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Tam Ging Wien began his investing journey with zero experience as a young computer science graduate in 2005. He credits his father for pushing him to start investing even though he had little inclination to begin.
Wien started out investing in physical real estate first, as his father was particularly interested in properties. While he learnt a lot and enjoyed it, information and resources were not as readily available back then.
Wien recalls having to do detailed research on the properties, breaking them down into areas and districts on maps on his own. Being new to investing, he also regularly bounced ideas with his father and a trusted real estate agent.
Investing In REITs Over Physical Properties
In 2012, Wien met a mentor who introduced him to REIT investing. Over time, he realised that some of the drawbacks of investing in physical properties can be negated by investing in REITs – including providing better liquidity, accessing more research material, having to put down less upfront capital, and not needing to pay property and income tax.
After successfully investing in REITs for several years, Wien decided to contribute back to the investing community – something his mentor did for him – first by publishing his investment book REITs to Riches: Everything You Need to Know About Investing Profitably In REITs in 2017, and then by setting up ProButterfly.com and building a detailed REIT Screener tool with a co-founder.
While adhering to safe distancing measures, we sat down with Wien for our #MyFirstLoss column to find out more about some investment mistakes he has made in the past.
Dinesh Dayani (DD): Hi Wien, we ask everyone the same question on this column – do you remember the first time you made a loss in your trades?
Ging Wien Tam (GWT): I had many wins and losses throughout my investing journey. I cannot remember the first, but the one that stands out the most is with First REIT.
When I first invested, it was only at $1.05! As prices went up, I added to my position at increasing prices – some more at $1.12 and $1.15. I did sell a portion at the highs of $1.47 and bought them back against around the $1.15 price. Each time I entered, my position was larger as I grew more confident of the stock.
It was a substantial loss that taught me a valuable lesson in reassessing how I invest. I was overconfident and complacent, invested my money based on the historical performance of First REIT. On top of that, I had grown so emotionally attached to First REIT – being one of the initial REITs I had researched and bought in 2012, and soon it became a large part of my regular cash portfolio, my SRS portfolio, and my CPF portfolio.
Back in 2018, prices fell due to the Lippo Karawaci saga, but I was so emotionally attached to First REIT that I couldn’t bring myself to cut losses. Despite the red flags, I continued to average down in the belief that it would recover. Finally, I decided to cut my emotional attachment in the REIT at around 80 cents to 85 cents range earlier this year. In total, I lost more than $75,000 holding on to the stock.
DD: What did you learn from your mistakes?
First, companies change. What was once a good and solid company can turn sour. And conversely, what was once a laggard can become a turnaround story.
Second, never become emotionally attached to your investments. Investment decisions need to be made rationally and not based on emotion. In the case of First REIT, unfortunately, there were red flags building up that I chose to ignore. A fellow blogger and friend, Kyith from Investment Moats, had even pointed out the risk in their balance sheet back in 2018. Even with the privilege of knowing this, I brushed it off instead of investigating closer.
It took me until the second quarter of 2020 – about 2 years – to cut this loss. Had I not cut my losses, it would have halved its value again just a few months later. Cutting losses may seem painful, but it’s better to preserve our capital to reinvest elsewhere. Capital protection is paramount when it comes to investing as that is all we have to work with. If our capital is wiped out, we won’t have a second chance to capitalise on it.
Third, it’s important that investors understand the underlying risks present like counter-party risk or exchange rate risk. First REIT was always portrayed as the “perfect REIT” because it is a healthcare REIT and does not take on exchange rate risks by receiving its rental on the Indonesian hospitals in Singapore Dollar.
In truth, the exchange rate risk never went away, it was merely transferred to its master tenant – Lippo Karawaci. With nearly 96% of its income exposed to its master tenant, effectively, the REIT is as good as its tenant. Neglecting to identify this risk and take measures to mitigate or manage exposure resulted in a false sense of security.
DD: We also understand you built a REITs Screener tool from scratch. How can we use it to avoid the mistakes you made, as well as identify other potential pitfalls while investing in REITs?
