As from April 2013 my Journey in Investing is to create Retirement Income for Life till 80 years old for two over market cycles of Bull and Bear.

Welcome to Ministry of Wealth!

This blog is authored by an old multi-bagger blue chips stock picker uncle from HDB heartland!

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

"For the things we have to learn before we can do them, we learn by doing them." - Aristotle

It is here where I share with you how I did it! FREE Education in stock market wisdom.

Think Investing as Tug of War - Read more? Click and scroll down



Important Notice and Attention: If you are looking for such ideas; here is the wrong blog to visit.

Value Investing
Dividend/Income Investing
Technical Analysis and Charting
Stock Tips

Sunday, 31 January 2010

Bi-directional View Of the Stock Market Movement

When the stock prices in my portfolio are moving up, I am looking forward to take some profits off the table and to recover some investing capital for the war-chest.

When the stock prices in my watch list are moving down, I am looking forward to deploy some recovered capital and to re-invest some realized profit.

When the stock prices in my watch list are dropping further, I am looking forward to deploy some available investing capital.

When the stock prices in my watch list  continue to spiral downward, I deploy the opportunity fund.

If the stock prices continue to plunge, I go and eat grass.


But, I still prefer the stock market to go up as I don't short it.


Over Long Term We Are Safe?

Brolp said: "Yea right, in the long term, we're all dead."
and "I therefore cringe whenever I hear the word 'long-term' being uttered. A shiver of uneasiness will creep up my spine."

But, there is one group of people over long term are safe and happy. The rest of us may or may not. This particular group of lucky people have Bank Of Papa or Bank of Mama behind them and over long term they will takeover the "Bank Account"; if not, then sue the bank for it -  Woman with S$8.8m takes bank to court .

Long Term Planning for Kid's Education

Like many others, I did long term planning for my kids' university education using Endowment policies.

Generally, over long term, endowment policy should be relatively safe, provide protection, and reasonable risk-returns.

But, in reality it is not true at personal level over long term. It is when you need the money that really counts and the outcome may be unexpected. The amount you received may fall short of your projected target after years of inflationary effects and unfortunately at that time, what if you have no other means of financial resources to mitigate the shortfall and can be serious.

My Endowment Plan

Insurance - Enhanced Endowment Policy Suck!

In my case it is unfortunate that the Endowment policy matured at the wrong time. It has matured during the time of the Greater Bear of 2008 and I believe the Endowment fund's assets must have been severely wiped out and give such poor returns.

Has my Endowment policy matured in 2007 instead of 2009, I might be singing different tune about Endowment policy.

Over long term are we safe? It definitely depends when you need the money. If you need the money at the next Greatest Bear, I bet you might be crying bitterly so it is not wise to bet over long term that we are safe.

Saturday, 30 January 2010

Using CPF OA for your kid's local university and poly education - Part 2

Using CPF OA for your kid's local university and poly education

For those on CPF scheme, the government has helped you to invest around 34.5% of your earned income and give you a risk free returns at 2.5% for CPF OA and 4% for CPF SA.

For those self-employed without CPF, I realize that their challenge for investment returns are far greater than those on CPF.

It is a huge challenge to invest another 34.5% of their earned income on top of the regular saving to get that type of returns year after year.

CPF, I think you have made my investment tasks and responsibility easier. Phew!

insurance - enhanced endowment policy suck! - Part 2

Read? insurance - enhanced endowment policy suck! - Part 1

I have three endowment polices, one for each of the three kids. The first endowment for 1st kid matured on last Oct 2009 and the annualized return is 1.64% after XX years with XX insurance co and far away from the projected value.

The second one will mature in Nov 2010. Let see how bad the annualized return will be?

The third one will mature in Mar 2016 for the youngest kid who is now in Sec 3.

At that time, I was a dumb investor and low in FQ and probably that investment decision made was really the right fit for a dumb investor. That is the price I paid for a peace of mind.

Is this really a peace of mind? It has fell far short of the projected value. What if that is the only fund I have? Will I still have a peace of mind?

I have repeatedly remind my kids not to discuss with any financial advisers when they start working next time but get the financial advisers to talk to me first as I am no longer a dumb investor with low FQ.

There will be plenty of tough questions to grill them and then I shall walk away after some free coffee and may be some finger food too. So shiok!

Value Investing Or Active Investing? - Part 2

Value Investing Or Active Investing?

Opportunity In The Stock Market?

do you know where are rocks? (stocks)

When one door closes, another opens; but we often look so long and so regretfully upon the closed door that we do not see the one which has opened for us.” - Alexander Graham Bell

I know many people who came to the stock market thinking that they have the capability to make money but end up badly burnt by the stock market.

They learned their bitter lessons, chopped their fingers and promise themselves never to touch the stock market again. One of them is one of my brothers-in-law and the other one if I remembered correctly is Piggy's hubby.

Some of them lose money but they never give up. They re-examine their investing strategy and seriously seek out their "Gurus".

Soon they become enlightened and begin making money from the stock market.

The real losers in the stock market are those lose and give up.

I am thinking what are the differences in the two women mentioned in the earlier story and they got it right. May be, they are the lucky ones who came knocking at the right door at the right time. The door was open wide, they heard the whispers about the "Touch Stone" and the "Rocks".

They believe and became confident that they too can succeed. They have seen with their own eyes "people are walking on the water".

May be they are like what Newton said: "If I have seen further it is by standing on the shoulders of giants."

 


If you are not already the giant, may be it is time for you to look for a giant and stand on its shoulder to look further.


Does Your Account Size Matter? - Part 2

Does Your Account Size Matter? - Part 1

The wealth of the stock market is locked by more than one key so you will need more than one key to unlock it.

Capital is the first key to successful investing/trading. Holding power is the second key. Without holding power, you are more likely to panic sell during market volatility and causing you to lose money.

But, some people will tell you that holding on losing positions and sitting on paper losses will cause you opportunity costs.

True or not?

What if you still have some available investing capital at hand? What is your opportunity cost? Your opportunity cost for holding on to the losing positions is the current interest rate and nothing more as you still have money to invest in the stock market or other financial instrument.

It is only when you have zero capital left to invest, then you have to seriously consider what is the opportunity costs of holding to those losing positions?

It may be better off for you to bite the fingers to cut losses on some losing positions to recover some capital to invest.

In 2008 Greater Bear, I have used up all my investing capital and left with zero cent. I too bite my fingers and cut losses to recover some investing capital even though I don't have stop-loss strategy. The truth is that you don't need to win back in the same way that you have lost. 2009 Year End Performance Review

Friday, 29 January 2010

A Conversation With Benjamin Graham

What general rules would you offer the individual investor for his investment policy over the years?

