Retirement Investing for Thai Expats

[very old man]

I am wondering if any retired expats would like to share inviting strategies

I recently read an article in my local phuket newspaper about investing. In short it was talking about how it was to early to invest in Alibaba.

The article was written buy a professional financial advisor. Since it was written about a week or so ago baba is up 25%.

I am a retired small business owner with no pension . I retired at the end of 2006 and have had many investing adventures since , I have also gone through a number of advisors news letters and investing courses. I have also managed to live off my investments (i have just enough) and have about the same amount today as i did ay the end of 2006.

The above financial advisors advice in the article about Alibaba was reasonable but it reinforces a important truth about investing , the direction or short term gain or loss of the market is impossible to predict .

I am glad i did not see the article until today , i invested in Alibaba a few days after the IPO and it immediately declined i had about a 5%loss in it and was wondering if i had made a mistake. If or when Alibana declines as this advisor thinks it will i will add to my position in it.

The one thing i did do is follow my own set of rules when i bought Alibaba . 1 my initial investment in a individual stock is .05% of my portfolio. 2 It is for the long term. 3 I only invest in companies i understand, i have used Alibaba and it is a great way to buy things and have them shipped to Thailand at a great price.

Now is it time to protet this gain with a long term put option , or sell and try to buy back in at a lower price?

I have also taken many losses but i thought i would start of with something positive.

good luck

[SantiSuk]

The trouble with sharing investing strategies is that many people invest in a way that suits them but in their heart of hearts they know it would never win any plaudits. Either that or they know they are not happy with their own investing strategy.

Eg, I am very happy with the results of my investing over 40 years. I buy only equities and mostly only pooled investments (investment trusts in the UK - same concept as mutual funds). I buy entirely for the long term. I have very little property and no commodities - though for the first time ever I am considering a significant (for me - say 5% net wealth) punt on oil and gold. I keep cash balances (bank deposits) of between 10% and 40% according to how much forward confidence I have in global equity markets. I know nothing about the fixed interest market so have always avoided it.

I routinely outperform the UK equity market by some distance, but that's hardly surprising given that I maintain a broad geographical spread. I keep meaning to benchmark myself against global, but fall shy cos I might not like the answer (!). I am poor at spotting general and geographic market tops but good at spotting bottoms - I think it is probably the fact I am prepared to sit on cash (wasting income earning opportunities with large amounts at small interest rates) and wait for the doom & gloom and black swan events, that has been my major contributor.

See - full of holes!

The beauty of not investing in individual stocks is that monitoring general geographic markets is so much easier - an hour or so a day flicking Bloomberg/CNBC seems to do me. I did once pay a US adviser when I first decided to move into the US market and maintain a portfolio of individual stocks. He spent all his time trying to make me sell things I did not want to (eg Apple when it was going gangbusters in the 90s) and then it seemed we drifted into me becoming his adviser, not vice versa (cos he was carp, not cos I was great at the US plate!)

Have no idea which way Alibaba will go. If I had bought it within my short term punts portfolio (a portfolio which I rarely have) I would be taking profits on a rise of that magnitude. If I had bought it as a good long term play I would hold it. Looks like another Microsoft or Apple to me, in which case it could be worth ten times todays value in 5 years time if you have the cussedness to hold it through some short term China downdrafts. Ain't no way you are going to predict short term market movements on single stocks and your 0.05 rule should protect your wealth anyway. Can't imagine why you want to pay someone a premium for an option just because you can't take a decision on the basic asset yourself, but that's just my prejudice against clever bankers

I recommend you stick with your own common sense - seems like you've got plenty of that.

[SheungWan]

If say you have $10,000 invested in Alibaba then a 25% gain only nets you $2500 anyway. The question is whether you need to sell some of this stock as part of a strategy to generate income for your retirement. This is the issue for growth stocks unless Alibaba is going to be a decent dividend stock.

[Soutpeel]

My advice, be very wary of any advice you get on pm's from TV members posing as financial advisers and offering their services

[Soutpeel]

Double post

Edited November 12, 2014 by Soutpeel

[very old man]

thanks for the replies all have made good points

Edited November 12, 2014 by very old man

[Pinot]

If you want to play with .05 of your principal, think of it as gambling money. I would sell, but investment risk is a personal thing.

