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Tuesday, 16 February 2016

What's the first rule of investing again? (Part 1 of 2)


I tell you, the majority of retail investors out there can parrot the correct answer.

And they can even throw in rule no. 2 for added effect!




However, the reality is most of them never listened to Warren Buffett; know how to quote only (someone should tell them that upon leaving school, quoting other people does not carry any brownie points like in tests or exams).

Don't believe?

Just open up your portfolio.   



Remember this next time you want to impress others with your favourite Warren Buffett quotes...

If you never put into practice rules 1 and 2, how to convince others with a straight face you are a practicing acolyte of Warren Buffett?



While you are reflecting, you might want to verify whether Warren Buffett ever lost money in investing?

If he did, what to make of his "advice" to us?



Don't look at me... I'm not his fan. The only thing I have in common with him is that we both like our Coke. Wait a minute... Do I have Coke in my portfolio?




47 comments:

  1. Hi SMOL,

    I'm also not his fan. Don't see how to ensure rules 1 & 2 are 100% complied to all the time.

    ReplyDelete
    Replies
    1. Joyce,

      Any veteran investor/trader worth his salt will know Warren is being rhetorical.

      It's impossible not to lose in investing or trading.

      All business owners will also know there's no such thing as never losing money in business ;)

      That leaves those who read everything literally. Shh...

      Delete
  2. Lol. SMOL.

    I am a fan of Warren, read his teachings but must say I am not a strict follower of his concept.

    I dun see anything wrong with his statement.

    He want to impressed on the concept of not taking shares as a casino but a piece of business.

    He also a stamp collector, so paper loss not loss mah, although he also realised his loss, I think due to BYD of China.

    Anyway, anyone who think he is better than him, please show me your craft.

    ReplyDelete
    Replies
    1. Easier to be value investors than traders as we have plenty of time ahead of us to prove it is working. :-)

      Delete
    2. Sillyinvestor,

      The question is WHY and WHAT are we investing for?

      Same goes for an entrepreneur who starts a business.

      Or an employee who works at a job.


      Surely it's not to lose money right?

      Or to breakeven in X years right?

      It's like saying I work to earn enough to cover my transport to and fro work I happy oredi!


      Ah! You have said it. Warren Buffett DOES realise his losses. Sometimes in the hundreds of millions as in Conoco Phillips...

      And yet, despite losing $2 billion unrealised losses in IBM, Warren Buffett keeps adding more.

      As his fan, can you explain why sometimes he follows his own rules 1 and 2, while at other times, he don't?


      P.S. Interesting retort at the end of the comment ;) Let's turn it around, do fans of Warren Buffett think they can match Warren's skills and craft?

      Delete
    3. CW,

      It's "easier" to call oneself a value investor as the time for capitulation may take 10, 20, to 30 years... More time for denial and little lies...

      That's one of the most painful pitfall of long term investing. When we finally realise and accept we suck at investing. Money lost can be recovered... Time lost?

      Ouch!


      Trading is harsh; but max 2 years a trader would know whether he belongs to the 95% or 5%.

      That's why we see lots of failed traders who become born again "investors", suddenly discovering passive indexing, permanent portfolios, value investing, dividend investing, selling financial courses, etc...

      If only they have a 20 to 30 years track record like you ;)

      Delete
    4. wah just becos we are not better than someone we cannot comment liao, then who can we comment? what logic is that?

      i remember i use to call Quah Kim song very hand gun one, he use to missed many simple goal but still he is my favorate footballer haha...

      Delete
    5. coconut,

      Steady... Cool down now ;)

      His England not as fluent as his Cheena. It may not have come out as what he intended.

      He is a good guy.

      Also one of us "quick man quick words".

      Delete
    6. ofcos ofcos i know la, just trying to make fun of him haha...

      Delete
    7. Eh! I don't know where to hide my face.

      Last night when WTI crude broke below $30, I shorted the Simci at 298. Reasonably entry.

      Woke up this morning to see the S&P rallied (WTF)!?

      Start the day with a loss at 8:30 am. Was going to cover my short at a loss when to my surprise, instead of going up, Simsci went down back to 298???

      Quickly scratched my trade at 297.8.

      Happy no loss so out I went to breakfast and marketing.

      Came back after 10:00 am only to see the Simsci has declined without me on board (again)!

      LOL!

      Oh well... Served me right! Say don't play Simsci but what to do?

      I did say if WTI goes below $30 I'll be "busy". If setup appears, must ACT what?

      A small loss is better than being inflicted with "cannot squeeze trigger" syndrome...

      The euphemism is I need to "analyse" more. Shh...

      Delete
    8. i don't see anything wrong with your trade. what if you don't exit and market start to climb again?

      no right or wrong, stick to your plan.

      Delete
    9. today market down is not a firm signal that it will go down further. cruel down becos it was up more than 10% the other day, just a normal correction.