Let me suggest three such rules: (1) The individual investor should act consistently as an investor and not as a speculator. This means, in sum, that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money's worth for his purchase--in other words, that he has a margin of safety, in value terms, to protect his commitment. (2) The investor should have a definite selling policy for all his common stock commitments, corresponding to his buying techniques. Typically, he should set a reasonable profit objective on each purchase--say 50 to 100 per cent--and a maximum holding period for this objective to be realized--say, two to three years. Purchases not realizing the gain objective at the end of the holding period should be sold out at the market. (3) Finally, the investor should always have a minimum percentage of his total portfolio in common stocks and a minimum percentage in bond equivalents. I recommend at least 25 per cent of the total at all times in each category. A good case can be made for a consistent 50-50 division here, with adjustments for changes in the market level. This means the investor would switch some of his stocks into bonds on significant rises of the market level, and vice-versa when the market declines. I would suggest, in general, an average seven- or eight-year maturity for his bond holdings.

In selecting the common stock portfolio, do you advise careful study of and selectivity among different issues?

In general, no. I am no longer an advocate of elaborate techniques of security analysis in order to find superior value opportunities. This was a rewarding activity, say, 40 years ago, when our textbook "Graham and Dodd" was first published; but the situation has changed a great deal since then. In the old days any well-trained security analyst could do a good professional job of selecting undervalued issues through detailed studies; but in the light of the enormous amount of research now being carried on, I doubt whether in most cases such extensive efforts will generate sufficiently superior selections to justify their cost. To that very limited extent I'm on the side of the "efficient market" school of thought now generally accepted by the professors.

(CreateWealth8888: Hardcore retail value investors, it is about time to wake up as your Grand Master no longer advocate it now. Sentiment of the market is clearly indicated in the chart)

http://www.bylo.org/bgraham76.html

Value Investing Or Active Investing?

"However beautiful the strategy, you should occasionally look at the results." - Winston Churchill

Peter Drucker once said, “What gets measured, gets managed.”


Measure, Measure, Measure - Part 2

Portfolio Management - Stop Losses?

Trading/Investing - Are you winning or losing?

Active Investing, Passive Investing, and Active Monitoring - Part 2

Long Tem Investing and Short Term Trading

I heard one value investor said: "It's hard to understand why people venture into trading. It's better to ignore it totally. I think the reason is the innate nature of human to strike it big through gambling which derives both satisfaction for short-term gain and also the thrill. Maybe some of them really can make some money, but I know none"

I am telling you the true story of two women who has been making money as active investors and they can be considered as relatively new active investors.
  • Super Mum started her active investing journey from Jul 2008 and of yesterday her CAGR is 15.5%
  • Piggy was lucky to start her active investing  from Feb 2009 where it was near to the low of 2008 Greater Bear and her CAGR is 25%
However, we cannot expect to continue have such good portfolio returns going forward and anything more than 10% CAGR is pretty good.

Who say you can't make money in active investing? Let be open minded!

It is definitely far too difficult to take the road traveled by Warren Buffet and Tiger wood; but to trace the footprints of Super Mum and Piggy is not so difficult as you think.

Work or Further My Studies?

Work or Further My Studies - FF

I couldn't afford it and have to give up full time study for a Degree in Accountancy in University of Singapore (NUS); but I still continue to further my education taking the part-time route by doing a Diploma and followed by a Degree.

I also spent more than a year thinking very hard whether should I continue with a part-time MBA. But, in the end I decided to invest the MBA course fee into the ever learning "University of Stock Market" and hope to graduate with a "Masters In Stock Market".

I am not sure when can I graduate from the stock market?

Thursday, 28 January 2010

Sending Your Kids To Overseas University?

Three stories of my colleagues who send their kids to overseas university.

Two of them sent their daughters to overseas university and wipe out much of their retirement fund. Both daughters never came back and their poor parents have to fly over to visit them as their daughters are too busy with their careers to visit their parents.

The third one has to down grade from 5-room to 3-room to raise money to send their son to overseas university and their elder son was quite fed-up with his parent's decision and asked: "Why should the whole family suffer because younger brother fooled around and didn't study hard?" 

If you have more than 1 kid, do you think it is fair to let one kid depleted most of the limited family financial resources?

Wednesday, 27 January 2010

STI- down -1.24% @ 2706



STI has corrected -7.7% from its high @ 2,934 and in red for six straight days. More to come as support is broken!

Finding Both Dividend & Growth Stock?

Begone idealistic youth!

LP said: "I thought that the market only have two kinds of stocks - dividends or growth stocks. Dividend stocks means that there is no growth anymore while growth stocks means that there is a huge chance of capital gains. I used to like growth and detest dividend stocks."


Can we find a stock in SGX that gives both dividend and growth? Yes, it is even possible to find them in STI blue chips that are backed by Temasek. You can certainly sleep soundly at night holding them.

Kep Corp is one good example where I am sleeping soundly for years - good dividend and growth:

Kep Corp - Big Pay Day. Thank you!

Besides being a dividend and growth stock, it is also a great trading stock.

Kep Corp is now growing its third wing to replace its weaken 1st wing and may continue to fly high with 1 weaker wing but supported by 3 wings altogether.









STI - Possible Technical Rebound Today?



STI has corrected -6.4% from its high @ 2,934 and in red for five straight days. May be today, we may see a possible technical rebound.

Tuesday, 26 January 2010

Market On Sale!







I believe many weak holders and margin traders were more or less cleaned up in today market action.

Were you afraid today?

Did you grab a little to build up your inventories?

A shop owner without inventories can't do much.

Kep Corp - Big Pay Day. Thank you!

Final Dividends and Listing of K-Green Trust


With the good results, the Board of Directors would be recommending a total distribution to shareholders of 61 cents per share for the whole year. This will comprise the interim dividend of 15 cents per share, a proposed final dividend of 23 cents per share, and a proposed dividend in specie in units in our K-Green Trust, equivalent to 23 cents per share.

We are proceeding with the listing of our K-Green Trust, which will optimise returns from our Infrastructure assets. The Trust was established last year with the Senoko Waste-to-Energy Plant as seed asset. We will be injecting two additional assets in Singapore into the Trust, which after listing, will aim to generate long-term, regular and predictable distributions to Unitholders

-----------------------------------------------------

My full year dividend yield = 5.3% (interim $0.15) + 8.1% (final $0.23) = 13.4%

Another proposed dividend in specie in units in  K-Green Trust, equivalent to 23 cents per share. The Proposed Distribution will be effected by way of a dividend in specie to Entitled Shareholders on the basis of 1 KGT Unit for every 5 Shares held by an Entitled Shareholder,


Indeed a very good year for loyal shareholder. Thank you, Keppel Corp for creating shareholder value.

SCI - Got it @ $3.47

Round 50

Round 51 is on ....

SML - Got it back @ $3.47 (2nd batch/3 batches of buying back)

Buying back SML - 1st batch out of 3

Monday, 25 January 2010

Spending Quality Time With Loved Ones? - Part 2

Time is the most valuable coin in your life. You and you alone will determine how that coin will be spent. Be careful that you don't let other people spend it for you ~ John Dryden


Spending Quality Time With Loved Ones?

Time is the new currency.
 
If time is the new currency and you spend so little time e.g. $100 instead of $500 on your loved ones as you have too many other commitments.
 
Would you tell people that you are spending quality $100? 
 
 
 

Spending Quality Time With Loved Ones?

This phrase: "Spending quality time with loved ones"

This is another nonsense often spoke by those who felt deeply inside their hearts that they are guilty of not spending enough of their personal time with their loved ones and to justify to themselves that those time spent with their loved ones are quality time.

