Investment Return in 2018 – Here’s how a Plumber Did Better than his Banker

(Last Updated On: 08/07/2019)

Hi, I am CF Lieu. I am not the plumber in this story, but I am the person who is going to narrate this story to you.

The plumber is a client (and now, a friend) of mine who first joined REITMethod online investment course which KCLau himself & me started in 2012.

The plumber first joined REITMethod course in 2013 and later engaged me (CF Lieu) for 1on1 consultation session.

(original article was first published in KCLau.com)

 

Background of what happened in 2018

Yes, there’s government change in Malaysia. Big deal. But that’s not what we wanna discuss today.

If you lose money from your investment in 2018, whether it is stocks or unit trusts, know that it is not your fault.

Anywhere you invest in 2018, chances are – you’ll lose money because almost every markets around the world are in red; except, you are using advanced global macro strategy employed by many hedge fund managers.

In other words, it’s a perfect storm hitting global share market in 2018.

Which is why, conventional long equity strategy even for the world’s legendary investor like Warren Buffett’s Berkshire Hathaway only managed to get a *measly 3%+ return in 2018. (*source: Yahoo Finance, check Berkshire Hathaway stock price from 2 Jan 2018 and 31 Dec 2018)

See table below (source: Bloomberg, percentage return computed from year end close vs the year before)

 2012201320142015201620172018
Malaysia-KLCI10.34%10.54%-5.66%-3.90%-3.00%9.45%-5.91%
US-DowJones7.26%26.50%7.52%-2.23%13.42%25.08%-5.63%
US-S&P50013.40%29.60%11.39%-0.73%9.54%19.42%-6.24%
US-NASDAQ15.91%38.32%13.40%5.73%7.50%28.24%-3.88%
UK-LondonFTSE5.84%14.43%-2.71%-4.93%14.43%7.63%-12.48%
France-CAC4015.23%17.99%-0.54%8.53%4.86%9.26%-10.95%
Germany-FrankfurtDAX29.06%25.48%2.65%9.56%6.87%12.51%-18.26%
UAE-DubaiFinancialMarket19.89%107.69%11.99%-16.51%12.06%-4.55%-24.93%
QatarStocksExchange-4.79%24.17%18.36%-15.11%0.07%-18.33%20.83%
Japan-TokyoNikkei22.94%56.72%7.12%9.07%0.42%19.10%-12.08%
Hong Kong-HangSeng22.91%2.87%1.28%-7.16%0.39%35.99%-13.61%
South Korea-KOSPI9.38%0.72%-4.76%2.39%3.32%21.76%-17.28%
China-SSECompositeIndex3.17%-6.75%52.87%9.41%-12.31%6.56%-24.59%
Singapore-STI19.68%0.01%6.24%-14.34%-0.07%18.13%-9.82%
Indonesia-JCI12.94%-0.98%22.29%-12.13%15.32%19.99%-2.54%
Thailand-SETindex35.76%-6.70%15.32%-14.00%19.79%13.66%-10.82%
Philippine-PSECompositeIndex32.95%1.33%22.76%-3.85%-1.60%25.11%-12.76%

[source: market indexes compiled from Bloomberg data]


When I met this plumber client cum friend for a catch-up yamca session in the first week of Jan 2019, I naturally asked:

“How was your investment doing? 2018 was a pretty rough year”

He looked at me like I just told him about how a NASA rocket works and then said (edited for clarity) –

“What rough year? Didn’t feel it eh…

I followed your REITMethod lessons bulat-bulat since 2013, and I am still getting like ~ total – seven thousands plus dividends last year (2018) in my bank account from that without doing anything extra then –

…and I think – I checked a few days ago, I am still sitting on a 50% gain on my initial capital…and because I have no time to monitor it, I just plunked my money into ….what’s that REIT counters again ah..the name…I forgot…but the one with Midvalley Malls one ah…”


Let me explain how is this possible

This plumber doesn’t have a diploma or degree, he’s far from someone you’d call as ‘financially literate’. Heck, he can’t even recall the exact stock name or ticker which he bought in 2014 and is still holding.

But despite his lack of time to monitor or ‘trade’ in the share market (because he has his hands full running his small business)…

…despite his lack of knowledge in complex financial stuff like CFDs, options, warrants, hedging, leverage, etc…

… and given the fact he has NOT attended any advanced value investing or technical analysis physical seminars/workshops…

…despite all these – he still fared better than what most people achieved in their investment returns for 2018.

