Dabbling in REITS

Having suffered significant losses in blue-chip stocks in 2018 due to my ill-timed purchase of Singtel and Raffles Medical stocks in 2017, I was slightly reluctant to further invest in blue-chip stocks. Hence, I decided to turn to REITs or Real Estate Investment Trusts as they offer attractive dividends and relatively stable prices.

My only knowledge of REITs at that point of time was that a REIT collected rental income from tenants, and it distributed the income back to stockholders. However, I was unaware of the different types of REITs and the fact that a REIT was legally obliged to redistribute at least 90% of taxable income. By a stroke of luck, I chanced upon a review of Ascendas Reit on Motley Fool. Understanding it to be one of the most popular REIT in Singapore and with analysts providing buy recommendations, I decided to buy 1000 Ascendas REIT in March 2018 at a price of $2.60. With additional cash in my savings account, I decided to purchase 1000 stocks of Frasers Centrepoint REIT at a price of $2.17.

Fortunately for me, my investments in REITs were profitable as I sold Frasers Centrepoint at a price of $2.43 and Ascendas REIT at a price of $2.90 in May 2019. However, I was lucky to have bought the REITs when they were undervalued without having done my necessary research. Given that real money is at stake, I had decided at that point that my future investments would only be backed by thorough research and with a specific strategy in mind.

Beginning of my investment journey in stocks

Mindset

In 2017, as my savings increased from a 3-digit sum to a 4-digit sum with the excess from my National Service allowance, I was not contented to let it lay inactive in my POSB Save-As-You-Earn account even though the interest rate was a relatively attractive 2% per annum. Hence, I decided to embark on my investment journey.

With my limited financial knowledge, the beginning of my investment journey was truly challenging. The economy was booming in 2017 and it seemed like it was the best time to start investing. Armed with the savings from my NS allowance, I decided to take the plunge and opened an account with DBS Vickers. Investing in unit trusts or saving bonds or even exchange-traded funds were out of the question for me as I wanted to actively monitor my investments and gain experience from my initial investments. My strategy then was simple but essentially non-existent: all that I intended to do was to purchase blue-chip stocks which were given “buy” recommendations from different sources such as investment analysts as well as investment blogs.

Even though I understood the terms used in the reviews and recommendations from my basic economics knowledge, my limited financial knowledge meant that I did not appreciate the underlying assumptions made in the recommendations. I was unable to conduct my own analysis as well. However, I thought that investing in blue-chip stocks will be almost risk-free and suitable for a beginner like me.

First stock: Raffles Medical

The first stock that I decided to buy in July was Raffles Medical for a few reasons:

  1. It was a blue-chip stock
  2. It was in the healthcare industry which I thought had great potential for growth considering the increasing reliance on healthcare

It turned out to be a really poor investment. I purchased it at $1.38 in June 2017. Its price now is only about $1.03. However, the silver lining in the dark cloud is that the company’s fundamentals are still strong.

Second stock: Singtel

The first stock that I decided to buy in July was Singtel for a few reasons:

  1. It was a blue-chip stock
  2. It paid attractive dividends (~5.4%)
  3. Analysts were confident of its prospects
  4. Everyone of all ages seemed to be holding on to Singtel stocks.

At that time, Singtel’s price was $3.86 and it did not occur to me that it might have been too expensive. Hence, I decided to buy Singtel stocks. It turned out to be an unwise decision as the price plummeted to $2.90 in 2018 before recovering to a current price of about $3.20. Similar to Raffles Medical, the company’s fundamentals are still strong.

Lessons learnt:

1. It is important to invest with a strategy in mind. 

Investing without a clear and well-thought out strategy is akin to gambling.

2. Both fundamental and technical analysis of stocks is important.

My mistake was to completely neglect the technical aspect of investing and merely focus on the fundamental analysis. This was not practical, especially given the poor knowledge I had of a company’s financials at that time. Moreover, purely relying on fundamental analysis will not be effective in the short to mid term.