(Comparatively) Short Term Investing Advice

[Lacessit]

3 minutes ago, TallGuyJohninBKK said:

 

That's true, and I believe Eastman Kodak was a dividend payer before eventually going under.

 

However, I'd say the odds that AT&T, Coke, Pepsi, Exxon, Procter & Gamble etc etc won't be around and making profits for many years to come are extremely small. In part, because those companies and others ARE inherently diversified in their own businesses.

 

Coke and Pepsi aren't just soft drink/soda companies and haven't been for many years. Pepsi is big time into snacks and foods, and Coke is big time into waters and juices and other beverages. So unless people stop eating and drinking, I'd say they're pretty safe.

 

I would definitely avoid Exxon. Energy companies worldwide are shitting themselves over developments in renewable energy, and its storage. For example, imagine a world where most cars are fueled by hydrogen. The technology is being developed as we speak.

[TallGuyJohninBKK]

Just now, rumak said:

i agree.    but i am not a stock mkt fan.   everyone is a genius when it goes up.   I happen to favor property....feels better in my hand than paper.

 

A person can invest in property, without actually owning property directly themselves and all the headaches that come with that, by investing in/buying shares of stock market entities called REITs (Real Estate Investment Trusts). Quite a few are very long-term and successful dividend payers and growers that often pay substantial dividends of 4-7% or more.

 

Among them, Realty Income (O), National Retail Properties (NNN), Digital Realty Trust (DLR), others.

 

https://www.dividendgrowthinvestor.com/2018/03/realty-income-delivers-high-yields-and.html

 

 

 

[TallGuyJohninBKK]

Just now, Lacessit said:

I would definitely avoid Exxon. Energy companies worldwide are shitting themselves over developments in renewable energy, and its storage. For example, imagine a world where most cars are fueled by hydrogen. The technology is being developed as we speak.

 

I believe, Exxon has substantial interests in non-oil/non-petroleum energy. And, they've continued paying and raising their dividend even through various crashes in oil prices. For anyone heading toward retirement age now, given the world's current reliance on petroleum, I don't think there's much to worry about.

 

But I do agree and hope that for the longer term, hopefully our energy reliance will shift. But I wouldn't be surprised to see Exxon and others end up being part of those future shifts.

 

Speaking personally, I don't and won't invest in tobacco stocks because of the health issues related to tobacco use and the health risks and litigation cloud over that industry. But others don't mind buying their stocks and pocketing 4%+ annual dividends.

 

Everyone has to make their individual investing decisions based on their personal situations and personal choices.

 

[Suradit69]

4 hours ago, Sheryl said:

I'll have a look at Vanguard and Fidelity and the fixed bond funds mentioned. I was of the impression that bond funds were a type of mutual fund thus no guarantees re either return or value of the principal, is that not the case?

US Government debt, theoretically, is the safest place to put your money as far as guaranteed repayment is concerned, but it only offers around 3% for periods of either 2 years or 10 years. 

 

The reason a bank deposit in Cambodia generates twice that is because most people would consider money in a Cambodian bank is a great deal riskier than a US bank deposit or US govt bonds. The reason you want to move the money is that you're concerned about Cambodian regulatory change risk. Greater risk, greater interest paid.

 

I recall when living in Africa our local Barclays Bank paid interest of more than 100%. Unfortunately the inflation rate in the country was so high that getting 100 or 200% interest was still a losing proposition because of purchasing power risk. 

 

As soon as you look for better returns than 2.5 to 3%, you start heading up the risk level (or at least what investors assess as higher risk).

 

I can get 10% or more from some Closed End Funds that I consider relatively safe, but I do closely monitor them and the share price can be volatile in the current investing environment.

 

If you want to park money for a few years, not monitor it frequently and feel assured that you'll get back your original investment plus interest, you're not going to be paid much for your trouble. 

 

Even if you buy a bank CD with a decent return, you're probably going to lock yourself in for a set time period with penalties if you decide to withdraw it before it matures.

 

That's why risk (or restrictions) versus reward move in tandem. The greater the perceived risk, the greater the potential reward. The lower the former, the lower the latter.

 

Yes, any bond or bond fund or any pooled investment in a range of bonds can have price risk. 

 

I can understand your need to preserve and guarantee your original capital investment will be returned. You need to understand that the cost of that sense of security is a low return. If something looks very attractive in terms of interest paid, be assured it comes with implied greater risk.

