Greed?

Mahatma Gandhi once said, “Earth provides enough to satisfy every man’s need, but not every man’s greed.”

Investment Rewards come with Risks, Time and Effort.

If some one promises you return that are a few times better than the current Fixed Deposit rate without having you putting time and effort and little or no risks, and you happily believe there is such investment. Definitely, the Greed has overcome you.

It is just that simple. There is no such thing as little risk, little effort, little time spent and expect a high return over current Fixed Deposit rate.

Portfolio Management - Time In The Market

http://createwealth8888.blogspot.com/2009/10/portfolio-management-growing-money-tree.html

"You cannot afford to wait for perfect conditions. Goal setting is often a matter of balancing timing against available resources. Opportunities are easily lost while waiting for perfect conditions." -Gary Ryan

"You can't time the Market!"

You guess who are the people shouting that? Likely, these people are the fund managers and then echo closely behind are the retail value investors.

There are good reasons for fund managers to discourage investors from market timing so that there is less churn in their fund and they are less pressurized to perform as dividend yield from the portfolio is able to adequately cover the fund's management fees and expenses.

But, I don't understand why retail value investors also shouting that? "You can't time the Market!"

Now back to LHS.

LHS = Current Value of All the Stocks in our Portfolio + Available Cash left for investing or trading.

This requires you to try to time the Market and try to optimize the allocation of stocks and available cash according to your own market forecast in the next few months.

The Truth is that we can NEVER time the market CORRECTLY and no one can; but, it doesn't mean that we can't spend time in the market and also to time the market to exit when it hits our own profit target.

The key is that we want to time the market to generate cash flow for our portfolio and not to correctly time the market. See the difference!

Do I buy, hold or sell?

thesundaytimes Oct 18, 2009

Sumiko asked: "The recession is over but I still feel the pinch. Could the stock market be my answer?"

CreateWeath8888 said: "Why not, stay invested in stock market, and one won't regret, but one must spend some time and effort to learn"

She said: "The biggest lesson has been how I must think of growing my money instead of letting it sit in a saving account."

I said: "Growing money in stock market is more likely to beat the return in one's saving account, but one must first spend less time in shopping and spend more time in learning how to invest, and same like taking up cooking lesson to learn how to bake a good cake"

Her colleagues who swear that property, not stocks, is the better way to go.

I think that is a common property market myth that return on property is better than stocks.

Most property investors are likely to over-state their returns and under-estimate their risks especially true for investors who are not Nett Worth positive after taking up the housing loans.

If the property investors become highly Nett Worth Negative after taking up the big housing loan, and then one must not forget that Leverage Is A Double Edged Sword - It can also kill.

Portfolio Management - Growing Money Tree

http://createwealth8888.blogspot.com/2009/10/portfolio-graham-way.html

This is the Symbolic Picture of Growing Money Tree in My Profile -

It helps me to visualize why am I actively Invest or Trade.

"What the mind can conceive and believe it can achieve" - Napoleon Hill

Common saying: Money Is Not Yours Until You Spend It. (or someone else will spend it for you)

And I said: Profit Is Not Yours Until You Realize It. (or Mr. Market may take it back unexpectedly)

Take a good look at the components of a Portfolio:

Mathematically, LHS (Left Hand Side) = RHS (Right Hand Side)

LHS = Current Value of All the Stocks in our Portfolio + Available Cash left for investing or trading.

RHS = Total Investing Capital + Realized P/L + Unrealized P/L

Our Job in Investing is to grow this Money Tree (Portfolio) as fast as possible and then pluck the Money Fruits and store it away safely in the House.

Look at the RHS of the equation.

RHS = Total Investing Capital + Realized P/L + UnRealized P/L

and understand what you have control to grow this Money Tree?

1. Total Investing Capital - You have control to add more Capital to grow it, but this is not the right reason to grow your money tree in this manner. You might as well put the money in the saving bank.

2. Realized P/L - You can periodically realize full or partial profit by selling some of the profitable positions in your portfolio holding.

and understand what you cannot have control over it?

3. Unrealized P/L - Market forces will control it and will eventually determine the health of your Money Tree.

Realized P/L is Cash flow

Cash flow is the bloodline of any company or business; and similarly, Realized P/L is the bloodline of your portfolio. Company needs healthy cash flow to grow and it is no different from your portfolio, it too needs healthy cash flow i.e. realized profit to grow.

When you realize your profit; the profit becomes money, and the money can be re-invested or can become your money if you choose to spend it.

You can re-invest your money to expand your portfolio by buying back more of the same counters when their share prices pullback or you can choose to diversify into other counters to mitigate stock risks.

UnRealized P/L is Not Within Your Control

Any UnRealized P/L is never yours yet and it is controlled and determined by Market forces and can be potentially damaging to your health of your Money Tree. However, any potential damage can be effectively mitigated by growing your Realized P/L in the way of the most money in the least time.

Let take a good look at RHS of the Money Tree once again.

So you need to periodically SELL to grow the Nett Realized Profit and to grow your Money Tree.

You don't need 3 good reasons to sell. There is only 1 reason to sell. Selling is the KEY to growing your Money Tree. Fact or Fiction? You decide for yourself.

Why Does Financial Advisors Always Advise You To Invest For Long Term?

Why does Financial Advisors always advise you to invest for long term and not to be distracted by short-term market volatility?


Answer: By the time you realize that your investment is not doing well either he has retired or not around anymore.

Is Investing In Real-world Business Safer Than Stocks? - Part 2

7. Competitors Risk - This risk is so real and can happen sooner than expected.

Is Investing In Real-world Business Safer Than Stocks?

That coffee shop next to Hougang MRT station has a number of good years until recently Hougang Mall built an extension building to it and guess what?

It houses a 24x7 KopiTiam Food court and if we buy food using KopiTiam Card, there is a 10% discount.

Both noodle stalls at the coffee shop and KopiTiam food court are selling Pak Choi Mee at $3 a bowl, but at KopiTiam food court after discount it is only $2.70; so it is cheaper and in air-con environment.