You either spent more or less of your personal time with their beloved ones. There is no such thing as quality time. Stop kidding and get real!

Time Value Spent On Saving and Investment

Do you think you are a smart investor with your investing capital and time?

Most of the smart investors are very smart when it comes to managing their investing capital; but when it comes to determining the time value spent on saving or investment, these smart investors may not be so smart.

One good example is painting your house for the coming Chinese New Year.

Assuming you are a smart investor who knows how to make few hundred bucks from the stock market from time to time?

Would you rather pay the painting contractor to paint your house or you save that few hundred bucks by laboring yourself over the weekends to paint your own house?


If you choose to paint your own house just to save that few hundreds instead of doing researches over weekends to look for stocks ideas; then you are still unclear of time value on saving and investment.

Likewise, as a smart investors, do you spent most of your time to look for better deals to save on pennies and forgo the time to spend on finding better investment ideas that will return more dollars.

Time spent on saving is the opportunity cost for investment.

Saving and Investment are the twin sisters while Leisure and Working are the twin brothers.

Sunday, 24 January 2010

Why Your Mee Pok Will Cost $2.50/$3.00?





Looking at the product costing of a bowl of your favorite mee pok? Why will it cost you $2.50/$3.00?
The bulk of the cost comes from the stall rental and the cost of rental is very high and so the cost of a simple fare like bowl of mee pok has to cost that much.

Any business that don't have to incur high rental cost e.g. home-based business, they are likely to offer similar or comparable product at better cost-value or price-value.

A home-based group tuition is a good place to start your small business; but too bad I am out-of-date for such biz. What else can I do? Any suggestions?






Using CPF OA for your kid's local university and poly education

The biggest use of CPF OA is for housing loan and not sure how many married couples out there are consciously aware that the next biggest use of their CPF OA is to pay for their kid's local university or poly tuition fees.

Those couples taking up 30 years housing loan, are they consciously aware that the next bigger use of CPF OA is waiting for them while at the same time having their CPF Employer contribution cut upon reaching 50 years old. In another word, more use, less fund.

Saturday, 23 January 2010

What Happen?

What happen when we have the following events:

  • A badly burnt toast bread
  • A drown man at the sea
  • A badly unwanted pregnancy
  • A badly burnt investors/traders


Answer: Pull out too late!

So knowing when to pull it out is equally important than going in.

The 8th Sin Of Investing (Not deadly)

"The 7 Deadly Sins of Investing” by Maury Fertig. It is a good  book to read on investing.

But, there is one more sin that hard core value investors are not aware of. The 8th Sin of Investing: Refuse to read stock chart and it is like saying I am always right and the views of the market are irrelevant.

Before you come to the market, it is wise that you hang your high ego at the door; otherwise Mr Market will one day punish you and show you who is the real master.

Although the No 8 sin is not deadly, it is still good not to commit it.

Get Real, Margin Of Safety - Part 2

"However beautiful the strategy, you should occasionally look at the results." - Winston Churchill


Get Real, Margin Of Safety - Part 1

Let look at the recent Noble trade:

Round 10: ROC 6.5%, 20 days, B $3.07 S $3.29

I bought back Noble at $3.04 on Friday for Round 11 and this immediate position has a real margin of safety of 6.5% and not an imaginary number in the investor's mind.

Do you know how to play the game of real margin of safety?

OBearMa is here!

Have you been preparing for this Great OBearMa? What is your plan next week?



Friday, 22 January 2010

STI - Just another Ladder and Snake Game

STI today closed down @ 2,819.71 for three straight days of down.

STI took nearly one month to climb the small ladders and only need 3 days to slide down the snakes to reach where it began.

Do you realize why?


Noble - Got it back @ $3.04 for next round

Last round as follows:

Round 10: ROC 6.5%, 20 days, B $3.07 S $3.29

Thursday, 21 January 2010

Are Loan Good or Bad?

When is your loan actually good and not necessary bad?

First, we look at net worth of a person:

Net Worth = Assets - Liabilities

*Assets exclude your residential home as everybody need a roof over their head.

When you are net worth positive, then all your loans can be considered as good loans in the current low interests environment. You should be able to generate higher returns to pay off the interests payable.

Net worth positive means that you have enough assets to repay your debts fully if you are pushed to the corner to do so.

Don't Forget 200 EMA

Newton’s First Law

Every body continues in a state of uniform motion in a straight line, unless it is compelled to change that state by a force impressed upon it.

You may remember this law as “an object in motion, stays in motion.” This means that once the stock price starts to move in one direction, it’s very likely to continue to trend in that direction until something changes the overall bias of the stock movement.

Simple EMA for my Lizard brain

The 200 EMA could be considered the most important trend indicator. Why? Because the stock price is either moving toward it or away from it. It’s a Yin/Yang or love/hate relationship. Therefore, if the stock price is held by the 45 EMA, the stock price will likely continue to move away from the 200 EMA.
 
When the stock price arrives at the 200 EMA and breaks down; it means the bears have finally over run all the bulls.
 
If 45 EMA crosses below 200 EMA, the bears celebrate their victory.
  

But not all bulls are dead as some bulls are busy producing more bull calves.


200 EMA is known to be used by many long term investors looking to exit or reduce their long term holding in a stock.

So the general rule is that if the stock price is above the 200 EMA then you should look for buying opportunities until it falls below this indicator, at which point you should seriously consider selling some or all your stock.

But, of course you may look for oversold positions when the stock price is substantially below the 200 EMA; but you will never know when the stock price is at or near the bottom and may substantially fall further to trigger a falling knife effect.

Wednesday, 20 January 2010

7.38% return over 4 year 11 months!

7.38% with XXXX Invest Equity YYYY over 4 year 11 months!

I believe if you come here often and implement the "Buy 1 cents lower strategy". You will beat this return flat!.

ROC or Absolute Dollar Gain?

When you made $50K from the stock market, how will you shout out? The announcement should make you feel good and hopefully you can hear the "wow" sound coming from the crowd.

When you have small account size like $100K, you shout out 50% ROC. Wow!

When you have big account size like $1M, you shout out: "Brothers, I made $50K man!"  Wow! $50k

One Way This Blog Can Help You

10 Ways This Blog Can Help You - Financial Freedom


One way this blog can help you by showing you as a retail investor, you can make money from the stock market using simple TA, FA, Money Management and Emotion Control.

Believe it or not. Up to you.

Investment Decisions
  • Fully understand the true meaning behind these quotes
Stock picking is part science, part art, part luck, part intuition, and always uncertain - "not precisely knowing."

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

"If I have seen further it is by standing on the shoulders of giants." - Isaac Newton, letter to Robert Hooke, 1676

Peter Drucker once said, “What gets measured, gets managed.”

"However beautiful the strategy, you should occasionally look at the results." - Winston Churchill

"When the tide comes back, you will soon find out not all boats rise high." - CreateWealth8888

Implement these strategies:

Value Investing - It is about multi-baggers

Long Tem Investing and Short Term Trading

Pillow Stocks Strategy

If you make money from the stock market. Please remember to buy me a cup of kopi-O to say "thank you".


