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Saturday, 20 February 2016

C'mon, you know the first rule of investing! (Part 2 of 2)

What motivated you to start your investing journey in the first place?

It's definitely not for world peace, your desire to give back to society, financial freedom to do what you want, or any other euphemisms...

You know it; I know it.

What's the first rule of investing?

It's to make MONEY.


Now look at your portfolio.

Is this what you had planned?

What happened to your goal settings?

I know. I used to have an investing plan too when I started out. That flew out the window the moment I got punched in the face...

The one who punched me was called the Nasdaq crash 2000. He is also known as Dot.com crash.

How did you let it happen? You must be asking yourself.

Now you are in a bigger hole than those "financially illiterate" friends of yours whom you have lamented and shook your head at in the past.

You rather avoid them now. That's because even you don't believe the bullshit you tell yourself - My investing goal now is to break even in X years???

Does it sound familiar?

Yup, whole life insurance breaks even in 20 years.

I bet you wouldn't be saying, "Buy term; invest the rest" anytime soon.

Not when your investing track record is looking a lot like whole life insurance...

Now you can better appreciate the wisdom of Warren Buffett and his investing rules no. 1 and no. 2.

You're welcomed.


  1. SMOL,

    No lei, the last time I checked my port in dec, it is down 15% agar agar. I dun feel embarrassed, nor I blamed myself. I still doing what I am doing. In fact, I not kanchong when people go "huh, you all in" your cash is only like X% of your port now?

    I dun go trumpeting investment advices. But if anyone want to ask me, how am I doing, I will tell them straight face lor...

    if I sell everything now, I lose 15% of my money. They want to shake head shake head lor.

    ANd I know of people who lose only 3-4% and some with winning portfolio (excluding dividends! you know)even until now.

    My Plan is expand port when market is down, slowly and trim when market is up slowly. MEantime eat panadol.

    1. Sillyinvestor,

      Coming from a self-professed fan of Warren Buffett your sharing is quite interesting and representative of the majority of retail investors out there - especially if they have not gone through a full Bull/Bear cycle.

      A fan who do not put much weight to the 2 most quoted investing rules from Warren Buffett - rules 1 & 2 ;)

      What started out as "growth investing" (buy high sell higher) has now become a long term "value investing" or "dividend play"...

      I bet it wasn't the investing thesis you had in the first place. Go check if you had written it down ;)

      Warren Buffett admitted he made a mistake with ConocoPhillips; and got out.

      No sugar coating or resorting to hope as a strategy.

      Of course crude will go back to $100 one day. Could be 1 year, 10 years, 100 years?

      With inflation, long term prices "should" go up. Unless globally we fall into the 30 years deflation spiral like in Japan... Now that's a scary thought!

      It seems Warren Buffett decided not to hope and wait for the crude market to recover and get out at breakeven ;)

      No. Sillyinvestor. I'm not asking for your plan NOW (the revised version).

      I'm asking what's your original motivation or goal when you first took your first step towards investing.

      Or have you forgotten it?

      Sometimes its good to revisit our "true heart" from the beginning (初心).

    2. mr buffett's investing, not everyone can follow.
      because he got too much money. some of his positions, he cannot exit too obviously, so he rebalance. some of his positions, he doesn't depend on the market decided prices. he is less often wrong, but very often bo pian or LL.

    3. SMK,

      I'll bet most of his retail fans are not aware Warren Buffett is quite savvy in selling put options to get better entry prices for his long term buys ;)

      All they know is to quote Warren's derivatives are weapons of mass destruction bit...

    4. true that.

      which is why I maintain that Mr Buffett will very often say one thing and do another. I told a buffett fan that Buffett is a 'hypocrite'. Immediately he launched into an impassioned defense like I criticised him instead! talk about groupies!

      I also heard of a few self styled 'buffetts' in ASEAN who give talks in Singapore yearly. Some, upon closer scrutiny, are actually market timers, that's not primarily Buffett style.

      sigh I miss Ladykiller.

    5. SMK,

      What you expect when you critique the Sun whom cold-blooded lizards rely on to power their decision making?

      Warm-blooded mammals have less need for idol worship. We have our own internal power generator ;)

      Thanks goodness we have coconut!

      Ladykiller is like fireworks. Come, makes a splash, then disappear.