Not sure for how long can the noodle stall at the coffee shop survives with a new competitor selling it cheaper and in a better eating environment?

Fear and Greed - Driving Forces of the Stock Market

By Manshu Verma

Fear and Greed are the two driving forces of any market. Greed inflates prices: gets more and more people to jump in the bandwagon and buy the stock, commodity or tulip bulbs and drive prices to a level where they are no longer sustainable and become a bubble.

When greed overcomes the market; no one talks about fear. Greed completely eclipses out fear and the fact that people usually have a short term memory also does quite a bit of good. In times of bull market rallies, people forget what it was like a few months or few years ago and what it meant to be fearful.

During the real estate bubble, investors forgot about the fear and panic that accompanied the dot com bubble. This time it is different - everyone will tell you. The fact that the market collapsed and crashed just a few years ago doesn't help to keep things in perspective and the market heads for one more collapse.

This is just human psychology, and has nothing to do with the country or even century you are in. The first speculative bubble was recoded during the 1600s in what is now Netherlands. It is recorded that prices reached such a high that at one point - 12 acres of land were offered for one variety of a Tulip bulb!

At that time greed was on its high and had completely eclipsed fear. One reason given by historians for the high prices of tulip bulb contracts was that people expected that there will be a parliamentary decree that will void the smaller contracts of tulip bulbs and limit the risk of the buyer.

During the dot com bubble the greed was fed by the assumption that old economic cycles are not applicable to new technologies and the Internet will completely change our lives.

Whatever be the reasons: when greed grips the market it overshadows fear completely and makes people forget how scared they were just a few years ago.

Past Greed and Future Greed

Fear works in much the same manner, and, when fear grips the market it eclipses future greed and exaggerates past greed.

People have lost a lot of money in the current financial crisis and they are attributing much of it to the greed of Wall Street Bankers, Hedge Fund Managers, Real Estate Brokers and their like.

Everywhere there are cries about how greedy people at Wall Street have ruined the savings of Main Street. Fear has gripped the market and greed is the culprit.

People are not talking about future greed though, not yet in any case. No one is asking - where the next bubble will form?

Markets are gripped with fear and are blaming past greed, but, that completely eclipses out the fact that there will be future greed.

There are a few seasoned investors who are talking about where the next big move is going to come in - green energy, gold, agriculture, emerging markets etc. but their voice has been crowded out by the cries of fearful investors.

Greed and Fear work beautifully in tandem and complement each other perfectly.

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Createwealth8888:

Greed and Fear is your Twin Towers and absolutely very personal and it is only for you to find out how to make it works beautifully in tandem and complement each other perfectly.

What Is A Rat Race?

From answers.com:

Fierce competition to maintain or improve one's position in the workplace or social life.

This term presumably alludes to the rat's desperate struggle for survival. [Colloquial; first half of 1900s]

From Dictionary.com:

any exhausting, unremitting, and usually competitive activity or routine, esp. a pressured urban working life spent trying to get ahead with little time left for leisure, contemplation, etc.

From thefreedictionary:

a fierce struggle for success, especially in one's career or business

From Cambridge Advanced Learner's Dictionary:

a way of life in modern society, in which people compete with each other for power and money

yourdictionary.com:

a mad scramble or intense competitive struggle
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So getting out of Rat Race is not the same as putting the mind into IDLE mode.

What does getting out of the Rat Race mean to you?

I believe that I am Out Of Rat Race if I have realized most of these:

• Financial Independence (coming soon)
• More Time to spend with Family & Friends (done)
• Spending Money on Friends, Family, Charity & myself (more to come)
• Time to do those Hobbies I've always Wanted to do (more to do)
• Fulfilling my childhood's Dream list (more to come)
• Treating bosses just like another employees of the company (done)
• Not looking forward for year end bonuses (done)

for some people it may even include:

• Becoming your own Boss
• Travel around the world
• Financial Freedom
• .....

What does getting out of the Rat Race mean to you?

Life Cycle - Some Dreams And Lots Of Regrets

When we were young, we might have wonderful dreams of what we would like to do when we are older. When the English teacher asked us to write composition on our dream. What did we write?

However, when we start working, most of us may tend to follow the job market and take up whatever the job is offered by the job market and we may have forgotten our dreams and move on with our life just like the rest of our friends.

When we reach middle age or late 30's, then some may feel disappointed with their living conditions, their accumulated wealth, their job satisfaction, and start to wonder how come they get into this situation, and some may even blame everybody and including the government, and except themselves. But, on one side, they can't really get out of their corner as they have family to take care and some even have retired parents too. These people may have no choice but to bite their fingers and move on.

When we reach 60's, we usually will have nothing much to say because the time has arrived and only be thinking what if we could have dream differently at 30's, or 40's and pursue our dream and will our life story at the 60's be different.

If you are at your 30's and 40's and there is still time to fulfill your dreams and don't drop them yet.

My dream at 40's after tired of watching the Rat Race is to "Get Out of The Rat Race!". I will tell you again at the 60's.

"The trouble with the rat race is that, even if you win, you're still a rat." - Lily Tomlin

What did you dream?

Saving, Life Insurance and Investing - Revist

Wah, another round of hot debates on ILP (investment linked policy) in ST!

http://www.straitstimes.com/ST%2BForum/Story/STIStory_443230.html

http://createwealth8888.blogspot.com/2009/07/saving-life-insurance-and-investing.html

Get yourself educated, and then you are in better position to educate your own children when they are old enough to decide to hedge their own Human Asset.

I was once not really educated in insurance matters, and bought those recommended policies because relationship and friendship that matter.

Thinking back it was not a financially right approach towards insurance, but now I have better knowledge to advise my kids insurance needs.

http://createwealth8888.blogspot.com/2009/10/insurance-human-asset-and-liability_13.html

Opportunity In The Stock Market?

The story ....

