I started serious Investing Journey in Jan 2000 to create wealth through long-term investing and short-term trading; but as from April 2013 my Journey in Investing has changed to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

Since 2017 after retiring from full-time job as employee; I am moving towards Investing Nirvana - Freehold Investment Income for Life investing strategy where 100% of investment income from portfolio investment is cashed out to support household expenses i.e. not a single cent of re-investing!

It is 57% (2017 to Aug 2022) to the Land of Investing Nirvana - Freehold Income for Life!


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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

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Saturday 15 November 2008

Thinking of Risks before Profit

It is very important when investing to think of risks before profit, whether in stock or property investing. Do we need to learn through the painful way of losing huge sum of money before we learn how to think of risks before profit.

Also there is such no investment that is low risk, and moderate return; otherwise, this investment will definitely be overbought by the Market and return will be significantly reduced or out of stocks.

In another word, for better return, higher risk is expected, and chance of losing your invested capital is real, and can happen unexpectedly.

Think of risks before profit.

1) How much I could lose without hurting me financially, if not to reduce the investing capital to the level that is not hurting.

2)For smaller capital, one could take higher risk as one could have not much difficulty in restoring the lost capital through more aggressive saving or reduced expenses to rebuild the investing capital to resume investing. Investing is a marathon, once started, no matter how, one have to stay invested; otherwise, there is no chance to recover those losses through return on safe financial instrument like fixed deposits. For bigger capital, one will have to take lesser risk approach and diversify the risks, it will be harder and take longer time to rebuild capital back to this level again.

3) If one thinking of using leverage (borrowing or taking loan to buy property), it is better to consider the numer of times of leverage against your annual earned income. Do you want to be 20 or 30 times leveraged? Look at those bankruptcies, they all killed by overleveraged. Period.

4) Long term investing does not mean no risks. In the market, corporate raiders are constantly prowling the Street to take companies private. It is not wise to overweight one counter to more than 40% of your portfolio. Overweight is a double edge sword, it can boost profit signicantly but it can kill too.

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