      Understandable. You don't fool around when your career is on the line.

      If I'm the boss and I found out one my traders is blogging during trading hours... I'll not show him the door; I'll show him the window out on the 40th floor! Not when he is trading with my money!


      Ya, I miss Ladykiller's humour and irreverence ;)

      Fat has also stopped blogging :(

      That's where I "met" coconut :)

  2. Hmm...

    The very beginning ?? But should that count? Because we are have a period where we don't know anything and keep changing the plan...

    I even wanted to trade warrants for a living before. But I wake up very quickly. I also had a thrill buying "cheap valuation" of s-chips and had my hits and misses.

    2013 is the year I cleanse my portfolio for dividends paying companies and I have not looked back since.

    Anyway, change is inevitable in investing, or even trading, why is change "frown at". I believed any Tom and dick has a plan or strategy that is different from the beginning.

    As for "loss", it is even more ironic, since traders stop loss even more frequently than "investors", we not legends what, what is loss if I am confidence it will recover in time?

    I doubt anyone and I seriously mean anyone can claim he never made a loss in his total portfolio at one point of his time.

    Still dun quite get what you are driving at at the comments section or the post itself is quite clear.

    Are u poking people who chase "growth" but used "value" metrics?

    while I can understand "denial" and flip flopping between growth investing and "investing long term",

    It is a line that is not so clear. You might think he is in denial and using value investing and time as a excuse or mask ( which might be true)

    But it could well also be conviction that his call on the various companies will do well than his purchase price since as earnings revert to means as the business capabilities expand during down cycle.

    1. Sillyinvestor,

      To you I'm poking; to others it may seem like I'm doing, ahem, coaching ;)

      Talk about coincidences, you may want to read the fisherman and oily man's recent post on reviews and their self reflections.

      I had my fall and stumble; so did they.

      Change only happened when we admit there's a problem ;)

      Again, what was your original goal to start investing?

      To make money or one day I'll breakeven?

      Knowing you, you'll probably say it depends...


      Got to go to work now. Have a super Sunday!

      I'm not crystal; not my style.

      CW's graphical powerpoints are so clear and right in your face.

      Rolf's sharing is very direct and to the point.

      I can tell you right away what's missing in your strategy; but that's not helping in your own learning...

      Its best you figure it out on your own.

      Maybe we should wait until your portfolio is down 50%?

    2. 50%? really? LOL

      but i think he seriously doing not too badly with 15% down only.

    3. SMK,

      Well, he did say 15% no feeling what ;)

      It took me the slow death by thousand cuts from 2000 to 2003 to have the "motivation" to do something different ;)

      Yup, I'm one slow and stubborn learner!

      No see yellow river heart no die.


      P.S. Now can joke about it. Then? Felt like crawling into a hole and never go out ever again :(

      That's why the answers have to come from within ;)

    4. if you lose 50%, you need to make 100% to breakeven! Cham cham Cham...

    5. Ar ber then?

      Some smart ass will counter Peter Lynch never use stop losses.

      Peter Lynch is quite savvy in getting 10 baggers to overwhelm and dilute out the duds and lemons in his portfolio.

      How many 10 baggers (mark to market) do we have in our portfolios?

      I didn't think so!

  3. Oh I think I know what u are driving at LOL

    1. Lol,

      But hor... Give chance can... I am also a fan of Obama, and see traders in high regards. But that doesn't mean I need to emulate what they doing mah.

    2. Exactly!

      It's about you walking your own path.

      Another blogger also shared his about turn in strategy.

      Some may see it as capitulation. I see it as aligning with our True North.

      Not everyone enjoys the DIY investing journey ;)

  4. Have a good time working ... May your sales kiliat kiliat and network at the same time. The products you are selling will most attracted wifes of mothers thou ... Hehhee

    Ya. If u wish to coach me, I am all ears, Anytime. Don't have to wait till its 50% down. But I know it will go down 50% and I do built in that scenario.

    I will listen to all sincere opinon and consider them seriously. When we read books, it's also others' opinin anyway.

    1. Sillyinvestor,

      I not a bleeding heart lah. I just "talk male chicken".

      Don't take me too seriously.

