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!

Click to email CW8888 or Email ID : jacobng1@gmail.com

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

Monday 30 November 2009

False Wealth?

Stock Market is truly a False Wealth generating machinery. During Bull Run, it can make every one feel so rich and during the Bear Raid, it makes everyone looks so poor. Why do we need to feel so?

Critical Illness cover – the pitfalls


Bryan Nott , 23/04/2009 , News articles and press releases by Simpson Millar LLP

A recent independent study by the Financial Services Authority (FSA) warns consumers of the not giving the right information when buying critical illness policies.

Most people take out a critical illness insurance policy in case they become seriously ill.

The study revealed that:

68% of policyholders assumed they could claim for any illness that meant they could not work

55% believed they only needed to provide more information eg smoking behaviour or family history eg cancer when and if they made a claim

It is important that all consumers are aware that not every illness is covered under these types of policies and they should find out exactly which illnesses are covered and at which stage of the disease they may be entitled to make a claim.

By failing to give detailed information at the outset of the policy you could find yourself in the position of potential claims being invalid. It is also extremely important that you inform the insurance providers of any changes to your family history of illness or your own in order to ensure that any future claims have the best possible chance of being honoured.

The FSA believes that the study's results are worrying and believes that the limitation of the cover is not necessarily being adequately explained to consumers during the sales process.

The study also showed that although consumer thought they had been given all the details they needed during the sales process many were hazy on the finer points of the insurance policies.
If one can only claim during late stage of illness, CI doesn't really help. Late stage illness means no chance for survival. The difference in claim from CI and claim from death is just probably earlier by less than six months given the survival rate from late stage of illness is probably less than six month.
I think it is easier to withdraw your CPF due to critical illness than to claim for CI.
Q: Can I withdraw my CPF if I am no longer fit for employment? If so, what do I need to do?

A: You may apply to withdraw your CPF in the Ordinary and Special Accounts if you are suffering from an illness which has resulted in you being permanently unfit from ever continuing in any employment.

You may apply for withdrawal online under my cpf Online Services - My Requests if you have a SingPass. Alternatively, you can also complete the application form CPF-MGS and mail it to us.

To support your application, please mail us a doctor's letter (dated within six months of your application) stating your illness.

Once we receive your completed forms and documents, we will obtain a medical report from your doctor or refer you to our panel of doctors to assess whether you are eligible to withdraw your CPF savings on medical grounds.

Do consider to include medical insurance and self funding. (keep sufficient large amount of money in yr CPF account).
BTW, I don't have any CI coverage; but, I do have medishield plus, medisave, and enough money in the CPF account to beat the CI coverage for the same amount of CI insurance premium that I could afford to pay.

Sunday 29 November 2009

Portfolio Management - Passive Income (Re-visit)


me & my money, Nov 29, 2009, thesundaytimes

Some interesting points:

1. Like me, Wai Chung also spurred by the book - Rich Dad Poor Dad.

2. His passive income come from stock dividends.

Don't forget to include dividend play stocks in your Portfolio even you are a frequent trader and it helps.

Cash Is King?

Someone said this: "better to keep cash, i.e. put in a bank to earn 0.5% per annum. This may be a poor return, and does not cover inflation, but it is safer". He doesn't like the stock market now.

Is this a reasonable good advice?

BTW, he is not a money manager. For investing in stock market, one should listen to proven long time money manager like Anthony Bolton.


Important points to recap:

A GOOD investor gets it right 60 per cent of the time, says veteran fund manager Anthony Bolton. As for the rest of the rest of the time that he is wrong, the challenge is to 'just keep going'. 'When you make mistakes, learn but don't get too depressed. I sometimes see managers get into a declining spiral when they have bad performance, and they can't get back again. You have to be detached. You're going to have good times and bad, and you have to just keep going.'
'My best guess is we're in a bull market that will be multi-year. The first phase is a very strong phase, but because I think a lot of professional investors have missed out on the rise, it probably doesn't stop until a lot of them are sucked into the market. (CreateWealth8888: Stock markets are always driven up or down by the professional investors i.e. money managers)

'I think we're getting towards the end of the first phase. It could finish now or early next year. Then we get to a slightly different marketplace. There have been certain types of companies to own in the first phase. The types to own in the next will be slightly different.' (CreateWealth8888: Do your homework and open your eyes wide for the "types" to own)

'I generally found the companies that I lost the most money in were those that had high gearing. It's not that I would recommend to people never to invest in companies with high gearing or weak balance sheets, but you want to do it with your eyes open. If something changes for the worse, you want to get out quickly because the downside can be a long way.

'Someone has asked me - but surely low growth is bad for markets. I disagree. What markets don't like is overheating and rates going up. I think if you have low but sustainable growth and low rates, and if you can find growth stocks in that, you'll do very well.'
He tells punters who invest directly in stocks to do their homework and monitor market sentiment. 'The best opportunity to buy is when everyone hates stocks. You need a contrarian ability. I've been in the industry so long. I think if you get it right 60 per cent of the time, you're doing great.'

Rather than set a stop loss, investors should have an 'investment thesis' or a rationale to hold a stock, he says. Once that thesis is no longer valid, the stock should be sold - even at a loss. Mr Bolton is mainly a fundamentalist, but uses technical analysis which helps in timing and size decisions. 'If I'm looking at a stock that has done well for seven years, I look at it differently from one that hasn't done well,' he says. 'A stock that has done well has most of the good news in the price. If things change, there are lots of profits that people can take so investors are likely to suffer on the downside.'

As he writes in his latest book, investors should forget the price they paid for a share as it can become a psychological barrier when the price falls. 'The investment thesis is the key - check it regularly. If this changes for the worse and the share is no longer a buy and probably therefore a sell, you should take action regardless of the price being below what you paid. Trying to make money back in a share when you have lost money to date, just to prove your initial thesis was correct, is very dangerous. As a general rule in investment, it's not good practice to try and make it back the way you lost it.' (CreateWealth8888: Do you Average Down? - most retail investors love to average down. http://createwealth8888.blogspot.com/search?q=average+down .

