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Monday, 20 March 2017

How to ownself snake-oil ownself - Investment Goal Setting


Why do people like to set "SMART" goals on consequential activities they have little control or influence over?

For example, setting an investment goal of 8% return per year when you are a long only retail "investor". Hmm...

When they hit their goals, they say its their stock picking skills (STI went up 20%).

But when they failed to hit their goals, they say it bad luck, its a bear market you know? (STI went down 20%)


Eh... Like that how is it any different from Passive Indexing?

Smart Passive Indexers don't set goals on investment returns. What's the point of setting goals on passivity? The whole point of Passive Indexing is you get Market returns. Period.


How to spot a long only retail investor who knows his stuff? (Notice I removed the " "?)

They will never set absolute return goals like 8% a year. That is only possible if you are both a long and short investor (operating like a hedge fund). Wink.

They are wise and honest enough to admit they can only set a relative return goal.

You know, to outperform a benchmark by X%?

In a bear market, the best they can do is to have no losses (moving 100% into cash before the crash). Already outperform like siao liao against their chosen benchmark!

Pray tell how to achieve that 8% goal of yours in a bear market if you can only long?


Of course, if you are iron-teethed (stubborn), you can still set your "SMART" absolute return goals with a long only investment strategy.

You add in tiny print after your goal setting:


This goal is valid only for bull markets. Its void for flat and bear markets for which I have neither the control nor influence over; I accept no responsibility whatsoever in such markets.


Well done!

You now very de smart!

You ownself snake-oil ownself!


Clap, clap.



 

24 comments:

  1. Replies
    1. L Young,

      Thanks!

      My kind of "poking" entails a death wish.

      Walk along the street anytime can get eggs thrown at me also don't know!


      I use this trick/technique a lot during the leadership workshops I facilitated.

      Many dwell too much on whether their goals meet the criteria of "SMART" - efficiency focus.

      Only a few brighter ones pay more attention to whether their goals make sense in the first place - effectiveness focus.


      And of course the names I submit to HR whom I felt got "potential" are few ;)

      Delete
  2. Hi SMOL,

    Some social scientists try so hard to establish the existence of a given psychological phenomenon in the lab. They remove extraneous variables, control this, control that. "Look ma! I invent that theory!"

    .....And they forgot that what happens in a sterile lab is vastly different from what happens in the real world, where complexities interact with other complexities, producing much less predictable outcomes than what their models prescribe.

    Internal validity vs external validity. Two concepts that need just as much unpacking as efficiency and effectiveness.

    ReplyDelete
    Replies
    1. Unintelligent Nerd,

      Ah yes!

      This applies to Academia versus Market Practitioners too ;)

      No serious market practitioners would pay much attention to the Efficient Market Hypothesis; not when everyone is jostling for an edge over the other...

      Some even to the extent of breaking the law as in Insider Trading... Some quite famous hedge fund managers too!


      I've read quite a few completely useless tomes of investing books written by academia...

      But if I did not study them first, how would I know they were useless?

      Hence I never trust the man with one book ;)

      Delete
  3. Set 10 to 20 years Goals as smart targets. Every year has the next year as moderation. We need kopi session to set goals

    ReplyDelete
    Replies
    1. CW,

      "What is the CARG WITHOUT the HUMAN ELEMENT?"

      Let me explain what this cryptic reader of yours meant when she wrote what she wrote in your blog ;)


      Your CARG for the last 17 years is 7%; and no, I'm not going to follow you and write 17.2 years and CARG 7.1% !!!

      LOL!


      If the market CARG is 12% over the same 17 years period, she will probably not visit your blog anymore.

      If the market CARG is 2%, she'll jio you out for kopi ;)

      If the market CARG is 7% same same as yours... I mean after all the effort and time spent on goal settings, track and measure, and countless powerpoints!?

      Somehow I suspect she would rather invite Andy or Kevin out for coffee to learn more bout their Passive Indexing Strategies.


      Delete
    2. WHAT?

      Made 8% in a bear's market!

      Ha! Ha!

      i lost almost 50% in 2008/2009 market at the lowest point.

      But it's true i never set any target of profit or loss.

      Delete
    3. temperament,

      Neither do I. I've learnt it the hard way :(

      I now only set qualitative goals on improving my entries and exits.

      It's a bit like love making. We know we have improved with more "practice", but how to put a number to it?

      LOL!


      Delete
    4. Funny why no one ask lost 50%,in Bear Market "有影 Boh"!?

      Delete
    5. For my case i learn it all the way.

      Still can't find a way out.

      What'da you say, "Shot Bugs Bunny"?

      Ya! Ya!

      Short, Short, Shot!

      i think i must learn CFD now before the next Bear comes along.

      Understanding what is it is one thing, no heart(aka temperament, mental energy/skill) for CFD is another thing.

      Not everything is for everybody.

      Delete
    6. temperament,

      Those who started their investment journeys during and after 2009 may not have the experience of staring in shock at a 50% loss at portfolio level.

      But at individual stock level, if they had bought commodities, REITs, O&G, and penny stocks at the highs, then yes, they know what a 50% loss is like.

      Hence they know what you say is true, no need verification ;)


      Exactly! If shorting is not in your blood, then no. Don't force it! Whichever vehicle and time frame we choose must match our Mind.

      Scaling into cash and avoiding the blood letting during a bear market is "winning" enough by itself!

      Then with cash in hand, you and do the rinse and repeat all over again ;)

      Delete
    7. Wah!

      You always can answer with "Boh Bey Chow" principles.

      You should be honoured by some University ("Of Hard-Knocks").

      //

      i still trying to liquidate some stocks.

      You know what?

      Once you are in the Market, it's very hard (at least psychology) to start from scratch again.

