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

Saturday, 30 July 2011

Investing Made Simple by Uncle8888 (21)

Read? Playing The Game of Leverage (8)

Read? Investing Made Simple by Uncle8888 (20)

Hmm...  Uncle8888 you are debt-free. Why you never take a 30-years housing loan?  Housing loan is the cheapest loan in town you know hor. Walau, you not financially savvy leh!

Jessie Livermore once said in his three simple one liners:

In the stock market:
  1. Time is not money.
  2. Time is time.
  3. Money is money.
How many of you who are investing in the stock market fully understand them and appreciate these three simple one liners. Once you really understand them, you may think and act differently in your investing strategy and in your portfolio and money management.


In your life, there are three distinct phases related to wealth:

Phase 1: Consuming your parents' wealth
Phase 2: Accumulating your own wealth
Phase 3: Living off your own wealth or your children's wealth

However, there are some lucky fellows who are consuming part of their parents' wealth in all three phases. Unfortunately, most of us are not so lucky so we have to work harder in Phase 2 to accumulate wealth.

Phase 2: Accumulating your own wealth

You accumulate your wealth from earned income through employment, self-employment or doing businesses and also from investment return and capital appreciation in your investment portfolio.

During your wealth accumulating phase, the rate of inflation will pose a serious threat to your wealth. It may even diminish your wealth if you are not able to beat the inflation rate by bigger margin year on year. In another word, your goal investing should not be just beating inflation rate unless you are one of those high income earner with high net worth looking to preserve wealth.


In that story, the hare over slept and woke up too late to catch up with the tortoise and lost the race.

In the next race, the hare decided to change his race strategy. He knew himself well that and he would need to sleep somehow. So this time, when the race started, he went to take a nap and tortoise ran first. This time he took a shorter nap. After the nap he was full of energy and, he dashed down the road at triple speed.  

Do you think the Hare will win this race?

 Rate of Return during Wealth Accumulation Phase

Do you understand the moral of the story of the second race by the Hare and Jessie Livermore's three simple one liners?

When you are debt-free, you will have all necessary fire power and fuel you need and in better position to take higher risks for higher rate of returns.

When you are debt-free, it may be easier your spouse to quit her job and stay at home to take care of her family. When your spouse is taking care of day-to-day faimly affairs; it will leave you with more time to take care of your investment affairs.

When your investment do well, you can afford to slag a little in your office and gaining even more time for your investment activities.

Time is time. Money is money. Finally, for investing during your wealth accumulation phase, it is the rate of returns that will determine how you may end up in this phase. Like the Hare in his second race, he took a nap and then woke up with full of energy. He dashed down the road at triple speed and won the race.




How?
Do you get it now?


3 comments:

  1. Time is time.

    But Time is your Ally.

    By – Jamie E Smith.

    "WITH INVESTING, THE MORE TIME YOU HAVE THE BETTER IT GETS

    Harley Davidson is in my view, a special company. I have been interested in Harley Davidson Company for a long time and waited many years (it felt like very long years) before buying shares in this business, finally in early 2009. I had wanted to buy shares in Harley Davidson for nearly five years prior to that date, but, as often the case in investing, time is your ally. I will not pretend that it was easy to resist buying them earlier and many times I was tempted to, but the correct course of action was to be consistent with my investment principles and it was the right thing to do.
    Wait until the time is right, and when you think it is, invest aggressively.
    Remember that looking at historical share price trend (my additions – dividend yield trend & PE trend) are useful only in the sense that they provide you with some historical context for the current price. Remember that the past is no indication of likely future prices.
    What they do provide you with is a view as to whether, in a historical context, the current price is above or below the historical average.
    How you interpret that and what weight you apply to it is up to you and you should form your judgment in connection with a range of other indicators and wider research."

    ReplyDelete
  2. no,

    time is your enemy! as the saying goes, "time is a great teacher but it kills all its students.

    ReplyDelete
  3. Hmmm, if somehow the hare can hitch a ride from a car passing by, the hare will win hands down.
    unfortunately, till the hare learns how to hitch a ride without being eaten up as rabbit meat, no hare will actually want to take that risk.
    For humans, leveraging is only available if we are below 60. otherwise, no banks will allow us to hitch a ride.

    ReplyDelete

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