      Delete
    10. too kan chiong already lah you.

      i am still waiting for it to scream at me. for me, the markets decide everything. i am just a boat.

      nice dig from cw8888 lol

      Delete
    11. coconut,

      Yup, I agree with you.

      Europe has opened up strongly and the US futures are now soaring once again ;)

      Simsic shorts are scrambling to cover ;)


      No harm; no foul.

      Not losing is winning!

      Delete
    12. oh you got "cannot squeeze trigger" problem?

      mine is "cannot let go trigger" problem!

      Delete
    13. just happen an hour ago, this M...stock, i intent to buy 20 lots when it suddently came down to my entry for market order, i ended up long 200 lots #@^%$%&%@!!!

      Delete
    14. SMK,

      The comment I wrote above is meant to tie in with my post above ;)

      I entered the short last night as a gap down play. It didn't materialize.

      So I got the hell out. Simple as that. I focus on what I can "control". Not losing money was a bonus :)

      It wasn't meant to be a longer time frame swing or position trade. Just a quickie kopi money trade ;)


      I didn't reply your question as we are both looking for the same play.

      CW got his rounds 1, 2, 3.

      I got my kopi money trades to pass time while waiting ;)

      The main event has not happened yet. Akan datang...

      Delete
    15. i literatelly took all the quantity there is and the price went back up, then back down again haha..

      tomorrow i better start selling some or otherwise i'm too long already...

      Delete
    16. not fat fingers la, my fingers and my brain break down in communications!

      my brain say STOP! but my fingers say MORE!

      #%(%#%&*^!!!

      Delete
    17. coconut,

      LOL! You got fat fingers! Your broker must love you; free commissions for nothing :)


      Yup, that's why must practice with small positions to train myself to ACT with NO MIND.

      Hopefully when the fat pitch comes my way, I'll be able to swing without any hesitations :)

      I not smart. I need to PRACTICE my craft.

      Delete
    18. smol, my "investment" (don't know whether can hold for how long haha) had more than double already than before, this market bottom better be right or else.....

      Delete
    19. LOL!

      If "or else..." happens, I'll see you at Desker Road.

      Don't worry. I'll help you out.

      Coconuts for sale! Lelong, lelong!

      Delete
    20. Easier to sell value investing courses to weak minds as it will take sometime for to polish up their craft before they can complain that is not working. LOL!

      Delete
    21. agreed smol. haha the question not meant for you.

      cw8888 nice snipe again. lol

      Delete
    22. CW,

      Trading gurus at least work harder - must give live trades demo, provide instant messaging updates on latest buy/sell tips, share past winning trades (losing ones hide) as proof, etc.

      All in the here and now. "Koyok" no good, disciples run to another snake oil medicine peddler :(

      Investing gurus can seek shelter under "long term". If disciples complain negative results, tell them must wait 30 years or later. Win liao lor!

      30 years later either we either die or become senile.

      Even if alive and in good health, how to sue when the guru throws the statue of limitations at you?

      Delete
    23. SMK,

      You got to learn how to use greetings and salutations!

      Delete
  3. I just drank one ufc coconut drink, feels refreshing

    ReplyDelete
    Replies
    1. Small Time Investor,

      Ah! Another 没理头 kaki!

      Come, have a seat. Have a sip of coffee. Eat a char shao pao!

      Delete
  4. Lol coconut and SMOL,

    I trying very hard to poke SMOL, whoa, SMOL you got fans to block my poke.

    But really mean no "malice"

    Seriously, I am always very intrigued with what traders can bear, both financially and emotionally.

    Money earned is not money earned, money lost is not money lost l, because tomorrow not here yet.

    I said this with respect. While I dun have the craft, I think I agar agar u see stand it's concept and what it entails since recently there are Jac and lady killer turn wrestler who are also traders.

    I know for sure I cannot tahan that roller coaster.

    ReplyDelete
    Replies
    1. Sillyinvestor,

      Traders are 武将; investors are 文官。


      You sit here and wait patiently for part 2 ;)

      好戏在后头。

      Delete
    2. Ah.. I like the analogy...

      But we need both people to run a place and keep peace.

      I Defintely 文人。but aspire to be 文韬武略。

      U reminded me of a phrase of my favorite comic, here come the adaptation:

      武将怕技不如人,
      文官怕计不如人。
      文官也好,武将也罢,
      机会来了,都要“wu ji" (hokkien)

      Delete
    3. Sillyinvestor,

      You have expressed this "less analyzing; more investing" very aptly in our rojak Cheena :)

      Less analyzing does not mean no analyzing. When opportunity appears, we strike! No mind.

      Delete
  5. Trading at a fast to very fast pace is "yakky" to me.
    i am just the slow coach type; like to do things at a relax pace; hurrying, hurrying can kill me in no time.
    Besides why 3 day downs so much and the next day up to more then the 3 days down.
    And if you follow closely you may discover at times for the same type of market logic (news and what not), a particular stock's price can behave like this at this time and exactly opposite the next.
    So what to or who to believe in trading?
    It's more tikam, tikam to me lah more then anythings else.
    Ha! Ha!
    i admit i also tikam, tikam in my own ways.
    Everyone possible to make money in his own ways, except the pig.