One should only do Average In, i.e you have pre-determined x% of your investing capital for that particular stock and buy them in batches when the stock price fall and not adding more capital just because it is getting cheaper)

Since when Stock Market is not risky? When I was younger, I have many times heard from many senior relatives and senior citizens telling me stock market is very risky. If I have listen to them, probably I will be having negative returns after inflation.

Saturday 28 November 2009

Portfolio Management - The Importance Of Realized Profit


What were you thinking on Thursday and Friday when major markets around the world tumbled? Are you terrified by the -5% drop in HSI?

One good way to overcome this Fear is to have good buffer of realized profit and use the realized profit to diversify into different sectors.

When the panic selling hits the market, some may withdraw completely from the market and stay in cash and observe the market for a while. Others may switch to more defensive counters or counters that have little or not linked directly with the cause of the panic. So when panicky investors switched into your counters; your portfolio may be spared from huge damages from the meltdown.

It is also a good time to review what are those counters that survive this melt down and you may want to include them if they are not already in your portfolio.

How to have more and more realized profit? You have to SELL.


Friday 27 November 2009

Sanity Check On The Strength Of Your Portfolio

Come next week, when STI tumbles, we will be able to find out the strength of our portfoilio and does stocks diversification help to mitigate the degree of damages?

Thursday 26 November 2009

Book on TA for Beginners

If you are interested in learning TA, you may wish to borrow this book from our NLB.

Wednesday 25 November 2009

Greed And Fear - Part 5


In  “Trading in the Zone”, Douglas wrote that all trading errors due to Fears.

Four Primary Fears:

1. The fear of being wrong.
2. The fear of losing money.
3. The fear of missing out (on the trade and profits).
4. The fear of leaving money on the table, or giving back open profits.

These fears lead traders to second-guess their trading rules and strategies. They might buy too early as they were afraid  that the market was going to run away without them. And they might sell too soon as they were so worry that the market would snatch their profit, and not waiting for the trade to develop and to hit their set target.

The solution?

1. Have a  system.
2. Have a clear set of rules for entering and exiting trades.
3. Follow your rules!

Have faith in your system and faith in your rules. If your system is a good one you will make money.

So you must follow the rules of your system, instead of reacting to your emotions when deciding whether to enter or exit a trade.

Greed And Fear - Part 4


I have this chance to observe how the Greed and Fear action played out in a trader on her trade on Kep Corp.

She has queued to sell at $8.44 and sudden movement of price up and she quickly withdrew her sell order. She was very happy and hoped that Kep Corp could continue to move up.

However, an hour later, when HSI dropped sharply, probably due to stumbling of SSE when the Central Banker may tighten Chinese banks’ capital requirement.

Fear of losing and she pressed the panic Sell button at $8.41.

Guess what, Kep Corp recovered and continue to power up. The reason for more buying interests from BBs probably due to several month of dry spell (no orders announcement) and suddenly out of the blue, it announced 2 orders. The better one is on drill ships which many analysts believe that Kep is unable to compete.

In a long spell of dry season, 1 day of rain may bring hope to the farmers.

How can we probably overcome this Fear and Greed in the market to make better decision?

I am still working hard on it. FA or/and TA for Exit strategy?

Tuesday 24 November 2009

The Case for Retiring in a Bear Market

by Jonathan Clements

In a sense, a bear market creates a financial cushion. If you can look at your beaten-up portfolio and remain confident that you have enough to retire, maybe you are indeed in good enough financial shape.

Of course, you might get a little impatient waiting for the next bear market to arrive. Want to retire today? Before you tell the boss, take your stock portfolio's value and mentally lop off 30%. Still feel you have enough money socked away? That's probably a good sign.


That is probably close to my thinking of building a stock portfolio by discounting 30% as part of retirement fund.

5 Myths About ETFs


Investing in ETFs may not be simple as what you think and you still need to spend fair amount of time and energy to pick the right ETFs that are suitable for your investing goals and horizon; otherwise, it is probably just "blind" investing and hoping for the best.
by Michael Iachini

Key points

  • Here are five commonly held myths of ETF investing and why it pays to look beyond your first assumptions.
  • Consider carefully what it is you're looking for from an ETF before you buy—and make sure your ETF delivers what you need.
  • Find out whether ETF investing is right for your portfolio needs.
you probably know a thing or two about exchange-traded funds, better known as ETFs. You know that ETFs are basically index mutual funds that trade like stocks. You know that they have low expenses and are easy to trade. You know that they are a cheap, easy, tax-efficient way to get good diversification.

Or you think you know all of that.

In fact, many ETFs may not have all of the good characteristics that you associate with this increasingly popular investment type:

Many ETFs have higher expenses than you might expect.

Some ETFs can be difficult and expensive to trade.

Rather than traditional indexing, some ETFs flirt very openly with active management.

Some ETFs can give you taxable income.

Certain ETFs give you no diversification at all.

Here are five commonly held myths of ETF investing and why it pays to look beyond your first assumptions.

Myth No. 1: All ETFs have low expenses

The first thing that many investors think about when they consider the good qualities of ETFs is the low expenses they carry. This is true for many traditional ETFs, such as the S&P 500 SPDR (SPY), which tracks the S&P 500® index and carries a tiny expense ratio of 0.09%.

But did you know that some ETFs charge much more? For instance, most ETFs that track single-country indexes—such as the iShares for the United Kingdom (EWU), Australia (EWA) and Germany (EWG)—charge 0.52%.

You'll also tend to pay more for funds that are focused on a specific industry, such as the iShares Dow Jones U.S. Oil and Gas ETF (IEO), which charges 0.48%.

Another example: ETFs that follow unconventional indexes, such as WisdomTree DEFA High-Yielding Equity ETF (DTH), which charges 0.58% and weights stocks according to fundamentals like earnings, dividends and cash flow.

ETF expenses currently top out at 1.53% with Claymore/Ocean Tomo Growth (OTR), an ETF that aims to invest in companies that own valuable patents.

The expenses might be worthwhile if you need the specific exposure the ETFs provide, and they are still generally less expensive than many actively managed mutual funds. But be aware: The fact that something is an ETF doesn't necessarily mean it's the cheapest option.

If you're trying to compare expenses between an ETF and a mutual fund, the expense ratio is a good place to start.

