What are the main differences related to Saving, Life Insurance and Investing?
Saving is NEVER an INVESTMENT and will never get better return as it is almost risk free. There will NEVER be such investment product where there is almost risk free and yet gives good returns. All investment products by nature carry risks and you may potentially lose some or all your investing capital. The provider of such investment product need to be able to earn good margins for them to assume the risks on your behalf. In another word, they assume your risks and expected to be paid first before giving you the leftovers.
Generally, the purpose of life insurance is to provide peace of mind by assuring that financial loss or hardship will be lessened or eliminated in the event of death or permanent disability or in some cases critical illnesses if covered.
The value for the policyholder is derived, not from an actual claim event, rather it is the value derived from the 'peace of mind' experienced by the policyholder, due to the negating of adverse financial consequences caused by the death of the Life Assured.
Since life insurance is not really a "good" investment product so don't expect better returns. So do you use Life insurance as an investment for retirement planning? Weigh the pros and cons carefully when deciding whether life insurance has a place in your investment or retirement plans. If it does, educate yourself and shop wisely as you are sinking probably a huge sum of your potential investing capital in life insurance; and knowing what are your opportunity costs.
A better option is to spare some of your valuable time in educating yourself in active investing and builds a well balance portfolio of saving, life insurance, and investment. Happy learning. Cheers!
Sunday, 12 July 2009
Saturday, 11 July 2009
Earning more than your boss?
Can someone possibly earn more than one's boss assuming both have the same length of service in the company? Probably, the answer is definitely NO. Why? Your boss's NAV in the company is definitely perceived more than you so he/she will be paid more. So how can one earn more than his/her boss?
http://createwealth8888.blogspot.com/2009/07/your-most-important-asset-is-yourself.html <-- increase your NAV
1) Increase NAV in the company until you can be promoted above your boss, and you become his/her boss.
2) Increase NAV in your investing/trading to earn more income in addition to your employment income.
Remember what Clement said: "Nobody is stopping you from investing your own money. For investing and trading, you don't have to appear physically somewhere. You can make money using the Internet or (createwealth8888: Broadband on Mobile), and you don't need to face suppliers or competitors. You just need to face yourself."
You can do it quietly since the Mobile technology provides you the enablers. Now, with iPhone you have the computer at your palm to trade online.
So it is for your boss to earn more than his/her boss. Maybe your boss is already doing that, didn't you realize it?
http://createwealth8888.blogspot.com/2009/07/your-most-important-asset-is-yourself.html <-- increase your NAV
1) Increase NAV in the company until you can be promoted above your boss, and you become his/her boss.
2) Increase NAV in your investing/trading to earn more income in addition to your employment income.
Remember what Clement said: "Nobody is stopping you from investing your own money. For investing and trading, you don't have to appear physically somewhere. You can make money using the Internet or (createwealth8888: Broadband on Mobile), and you don't need to face suppliers or competitors. You just need to face yourself."
You can do it quietly since the Mobile technology provides you the enablers. Now, with iPhone you have the computer at your palm to trade online.
So it is for your boss to earn more than his/her boss. Maybe your boss is already doing that, didn't you realize it?
Greatest Bear - any parallel? Are u betting it? Updated.
Did you see any parallel and start getting worry? Hopefully, it doesn't happen in Aug or Oct 09 or else another round of blood letting for investors.
Warren Buffett's Top Three Investment Rules for the Average American
aiyo... Buffet has new Investment rules!!!!
there's no mention of intrinsic values, durable competitive advantages, or even buy-and-hold.
Time has changed. Now, we are living in a globally connected economy; and news travel at the speed of electonic light wave and drive stocks prices crazy before you even realized it. Isn't time for Buffetology followers to start thinking on his new investment rules??? Why doesn't he mention his old favourite rules???
Hmm... Buffet's Rule No 3 looks same as one of my own Rules?
If you like to read more http://createwealth8888.blogspot.com/2009/01/understanding-debt-risk-and-leverage.html and follow up with search on keyword: leverage
----------------------------------------------------------------------------------
By: Alex Crippen
Executive Producer
Warren Buffett isn't shy about giving advice. If he hadn't gone into the investing business, he could well have made teaching his profession.
Now that he's the world's greatest living investor, there are plenty of pupils anxious to attend class.
Today (Friday), ABC's Good Morning America featured several Buffett lessons.
In a taped interview, Bianna Golodryga asks Buffett for his "top three pieces of advice for average Americans who want to grow their savings and keep their money safe."
In this venue, there's no mention of intrinsic values, durable competitive advantages, or even buy-and-hold.
Buffett's response:
1) If it seems too good to be true, it probably is.
2) Always look at how much the other guy is making when he is trying to sell you something.
3) Stay away from leverage. Nobody ever goes broke that doesn't owe money.
Buffett also finds important life and investing lessons in his favorite game:
AP
Warren Buffett plays bridge at the 2005 Berkshire Hathaway shareholders meeting
--------------------------------------------------------------------------------
"In bridge, everything anybody does or doesn't do, you're drawing inferences from, including your partner and your opponents. You're working with a partner. If you don't work well with partners you're not going to have a winning bridge team over time. And everything you've learned from the past has some utility on the next hand you play. The next hand, you've never played it before and you'll never play it again in your life. But on the other hand, the problems you've solved in the past are useful in solving the problems there. And you have to keep paying attention all the time. You can't coast."
And while Buffett doesn't think that everyone should necessarily get a college degree, he does strongly believe in the value of learning, as any good teacher would.
"Generally speaking, investing in yourself is the best thing you can do. Anything that improves your own talents. Nobody can take it away from you. They can run up huge deficits, the dollar can become worth far less, you can have all kinds of things happen. But if you've got talent yourself, and you maximize your talent, you've got a terrific asset."
http://createwealth8888.blogspot.com/2009/07/your-most-important-asset-is-yourself.html <--- If you wish to read more ...
there's no mention of intrinsic values, durable competitive advantages, or even buy-and-hold.
Time has changed. Now, we are living in a globally connected economy; and news travel at the speed of electonic light wave and drive stocks prices crazy before you even realized it. Isn't time for Buffetology followers to start thinking on his new investment rules??? Why doesn't he mention his old favourite rules???
Hmm... Buffet's Rule No 3 looks same as one of my own Rules?
If you like to read more http://createwealth8888.blogspot.com/2009/01/understanding-debt-risk-and-leverage.html and follow up with search on keyword: leverage
----------------------------------------------------------------------------------
By: Alex Crippen
Executive Producer
Warren Buffett isn't shy about giving advice. If he hadn't gone into the investing business, he could well have made teaching his profession.
Now that he's the world's greatest living investor, there are plenty of pupils anxious to attend class.
Today (Friday), ABC's Good Morning America featured several Buffett lessons.
In a taped interview, Bianna Golodryga asks Buffett for his "top three pieces of advice for average Americans who want to grow their savings and keep their money safe."
In this venue, there's no mention of intrinsic values, durable competitive advantages, or even buy-and-hold.
Buffett's response:
1) If it seems too good to be true, it probably is.
2) Always look at how much the other guy is making when he is trying to sell you something.
3) Stay away from leverage. Nobody ever goes broke that doesn't owe money.
Buffett also finds important life and investing lessons in his favorite game:
AP
Warren Buffett plays bridge at the 2005 Berkshire Hathaway shareholders meeting
--------------------------------------------------------------------------------
"In bridge, everything anybody does or doesn't do, you're drawing inferences from, including your partner and your opponents. You're working with a partner. If you don't work well with partners you're not going to have a winning bridge team over time. And everything you've learned from the past has some utility on the next hand you play. The next hand, you've never played it before and you'll never play it again in your life. But on the other hand, the problems you've solved in the past are useful in solving the problems there. And you have to keep paying attention all the time. You can't coast."
And while Buffett doesn't think that everyone should necessarily get a college degree, he does strongly believe in the value of learning, as any good teacher would.
"Generally speaking, investing in yourself is the best thing you can do. Anything that improves your own talents. Nobody can take it away from you. They can run up huge deficits, the dollar can become worth far less, you can have all kinds of things happen. But if you've got talent yourself, and you maximize your talent, you've got a terrific asset."
http://createwealth8888.blogspot.com/2009/07/your-most-important-asset-is-yourself.html <--- If you wish to read more ...
Friday, 10 July 2009
Thursday, 9 July 2009
Sunday, 5 July 2009
Invest in Singapore companies???
LOL. Finaly, come across some big name like CEO of WheelLock, Mr David Lawrence talking in the same frequency band as CreateWealth8888.
------------------------------------------------------------------
He said: “Personally, I never buy any structured product. I only buy stocks… There are very good stocks, with good boards of directors, that pay good dividends. So don’t be greedy. Just invest in Singapore companies (such as the three local banks, Keppel, Fraser & Neave, Singapore Press Holdings, SingTel and Singapore Technologies) … with boards of directors - executive and independent directors - with proven integrity.”
He also cautions retail investors to beware of the risks entailed in exchange traded funds (ETFs). In the US, for instance, regulators have ruled out the sale of leveraged and inverse ETFs to retail investors. 'Personally, I never buy any structured product. I only buy stocks,' he said. 'Even if I buy commodities, I buy shares of mining companies like Rio Tinto and BHP. I buy stocks because I have complete control over it. It's a low-cost entry.
'I don't trust fund managers. You invest in funds. What happens? You get a crash, you get redemptions, they have to sell.'
But Mr Lawrence is not suggesting investors rush into the stock market after the recent surge. 'I think, just start looking at the moment and wait and see. A lot of profit has already been made,' he said.
'If you can get the timing right, or a little bit right - I am never clever enough to buy at the bottom and sell at the top - you can do very well. You can make very good capital appreciation.
'But what you don't do is buy, then panic and sell as prices go down, because you are investing in well-run companies that will survive. They pay you a dividend. So even if you buy high and they go low, you just keep them and live off the dividend. Don't buy unless you're going to hold them for the long term.'
-----------------------------------------------------
Yalor. I fully agreed with him. If you only have capital like $xx,xxx or even $xxx,xxx, please stop fooling yourself by behaving like big boys investing globally for diversification. Stop making your investing strategy more complicated by taking in foreign currency exchange rate risk. When you made a hundred buck in Singapore market, that is definitely S$100 but it is not same for profit made in foreign currency, it can be less than S$100 or in worst case may end up in nett losses.