      Free jio me out. I'll treat you to that ice cream you introduced me ;)

      There's a branch at Star Vista. Feel a bit embarrassed each time I visit it. Most of the customers are young school girls and I 大叔 feel a bit sheepish joining the queue...


  5. Hi Jared,

    These two articles are very good! I really like it a lot.

    It gives a more in depth understanding and the true meaning of not losing, rather than at first thought, wining, growing, FFF before 40!

    Strangely, I always thought if I want to be rich or retire before 40, why would I spend so much time on investment.

    Grow your salary, pia pia pia, buy a HDB early and faster finish paying it. Then if possible buy another within ur comfortable salary range. ok... before all these cooling measures...

    Anyway, if u r young, debt is not as scary as many financial bloggers here say!

    I still think more people get rich from property than investment! The only difference is people here all talk about need to be frugal! Can be giam siam if not careful!

    1. After reading about you about your concern about "Giam Siam", i like to think you are a man who can be quite generous with your money to those who are in needs. It really warms my heart.

      Let me share what i think of frugality
      Frugality. It’s not exactly an alluring word, is it? Most of us worry that being frugal means living a bleak, depressing life, missing out on “normal” society.
      The truth is, frugality simply means applying a bit of thought to how you spend your money. It’s not about being cheap or miserly; it’s about taking control.

      When there is a need for me to spend, i spend without regret.
      When there is a need for me to save , i save with feeling bad or cheap.
      i didn't spend my money in a restaurant until i made my first 100K in stock investment. The rest is history.

    2. Rolf,


      I love to do a bit of twist and turn in my posts. Maciam poking Warren Buffett, but in the end giving him a high five! LOL!

      Still not a fan of him though :(

      I think we are fortunate in the sense we have the opportunity to mix and learn from different business owners during our corporate careers.

      You even more powerful! Was the alpha shepherd for a while in your youthful enthusiasm to climb quicker, faster, sooner ;)

      Lucky heavens gave you a reminder on the consequences of "ai pia mai mia"... Treasure it.

      It's the same for investing.

      There are consequences in shooting to MAXIMISE instead of OPTIMISE ;)

    3. Hi temperament,

      hehe.. frugality is very good, just that we must understand the meaning and not mixed with Giam! Your example is concrete and inspiring for most. *Respect!* Restaurant food not necessary better than Hawker food! Good hawker food harder to find nowadays. Better eat more hawker before all the aunties/uncles retire.

      I had a good friend he worked v hard and is frugal to himself but always generous to friends and his family member. *Respect!* But I feel he is sometimes a bit "cruel" to himself until recently he changed a bit.

      For me, although I m poor since young, I am always generous to everyone around me including myself! haha...

      In the past, sometimes I can be too generous to myself also, although I always have enough savings and never get into debt issues.

      Nowadays I m more frugal to myself although I ll never stinge on the things I really like and also not sting on those who treat me nice, especially my elderly aunties/uncles. It's not easy to find things I really like actually. hehe

      I believe if I worked hard to earn, I should pamper myself and also give to the people I loved or those who deserved it.

    4. Hi Jared,

      We are both unfortunate (humble background) and yet fortunate (if not poor, difficult to understand Ai pia!

      I am not alpha shepherd. Truefully, no matter how smart or how pia I am, without my two ex-bosses, I will not have what I have today with much humility!

      I like to emulate u and Andy to take control of my own life in my 40s but i can't bear to leave the O&G industry, although I m quite sure I does not want to be an entrepreneur in the O&G. Just look at the oil price up n down! Blood pressure of many bosses in O&G today also up n down.

      Today I reminded myself to think any of my success can never be attributed to myself. It must be a godsend to me from people around me or probably because of some good deeds I have done!

      Neither m I a fan of WB but I respect him to the top, except for him letting his first wife leave w/o stopping which I mentioned to u before.

    5. Rolf,

      Aye. We stand on the shoulders of giants before us.

      To me, I am most thankful to be born in Singapore.

      Without this big macro meritocracy environment, I wouldn't be able to thrive and find my own niche.

      Who knew, when I started out on Metro's selling floor at 16, I'll end up here where I am now?

  6. Ha! Ha!
    Apart from KK investing mistakes (speculating with S-CHIPS) with the money i made with "normal style" of investing, my principles of investing have not changed much leh from day one.
    Except more 4Ks now.