Once upon a time, there was a young man who wanted to be rich and successful. He climbed up the mountain near his village to ask the monk who had been meditating at the top of the mountain all his life. The young man thought that since the monk was a very wise man, the monk could definitely help him to find the secret of success.

The monk told the young man that actually there was a magical stone called the Touchstone, which could grant the wish of whoever made a wish while holding it. The monk also told the young man that the touchstone was on the beach just at the foot of the mountain. It laid there among thousands of other normal stones. And the young man could differentiate the touchstone from other stones by its temperature. The touchstone was warm, much warmer than the normal stones.

And so, the young man set his course to the beach. He found out that there was really thousands of stones by the beach. Believing that one of the stones was the touchstone, he began his search.

He picked up one stone, felt that it was cold, then threw it away to the sea. This way, he could make sure that he would not pick up the same stone twice.

Days and weeks passed and the young man had not given up hope yet. He still kept on picking up stones, one-by-one, and as long as it was cold, he would throw the stone into the sea.

One day, he picked up a stone that felt warmer than the other stones. But guess what did he did? Unfortunately, having gone the same motion of picking up and throwing away stones for months, he got used to throwing away any stone that he picked up. And so, unintentionally, he threw the touchstone into the sea.

It's sad story, isn't it?

Createwealth8888:

How is the moral of the story related to the stocks?

The stones at the beach are the stocks that we are actively trading (picking up and throwing back to the sea - buy and sell) in the market and the Touchstone is the the base stock to build up a potential Pillow Stock.

When do I recognize it is a base stock? It is warmer than the earlier buys. The buy price never look back after buying is telling me that it is much warmer than other buy prices and may have pick up a touchstone.

But, if you have the habits of picking up and throwing back the stones to the sea and you will never ever find the touchstone. Believe it or not!

Investors: Don’t Be Average

By Robert Kiyosaki

I am often asked, “What advice do you have for the average investor?” My reply is, “Don’t be average.”

Most of us know of the 80/20 rule. That rule is a good rule for averages. And in the world of money, the rule is 90/10. This means 90 percent of the people make 10 percent of the money and 10 percent of the people make 90 percent of the money.

This 90/10 rule holds true in almost anything financial. Take the game of golf, for example. Ten percent of the professional golfers make 90 percent of the money.

Not Good Enough

Years ago, I asked my rich dad, “What is the difference between a professional and an amateur?” His reply was, “Professionals know their best is not good enough. They always want to do better.”

He paused before continuing and said, “When someone says, ‘I’ll do my best’ or ‘I’ll give it my best shot’ or ‘I’ll try,’ they’ve already lost. Those are not words of a winner.”

In the world of ‘the best,’ your best is never good enough. If you’re going to be a winner in life, you have to constantly go beyond your best.

Most people are happy being average. Most are happy being faceless in a sea of faces. That’s why 10 percent always win 90 percent of the rewards. I get up every day, grateful for what I have accomplished, yet looking forward to doing better. I want do better than my (previous) best everyday. It’s not about the money anymore. I have enough money. I just love the game of making money.

Today I give most of my money away…but I will not give up the game of money. I play the game because the game is always better than me…and my best will never be good enough. I continue to work hard to become better at a game I love.

I once read a book on golf that said, “People say amateurs play for the love of the game and professionals play for money. That is not true. Amateurs are amateurs because they do not love the game enough.

When it is cold and rainy, a professional golfer will play. The amateur will not. When they are sick, the professional will play. The amateur stays in bed. When they are losing, the professional will practice harder and enter more tournaments. The amateur will quit and take up tennis.”

It matters little if the game is golf, tennis, or money. Ten percent of the people will always make 90 percent of the money. When the markets began crashing in 2007, the money did not disappear. Ninety percent of the money went to 10 percent of the investors.

A financial crisis is a great time for professional investors and a horrible time for average ones. If you’re going to invest, don’t be average. It’s time to turn pro… or take up tennis.

Am I Better Off With Trading or Buy&Hold?

Cheng asked:

"On hindsight, if you had held on to it from $1.37 to $2.65(not including divy and rights issue, excluding trading fees) will give you $193.43, which is 93% gains"

related to http://createwealth8888.blogspot.com/2009/10/olam-sold-265-roc102.html

http://createwealth8888.blogspot.com/2009/07/noble-sold-182-roc-57.html

Let me do a review on Noble and Olam, the two most actively traded counters in 2009.

Let look at the charts of Realized and UnRealized P/L between Buy&Hold and Buy&Hold&Sell&Buy

Assuming I held on to Noble @ $0.91 and Olam @ $1.37 at Round 1.

After sensing that STI was not going to crash back to lthe level of Mar 09, I decided to leave behind some Noble at $0.96 and Olam at $1.68 to continue the commodities race with CIC and Temasek.

It is important not to left behind while the Bulls are charging up without you or the Bears stumbling down and you are fully on board.

I can see the difference!

The Compound Magic Of Stock Transaction Timing

The Truism in the Stock Market - Stock Prices Fluctuate!

If stock prices fluctuate wide enough then you can apply the compound magic of stock transaction timing and make compounding gain out of many short term trades.

Is psychological barrier holding you back or lack of knowledge and skills?

Knowledge and skills can be acquired through learning and actual life experience.

If it is due to psychological barrier, then probably you may have to go up to Bukit Timah Hill every weekend to seek the inner strength to break through.

The most dollar in the least time

Let says some one told you that he has doubled his investing capital. That good. But, what if he told you that he took 10 years? Not bad. His yield is about 10% per year.

But, another person told you that he has doubled his investing capital in 2 years. That is really good. His yield is about 50% per year.

You see the difference. The most dollar in the least time. We should be measuring the investment yield in terms of profit per unit time over our entire investing life cycle.

To understand "The most dollar in the least time", you first need to understand:

The rule of 72 and long term returns

You might not have learnt this at school, but Einstein’s rule of 72 is one of most magical and simple formulas around. What this says is that to work out how long it takes to double the value of an investment, you simple divide the return into 72.