I invest in ETF's that produce monthly income. Buying individual stocks gets problematical. Leaves you open to a "Black Swan" event. ETFs spread that risk out. Right now high yield bonds (see HYD, JNK) paying 6% have been steady. I also like Senior Loan ETFs. CEFs are another possibility. There is a fund of funds called PCEF that I think is a good buy now.

I invest through an American broker, Charles Schwab.

[very old man]

I do have the largest part of my investments in closed end funds , ETF's and a small portion in individual stocks.

I also use an american broker , Interactive Brokers.

I use options but conservatively .

I find feed back useful and have been a subscriber of a newsletter with an active forum for quite a while. I liked the forum the investment advice was not my style , far to much trading and inconsistent .

Do any of you guys visit a forum where people share investing ideas ?

[fletchsmile]

I share quite a few thoughts on this thread. Not necessarily specific to retirement, though for family I manage different portfolios with different objectives: for my kids (future), my brother (professional couple with kids in university), myself (financial independence), my mum (retired).

http://www.thaivisa.com/forum/topic/640408-set-index-and-thai-mutual-funds/

The core of my funds for me are built around:

- unit trusts/mutual funds - with a preference for income generating if available.

- Mainly equity based funds, though now around 10% fixed income and looking to add more when timing is right

- THB currency cash of 2-3 years expenditure

- Foreign currency cash of 1-2 years expenditure - mainly SGD

- Individual share portfolios in AUD/EUR/GBP/SGD/USD which I classify as "available for sale"/ held for liquidity, but also trade anything else I think is value

- Some trading on SET50 options

To be honest more and more I'm tending to moving away from individual stocks as it gets too time consuming. Much easier to look at macro level stuff then research the best fund manager per sector, and let them do their job. Frees up time. Though I do like trading as a hobby, more and more I'm looking to spend time elsewhere and just collect income

For my mum who's retired:

- mainly unit trusts based in UK, with 37% fixed income, 37% equities, 15% mixed and the remainder strategic/various. I take out around 4% p.a. capital on any non-distributing funds

- aim is to take out about 4% income per year, and see the portfolio grow. not overly worried about inflation given her age, and other pension income

- much simpler as no need to worry about different currencies. don't take any major risks or buy individual shares

Cheers

Fletch

Edited November 12, 2014 by fletchsmile

[Langsuan Man]

My question to these financial advisers has always been :

If you know so much why are you not rich enough so that you don't have to hawk yourself as an adviser ?

[SheungWan]

My question to these financial advisers has always been :

If you know so much why are you not rich enough so that you don't have to hawk yourself as an adviser ?

I think there is a difference between a professional advisor and someone who has an interest in finance and wants to share/test their opinions/strategies on a forum such as this. BTW, someone may have acquired a great deal of knowledge (know so much....) through making mistakes and understanding the risks of investing in the markets. They are not necessarily going to be rich. Over a period of time a significant number of TV readers sell up, retire, etc and are just looking for opinions as to what to do with their money, so pop over to this section to read the good, the bad and the ugly. Those who contribute range from share and option traders to hardline PM bugs. Whether the new guy is able to sift through it all is down to them.

[very old man]

That is a good point ,there are rich ones they are sometimes called hedge fund managers .

Their are also fresh college graduates with masters degrees in business so of course they are not rich, and have no real life experience with the market.

In the movie Wolf of wall street near the beginning his first mentor talks about earning commissions and putting money in their pocket's every trade his client makes (whether they do or not).

Their are good honest financial advisors . They can be hard to find and already have plenty of business.

I want to make this point again , Im not a financial advisor don't want one don't need one.

just sharing ideas with others I will not pm anyone that dose not pm me first and will not try and sell any one anything i say this just to be clear about my intentions .

[SheungWan]

It is worth noting that some high net worth individuals are prepared to pay the significant hedge fund management fees as they consider them outweighed by their successful performance over a period of time.

[very old man]

Option strategies

I use options

My favorite is called a stock replacement strategy , basically it is buying at the money long term option's (1 year or more) on a index spx or the the spy instead of buying the etf spy .

and investing the difference in income producing cef's , preferred stocks, bond funds your choice .

it goes like this let' say you have $200,000 to invest you can put it all in the spy or it and other ETF'S.

