My Realised Capital Gains After 8 years in the market Is Near Zero

Recently, I mentally tabulated a number of my stocks that I have sold, or suspended, or privatized… And the grand total of capital gains (dividends excluded) among all these realised gains is near zero… :(

Granted, there were a number that were due to mistakes made as a newbie in the stock market. The stocks offhand that I recall:

How I went from 0 to 100k to 300k+ savings by age 32

Recently, there have been a number of the younger generations (mid twenties) asking how I managed to save... So I decided to write and share my experiences.

Recall that about 2 years ago, the national newspaper has mentioned how it is possible to save 100k by 30 years old. I remember there were quite a number of people who thought it was crazy and undoable, or maybe my memory failed me. Either way, there are a lot of people who achieved that before 30 years old.

Granted, my savings aren't exceptional. I do know a friend who has hit the two million mark when he was age 32 about two years ago. That.... is really exceptional, and I am unable to play at his level at the moment.

I don't want to write a grandmother story, so in summary, these were some of the events that I have been through before today. There were a lot of luck involved, but none involved striking the 4D or ToTo.

Investment Philosophy -- How it has changed for me

Since I first started on this journey years ago, my investment philosophy has changed quite a fair bit.

Back then, I was a greenhorn. I didn't know a lot of stuff. Especially for the first few purchases, it was based on hearsay. Hearsay from forums, from friends, from family. Honestly I didn't know better, and good $$ was lost. That was... in a way... "lesson fees".

Then, in my late twenties, I increase my focus on investing in sustainable businesses. The main focus was on monopolies, oligopolies, as well as "sustainable" REITs. I added inverted commas to the word sustainable before REITs because I may still be wrong in the long run. However, my model has served me well enough for the past few years.

Now, in my early thirties, having "sustained damages" from two of the three bombs, marriage and housing, my investment philosophy has changed a little more. Instead of just investing in sustainable businesses, I'm adopting a "Rise-And-Die-With-Singapore" investment mindset. Just what is this mindset about?

Retirement -- Think of building business systems

This post is inspired by a friend's blog post, which you can find at http://bullythebear.blogspot.sg/2014/09/retirement-thoughts.html#.VAyDrFahgds

I guess it is easy for us to calculate. Let's say we manage to save $4k a month for the next 30 years, that would net us $1.44 mil.

Sounds good.

But that's 30 years later.


Then we read about news like Zopim being acquired for $37mil SGD, leaving their founders as multi-millionaires while below 30 years old.

What's the difference?

I have come to realise that starting our own businesses is among the best way to propel our wealth. But... the caveat is that lots of hard work is needed, much more than being just self-employed. Worst is, the hard work may not even pay off in the end. Of course, such probabilities could be improved with more knowledge and learning. And that is what I have been doing/studying the past 2 months.

The greatest realisation came after I chanced upon this quote which I like to share:

"Organize around business functions, not people. Build systems within each business function. Let systems run the business and people run the systems. People come and go but the systems remain constant" -- Michael Gerber

Investing Lessons to be gleamed from Eratat -- Avoiding a potential value trap

*This is a blog post written with hindsight, but I'm pretty sure it would have been dissed off and thrown aside had it been written earlier.*

Recently, just before Chinese New Year holidays, Eratat requested for a trading halt and subsequently suspension. It was a company I have been suspicious about since March 2011. Much of my analysis (with some calculations probably off) can be found here.
China Eratat

Note that this isn't an exercise or pure blog post done specially to ride on a S-chip suspension bandwagon, but to consolidate the lessons and what has been posted before since 2011.

The question is, is it possible to detect such fraud before it happens? Apparently, there were lots of clues to this, and this was posted in a few forums. Apart from that, from my recent read ups of marketing materials, I realise there are more things to investing in a business from a fundamental analysis viewpoint that is not often discussed about.

I might well be wrong, and everything turns out fine eventually. But I highly doubt so.

Let us first recap the pretty obvious red flags that were brought up over the course of time in different forums.

1) High percentage of receivables as part of assets.
2) The receivables would have been even higher had some of it not be written off as sales incentive and renovation subsidies.
3) Despite high cash levels, Eratat had "no choice" but to borrow at an effective interest rate of 32%.
4) As Greenrookie has pointed out in NextInsight forum, Eratat's subsidiary did not appear in the tax reports of top 100 corporate tax payers, which means it paid less than 3 mil RMB in taxes. The maths does not work out.
5) The director sold all his shares at a "deep discount" in Aug 2013 due to personal reasons that were never revealed. Now we know his "personal reasons".