      Sell everything and start all over again.

      Have you done that or at least thinking of doing it?

      Surely you have some stocks you not willing to sell?

      Delete
    8. temperament,

      Newbies may not know but all the things I've said and shared you already know.

      It's just old wine in new bottle ;)


      Once upon a time, someone bought a Doctorate of Options from some degree mill to start his snake-oil peddling business. He's back selling some app!?

      If free, I don't mind receiving. Can ask everyone to address me as DR SMOL :)

      But if I had to pay for a piece of "scammy" qualification... I'll pass. I think I'm snake-oil enough!


      I did that in early 2003 where I pressed my capitulation "reset" button. "Maciam" like defrag our computer hard disk and reload all the programs.

      Clean start all over again from zero-base with no legacy.


      This one I must defer to CW; he said it best with:

      "You don't have to win back the same way you've lost."


      If one does not have that capitulation experience, you can't appreciate the wisdom of this statement fully ;)




      Delete
  4. Jared, I agree measuring ones skills vs an absolute return goal makes as much sense as judging a farmer on his crop without accounting for drought, freezes and diseases.

    For the non-passive index investing part of my portfolio (I also need to have some hobbies, right?) I do measure the number of transactions for which I have followed my pre-determined System on entries, exits, position sizing, and trailing stop-losses. The higher that percentage the better, as I do know that my System will make money above the inflation rate over the long run.

    SMOL, did you generously hook me up for a Kopi Session with Kevin and a lady who commented on CW8888? Who is she? May I know?

    ReplyDelete
    Replies
    1. Andy,

      Ah! So you got dabble with a bit of trading ;)

      Well done! What is life without some vice?

      I mean Passive Indexing is as much fun as watching grass grow... LOL!


      I've no clue who's the lady - could be a troll - but she left a very cryptic comment out of context at CW's blog:

      http://createwealth8888.blogspot.sg/2017/03/hard-not-to-fall-into-wow-factor-in.html#comment-form


      Or she could be a dragon and poking CW ;)

      Delete
    2. Hi SMOL, and Andy,

      Measure one skills based on market performance is like measure the "goodness" of a teacher by the results of his/ her pupils alone.

      Looking at a school by looking at the scores of the student alone or the awards it get.

      U know what? My wife's school got accolade for being pro-family. Well done. They send teachers packing at 5 pm. But gave my wife 3 levels of Maths, so my wife instead of spending some quality alone time in school to do 1-1.5 hours marking carry everything back and since my son will be bothering her and it's dinner time, will push the markings to the night and wake up at 4 am daily to mark again. Pro-family my foot!

      Delete
    3. Actually it's quite normal to work your workers hard and squeeze the last productivity out of them. We are in a capitalism system, what can we complain about?

      That's why so many seek FI. But come on, if u can show appreciation and recognition, good, if not just shut down ok.

      Hypocrasy is worse than idiocasy

      Delete
    4. Sillyinvestor,

      Well, your honeymoon period from Japan didn't last long...

      LOL!


      From outside your wife's school looks good, better, best when it comes to pro-family - win "award" some more!

      This happens a lot in investing. Some listed companies will hire financial PR firms and/or sell side brokers to put a positive spin on their listings.

      Savvy investors would try to get an edge by knowing what really goes on from the inside - of course not breaking any insider trading laws ;)


      I think some of our civil servants are picking up the wrong values... Look good, protect ass, don't rock the boat, and don't do anything not requested by ministers...

      A few years back, Prince William and the Duchess of Cambridge Catherine visited the Alexandra Canal Linear Park at Queenstown during the hot afternoon sun on a WEEKDAY.

      Our civil servants orchestrated a totally FAKE outing: with old men in beautiful silk doing Taichi in the park, young families with children playing in the playground... Add in a few pets... Aw...

      Even Prince William can't help but poke the entourage a little...

      Come'on! He is English. He knows only Englishmen and mad dogs play in the noon day sun!!!

      Want to bluff who?

      It was so embarrassing!!!

      And I thought this kind of thing they only do in Communist China...

      Delete
  5. “All the world’s a stage,/ And all the men and women merely players.”

    As long you can play your parts, and me my parts, we should be happy liu.

    Can we do that in North Korea or even China?

    ReplyDelete
    Replies
    1. temperament,

      I hope our civil service can rope in a few more mavericks like Philip Yeo.

      And less of those who spend too much time thinking up new euphemisms like "ponding".


      You "wayang"; I "wayang".

      But when it's too obvious, it gets painful to watch...


      Delete
  6. Hi Jared,

    Oei, why you say me like that? It's a target that one hopes to achieve over a period of time. Of course, it's different for every market circumstances but most likely when I sell, definitely during bull market. Like that also cannot, so hard to please, hehe.

    ReplyDelete
    Replies
    1. Jes,

      Did I say you?

      You ownself admit ownself one hor! (The speak proper English brigade must be having a fit right now)


      The question to ask is what DO you do when you have hit your target ;)

      Do you sell? Hold? Or move the goal posts?

      I've hinted to you before - from one trader to another:

      You are not in the business of collecting nuts and dried fruits ;)


      Delete
    2. Hi Jared,

      Haha, I am not ashamed to admit my mistakes and learning from you is the only way to go! I sell over valued stocks even if they are short term, but still too new to investing to accurately tell you how I would react.

      Haha that's true. In a stage of learning with hard knocks, pardon me :) Now you know why I abstain from talking about financial stuff, cannot go in depth.

      Delete
    3. Jes,

      Have fun!

      Its perfectly alright to share opinions.

      Opinions are not facts - so cannot be wrong or right ;)

      Its only when we blindly follow other people's opinions that things start to get sad and dismal :(

      LOL!



      Delete

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