To estimate how long it would take to double you money on an investment just divide 72 by the percentage rate you are earning on your investment; and that's it.

For example, if you have a savings account with $500 deposited in it. The rate of interest is 4% per year. So the doubling point, the length of time it will take you to double your $500 to become $1,000 is: 72 divided by 4 = 18 years.

If the rate of interest were 6%, then the doubling point to be 72/6=12 years.

Well and good in theory, but we still have to get our hands dirty to do it.

YOU CAN’T HAVE YOUR CAKE AND EAT IT TOO

The most popular form of saying—“You can’t have your cake and eat it too”

Some Buy-and-Hold investors are probably thinking along this line - “You can’t have your cake and eat it too.” The cake is so nice and you can't bear to eat.

To have one's cake and eat it too is another popular figure of speech. Since the cake is so nice and you can't bear it to eat. Why don't you buy another same cake and eat it? Yes, you have the cake and eat it too. That is the thinking of Buy-and-Hold-Sell-and-Buy-Sell trading investors.

Olam - Sold $2.65, ROC 10.2%

Last sold Olam in 27 Aug 09 @ $2.62. Patiently waited and bought back in 5 Oct 09 @ $2.39.

Stuffing more feathers. Cheers!

Round 6: ROC 10.2%, 8 days, B $2.39 S $2.65

Round 5: ROC 6.3%, 3 days, B $2.45 S $2.62 (Bought back higher)
Round 4: ROC 5.9%, 15 days, B $2.26 S $2.41
Round 3: ROC 9.6%, 8 days, B $2.18 S $2.40
Round 2: ROC 7.0%, 8 days, B $2.18 S $2.35 (Bought back higher)
Round 1: ROC 9.8%, 161 days, B $1.37 S $1.52

Portfolio - The Graham Way

In his classic book "The Intelligent Investor," Benjamin Graham -- Mr. Buffett's mentor -- advised splitting your money equally between stocks and bonds. Graham added that your stock proportion should never go below 25% (when you think stocks are expensive and bonds are cheap) or above 75% (when stocks seem cheap).

Graham's rule remains a good starting point even today. If time turns out to be your enemy instead of your friend, you will be very glad to have some of your money elsewhere.

How about doing it the CreateWealth8888 Way: Stocks and Available Cash for Investing?

http://createwealth8888.blogspot.com/2009/09/stock-market-is-war-part-3.html

Insurance - Human Asset and Liability - Part 2

Posted by Tan Kin Lian in his blog:

I met many senior insurance managers at an Asean Insurance Conference in Vientiane, Laos. One participant, who is a CEO, told me that he advised his friends and family members to buy Term insurance for the insurance cover. He advised them to avoid insurance products as investments, as they get a poor return.He wished that it was possible for his company to sell better value products, but after providing for the high commission to the agents, this was not possible. He was not able to develop a new sales channel to replace the agents.

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http://createwealth8888.blogspot.com/2009/10/insurance-human-asset-and-liability.html

You can view Term Insurance as a hedge against your Human Asset and bear in mind that Insurance as a financial investment product doesn't really provide the expected returns; and it is often too late to realize it.

Is Investing In Real-world Business Safer Than Stocks?

After this shocking market crash in 2008, some investors may think that investing in the stock market is far too risky, and they are not sure how to deal with this uncertainty of market shocks going forward?

They may be thinking that they may be better off in investing in real-world business producing real assets in the areas that they are familiar with or interested in; and getting their investment returns from the real-world business.

Let me share my thinking because I too have been thinking about it in my earlier days for many moons.

Unless you have the entrepreneurship spirit in your blood and you need to fulfill your dream and reach the Self-actualization stage in Maslow's hierarchy of needs. I said: "GO FOR YOUR DREAM!"

But, it is just about investment returns from pure financial reasons, then you are taking more risks than expected.

Investing in stock market is likely to be exposed to two risks - market risk and stock risk and these risks can be mitigated through proper portfolio risk management and control.

You just need to acquire the relevant knowledge and skills to manage your risks.

One clear advantage in investing in the stock market if you treat it seriously as your business entity is that there is virtually zero fixed cost overhead.

But, investing in the real-world business, there is fixed and variable costs overhead, and in bad times your fixed costs overhead is going to kill you earlier than expected.

In running a real-world business, there are just too many risks to manage and control, and list out some of common risks associated with running a business:

1. Operation Execution Risk

2. Sales Risks

3. Pricing Risks - under-pricing or over-pricing

3. Supplier Risk

4. Customer Risk

5. Cashflow Risk

6. Refinancing Risk

7. Competitors Risk

8. Market Risk

9. Staff Risk

10. Fraud Risk

So do you still see investing in stocks is far riskier than investing in the real-world business?

I said again, unless you have the entrepreneurship spirit in your blood and you need to fulfill your dream and reach the Self-actualization stage in Maslow's hierarchy of needs. Then I said: "GO FOR YOUR DREAM!"

Insurance - Human Asset and Liability

For the sake of this discussion, let us put aside all the human emotions and love that impress upon on the insurance matters, and take a look at Insurance as a hedging tool against Human Asset and Liability in the Human Life Cycle - Balance Sheet from a financial perspective.

So what is hedging?

Hedging means reducing or controlling risk.

Insurance as a hedge against Human Asset and Liability?

The moment when we were conceived in our mother's womb; a human liability was created in our parent's Human Financial Balance Sheet; but, it was still a very, very small liability.

When we were born, this human liability became very real and will continue to grow each day till the day when we start working full time as human asset and generate Income. When we start to generate income, the Liability in our parent's human financial balance sheet begins to decrease.

Slowly, we start to increase our human liability in our own human finanical balance sheet when we start a family and create more human liability. (gosh, now I understand why some couples decide to have no or 1 child as they want nice looking balance sheet with less human liability)

So as parent, do we see our child as Human Asset or Human Liability in our Human Financial Balance Sheet.