I have also pointed out earlier that the NAV after netting off receivables looks constant after 2 years of being listed.

Taking a little profit off the table

Over the past week, I have disposed of Singtel and SingPost.

The reason for the disposal are
1) Singtel, sold at $3.92, is quite near it's past recent high of $4.17
2) Singpost, sold at $1.29, is near it's past recent high of $1.30

There's a time for buying, and there's a time for selling. While the market may look to be on a bullish run, there's always a time the music will end.

Just don't get caught naked when the tide runs out ;)


While the music is still on, and the interest rates still low, I will be looking to sell a few more counters which I don't really like the business or the dividend yields, but bought because I think the prices were too low.

The counters are
1) CitySpring. I'm uncomfortable about its high debt, although the dividend yield is moderately acceptable.

2) Capitaland. The business of this volatile stock is probably ok, but its dividend yield is way too low, and hence the returns aren't that great. I have this counter since March 2009 at a very low price, but I might consider offloading all.

3) CapitalMallAsia. Same as point (2)

4) GLP. The business is probably ok, but I think it is getting a bit too pricey. I don't have a calculation of its value; it is more of a gut feel that $3 may be a sell.

5) Silverlake. The business is really great. But the price has gone really high too. I will have to evaluate the counter again, something which I have not done for a long time. With a 112% gain on top of the 5% annual yield, I guess I do have some leeway to play around :)

6) Cosco. My first stock bought at $2.67. Am considering to cut loss on this, buoyant by massive gains in other counters. A stock bought with zero analysis except hearsay from my sis. :x

7) Aztech. Probably a wrong FA purchase.

8) Hor Kew. Another wrong purchase.

9) SPH. Well, I like the business, but I'm unsure if the counter is worth $4.40.

10) Starhub. One of my biggest gains in my portfolio, apart from AIMSAMPIREIT. With a 147% gain and a annual 10.5% dividend yield, I couldn't be happier :)  But at around $4.70? Is it too high for such a counter? I might sell some such that my remaining counters cost $0.


Not in a rush to sell, but I'm starting to monitor again. I will probably sell some REITs soon too, just not yet...

All in all, the amount I'm eyeing to sell is about $80k and up. The cash will probably be re-invested into a second business venture, as well as invested into my wedding next year :)

My dividend yield will probably be adversely affected, but in a way, with the amount of paper gain, I could probably treat it as taking my dividends for 10 years early. Surely 10 years would be a sufficient time frame to see the next bear market.


As an afterthought after HM Shak's comment below:

Using Fibonacci Retracement on the STI,
In any case, if we take 1513 as the reference low and 3857 as the reference high from Yahoo Finance, the 76.8% retracement is 3313 and the 78.6% retracement is 3355. If we take into account the intra-day fluctuations (which I didn't bother to dig out), the values could be higher, and 3400 is about right.

This was my plan since 2011:
http://wealthbuch.blogspot.sg/2011/02/personal-updates.html

Excerpts from The Intelligent Investor

The recent market volatility prompted me to post two excerpts from the Intelligent Investor by Benjamin Graham. His wisdom may show some light:

Excerpt 1

A serious investor is not likely to believe that the day-to-day or even month-to-month fluctuations of the stock market make him richer or poorer. But what about the longer-term and wider changes? Here practical questions present themselves, and the psychological problems are likely to grow complicated. A substantial rise in the market is at once a legitimate reason for satisfaction and a cause for prudent concern, but it may also bring a strong temptation toward imprudent action. Your shares have advanced, good! You are richer than you were, good! But has the price risen too high, and should you think of selling? Or should you kick yourself for not having bought more shares when the level was lower? Or—worst thought of all—should you now give way to the bull-market atmosphere, become infected with the enthusiasm, the overconfidence and the greed of the great public (of which, after all, you are a part), and make larger and dangerous commitments? Presented thus in print, the answer to the last question is a self-evident no, but even the intelligent investor is likely to need considerable will power to keep from following the crowd.

It is for these reasons of human nature, even more than by calculation of financial gain or loss, that we favor some kind of mechanical method for varying the proportion of bonds to stocks in the investor’s portfolio. The chief advantage, perhaps, is that such a formula will give him something to do. As the market advances he will from time to time make sales out of his stockholdings, putting the proceeds into bonds; as it declines he will reverse the procedure. These activities will provide some outlet for his otherwise too-pent-up energies. If he is the right kind of investor he will take added satisfaction from the thought that his operations are exactly opposite from those of the crowd.