------------------------------------------------------------------
He said: “Personally, I never buy any structured product. I only buy stocks… There are very good stocks, with good boards of directors, that pay good dividends. So don’t be greedy. Just invest in Singapore companies (such as the three local banks, Keppel, Fraser & Neave, Singapore Press Holdings, SingTel and Singapore Technologies) … with boards of directors - executive and independent directors - with proven integrity.”
He also cautions retail investors to beware of the risks entailed in exchange traded funds (ETFs). In the US, for instance, regulators have ruled out the sale of leveraged and inverse ETFs to retail investors. 'Personally, I never buy any structured product. I only buy stocks,' he said. 'Even if I buy commodities, I buy shares of mining companies like Rio Tinto and BHP. I buy stocks because I have complete control over it. It's a low-cost entry.
'I don't trust fund managers. You invest in funds. What happens? You get a crash, you get redemptions, they have to sell.'
But Mr Lawrence is not suggesting investors rush into the stock market after the recent surge. 'I think, just start looking at the moment and wait and see. A lot of profit has already been made,' he said.
'If you can get the timing right, or a little bit right - I am never clever enough to buy at the bottom and sell at the top - you can do very well. You can make very good capital appreciation.
'But what you don't do is buy, then panic and sell as prices go down, because you are investing in well-run companies that will survive. They pay you a dividend. So even if you buy high and they go low, you just keep them and live off the dividend. Don't buy unless you're going to hold them for the long term.'
-----------------------------------------------------
Yalor. I fully agreed with him. If you only have capital like $xx,xxx or even $xxx,xxx, please stop fooling yourself by behaving like big boys investing globally for diversification. Stop making your investing strategy more complicated by taking in foreign currency exchange rate risk. When you made a hundred buck in Singapore market, that is definitely S$100 but it is not same for profit made in foreign currency, it can be less than S$100 or in worst case may end up in nett losses.
Your most important asset is yourself?
Adam Khoo said: "The returns are infinite. When you invest in yourself, it's something that on one can take away from you."
Clement Chiang said: "Nobody is stopping you from investing your own money. For investing and trading, you don't have to appear physically somewhere. You can make money using the Internet or (createwealth8888: Broadband on Mobile), and you don't need to face suppliers or competitors. You just need to face yourself."
Joseph Chong said: "Inertia is an investor's worst enemy. It means time wasted and money foregone. Every year you delay saving and investing, it becomes worse and worse. People should start learning about investing as soon as they start saving. If you don't do that, the tuition fee becomes a lot heavier. the mistakes made earlier are cheaper. It was already mathematically clear then that just working and saving wouldn't do it. To be free from the "bondage" of employment, you must invest and compound your money."
Robert Kiyosaki said: "Most of us are so enamoured of the idea of security that, even when you are unhappy with our jobs, we will stay with them, day after day, year after year. The truth is that staying in situations which are unsatisfying only increases our sense of insecurity. We begin to feel there is no other choice but to sell our souls in the name of security."
CreateWealth8888 said: "I already realized it one day in 2001? after reading the book "Rich Dad, Poor Dad" that I need to be successful in my active investing in Singapore stocks only so as to free from the "bondage" of employment and that is the reason why I am blogging here."
Richard Smitten said: "Certain rules of the market are to be studied as closely as if you were a law student preparing for the Bar."
Jesse Livermore said: "Since I was 15, I have studied this subject (createwealth8888: Market) closely. I have given my life to it, concentrating upon it and putting into it my very best."
Frank McKinney said: "Take risks but never gamble."
CreaeWealth8888 said: "I agreed with Frank. Never gamble. I don't do professional gambling like trading FOREX where there is no assets involved, you are basically playing professional poker game with your retail forex brokers. I like to take risks with stocks that are paying regular dividends that are better than CPF rate of 2.5%,and prefer blue chips that our government has a hand or leg in it and if necessary the government men will kick the asses of those management."
Tom Gardner said: "The best time to start investing was yesterday. The next best time is today."
CreateWealth8888 said: "Kick your ass and get started in active investing and get yourself educated in investing and financially related knowledge." and do the following if you are newbie to active investing:
1. How much capital do you have? (This is the money that you can safely set aside and will not be needed for next 5-7 years as this is the average length of a market cycle if you are caught investing at the wrong time)
2. What is the your final target sum you wish to accumulate over your investing time frame?
3. Set your yearly performance target to reach your final target sum over your investing time frame. (Please note that in the worst years you may not achieve your yearly target; but, it should be reverting to your mean yearly target.)
Happy active investing and be hardworking in getting yourself educated. Cheers!
Clement Chiang said: "Nobody is stopping you from investing your own money. For investing and trading, you don't have to appear physically somewhere. You can make money using the Internet or (createwealth8888: Broadband on Mobile), and you don't need to face suppliers or competitors. You just need to face yourself."
Joseph Chong said: "Inertia is an investor's worst enemy. It means time wasted and money foregone. Every year you delay saving and investing, it becomes worse and worse. People should start learning about investing as soon as they start saving. If you don't do that, the tuition fee becomes a lot heavier. the mistakes made earlier are cheaper. It was already mathematically clear then that just working and saving wouldn't do it. To be free from the "bondage" of employment, you must invest and compound your money."
Robert Kiyosaki said: "Most of us are so enamoured of the idea of security that, even when you are unhappy with our jobs, we will stay with them, day after day, year after year. The truth is that staying in situations which are unsatisfying only increases our sense of insecurity. We begin to feel there is no other choice but to sell our souls in the name of security."
CreateWealth8888 said: "I already realized it one day in 2001? after reading the book "Rich Dad, Poor Dad" that I need to be successful in my active investing in Singapore stocks only so as to free from the "bondage" of employment and that is the reason why I am blogging here."
Richard Smitten said: "Certain rules of the market are to be studied as closely as if you were a law student preparing for the Bar."
Jesse Livermore said: "Since I was 15, I have studied this subject (createwealth8888: Market) closely. I have given my life to it, concentrating upon it and putting into it my very best."
Frank McKinney said: "Take risks but never gamble."
CreaeWealth8888 said: "I agreed with Frank. Never gamble. I don't do professional gambling like trading FOREX where there is no assets involved, you are basically playing professional poker game with your retail forex brokers. I like to take risks with stocks that are paying regular dividends that are better than CPF rate of 2.5%,and prefer blue chips that our government has a hand or leg in it and if necessary the government men will kick the asses of those management."
Tom Gardner said: "The best time to start investing was yesterday. The next best time is today."
CreateWealth8888 said: "Kick your ass and get started in active investing and get yourself educated in investing and financially related knowledge." and do the following if you are newbie to active investing:
1. How much capital do you have? (This is the money that you can safely set aside and will not be needed for next 5-7 years as this is the average length of a market cycle if you are caught investing at the wrong time)
2. What is the your final target sum you wish to accumulate over your investing time frame?
3. Set your yearly performance target to reach your final target sum over your investing time frame. (Please note that in the worst years you may not achieve your yearly target; but, it should be reverting to your mean yearly target.)
Happy active investing and be hardworking in getting yourself educated. Cheers!
Saturday, 4 July 2009
Live Simply?
Live Simply is NOT THE SAME as trying to save every penny one has and living like a miser. No, it is not like that. Remember that we ONLY live ONCE, and let try to enjoy ourselves and still have fun, and yet not spending too much time and energy acquiring more money to sustain that kind of lifestyle.
We can choose our own lifestyle. We can choose how to spend our time, energy, and money or we can choose NOT to catch up with frenetic urge to acquire more to show off. We can choose to slow down in the later stage of our work life and forgo climbing the corporate ladder once we have less family liabilities.
I have chosen to be DEBT FREE before 40 and will remain that way till the day I say bye bye to planet Earth. I don't bother with the idea of GOOD DEBT OR BAD DEBT. Every debt by nature carries the risk of default in the event of a BLACK SWAN happening. How to live a carefree life if one still have debts to pay off as you will need to divert some time and energy into debt management.
I choose not to upgrade my four-room flat so that I will not get into another debt.
I choose BMW as transport. (Bus, MRT, Walk)
I choose to be partial blind and unable to see clearly what others have in their everyday processions.
So what did you choose and that will determine how you are going to slog it out in your work life?
We can choose our own lifestyle. We can choose how to spend our time, energy, and money or we can choose NOT to catch up with frenetic urge to acquire more to show off. We can choose to slow down in the later stage of our work life and forgo climbing the corporate ladder once we have less family liabilities.
I have chosen to be DEBT FREE before 40 and will remain that way till the day I say bye bye to planet Earth. I don't bother with the idea of GOOD DEBT OR BAD DEBT. Every debt by nature carries the risk of default in the event of a BLACK SWAN happening. How to live a carefree life if one still have debts to pay off as you will need to divert some time and energy into debt management.
I choose not to upgrade my four-room flat so that I will not get into another debt.
I choose BMW as transport. (Bus, MRT, Walk)
I choose to be partial blind and unable to see clearly what others have in their everyday processions.
So what did you choose and that will determine how you are going to slog it out in your work life?
Friday, 3 July 2009
Retirement Planning?
A recent survey revealed that 39 per cent of Singaporeans feel they have a good understanding of their short-term finances. But only 23 per cent can say the same for their long-term finances. The survey also showed that 91 per cent of Singaporeans do not know what their retirement income will be.
'The lack of understanding and knowledge of long-term financial milestones like retirement could be intensified by the current economic downturn, which may have led more people to divert their attention to short-term survival needs instead of long-term goals,' says Sebastian Arcuri, head of Personal Finance Services at HSBC Singapore.
'The consequence of focusing on the short term may be a struggle to make ends meet when it is time to retire.'
Retirement planning includes identifying ways to generate passive income, may be some active income, and manage cash flow, supplement medical coverage, prepare for medical uncertainties and plan for a lifestyle after retirement.
This deep Bear market is a good opportunity for one to carefully build up a base for one's retirement portfolio for future passive income from stock dividends and draw-down for cashflow management.
'The lack of understanding and knowledge of long-term financial milestones like retirement could be intensified by the current economic downturn, which may have led more people to divert their attention to short-term survival needs instead of long-term goals,' says Sebastian Arcuri, head of Personal Finance Services at HSBC Singapore.
'The consequence of focusing on the short term may be a struggle to make ends meet when it is time to retire.'
Retirement planning includes identifying ways to generate passive income, may be some active income, and manage cash flow, supplement medical coverage, prepare for medical uncertainties and plan for a lifestyle after retirement.