Myth No. 2: All ETFs are easy and cheap to trade

Investors also love ETFs because of their liquidity—the ease with which they can be bought and sold. It's true that you can trade ETFs anytime during the day, just like a stock.

But there's a cost to trading, and it's not just commissions. Whenever you buy or sell anything on an exchange, there's a bid-ask spread—the difference between the higher price at which investors are asking to sell and the lower price at which they're offering to buy.

For ETFs that are actively traded all day long, the bid-ask spread tends to be quite small. But less-liquid ETFs (that is, those that are harder to trade) tend to have much larger spreads.

In addition, unlike open-end mutual funds, the price of an ETF doesn't necessarily match the net asset value (NAV) of the securities in its portfolio. The difference is known as the discount or premium to NAV, and it can be very unpredictable.

More-liquid ETFs tend to have smaller discounts and premiums. So while you can trade an illiquid ETF anytime, it might cost more in spreads.

For example, one lesser-known ETF, Claymore/Zacks Country Rotation ETF (CRO)—which tracks an index of international stocks that changes its country focus over time— had an average daily trading volume for the month of July 2009 of only $15,000 per day, with no volume at all on eight of the 22 trading days in the month.

During the same period, the widely traded S&P 500 SPDR (SPY) had an average daily volume of more than $18 billion—over one million times that of the lesser-known fund.

According to data from XTF, the average bid-ask spread for the less-liquid CRO fund during this period was 1.66% of the price of the fund. During the same period, the average bid-ask spread for the ultra-liquid SPY fund was only 0.01%.

If you had accepted the price the market had set each time you traded, it could have cost you 1.66% of your investment to trade CRO but only 0.01% to trade SPY.

Myth No. 3: All ETFs are index funds

You may like ETFs because they're index funds. With an index fund, you get all of the stocks in the index without having to worry about whether the portfolio manager is picking the right securities or not—the manager just buys them all.

However, not all indexes tracked by ETFs are traditional market indexes like the S&P 500.

Some indexes, like the PowerShares Intellidex indexes, are effectively actively managed; the company that puts the index together tries to include only stocks that it believes will outperform the market. And a few truly actively managed ETFs have been launched recently, such as Grail American Beacon Large Cap Value ETF (GVT).

This leaves you open to the possibility that the people or companies assembling the index will be wrong about which stocks will outperform. That's called active management risk, and avoiding that risk is one of the features of indexing that some ETFs fail to provide.

For example, the PowerShares Dynamic Market ETF (PWC), which is a total-market fund (meaning it includes very small to very large companies), has outperformed the total-market Russell 3000® index (which follows the 3,000 largest public US companies) by as much as 2.9% in a single month since its June 2003 launch—but it has also underperformed that index by as much as 4.2% in a single month.

Contrast this with a traditional total-market index ETF, the iShares Russell 3000 Index (IWV), whose returns have been within 0.05% of the index every month in that time period. While the more active fund may outperform a traditional index, the risk of underperforming is present, as well.

One way to tell if you're getting an actively managed fund in disguise is to read the language in the ETF's prospectus describing the index the fund is following. If the index picks stocks that are "expected to outperform," investigate further.

Myth No. 4: All ETFs are tax-efficient

Much has been made of the tax-efficient nature of ETFs, and it's true that they are often more tax-efficient than similar mutual funds.

Myth No. 5: All ETFs give you diversification

Finally, you may like the easy diversification provided by an ETF—by making one trade, you suddenly have a well-diversified domestic equity portfolio. This is certainly true for many ETFs. For instance, by buying one share of the iShares Russell 3000 Index (IWV), you gain exposure to nearly all stocks in the US markets.

This isn't true of all ETFs, though. Very narrow ETFs may provide you with very little diversification. iShares Dow Jones US Energy (IYE) looks diversified with 76 holdings, until you realize that more than half of its assets are concentrated in just five stocks! Buying shares of a gold (IAU, GLD) or silver (SLV) ETF gives you access to exactly one asset.

Generally speaking, the more narrowly defined the index, the less diversification it gives you. You can find the percentage of a fund concentrated in its top 10 holdings in the ETF Visual Screener on Schwab.com.

Myths debunked

Now you understand that not all ETFs are alike. Although many ETFs are good tools for providing inexpensive, highly liquid, tax-efficient diversification without taking on active management risk, some ETFs fail to live up to this billing.

Consider carefully what it is you're looking for from an ETF before you buy—and make sure your ETF delivers what you need

Monday 23 November 2009

Shake That Seller's Mindset?

If you are sitting on nice pile of unrealized profit, should we take realized profit now or risk the market taking them back. How to shake that Seller's mindset?

May we should be using Trailing Stop to capture as near to the top as possible instead of selling near or at the resistance?

Sunday 22 November 2009

Running money

Published November 21, 2009, BT Weekend

Anthony Bolton's contrarian streak and eye for turnaround stocks has won him much acclaim in fund management and billions in assets for Fidelity. The retired fund manager remains very much involved in finance


CreateWealth8888: Look at what I had posted on 2 May 09 an article where Anthony Bolton despite the March rally seeming to have petered out in the past couple of weeks and the uncertainty now posed by the swine flu outbreak. He was sticking his neck out and announcing the end of the bear market


A GOOD investor gets it right 60 per cent of the time, says veteran fund manager Anthony Bolton. As for the rest of the rest of the time that he is wrong, the challenge is to 'just keep going'. 'When you make mistakes, learn but don't get too depressed. I sometimes see managers get into a declining spiral when they have bad performance, and they can't get back again. You have to be detached. You're going to have good times and bad, and you have to just keep going.'

'To spot turning points, I look at patterns of bull and bear. They're never quite the same. When the market has been rising for a long time and has risen a long way, I'm more cautious. And when the market has fallen a lot and for a long time, as it was in the first quarter, I'm more optimistic.

'Then I look at sentiment of investors. When they're very cautious I try to be optimistic. I look at long term valuations over more than 20 years. If the three line up with each other as they did in the first quarter, you may not get the exact date, but you could get the quarter right if you're lucky.