Or you could also buy 10 long term call in the spy or 1 spx for let' say $15,000 (these option's controls about $200,000.of the spy or spx) dollars then the remaining $185,000. is invested for income as aggressively or conservatively as you like.

This way you can participate in market gains and or losses while getting more income and some diversity .

Any one interested in this there is a very good book called buy and hedge i highly recommend it.

It is important to have a good understanding of options before you do this , it is a good and proven strategy .

[fletchsmile]

For options on a retirement based portfolio in general I actually prefer selling/writing index options to buying options. Key rationale:

1) statistically most options tend to expire - so stacks the odds in your favour done correctly.

2) for a retirement portfolio I figure that you've already built your assets so are no longer in an asset creation phase. Instead you're looking to maximise income from those assets. Buying calls for me is more suited to wealth creation, as you're looking for valuation gains, whereas selling a call generates premium income

Obviously has to be balance with risk management/limits etc so then:

3) I prefer writing out of the money options

4) I prefer writing calls as I am generally long equities

I like SET50 index options as the market is not very mature. This means its also a slower pace so retail investors have a better chance, plus there are more pricing anomalies to take strategic advantage of. The downside is it's sometimes not that liquid, although the quarterly (Mar,Jun,Sep,Dec) rather than monthly settlements are better.

I particularly like selling calls on the SET50 as I'm generally long the SET via Thai equity mutual funds/unit trusts. These long equity positions dwarf my option positions. Hence, if the out of the money calls expire, I've generated extra income from the premium, above my normal holdings. If they did happen to be exercised against me, the gains on the equity funds would outweigh the losses on the options. This therefore provides me with extra income in falling markets and worst case reduces my gains a little in rising markets. This aligns with retirement objectives of smoothing returns.

The beauty of index options is you can dynamically manage them. Most times if out of the money calls written start to go against me I can buy calls at a higher level (so cheaper) to limit losses, or even roll to the next quarter. As long as I remain within the limits I set on number of contracts and margins amounts, risk is minimal if managed dynamically.

Unfortunately though there aren't always buyers of calls at attractive prices so you have to play the cards you're dealt, so:

- I'm not averse to writing out of the money puts, but I will write less. My limit in contract numbers is half my limit is half the limit I use for calls, as I don't have the underlying equity cover on the downside.

example: max of 20 short calls total outright, 10 net. But max of 10 short puts outright, 5 net. While trading I don't maintain the ratio these are just absolute limits. i.e can have zero calls outstanding but don't go above 10 total puts or 5 net ever. Just saying that the risk I take for puts at a maximum is half that at a maximum for calls

- I quite like buying in the money or close® to the money options contracts funded by 2 contracts which are out of the money. eg buy 1 call SET50 Call1075 and sell 2 Call 1100, or same with puts. Keep an eye on it and can dynamically manage it

- As I prefer writing/selling I particularly like selling out of the money calls and out of the money puts at the same time. Collect two premiums. Hopefully neither kicks in. But the upside is both definitely can't kick in. I like this for range bound movements

I have other strategies, but depends on where the market is going and what my views are. But always remembering I prefer to write/sell to generate extra income, and I'm always long mutual funds

I don't take big positions, but it's nice icing on the cake. Nice also to be able to profit even if markets go down

Cheers

Fletch

Edited November 13, 2014 by fletchsmile

[jpinx]

For the last 5 years I have been getting anything from 5.5% to 6.5% without serious risk. I looked at stocks, funds, etc and never see any doing significantly better without taking big risks, which I cannot afford. Lots of people brag about their high returns, but forget to mention the losses they've taken as well. I reckon their overall performance is rarely better than 5%.

I need the income,. but I also need to have a life and be able to sleep at night

[very old man]

I have learned option trading over the last 4 years before that i was a buy and old investor.

the news letter forum I was a part of i would have 20- 30 option trades going it was to much stress and just like jinx said most of my big gains were wiped out buy big losses.

now i only have 3 or 4 option strategies going at one time and i Defiantly prefer index options. these strategies are much more long term and conservative (if their is such a thing in option trading) and i keep it to about 10 % of my overall portfolio.

Risk is every thing but can be hard to define some supposedly very safe investments were frozen or not liquid in 2008. i know i was in some.

jinx i would say i fit in your category for returns and i have nothing to brag about but thats not going to keep me from trying.

I do enjoy investing and learning about it and thanks for your feed back.

cheers vom