Investing in stocks is a lot like lending your friend money
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Note: This article is a collaboration between The Good Investors and The
Woke Salaryman. It was written by me and edited by He Ruiming. An earlier
version ...
1 hour ago
CW,
ReplyDeleteI like your analogy :)
This is why same school, same class, same teachers - the students' grade may vary...
But in real world, we see others got MBA and promoted, we also must get! (Better blame our lack of papers than admit we not as good as others)
Yesterday others follow value investing, I follow also.
Today passive investing is the style everyone put on their lips, I switch!
Some seek answers within.
Some like my weekend customers, like to ask, "Which brands are the most popular?" (Make a wild guess would I include the brand I promoting?)
Quote "But in real world, we see others got MBA and promoted, we also must get! (Better blame our lack of papers than admit we not as good as others)"
DeleteYa. I have been there before. LOL~
Read? Work or Further My Studies?
Half glass to fill to full glass or full glass now left half glass to fill to full glass again?
ReplyDeleteIt's like investing going up hill is definitely different from investing going down hill.
U see a different scenery.
Going downhill has a more beautiful scenery.
U want to linger longer going downhill.
U are no more "Kan Cheong Spider".
Buffett also saying the same thing!
ReplyDeletehttps://www.cnbc.com/2018/02/26/buffett-says-out-of-the-three-ways-to-go-broke-liquor-ladies-and-leverage-leverage-is-the-worst.html
Even for those who consider themselves experts, it's dangerous to leverage up too much of their available portfolio. Those who trade products like futures, options, forex, CFDs etc are also using leverage, but usually only a small part of their portfolio, and they will have strict pre-determined plan in-place to handle losses. Those that don't are gamblers & don't have much to lose anyway.
ReplyDeleteBuffett himself is no stranger to leverage & he often uses millions of dollars worth of leveraged derivatives, while telling people that derivatives are WMDs. However he uses them mainly as hedges or as distressed plays, especially during GFC.
The problem with leverage is if over-leveraged and also under-estimating volatility of underlying assets. During a credit crunch / credit crisis induced bear market, even the largest REITs can drop 60% to 75%.
In addition, there will be Billions of dollars worth of rights issues being frantically rolled out to service debts & shore up balance sheets. These recession rights issues not only will dilute DPU, but will also hammer share price, making margin calls more likely. Hence you'll need plenty of spare cash to (1) handle margin calls & (2) handle rights issues to prevent DPU dilution.
To me, leveraged dividend portfolio using underlying assets that are already leveraged is an eventual plan for failure. Unless just to reap rewards during good times, and have a plan to cut when portfolio drops by a certain amount.
Yes but plan may not be able to execute in time because market turns too brutal, and too abrupt all of a sudden.
ReplyDeleteIn fact it often catches most of us off-guard by surprise no matter what we plan.
Trading without leverage is already quite difficult; what's some more to compete with the Pros?
During my working years, got many opportunities to leverage in properties but wify disagreed because of fear of retrenchment or ask to leave because Boss says so.
May have made some money actually in properties.
It's O. K. no regret.
Actually still made some money in properties but very little because did not use double edge sword.
ReplyDelete