I always compare my leveraged returns against the best practices in the market, such as professional REIT managers borrow banks to make money for their Real Estate Investment Trusts (REIT). This allows me to evaluate the risks that I am taking vs the potential returns.
Leverage is defined as the process of borrowing money to make an investment, with the expectation that the profits made from the investment will be greater than the interest on the debt.
In my investments in bonds and reits, I like to use leverage. On the other hand, some of my friends stay clear of leverage. They try to pay off their loans as soon as possible.
So is leverage good or bad?
OUE Com Reit (TS0U.SI) has fallen 12.5% the past month, is it time to buy?
Almost every other day, the news read something like this :
“Asian stocks decline as trade concerns resurface”. Its getting a bit repetitive.
I was asked for my views of the current market, here is something simple.
I was at the Hyflux town hall meeting last night. It was very well organized meeting by SIAS and Hyflux. I left as soon as the presentation ended without waiting for the Q&A. Its only natural that there will be many disgruntled investors who will want to voice their regrets of loss of savings.
Since Feb 2018, bonds and reits have fallen and have not recovered to Feb highs. With interest rates rising, they have fallen out of investor’s favour. Yet recently, many SREITS are now making 20 day highs, outperforming most SGX stocks. Like wise bonds have recovered slightly after long tenor bonds were beaten down.
I sold ASTREA IV S$242M4.35%B280614 (RMRB.SI) retail bond at 1.05 last friday. Nothing wrong with this bond, in fact, I like this bond (see http://wealthlions.com/2018/06/astrea-iv-4-35-retail-bonds/). 5% is more than one year’s coupon. The money can be channeled elsewhere.