Perspective matters! You are your own shepherd

I was having my breakfast at the hawker centre this morning when I overheard an interesting banter between a quite youthful dressing "ah ma" with her granddaughter and another man in his late 60s at the next table.  

The senior man is single and was lamenting on his singlehood; while the ah ma was telling him she regretted marrying and its much better to be single...

It was kinda fun until I noticed the poor granddaughter sitting all quiet and staring at her food with a forlorn face...

Do not underestimate young children. They understand a lot more than we think! Poor girl must be thinking of the "squabbles" at her ah ma's home...

You know how it is.

If you marriage is blissful, children obedient and doing well, you would pity me on my singlehood. Each time we meet, you never fail to coax me to find some woman and get married already!

But if your marriage is on the rocks, and children just drain you out in frustrations, you would envy my "freedom" and praise me for my "wise" lifestyle decision...

In the investing arena, if you are lucky, you would get the same bipolar well-intentioned advice from people around you.

We'll leave out those vested interest "advices" (remember to treat them as sales pitches) as they need you to stay invested so they can continue to generate commissions and charge you fees. 

One group will be those "investors" who just happen to start their investing journeys in a bull market. They have never experienced a 50% loss at portfolio level yet. Since all they ever knew is making money year after year, of course they would want to share the "good news" with you!

Just invest lah! Anyone can do it!

The other group are those "unlucky" investors who went into the market near the market top and are still nursing their bruising losses... Some may have capitulated and sold at huge losses, while some maybe still wishing and hoping the market will recover so they can breakeven and recover their capital back...I'm a long term investor; surely one day I'll get all my money back!? They are no longer looking for compounded returns...

Investing not easy. Not everyone can make it.

Don't be a piece of white paper

If you are able to ascertain the perspective the person is speaking from, its the first step towards thinking for yourself.

But that's not enough.

Get yourself educated so you can form your own opinion. This way, other people's ink will not be able to influence you so easily. Only you can write on your own paper.

When people tell you to get invested, you of course agree politely. In your heart, you smile knowingly that buying winter clothes in winter is not the same as buying winter clothes during summer...

And when people lament on their disastrous investment losses, how market is bad and you should stay the hell clear, you nod sympathetically. But once you reach home, you put in your queue orders to take advantage of those who are capitulating at soul breaking prices to you...

You understand the essence of "Buy low; sell high".

Insultingly simple and obvious; but it may take 10,000 hours or trades to master. Wink.

Everything You Ever Need To Know About Investing

Buy low; sell high.

That's it! Send in the reserves now!

As some readers may have deduced, I'm a fan of military history.

When you read the historical accounts of famous battles, you'll find military commanders withholding their reserves and committing them only at right moment of the battle.

The reason you don't commit your forces all at once (show hand) is so you can deal with the fluidity of the battle and react if there's a breakout or counter-attack from the enemy.

Unless of course you are a military genius who can predict your opponent's moves - always one step in advance.

Now look at your portfolio.

Have your fully committed all your forces?

If yes, that means you are fully exposed to the vagaries of the market. Can only hope and pray the battle outcome is in your favour.

Or you have high conviction in your thesis (or plans, or goal settings).

If no, then you can react accordingly - depending whether the market goes up or down (crash got sound).

You don't forecast what the market will do; you just bend with the wind.

I'm only a Lance-corporal (ikan-bilis) during my National Service. So take what I say with a pound of salt. I am no officer.

Although during my reservist in-camp trainings, my army mates always scold me for frightening them as from afar, I look like officer from the way I walk and carry myself.

Some active new birds even salute me. 

LOL!

Life is funny. Got work that time, always hated reservist for the disruptions. Now nothing to do, don't mind going back to camp for 1-2 weeks of "staycation"!?

And that's the irony of life. Nothing has changed. Only our thinking.

The Math of Averaging Down

Test your math.

What's the difference between a -80% loss and a -90% loss?

50%.

If the answer came to you immediately, you can stop reading.

In years gone by, you probably would have made good profits by spotting arbitrage opportunities!

But now, its a lot harder with high frequency trading and all...



Show me, show me!

For the rest of us mortals, let me illustrate:

1.  You bought a stock at $1.00

2.  At -80% loss, the market price is $0.20

3.  At -90% loss, the market price is $0.10


Still want to average down when price is at $0.20?

Price so low oredi, surely it can't go any lower?

Well, a "small" additional decline of $0.10 is now a 50% loss for your 2nd entry!!!

Now you know why people capitulate (sell) at crazy super low prices.

Especially to the "iron teeth" (stubborn) ones  who will continue to average down a third time at $0.10 price.

See what happens when price drop further to $0.05 cents?



Don't try this at home

Of course you were banking the reverse would happen when you averaged down.

a.  You invested $10,000 into stock XYZ at $1.00

b.  At market price of $0.10, you average down another $10,000

c.  When price "recovers" to $0.20, you sell both tranches with a big sigh of relief...