This deep Bear market is a good opportunity for one to carefully build up a base for one's retirement portfolio for future passive income from stock dividends and draw-down for cashflow management.
Thursday, 2 July 2009
Anthony Yeo Toon Yong's last wise words
Anthony Yeo Toon Yong was a very recognizable public figure, distinguished by his greying goatee. A much sought after counsellor, he had helped many. The mass media often quoted him on Singapore’s social and political life.
He appeared often over TV, wrote an occasional newspaper column, encouraged others to speak out, and taught from all platforms, church and public. He is credited to have trained more than 1,000 counsellors.
One underlying message of his: live simply, do not be caught up with Singapore’s and Singaporeans’ frenetic urge to acquire more. It was one of the last sermons he delivered last March when, unknown to him, leukaemia had already begun to gnaw away at his life.
He said: ”You can experience the richness of life without the riches of life. You can experience abundant life without the abundance of life. You can experience health and well being without wealth.” (Createwealth8888: Many people still quite blur between being wealthy and being rich. One can be wealthy but not rich. My goal is to be wealthy and not necessary I am rich as I live simply. I think it is not easy to live simply as you need to be thick skin, and you have to learn to ignore how other people look at you)
Of his own mortality, he had said: “If I do not see another day, at least I can leave this earth with open hands, knowing that I am not grabbing on to anything.”
He appeared often over TV, wrote an occasional newspaper column, encouraged others to speak out, and taught from all platforms, church and public. He is credited to have trained more than 1,000 counsellors.
One underlying message of his: live simply, do not be caught up with Singapore’s and Singaporeans’ frenetic urge to acquire more. It was one of the last sermons he delivered last March when, unknown to him, leukaemia had already begun to gnaw away at his life.
He said: ”You can experience the richness of life without the riches of life. You can experience abundant life without the abundance of life. You can experience health and well being without wealth.” (Createwealth8888: Many people still quite blur between being wealthy and being rich. One can be wealthy but not rich. My goal is to be wealthy and not necessary I am rich as I live simply. I think it is not easy to live simply as you need to be thick skin, and you have to learn to ignore how other people look at you)
Of his own mortality, he had said: “If I do not see another day, at least I can leave this earth with open hands, knowing that I am not grabbing on to anything.”
Wednesday, 1 July 2009
Do you want to join the Singapore's Millionaire Club?
S'pore's rich list takes a beating
By Joanna Seow
SINGAPORE'S rich were not spared the effects of the global financial meltdown last year, with the number of millionaires here shrinking 22 per cent to 61,000 people.
A year earlier, Singapore boasted one of the world's top 10 fastest-growing millionaires' clubs, with a 15.3 per cent expansion to 78,000.
A millionaire is defined as a person having net assets of at least US$1 million (S$1.45 million), excluding his main residence and everyday possessions.
Observers say the sharp drop is probably because the well-heeled here were invested heavily in equities and real estate, both of which have suffered in the crisis.
The figures emerged in the 13th annual World Wealth Report released yesterday by banking group Merrill Lynch and research firm Capgemini.
On average, Singapore's 'high net worth individuals' were worth about US$3 million each, said Mr Kong Eng Huat, managing director and head of South Asia advisory at Merrill Lynch Global Wealth Management.
'A lot of these (individuals) are in the US$1 million to US$5 million range. So that's why you find a greater drop in terms of the high net worth population because...when the market comes down and they have invested heavily in equities then they would not be a high net worth individual any more,' he added.
Globally, the number of people in the millionaires' club fell by about 15 per cent to 8.6 million, which is below the figure in 2005. North America, Europe and the Asia-Pacific registered the largest declines.
The total wealth of these individuals fell to US$32.8 trillion, also below the levels in 2005. However, this is forecast to recover in all regions by 2013, with Asia-Pacific leading the growth.
More than half of the world's millionaires last year came from three countries - the United States, Japan and Germany. The proportion is a slight increase from the year before.
China climbed one rung to become the country with the fourth largest millionaires' population of 364,000.
The World Wealth Report also indicated that the millionaires have reacted to the crisis by moving more of their assets into cash and fixed-income securities - and away from equities.
A larger proportion of wealth was allocated to art collections and jewellery, gems and watches. This category hit 47 per cent last year, up from 38 per cent in 2006.
Mr Bhalaji Raghavan, Capgemini's banking solutions leader for Asia-Pacific, said: 'One of the reasons is that people believe that (these items) over a long period of time increase in value, so it's a lot safer than putting their money in financial markets.'
Giving to charity was forecast to be on the decrease on average across the globe this year, especially in North America, but increasing in the Asia-Pacific region.
Private banks contacted by The Straits Times said their clients are now staying away from high-risk investment products.
'Currently, it is back to basics of investment, and we have seen that cash positions in portfolios are high,' said Mr Rajesh Malkani, Standard Chartered Private Bank's head of Southeast Asia.
Mr Raj Sriram, RBS Coutts' head of private banking in Singapore, agreed: 'From a private bank perspective, the main challenge is that clients have become more risk averse due to volatility in the markets...Clients today largely prefer simpler, liquid investments.'
By Joanna Seow
SINGAPORE'S rich were not spared the effects of the global financial meltdown last year, with the number of millionaires here shrinking 22 per cent to 61,000 people.
A year earlier, Singapore boasted one of the world's top 10 fastest-growing millionaires' clubs, with a 15.3 per cent expansion to 78,000.
A millionaire is defined as a person having net assets of at least US$1 million (S$1.45 million), excluding his main residence and everyday possessions.
Observers say the sharp drop is probably because the well-heeled here were invested heavily in equities and real estate, both of which have suffered in the crisis.
The figures emerged in the 13th annual World Wealth Report released yesterday by banking group Merrill Lynch and research firm Capgemini.
On average, Singapore's 'high net worth individuals' were worth about US$3 million each, said Mr Kong Eng Huat, managing director and head of South Asia advisory at Merrill Lynch Global Wealth Management.
'A lot of these (individuals) are in the US$1 million to US$5 million range. So that's why you find a greater drop in terms of the high net worth population because...when the market comes down and they have invested heavily in equities then they would not be a high net worth individual any more,' he added.
Globally, the number of people in the millionaires' club fell by about 15 per cent to 8.6 million, which is below the figure in 2005. North America, Europe and the Asia-Pacific registered the largest declines.
The total wealth of these individuals fell to US$32.8 trillion, also below the levels in 2005. However, this is forecast to recover in all regions by 2013, with Asia-Pacific leading the growth.
More than half of the world's millionaires last year came from three countries - the United States, Japan and Germany. The proportion is a slight increase from the year before.
China climbed one rung to become the country with the fourth largest millionaires' population of 364,000.
The World Wealth Report also indicated that the millionaires have reacted to the crisis by moving more of their assets into cash and fixed-income securities - and away from equities.
A larger proportion of wealth was allocated to art collections and jewellery, gems and watches. This category hit 47 per cent last year, up from 38 per cent in 2006.
Mr Bhalaji Raghavan, Capgemini's banking solutions leader for Asia-Pacific, said: 'One of the reasons is that people believe that (these items) over a long period of time increase in value, so it's a lot safer than putting their money in financial markets.'
Giving to charity was forecast to be on the decrease on average across the globe this year, especially in North America, but increasing in the Asia-Pacific region.
Private banks contacted by The Straits Times said their clients are now staying away from high-risk investment products.
'Currently, it is back to basics of investment, and we have seen that cash positions in portfolios are high,' said Mr Rajesh Malkani, Standard Chartered Private Bank's head of Southeast Asia.
Mr Raj Sriram, RBS Coutts' head of private banking in Singapore, agreed: 'From a private bank perspective, the main challenge is that clients have become more risk averse due to volatility in the markets...Clients today largely prefer simpler, liquid investments.'
Tuesday, 30 June 2009
H1 2009 has ended!!! So how am I doing?
As on 30 Jun 09, I have achieved 26.84% of 2009 Goal (In 2003, I set bullish and progressive goals from 2003 to 2011).
Going forward, I believe that from 2009 to 2011, these bullish goals set at 2003 will be extremely difficult to achieve; but, nevertheless, I shall not change them, but still work towards getting them. Cheers!
Going forward, I believe that from 2009 to 2011, these bullish goals set at 2003 will be extremely difficult to achieve; but, nevertheless, I shall not change them, but still work towards getting them. Cheers!
Sunday, 28 June 2009
Sector rotation
From Wikipedia, the free encyclopedia
Sector rotation is a term normally applied to stock market trading patterns. In this context, a sector is understood to mean a group of stocks representing companies in similar lines of business.
For example, an investor or trader may describe the current market movements as favoring basic material stocks over semiconductor stocks by calling the environment a sector rotation from semiconductors to basic materials.
Sector Rotation Models exist primarily to help investors identify and participate in new trending sectors of the stock market. A sector rotation investment strategy is not a passive investment strategy like indexing, and requires periodic review and adjustment of sector holdings. Tactical asset allocation and sector rotation strategies require patience and discipline, but have the potential to outperform passive indexing investment strategies.
------------------------------------------------------------------------
“If you are in the right sector at the right time, you can make a lot of money very fast” –Peter Lynch
Sector Rotation Theory can help you invest (or trade) in the key sectors that are outperforming the market right now. There are always stocks in certain sectors that are “on fire” or “out of favor”.
Your goal is to understand broad patterns that reoccur and try to find connections between ideas and occurrences in the market and the broad economy. The stock market can at times lead the general economy and provide high-probability trade ideas for longer term positions.
If you can come any closer to mastering the skills of recognizing sector rotation in play, you will be profitable in many months to come. Open your eyes wide. Take the advice from Jim Cramer: “If you want to make money,” Cramer said, “you need to take a chance. Sometimes you will be wrong, but if you never try…you'll never be right.”
Cheers!
Sector rotation is a term normally applied to stock market trading patterns. In this context, a sector is understood to mean a group of stocks representing companies in similar lines of business.
For example, an investor or trader may describe the current market movements as favoring basic material stocks over semiconductor stocks by calling the environment a sector rotation from semiconductors to basic materials.
Sector Rotation Models exist primarily to help investors identify and participate in new trending sectors of the stock market. A sector rotation investment strategy is not a passive investment strategy like indexing, and requires periodic review and adjustment of sector holdings. Tactical asset allocation and sector rotation strategies require patience and discipline, but have the potential to outperform passive indexing investment strategies.