Excerpt 2

Imagine that in some private business you own a small share that cost you $1,000. One of your partners, named Mr. Market, is very obliging indeed. Every day he tells you what he thinks your interest is worth and furthermore offers either to buy you out or to sell you an additional interest on that basis. Sometimes his idea of value appears plausible and justified by business developments and prospects as you know them. Often, on the other hand, Mr. Market lets his enthusiasm or his fears run away with him, and the value he proposes seems to you a little short of silly.

If you are a prudent investor or a sensible businessman, will you let Mr. Market’s daily communication determine your view of the value of a $1,000 interest in the enterprise? Only in case you agree with him, or in case you want to trade with him. You may be happy to sell out to him when he quotes you a ridiculously high price, and equally happy to buy from him when his price is low. But the rest of the time you will be wiser to form your own ideas of the value of your holdings, based on full reports from the company about its operations and financial position.

The true investor is in that very position when he owns a listed common stock. He can take advantage of the daily market price or leave it alone, as dictated by his own judgment and inclination. He must take cognizance of important price movements, for otherwise his judgment will have nothing to work on. Conceivably they may give him a warning signal which he will do well to heed—this in plain English means that he is to sell his shares because the price has gone down, foreboding worse things to come. In our view such signals are misleading at least as often as they are helpful. Basically, price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal. At other times he will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies.

Growth Strategy for 2011 and beyond

Happy new year to readers in the year 2011!

Year 2010 was a rather good year for me in terms of networth growth (nearly doubled). It was a year where I was super busy, but monetary and spiritually rewarding. Why I said it is spiritually rewarding is because I believe it is my calling now to assist and help students do well in their studies, through active teaching and through books.

Year 2011 and beyond is indeed more exciting than ever before. This post is not going to be about any new year resolutions, because I have already set myself in place with Goal 2013.

Apart from Goal 2013, this is my view of the economy and market in concise form:

December Portfolio Update + Quick Review of 2010

December was a rather quiet month.

The main changes to my portfolio are

1) First Reit. I initiated a position in First REIT rights at 0.165, and subsequently exercised the rights by paying another 0.50, bringing my price to 0.665. This gives a yield of about 9.64%. This is a stock I wanted while it was 40c region, but procrastinated too long. While, hindsight is 20/20.

2) Silverlake. I initiated a position at 0.33, and I have written 2 posts about this.

3) CapitalMallsAsia. I initiated a position at 1.86.

4) Cut loss on China Sky at 0.22. While on hindsight, I could have done better and sold it this week with a profit instead of a $500 loss.... :(

5) Took profit on Breadtalk. Again, on hindsight, I could have earn more if I sold it this week, but then again, it's hindsight, and my number of lots is so little it would have mattered much anyway.

6) Subscribed for LC Dev rights. 

How to Exercise Your Warrant Options (SGX)

I have exercised my Saizen Warrants recently. While doing so, I realised that there are people who were unsure of how to exercise their warrants. So here I am, writing a mini tutorial on how to exercise your warrants and convert them into mother shares.

I found out how to exercise my warrants from here:
http://www.cdp.com.sg/faq/warrant_faq1.html


Step 1:
Find out who your warrant agent is from
http://www.sgx.com/wps/portal/marketplace/mp-en/products/securities_products/company_warrants

The Story of the Marriage Passbook

I was looking through my old emails, and I discovered this interesting mail.
It's very nice and touching, while at the same time, includes the virtue of saving.

Relationship is an investment.  It is wealth in itself.

Enjoy the story:
 
=====================================================================

Marriage Passbook

Jocelyn married William this day. At the end of the wedding party, Jocelyn's mother gave her a newly opened bank saving passbook. With $1000 deposit amount.

Mother: 'Jocelyn, take this passbook. Keep it as a record of your marriage life. When there's something happy and memorable happened in your new life, put some money in.

Write down what it's about next to the line. The more memorable the event is, the more money you can put in. I've done the first one for you today. Do the others with William. When you look back after years, you can know how much happiness you've had.'

Jocelyn shared this with William when getting home. They both thought it was a great idea and were anxious to know when the second deposit can be made.

This was what they did after certain time:

How Companies Calculate Depreciation

Basically, there are two possible ways for companies to calculate depreciation.
1) Straight line depreciation method, or
2) Accelerated depreciation method.