'My best guess is we're in a bull market that will be multi-year. The first phase is a very strong phase, but because I think a lot of professional investors have missed out on the rise, it probably doesn't stop until a lot of them are sucked into the market.

'I think we're getting towards the end of the first phase. It could finish now or early next year. Then we get to a slightly different marketplace. There have been certain types of companies to own in the first phase. The types to own in the next will be slightly different.'

'It's very difficult in short periods to differentiate between luck and judgement. You can do well for a couple of years purely by luck and no judgement. Our analysts rotate and cover an industry for two to three years. Most analysts go through two to three rotations, so it takes five to seven years before they get a chance to be a fund manager.

'When you work with an analyst for five to six years, you can tell if they have it or not. You see what their recommendations do, how they react when things go wrong. I think it takes that amount of time. You can really only assess potential people to be fund managers if you work closely with them for a number of years.'

He is frank about his mistakes, devoting a chapter to recounting them in his book. One of the disasters was a conglomerate called Parkfield which became one of his top 10 holdings in the early 1990s. It subsequently went into receivership and its shares were suspended and effectively worthless. He did not scrutinise gearing closely enough, he says. 'I have nearly always found you lose the most money on companies that are poorly financed when conditions change. The strength of a company's balance sheet is very important.

'I generally found the companies that I lost the most money in were those that had high gearing. It's not that I would recommend to people never to invest in companies with high gearing or weak balance sheets, but you want to do it with your eyes open. If something changes for the worse, you want to get out quickly because the downside can be a long way.'

The latest banking crisis, he says, was the sixth he has weathered. 'When our instincts tell us it's time to quit, this is nearly always the wrong course of action. The outlook for markets will look its worst at the bottom. I think to be a good investor and to avoid getting shaken out of markets when they are low or sucked into markets when they are high, you need to be somewhat detached.'

Paradoxically, he believes a backdrop of low growth and low interest rates are good for investments.

'Part of my thesis is that we're going back to a period of low growth in developed markets, and I think we'll have low rates for the next couple of years. Low growth rates are actually a good environment for stock market investing.

'Someone has asked me - but surely low growth is bad for markets. I disagree. What markets don't like is overheating and rates going up. I think if you have low but sustainable growth and low rates, and if you can find growth stocks in that, you'll do very well.'


Hmm... let open our eyes to look for growth stocks in SGX. Which ones?

The Compound Magic Of Stock Transaction Timing - Part 2


I believe many investors love the Rule Of 72 and start thinking how long would it take to double their investing capital?

Take a good look at STI main data point since 1990. We have to be realistic and mindful that the Rule of 72 can only work well in a prolong Bull market or unless Investors turn into Speculators and start shorting the market on the way down.

For the Rule of 72 to really work in our favor, we may have to time the market; and have to be good at market timing to avoid those market crashes or major corrections. It just takes 1 or 2 bad years to wipe off much of the past gains if our portfolio is caught by market crashes or major corrections.

So do you think that market timing is important for Rule Of 72 to work for you?

Technical Indicators?

Technical indicators come in three time zones.

A leading indicator tells what's going to happen -- like the smell of pizza in a box suggests that a meal's near.

A coincident indicator tells what's happening now -- the pizza's being eaten.

A lagging indicator tells what happened -- like an empty pizza box.

But some things don't act as indicators at all -- a pizza coupon in the newspaper doesn't necessarily mean a meal is about to happen, is happening or has happened.

When considering indicators, it's also important to remember that the closer a predictive value comes to 50-50, the less useful it is. You might as well flip a coin.

Saturday 21 November 2009

Understanding Stock Market Risks - No 6 Risk


6. Liquidity Risk

This risk is associated with the ability to sell out our stocks easily without depressing the price level further and causing potential buyers to retreat to sideline in anticipation of more fire sales coming.

It is true that when we buy stocks which have low liquidity; we can have all the time in the world to buy slowly. I am not sure if the opposite is true when you need to sell? Do you really have the time in the world to sell slowly? Probably, you may have urgent need to raise money; otherwise, why would you be selling?

Some General Advices To Newbies In Trading

Some general advices to newbies in trading on possible sources of weaknesess:

  • insufficient capital
  • lack of knowledge and skills
  • lack of viable trading strategies and tactics
  • lack of emotional control
  • lack of buying and selling decision
  • lack of transactions history
  • lack of patience
The good news is all these weaknesses can be overcome and you will be successful. Cheers!

You may want to first read up on posting related to Stock Market ..


TA - Always Two Sides To Every Technical Decision

You may look at a chart with your own favourite indicators and system and see one thing, while another person who likes to look for e.g. reversals may look at the chart and see something else or totally different. Every buyer and seller have their own reasons to buy or sell and every transaction is matched between buyer and seller.

So who is right? Well, only the future will tell. You have to keep good record of every transaction you have made, and honestly you asked yourself, are you getting nearer to your trading goals or you are just making some wins and losses here and there and not really accelerating towards your trading/investing goals. Or you are just enjoying trading?

Market Crashes: What are Crashes and Bubbles?

From http://www.investopedia.com/

A bubble is a type of investing phenomenon that demonstrates the frailty of some facets of human emotion. A bubble occurs when investors put so much demand on a stock that they drive the price beyond any accurate or rational reflection of its actual worth, which should be determined by the performance of the underlying company. Like the soap bubbles a child likes to blow, investing bubbles often appear as though they will rise forever, but since they are not formed from anything substantial, they eventually pop. And when they do, the money that was invested into them dissipates into the wind.

A crash is a significant drop in the total value of a market, almost undoubtedly attributable to the popping of a bubble, creating a situation wherein the majority of investors are trying to flee the market at the same time and consequently incurring massive losses. Attempting to avoid more losses, investors during a crash are panic selling, hoping to unload their declining stocks onto other investors. This panic selling contributes to the declining market, which eventually crashes and affects everyone

Asia is faced an asset bubble, due to speculation in real estates caused by low interest rate, due to stimulus spending by governments in many countries - NYTimes

With the current very low interest rate, many potential retail property investors ( defined as those are seriously net worth negative after taking on the housing loans as leverages) are thinking that investing in properties is the way to go for potential cash flow and future capital gains. How nice is to be a landlord?

