19 November 2020

Quick update - Nov 2020

I have quite caught up with work (on 6-day work week) and family matters, so I have kind of put a stop to my financial learnings and readings lately. That also explains my lack of posts. This update would be a really quick one as I am just too too tired.


1) SG stocks portfolio

Between the period of April (big crash) till now, these are the stocks which I have purchased during their price trough period.

Capitaland
CapitaRetailChina
Comfort Delgro
Singtel
Mapletree NAC
DBS
Ascott Trust
Olam Intl
Thaibev
SGX
Keppel
Mapletree Logistics Trust

The deployment have been quite conservative and in phases (means I don't purchase all in one batch). Some of them are straight winners after the purchase, but some took a further tumble. Which is which, you can go and see their charts to find out. 

STI have slept long enough, I am glad to see that it has finally awaken to the beats of its US counterparts. Hope for covid vaccine? So fast?

My current portfolio based on capital invested sits on -2%. Worse performers are Silverlake, First Reit, Starhill and Singtel. Best performers are the banks.


2)  Cryptocurrency

This one is like my black horse. Despite suffering from a major crash together with the stock market, it beats all indexes hands down during rebound. Read: Bitcoin breaks $18,000 as rally powers on

If one bought BTC during the trough of its big crash and held on, it would be a 3-bagger now!

I still have my qualms about crypto so I did not jump in at all opportunities. I purchased some in January this year and traded for slighted profits. I also purchased some in the post-crash period which has reaped about 100% gain (double bagger!). However, I have sold too early in the midst of the rally (when 1 BTC was around SGD 18k) to reap the profits. The steepness of the rally made me can't help but think "Am I too greedy to hold on, what if it flash crash?". 

Note that ease of buying and using BTC may be factors that drive up its recent price. Read: Square and PayPal may be the new whales in the crypto market as clients flock to buy bitcoin

I used Binance sg and not some professional trading platform for buying crypto, so I can't set any stop loss (no good for trading). However even those professional trading platforms can their caveats when there's a flash crash, bearing in mind too that those are custodian accounts and vulnerable to hacks / manipulations. 

Now I am still holding on to a bit of cryptos as they rally on. Really a bit. Just to continue speculating.


3) Trading

I managed to "smoke the last puff" of the BABA rally before the news about the Ant IPO suspension came out and its price land slide begun. I attempted to buy in once after the slide but got stopped out shortly. A little silly not to have done my TA homework well.

Overall my US trading is holding up well for this year, as I was more careful in executing my trades and also took quick profits amidst volatility. 

Capping losses is of utmost importance when lose-win is at almost a 50-50.

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Investing, speculating, trading and marching on...



"Money-making opportunities befall those who can see what others don't see coming."


That's all for now. Till next time!


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21 August 2020

Why do we often make fair but not excellent investment decisions

Why do we often make fair investment decisions and end up with fair returns?  

Here are some thoughts.

We are afraid of the EXTREMES


We were taught from young that everything should strike a balance. Don't go to the extremes... and we will be pretty much safe isn't it?

That's right and you might even thank yourself for it. Anything with ratios that are too extreme may smell like trouble. For instance, price /NAV of Eagle hospitality trust is at a record low of 0.17, Lippo Malls is 0.44, but will one dare to buy? 

Certainly not! It's for obvious reasons.

Then...

We are afraid of buying into the All Time High Over-valued stocks


This is another subset of fearing extremes. Many times we missed catching growth stocks until their share prices go to the moon and so do their P/Es. 

As though a lack in foresight is not enough, there comes Price Anchor Bias, which I can't deny I have also fallen prey to.

Remember this famous quote? "It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” - Warren Buffett

Then we would wait... and wait... and wait some more. Or just buy the fair company cos fed-up from waiting!


This is not saying that everyone should go and buy shares at ATH prices. We need to understand that decisions should be based on data that are forward-looking and not backward-looking, which involves certain degree of prediction and conviction.


Price Anchor Bias also led to the problem of believing that fallen stocks will come back once again to their glory (backward looking once again). On one hand, we recognized that not buying into the extremes is a wise thing to do. However, on the other, we are still holding on to the "extremes" and even average down on them.



Some time ago, I mentioned Barbell strategy. This strategy advocates going extreme. It's something that I have wanted to try but eventually did not.


The gist of Barbell strategy is allocating money for investments into two extremes - the very stable, almost capital-protective investments and the risky but very high-return investments. So the high-return investment (which should only constitute a small portion of the portfolio) can give substantial gains to compensate for the opportunity cost of the stable but low-return investments. There will be almost nothing in the middle "fair return" zone. Simple as it may sound but difficult to execute.