Tuesday, 19 January 2010

STI ETF: Low Risk at Market Return over long term?


Why do people think that STI ETF is low risk at market return over long term?
Looking at the chart and I can't see any evidence of low risk?

Monday, 18 January 2010

Home for Living and not for profit taking - Part 3

Read? Home for Living and not for profit taking - Part 2

SuperMum was telling us the story of her friend who has sold her Seng Kang flat at profit of $100K after 5 years and then bought another older flat at Hougang. The profit is so shiok!

This is the same story but different actor only. May be SuperMum should check with them at the next recession.

CapitaLand buys Orient Overseas Developments Ltd for US$2.2 bil

CapitaLand growing presence in China

CapitaLand Limited said on Monday it has inked a deal with Hongkong-listed Orient Overseas (International) Limited (OOIL) to buy the latter's 100 per cent stake in Orient Overseas Developments Limited (OODL).

Under this arrangement, CapitaLand will acquire a real estate business with a portfolio of seven sites located in Shanghai, Kunshan and Tianjin for a purchase consideration of US$2.2 billion (approximately S$3.1 billion).

The move will double CapitaLand's China property portfolio from 1.4 million sq metres to 2.8 million sq m.




Will CPL breakout from this news?

Where Does The Money In The Stock Market Come From?


Everybody comes to the stock market with one objective - to make money?

Since everybody want to make money; where does the money from the stock market come from?

There are some money coming from companies paying out periodically as stock dividends, capital reduction or shares buy-back; but it is not much money compare to the enormous size of the money change hand in each trading day.

Most of the money made in the stock market come from capital gains through Greater Fools distributing their money to the Better Fools.

It is foolish to expect to make money in the stock market where in fact there is so little money to make from stock dividends, capital reduction or shares buy-back. So all stock market participants are indeed fools. It is either you are Greater Fools or Better Fools.

Better Fools make most of their money from the Greater Fools and perhaps some money from the stock dividends and capital reduction as well.



Sunday, 17 January 2010

Who Want To Be A Millionaire?

The possible stages before becoming a Millionaire ..

Four Financial Progressive Stages

Asset Rich Millionaire

They accumulate enough wealth to become a millionaire; but by then they are near retirement and their wealth may be enough to see them through a decent retired life. They are unlikely to have the ability to take more risks to create more wealth. They tend to be very careful with their money as it will most likely to dwindle down with passing time. These millionaires are typical asset rich Singaporeans who have substantial CPF saving,  unit trusts, mature insurance endowment, and down-graded or sold their residential home after retirement.

[After post:
Comment from Laksa: I believe your Asset Rich Millionaire definition does not fit what you are trying to say. Asset rich millionaires could also be people who have plenty of properties and nothing else. Those are termed assets as long as it generates a positive cashflow and they may not be investment savvy.
Comment from CW8888: Not sure someone who have plenty of properties and still not considered as investment savvy. Maybe they inherited those properties so we have another class called Silver Spoon Millionaire]

Investor Millionaire

They create and build up massive wealth through various classes of investment including properties. They have vast knowledge, skills and experience in investing and able to continue create wealth even after their retirement but may be at a slower pace. They are shrewd investors during their lifetime.

Understanding stock movements - Part 2

Understanding stock movements

The stock price movement is still primarily determined by the Law Of Demand and Supply:
  • More willing buyers and less willing sellers will cause the stock price to move up.
  • More willing sellers and less willing buyers, the stock price has to come down.
The Supply is finite and limited and will have a stronger influence over stock price movement so we definitely have to watch the Supply side more closely.

Any Increase In Supply

Sometime when a company announces an increase in supply of shares through different methods to raise capital; its stock price will plunge as the market fears on the expectations of more and more willing sellers coming on board in the short term.

But, sometime, instead of plunging, the stock price quickly moves up. Why? Because the market believe the new buyers are long term, savvy investors and their actions will cause more willing buyers to follow them.

The daily stock price movement has very little to do with the fundamental and valuation of the underlying company and more likely to follow the Law Of Supply and Demand.

If there is any changes or potential changes in a company fundamental, its stock price will be quickly price in by the market participants; and thereafter its stock price movement will just follow the Law of Supply and Demand.

Saturday, 16 January 2010

Get Real, Margin Of Safety

Keep hearing retail value investors chanting their Holy Grail: Margin Of Safety.

What is their Holy Grail all about?

Understanding value investing
Investment Dictionary: Value Investing

The strategy of selecting stocks that trade for less than their intrinsic value. Value investors actively seek stocks of companies that they believe the market has undervalued. They believe the market overreacts to good and bad news, causing stock price movements that do not correspond with the company's long-term fundamentals. The result is an opportunity for value investors to profit by buying when the price is deflated.

Typically, value investors select stocks with lower-than-average price-to-book or price-to-earnings ratios and/or high dividend yields.

Investopedia Says:

The big problem is estimating the intrinsic value. Remember, there is no "correct" intrinsic value. Two investors can be given the exact same information and place a different value on a company. For this reason, another central concept to value investing that of "margin of safety". This just means that you buy at a big enough discount to allow some room for error in your estimation of value.

Also keep in mind that the very definition of value investing is subjective. Some value investors only look at present assets/earnings and don't place any value on future growth. Other value investors base strategies completely around the estimation of future growth and cash flows. Despite the different methodologies, it all comes back to trying to buy something for less than its worth.

Understanding Margin of safety.
By Sham Gad

Warren Buffett calls them "the three most important words in all of investing." Value-investing dean Benjamin Graham gave rise to the term in his classic book The Intelligent Investor, where he devoted an entire chapter to expanding on its importance as the central concept in any investment operation.

The idea of a margin of safety stems from the reality that no investor, not even Buffett, can determine the exact intrinsic value of any business. Because the intrinsic value is derived from an investor's assumptions, the value is merely an approximation. Yes, an investor as skilled as Buffett will probably have a better approximation of intrinsic value than most, but it is still an approximation nonetheless.

(Createwealth8888: Do you really understand why Warren Buffet said this: Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.

It simply means that even Warren Buffet believe his portfolio could go down by 50% and still within the normal behavior of the market)

This is why the margin-of-safety concept is of paramount importance. It gives the investor a degree of protection from the market's uncertainties. A margin of safety of at least 40% of intrinsic value typically proves satisfactory, although the wider the margin, the better. In any event, you will rarely lose money investing if you always demand a satisfactory margin of safety.

And demanding one means that your first goal will be to focus on return of -- not on -- capital. Once you've determined a floor price based on a fundamental valuation approach, then investing at or below that floor price ensures that your return of capital is not at a high risk of loss.

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Createwealth8888:

Price is what we pay and value is what we perceive in our mind.

Intrinsic value and high margin of safety is not real and only exists in the mind of the retail value investors and perhaps for Warren Buffet and likes of Warren Buffet may be they are nearly real.

The Trouble With Warren Buffett’s Methods

Only when the stock price moves up then part of the intrinsic value can be realized. If the stock price doesn't move up significantly, the retail value investors can continue with their dream of high margin of safety for a long time.