------------------------------------------------------------------------
“If you are in the right sector at the right time, you can make a lot of money very fast” –Peter Lynch
Sector Rotation Theory can help you invest (or trade) in the key sectors that are outperforming the market right now. There are always stocks in certain sectors that are “on fire” or “out of favor”.
Your goal is to understand broad patterns that reoccur and try to find connections between ideas and occurrences in the market and the broad economy. The stock market can at times lead the general economy and provide high-probability trade ideas for longer term positions.
If you can come any closer to mastering the skills of recognizing sector rotation in play, you will be profitable in many months to come. Open your eyes wide. Take the advice from Jim Cramer: “If you want to make money,” Cramer said, “you need to take a chance. Sometimes you will be wrong, but if you never try…you'll never be right.”
Cheers!
Saturday, 27 June 2009
How Much Is Enough? Running Monte Carlo simulator
http://www.flexibleretirementplanner.com/java/LaunchFRPWeb.html
Quite interesting as the simulation supported my planning of retirement fund = 25 x Expected Annual Expenses with 3% average investment return and 3.5% average inflation rate.
Quite interesting as the simulation supported my planning of retirement fund = 25 x Expected Annual Expenses with 3% average investment return and 3.5% average inflation rate.
Friday, 26 June 2009
Olam - sold @ $2.40, ROC 9.6%
Round 3: ROC 9.6%, 8 days, B $2.18 S $2.40
Round 2: ROC 7.0%, 8 days, B $2.18 S $2.35
Round 1: ROC 9.8%, 161 days, B $1.37 S $1.52
Making the next pillow in progress. Cheers!
Round 2: ROC 7.0%, 8 days, B $2.18 S $2.35
Round 1: ROC 9.8%, 161 days, B $1.37 S $1.52
Making the next pillow in progress. Cheers!
Olam - sold @ $2.35 , ROC 7%
Round 2: ROC 7.0%, 8 days, B $2.18 S $2.35
Round 1: ROC 9.8%, 161 days, B $1.37 S $1.52
Looking for the next round. Cheers!
Round 1: ROC 9.8%, 161 days, B $1.37 S $1.52
Looking for the next round. Cheers!
Saturday, 20 June 2009
Noble - Take profit next week?
Testing the time-tested hard Resistance level again and again, but GMMA might be showing that it could break into the next higher ranging box.
Thursday, 18 June 2009
Wednesday, 17 June 2009
Singaporeans unclear about retirement income - Part 2
"Singaporeans unclear about retirement income: survey" <--- Part 1
aiyo, I am short of 26.7% of income and either to fund it from partial draw-down and/or others.
Perhaps, I may need to allocate more money into CPF to earn risk-free 2.5% or increase more pillow stocks for dividends, and also look into other source of passive income.
Need to re-strategise liao!
aiyo, I am short of 26.7% of income and either to fund it from partial draw-down and/or others.
Perhaps, I may need to allocate more money into CPF to earn risk-free 2.5% or increase more pillow stocks for dividends, and also look into other source of passive income.
Need to re-strategise liao!
Tuesday, 16 June 2009
Paradox Of Our Times
Today we have bigger houses, but smaller families
More conveniences , but less time
We Have More degrees, but less common sense
More knowledge , but less judgment
We have more experts, but more problems
More medicine, but less wellness
We spend too recklessly
Laugh too little
Drive too fast
Get too angry too quickly
Stay up too late
Read too little
Watch TV too much
And ponder too little.
We’ve multiplied our possessions,
but reduce our values
We talk too much, love too little and lie too often
We’ve learned how to make a living, but not a life
We’ve added years to our lives, but not life to our years
We have taller buildings, but shorter tempers
Wider freeways, but narrower viewpoints
We spend more, but have less
We buy more, enjoy it less
We’ve been all the way to the moon and back
But have trouble crossing the street to meet our neighbors.
We’ve conquered outer space,
But not inner space
We’ve split the atom
But not our prejudice
We write more, learn less, ---------------------- plan more, but accomplish less
we’ve learned to rush, but not to wait,
we have higher incomes , but lower morals
We build more computers to hold more information, to produce more copies
But have less communication
We are long on quantity,
But short on quality
These are the time of fast foods and slow digestion
Taller people, and short character
More leisure and less fun ,,,,,more kinds of foods ,,,,, but less nutrition
Two incomes ,,,,,but more divorce
Fancier houses ,,,, but more broken homes
That’s why I propose , that as of today , you do not keep anything for special occasions, because every day you live is a special occasion.
Search for knowledge , read more , sit on your front porch and admire the view without paying attention to the time.
Spend more time with your family and friends , eat your favorite foods, and visit the places you love .
Use your crystal goblets…do not save your best perfume for best…throw a party for no good reason.
Life isn’t only about survival … It’s about joy.
Do not delay anything that adds laughter and joy to your life.
Remove from your vocabulary phrases like “ one of these days “ and “ someday”
Let’s write that letter we thought of writing “ one of these days “
Let’s tell our families and friends how much we love them.
If you’re too busy to take the time to send this message to someone you love , and you tell yourself you will send it “ one of these days “
You missed the point! believe me
Source: Cyberspace. Author: ???
More conveniences , but less time
We Have More degrees, but less common sense
More knowledge , but less judgment
We have more experts, but more problems
More medicine, but less wellness
We spend too recklessly
Laugh too little
Drive too fast
Get too angry too quickly
Stay up too late
Read too little
Watch TV too much
And ponder too little.
We’ve multiplied our possessions,
but reduce our values
We talk too much, love too little and lie too often
We’ve learned how to make a living, but not a life
We’ve added years to our lives, but not life to our years
We have taller buildings, but shorter tempers
Wider freeways, but narrower viewpoints
We spend more, but have less
We buy more, enjoy it less
We’ve been all the way to the moon and back
But have trouble crossing the street to meet our neighbors.
We’ve conquered outer space,
But not inner space
We’ve split the atom
But not our prejudice
We write more, learn less, ---------------------- plan more, but accomplish less
we’ve learned to rush, but not to wait,
we have higher incomes , but lower morals
We build more computers to hold more information, to produce more copies
But have less communication
We are long on quantity,
But short on quality
These are the time of fast foods and slow digestion
Taller people, and short character
More leisure and less fun ,,,,,more kinds of foods ,,,,, but less nutrition
Two incomes ,,,,,but more divorce
Fancier houses ,,,, but more broken homes
That’s why I propose , that as of today , you do not keep anything for special occasions, because every day you live is a special occasion.
Search for knowledge , read more , sit on your front porch and admire the view without paying attention to the time.
Spend more time with your family and friends , eat your favorite foods, and visit the places you love .
Use your crystal goblets…do not save your best perfume for best…throw a party for no good reason.
Life isn’t only about survival … It’s about joy.
Do not delay anything that adds laughter and joy to your life.
Remove from your vocabulary phrases like “ one of these days “ and “ someday”
Let’s write that letter we thought of writing “ one of these days “
Let’s tell our families and friends how much we love them.
If you’re too busy to take the time to send this message to someone you love , and you tell yourself you will send it “ one of these days “
You missed the point! believe me
Source: Cyberspace. Author: ???
Sunday, 14 June 2009
H1 Window dressing coming soon?
Where will STI heading to? Breaking up above 2400 or breaking down below 2300? Will the Smart Money buy the ideas of G8?
-------------------------------------------------------------------------------------
June 14 (Bloomberg) -- The Group of Eight nations began considering how to reverse the emergency steps they took to rescue the world economy as it shows signs of recovery.
As they delivered their most upbeat outlook since Lehman Brothers Holdings Inc. collapsed, G-8 finance ministers said they will start planning exit strategies for when sustainable growth returns. It’s still too soon to roll back budget deficits and bank bailouts, they said after a meeting in Lecce, Italy.
“We discussed the need to prepare appropriate strategies for unwinding the extraordinary policy measures taken to respond to the crisis once the recovery is assured,” the ministers said in a statement yesterday after two days of talks. There are “signs of stabilization,” though “the situation remains uncertain.”
Saturday, 13 June 2009
Singaporeans unclear about retirement income: survey
Published June 13, 2009
By ZEINAB YUSUF
MOST Singaporeans - as in elsewhere - are clueless about what their retirement income will look like, a recent survey by HSBC revealed.
NOT FULLY PREPARED
Singaporeans are focusing on short-term finances rather than long-term considerations like retirement needs
Released yesterday, the fifth annual Future of Retirement study, It's Time to Prepare, questioned 15,000 people in 15 countries and found that 91 per cent of people here do not know what income they will receive in retirement.
Additionally, the survey identified a 'preparedness gap' in people's retirement planning across the world with nearly 9 out of 10 people not feeling fully prepared for their retirement.
------------------------------------------------------------------------------------
I have identified possible sources for Retirement Income as follows:
1) Dividends from stocks
2) Interests from Fixed Deposit/CPF (leaving it at CPF after 55 years old at 2.5%)
3) Minimum sum payout from 65 onwards
4) Any shortfall to be covered by partial draw-down from Retirement Fund
http://createwealth8888.blogspot.com/2008/09/retirement-drawdown-and-passive-income.html
By ZEINAB YUSUF
MOST Singaporeans - as in elsewhere - are clueless about what their retirement income will look like, a recent survey by HSBC revealed.
NOT FULLY PREPARED
Singaporeans are focusing on short-term finances rather than long-term considerations like retirement needs
Released yesterday, the fifth annual Future of Retirement study, It's Time to Prepare, questioned 15,000 people in 15 countries and found that 91 per cent of people here do not know what income they will receive in retirement.
Additionally, the survey identified a 'preparedness gap' in people's retirement planning across the world with nearly 9 out of 10 people not feeling fully prepared for their retirement.
------------------------------------------------------------------------------------
I have identified possible sources for Retirement Income as follows:
1) Dividends from stocks
2) Interests from Fixed Deposit/CPF (leaving it at CPF after 55 years old at 2.5%)
3) Minimum sum payout from 65 onwards
4) Any shortfall to be covered by partial draw-down from Retirement Fund
http://createwealth8888.blogspot.com/2008/09/retirement-drawdown-and-passive-income.html
Friday, 12 June 2009
4 Mental Keys That Help My Trading Performance
On Thursday June 11, 2009, 10:05 am EDT
Price Headley - CFA, CMT, President & Founder of BigTrends.com. Price has been widely quoted by Barron's, CNBC, The Wall Street Journal and USA Today. Price is also the author of the new book, Big Trends in Trading: Strategies to Master Major Market Moves.