    So i adopt WB's rule NO 1 and 2 quite seriously in that sense that to be K "too ho", don't be KK lol! - in all money matters and not only in investing.

    i think we all must first establish our own principles of investing and try to abide to them as strong as possible.
    With out principles, we can not even live probably in our daily lives.

    1. temperament,

      That's why we don't invest the same way a 100K portfolio like a 10K portfolio ;)

      The bigger the portfolio, the more kiasu and kiasi we become.

      A 20% loss on a 100K portfolio is "only" 20K. Most young graduates can "comfortably" earn and save back this 20K in a year.

      Why should I bother with Warren Buffett's rules 1 and 2? I'm not fragile. I can recover easily!

      Ah! How I wished to be young again :)

      The same 20% loss on a 1 million portfolio? How many mid-career executives can earn and save 200K in a year?

      Percentage is the same; recovery process not the same :(

  7. Hey Jared,

    I think this is one question that many may have the answer to, but chose not to share here.

    For me, if you dig really deep enough, the answer is simple. Fear. It is a great motivator.

    I had my YOLO days even before #YOLO is like, a thing. I guess one day, I realized that at the end of the day, there are parents to look after and my family to take care of.

    What if I couldn't work one day? What would happen to them?

    Started taking responsibility for my finances. I needed to start building my pillars that I could rely on.

    I wanted to be like Forrest Gump - keep running because I want to but can stop and turn back at any time just because I can. So many people can't stop running these days.

    Along the way, magical things happened. You know, world peace and giving back? These are like by-products of the process!

    Well, about the erm rule #1, I'm still looking at a positive %. Lucky me!

    1. Kevin,


      You have some secret sauce hidden somewhere too ;)

      In a bear market, a passive index investor can still be in positive territory :)

      Clap, clap.

      I think some newbie passive index investors who started their journeys in 2015 must be wishing they had bought the KLCI ETF instead!

      Imagine got Nagib and ringgit weakness still outperforms STI!? Power or what?

      I mean talk about bad luck as in "wrong place; wrong time". Who knew STI would be amongst the worst performing indexes in Asia, and some say the World!?


      But then, that's the best way to learn about narrow country focus risks ;)

      The pin no prick no pain.

      Those more alert ones will say KLCI my foot! That's jumping from the pot to the fire. Maybe this time they will discover MSCI Asia ex-Japan or World indexes ;)

      I love Japan's culture and mei-meis. But when it comes to investments, I'll stay the hell clear. Unless they start welcoming foreigners to be citizens just like big daddy has done over here ;)

    2. Haha! No secret sauce lah, soya sauce I have a lot ;) Newbie passive investors ought to be happy right now, isn't it?! "Cheap" leh!

    3. Kevin,

      That's the secret sauce ;)

      1 year old newbies feeling moody.

      Fresh off the bakery newbies of course happy - got 20% discount what!?


  8. wah so many comments already! still busy selling my stuff..

    write something useful, topic "financial freedom" where everyone of us long for...

    first ask CW or AK, are you financial freed? i think they will answer "my foot"! if you ask me, my answer will be "LC"!

    haha, i was poor last time, always dream about the million i'm going to have so that my life will be easy and relax and enjoyable. but now not only i have not gain my financial freedom, i have to work like hell and having more worry than before, WTF!

    therefore i came to a conclusion that there is no such thing as financial freedom.

    i guess this apply to the ultra rich as well, the more wealth they have, the more they are "stuck"! is like riding a bycicle, the more load you put on, the harder you have to paddle in order to keep yourself balance!

    so to hell with financial freedom, just do what you love most.

    1. coconut,

      Psst. Don't mention CW and AK in the same sentence. It's a bit like show business where "king" don't see "king"; "queen" don't see "queen".

      Don't say you!

      People trade for kopi money to pass time and practice craftsmanship.

      You take on million dollar positions for buy the bounce trade?

      Can key in wrong sell orders when you meant buy. Enter extra "zero" in buy qty some more!!!???

      Like that also can???

      Bloody hell still make money!!!

      Let's see, conservatively say 5% profit. That's $50K for a week's work ;)

      Kopi on you!!!