What is the truth behind the concept of margin of safety?

The margin of safety is a concept to protect investing capital against falling stock price and capturing gain in rising stock price.

As a retail investors without superior information sources, is there a simpler way to determine the margin of safety and get real?

Get Real, margin of safety

Margin Of Safety = Realized Profit + Un-realized P/L

When you first enter into a new stock position, your margin of safety is zero or even negative. But, once you have realized some profit on this particular stock, and on the next purchase of the same stock; you will have some margin of safety. Even you buy back the same stock at higher price, the margin of safety is still there but only at a higher capital cost.

Keep on attacking on the same stock and soon you will have a pillow stock - the ultimate Margin Of Safety.

Understanding .. Pillow Stocks Strategy and Payback period

Friday, 15 January 2010

SML: Got it back @ $3.67

Going for Round 39 ....

AnyTime, AnyWhere

With the advance technology in mobile, wireless and hand-held computing devices, you can be AnyTime, AnyWhere trader or investor and don't have to appear physically at somewhere to trade or invest.

You can monitor your stocks through SMS or Email alerts.

Research reports are delivered right into your email inbox. So good.

There is really nothing to stop you from investing or trading your own money. No time is just an excuse for not doing well.

Long Tem Investing and Short Term Trading

As retail investors we have absolute freedom to define who we are?

Why can't we invest for long term and do short term trading to get ourselves constantly expose to the market and learn and experience from the market.

Investment means looking for multi-baggers; otherwise, why invest?

Value Investing - It is about multi-baggers

When you invest and trade at the same time, you learn to live in harmony with the market.

When some of your trading stock price goes up, you take profits and retain cash and wait for opportunity to buy back. Some time you buy low and high but at time, you got to buy high and sell higher. That is how the market works. You got to be realistic, you can't always buy low and sell high.

Real examples:
Noble Trades

Olam Trades

When you are holding both investment and trading positions, you tend to be less emotionally affected by market movement.

When the market moves up; your investment position are getting richer, and you are also looking forward to take profits on your trading positions.

When the market moves down, you are looking at opportunities to add new trading positions.

The only time you are really sad is when you run out of money and the market keeps going down!

Lastly, stop kidding yourself and call your losing positions as long term investment. Long investment must be potential multi-baggers.

Thursday, 14 January 2010

Should I Be A Trader?

Should I Be A Trader?

Take this test

My test result is as follows:

CreateWealth8888's comments: Amazing accurate!

You tend to be decisive and to the point. You can spot logical inefficiencies in the market easily and take advantage of them, especially if you are pointed in the right direction. You enjoy long-term planning and goal setting and seem to enjoy learning, expanding your knowledge and staying well-informed.

One of Your Trading Strengths - You could probably generate a trading business plan and trading systems quite easily and naturally.

CreateWealth8888:

Not really using technical indicators? Why?

I am a Simple Simon and have a simple Lizard Brain and cannot grasp complex relationships among indicators so I focus mainly on Price and Volume, Support & Resistance, and Trend lines.

Who Moves My Market?

One of Your Trading Challenges - You may not honor your stops because you want to be right about your trades.

CreateWealth8888: I don't have stop loss.

Portfolio Recovery? Any lessons learned?

Did we really make any drastic changes or adopt new strategies during 2008 and 2009 to enable our portfolio recovery at end Dec 2009?

or we just sit through the Greater Bear and the portfolio recovered by itself due to rising tide.

If the portfolio recovery is just due to rising tide lifting up many boats, did we really learn anything? I wonder other than learning that we need holding power to sit through the next bear.

Wednesday, 13 January 2010

Value Investing - It is about multi-baggers

Dr Michael Leong - Your First $1,000,000, Making It in Stocks

To succeed as (value) investor, one has to look at stocks on the longer-term horizon and search for multi-baggers.

Do you have multi-baggers in your portfolio?

Value Investing - You need more than just numbers crunching!

Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.  - Warren Buffet

The Trouble With Warren Buffett’s Methods

by Rich Hamilton


Warren Buffett is the world’s most successful investor. His investment strategy works marvelously well – for Warren Buffett.


In our experience many small investors have lost money trying to follow in Buffett’s footsteps. Not that there is anything wrong with his methodology per se – Buffett’s track record speaks for itself. The problem is that the small, beginning investors who find his folksy investment-talk most appealing often find it very difficult to replicate his techniques successfully.

Unfortunately, small investors often fail to implement Buffett’s strategy successfully. For one thing, many of us – Buffett included – learn investing through trial and error. Sure, we read as much as we can before we begin, but reading isn’t enough. It’s only when you’ve put your own savings on the line and lost money that you really learn. Making mistakes is how the majority of us learn our most important lessons.


But if you’ve got to wait five years before a stock you’d like to own becomes available at the right price, then you’re going to miss out on a lot of market experience. And what if it turns out you waited five years to make your first mistake? The next five years will give you a lot of time to reflect on that. You’ll just have to hope that you will learn enough from your first mistake not to make a second. Remember though,it takes a lot of practice before a baseball player consistently hits home runs from perfect pitches.

Small investors who want to invest like Warren Buffett fail because they do not have access to the quality of information Buffett has. Compared with most of us, Warren Buffett has enjoyed a privileged position from the very beginnings of his career. He is the son of a United States Congressman – a Congressman who was also a stockbroker.

For most of his life, Warren Buffett has been able to chat with and gather information and advice from CEO’s and other big movers that small investors have no access to. Warren began trading in stocks at the tender age of 11 years.

Beginning investors fail because they learn in “How to be a New Warren Buffett” books that they must invest with a ten-year perspective or longer. When their stocks go up, they’re happy. When their stocks do down, they’re less happy but they tell themselves “I’m a long term investor”. When their stocks continue to go down, they get worried. When their stocks go down even further, they eventually give in and sell – at a big loss. They do not have the long-term confidence in their stocks that Buffett – through superior information sources and superior market experience – has in his. Those investors who do have confidence in their stock picks often find their confidence is misplaced. They doggedly hold on to inferior stocks, believing they are following the Buffett way. In reality they aren’t and they will not be rewarded because they paid too much in the first place for inferior stocks. Buffett buys his stocks with a skill few of us can match.

Far from trying to exercise patience, some small investors, filled with sheer enthusiasm (and a hint of greed) from reading “How to Become A Millionaire Like Warren Buffett” rush out and buy stocks. Unfortunately, most of them pay too much for their stocks or the stocks don’t have as good long-term prospects as Warren’s own picks.

Beginning investors fail because, in addition to lacking Buffett’s superior access to information, they lack his temperament. Buffett says if you cannot watch your portfolio lose 50 percent of its value without becoming panic-stricken, you shouldn’t be in the market. Well, according to that criterion, most of us should think very hard before investing in stocks. Although perhaps not panic-stricken, most of us would be deeply perturbed if our portfolio lost half its value. For the majority of us, the money we’re putting into stocks is hard earned. To watch it disappear is distressing. The distress can result in small investors selling fundamentally sound stocks just before they recover. Unfortunately, people read books about investing like Buffett and convince themselves that they will be able to handle the stress of watching their stocks dropping in value. It’s only when it really happens to them that they learn the truth – watching your stocks sink is extremely stressful and, after holding underperforming stocks for a long time, people sometimes do end up selling at a big loss.