The mental part of trading is just as important as the systems and indicators you utilize. Today, we'll touch on some insights from an excellent book for traders, Larry Williams' go to amazon.com to find Long-Term Secrets to Short-Term Trading.
Insight #1: "Why do most traders lose most of the time? Markets can spin on a dime and most traders cannot."
Even the best traders (or the best trading systems) are going to be frequently wrong. That doesn't negate the trader or the system - that's just part of trading. The challenge for traders is accepting that the trade signal was errant. In a case such as this, Williams correctly points out that we've been trained to 'hang in there' and 'have faith in our initial insight', even if it's clearly the wrong course of action. That's just our ego needing to be right so badly that it will often ignore the exit signals that warn the trader of the impending problem. His analogy may help you work through this issue. He compares trading to robbing a bank. A bank robber may successfully break into a bank and start scooping up the money, but when the lookout guy warns the man in the safe that the cops are on the way, the robber drops the money and runs. If the robber were like too many traders, he might stay in the bank and hope the warning about cops being on the way was a false warning. As Williams says, "The instant you learn to trade reality, not wishes, you will break through the wall of fire to become a successful trader."
Insight #2: It's not the trade, it's the battle.
Too many traders believe that their last trade is a reflection of just how good of a trader they are (but they are the only ones who feel that way about themselves). This boils down to one word - expectation. If you expect to win all the time, or even the vast majority of the time, you're setting yourself up for a lot of heartache. That frustration, though, is the very same force that will truly make your negative perception of yourself a reality. And even a good trade can be damaging if you let it warp your disciplined approach. The fact of the matter is that this is a game of odds, and should be played over a long period of time. Focus on the war - not the battle.
Insight #3: The amount of (or lack of) evidence for a market move does not make the move any more or any less likely.
All traders, but especially new traders, have one of two problems. They either buy too soon, or buy too late (and in reality, when it comes down to it, those are the ONLY two problems in trading). The first problem of buying too soon is a sign of not wanting to miss out of any of a move. Of course, if you jump in and the move never becomes a reality, the trade suffers. The second problem is the opposite - the trader wants to make sure the move is going to happen, so he or she will wait for all the right signals to verify that the move is for real. Of course by that time, most of the move is behind you. While it's easier said than done, one has to find a balance between those two extremes. In this case, the best teacher is experience.
Insight # 4: What's the difference between winning traders and losing traders?
Well, first, there are a few similarities. Both are completely consumed by the idea of trading. The winners as well as losers have committed to doing this, and have no intention of 'going back'. This same black-and-white mentality was evident in their personal lives too. But what about the differences? Here's what Williams observed:
The losing traders have unrealistic expectations about the kind of profits they can make, typically shooting too high. They also debate with themselves before taking a trade, and even dwell on a trade well after it's closed out. But the one big thing Williams noticed about this group was that they paid little attention to money management (i.e. defense).And the winners? This group has an intense focus on money management, and will voluntarily exit a trade if it's not moving - even if it's not losing money at that time! There is also very little internal dialogue about trade selection and trade management; this group just takes action instead of suffering analysis paralysis. Finally, the winning traders focused their attention on a small niche in the market or a few techniques, rather than trying to be able to do everything. Hopefully the second description fits you a little better, but if the first one seems a little too familiar, you now at least know how to start getting past that barrier.
Price Headley - CFA, CMT, President & Founder of BigTrends.com. Price has been widely quoted by Barron's, CNBC, The Wall Street Journal and USA Today. Price is also the author of the new book, Big Trends in Trading: Strategies to Master Major Market Moves.
The mental part of trading is just as important as the systems and indicators you utilize. Today, we'll touch on some insights from an excellent book for traders, Larry Williams' go to amazon.com to find Long-Term Secrets to Short-Term Trading.
Insight #1: "Why do most traders lose most of the time? Markets can spin on a dime and most traders cannot."
Even the best traders (or the best trading systems) are going to be frequently wrong. That doesn't negate the trader or the system - that's just part of trading. The challenge for traders is accepting that the trade signal was errant. In a case such as this, Williams correctly points out that we've been trained to 'hang in there' and 'have faith in our initial insight', even if it's clearly the wrong course of action. That's just our ego needing to be right so badly that it will often ignore the exit signals that warn the trader of the impending problem. His analogy may help you work through this issue. He compares trading to robbing a bank. A bank robber may successfully break into a bank and start scooping up the money, but when the lookout guy warns the man in the safe that the cops are on the way, the robber drops the money and runs. If the robber were like too many traders, he might stay in the bank and hope the warning about cops being on the way was a false warning. As Williams says, "The instant you learn to trade reality, not wishes, you will break through the wall of fire to become a successful trader."
Insight #2: It's not the trade, it's the battle.
Too many traders believe that their last trade is a reflection of just how good of a trader they are (but they are the only ones who feel that way about themselves). This boils down to one word - expectation. If you expect to win all the time, or even the vast majority of the time, you're setting yourself up for a lot of heartache. That frustration, though, is the very same force that will truly make your negative perception of yourself a reality. And even a good trade can be damaging if you let it warp your disciplined approach. The fact of the matter is that this is a game of odds, and should be played over a long period of time. Focus on the war - not the battle.
Insight #3: The amount of (or lack of) evidence for a market move does not make the move any more or any less likely.
All traders, but especially new traders, have one of two problems. They either buy too soon, or buy too late (and in reality, when it comes down to it, those are the ONLY two problems in trading). The first problem of buying too soon is a sign of not wanting to miss out of any of a move. Of course, if you jump in and the move never becomes a reality, the trade suffers. The second problem is the opposite - the trader wants to make sure the move is going to happen, so he or she will wait for all the right signals to verify that the move is for real. Of course by that time, most of the move is behind you. While it's easier said than done, one has to find a balance between those two extremes. In this case, the best teacher is experience.
Insight # 4: What's the difference between winning traders and losing traders?
Well, first, there are a few similarities. Both are completely consumed by the idea of trading. The winners as well as losers have committed to doing this, and have no intention of 'going back'. This same black-and-white mentality was evident in their personal lives too. But what about the differences? Here's what Williams observed:
The losing traders have unrealistic expectations about the kind of profits they can make, typically shooting too high. They also debate with themselves before taking a trade, and even dwell on a trade well after it's closed out. But the one big thing Williams noticed about this group was that they paid little attention to money management (i.e. defense).And the winners? This group has an intense focus on money management, and will voluntarily exit a trade if it's not moving - even if it's not losing money at that time! There is also very little internal dialogue about trade selection and trade management; this group just takes action instead of suffering analysis paralysis. Finally, the winning traders focused their attention on a small niche in the market or a few techniques, rather than trying to be able to do everything. Hopefully the second description fits you a little better, but if the first one seems a little too familiar, you now at least know how to start getting past that barrier.
Thursday, 11 June 2009
Wednesday, 10 June 2009
Myths that stand in the way of investors
Published June 10, 2009
By SHANE OLIVER
GIVEN the complexity of investment markets and investing, along with the massive amount of information available to investors, many people rely on logic based on 'common sense' or simple 'rules of thumb' in making investment decisions. However, while some such rules of thumb are reasonable, in many cases they are not and can result in investors missing opportunities or losing money. In this note, we look at some of these and why they are unreliable.
Making gains: History indicates time and again that the best gains in stocks are usually made when the economic news is poor and economic recovery is just beginning or not even evident
Myth #1: High unemployment will prevent an economic recovery
This argument is wheeled out every time there is a recession - like now. If it were correct then economies would never recover from recession but simply spiral down into the sort of crises that Karl Marx predicted would ultimately lead to the demise of capitalism. Of course, no such thing happens. Rather, the boost to household discretionary income from lower mortgage bills (as interest rates fall) and tax cuts or stimulus payments to households during recessions eventually offsets the fear of unemployment for the bulk of people still employed. As a result, they eventually start to spend more which in turn gets the economy going again. In fact, it is normal for unemployment to keep rising during the initial phases of an economic recovery as businesses are slow to start employing again fearing the recovery won't last. Since share markets normally lead economic recoveries, the peak in unemployment often comes a long time after shares have bottomed.
Myth #2: Business won't invest when capacity utilisation is low
This argument is also rolled out during recessions. The problem with this myth is to ignore the fact that capacity utilisation is low in a recession simply because spending - including business investment - is weak. So when demand turns up, profits improve and this drives a pick-up in business investment which in turn drives up capacity utilisation. So while business investment in key countries right now is poor, providing there will be a pick up in demand - and several indicators are pointing to such later this year - then business investment will start to improve even though many factories are still idle.
Myth #3: Corporate CEOs, being close to the ground, should provide a good guide to where the economy is going
Again this myth sounds like good common sense. However, senior business people are often overwhelmingly influenced by their own sales figures but have no particular lead on the future. In the late stages of the early 1980s and early 1990s recessions, anecdotal comments from Australian CEOs were generally bearish - just as recovery was about to take hold. Note this is not to say that CEO comments are of no value; but they should be seen as telling us where we are rather than where we are going.
Myth #4: The economic cycle is suspended
A common mistake investors make at business cycle extremes is to assume that the business cycle won't turn back the other way. After several years of good times, it is common to hear talk of 'a new era of prosperity'. Similarly, during bad times it is common to hear talk of 'continued tough times'. But history tells us the business cycle is likely to remain alive and well.
Myth #5: Crowd support for a particular investment indicates a sure thing
This 'safety in numbers' concept has its origin in crowd psychology. Put simply, individual investors often feel safest investing in a particular asset when their neighbours and friends are doing so and the positive message is reinforced via media commentary. The only problem with it is that while it may work for a while, it is usually doomed to failure. The reason is that if everyone is bullish and has bought into the asset, there is no one left to buy in the face of any more good news, but plenty of people who can sell if some bad news comes along. Of course, the opposite applies when everyone is bearish and has sold - it only takes a bit of good news to turn the market up. The trick for smart investors is to be sceptical of crowds rather than drawing comfort from them.
Myth #6: Recent past returns are a guide to the future
This is another classic mistake that investors make, which is again clearly rooted in investor psychology. Reflecting the difficulty in processing information, short memories and wishful thinking, recent poor returns are assumed to continue and vice versa for strong returns. The problem with this is that combined with the 'safety in numbers' myth it results in investors getting into an investment at the wrong time (when it is peaking) and getting out of it at the wrong time (when it is bottoming).
