Before one can fully comprehend the above rule and put it to good use, the Kiasu Investor (KI) would first need to have an appreciation of what Fantasy Premier League (FPL) is all about.
 |
Not exactly our idea of "Fantasy Premier League" |
For the uninitiated, Fantasy Premier League (FPL) can best be described as an online competition-cum-strategy game that involves millions of players from around the world (and yes, there is real and decent prize money for the ultimate winners). The game is based on the weekly performance of football teams from the English Premier League.
To put it briefly, the underlying premise (objective) of this game is to:
- assemble the best football players that you can from a limited budget (to form your team).
- each week, your team will get an overall score based on how well the footballers you have selected perform in the real-life Premiership matches.
- each footballer have a "price tag" that may fluctuate daily depending on how well he is performing in his matches.
- each week, your team will get an overall score based on how well the footballers you have selected perform in the real-life Premiership matches.
- each footballer have a "price tag" that may fluctuate daily depending on how well he is performing in his matches.
- tinker with your team by transferring footballers in and out in an attempt to maximize your game score. (again restricted by your budget)
All this may sound very well, but one may start to wonder, "What the hell has the above mentioned got to do with my investment strategy??"
Allow us to explain: In FPL, one of the most basic but extremely effective strategy when selecting your goalkeepers is to "pair" two cheap keepers rather than go for a reputable goalkeeper that would cost dearly. This is because matches are typically played in "home" and "away" fashion, with the teams playing at home typically out-performing (due to home ground advantage). Hence by choosing two average goalkeepers and alternating them every week (always playing the goalkeeper at home), there is a good chance to earn excellent "returns" every gameweek and hence outperforming the score you would have gotten by playing the more "reputable" keeper week-in, week-out.
Coming back to our investments, by applying Kiasu Analysis (KA), we can also divide the stock counters that we favor into alternate groupings based on their distribution / dividends dates.
As an example, first, we can apply KA to come up with a list of trusts / REITs that gives out half-yearly distributions (i.e Feb & Sep). Next we come up with a list that gives out half-yearly distribution in alternate quarters (i.e May & Nov).
In the 1st Group (distribution in May & Nov)
Coming back to our investments, by applying Kiasu Analysis (KA), we can also divide the stock counters that we favor into alternate groupings based on their distribution / dividends dates.
As an example, first, we can apply KA to come up with a list of trusts / REITs that gives out half-yearly distributions (i.e Feb & Sep). Next we come up with a list that gives out half-yearly distribution in alternate quarters (i.e May & Nov).
In the 1st Group (distribution in May & Nov)
Ascendas India Trust - 7.16% annualized yield
In the 2nd Group (distribution in Feb & Sep)
In the 2nd Group (distribution in Feb & Sep)
Saizen REIT - 6.933% annualized yield
K-Green Trust - 8.21% annualized yield
By adopting a "pairing" of perhaps Ascendas India Trust (AIT) with K-Green Trust (KGT), I can potentially extract annualized yield of up to 15.37%** by switching in-and-out between the two after receiving each distribution.
For Illustration:
Mar-May'11 - Buy into AIT
May'11 - receive AIT distribution (approx. 3.5%)
Jun-Sep'11 - Sell AIT, buy into KGT
Sep'11 - receive KGT distribution (approx. 4.1%)
Sep-Nov'11 - Sell KGT, buy into AIT
Nov'11 - receive AIT distribution (approx. 3.5%)
**assuming nett zero gains (or losses) from switching between the counters
In this way, you get to receive distributions from both counters within the "pairing" but only need to stay invested in only one counter at any point in time.
The best part is, you can apply this principle to form any "pairings" of your personal preference (need not necessarily be REITs or trust, though the former typically provide more certainty in terms of distribution). In fact, for Grandmaster KIs, you can even do pairings of three or more counters.
More examples of counters that gives half-yearly distribution:
CapitaComm, CapitaRChina (i.e Jan & Jul)
SPH (May & Dec)
Perhaps you can discover and share with us your personal favorite pairings or combos?
K-Green Trust - 8.21% annualized yield
By adopting a "pairing" of perhaps Ascendas India Trust (AIT) with K-Green Trust (KGT), I can potentially extract annualized yield of up to 15.37%** by switching in-and-out between the two after receiving each distribution.
For Illustration:
Mar-May'11 - Buy into AIT
May'11 - receive AIT distribution (approx. 3.5%)
Jun-Sep'11 - Sell AIT, buy into KGT
Sep'11 - receive KGT distribution (approx. 4.1%)
Sep-Nov'11 - Sell KGT, buy into AIT
Nov'11 - receive AIT distribution (approx. 3.5%)
**assuming nett zero gains (or losses) from switching between the counters
In this way, you get to receive distributions from both counters within the "pairing" but only need to stay invested in only one counter at any point in time.
The best part is, you can apply this principle to form any "pairings" of your personal preference (need not necessarily be REITs or trust, though the former typically provide more certainty in terms of distribution). In fact, for Grandmaster KIs, you can even do pairings of three or more counters.
More examples of counters that gives half-yearly distribution:
CapitaComm, CapitaRChina (i.e Jan & Jul)
SPH (May & Dec)
Perhaps you can discover and share with us your personal favorite pairings or combos?
Hi Persia,
ReplyDeleteHave you actually gain thru this method of investment strategy. I have thought about this but would not think it will be beneficial at the end of the day because the price will gap down once its XD.
Thanks
Hi Rookie,
ReplyDeleteAs with any strategy, success is not "guaranteed", but my personal experience is that returns from this approach outperforms the returns from a pure "buy and hold for dividends" approach. To simplify discussions, we can consider two scenarios:-
1) In rising or stable markets
- for dividend plays, share price tends to appreciate as we approach results announcement dates. Price may rise further upon CD status.
- if one had been invested 4-6 weeks before the results announcement, we would likely already have the "margin" to cater for the price drop after XD. (I.e bought at 0.92, rise to 0.96 on CD, drop back to 0.92 on XD. We get to keep the distribution and sell at purchase price.)
2) Falling market
- price tends to drift lower or stabilize near results announcement period.
- one does not really lose out compared to "buy and hold" strategy as both counters prices are likely to weaken
- in this type of market, if possible, we try to time the switch to the other paired counter when the differential in prices between the two counters is most in our favor ( or more favorable than usual). We judge this through daily monitoring of price differential.
Go try it out! Kiasu analysis is not easy work, but as a Kiasu investor, "we cannot afford to lose out!" ;)
Thanks for sharing. however, it will be more convincing to show an actual paper trade.
ReplyDeleteTaking an example of 2 stocks. Entry price and XD date of 1st stock and then the 2nd stock.
Rgds.
Congratulations Rookie! I feel that you qualify as a kiasu investor because you are skeptical and cautious with you $$$. For now, take Ascendas India Trust and CapitaComm Trust as a very good example how this pairing can pay off well in the past year. I shall elaborate more on the details in a subsequent post. Thank you for coming up with this good suggestion!
ReplyDelete