First tranche:                Entry at $1.00; exit at $0.20 = -$8,000 loss

Second tranche:           Entry at $0.10; exit at $0.20 = $10,000 profit


Hey! All in all, you've made a $2,000 profit!!!

Really? Risking all these money just to "break-even"?

Tip: Don't play Poker or Mahjong with real money - you lousy with risk/reward odds.

What?

You still got the cheek to "advise" people not to gamble...



Be honest now

Which is the likelier scenario to play out?

How good is your entry skill?

You did buy at $1.00, remember?

What makes your such an expert market timer now so super sure $0.10 will be the turning point?

And more importantly, you did let a $1.00 position slide all the way to $0.10 - that's not saying much about your exit skill, does it?

Do you honestly believe you will exit everything when the price hits $0.20?

Or maybe you are the white-haired demon girl (白发魔女); you changed completely in one night.


If you can do so, I clap my palms before you. And bow.

Namaste (I salute the holiness in you)

Its not about the tracking and measurement silly!

The reason why its important to track and measure performance is not the actual measurement in itself - its to provide actionable information for us to improve our game.

Americans are the no.1 when it comes to statistics - just look at their sporting stats!

But why is it then some have been tracking and measuring their investing/trading performance for years yet there's little or no improvement?

Denial

The butterfly had a good post recently where he was upset with himself for not sticking with his stock entry plan.

Excellent!

If we deviate from our plans and we then lie to ourselves that its "OK", why track and measure again?

Where there's no problem; there's nothing to improve.

That's is why in group therapies dealing with alcohol abuse, compulsive gambling, anger management, etc; the first step is to admit we have a problem.

Procrastination

Once we have a reason to improve, the next natural thing to do is action.

That's easier said then done.

And we know this all too well...

We know what to improve, but we never seem to find the "time" to do anything about it.

No time?

Yup, its back to denial...

Or maybe the nail does not hurt enough yet.

Common sense (or lack of)

Fantastic!

You admit you have a problem, and you took action to rectify it! 

However, some have a bad habit of doing the same thing over and over again, and expecting a different result?

Action is good; but we need some common sense too.

No, we don't need a Phd to start investing or to do trading. But being an idiot does not help, does it?

One good example is averaging down on your loser of a stock. Each time you buy, that lemon stock goes even lower... 

You ask if don't average down how are you ever going to recover?

The fisherman has a very good quote and actionable strategy (with track record):

You win back not the same way you have lost.

No. I won't explain it. If you interested, go buy CW a drink and hear from the horse mouth yourself.

Hollywood only; no guts to make a decision

Have you noticed some colleagues or managers like to collect data and reports all the time?

But never making a decision?

Tracking and measurement are just tools.

Tools can't make the decisions for you.

How to tell you have decision making phobia?

You have been tracking and measuring your investing/trading performance for more than 5 years, but not once have you made any concrete actions for improvement...

What's the point of tracking and measurement again?

Oh!

To look busy!

Who will like this SGX APAC Dividend Leaders REIT ETF?

Japan yield hunters

Top of my mind, I think Mr and Mrs Watanabe will like this ETF!

I mean Mrs Watanabe is famous for being conversant with forex trading as a side income. So foreign exchange risk is not an issue since they are not "bei kambings" (white little lambs).

With negative interest rates back home, Japanese insurers and pension funds have been piling into Australian bonds as they continue their search for yield.

Currently, the Australia 10 year bond yield is around 2.25%.

Those Japanese investors who are more "garang" (aggressive) may want to spread some love into this REIT ETF as they can get double the yield at 4.5%.

Nothing ventured; nothing gained!

Emerging Markets Hedgies

The next group of investors who may be interested could be our neighbouring investors from Thailand, Malaysia, Indonesia; etc.

I mean those investors with home currencies that fall super fast whenever there's a risk off environment.

No need to look far. Just look how their currencies tanked during beginning of this year, taper tantrum 2013, and fiscal cliff end 2011, 2008/09 Great Financial Crisis, and of course the mother of all currency crashes - the 1997 Asian Financial Crisis!

Notice this ETF is also listed in USD? Make a wild guess why is this so?

Normally you have to "pay" to put hedges on; but this REIT ETF vehicle pays you a dividend instead!

Good, better, best or what? 

Singaporeans not the main target group lah

First, competent retail investors won't bite. Not when we are already spoilt for choice with SGX listed REITs that yield more than 4.5%. Duh!

Secondly, those Panda and Koala bear Singapore stocks only "specialists" would lose their home-base advantage or edge.

I mean with 59% weighting in Australian REITs, unless you tell me you read the Australian press or economic news daily, tell me how you'll have an edge over that Australian investor who takes the opposite side of your position?

Who from Singapore will bite then?

Probably those Singaporean retail investors who salivate whenever they hear the word REITs. And when they hear ETF, they immediately associate it with "low cost".