Myth #7: Strong economic growth and strong profit growth are good for stocks and poor economic growth and falling profits are bad
This is generally true over the long term and at various points in the economic cycle, but at cyclical extremes it is usually very wrong and constitutes another big mistake investors make. The big problem is that share markets are forward looking, so when economic data is really strong - measured by strong economic growth, low unemployment - the market has already factored it in. In fact the share market may then start to fret about rising cost pressures and rising short-term interest rates. As an example, when global share markets peaked in October/November 2007 global economic growth and profit indicators looked good.
Of course, the opposite occurs at market lows. For example, at the bottom of the last bear market in shares back in March 2003, global economic indicators were very poor and the general fear was off a 'double dip' back into global recession. As it turned out despite this 'bad news' stocks turned around, with better economic and profit news only coming along later in the year to confirm the rally. History indicates time and again that the best gains in stocks are usually made when the economic news is poor and economic recovery is just beginning or not even evident.
Myth #8: Strong demand for a particular product produced by a stock market sector (for example, housing) should see stocks in the sector do well and vice versa
While this might work over the long term and for a while it suffers from the same weakness as Myth #7. That is that by the time, for example housing construction, is really strong it should already be factored into the share prices for building material and home building stocks and thus they might even start to start to anticipate a downturn.
Myth #9: Having a well diversified portfolio means that an investor is free to take on more risk
This mistake has been clearly evident in recent years. A common strategy has been to build up more diverse portfolios of investments less dependent on equities and with greater exposure to alternatives such as hedge funds, commodities, direct property, credit, infrastructure and timber. This generally led to a reduced exposure to truly defensive asset classes like government bonds. So in effect investors have actually been taking on more risk helped by the 'comfort' provided by greater diversification. Yes, there is a case for alternative assets. But unfortunately the events of the last two years have exposed the danger in allowing such an approach to drive an increased exposure to risky assets overall. Apart from government bonds and cash, virtually all assets have felt the blow torch of the global financial crisis, with agricultural investments being the latest victim in Australia.
Myth #10: Tax should be the key driver of investment decisions
For many the motivation to reduce tax is a key investment driver. But there is no point negatively gearing into an investment so as to get a tax refund if it always makes a loss. Similarly the recent experience with Managed Investment Schemes also highlights the danger in relying too much on tax considerations to drive investments. The first priority is to make sure that an investment stacks up well in its own right - without relying on tax considerations.
Myth #11: Experts can tell you where the market is going
Economic and investment forecasts are often seen as central to investing. But, at the risk of being thrown out of both the 'economists club' and the 'market strategists club', no one has a perfect crystal ball. And sometimes they are badly flawed. It is well known that when the consensus of experts' forecasts for key economic or investment indicators are compared to actual outcomes, they are often out by a wide margin. This was particularly the case last year. Forecasts for economic and investment indicators are useful, but need to be treated with care. If forecasting the investment markets was so easy then everyone would be rich and would have stopped doing it. The key value in investment experts' analysis and forecasts is to get a handle on all the issues surrounding an investment market and to understand what the consensus is. Experts are also useful in placing current events in their historical context, and this can provide valuable insights for investors in terms of the potential for the market going forward. This is far more valuable than simple forecasts as to where the ASX 200 will be in a year's time.
Conclusion
The myths cited here might appear logical and consistent with common sense, but they all suffer often fatal flaws which can lead investors into making the wrong decisions. The trick to successful investing is to recognise that markets (and economies) are highly complex, that they don't go in the same direction indefinitely, that markets are usually forward looking and that avoiding crowds is healthy.
Shane Oliver is head of investment strategy and chief economist, AMP Capital Investors
By SHANE OLIVER
GIVEN the complexity of investment markets and investing, along with the massive amount of information available to investors, many people rely on logic based on 'common sense' or simple 'rules of thumb' in making investment decisions. However, while some such rules of thumb are reasonable, in many cases they are not and can result in investors missing opportunities or losing money. In this note, we look at some of these and why they are unreliable.
Making gains: History indicates time and again that the best gains in stocks are usually made when the economic news is poor and economic recovery is just beginning or not even evident
Myth #1: High unemployment will prevent an economic recovery
This argument is wheeled out every time there is a recession - like now. If it were correct then economies would never recover from recession but simply spiral down into the sort of crises that Karl Marx predicted would ultimately lead to the demise of capitalism. Of course, no such thing happens. Rather, the boost to household discretionary income from lower mortgage bills (as interest rates fall) and tax cuts or stimulus payments to households during recessions eventually offsets the fear of unemployment for the bulk of people still employed. As a result, they eventually start to spend more which in turn gets the economy going again. In fact, it is normal for unemployment to keep rising during the initial phases of an economic recovery as businesses are slow to start employing again fearing the recovery won't last. Since share markets normally lead economic recoveries, the peak in unemployment often comes a long time after shares have bottomed.
Myth #2: Business won't invest when capacity utilisation is low
This argument is also rolled out during recessions. The problem with this myth is to ignore the fact that capacity utilisation is low in a recession simply because spending - including business investment - is weak. So when demand turns up, profits improve and this drives a pick-up in business investment which in turn drives up capacity utilisation. So while business investment in key countries right now is poor, providing there will be a pick up in demand - and several indicators are pointing to such later this year - then business investment will start to improve even though many factories are still idle.
Myth #3: Corporate CEOs, being close to the ground, should provide a good guide to where the economy is going
Again this myth sounds like good common sense. However, senior business people are often overwhelmingly influenced by their own sales figures but have no particular lead on the future. In the late stages of the early 1980s and early 1990s recessions, anecdotal comments from Australian CEOs were generally bearish - just as recovery was about to take hold. Note this is not to say that CEO comments are of no value; but they should be seen as telling us where we are rather than where we are going.
Myth #4: The economic cycle is suspended
A common mistake investors make at business cycle extremes is to assume that the business cycle won't turn back the other way. After several years of good times, it is common to hear talk of 'a new era of prosperity'. Similarly, during bad times it is common to hear talk of 'continued tough times'. But history tells us the business cycle is likely to remain alive and well.
Myth #5: Crowd support for a particular investment indicates a sure thing
This 'safety in numbers' concept has its origin in crowd psychology. Put simply, individual investors often feel safest investing in a particular asset when their neighbours and friends are doing so and the positive message is reinforced via media commentary. The only problem with it is that while it may work for a while, it is usually doomed to failure. The reason is that if everyone is bullish and has bought into the asset, there is no one left to buy in the face of any more good news, but plenty of people who can sell if some bad news comes along. Of course, the opposite applies when everyone is bearish and has sold - it only takes a bit of good news to turn the market up. The trick for smart investors is to be sceptical of crowds rather than drawing comfort from them.
Myth #6: Recent past returns are a guide to the future
This is another classic mistake that investors make, which is again clearly rooted in investor psychology. Reflecting the difficulty in processing information, short memories and wishful thinking, recent poor returns are assumed to continue and vice versa for strong returns. The problem with this is that combined with the 'safety in numbers' myth it results in investors getting into an investment at the wrong time (when it is peaking) and getting out of it at the wrong time (when it is bottoming).
Myth #7: Strong economic growth and strong profit growth are good for stocks and poor economic growth and falling profits are bad
This is generally true over the long term and at various points in the economic cycle, but at cyclical extremes it is usually very wrong and constitutes another big mistake investors make. The big problem is that share markets are forward looking, so when economic data is really strong - measured by strong economic growth, low unemployment - the market has already factored it in. In fact the share market may then start to fret about rising cost pressures and rising short-term interest rates. As an example, when global share markets peaked in October/November 2007 global economic growth and profit indicators looked good.
Of course, the opposite occurs at market lows. For example, at the bottom of the last bear market in shares back in March 2003, global economic indicators were very poor and the general fear was off a 'double dip' back into global recession. As it turned out despite this 'bad news' stocks turned around, with better economic and profit news only coming along later in the year to confirm the rally. History indicates time and again that the best gains in stocks are usually made when the economic news is poor and economic recovery is just beginning or not even evident.
Myth #8: Strong demand for a particular product produced by a stock market sector (for example, housing) should see stocks in the sector do well and vice versa
While this might work over the long term and for a while it suffers from the same weakness as Myth #7. That is that by the time, for example housing construction, is really strong it should already be factored into the share prices for building material and home building stocks and thus they might even start to start to anticipate a downturn.
Myth #9: Having a well diversified portfolio means that an investor is free to take on more risk
This mistake has been clearly evident in recent years. A common strategy has been to build up more diverse portfolios of investments less dependent on equities and with greater exposure to alternatives such as hedge funds, commodities, direct property, credit, infrastructure and timber. This generally led to a reduced exposure to truly defensive asset classes like government bonds. So in effect investors have actually been taking on more risk helped by the 'comfort' provided by greater diversification. Yes, there is a case for alternative assets. But unfortunately the events of the last two years have exposed the danger in allowing such an approach to drive an increased exposure to risky assets overall. Apart from government bonds and cash, virtually all assets have felt the blow torch of the global financial crisis, with agricultural investments being the latest victim in Australia.
Myth #10: Tax should be the key driver of investment decisions
For many the motivation to reduce tax is a key investment driver. But there is no point negatively gearing into an investment so as to get a tax refund if it always makes a loss. Similarly the recent experience with Managed Investment Schemes also highlights the danger in relying too much on tax considerations to drive investments. The first priority is to make sure that an investment stacks up well in its own right - without relying on tax considerations.
Myth #11: Experts can tell you where the market is going
Economic and investment forecasts are often seen as central to investing. But, at the risk of being thrown out of both the 'economists club' and the 'market strategists club', no one has a perfect crystal ball. And sometimes they are badly flawed. It is well known that when the consensus of experts' forecasts for key economic or investment indicators are compared to actual outcomes, they are often out by a wide margin. This was particularly the case last year. Forecasts for economic and investment indicators are useful, but need to be treated with care. If forecasting the investment markets was so easy then everyone would be rich and would have stopped doing it. The key value in investment experts' analysis and forecasts is to get a handle on all the issues surrounding an investment market and to understand what the consensus is. Experts are also useful in placing current events in their historical context, and this can provide valuable insights for investors in terms of the potential for the market going forward. This is far more valuable than simple forecasts as to where the ASX 200 will be in a year's time.