GWT: REITScreener.com was built with the same philosophy that I had used for investing in REITs. In fact, both our SkillsFuture credits approved REITs To Riches Workshop and REITScreener are models I had finetuned over the years to identify REITs. While I had already been investing and analysing REITs a great deal, many of the analysis is on spreadsheets and I had to painstakingly perform the data entry back to at least 5 to 7 years.
It was a long-time friend and university mate – Usman Sheikh, who looked at my models and spreadsheet analysis and suggested building a proper screening software. We decided to make this screener public and REITScreener.com was born.
One thing that the REIT Screener does is to take away the emotions involved in investing in REITs.
Just take one example, observe the following Price-to-Book ratio chart generated by REITScreener for Mapletree Commercial Trust, which is among the REITs in my portfolio today. When the valuation breached into the “Very Expensive” range, I took a measured and rational decision to trim half my holdings back in Oct-2019. But when the COVID-19 sell-off happened, you could see that the value breached into the “Bargain” zone and, despite the uncertainties during the period, I took the opportunity to buy back into my position in the stock at an excellent valuation.
DD: Besides your REITs Screener, you also run a REITs to Riches course. How does it add value to new and experienced REIT investors?
GWT: The very first thing I challenge right on the first day of the course are:
- The effectiveness of the triple-constraint REITs analysis model of High Yield, Low P/B Ratio and Low Gearing
- REITs are growth stocks and not dividend stocks
In the early days of my REIT investing journey, I have employed the triple-constraint REITs analysis modal as it was easy to understand and simple to use. It was effective in the early days of REIT investing when S-REITs were a less mature market.
In today’s markets, this model does not work very well. At best, it has a tendency to shortlist sub-par quality REITs. I explain much of this in one of our online webinars. It’s a 2.5 hour recorded webinar and anyone can sign-up and watch it for an affordable US$1.49 only!
The second part would be best illustrated in some cases. Observe the performance of some of the best performing S-REITs such as Keppel DC REIT, Mapletree Industrial Trust, Parkway Life REIT, all of which we have touched on or written about on our ProButterfly.com blog. Just observe their share price movements – growing at an average of 25% or more per year over the last 5 years; doubling or tripling in just 5 years. If REITs were merely dividend stocks, we would not see such kinds of returns.
We also have a tight-knit community where we share our thoughts on REIT investments and help one another stay true to making rational investment decisions rather than emotional ones.
With our REITs Screener, REITs to riches course, and close community, the aim is to reduce the chance of being misled by emotions when making our investment decisions. This allows us to invest based on facts and a proven strategy.
Understand Your Rationale For Making Investment Decisions
Wien’s biggest mistake was becoming too emotionally attached to a stock that he purchased, to the point that even when a friend and trusted blogger spoke about a potential blind spot he had, he chose to ignore it.
One method to overcome potential blind spots in our investments and trading is to learn more about the topic. Today, there are many resources we can turn to today, including personal finance websites like DollarsAndSense, blogs that financial bloggers run, including Wien’s ProButterfly blog, as well as platforms offered by companies such as IG, with its latest news and trade ideas.
Wien also created a REITs Screener tool to help him and other investors avoid making emotional decisions. Similarly, we can tap on useful tools such as the SGX Stock Screener, to sieve out Singapore-listed stocks based on certain criteria and IG’s Trade Analytic Tool, where we can analyse our trade history, get a mistake diagnosed on our trades and learn from educational videos.
Courses also have a role to play in helping us become better trader and investors. Rather than “learn in the markets” by going in blind, courses can expedite our learning journey. Today, there are many courses we can choose from. Wien runs his REITs to Riches course, as do some other financial bloggers in the space. Many companies also run their programmes, such as the IG Academy which provides free online courses and live sessions. That said, we still need to be conscious of the fact that while these courses accelerate our learning process, they do not guarantee success.
When we are uncertain of a trading decision, we can rely on a community of like-minded individuals, such as the IG Community or others on Facebook or Telegram, to lead us to the principles we believe in or tell us that we are deviating from our investment strategy. It’s also prudent to start with a demo account so that you can build up your confidence in trading first before putting in actual money to trade.
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