 

 

Edited September 25, 2018 by Suradit69

[TallGuyJohninBKK]

52 minutes ago, Lacessit said:

 

The big banks in Australia cut dividends for one year in 2009, and were back to normal in 2011. They were a screaming buy in 2009.

 

As an American, I'm not familiar with Australian banks, except generally as a consumer.

 

However, let me expand your example to a broader concept. It's one thing when a company freezes its dividend, as in, doesn't increase it for one or more years but keeps paying the same amount, and an entirely different thing when a company cuts/reduces its dividend, especially if you're a stock owner who's relying on that dividend for income.

 

A lot of dividend investors have a core rule that anytime a company might CUT its dividend, they'll sell that holding and invest elsewhere, as that company is no longer a reliable, multi-decade dividend increaser.  For a lot of the U.S. mega banks, I believe, after their big dividend cuts circa 2009, it's taken them the better part of the ensuing decade to get their dividend payouts back to what they were before, and some still haven't.

 

As an example, Bank of America was paying a quarterly dividend of 64 cents in fall 2008. That was cut in half to 32 cents per quarter in December 2008, and then went to 1 cent per quarter starting with 2009 and onward through mid 2014! Even today, almost 10 years later, Bank of America's quarterly dividend has only risen to 15 cents.

 

Wells Fargo, meanwhile, was paying 34 cents per quarter in early 2009, cut its dividend to 5 cents from 2009 to 2011, and since then has grown it back to its current 43 center per quarter rate. Although that rate is still lower than the bank had from 2003 to 2006. So again, lots of years where their dividend payouts were diminished.

 

That's the reason most U.S. banks aren't on long-term dividend growers lists.

 

Dividend cuts and cutters are generally a bad thing for investors, and best avoided.

 

Edited September 25, 2018 by TallGuyJohninBKK

[Lacessit]

11 hours ago, TallGuyJohninBKK said:

 

As an American, I'm not familiar with Australian banks, except generally as a consumer.

 

However, let me expand your example to a broader concept. It's one thing when a company freezes its dividend, as in, doesn't increase it for one or more years but keeps paying the same amount, and an entirely different thing when a company cuts/reduces its dividend, especially if you're a stock owner who's relying on that dividend for income.

 

A lot of dividend investors have a core rule that anytime a company might CUT its dividend, they'll sell that holding and invest elsewhere, as that company is no longer a reliable, multi-decade dividend increaser.  For a lot of the U.S. mega banks, I believe, after their big dividend cuts circa 2009, it's taken them the better part of the ensuing decade to get their dividend payouts back to what they were before, and some still haven't.

 

As an example, Bank of America was paying a quarterly dividend of 64 cents in fall 2008. That was cut in half to 32 cents per quarter in December 2008, and then went to 1 cent per quarter starting with 2009 and onward through mid 2014! Even today, almost 10 years later, Bank of America's quarterly dividend has only risen to 15 cents.

 

Wells Fargo, meanwhile, was paying 34 cents per quarter in early 2009, cut its dividend to 5 cents from 2009 to 2011, and since then has grown it back to its current 43 center per quarter rate. Although that rate is still lower than the bank had from 2003 to 2006. So again, lots of years where their dividend payouts were diminished.

 

That's the reason most U.S. banks aren't on long-term dividend growers lists.

 

Dividend cuts and cutters are generally a bad thing for investors, and best avoided.

 

I don't disagree with you. Conditions in Australia are entirely different to that of America, where the banks took on ridiculous LVR ratings prior to the GFC. The dividend cut in 2009 by Australian banks was a prudent measure to conserve capital. They were still a great buy because they were on a sound base.

The other thing with shares in Australia is our system of dividend imputation. Sorry, not available to people who aren't Australian citizens. All retirees who own shares love it, because below a certain income threshold you not only pay no income tax, but also get a cheque back from the taxman. Manna from heaven.

The Australian banks have had 100% dividend imputation since it was first brought in the 1980's.

Sorry, I am drifting off topic. I would agree with you American bank shares should not be on Sheryl's list of potential investments. In her position, I'd be looking at ETF's for safety, and peer-to-peer lenders for income. Surely the US must have them.

[Oxx]

Those previous posters who are suggesting investing in USD are ignoring foreign exchange risk.  To give an example:

 

Assuming investing US$100,000 at the end of September 2015 when the FX rate was 36.4, this would have bought 3.64 million baht.  If invested in Thailand until now, assuming a conservative interest rate of 1.5% (the BOT lending rate), this would have rising to 3,807,500 baht.