In investing, double the effort would not necessarily means double the return. Watch below to understand why.

Let me give another example – Genting, the only casino operator in Malaysia. Even without doing any value investing or fundamental analysis on it, even a layman would know casino business cannot lose money one.

It is statistically impossible, unless there blatant mismanagement.

genting stock price jan 2018 value investing don't work

But see what happens in Jan 2019? No amount of time or effort spent or technical analysis or charting would have prevented you from losing money (albeit, maybe temporarily) investing in Genting stocks as its price plunge due to some ‘bad luck’ <— read the details here.


Back to the plumber story….

As a matter of fact, ALL of his structured investments with banks are losing money. And all he got from his bankers/relationship managers was – “Market very bad lo…”

Below, are the chronology of events of his journey after enrolling into our REITMethod course way back in 2013

  • In Dec 2013, he enrolled into REITMethod course where myself, CF Lieu is the Chief Coach.
  • He has RM 100k of extra funds from inheritance, sitting idly in bank account doing nothing.
  • In Feb 2014, he bought IGBREIT when it was trading at RM 1.15/share (see IGBREIT stock chart below)
  • He went all in – 100k into IGBREIT (albeit a high concentration risk) because that’s all he knows; he stays in Penang and never fail to make annual CNY shopping trip with his family to Midvalley Megamall. It’s something he can see, touch, feel and understand
  • At the time of writing, IGBREIT price has appreciated to RM 1.7x per share. Nobody can truly predict how the price of any investment is going to in short/mid term. But here's the fact - his total capital gain is around 50%, making average compounded annual return stands at 8.4% and valued at RM 150,000+ as of Jan 2019 (time of writing).

IGBREIT stock chart

 

For some of you who are numbers-inclined, here’s a simplified computation of his yearly returns from 2014 to 2018

 20142015201620172018
Dividend Per Share (Gross) in cents7.798.198.719.289.19
Dividend Return based on cost/share (Gross) %6.87.17.68.08.0
Average annual Return %8.48.48.48.48.4
Total annual Return %15.215.516.016.416.4
FBM KLCI-5.56-3.90-3.009.45-5.91

Obligatory disclaimer: This write up is for informational purposes only and does not constitute a recommendation and advice to buy or sell. None of the information or analyses presented are intended to form the basis for any investment decision, and no specific recommendations are intended. We expressly disclaims any and all responsibility for any direct or consequential loss or damage of any kind whatsoever arising directly or indirectly from: (i) reliance on any information contained in this article, (ii) any error, omission or inaccuracy in any such information or (iii) any action resulting therefrom.

But if you are someone who are highly skeptical of this, then that’s OK too.

I’m absolutely not trying to change your mind or beliefs.

Actually, the less people actually believe this is simple to do (but not easy), the better for you reading this.

Fact is – investing isn’t a game where the guy with the 160 IQ beats the guy with a 130 IQ – I’m quoting Buffett here.

If that’s the case, all economic professors will be the world’s most successful investor.

Because if that’s the case, a banker would have outperformed a plumber many folds in investment returns.

That’s also the reason why some very smart people make dumb investment decisions. Watch as I explain below:

Instead, focus on investment vehicles which deliver the most consistency with decent growth, with least uncertainties or downside risks. Know how to separate wheat from chaff, the useful info from noise.

REITMethod just happens to be an online course which shows you the vehicle and methods to do that.

Now, if you don’t come from investing background, then investing is not really a walk in the park. The analogy is that – you still need to go thru proper lessons to drive a car.

That takes a month or two before you can navigate safely and confidently on public roads.

But you don’t need to go thru years of rigorous learning how to fly a commercial plane just like a pilot (aka the complicated trading strategies using fancy financial instruments) when all you want to do is to get from KL to Singapore using a car.

Ready to start your ‘driving lessons’?

Register for an upcoming online web class.

 

In this web class, I think the #6 pointer will shed lights on what we covered above:

How REITs gives you Automatic Cash Flow Consistently Regardless of Economy

 

Since 2012, we got pretty interesting comments from our students.

REIT is more than stocks or property investment alone. It essentially combines these 2 into 1, and make your investment portfolio ‘indestructible’ in both realms.

The Whole is Greater than the Sum of its Parts (1 + 1 is not always equal 2 but, can be 3,4 or 5)

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