Yes. While it is true that the fastest way to build up your wealth is through using the biggest leverages that you can find. But, retail property investors also have to be mindful that leverage is a double edged sword - it can also kill you faster than expected.
What made you think that the interest rate will remain low for a long time? Look at the historical Fed Rate, it could rise faster than expected and could keep rising for a long while.


And if the interest rate is rising faster than expected, what will happen to the wonderful dreams of those retail property investors ( defined as those are seriously net worth negative after taking on the housing loans as leverages).

Do understand what is market crash - almost undoubtedly attributable to the popping of a bubble, creating a situation wherein the majority of investors are trying to flee the market at the same time and consequently incurring massive losses. Attempting to avoid more losses, investors during a crash are panic selling, hoping to unload their declining Properties onto other investors. This panic selling contributes to the declining market, which eventually crashes and affects everyone.

One thing about the leveraged properties, you may not need to sell it yourself, your friendly banker will force sell for you. Does it sound good?

"While we are free to choose our actions, we are not free to choose the consequences of our actions." - Stephen R. Covey

Friday 20 November 2009

Goals - Part 2


Someone set a Saving Goal of $50K in a year and told himself: "I'm still going to do it nevertheless. Armed with this suicide bomber mentality, I toiled month after month. I'm going to die trying it if I have to. When you announce to the universe that you wanted this so badly, things will bend over backwards to make it happen for you."

Yes, it is possible for your Saving Goal. You can hit your target if you do whatever it takes to get there.

But, there is one goal that may not be true - Trading Goal. Why?
"Stock picking is part science, part art, part luck, part intuition, and always uncertain - "not precisely knowing." - ???

I realized that for Trading Goal, no matter how hard you try, you may not even hit 50% of your Goal and not even you threaten to jump down from 50th storey. The Market doesn't know you and don't care whether you jump or not.

To consistently make money from the market required more than hard work and determination. It also required plenty of luck and intuition. Not sure is there any way to improve our luck and intuition?

If you come across any method that can help to improve luck and intuition, let us know.

Thursday 19 November 2009

Understanding stock movements


THE most popular phrase that stock market commentators use to describe rising prices is 'bargain hunting' and when the market falls, we often hear it was because of 'profit-taking'. Sometimes, these variations are used - 'demand was greater than supply' or 'there were more buyers than sellers in the market'.

But do stock prices really rise because of bargain hunting or fall because supply exceeded demand? Or is the use of these descriptions nothing more than commentators and analysts taking the easy way out and not wanting to think through the real reasons why the market moved the way it did?

Equating buying with rising prices and selling with falling prices is actually wrong because the two activities are two sides of the same coin. For every transaction done in the market, there has to be an equal number of buyers and sellers; the absence of one set of parties means no transaction takes place. If no transaction is concluded, then prices do not move.

What actually happens when prices do move is that shares have been exchanged among investors whose opinions and expectations have changed about the market or the companies concerned.

Rises and falls

For instance, prices rise because investor expectations have become positive. It may be that the company has announced a big, profitable deal. Or perhaps the government has just announced an upgrade in its economic forecast that could directly benefit that particular company.

Investors will then pay a higher price for stocks which they think will be later worth more.

Conversely, prices fall because investors have reversed their outlook and are willing to transact at lower prices. Their outlook for that stock or the market as a whole has changed to negative.

Similarly, saying that 'demand was greater than supply' to explain a price rise is wrong because stocks do not follow the traditional demand-supply frame work.

In a perfectly competitive market, demand for goods will be more when the price is low and less when the price is high. For example, a cell phone or a pair of shoes will sell in greater quantities if it is priced at $100 instead of $500.

Stocks, however, do not follow this predictable pattern. For example, when Creative Technology's shares fell to $5 during the regional crisis six years ago, analysts called a 'sell' on the counter.

When it rose above $60 a few months later, everyone said it was a 'buy' and the price duly rose to $66. In other words, demand for stocks is different from demand for any other goods that we know of and people will chase prices higher and higher. Recall the Internet boom of 1999-2000 and the fact that stocks rose by huge amounts, by as much as 40-50 times. Those same stocks either do not exist any more or trade for a fraction of their previous prices.

In his 1938 book The Theory of Investment Value, Harvard professor John BurrWilliams said: 'When the price of a stock moves, it moves because the demand curve moves, not because the quantity demanded changes.' A shifting demand curve is indicative of shifting preferences and, perhaps, sentiment.

Misleading phrases

What about the classic 'bargain hunting' and 'profit-taking', two phrases which convey no useful information to the reader or listener and whose common use actually mislead rather than informs?

Consider, for example, 'profit-taking', a phrase which implies falling prices because investors were cashing out. But what about those who bought? Presumably these buyers want to make money later, so why not say prices rose because of 'profit-making'?

Similarly, 'bargain hunting', which implies people bought because the items were cheap. However, the sellers obviously didn't think the stocks were bargains when they sold, so why focus only on the buyers?

The fact is that most of what we hear and read about markets today is misleading and is based on the wrong use of economic concepts. Stocks don't move because of demand exceeding supply or because people indulged in profit-taking or bargain hunting, they move because expectations change about the future.

They also move because greed and fear are present in differing quantities at any one time. Sentiment is the single most influential factor at work behind price movements. The sooner everyone recognizes this, the better.


 "Man is a goal-seeking animal. His life only has meaning if he is reaching out and striving for his goals." - Aristotle

And I believe it's very important to have goals. They help to keep us focused and motivated, giving us a sense of purpose and direction.

Wednesday 18 November 2009

The Bandwagon Theory: A Glimpse At How The Market Really Works?


Another story of the stock market ...

Author: ?????

Imagine a bandwagon that is rolling forward at a quickened pace. Music that is very pleasing to the ear is being played from speakers from each side of this bandwagon, and a few people on the back of the wagon are partying, having the time of their lives.

The music, loud and clear, starts to attract many other onlookers that happen to be idly standing on the sidelines. These onlookers, unable to resist the sweet sounds being played, run to join the party that seems to be going on.

Progressively, more and more onlookers jump on the back of this bandwagon, and those few who were enjoying the first phase of the party begin to leave.