Small investors fail because they do not have Warren Buffett’s genes. Buffett is an unparalleled genius who has thought deeply about investment for decades. Although he talks modestly and in homely tones to the public, he is an extremely clever and competitive man with an enormous capacity to memorize numbers and facts and apply them in financial calculations and in due diligence. He has developed an immense array of strategies and tactics to keep his wealth increasing, irrespective of market conditions. You should no more think you might emulate Warren Buffett after reading a few books than you should believe that by studying physics for a few months in your spare time, you might emulate Albert Einstein or Isaac Newton.

Warren Buffett’s methods are appropriate for experienced investors who share his temperament. New investors may enjoy greater success using less challenging methods.

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Createwealth8888:

Read? The Two Lessons Retail Investors Can't Learn From Warren Buffet. Why?

Rights issue sucks! Really?

More on Dilution

Does right issue really suck?

Right issue is suck only if you have no money to stay in the game to prevent dilution.  You get diluted. You became a sucker; otherwise, you just continue the game with a higher investment cost and higher risk exposure.

Ask those people who sold their right issue too early for DBS, CPL, KepLand and more



Tuesday, 12 January 2010

Why Don't People Advise You To Sell Your Stocks? - Part 2

Why Don't People Advise You To Sell Your Stocks?

I have always wanted to find out why value investors have so much difficulties in selling a stock and I happen to overheard something from the No-Sell-Horse's mouth:

"no sell unless the biz fundamentals deteriorate as evident by poor mgt decisions and repeated quarters of decline"

When bad news on the stock hit the market, the stock price don't just fall, it will plunge like a falling knife! Falling more than 40-50% is not uncommon. Will you still have the heart to sell? Likely not. Due to Endowment Effect.


From Wikipedia, the free encyclopedia

In behavioral economics, the endowment effect (also known as divestiture aversion) is a hypothesis that people value a good or service more once their property right to it has been established.

In other words, people place a higher value on objects they own than objects that they do not. In one experiment, people demanded a higher price for a coffee mug that had been given to them but put a lower price on one they did not yet own.

The endowment effect was described as inconsistent with standard economic theory which asserts that a person's willingness to pay (WTP) for a good should be equal to their willingness to accept (WTA) compensation to be deprived of the good. This hypothesis underlies consumer theory and indifference curves.

The effect was first theorized by Richard Thaler. It is a specific form, linked to ownership, of status quo bias. Although it differs from loss aversion, a prospect theory concept, those two biases reinforce each other in cases when the asset price has fallen compared to the owner's buying price. This bias has also a few similarities with commitment and attachment.

Monday, 11 January 2010

STI marching towards 3,000?






Half empty or Half full?

I don't know. So it is better for me to just watch and do nothing now.

Sunday, 10 January 2010

What Price happiness?

thesundaytimes, Jan 10, 2010

Are Singaporeans happier when they have lots more money?

Result of study:
  • Singaporeans earning less than $2K a month who enjoy life the most.
  • The higher the household income, the more a singaporean feels that he or she has not achieved much in life.
  • You may live in a million-dollar home but if you owe the bank a lot of money, you are not going to enjoy very much.
  • The fear of not being able to sustain the high life "can be a source of strain or unhappiness"
  • Happy people know and use their strengths. Naturally, they are better able to enjoy life, which leads to happiness.
  • Ability to enjoy life and the feeling of achievement ultimately bring about happiness.
  • Contentment is the key to happiness.
  • Happiness is a state of mind.

Why Don't People Advise You To Sell Your Stocks?

Not your close friends or relatives or even your brokers would dare to advise you to sell your stocks unless there are headline news that are obviously pointing to your company going under.

Why don't people advise you to sell your stocks?

People don't have any problem to recommend their friends and relatives to buy stocks. Why?

When you recommend someone to buy a stock and even when the stock price plunges after buying, you can confidently and easily console the buyer and give the buyer 101 reasons why it is still good to hold and can even consider to average down.

But, if you advise someone to sell his/her stocks and if after selling the stock, the stock price shoots through the roof, the seller is not going to forget your lousy advice for a long time.

Can you find 101 reasons to console the seller why he/she shouldn't be holding and selling is the right thing to do?

When you buy and hold, the game is on and there is always hope; but, when you sell, the game is over and no more hope. People rather be hopeful than hopeless so buying is always easier and selling is always harder.

The Two Lessons Retail Investors Can't Learn From Warren Buffet. Why?

CreateWealth8888:

The Truth About Retail Investors

The Two Lessons retail investors can't learn from Warren Buffet:

Lesson No. 8: Buy big, concentrated positions

Some retail investors are thinking that they are buying into a firm's business, when they are just buying a stock.

When you are buying x% or xx% of the firm's share, you are buying into the firm's business as you become a major shareholder of the firm. The firm's management will have to warm up to your presence and you may even have a board seat.

With a board seat, your interest in the firm is represented. You will have access to the Management to understand their immediate and long term prospects, assess the real ability of the management team, cognitive of the goals of the board members, their future products in the pipeline, the expected acquisitions, the competitive landscape and many more ..

If you buying x or xx or even xxx lots of the firm's shares, you are just buying stocks and don't have the falsehood of thinking that you are buying into the firm's business. Is your interest in the firm in anyway represented? Do you have access to the management team?

You are likely at your disposal for detailed analysis of the company's business and its future earning prospects through quarterly and annual reports, and probably attending AGM and asking a few questions; and most of the time the Management is very careful not to mention any undisclosed information; otherwise, they will have to rush out a press release.

Warren Buffet and the likes of Warren are buying into firm's business and even home-grown Warren-like, Dr Michael Leong like to buy 3-5% of the firm's share. These people are buying into business and not buying stocks. They buy a good business at good discount and hold for forever if the business continues to be good.

But, buying a stock is different because the primary reason to buy a stock is to sell it.

Even you are a long term value investor, you should at least look at chart for a 200 days EMA, if the stock price ever falls below the 200 EMA, at least do a partial sale.

Lesson No. 9: Hold for life

Human life is short unlike the life of institutions which may last many centuries. Our working life is even shorter. Most of us who are earning incomes have a finite number of years in which to build our lifetime saving and to invest part of this saving.


As retail investors, we will finally one day liquidate most of our investment to keep up with expenses and the need to liquidate may come sooner than expected.

Do you think Warren Buffet needs to liquidate most of his investment to meet his retirement fund? Certainly not but most of us need to.

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Lesson No. 1: Be frugal

If the economic downturn is forcing you to live simply, look on the bright side: It's making you more like Buffett.

Buffett lives in the same modest house in Omaha, Neb., that he bought more than five decades ago. He drives his own car.

How does this make him a better investor? First, it gives him more to invest.

Second, a frugal investor will demand this quality from managers. Buffett is leery of corporate waste. Excessive executive pay or silly perks are red flags. Buffett once quipped that companies stack pay committees with "sedated Chihuahuas."