 

Now assuming that the money had been invested in USD at an interest rate of 2.0% (the current Federal Funds Rate - though it actually started the period at 0.5% and has been below 2.0% until June this year).  The value today would be $106,180.  Converting that to THB at the current exchange rate (32.45), that would give 3,445,541 baht.  In other words, the investor would have lost 194,459 baht (just over 5%).

 

Given that the currency of the OP's future expenditure is most likely THB, and given her very cautious approach, keeping the money in any currency other than THB would be imprudent.

 

(And for those who think I have picked the worst possible dates to prove a point, I haven't.  Over the last 10 years the USD/THB FX rate has varied from 36.4 to 28.6 or thereabouts.)
 

[Lacessit]

2 hours ago, Oxx said:

Those previous posters who are suggesting investing in USD are ignoring foreign exchange risk.  To give an example:

 

Assuming investing US$100,000 at the end of September 2015 when the FX rate was 36.4, this would have bought 3.64 million baht.  If invested in Thailand until now, assuming a conservative interest rate of 1.5% (the BOT lending rate), this would have rising to 3,807,500 baht.

 

Now assuming that the money had been invested in USD at an interest rate of 2.0% (the current Federal Funds Rate - though it actually started the period at 0.5% and has been below 2.0% until June this year).  The value today would be $106,180.  Converting that to THB at the current exchange rate (32.45), that would give 3,445,541 baht.  In other words, the investor would have lost 194,459 baht (just over 5%).

 

Given that the currency of the OP's future expenditure is most likely THB, and given her very cautious approach, keeping the money in any currency other than THB would be imprudent.

 

(And for those who think I have picked the worst possible dates to prove a point, I haven't.  Over the last 10 years the USD/THB FX rate has varied from 36.4 to 28.6 or thereabouts.)
 

Another hedge to consider is the Swiss franc. It seems to be the one currency that appreciates when a major negative world events occur. AFAIK it's also the only currency that has revalued rather than devalued over the last 5 years.

[Oxx]

40 minutes ago, Lacessit said:

Another hedge to consider is the Swiss franc. It seems to be the one currency that appreciates when a major negative world events occur.

 

Against the baht, over the last 10 years, it's varied in a range of 28 to 41 baht/franc (actually a bigger range than for the dollar).  It's as bad an idea as investing in the US dollar for someone who's future expenditure will probably be in baht.

[Sheryl]

Very useful discussion so far.

 

I am aware of the inverse relationship between risk and return. Just looking to identify thr best low risk/virtually risk free option.

 

I am diversified, in fact my potential Executors have complained about the multiplicity of accounts and institutions. This is not my total savings by any means. But it is enough of it that I can't afford to lose it.

 

I have never been one for financial risk taking and certainly not now when I am retirement age.

 

Sent from my SM-J701F using Thailand Forum - Thaivisa mobile app

 

 

 

 

[Sheryl]

 
Against the baht, over the last 10 years, it's varied in a range of 28 to 41 baht/franc (actually a bigger range than for the dollar).  It's as bad an idea as investing in the US dollar for someone who's future expenditure will probably be in baht.

I have some quasi-dependents in the US and also maintain US credit cards that I pay in US dollars. And likewise have people I help support in Cambodia where the currency is effectively USD. So I do have use of dollars even living in Thailand. But it would be useful to have some investment in THB if the returns were even close to ehat I can get in the US. That does not seem to be the case though.

The currency angle can go either way. I was living here during the "Thaitanic" crash and benefitted then from not having too much of my savings in THB.

Sent from my SM-J701F using Thailand Forum - Thaivisa mobile app

[Lacessit]

35 minutes ago, Sheryl said:

I have some quasi-dependents in the US and also maintain US credit cards that I pay in US dollars. And likewise have people I help support in Cambodia where the currency is effectively USD. So I do have use of dollars even living in Thailand. But it would be useful to have some investment in THB if the returns were even close to ehat I can get in the US. That does not seem to be the case though.

The currency angle can go either way. I was living here during the "Thaitanic" crash and benefitted then from not having too much of my savings in THB.

Sent from my SM-J701F using Thailand Forum - Thaivisa mobile app
 

I think it's best for every retiree to stick with investing their savings in their country of origin, mainly because they understand their native financial systems better. Or should do.

If you bought a good condo in Chiang Mai 15 years ago, it would be a great investment in terms of rental return now. However, I consider property ownership in the retirement stage to be a burden rather than a blessing. That's why I sold my house in Australia. And there's always the chance a political upheaval could turn an investment here into mush.