As the crowd of the new party animals on this bandwagon grows larger, the bandwagon finds it harder and harder to move forward at the same pace. It slows, enabling more and more late onlookers, witnessing the great fun, the chance to jump on.

The crowd grows even larger. Larger and larger the crowd grows, until the bandwagon, heavily laden with bodies of drunken party animals, can no longer move forward.

It finally comes to a complete stop.

Now that the bandwagon is at a complete standstill, more people jump on. And why not? At this point, joining the party is easy. Absolutely no work is required, for individuals wanting to join the crowd no longer have to run to jump on board.

But the nature of the bandwagon is to move forward. It’s motionless state is unnatural, and therefore cannot last. It tries to move forward but can’t.

The crowd piled on back is too large. It must free itself of the heavy burden. And it does.

It quickly shifts itself into reverse, and jolts backwards, knocking a few of the party animals off the back.

The music stops.

Puzzled faces from the crowd begin to emerge. Before anyone figures out what’s going on, another backwards jerk takes place, only this one is move violent. Another large group of people get thrown off the back.

Now reality sets in.

The FUN has turned into a NIGHTMARE of EPIC proportions, and panic begins to run rampant. Some decide to jump off to their deaths. Another thrust backwards sends an even larger group of drunken, offbalance people, hurling to the muddy ground.

It doesn’t stop.

The jolts backward continue, each successive one more violent than the last. At this point, only a few die-hard dwellers are holding on, their very lives hanging in the balance by a very thin thread.

Failing to be completely free, the bandwagon angrily puts the pedal to the metal, and this final thrust backward is so vicious that it’s front wheels lift high off the ground, momentarily suspending the wagon in a perpendicular position.

The last of the hangers-on crash to the ground, broken and maimed to no end.

At this point, a new group of onlookers emerge from the nearby woods. They are clean and serene. Each move they make is deliberate and powerfully energetic, for they did not take part in the tragedy that just transpired. Or did they?

A few of the dejected souls lying on the ground take a closer look, a look that reveals something very interesting.

This seemingly new group is not new at all. It is the same group that was seen quietly exiting the party before it came to it’s violent end.

An even closer examination by a few more beaten-down onlookers reveals something even more stunning.

This group not only exited the party early, they were the originators of it!

“My God,” someone exclaims. Paralyzed, and unable to move freely, all these dejected souls can do is watch, as the masters of the game go back to work, again

No sooner does this bandwagon’s wheels hit the ground, than this professional platoon bolts for the wagon. In a flash they are onboard. Easy

The bandwagon, now free of the larger crowd, can move forward freely and gracefully, comfortably carrying the more astute group with it.

It’s pace quickens, and before long a smooth elegant stride is in place. After a few more miles of uninterrupted movement, someone from the masterful group flips on a switch, and suddenly the loud sound of entertaining music starts up again.

Someone yells, “OK everyone. Here they come. Let’s do it again.”

Within moments, those who were the former victims of the backward crash become interested again. The music almost calling them from the grave.

And once more the never ending cycle repeats.

(the hidden wisdom embedded in these metaphors, will allow you to claim a higher level of understanding and mastery at the game of the market).



Do you now understand how the game is being played?

Monday 16 November 2009

Pareto's Law In Investing?

Financial & Investment Dictionary: Pareto's Law

Theory that the pattern of income distribution is constant, historically and geographically, regardless of taxation or welfare policies; also called law of the trivial many and the critical few or 80-20 law. Thus, if 80% of a nation's income will benefit only 20% of the population, the only way to improve the economic lot of the poor is to increase overall output and income levels.

Other applications of the law include the idea that in most business activities a small percentage of the work force produces the major portion of output or that 20% of the customers account for 80% of the dollar volume of sales. The law is attributed to Vilfredo Pareto, an Italian-Swiss engineer and economist (1848-1923).

Pareto is also credited with the concept called Paretian optimum (or optimality) that resources are optimally distributed when an individual cannot move into a better position without putting someone else into a worse position.

Pareto's principle can be true in your Portfolio Management. 20% of those stocks (multi-baggers) in your Portfolio are providing 80% of the returns. Likewise, 80% of losses are contributed by 20% of losers.

The rest are small gains and losses here and there; and don't have any serious impact to total or net returns of your Portfolio.

Take note of Pareto Principle and apply them to your Portfolio Management, let the top 20% of winners run; and prevent the top 20% of the losers from creating havoc and cut losses fast.

Sunday 15 November 2009

Path To Financial Freedom? - Part 2

The path to Financial Freedom is easier and simpler if you choose to stay single. You only need to take care of your own personal future needs. But, if you choose to get married; welcome to the World of Dependencies.

You will need to provide adequately for your dependents. The path to Financial Freedom  is going to be very challenging; and be mentally prepared for any unexpected surprises that will put your plan into jeopardy. Did you see that there are more than one investing goal?

How will you choose your path to build up your wealth in the journey towards Financial Freedom? Where does your money come from?

You either work very hard to climb the corporate ladder.

In addition, you may invest in your own businesses or other people's businesses (stock market) to build up more wealth.

I have elected to invest in stocks and be an active stock investor who will spend time and effort to get it done.

I don't speculate in non-asset financial instruments like futures, options, forex etc because I am not a good speculator and I hate stop losses so speculation is out for me.  http://createwealth8888.blogspot.com/2009/09/gambling-investment-speculation.html

I also don't invest in overseas stocks for two reasons:

  • Currency risks is a double edged sword - I like to fight the market with one-edge knife so that I know where is the sharp blade is.

  • Monitoring one local market is really taking up lots of time and effort. Singapore market is a lot slower than oversea market. I don't mind the slowness as I am a fisherman.

Does it really matter where you earn that $ from?

Path To Financial Freedom? - Part 1

Why do we want to seek the path to Financial Freedom (or in my case Financial Independence - getting out of Rat Race: http://createwealth8888.blogspot.com/2009/10/what-is-rat-race.html and http://createwealth8888.blogspot.com/2009/04/four-financial-progressive-stages.html)

The official Retirement Age in Singapore is 62, and optional at 60 i.e. if you opt to retire at 60, then your company is required to pay you whatever you are entitled for retirement benefits. The retirement benefits provided by company will vary from company to company.