Conclusion
The myths cited here might appear logical and consistent with common sense, but they all suffer often fatal flaws which can lead investors into making the wrong decisions. The trick to successful investing is to recognise that markets (and economies) are highly complex, that they don't go in the same direction indefinitely, that markets are usually forward looking and that avoiding crowds is healthy.
Shane Oliver is head of investment strategy and chief economist, AMP Capital Investors
Tuesday, 9 June 2009
It pays to stay invested
Business Times - 06 Jun 2009
WEALTH INSIGHTS
When market recovers, emotional investors will be left with a portfolio of defensive assets and a truckload of regret
By Lim Beng Tat
Director
Russel Investments Asia
WE ALL know equity markets rise and fall. However, the recent market correction has worn down many investors. Weary of asking 'have we reached the bottom yet?', investors want to know when the recovery will come. And unfortunately no one knows the answer to that.
To sit back and watch investments post negative returns is simply unbearable for many. The truth is there may be more value in 'inaction' for the smart and disciplined long-term investor. And experience tells us that decisions about money made under highly emotional circumstances rarely turn out to be good ones.
What we do know is that when equity markets do finally have a rally (as history has shown they do) investors who have chosen not to stay invested in equity markets risk missing out on a recovery that could help them recoup some of their market losses.
Towards the end of 2007 we witnessed one of the greatest bull markets of all time. Investors in the Singapore stock market had been riding a euphoric wave of double-digit equity market returns over the preceding five-year period as can be seen in Chart 1. Then 2008 arrived and the party was over.
In the last few years many 'emotional investors' who traditionally invested in more defensive assets (such as bonds and cash) transferred money over to equities blindly attracted to the apparent returns without considering the associated risks. When equity markets collapsed, these emotional investors started to realise that markets could go down as well as up.
Similarly, over attention to risk during the current market downturn has focused investor attention on minimising losses rather than waiting to participate in the recovery. As a result, these investors have oversold equities and transferred the proceeds into bonds and cash.
Investors have also held back from investing in equity markets in recent months because there is continued uncertainty and a seemingly never-ending run of bad news of corporate failures and bailouts.
However, what many of these investors have forgotten is that when market do recover, they will be left with a portfolio of defensive assets and a truckload of regret.
Although the current market volatility - triggered by the US housing slump and sub-prime mortgage crisis - has been a painful experience, investors can take some comfort in putting the recent downturn into perspective. If we step back and look at the performance of the Singapore market over the past five or six years, it is easy to appreciate the value of long-term investing and it is quite clear there will be another 'party'. We just don't know when.
The current bear market's intensity has been compared to the Great Depression and the bear market of 1973-74. The 1973-74 bear market created many jumpy equity investors. However, those who maintained their equity positions were well rewarded in the second-half of 1974 and the first quarter of 1975.
Charts 1 and 3 illustrate this fact and also show the different time periods where US and Singapore equity markets recorded strong negative returns. As you can see, periods where there are heavy losses on the markets are generally always followed by significant bounce backs.
What we do know is that markets can't go down forever. Although sometimes, in the middle of a strong downturn, it is hard to believe that markets will one day recover. While nobody can accurately predict when the bottom of the trough will be reached - or if indeed it has already - everybody knows that it will (sooner or later) arrive.
And when it does, it will pay to be invested. Some of the highest returns are experienced suddenly in an oversold, overshot market.
Give it some thought - as shown in Chart 1, the Singapore market experienced consecutive negative returns in 1997 and 1998. However in 1988, the market bounced back in a big way climbing close to 80 per cent. We saw it again from 2000 to 2002 and then in 2003 we saw returns of over 30 per cent.
While it may be tempting to simply convert equities into cash and bonds and watch from the sidelines, history tells us that investors selling to cash during falling markets can expect to see significant underperformance when equity markets return to health.
Yes we would all like to 'buy low and sell high' but the reality is that emotions work against this investment principal. While extended bear markets inevitably induce fear in investors - professionals and individuals alike - a disciplined approach can help minimise losses during the downswing and ensure readiness for the upswing.
Forecasting represents predictions of market prices and/or volume patterns utilising varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.
WEALTH INSIGHTS
When market recovers, emotional investors will be left with a portfolio of defensive assets and a truckload of regret
By Lim Beng Tat
Director
Russel Investments Asia
WE ALL know equity markets rise and fall. However, the recent market correction has worn down many investors. Weary of asking 'have we reached the bottom yet?', investors want to know when the recovery will come. And unfortunately no one knows the answer to that.
To sit back and watch investments post negative returns is simply unbearable for many. The truth is there may be more value in 'inaction' for the smart and disciplined long-term investor. And experience tells us that decisions about money made under highly emotional circumstances rarely turn out to be good ones.
What we do know is that when equity markets do finally have a rally (as history has shown they do) investors who have chosen not to stay invested in equity markets risk missing out on a recovery that could help them recoup some of their market losses.
Towards the end of 2007 we witnessed one of the greatest bull markets of all time. Investors in the Singapore stock market had been riding a euphoric wave of double-digit equity market returns over the preceding five-year period as can be seen in Chart 1. Then 2008 arrived and the party was over.
In the last few years many 'emotional investors' who traditionally invested in more defensive assets (such as bonds and cash) transferred money over to equities blindly attracted to the apparent returns without considering the associated risks. When equity markets collapsed, these emotional investors started to realise that markets could go down as well as up.
Similarly, over attention to risk during the current market downturn has focused investor attention on minimising losses rather than waiting to participate in the recovery. As a result, these investors have oversold equities and transferred the proceeds into bonds and cash.
Investors have also held back from investing in equity markets in recent months because there is continued uncertainty and a seemingly never-ending run of bad news of corporate failures and bailouts.
However, what many of these investors have forgotten is that when market do recover, they will be left with a portfolio of defensive assets and a truckload of regret.
Although the current market volatility - triggered by the US housing slump and sub-prime mortgage crisis - has been a painful experience, investors can take some comfort in putting the recent downturn into perspective. If we step back and look at the performance of the Singapore market over the past five or six years, it is easy to appreciate the value of long-term investing and it is quite clear there will be another 'party'. We just don't know when.
The current bear market's intensity has been compared to the Great Depression and the bear market of 1973-74. The 1973-74 bear market created many jumpy equity investors. However, those who maintained their equity positions were well rewarded in the second-half of 1974 and the first quarter of 1975.
Charts 1 and 3 illustrate this fact and also show the different time periods where US and Singapore equity markets recorded strong negative returns. As you can see, periods where there are heavy losses on the markets are generally always followed by significant bounce backs.
What we do know is that markets can't go down forever. Although sometimes, in the middle of a strong downturn, it is hard to believe that markets will one day recover. While nobody can accurately predict when the bottom of the trough will be reached - or if indeed it has already - everybody knows that it will (sooner or later) arrive.
And when it does, it will pay to be invested. Some of the highest returns are experienced suddenly in an oversold, overshot market.
Give it some thought - as shown in Chart 1, the Singapore market experienced consecutive negative returns in 1997 and 1998. However in 1988, the market bounced back in a big way climbing close to 80 per cent. We saw it again from 2000 to 2002 and then in 2003 we saw returns of over 30 per cent.
While it may be tempting to simply convert equities into cash and bonds and watch from the sidelines, history tells us that investors selling to cash during falling markets can expect to see significant underperformance when equity markets return to health.
Yes we would all like to 'buy low and sell high' but the reality is that emotions work against this investment principal. While extended bear markets inevitably induce fear in investors - professionals and individuals alike - a disciplined approach can help minimise losses during the downswing and ensure readiness for the upswing.
Forecasting represents predictions of market prices and/or volume patterns utilising varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.
Sunday, 7 June 2009
Simple Guidelines for Happiness
Remember these .....
1. Free your heart from hate.
2. Free your mind from worry.
3. Live simply.
4. Give more.
5. Expect less.
The story of old man and his happiness .....
A man of 92 years, short, very well-presented, who takes great care in his appearance, is moving into an old people’s home today. His wife of 70 has recently died, and he is obliged to leave his home.
After waiting several hours in the retirement home lobby, he gently smiles as he is told that his room is ready.
As he slowly walks to the elevator, using his cane, I describe his small room to him, including the sheet hung at the window which serves as a curtain.
"I like it very much", he says, with the enthusiasm of an 8 year old boy who has just been given a new puppy.
"M. Gagné, you haven’t even seen the room yet, hang on a moment, we are almost there. "
" That has nothing to do with it ", he replies.
" Happiness is something I choose in advance. Whether or not I like the room does not depend on the furniture, or the decor – rather it depends on how I decide to see it. "
" It is already decided in my mind that I like my room. It is a decision I take every morning when I wake up. "
" I can choose. I can spend my day in bed enumerating all the difficulties that I have with the parts of my body that no longer work very well, or I can get up and give thanks to heaven for those parts that are still in working order. "
So, my advice to you is to deposit all the happiness you can in your bank account of memories.
Thank you for your part in filling my account with happy memories, which I am still continuing to fill…
1. Free your heart from hate.
2. Free your mind from worry.
3. Live simply.
4. Give more.
5. Expect less.
The story of old man and his happiness .....
A man of 92 years, short, very well-presented, who takes great care in his appearance, is moving into an old people’s home today. His wife of 70 has recently died, and he is obliged to leave his home.
After waiting several hours in the retirement home lobby, he gently smiles as he is told that his room is ready.
As he slowly walks to the elevator, using his cane, I describe his small room to him, including the sheet hung at the window which serves as a curtain.
"I like it very much", he says, with the enthusiasm of an 8 year old boy who has just been given a new puppy.
"M. Gagné, you haven’t even seen the room yet, hang on a moment, we are almost there. "
" That has nothing to do with it ", he replies.
" Happiness is something I choose in advance. Whether or not I like the room does not depend on the furniture, or the decor – rather it depends on how I decide to see it. "
" It is already decided in my mind that I like my room. It is a decision I take every morning when I wake up. "
" I can choose. I can spend my day in bed enumerating all the difficulties that I have with the parts of my body that no longer work very well, or I can get up and give thanks to heaven for those parts that are still in working order. "
So, my advice to you is to deposit all the happiness you can in your bank account of memories.
Thank you for your part in filling my account with happy memories, which I am still continuing to fill…
SML
Where will SML be heading to? Still having bad news coming from oil rigs sector.
...........................................................
Jurong gets greenlight to sell PetroRig I
By Upstream staff
SembCorp Marine has reached a settlement with the bondholders Norsk Tillitsman and the owners of semisubmersible PetroRig I, clearing the path for the Singapore-based rig builder to proceed with the sale of the drilling unit.