Put both words REIT and ETF together, its "Buy!", "Buy!", "Buy!".

They can't help themselves. It's a Pavlovian response.

How to verify me

Come next week, when this SGX APAC Dividend Leaders REIT will start trading, look at the trading volume for both the USD and SGD tranches.

You can throw eggs at me if the SGD side has bigger trading volumes!

P.S  This post is labelled as "Advertorial" since the kind folks at Phillip Capital Management treated some of us bloggers to free dinner last night.

Just give me a drink and I'll sing like a canary for you!

How to double your income in sales

In sales, this is how we motivate and inspire our underlings to sell more!

First, we track ask them to track their sales performance.

For eg, how many customers they approached per day, how many of them turned into sales that day.

We will then get their closing ratio.

A sales person may score 1:10 - meaning for every 10 customers he applied his snake oil sales pitch on; 1 turned into kaching $$$!

Work harder

Want to double your income? Prospect and approach 20 potential customers per day!

Work smarter

What? You want work/life balance? You didn't join sales so you can work 15 hours a day?

But you still love the money... How?

Ah! This is where craftsmanship comes in!

Improve your prospecting and sales closing skills so you improve your closing ratio to 1:5. Wink.

This salesperson I must keep an eye on

Without prompting from me, if a salesperson does both - instead of debating whether working harder or smarter is better - this one got potential!!!

Will survive in this line.

But also must "guard" against as if he's too good, he could be a future competitor to my job...

Now why would anyone train someone who could be a future competitor?

Overriding commissions.

If I don't benefit from each and every sales my underlings make, you think I so free or so altruistic meh?

Can apply to Trading?

If you want to double your trading profits, how would you proceed?

Or maybe I make it easier for those of you never worked in sales but have been trading for some time.

Can you spot which trading techniques/styles belong to the "Work harder" and "Work smarter" categories?

Have fun!

Come! I recommend you jio Uncle8888 for coffee!

Treated him once; he now keep pestering for coffee at my watering hole...

So to get him off my back, I now write this advertorial to "lelong" his "Act of Charity" to you all.

Uncle8888 aka CW (I call him affectionately as the fisherman) has recently retired.

And he got only one final pokemon to catch before he retires completely from the game...

Yup! Time is on his side!

If you would like to seek the advice from a senior who has walked the walked; talked the talked - then look no further.

Someone who has climbed down the mountain.

Contrast it with you taking advice from someone who is still trying to climb up the mountain himself/herself... 

What the fisherman says is based on his personal track record and actual life experience; not straight line "extrapolations" or "prognosis".

All he asks in return is a drink (copy cat). He seems to like Ya Kun kopi black.

Go! Jio him for a drink at his blog DIRECTLY.

Got "heart", you'll find his email address.

If really cannot, write to me at my "jio me for coffee" (all the way at the bottom of my blog), and I'll tell you his email address.

But first, you'll have to sit through me "lecture you" on why its harder for you to succeed in life if you expect the mountain to move to you - the entitlement mentality.

Yah you!

The one who keep asking, "What stock should I buy?" or "At this price can buy or not?"

Can afford a place of our own after working for 5 years

Very few countries (or cities) in the world can young couples afford to buy a place of their own just after working for 5 years.

Singapore is one such place.

Of course I'm not talking about private properties.

But if it's HDB BTO 3 room in mature estates and HDB BTO 4 room in new (euphemism for ulu) estates - they cost about the same around $400K? Its more a choice between better location or bigger space.

And if you don't mind low floor as on 2nd level, can get for $300K.

You do the math.

20% of $400K is $80K, and divided by 2 people is $40K.

If you can't earn and save $40K after working for 5 years, why are you wasting your time talking about financial freedom and your goal of quitting work by 35?

Surely you have more pressing matters to attend to?

For those young couples amongst you who don't think you are "average", you better act fast before a quick flurry of promotions and pay raises will disqualify you from the 2 bites of the cherry HDB upgrade game.

Singapore is not cheap.

But one thing we should be thankful for is affordable public housing .

I know. Many will like to compare with third world emerging countries. But often you never compare the average salaries and affordability from local perspective there.

For those of you who don't like to tell little lies to oneself, its better to compare Singapore with cosmopolitan cities like Hong Kong, Shanghai, London, New York, Sydney, etc.

Singapore versus Hong Kong Housing Affordability

How to verify "wah kali kong" advice

Proud declaration: I never practice cut-loss!

Verify: You got any 10 baggers in your portfolio before?

No? Walk away...

Smug face: I measure and track my portfolio right down to 2 decimal places.

Verify: Your portfolio in the red or black?

Red? Walk away...

Snake-oil: The future of trading is automated trading!

Verify: How many copies of your software have you sold to institutions?

Only to retail traders? Walk away...

Parrot: Buy and hold long term investing is the one and only true path!

Verify: When did you start investing?

Last month? Walk away...