The Government will raise the official Retirement Age to 65, and not sure how will it affect the optional retirement age at 60? Maybe, the government will raise the optional to 62. Sorry, you got to work longer.

Why do we want to retire early from our paid jobs? May be all works suck as an employee? http://createwealth8888.blogspot.com/2009/11/all-work-sucks.html

For me, it is not really the works that are suck; but more of years of seeing those ex-seniors being slaughtered by Mgmt to improve their bottom line. These ex-seniors are once HORSES; but later ended up like COWS plowing the field, got milked by the management, and later got slaughtered and replaced by future young HORSES. Older staff are depreciating assets and always deem not cheap to be hired.


That is the reality of corporate life and only fews can escape from becoming COWS. Never be fooled by your Job Security.

Open your eyes wide and start thinking as early as possible before it is too late to prepare anything that have lasting impact to your Wealth Life Cycle.

Saturday 14 November 2009

Dow Theory - The Three Phases Of Primary Trends

Investopedia.com – Your Source For Investing Education.

Since the most vital trend to understand is the primary trend, this leads into the third tenet of Dow theory, which states that there are three phases to every primary trend – the accumulation phase (distribution phase), the public participation phase and a panic phase (excess phase).

Let us now take a look at each of the three phases as they apply to both bull and bear markets. Primary Upward Trend (Bull Market) The Accumulation Phase The first stage of a bull market is referred to as the accumulation phase, which is the start of the upward trend. This is also considered the point at which informed investors start to enter the market.
The accumulation phase typically comes at the end of a downtrend, when everything is seemingly at its worst. But this is also the time when the price of the market is at its most attractive level because by this point most of the bad news is priced into the market, thereby limiting downside risk and offering attractive valuations.
However, the accumulation phase can be the most difficult one to spot because it comes at the end of a downward move, which could be nothing more than a secondary move in a primary downward trend - instead of being the start of a new uptrend. This phase will also be characterized by persistent market pessimism, with many investors thinking things will only get worse.
From a more technical standpoint, the start of the accumulation phase will be marked by a period of price consolidation in the market. This occurs when the downtrend starts to flatten out, as selling pressure starts to dissipate. The mid-to-latter stages of the accumulation phase will see the price of the market start to move higher.

Figure 1: the accumulation phase

A new upward trend will be confirmed when the market doesn't move to a consecutively lower low and high.

Public Participation Phase

When informed investors entered the market during the accumulation phase, they did so with the assumption that the worst was over and a recovery lay ahead. As this starts to materialize, the new primary trend moves into what is known as the public participation phase. During this phase, negative sentiment starts to dissipate as business conditions - marked by earnings growth and strong economic data - improve. As the good news starts to permeate the market, more and more investors move back in, sending prices higher. This phase tends not only to be the longest lasting, but also the one with the largest price movement. It's also the phase in which most technical and trend traders start to take long positions, as the new upward primary trend has confirmed itself - a sign these participants have waited for.

Figure 2: the public participation phase

The Excess Phase

As the market has made a strong move higher on the improved business conditions and buying by market participants to move starts to age, we begin to move into the excess phase. At this point, the market is hot again for all investors. The last stage in the upward trend, the excess phase, is the one in which the smart money starts to scale back its positions, selling them off to those now entering the market. At this point, the market is marked by, as Alan Greenspan might say, "irrational exuberance".

The perception is that everything is running great and that only good things lie ahead. This is also usually the time when the last of the buyers start to enter the market - after large gains have been achieved. Like lambs to the slaughter, the late entrants hope that recent returns will continue.

Unfortunately for them, they are buying near the top. During this phase, a lot of attention should be placed on signs of weakness in the trend, such as strengthening downward moves. Also, if the upward moves start to show weakness, it could be another sign that the trend may be near the start of a primary downtrend.

Figure 3: the excess phase


I believe Accumulation phase is over. So are we still in public Participation Phase or already in The Excess Phase? Recognizing it can make a huge difference to your portfoli management.

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


Many investors claim to be long term investors. Me too but the only difference is that I doing Long Term Investing and Short Term Trading.

This book: Short Term Trading and Long Term Investing by Charles Vintcent is available in NLB.

Hands-on Passive Investing (Buy & Hold and Active monitoring) is strongly focused on preservation of capital in the selection of stocks and cash flow from dividends and hope for capital gains if any.

Active Investing is also focus on capital preservations and may also time the market to include some cash flow from dividends. The only difference is that they don't hope for capital gains but actively time the market to achieve capital gains.

Passive Investing choose to ignore market risks and usually don't have any money management strategy in place. For Active Investing, you need to build up your money management skills to actively time the market with your personal perceived market risks and market forecast.

Active  Investing or Hands-on Passive Investing, the choice is yours, there is no right or wrong approach.

1001 Frugal Things to Do?

After collecting your next salary or income, what can you do with your money:

1. Spend it,
2. Save it,
3. Invest it,
4. Lose it,
5. Give it.

Some will squeeze every cents out of their money to save as much as possible; but, there is nothing really wrong with this approach.

But, is there a better approach to saving?

There are few things that we need to remind ourselves before we become too focus on saving.

  • You only live once.
  • Don't put off till tomorrow what you can do today, for there may be no tomorrow - Lee Wei Ling
  • It is not wise to live poorly and die with plenty of money not spent - CreateWealth8888
Instead of focusing how much you could save, why not focus on how you could spend your money wisely and moderately, and save the rest.  You can have an annual and monthly budget on how you should spend your money so that you can still enjoy your life and any excesses become your saving. 

Any money unspent in the month will be rolled over to the next month. You can then decide to have some extra money to spend it or simply roll it forward to the next month. At the end of year, you either choose to spend some of it or end up with more saving than expected.

In this way, you may not over save and under spent. Remember: we are not immortal and there may be no tomorrow and die with plenty of money unspent.

Friday 13 November 2009

Sell Is Not A Dirty Word


Stock Truism: Stock price will unexpectedly peak and reverse down.

Selling a stock is taking back your control over your investing capital.

Sell when you can and that is happy selling.  Sell when you have to or force to; and that is sour selling. Don't you enjoy happy selling?