The settlement was recorded by the US bankruptcy court.
SembCorp’s wholly-owned subsidiary, Jurong Shipyard will proceed to accept the highest bid received from the ongoing tender for the semi-submersible.
The rig builder expects to recover all the balance costs and expenses incurred on the construction of the drilling unit.
SembCorp did not advise further on the bids received for PetroRig I.
However, sources said the rig builder has received five bids from Seadrill, Noble Drilling, Stena Drilling, Diamond Offshore and a Brazilian contractor for PetroRig I.
Four of the five bidders have offered over $450 million for the semi-submersible.
PetroRig I is said to have owed SembCorp over $200 million in operating and financial costs.
Saturday, 6 June 2009
Light Crude Oil (CL, NYMEX) Monthly Price Chart
Crude Oil breaking out soon? So watch out for Offshore & Oil play! Good luck.
Friday, 5 June 2009
Wednesday, 3 June 2009
Greatest Bear - any parallel? Are u betting it? Update
Not likely. This time could be different. Cheers!
Tuesday, 2 June 2009
Saturday, 30 May 2009
Opportunity exists in a crisis
Have a clear plan so that at the darkest hour, you can overcome inertia and won't miss out on market recovery
By TEH HOOI LING
SENIOR CORRESPONDENT
IN an article contributed recently to the monthly investment magazine Pulses, a relatively young man reflected on what he has learned in his four years as a financial planner.
He joined the industry at the right time - in 2004 - and rode the market all the way up. That is, until last year. He also gained more than a few insights into investing and financial planning in the past 12 months or so. 'For the longest time I have been a strong advocate of investing-for-the-long-term,' he said. 'However, I also realise that while it is not difficult to claw back a 20 per cent loss - you need a gain of 25 per cent) - it is an increasingly uphill and uneven task to claw back deeper losses.
'Table 1 below clearly illustrates that capital preservation is key. It makes sense to cap losses to the 20 to 30 per cent mark. After all, we can still get our foot out if we fall into a drain. But drop into a manhole, that's a different story. For example, if a stock you own has fallen 80 per cent, from that level it would have to climb 400 per cent for you to recoup your capital.'
The point is to cut the loss after 20 to 30 per cent. But for those who did not cut loss and watched in horror as their investment shrank by the day to, say, only 10 per cent of its original value, the tendency at that point was either to finally throw in the towel or to do nothing. By then, few would have the presence of mind to scoop up more shares at much reduced prices.
As Jeremy Grantham of GMO puts it in his letter in March: 'It was psychologically painful in 1999 to give up making money on the way up and expose yourself to the career risk that comes with looking like an old fuddy duddy. Similarly today, it is both painful and career risky to part with your increasingly beloved cash, particularly since cash has been so hard to raise in this market of unprecedented illiquidity. As this crisis climaxes, formerly reasonable people will start to predict the end of the world, armed with plenty of terrifying and accurate data that will serve to reinforce the wisdom of your caution.
'Every decline will enhance the beauty of cash until, as some of us experienced in 1974, 'terminal paralysis' sets in. Those who were over-invested will be catatonic and just sit and pray. Those few who look brilliant, oozing cash, will not want to easily give up their brilliance. So almost everyone is watching and waiting with their inertia beginning to set like concrete. Typically, those with a lot of cash will miss a very large chunk of the market recovery.'
Indeed, at the darkest hour of the crisis, when most people had become disillusioned, the market turned. And what a turn it has been so far. From their two-year lows - most of which were registered between October last year and March this year - Singapore-listed stocks have on average risen a whopping 110 per cent. The median increase is 91 per cent.
But wait, here's some perspective. From their two-year peaks - most of which were hit in 2007 - the stocks have fallen by an average of 78 per cent to their troughs. The median decline is 83 per cent. So the explosive rebound we've seen so far didn't even bring prices back to the halfway point between the peak and the trough. Had investors invested at peak prices, and done nothing since then, they would still be sitting on a 58 per cent loss.
As the financial planner noted, prices would have to jump by some 400 per cent before one can recoup one's losses after enduring an 80 per cent loss.
But what if, as Mr Grantham advised, we had a plan to cure our terminal paralysis in the darkest hours of the market? 'It is particularly important to have a clear definition of what it will take for you to be fully invested,' he said. So suppose you had that plan, and at the trough you recognised it as that, and you duly deployed new capital into the market. Where would you be today?
In Table 2, I listed where an initial portfolio of $5,000 would be after various levels of losses. Then I assumed an equal amount of new capital were injected into the assets at the significantly lower market price. And from that low level, I presented various scenarios of market rebounds and where that would take the entire portfolio to.
From the table, you can see that if the stock has fallen 80 per cent, you would need it to rebound by two-thirds or 67 per cent to recoup your losses if you inject new capital equivalent to the initial investment at exactly the lowest point. If your loss is deeper at 90 per cent, the rebound would have to be 82 per cent for you to make back your capital. And if the market, as it has done in the past three months, rebounded by more than 100 per cent, you would be sitting on some profits now.
Indeed, many stocks here did provide investors with opportunities to more than make back their capital had they stuck to a reinvestment plan. Table 3 are some of them. Take Ausgroup. Its peak in the past two years was $2.13 on July 27, 2007. Just over a year later, on Oct 23, 2008, it traded at only 11 cents - a plunge in value of some 95 per cent.
Yesterday, it last traded at 61 cents. That's 455 per cent above its low of 11 cents but still 71 per cent off its peak. Someone who invested $5,000 in Ausgroup at its peak needed to put in only an additional $1,550 at the low to make back all their losses. Had they put in the same amount as their initial capital - that is, $5,000 - they would have made a return of almost 200 per cent on their entire capital of $10,000. That should be incentive enough to try to fight your fear.
Other stocks that have staged spectacular rebounds in the past three months or so included Osim, Yongnam, Yanlord, Swiber, SC Global and Ezra.
Of course, we should only pick stocks whose fundamentals have not been permanently impaired to average down. If not, we might just be throwing good money after bad, and eventually suffer permanent loss of capital should the company go bankrupt.
As we have witnessed time and again, in a crisis exists opportunity. So always keep a clear head and try to fight the fear and seize the value when the doomsday scenario is the only view out there. Yes, prices may go lower. Nobody can ever catch the low. But again, as Mr Grantham puts it: 'Sensible value-based investors will always sell too early in bubbles and buy too early in busts. But in return, you may make some important extra money on the round trip as well as lowering the average risk exposure.'
Investing in the right stock or Making $ from the right stock?
Should I be investing in the right stock and hopefully I will increase my wealth through regular dividends and any unrealized gain as future capital appreciation? The downside of this approach is that my invested capital will be exposed to cyclical market risk.
or should I be making money in the right stock through series of profitable transactions and collecting some dividends, and then slowly accumulate enough realized profits to eventually own a certain number of shares of my desired stocks at a zero cost in terms of cash flow, and then let them run in the market as passive income from dividends and future capital appreciation or if necessary as future draw down by selling some.
At the end of this investing Game, it will look like this:
a) Only realized gains are reinvested in stocks and subjected to cyclical market risks and also participating in future capital appreciation to help offsetting some inflationary impacts.
b) Recovered investing capital will be parked in risk-free Fixed Deposits as draw down during retirement.
c) Don't see the need to make my capital works harder in later years to pass on the wealth to the next generation.
or should I be making money in the right stock through series of profitable transactions and collecting some dividends, and then slowly accumulate enough realized profits to eventually own a certain number of shares of my desired stocks at a zero cost in terms of cash flow, and then let them run in the market as passive income from dividends and future capital appreciation or if necessary as future draw down by selling some.
At the end of this investing Game, it will look like this:
a) Only realized gains are reinvested in stocks and subjected to cyclical market risks and also participating in future capital appreciation to help offsetting some inflationary impacts.
b) Recovered investing capital will be parked in risk-free Fixed Deposits as draw down during retirement.
c) Don't see the need to make my capital works harder in later years to pass on the wealth to the next generation.
Friday, 29 May 2009
STI - seriously overbought?
Since I have enough zebras running, probably I shall just watch at the sideline.
STI breaking the mighty resistance???
STI has recovered 59.9% from 09 Mar 09 low in 81 days, and 596 days has passed since 11 Oct 07 Peak
Wednesday, 27 May 2009
STI closed at 2306 today
STI has recovered 58.3% from 09 Mar 09 low in 79 days, and 594 days has passed since 11 Oct 07 Peak.
Creature of the Market
Be a creature of the market, you either eat more or less at longer or shorter intervals. There is no need to stay away from the Market - Creatwealth8888
Tuesday, 26 May 2009
Be courageous, follow through and answerable to yourself only
Whatever course you decide upon, there is always someone to tell you that you are wrong. There are always difficulties arising which tempt you to believe that your critics are right. To map out a course of action and follow it to an end requires courage." - Ralph Waldo Emerson
Monday, 25 May 2009
STI
Now many are expecting correction to come. Assuming if the high waves really hit the boat hard, have you planned to throw some luggages overboard like what we see in the movie on ship caught in sea storm, and sailors started throwing luggages overboard into the rough sea to keep the ship lighter.
Sunday, 24 May 2009
Investing - area of interests and passion?
invest, the sundaytimes, may 24, 2009
Another PSC scholar breaking his five-year bond with the Singapore Civil Defence. Maybe it is time for those BIG SHOTS to re-think about bonding and follow SMU on scholarship without bond. I am very sure there are many scholars out there grinding their teeth on their jobs serving out their bonds.
I personally knew few of them. Really sad to see them wasting a few year of their prime time when their assigned jobs just didn't match their life values, and finally choose to leave; otherwise a well planned career development path for a scholar.
I have seen a few scholars went to the field of investing or financial planning, maybe this area is really interesting and you can totally drown your passion into it.
Another PSC scholar breaking his five-year bond with the Singapore Civil Defence. Maybe it is time for those BIG SHOTS to re-think about bonding and follow SMU on scholarship without bond. I am very sure there are many scholars out there grinding their teeth on their jobs serving out their bonds.
I personally knew few of them. Really sad to see them wasting a few year of their prime time when their assigned jobs just didn't match their life values, and finally choose to leave; otherwise a well planned career development path for a scholar.
I have seen a few scholars went to the field of investing or financial planning, maybe this area is really interesting and you can totally drown your passion into it.
Subscribe to:
Posts (Atom)
