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Bryan has learnt from his mistakes through self-knowledge. NextInsight photo.
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I LOST about $300,000 playing contra in the stock market in 2007. It was money I could afford to lose but I still felt rotten about the loss. (Later in this article, I will give you details about my bad experience)

I have thought hard about my mistakes, and I have made a big change in my approach to investing.

Over many months recently, I took a close look at REITs and became convinced that this is the kind of investment I have knowledge about and confidence in.

The dividend yields of some REITs are very attractive to me as the prices of the REITs had been bashed down more than 70% in the market downturn. Their net asset values were also far higher than the stock prices.

In April this year, I accumulated a lot of different types of REITs. I now have spent $250,000 of my own money and another $184,000 from my $250,000 margin financing facility.

As you know, the market has been rallying. My investment now has a gain of about $200,000, which means a return of 80% on my cash! (This gain includes $62,800 in dividends that I have received or will be receiving as the stocks have gone ex-dividend recently.)

I am a mortgage broker and I am comfortable with investing in property-related stocks, such as REITs. I can check rental rates, I can pose as a tenant. It’s real investment as I have something to fall back on.

Currently, the stock market is giving me better returns than investing in physical properties. But when the sentiment improves in the physical property market, I will move my money there.

I will sell my stocks, including REITS, if they jump high enough. I think I understand the risk of being too greedy.

 

  No. of units Average price bought at Closing price on Tuesday (May 19) Profit

K-REIT

150,000 66.5 cts 87.5 cts $31,500
Suntec REIT 150,000 67 cts 90.5 cts $35,250
CDL H Trust 150,000 53 cts 79 cts $39,000
ARA 100,000 46 cts 57.5 cts $11,500
Plife REIT 100,000 73.5 cts 88 cts $14,500
Rickmers Maritime 100,000 34.5 cts 41.5 cts $7,000
        $138,750*

*Does not include dividends totalling $62,800 

I believe only physical properties can held for a longer term. Property investments yield rental and there will be housing demand from expatriates.

The property market has improved but I don’t think it’s time for me to re-enter it. It will pick up strongly when banks increase their maximum loan close to 90% again for the second property. Now it’s only 65-70%.

Easier financing and investor sentiment will go hand in hand. My philosophy is: Buy property when the sentiment gets better – instead of buying based mainly on factors such as amenities, location next to MRT station, and en-bloc potential.
 
Now I will tell you about my mistake in 2007 and what I learnt from it.

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Bryan, 30, at the poolside of his condominium home, The Springs, in the Novena area. He will be getting married in two months' time. NextInsight photo

Lost big-time on Jade

I was naïve. It was my very first time playing the market. I had made money in my mortgage financing business and some property investments.

I started by playing the penny stocks, such as Armstrong, Rowsley and Atlantac. The one I made hundreds of thousands of dollars on was Jade Technologies.

I went in and came out of Jade as it climbed from 12 cents to over 50 cents. There were stories of how it would go into various profitable ventures. 

I became greedy. Then the stock collapsed all the way to 3 cents and, boy, was I burnt. I didn’t know how to cut loss quickly. I stubbornly held on. I would say I had naïve thinking.

This is the stock I lost the most on. Now, I believe only in stocks which have solid fundamentals. 

If a stock has negative news, or a number of negative developments, I will also avoid it. An example is a certain company which has reported 94% drop in its profit recently, and is going for a rights issue.

I have become allergic to stocks with bad news.

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Abalones are an expensive delicacy to the Chinese but Oceanus is starting a fast-food chain selling abalone meals to the masses in China.

I want steady dividend plays with lots of upside in capital gains.

There is a non-REIT I now hold: Oceanus, which I bought on May 13. This business is very scalable. If I am not mistaken, the company has grown its abalone population to 150 million already and will not stop there.

Abalones are a delicacy for the Chinese people, who see it as a sign of prosperity and luck. I have bought shares of Oceanus at 25 cents each.

The money came partly from the over $100,000 I have pocketed from selling off Yangzijiang Shipbuilding and Suntec REIT in just two weeks.

By the way, I have a trading portfolio, and I have buddies to discuss trades with. I have learnt a lot also from my interaction with my clients. Most important, I have learnt a lot from reflecting on myself and my mistakes.


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Bryan Ong is director of BC Group, a leading mortgage broker in Singapore. To watch a Channel News Asia programme on him, click www.bcgroup.com.sg

Bryan Ong can be contacted at 6401-5678

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