First, it is NOT easy at all to dig for gems, aka high-return investments. Just how many people have foreseen the exponential growth of Apple, Amazon, Google more than 10 years ago and stay invested in them till now? (Not withstanding the possibility that many rotten apples might have been mistakenly picked along the way.) Many times "high return" are non-guaranteed and could even be luck-dependent. The Barbell strategy might have worked out if we managed to catch those ATH growth stocks at their ATL. (Perhaps the closest that we can get was the March 2020's sell-down. Those who scooped up a fistful of US stocks would be sitting on some handsome gains since there seems to be no dead cat bounce, as of now.)


Second, the other end of "low risk" investments are giving almost zero return in the current low-interest rate environment. It's a huge opportunity cost incurred there.


Thus, in the long run, we would have a tendency towards making fair choices, and end up with a basket of investments that give us just fair returns.


And we naturally blame it on...

Diversification


Diversification, although a sound strategy, can dilute returns. Yeah, too bad it's a double-edge sword.

The purpose of diversification, besides risk spreading, is actually to help us in uncovering gems. 

Think of it this way - we have to get our skin in the game, get our hands dirty with the chores of sieving through the countless choices to uncover the gems. Erm, eventually.


Peter Lynch said:

"All you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from the stocks that don't work out."
[Read more external link]


It is not saying "don't diversify". It is saying that you have got to turn enough stones over.


We can allocate equal sum of money to every single stock or vehicle of our investment portfolio, and allow dilution factor to come into play. 

However, we can also skew our holdings to the winners by allocating more money into them over the years. 

Morale of the story:  Don't buy into the losers. Buy into the winners


In the end, it is not about buying into the ATL, ATH or dabbling in high-risk instruments. It is about who is a step ahead in finding the winners and getting rid of the losers by closely observing the ever-changing macro and micro economic environments.


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"Millions of people are competing for each available dollar of investment gain. Who will get it? The person who's a step ahead."


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14 August 2020

Quick update - Aug 2020

I cannot recall when was the last time I shared my portfolio here as I don't have a habit of doing Portfolio Updates to readers. Despite US market being in the cloud nine after a V-shaped rebound, the STI is still languishing. Thus, I have decided to do a quick snapshot here on the top gainers and losers that I am holding currently, as summarized below.

Top losers % change Top gainers % change
Starhill Glb -40% Mapletree Logistics 50%
Silverlake axis -32.00% Prime US Reit 9.00%
First Reit -30% Yangzijiang  8%
ComfortDelgro -27% Ascott Residence Trust 7%
Singtel -27% Singapore Exchange 4%


The ones under retail sector, public transport and telcos are all badly hit in their profits (and dividends), thus the plunge in their share prices. Whereas First REIT's share price plunge was due to the unsettled saga with its parent company

Gainers are the ones who managed to hold their fort. A misstep post March's crash is that I sold majority of my MLT to take profits (on the shares I bought during the crash) when it managed to maintain dividend. However, I missed selling Ascott before it announces its dividend cut. I decreased my exposure to First Reit while maintaining exposure in the rest of my losers. I averaged down on Comfort Delgro and Thaibev - albeit too early.


Just a recap on the post which I have written last year before the downturn happens. The answers to what makes us want to capitulate are none other than - wrong position sizing strategy and under-diversification

When we miss these two important points when investing, it will make us hard to sleep at night in peace. Given the lackluster performance of SG stocks, I attributed my peace of sleep now to my bundle of bonds. No or minimal capital depreciation, stable return.

"Long-term success in any endeavor requires two tasks: Getting something, and keeping it. 
Getting rich and staying rich. 
Getting market share and keeping market share."

That is the essence of money management. Whether it's in investing or business.

We often forgot to make hay when the sun shines.

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Second update: 

I am going into DCA because of the really low interest rates (savings acct 0.05%, FD at best 1%) offered by both banks and SSBs lately. Being lazy, I have signed up for POSB rsp in Nikko AM bond fund (my mom's account) and a REIT fund (my account). I have no idea for how long will STI stay in the slump but with cycles, I believe the economy will eventually recover and boost the SG stocks again.

FYI, DBS bank is now having cashback (of sales charge) promotion for new set up of Invest-Saver plan till 31st Oct.


I also signed up for a new insurance under DBS to continue milking the 'bonus' interest rates of Multiplier account. Take note that if you sign up for an insurance to fulfill one of the criteria, it takes TWO months for the qualifying rate to be reflected.



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Third update (US stocks trading):

I have recovered all my losses from the Expedia bad bad trade and my account is now back in the green. Phew...

Cannot emphasize more how important is Stop Loss.


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