    2. smol, i'm not so stupid la, i set a cap that i can execute an order of not more than 50K in value, so there is no chance of enter extra zeros, the order will not go through one!

      but a buy order can turn out be a sell order thats happen quite often haha...

      when i buy stocks i use what they call iceberg order, which break my orders into smaller junck in different prices.

      got it?

    3. ya the main reason i use iceberg orders is to book orders, very useful for shorts cos sometimes you may not able to short cos of insufficient scripts.

    4. by the way whats wrong with WC and KA?

    5. they shouldn't recognise that i'm refering to them right?

    6. and don't tell them this, when comes to investing i actually follow what written in their blog, i started investing mid last year, right at the top of the stock market!

      as far as these investment goes, i'm down more than 10%, still recouping out from my trading gains!

      copi your head! i think i will write an email to them to complain about my losses!

    7. coconut,

      I can't use iceberg orders since my complete order is just the tip of the iceberg :(


      Stop! You are so funny!!!

      You remind me of a Sesame Street scene where a mupppet holds his hand and covers his eyes in hide-and-seek.

      You can't see me right?

      Mom is now looking at me strange as she is wondering why am I laughing my head off!!!

      WC and KA is a bit like Indonesia and Singapore.

      Most of the time everyone is chill; that's until one will tell the other party don't blow your smoke over my space, and the other will retort don't fly your planes over my space then!


    8. coconut,

      You are cool enough to admit you bought at the top last year.

      When you start to yourself little lies, look out below!

    9. i think by now KA should recieved my "disappointed" email already haha...

      then thats common, at first i was worry that they more like north and south korea, throwing bombs instead of smoke!

    10. coconut,

      Or!!! You die!!!

      KA will publish your email and shame you publicly with the help of his minions ;)

      Free I must kick him, "Be a man! Fight your own battles!"

    11. enough of making fun of him la, he has enough stress already....

      have to make sure i don't sell everything and left with some shares so that when narket recovered, i can claim credit from him for following him!

    12. Hee hee.

      OK, OK.

      Don't worry lah! He's not that weak as you think.

      You got class!

      Make money must write thank you notes to whoever helped you right?

      That's why some people have a harder time with life - only know how to complain; never know how to say thank you...

    13. hello wake up!!

      s&p futures already up from 0 to 1% liao, you still ding dong down here?!

    14. this week is the critical moment for our local stock market> it should go up with increase volume in order to reverse the trend. its not happening (yet i hope)!

    15. I thought what?

      Simsci still below yesterday's close lah.

      Of course I can see the market is in 2 minds. Want to go up cannot go up; want to go down also cannot.

      Europe and US futures positive :)

      Gold down; crude up.

      Yet, Simsci in limbo ;)

      Kan cheong what?

  9. Buffet is a smart guy
    buy stocks which pay dividends but his own company doesn't pay dividends and people still go gaga over him
    He is just any other businessman

    1. Jimmy,

      I respect Warren Buffet, don't get me wrong.

      I not a fan simply because I have a harder time "stealing with pride" from him. I guess his "ba zhi" and mine don't match?

      On the investing side, I'm more with John Neff's growth and income style ;)

      No, Warren is a great landowner who is quite adept at choosing his shepherds to manage his flocks.

      To understand Warren better, it helps if we can see things from landowner perspective.

      A good test is how we see issues like: foreign talent, population growth to 7 million, minimum wage, CPF, ministers' salaries, etc.

      Our viewpoints can reveal a lot about ourselves ;)

  10. The more I learn about investing, the more I start to dispute some of WB's quotes or perhaps start interpreting them in a different light.

    You are right. First rule should be - to make money.
    Then when see the portfolio starts declining, rule would change to - not to lose money. But drats too late... nvm change to bobian rule - to recoup losses.

    Rules are not easy to follow AT ALL.

    1. Rainbow lady,

      I cannot call you girl from now onwards.

      Nothing speaks attractiveness more than a WOMAN who has a mind of her own, can think for herself, and can make her own decisions.

      (Must act a bit helpless and clueless in front of boy boy OK? If not you frighten away weak men. I'm flashing my sailor moon kawaii horizontal piece sign salute at you now. OK, everyone Merlion!)

      It's like relationships.

      First must get a boy or girl.

      Then enjoy the romance.

      If romance turns to marriage, so sweet! (Buy and hold forever)

      But when the loving feeling is gone, that's when it gets complicated.