Third, frugal people don't need fast returns to support extravagant lifestyles. This leaves them free to think more clearly about when to buy and sell stocks, making them much better investors, believes Stephen Shueh, a Buffett expert and managing partner of Roundview Capital in Princeton, N.J.

Lesson No. 2: Wait for the 'fat pitch'

Resist the itch to constantly buy or sell stocks.

"Lethargy bordering on sloth remains the cornerstone of our investment style," quipped Buffett in his 1990 annual report to Berkshire Hathaway (BRK.A, news, msgs) shareholders. Have the patience to wait a long time until some market turbulence brings the "fat pitch," as Buffett calls it, or stocks of great companies trading at really cheap valuations.


Lesson No. 3: Be a contrarian

A great way to make money is to go against the crowd. "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful," Buffett explained in a 1986 letter to shareholders.

So be skeptical of the conventional wisdom. Not because the crowd is always wrong but because the crowd's wisdom is probably already reflected in market prices, says Todd Lowenstein, a portfolio co-manager of the HighMark Value Momentum Fund (HMVMX).

When the investing public is extremely negative, it's usually a good time to buy stocks. When investors are confident, be careful.

Lesson No. 4: Stick with what you know

One of Buffett's basic rules is: If you don't understand a company's product or how it makes money, avoid it. He calls this "staying within your circle of confidence."

This isn't always easy. During the late 1990s boom, Buffett famously avoided tech companies, confessing that he could not understand what they did. He looked dumb until the bubble burst. "Ultimately, when it came full circle, he was proven right," Lowenstein says.

Lesson No. 5: Don't depend on others to say you're right

If you are in need of constant affirmation about your investment decisions, particularly from the stock market, you won't be able to invest like Buffett, points out Legg Mason (LM, news, msgs) money manager Robert Hagstrom in his book "The Warren Buffett Way."

That's because Buffett makes outsized returns by purchasing disliked value stocks that are so beaten down they're often virtually ignored by the talking heads. They won't be on TV every week telling you that you made the right choice.

Lesson No. 6: Buy companies cheap


This is the essence of being a value investor. The first step involves calculating what Buffett calls an "intrinsic value" for a business -- either by examining what similar companies sell for or calculating the present value of all the cash that will be generated by a company in the future. For more details on how to do this, you'll have to consult books such as "The Warren Buffett Way" or "The Market Gurus" by Validea's John Reese.

Next, build in a "margin of safety" by purchasing a stock well below its intrinsic value.

Buffett doesn't pay much attention to earnings per share, a common measure of value. Instead, he likes to see companies with good return on equity, solid operating margins and reasonable or no debt. He also likes to see that companies generate a lot of cash and that they invest it well or return it to shareholders in the form of dividends or buybacks.

The key throughout this analysis is to look back over five years or more. Buffett wants to see a consistent operating history; he's not into startup companies. He also prefers to gauge how well a company does in different kinds of markets, not just the good times or the latest quarter.

Lesson No. 7: Look for companies with economic moats

A key characteristic supporting consistent operating history is a sustainable competitive advantage. In other words, a company should have a barrier to entry -- or a kind of moat -- that keeps potential competitors at bay.

This could be a patent protection on drugs, high costs to get into a business or simple brand power, fund manager Lowenstein says. "Franchise" businesses like these can do well because they have the power to raise prices. In contrast, companies in "commodity" businesses have to take whatever price is set by a competitive market -- which can crush profits during hard times.

Lesson No. 8: Buy big, concentrated positions

Most professional money managers protect against risk by diversifying. Buffett goes against the crowd here, too. When he finds a company he likes, he piles into it big time.

This is crucial to his success. Money manager Hagstrom calculates that if you eliminate a dozen of Buffett's best investment choices over his career, he's only an average performer. Buffett thinks his risk protection comes from understanding a business better than the market does and then being patient enough to buy it at the right price.

Lesson No. 9: Hold for life

Buffett quips that his favorite holding period is "forever." Embedded in this concept are two key Buffett tenets I've already alluded to. First, it's worth investing only in companies that are good enough to outperform for decades. Next, you have to think on your own and avoid the madness of the crowd.

"Buffett believes that unless you can watch your stock holdings decline by 50% without becoming panic-stricken, you should not be in the stock market," Hagstrom says.

This doesn't mean buy and forget. Buffett tracks his investments closely and gets out when he thinks that they are fully valued or that trouble is on the way, points out Pat Dorsey, the director of stock analysis at Morningstar (MORN, news, msgs). A few years back, Buffett sold big positions in Fannie Mae (FNM, news, msgs) and Freddie Mac (FRE, news, msgs), the home mortgage companies that blew up last year.


What is behavioral investing?

Buffett is not infallible, however. He still owns big positions in Gannett (GCI, news, msgs) and Washington Post (WPO, news, msgs) even though he forecast at his 2004 annual meeting that the newspaper business would see nothing but trouble for decades.

The price of his company's stock -- always a major part of his wealth -- dropped 31% in 2008 and continued to follow the market down early this year. Since, it and the market have rallied strongly.


Lesson No. 10: Believe in America

Unlike most investors, Buffett doesn't tweak his portfolio depending on which party is coming into office or where we are in the economic cycle. This may make him seen naive. But it also has him putting money to work now, when many others have lost faith in the U.S. economic system. It's a move that will likely make him a winner down the road yet again.

After all, the current fears about the long-term prosperity of U.S. companies make no sense, he wrote in an October op-ed column in The New York Times. That's why he was buying stocks before the current rally began.


"These businesses will indeed suffer earnings hiccups, as they always have," he wrote. "But most major companies will be setting new profit records five, 10 and 20 years from now."

Uncomfortable With Draw-down Method?

Singaporeans unclear about retirement income: survey

Someone told me that he is uncomfortable about using draw-down to fund his retirement and also want to see growth in Portfolio. I am also assuming that he would still want to keep up with his current lifestyle.

Let us do the Maths and don't talk about growth first and just only to maintain the Portfolio.

What type of return is needed for the Portfolio to fund retirement expenses without draw-down and assuming the following:

1. Retire at 55
2. Inflation rate at 3%
3. Portfolio size at 25 x Yearly Estimated Expenses
4. No draw-down
5. 5 years upfront cash out
6. Live up to 80

We would need the Portfolio to produce annual compound ROC at 7.5%




To compound the entire Portfolio at annual rate at 7.5% through the bulls and bears market cycle is a super challenging task. Not only you need super investing skills, you need super guts too to sink in the entire portfolio into the Market when you don't have any more earned income.  Phew!

Saturday, 9 January 2010

Technical Analysis?

Stock picking is part science, part art, part luck, part intuition, and always uncertain - "not precisely knowing."

In my own words, Technical Analysis is not limited to just Chart reading, it also includes analysis of breaking news or related news and how will it affect buyers and sellers sentiment; and those staying at the sidelines.

E.g. Breaking news of Dubai World crisis. Do you panic upon hearing and quickly sold all your positions or you are smiling at new opportunities to accumulate more?

You have keen eyes on sectors and stocks rotation in the market.

You watch out for emerging market leaders.

You play on laggards catching up with market leaders.