If we only see the child as Human Liability then we may use Insurance to hedge against this human liability and doesn't want to over-hedge to cover the financial aspect of a human asset when actually there is none.

What we probably need is a Liability Insurance - comprehensive Medical Shield? This is the basic hedge against human liability. We may have limited financial resources to hedge against all possible risks.

When we start working full time and generate income, then we will need to hedge against the new Human Asset and Human Liability as well.

The scope of insurance as hedge is now extended to cover the Human Asset. Again, we have limited financial resources to spend on the hedging expenses (insurance premiums) to hedge against human asset and liability. We have to hedge wisely.

We have to sit down to evaluate what is the percentage of this human asset to be hedged? To hedge 100% of the human asset is probably is too costly. Each of us have to determine how much to hedge according to our future earning power and living expenses.

When we fully retire, we once again turn back from a Human Asset to Human Liability and the hedging need change to somewhat like a child.

Like any hedging, it is far difficult to hedge correctly, and we also don't want to under-hedge if we can afford it. Finally, it is how much can you afford to hedge that counts in the entire Human Life Cycle - Balance sheet.

What Does Money Mean To You?

"Money is better than poverty, if only for financial reasons." - Woody Allen

"Money is human happiness in the abstract." - Arthur Schopenauer

"You aren't wealthy until you have something money can't buy." - Garth Brooks

"Lack of money is the root of all evil." - George Bernard Shaw

"Money is not an end in itself, but it's sometimes the most effective way to help us realize our dreams." - Donald Trump

"Money is NOT the most important thing in life; however, money can affect the most important things in life." - Merry Riana

By ALBERT LAM:

MONEY cannot buy love but it can buy happiness. The topic of money is one of the most important in our lives. Preoccupation with this subject is universal, since it is of concern to nearly all humans. Even the Bible expounds at great length about our attitude towards money and our responsibility towards its proper stewardship. The main cause of divorces around the world has been shown to be argument and struggles over money. I have also seen people who have gone from riches to rags, and from rags to riches.

Ironically, money has no bearing on the degree of joy, as joy is a reflection of contentment. Money, however, does have a significant impact on happiness because one can buy temporal happiness with money. Just think of a man who becomes happy when he gets his hands on the latest fast car or gadget, or a woman who can't stop smiling, with the coveted 'it' bag of the season on her arm

By CreateWealth8888:

Now, I am spending 80% of my time to make 80% of the money and 20% of the money is made from Money itself.

I am learning very hard to acquire the knowledge and skills to spend only 20% of my time to make 20% of the money and 80% of the money is made from Money itself then only can I say that I am truly enjoying the rest of my life. Cheers!

Two Books That Change My Views

I learnt from Napoleon that every idea is concieved in the mind, and the idea in the mind can be actualized through the definiteness of purpose, persistence, and a burning desire to reach that goal.

Bill Gates - If you born poor it is not your mistake, But you die poor, it's your mistake.

I have a burning desire to become wealthy as I was once poor living in a 1-room rental flat in Toa Payoh and some time went to school with no pocket money. I am not joking.

However, Napoleon shows me how to become successful, but he never tell me where?

Then came this book - Rich Dad Poor Dad by Robert Kiyosaki & Sharon L. Lechter

Read? Work For Money. Forget it

The biggest lesson learnt:

"The trouble with the rat race is that, even if you win, you're still a rat." - Lily Tomlin

I want to get OUT OF RAT RACE!

I can say that "Think and Grow Rich" by Napoleon puts me onto an airplane and "Rich Dad Poor Dad" by Robert parachutes me down into the Stock Market and the rest is War and hopefully soon the War is over and I will enjoy the Peace.

Horse, Cow, and Pig

COW:

The life of a cow is hard. A cow has to pull burden, get milked; and the only thing the owner gives it is grass to eat. The cow is milked until dry and then sent for slaughter and sold as Beef in the market.

HORSE:

A horse like the cow also work hard in its life . A horse is trained to become champion race-horse. It lives in a stable, given horse-shoe to wear and fed with good quality horse food. A champion horse is well loved by the owner when it wins many horse races. Some day, when the champion horse falls, it will be put to sleep unlike the cow who is sent for slaughter. The horse meat is sent to feed the Tigers and Lions in the zoo and it is not sold in the market.

PIG:

The life of pig is never hard. The Chinese love to eat roasted piglets. If piglet can survive without becoming roasted piglet, it will live a good life. Pig does not need to work hard. It eats and sleeps till the day it is sent for slaughter and its meat sold as pork in the market.

Look around in the office and observe for yourself how many people are working like Horses and Cows. Can you find those cows working hard day in and day out and are being milked by their bosses (over-worked) and given grass to eat (poor bonuses). Once they become old during bad times or recession, or whenever the bosses want to improve their bottom line. These cows will be slaughtered (retrenched/cut pay/cut bonuses)

Bosses love Horses as they work hard and bring lots of goodness to the bottom line. However, some day, these older champion horses will be replaced by the younger Horses and soon transform into Cows. That is the sad truth about most of the Horses. However, there will be a few true bred of Champion Horses that will be galloping till they retire.

Where are the Pigs? The pigs know that no matter how hard they work, and in bad times they too like the cows will be slaughtered; so the pigs work smart to look some time like a cow and other time like a horse and confuse the bosses while waiting for slaughter and eating some grass.

The only difference between the pigs and the cows is that the pigs know that their days are numbered while cows are still thinking that they are horses and well loved by their bosses. They only realize too late when the butchers arrive.

My advice is to work hard and be the true bred of Champion Horse. Happy Galloping!

Portfolio Management - Stop Losses?

http://createwealth8888.blogspot.com/2009/10/portfolio-management-price-volatilty.html

What is Stop Loss?

Setting a stop-loss for x% below the price you paid for the stock will limit your loss to x%. This strategy allows investors to determine their loss limit in advance, preventing emotional decision-making.

What are the Guru's recommendation of Stop Loss?

Alexander Elder strongly believes in (the 2% and 6% rules).