      Some will end the relationship abruptly and ruthlessly; some will drag it out for ages.

      We have to choose either 短痛 or 长痛.

      Some will not make let their partner make the decision so they can play "victim"...

  11. some of my leading indicators are point south already!

    those lagging indicators however still pointing north,

    others are pointing left and right!


    1. better check on cruel see where its pointing haha....

    2. coconut,

      You asking me?

      I'm the one who has a squeeze trigger problem remember?

      Last night closing Simsci was 300 points when US futures were all in the green.

      Now US futures all in the red Simsci still at 300!?



    3. Woah lai!

      Thought can still 27xx at first

    4. SMK,

      The trading range of 2700 to 2500 still holds ;)

      It's a trading environment now...

      coconut must be having a time of his life!

      The easy money from 3000 to 2700 has been made.

      Now it's waiting to see if the next 300 point move is back up to 3000 or take the next leg down to 2400?

      Bulls and bears will make money. We go with the flow.

    5. there might be many reasons why you can't squeeze the trigger, but the most important one perhaps is,

      not able to cut your losses.

      once you able to cut losses easily, you will discover pulling the trigger is chicken feet.

      however once you can cut losses like eating bread, then you have to guard against cutting your winners too soon!

    6. trading is when you learn a trick, other problems will pop out, then you set out to learn more tricks and more problem will pop up. it never ends!

      so for people who not passion in trading they stand absolutely no chance of making it!

    7. coconut,

      Nope. Cutting losses is not one of the problems that I've yet to overcome as a trader.

      I thought I've shared with you how I got out of my trades if the reasons I bought were no longer true? Price during exit has nothing to do with anything ;)

      Wait a minute. I just did a song and dance on parts 1 & 2 on risk management. What are you implying? No manners! So "lude"!


      You are so cute and adorable! I bet you are quite a ladies man ;) Girls have a soft spot for men like you.

      I've difficulty squeesing the trigger because I've chosen to be discretionary when it comes to my entries.

      Exits I've no problem as I use profit stops and stop losses - it's mechanical ;)

      I know most trend traders "automate" their entries; but I just can't bring myself to "trust" an algorithm...

      I've reached the stage of "Less analyzing; more investing"; but still a long way off from trading with "No mind" :(

      Yes, trading is like Zen. The more we understand; the more we realise we don't know.

      Now that's a "koan" for newbies to figure on their own ;)

      In my previous life as cheerleader for continuous improvement in Supply Chain, we always say: "Remove one bottleneck, we'll discover more bottlenecks that were masked by the previous one."

      Those who work in Supply Chain don't have to worry nothing to do one!


    8. Bopian the bigger herd has the bigger stick. Good thing is the bigger herd also has a saddle.

    9. SMK,

      You very de good and "ho mia"!

      Got saddle to sit ;)


      I just grab the bronco's tail and try to hang on for dear life!

      Not to be kicked in the face happy oredi!


    10. japan also looks like it is about to keel over.

    11. SMK,

      Yes, "akan dating".

      If Dollar/Yen breaks below 110, look out below!

  12. HI SMOL

    Super busy enjoying my life. May blog lesser until I can catch up my activities. Apologies for joining the parties late and less often recently.

    I actually can't believe my initial plan to only invest during depressed prices are my current strategies after verification. I was "distracted" by the voices of "staying invested" and I actually performed lousier in stock market because of this theory. I could have done better if I stay in my own world. lol.

    We seem to be in the same camp, except you trade actively and more sophisticated "toys".

    Hope eventually, we all made the money we want to.

    1. Frugal Daddy,

      Apologies not needed at this watering hole ;)

      Its come and go as you please.

      No expectations; no demands.

      No pipe-piper; no followers.

      Only peers and fellow journey companions.

      And we only talk "male chicken" here; no evangelism :)

      Enjoying life is right up my alley!

      What else matters more than being happy?

      Investing/trading is a solitary affair. Nobody can do the walking for us.

      It still amazes me most retail investors' first instinct is to look for a shepherd when they could be discovering their true heart...

      I guess it has to do with our human evolution. Our ancestors have found it's better to hunt in a pack.

      However, some can't tell the differences between being a member of a pack of wolves and being a member of a herd of sheep.


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