You play on news release of  US economics and market indicators.

and many more...

Isn't these technical analysis as it don't deal with numbers crunching?

The Truth About Retail Investors

Retail investors are profoundly different from institutional investors like mutual, pension, endowment funds or even Warren Buffet.

1. Source Of Investing Capital

Retail investors, where does the source of investing capital come from? Some of you may have rich parents to provide you with big sum of investing capital so it is not a problem; but for most of us, our investing capital come from saving from our hard-earned money. Every dollar saved for investment means a dollar less to spend on other "luxuries".

Someone even goes to the extreme to save on his daily dose of 70 cents coffee by making his own cup of coffee at home so that he can save every cent available for his investment.

The investing capital of these institutional investors are provided by other investors and not from saving from their hard earned money. This is world apart!

Have you finally realize the significance and emotion attached to our investing capital? In other word, for retail investors it represents our blood and sweat, and losing this investing capital may drive some of us into depression and even having the thought of killing ourselves for being so foolish.

We know that we cannot afford to fail; neither can we be overly defensive and manage to achieve meagre return on our investment and fail to build up sufficient wealth for retirement draw down.

2. Investing Horizon

Human life is short; but our working life is even shorter. Most of us who are earning incomes have a finite number of years in which to build our lifetime saving and to invest part of this saving.

How much retirement fund you can accumulate will depend on the Rate of Return on your investment during the wealth accumulation phase; and stop kidding yourself that you have plenty of time at your disposal for investment at low Rate of Return.

As retail investors, we will finally one day liquidate most of our investment to keep up with expenses and the need may come sooner than expected.

Do you think Warren Buffet needs to liquidate most of his investment to meet his retirement fund? Certainly not but most of us need to.

3. Inflation

Over long run, inflation is the most adverse for most retail investors and particularly most dangerous for retired retail investors and must be significantly overcome with more wealth during the wealth accumulation phase.

4. Conclusion.

Understand the truth about retail investors on the limitations and choose investing strategies that are most suitable for retail investors to meet their retirement goals.

The most dollar in the least time. We must.

FA or TA or Both? Who will really win? Case Study

"However beautiful the strategy, you should occasionally look at the results." - Winston Churchill


"When the tide comes back, you will soon find out not all boats rise high." - CreateWealth8888

I keep hearing people debating on FA, TA or combined FA and TA and who will finally win the race?

Let us watch an amazing race in 2010 ...




Who Will Really Win?

On left    : Mr Tortosie - Strongest FA that I can find.
On right   : Mr Hare      - TA the Chartist  .................

Mr Tortoise sold EZRA @ $2.05 and Swiber @ $95.5 to Mr Hare and bought MTQ @ $0.685 and GRP @ $0.20

Result of 1st Race: 8 Jan 2010

EZRA: Closing @ $2.36, + 15.1% to Sold Price vs GRP: Closing @ $0.22, + 10.0% to Purchase Price
Swiber: Closing @ $1.18, + 23.6% to Sold Price vs MTQ: Closing @ $0.74, +8.0% to Purchase Price

To be fair as Mr Tortoise is a high dividend yield player. No dividend No Play. Ok lo, let us add 25% entitlement of the total 10% dividend yield at each race.

So we adjust MTQ and GRP for 25% share of annual dividend yield of 10%:

EZRA: Closing @ $2.36, + 15.1% to Sold Price vs GRP: Closing @ $0.22, + 12.5% to Purchase Price

Swiber: Closing @ $1.18, + 23.6% to Sold Price vs MTQ: Closing @ $0.74, +10.5% to Purchase Price





Race 2 Re-match starts on Monday, 11 Jan 2010 ....





Place your bet, who win Race 2?


Friday, 8 January 2010

Re-investing Your Dividends For Compounding Effect?

If dividend yield is your only investment strategy, how could you re-invest your dividend when the market keeps trending upward?

When stock price trends upwards, valuation is getting expensive.

Will you stick to your gun to only look for under-valued stocks and will not re-invest your dividends and will wait for the next market crash?

Stay Married To The Market Not Your Stocks

Many bloggers start sharing their thoughts and lessons learnt in 2009.

I will add one more lesson ...




Do or do not. There is no try.- Master Yoda

Are you married?

What is your marriage vow?

May be something like this:

I, ___ take you, ___ for my wife/husband, to have and to hold, from this day forward, for better, for worse, for richer, for poorer, in sickness and in health, until death do us part.

If you seriously interested in investing and want to build up your wealth from the stock market. It is better for you to stay married to the Market

You marriage vow to the Market is somewhat similar.

I, ___ take you, Mr/Mdm Market for my wife/husband, to have and to hold, from this day forward, for better, for worse, for richer, for poorer, in bull and in bear, until death do us part.

If you have reading this blog, you may have noticed that I am fully committed to the market - for better, for worse, for richer, for poorer throughout 2009.

Stay married to the Market but not your stocks.
 

So ... Are You Married To You Stocks?

Thursday, 7 January 2010

Safety Net in the Market? - Revisit

Once upon a time, in the Land of Unknown, there was a hut. Inside the hut, it was total darkness except for some dim light shining upon a wooden beam which was placed in the middle of the hut from one end to the other. The beam was wide enough with the help of the dim light shinning upon it for someone to see the beam and walked on the beam towards the other end.


One day, Mr. Not Knowing called me for a challenge. He said: "Paid me a fee, and if you could cross the beam to the other end and you would be rewarded". The reward could be handsome depending on how fast I could cross it, but once I stepped on it; there was no refund and no turning back.

I took the challenge from Mr. Not Knowing. Paid him a fee. I had little difficulty to see the beam under the dim light shinning on the beam and quickly walked across the beam to the end other of the room and collected my rewards afterwards. The reward was pretty good for such a quick walk.

Mr Not Knowing asked: "Do you want to play again?". Surely, for such an easy gain, I would be silly not to play. I paid him more fees, and set my feet on the beam again. But, after walking a few steps, suddenly, the hut was brightly lit for a while and went off. To my horrible, I suddenly saw under the beam there were plenty of crocodiles with mouth open wide showing off their razor-sharp teeth and staring at me. Darkness filled the room once again leaving behind the same dim light shinning upon the beam.

I was terribly frighten, but I couldn't turn back. I nervously and slowly walked across the beam. But, I was so scare of falling into the mouth of crocodiles, that I went crawling on the beam instead of walking. Half-way through the beam, I totally lost the courage of crawling, and I sat frozen on the beam. I prayed to the Lord for help.

Suddenly, the light came back, and I saw a safety net cross the the room separating the crocodiles below from the beam. If I slipped, I would fall into the safety net but not into the mouth of crocodiles. The light went off again.

I quickly took the courage, got up but, I walked very slowly and carefully towards the end of the beam as I was still very worry whether the safety net was secured and strong enough to hold me back if fell into it.

So is there safety net in the Market? Were you be brave enough to get up and walk across the beam?

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When investing in stock, always consider the Total Return.

Total Return = Capital Appreciation + Dividend Yield.

Your primary return should be capital appreciation and dividend yield is just your safety net in market should your stock falls and you fail to capture the capital appreciation in the short term.
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