William O'Neil: Whenever a stock is bought, a tight stop loss of 7-8% is set below the purchase price. No matter what the reason for the decline, each stock should be sold without hesitation if it drops down to or below this limit.

Many traders and active investors follow closely the classic text book and Guru's advice and follow strict stop loss strategy. But, unfortunately I am a DUMMY and I don't use STOP LOSS.

I do CUT LOSS. But, CUT LOSS is different from STOP LOSS. STOP LOSS means when price of your stock that you have purchased falls and hits your STOP Loss level, you sell it.

I do cut losses to recover capital and redeploy the recovered capital to other stocks, but it is not related to the falling stock price. I don't need to win back in the same manner that I have lost.

One day in 2008, a guy came to this cbox and said: "Bro, do you have stop loss and you are holding a losing position for too long!"

I replied: "Bro, I don't use stop loss"

I don't believe when the price of a stock falls after purchase means it is approaching towards STOP LOSS. Why must it be so? Because the text books say so or the Gurus say so.

A medical doctor who is very passionate in trading said:

I don't use stops. Here is why?

I agreed with this doctor and I am so happy that I am not the ONLY FOOL who don't follow Guru's advice on stop loss.

Why I don't use STOP LOSS too? My reasons.

Digest this and fully UNDERSTAND what the Doctor is prescribing:

"What I learned was that I needed to learn how to manage my own risk without using stops. Using stops is asking an external tool (the stop itself) to manage your risk. You always have to pay to have someone else or something else manage your risk, and the flip side of that is that you get paid for managing your own risk.

This is the concept behind mortgage pricing. Fixed 30 year mortgages cost more because the institution is managing the risks involved with interest rate fluctuations. In contrast, for a 1 year variable loan, you as the borrower carry that risk, and you pay less for your money over the long term for doing that.

Anyway, I am digressing. In terms of the market, you need to learn how to carry your own risk. I do this in my own account by making sure that my position sizing is relatively small amount based on the variability of the stock relative to my account size."

 Like the Doctor, instead of using STOP LOSS to manage risks, I manage risks from different perspectives. I have trained myself very hard to look at Portfolio and not at stock. A few falling stocks may not impose a big risk to me. There are few important things to note:

1. I don't use any Leverages
2. I am using cash that are not needed for next 5-7 years.
3. I have enough emergency fund
4. I will only hold on to falling blue chips that Temasek or White Knights are likely to come to rescue

Many days later in 2008 after that guy who has asked: "Bro, do you have stop loss and you are holding a losing position for too long!"

Another woman (she is now known as SuperMum) came and asked at another cbox asked: "Do anyone use stop loss?"


Please help yourself to read the rest of the posts related to Portfolio Management.

http://createwealth8888.blogspot.com/search/label/Education%20-%20Trading%20-%20Portfolio%20Management

So do you want to join the fellowship? Let me know. LOL.I told her the reasons why I don't use. OMG, she became a disciple of NO STOP LOSS strategy. But, before you also get excited and want to join the FELLOWSHIP OF NO STOP LOSSES.

Stupid! Son. It meant to be SOLD!

Once there was a man who was retrenched from his Sales job and collected some retrenchment benefits and desperately went out to the street to look for a job. Days after days, he couldn't find any jobs.

One day, he came upon a stall and saw some people buying cans of sardine and he stood there for a while watching the stall. He thought for a while and thought about that business of selling cans of sardine was not bad.

He quickly approached the stall owner and offered to buy over his stall. The stall owner was an old man who had been waiting to retire and happily agreed to sell his stall.

The next day, the man began his business of selling cans of sardine. His business grew better each day and soon the distributor had difficulty in supplying enough cans of sardine to meet his sales. He also earned plenty of money and decided to build a factory and to produce his own cans of sardine.

Next, he began to expand his business and soon his cans of sardine were sold everywhere. His cans of sardine became very famous. He became very rich.

One day, his son came upon a stall selling his father's brand of sardine. The boy had been very curious and had been wondering why so many people were buying his father's sardine and his father had never brought home any cans of sardine. So he decided to buy a can of sardine and to try it.

When he opened the can of sardine he was shocked to see that sardine was not looking good. He thought for a while and maybe the sardine didn't look good, but might taste wonderful so he took a piece of sardine and tasted it. He almost fainted. The sardine tasted horrible. He was very disappointed and waited for for his father to come home and to tell him off.

When his father came home the boy was quick to tell his father that his cans of sardine looked so bad and taste so horrible.

His father yelled at his son: "Stupid! Son. It meant to be SOLD"

Do you understand the moral of the story? It is same for STOCK.

Learning to Overcome Jealousy and Live Your Own Life

By Trevor Johnson


When learning to overcome jealousy it is important to understand the root cause of the emotion. Believe it or not, not everyone reacts to a friend's new found love or great success in business with a secret anger or emotional grudge. It is not necessary to feel jealous over the accomplishments of others, and there is a reason that you do.

You need to consider whether the specific cause of your jealousy is something that you sincerely desire for your own life or not.

If your jealous moments center on things that you really do want for your life or only occur around a certain issue or object, then the root cause is likely fear that you will never have it for yourself.

It is not that you don't want these good things for others, but you want it for yourself so badly it is hard to escape the panic that it will never be your own reality.

On the other hand, if these feelings arise from a variety of things and most of them are things that you do not necessarily desire for yourself, then the root cause could be a general unhappiness with the life that you are living.

You don't sincerely want the fiance and new home that your best friend has just secured, but because you are so unfulfilled in your current life situation their happiness makes you envious.

Once you identify the root cause of the envy it is time to take action. If you are really afraid something isn't going to happen for you, write out some goals and an action plan to make it happen. Throw yourself full force into achieving that dream since it obviously is very important to you.

If the issue is a general dissatisfaction with your life it's time to analyze what will make you happy and go after it!