Straight line depreciation is calculated by spreading the asset cost evenly over the assumed lifespan of the fixed asset. Starhub, a telco in Singapore, uses this.

Accelerated depreciation is done by expensing a large part of the cost at the beginning of the life of the fixed asset, and lesser at the end. Cars in general undergo such depreciation; the moment you buy a car and use it for a very short time, the value would have depreciated by more than a proportionate amount.

Investing Strategy

Previously, I pointed out that I think STI could have topped. It may or may have not, but as concluded, scraping the bottom of the barrel isn't very ideal...

With this, my strategy for incoming salaries and dividends remains the same: Accumulate the cash, and only enter when the skies are clear.

Supposed I can keep my hands away, I shall be able to achieve 10% cash by the end of June 2010. That's if I don't grow itchy fingers :x

Then again, what's to stop me if I think there's sufficient value and safety margin to enter? Saizen at 0.165, AIMSAMPIREIT at 0.215, Starhub at $2.15, Singtel at <$3?

In a bull market, most people become a genius with the Midas touch. I don't want to fall into the trap. Have to exercise a lot of caution from now on...


P.S. This post is very short because I have no idea what to write next, or what stocks to look at next. Basically, it sums up my actions and thoughts now.

WHY DIDN'T I BUY/SELL THIS STOCK!

HL Asia.... ARGH!!!
COSCO!!!! ARGH!!!!!!

WHY!!!??!! WHY DIDN'T I BUY THESE WINNERS AT THE LOWS!!!!
WHY DIDN'T I SELL THESE LOSERS AT THEIR PEAKS???!

Do you often get these thoughts?
I'm guilty of it at times. But I'm growing out of it.

Are you entrapped in the Market Box?

Personally, I think that I was ensnared by the evils of the market when I first dabbled in it.You know are trapped in the market box when you are constantly anxious about your purchase... would it fall? Would it rise fast? Would the company fail?

You know you are trapped when you need to keep looking at the stock price every few minutes.

You know you are trapped when your life just revolves around it, neglecting your work (if u trade part time) or other things in life in the process.

Day Trading or Trade on multi month cycles or Investing Part II

Earlier, I had a blog post on which style of playing the market I should adopt.

As I proceed on, I become more and more convinced that a longer term approach is more feasible for me. Although I do see people earning nearly $6k extra monthly by day trading even with a full time job, I'm not sure if they can focus or are focussing on their day jobs. I know I can't.

While it's true that you don't need your job if you can consistently profit near to $6k monthly just by trading alone, that isn't really the desired path I want to take for reasons below:

Operation Fund Switch 1

Sold my 16 lots of Macquarie International Infrastructure Trust at 50 cents (60% profit) finally. This translates to a profit of about $3k plus.

Used funds to buy 4 lots Starhub at $2.100 today. I did it by jumping the queue at lunch time to grab the $2.100 lots on sale.

This........ is my Operation Fund Switch 1. I do not treat it as a new purchase, but merely a transfer of funds from 1 security to another.

Day Trading or Trade on multi month cycles or Investing

Sometimes, I just wonder which is better....

I have seen people in my age group day trading (contra) successfully, making a few grands a month.

I have seen people in my age group trading on positions and multi month market cycles.

I have seen people in my age group doing FA investing.

Of Opportunity Funds And Emergency Funds

Ever since I was sorely disappointed in March 09 when I see such bargain prices for stocks, yet I do not have the funds to continue loading, I understood the importance of Opportunity Funds. Opportunity funds are a necessity for averaging down, averaging up.... i.e. increasing your position in a security.... I didn't have any more opportunity funds in Mar 09 as I was just starting out at work, and placed my monies too early into the market, into SPH, CoscoCorp, etc.

As for now, I have $9k in opportunity funds from my active income sources. More should come by March to May (if I have not seen any value or reason for entering) from my different income sources, i.e. full time job, tuition, dividends from CapitaComm, Starhill, Starhub, CitySpring, GRP.

Introduction to Technical Analysis and Fundamental Analysis

Introduction to Technical Analysis and Fundamental Analysis

Let me begin by stating that I'm a believer of both camps of technical Analysis and fundamental Analysis. This article is primarily focused on the very basics of what is technical and fundamental analysis, and some of the criticisms on them.

Technical analysis and fundamental analysis are merely two different analysis methods. In a nutshell, technical analysis looks at price actions and indicators, and uses this data to predict future price movements. Fundamental analysis, however, looks at economic factors, business fundamentals, stock price vs value, etc.