the ones i like.

what i am trying to say is my bond holdings, though outperformed by the sti, is not too bad over the last one year. I would not have suffered any paper loss throughout the one year period (peace of mind) compared to sti which was doing very badly in feb 2014.
 

wondrdoggie

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did i say all my money is in bonds? Of course, i do allocate some of my funds elsewhere. i do hold some sti stocks but not the etf. i feel some of companies in sti quite sucky. i prefer to pick and choose the ones i like.

what i am trying to say is my bond holdings, though outperformed by the sti, is not too bad over the last one year. I would not have suffered any paper loss throughout the one year period (peace of mind) compared to sti which was doing very badly in feb 2014.

Nothing wrong with bonds, they serve their purpose in a diversified portfolio. But I am wary of perps, don't like the idea of no maturity date. Essentially lending someone money without a repayment date and I can only get my principal back if I can sell the debt to someone else. But I guess it really depends on the issuer, I doubt genting will default.
 
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