Learning to overcome jealousy has nothing to do with other people, and everything to do with you. It can be a life changing situation that finally frees you to go after what you want in life.Don't live through others, but through your own ambitions. Know the concept of enough

Sending Your Kid To Overseas University Education

Many years back, one of ex-colleague told me that she was very disturbed by her elder son's comment (She has two sons) when she planned to down grade from her fully paid 5-room HDB flat to 3-room to fund her younger son for his US University education.

Her elder son's comment: "Why do we have to suffer when Di Di never study hard and fool around during his school days and not good enough to enter local University and you have to spend the family's money to send him overseas at great expenses" (I roughly recall something like this)

Out of parental love, she sent her younger son to US.

So sending kids to overseas university education for an average wage earner could mean forget about your own retirement and be prepared to slog till the last days.

Capital Protected Investment?

If some one sells you a Capital Protected Investment product, you better walk away quickly.

Capital Protected may mean that fellow takes 100% of your capital and likely to invest in Zero-coupon bond.

Zero-coupon bond is sold at a deep discount and redeem it a full face value when it matures and then uses the discount to speculate in high risk investment products. If high risk investment returns some gain and that fellow may share some of the gain with you.

See what happen -

I win, You win some. I didn't win, You didn't lose your capital. Good deal????

It is so easy to create your own Capital Protected investment product and why don't you DIY?

Guarantee Return On Investment?

Any investment by nature carries risks and return on investment can never be guarantee and if anyone promise you certain amount of Guarantee Return on your Investment; it is likely to come from part of your invested Capital.

Don't EVER believe it. It is just taking back some of your own money.

Open Mind, Close Mind, Open Door, Close Door

“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

Somehow, what Alexander said can be quite true in Investing and Trading.

We must always keep an Open Mind and watch out for Open Doors and quickly move in and stay there till it is time to Close Door. Remember when one door closes, another opens.

In the Market, there will be some open doors that are ready to welcome us.

Don't keep a Close Mind, and thinking when one door closes, there will no open door.

Australia's central bank raised its key cash rate by 25 basis points to 3.25 percent

Australia's central bank raised its key cash rate by 25 basis points to 3.25 percent on Tuesday, saying it was prudent to gradually take back policy accommodation since the worst danger for the economy had passed.

Soon, Fed Rate will follow to rise and then DOW to follow too?

Magic Of Compounding - Cowsense

A Picture is worth a Thousand words.

The Best Secret in Investment and Trading – Compound Interest

Newbie To The Job Market?

When newbies with no relevant skills, no experience and little knowledge come to the Job Market, will they expect to be rewarded with peanuts or banana or nothing?

They know that they have to learn and work hard to gain the relevant skills, knowledge and experience for that job before they expect to be rewarded with banana.

But, when the newbies come to the Stock Market with no relevant skills, no experience and little knowledge and still expect to be rewarded with bunches of banana by the Stock Market.

Expectation from the Stock Market can be so weird!

The Best Secret in Investment and Trading – Compound Interest

A Picture is worth a Thousand words.

Read more on? The Best Secret in Investment and Trading – Compound Interest

Olam - Got it back @ $2.39

Bought back Olam at $2.39

Last sold @ $2.62, $2.41, and $2.40 so I have managed to pocket the differences and continue the commodity race with Temasek. Ha Ha.

Story Of The Tortoise and The Hare

Slow and Steady won the race! The Tortoise won.

But, in real life, the Hare will never rest in the race, and slow and steady Tortoise will never win.

Nest Egg For Children's University Education

thesundaytimes, Oct 4, 2009, invest

There is a table showing Cost of tertiary studies at a glance (source: Alpha Financial Advisers)

Singapore: 4 yrs, with Honours at $71K (including living expenses and for non-medical degree courses)

A degree course currently at NUS:

$71K for 4 yrs:

• about $32K-34K is payable to tuition fee and other fees
• left with $37K for living expenses - about $708 per month (This figure is close to my own estimation of living expenses)
• 
  

At SMU, it will cost more

• about $40K is payable to tuition fee and other fees
• living expenses at SMU will be much higher than $708 per month and they need to dress up nicely.

10 years' time: $100K
15 years' time: $120K
20 years' time: $142K

Have you started planning for your kids' Uni fund? How?

http://createwealth8888.blogspot.com/2009/05/insurance-enhanced-endowment-policy.html

Portfolio Management - Price Volatilty

http://createwealth8888.blogspot.com/2009/10/portfolio-management-market-forecast.html

Knowledge born from actual experience is the answer to why one profits; lack of it is the reason one loses - Gerald M. Loeb

George Soros earned his reputation and a lot of financial rewards by understanding risk and return has his views on volatility, risks, and returns. He said that asset classes and stocks that have the lowest short-term volatility also generate lowest long-term returns.

Short-term Price Volatility May Not Be Risk To Some.

If you are investing with high leverages, then short-term price volatility that goes against you will pose significant risks.

If you are trading with time decay, also short-term price volatility that goes against you will pose significant risks.

If you have strong holding power, why do you see short-term price volatility as a risk?

Learn to love short-term price volatility.

Volatility is your friend and it provides you opportunities to compound your gains in the market.

To obtain truly significant returns you must allow for volatility in short-term pricing of your portfolio and allows you to actively manage your Portfolio mix - continuous reallocation of different stocks and cash level.

Did you smile or frown last Friday when STI was down -1.99%?

PortFolio Management - Market Forecast and Re-investment Risk

http://createwealth8888.blogspot.com/2009/10/portfolio-management-portfolio-risk.html

http://createwealth8888.blogspot.com/2009/09/stock-market-is-war-part-3.html

Depending on your market forecast, you may want to adjust the portfolio concentration levels.

There are times to hold fewer positions and times to expand the portfolio.

But, if you are wrong on your Market Forecast, you will be exposed to Re-investment Risk.

There will be RISKS - either Investment or Re-investment Risks. Which risk are you comfortable with?