    ReplyDelete
    Replies
    1. temperament,

      I don't like fast and choppy markets too. I prefer swing trades that last for weeks; and position trades that can last for months or even years ;)

      Having said that, if a setup opens itself, having a go at gap up/down overnight plays or intraday moves is not beneath me.

      Kopi money is still money :)

      Delete
  6. wah cannot sleep tonight, too long already.

    smol, this is by far my biggest bet on the stock market, value wise, i have on hand 3.5 million invested, plus some stupid shorts i can't cover haha....

    you saw live didn't you on monday, tuesday and today? if the bottom holds this will be my best trade not becos of the coming winning but the execution part, i gave myself an A for that!

    as for the trade, too soon to celabrate.

    ReplyDelete
    Replies
    1. those trades mentioned are on top of my usual long/short trade but has since being scale down cause of margin concern.

      mean time i jsut concerntrate on rebalance my portfolio, they are all over the place.

      Delete
    2. although it is still early to call, but this year alone i try to hedge not once but twice becos i was so convence that the market is going to go down, sentiment was really really bad and market had price in for a world wide recession already!

      twice this year i jump in and out and in and out and in again, totally exsosted mentally.

      no i think i should get A+ haha....

      Delete
    3. but if you consider me an investor, i should score an F and a M....

      F for fail and M for mad.

      Delete
    4. coconut,

      That's why I treat your "attempts" at investing as "talk male chicken".

      You can't sit still ;)

      Market gap up. You win again!!!

      Lucky I got out of my short yesterday. A good trade or bad trade is not determined by whether make money or not. Our buy and sell processes determine it.

      Something retail "investors" can do well to learn from traders ;)

      Delete
    5. watching almost towards US market close last night, today i only hit the sell button.

      they say you have to sell down to a sleeping point! and that is exactly what i will do for the next few days.

      i have a feeling my sleeping point is at zero for investing haha...

      Delete
    6. coconut,

      Thumbs up.

      Taking some money off the table is an excellent money management technique.

      It's the 2 dots in the Ying and Yang Taoism symbol.

      If we are 100% high conviction market will go higher, of course don't sell!

      But if we entertain a little humility that we could be "wrong", then sell down to our sleeping point :)

      Delete
    7. still selling....hope i didn't over sold....

      also try to cut losses on those stupid shorts, not a lot but pain in the neck.

      judging from the market moves, it really feels like market bottom out, at least for a while. it usually moves in a way very hard for the bull to jump back in again. inexperience one will be completely left out, it happen to me in 2011 also where i took a hugh lost.

      Delete
    8. coconut,

      That's why I say this week and maybe this month is yours ;)

      STI I reckon will trade the range between 2500 and 2700. I wouldn't get too excited until the range breaks - bull and bears will make money :)


      Newbie traders must watch and learn from you:

      You are bullish so you are selling as the market goes higher ;)

      LOL!

      This is not a poke. This is part of money or risk management ;)

      When you understand, you can throw away the "newbie" adjective :)

      Delete
    9. yes sir, it doesn't matter what and how you feel, trade with the market, not what or how you feel.

      Delete
    10. i can gives them all the shares that i got, no problem!

      i know i can easily, well not really easy la, get back in again!

      Delete
  7. Hi SMOL,

    I read “snowball” and a couple of books on WB plus countless of his youtube vids. Know a fair bit of his life via reading.

    I respect WB but he is not my favorite. He is great, but also supported by the tailwind of borning in the right era and in the right country!

    Sometimes when I quote him (I do sometimes, bo bian – pple like to hear), I did feel a bit disgusted about myself!

    The phrase I hate most is “Be greedy when others is hungry and vice and versa!” I read/hear this phrase, my goose pimples stand, especially for those newbies in life and investments!

    In fact I think WB is NOT INTELLIGENT at all like many others think until he enlightened his big mistakes in life (not just in buying Berkshire). Ok smelly eggs throw at me by those value investors!

    Imagine he let “the love of his life – Susan Thompson leave without putting effort even to ask her stay”

    So at that point of time, when he was at the top of the world in investing, he knew nothing about life. And that is why later, he mentioned letting Susan leave is one of the biggest regrets in his life.

    I think rather than keep idolizing a person achievement in one part, we should learn more about the life story of the person and his evolvement. It helps us to think further and broader, and I think this enlightenment will help in our investment.

    So stop quoting WB rules / phrase in investment – goose bumps again!

    Thanks for this post to let me vent off some of my steam. haha..

    ReplyDelete
    Replies
    1. Rolf,

      Anytime!

      But that will cost you a drink ;)

      Delete

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