Selling is part art, part luck, and part discipline. If you have no sell discipline, learn it and get used to profit taking by selling pieces of your winners and it is part of money management strategy. But, it is also important not to panic sell in a volatile market.

The biggest profit is to ride the trend, but can you really overcome your emotions to ride up the trend in a volatile market. Trending stocks by nature are more volatile as they attract too many bullish and bearish market players at the same time with opposing views.

Multi-bagger stocks make a huge difference to your portfolio returns; do you have any multi-baggers in your portfolio? If no, then you have not master the Art Of Trend Riding yet. There are many books on Mastering Stocks Trend available in NLB.

Thursday 12 November 2009

Does A Highly Leveraged Man Risky To Marry?

A highly leveraged man who has borrowed heavily from banks to finance his 25 global properties and he is making good money out of his properties. If you are a woman, would you marry him? Is he too risky and a potential bankrupt?

If I tell you that his father is the richest man in Singapore, would you still think that he is risky man and will not marry him?

Highly leveraged companies are risky only if they have difficulties in re-financing or unable to raise large equities without support from major rich shareholders.


Are High Ratio Dividend Payout Stocks Make A Low Risk Investment?

Do you pick a stock primarily due to its high ratio dividend payout or you pick the stock primarily for its future growth and dividend is just secondary reason.

High ratio dividend payout means that the company is paying most of its earnings out as dividends, and doesn’t leave much for reinvestment in the business. Then how does the company grow? If the company cannot grow, it could well mean stagnant earnings per share. Do you believe the stock price will appreciate if the company's future earning is more likely to be stagnant?

What if the company all of a sudden decides that it needs cash for anything like merger or acquisition or if its earnings drop due to an economic contraction, chances are very high that the dividend payment, which was unsustainable in the first place, would be first on the management’s chopping block? Will the stock price tumble?

Tuesday 10 November 2009

Stock Market Is War - Part 4

Read? Stock Market Is War - Part 3

"The Stock market is a financial redistribution system. It takes money away from those who have no patience and gives it to those who have." - Warren Buffet

"When you are emotional, you make unwise decisions rapidly." - Warren Buffet

"When it comes to my finances, I walk before I run and run before I soar" - Dr John F. D.

A young colleague told me she got $10K and want to invest in stock and ask me for advice. I give her this advice: "Save up to $30K and come back again." I could sense that she was really disappointed.

Some people and especially the younger ones think: Yeah, I want to quickly invest in the stock market and make money and build up wealth.

But, it is more important to save enough capital and set a side a tidy sum of money for some financial stability and security before you start investing in the stock market. Stock market is a highly dangerous place and it is not a level playing field. There is no such thing as amateur and you come into the stock market immediately as pro.

See Who is in the Market?

Read? Trading could be looking easy!

Be patience, build up your capital base first and at the same time slowly read up on some investment books.

When your capital base is ready and by then you should have some good basic knowledge on investing. You can then slowly polish up your investing skills through your investing experience.

Be patience or Become patient

Three Little Pigs In The Stock Market

The first Little Pig built his house using straws and it was a nice house. But when the bad wolf came and blew it hard and the straw house collapsed and the first little pig ran away. When we first buy a particular stock, it is no difference from what the first little pig did - building his house with straw. The particular stock that we have just bought is in the weakest position and facing the highest risk. It is not sitting on any past realized profit except facing potential realized loss or already nursing the sorrow of paper losses.

The second Little Pig built his house using woods and it was a better and stronger house. But when the bad wolf came and blew it hard and the wolf blew very hard to blow the house down. When we buy back that particular stock again on pull back or correction, it is no difference from what the second little pig did - building his house with wood. Now, this particular stock that we have just bought is in a stronger position and facing lower risk as it is now sitting on some realized profit and it will take more downside for us to sit on any Nett unrealized losses.

The third Little Pig built his house using bricks and it was a very strong house. But when the bad wolf came and blew it hard, harder and hardest but the brick house remained steady. After a number of successful stock transactions, we may have acquired a new pillow stock and we will never lose our capital anymore. It is a strong and steady house for all the three little pigs to live happily ever after.


So are you the third Little Pig?

Monday 9 November 2009

Wealth Or Financial Freedom Doesn't Just Happen!

Some 15 years ago, the official retirement age in Singapore was 55. One day at one of my former big boss’s farewell dinner, he said something and at that time I didn't really understand what he was preaching?

It was many years after that I realized the truth of what he had said.

He said at his farewell speech something like this if I could recall it correctly.

"I chose to retire at 50 as I think I have made enough to last me for my life time. I want to travel and see more of the world when I am still healthy and can move easily. I didn't decide to retire suddenly at 50, but actually I plan to retire at 50 many, many years back."

Can you see the world when you become like this?


I think I started to plan for early retirement a bit too late in 40s and I congratulate those in 30s and late 20s really start to plan for their early retirement. Well done!

Semb Corp: Contra $3.34, ROC 3.1%

Hope to gather more feathers for a bigger pillow soon ...

Round 50: ROC 3.1%, 6 days, B $3.22 S $3.34

Round 49: ROC 7.9%, 91 day, B $3.14 S $3.41

Sunday 8 November 2009

All work sucks?


All work sucks. It is how much you are compensated for it in monetary terms that matters.

Work Sucks: That is the reason why we need Labor Day. One full day to relax away from work and count the hours until you’re forced to return to your joyless, monotonous job that sucks.

Another important day that you must stay away from work. It is your Birthday!

Who are the people likely to shout work sucks?

May be those people in the Left Quadrant are most likely to shout work sucks and it is not surprisely to include self-employed like taxi-drivers, hawkers, private tutors, dentists, etc. My ex-classmate who is self-employed dentist also say that his work sucks - working a 7-day week and long hours and he is hoping for an early retirement.

How often do you hear those people in the Right Quadrant shout work sucks? May be these people don't really use their own human labour intensively; but leverage on others and their capital to get works done so they don't really feel work sucks.

So follow Rich Dad Poor Dad's advice, try to spend less time and energy in the Left Quadrant and move more into the Right Quadrant, and then you don't need to look forward to the next Labour Day.
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