Portfolio Management - Portfolio Risk

http://createwealth8888.blogspot.com/2009/10/portfolio-management-passive-income.html

Portfolio Risk is composed of the following risks:

• Systematic Risk or Market Risk
• Non-Systematic Risk or Non-market Risk

Market Risk refers to the risk common to all stocks and the risk cannot be diversified in the same market e.g. Singapore stock market

Non-Market Risk is the risk associated with the stock of that particular company. Non-systematic risk can be diversified away by holding greater number of stocks in the portfolio.

In Joel Greenblatt's brilliant book, You Can Be a Stock Market Genius, he provides the following statistics by owning the following number of stocks:

• 2 stocks eliminates 46% of non-market risk of just owning one stock
• 4 stocks eliminates 72% of the risk
• 8 stocks eliminates 81% of the risk
• 16 stocks eliminates 93% of the risk
• 32 stocks eliminates 96% of the risk
• 500 stocks eliminates 99% of the risk

Have you done a good job in your Portfolio management to mitigate the Non-Market Risk?

Market Is War - Erupted in 2 Oct 09

Sun Tzu said:

Much computation brings triumph.

Little computation brings defeat.
How much more so with no computation.

"The general who wins the battle makes many calculations in his temple before the battle is fought."

Sun Tzu said:

Those who understand
these fundamentals will win.

Those who don't will be defeated.

During this weekends, you make many calculations on positioning, money and risk management and understand which stocks are fundamentally sound.

Watch out ONLY for tired horses and avoid sick horses. After enough rest, tired horses will be up and running while sick horses can be lying there for a long time.

Portfolio Management - Passive Income

Don't forget dividends as passive income in your Portfolio Management.

Some companies pay quarterly, some semi, and others full year dividend. If you have a good spread of quarterly, semi and full year dividends as income passive in your Portfolio like mine.

It will help to ease your dependencies for active income from trading and may also help to prevent you from over trading.

Some time the market just don't allow you to take up new positions, and if you know that you have some passive income coming in for that month; you may decide to stay at the sideline to watch the market and review your trading plan.

Cambridge - Got in @ $0.445

Add more CIT for passive income as it pays quarterly dividend.

This is part of Portfolio management strategy to include a stream of passive income in addition to active income from trading.

Personal Inflation Rate and Market Inflation Rate

http://createwealth8888.blogspot.com/2008/09/singapore-past-inflation-rate.html

Your personal inflation rate may not be the same as the market inflation rate. Your spending habit will determine your personal inflation rate and can be higher or lower than the market inflation rate.

When we retire; we should learn how to adjust our spending habits so that our personal inflation rate will be lower than the market inflation rate. With a lower personal inflation rate, it will be much easier to generate lower returns on investment to provide sustainable retirement income.

Concept of OPM (Other People Money)

A guy called KK loves to use OPM - using rental income paid by tenants to cover his property.


On second thought, I agree with him, and actually I have been this concept of OPM without knowing it - Pillow Stocks Strategy.


Pillow Stocks Strategy is zero-cost to me i.e. no capital outlay from me. It is OPM in the market to generate further returns if any.


Similarly, for business owners doing IPO - They are also using the concept of OPM when the business owners recover part or all their capital and continue the game with OPM.


The only difference is that my OPM concept is without leverage. Cheers!

Read? Payback period

Portfolio Recovery so far?

Have to be extra careful and not to get caught in Oct 09; otherwise, another round of painful recovery.

As on 30 Sep 09, I have achieved 39.06% of 2009 Goal (In 2003, I set bullish and progressive goals from 2003 to 2011. Phew!).

Going forward, I believe that from 2009 to 2011, those bullish goals set at 2003 may be extremely difficult to achieve; but, nevertheless, I shall not change them, but will still work towards getting at least 50-70% of the Goals. Cheers!

Trading Performance Review

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

Since 1 Nov 08 that I have given up the fast exciting active contra trading (or gambling) after three successive months of contra losses:
(Total net losses in 2008: $160K
 Jan:$76K, Aug:$68K, Sep:$18K, Oct:$31K) for a slow moving position trading, how am I doing now?


1. ROC from 3.8% to 34.3% (I don't use stop loss so no negative ROC)

2. Holding Days from 1 to 329 days (some of those sins committed in 2008 and cleaned up)

3. Average ROC: 11.9%

4. Average Holding Days: 59.7 days

Next performance review at end Dec 09.

Kep Corp: Got @ $7.98

So itchy hand! Why the sell down?

Find Your Perfect Pitch

Knowing others is intelligence; knowing yourself is true wisdom. Mastering others is strength; mastering yourself is true power. - Tao Te Ching

There is always great debate on TA, FA, TA combined FA, speculation or gambling and none can convince the other.


Do whatever method it takes for you to double your Investing Capital in 5-7 years? If after 5-7 years and you are unable to double your Investing Capital, then you are seriously not doing it right and you may need to seek to know Others.

Let me know if you taking up this challenge.

Gambling?

I think the only big difference in Gambling vs Speculation or Investing if you are ONLY allowed to either WIN or LOSE per transaction and you don't have the option to HOLD if the position goes against you. That is definitely GAMBLING.

E.g.

Contra Trading can be considered as Gambling if some one has no resources to fully pay up for the transaction and the only option is either WIN or LOSE.


Read on for more ...


http://createwealth8888.blogspot.com/2009/09/gambling-investment-speculation.html

ToTo - The fastest way to become Millionaire

http://createwealth8888.blogspot.com/2009/09/gambling-investment-speculation.html

Who want to become a Millionaire? Take part in the TV program or buy ToTo.

Buy ToTo whenever it hits Jackpot prize of more than $3M. Mid-Autumn and Hong Bao draw is a must buy.

Last Friday, three millionaires were born but too bad it was not me. Ha Ha!

Gambling - investment - speculation

A comparison can be done as above:

From: Behavioral finance FAQ / Glossary (Gamble)

Read on ...

http://createwealth8888.blogspot.com/2009/01/speculation-vs-investment.html

Olam - Is consolidation over?