During my time as purchaser, I was very impressed with one big Taiwanese supplier who "dares" to turn down our offer to have more production at their factory.
We have already taken up 20% of their production capacity, and that's the max our Taiwan supplier has allocated for any single customer.
Talk about turning business or profits away!? (If you in sales, how many companies will do that?)
That's customer diversification risk management for you!
Big daddy's trade shepherd boy is in the press cheerleading:
"Singapore has for many years prioritized economic diversification. He explained that the government has urged firms not to rely on particular products or markets for business, while making sure that the economy as a whole is not overly exposed to any one sector.
Doing that will allow the Singaporean economy to withstand knocks from unforeseen circumstances such as the ongoing virus outbreak, he said."
Many can parrot don't put all your eggs in one basket. Who doesn't know?
Yet what do we do?
Take a look at your portfolio.
Any different from those Enron employees who invested their life savings in Enron's stock too?
Ehhh ... "Big daddy's trade shepherd boy" has really concentrated his career bet & it has paid of big time! LOL!
ReplyDeleteAt least with a few years out of the echo chamber known as SAF, negotiating, discussing & building relations & street cred with various MNC head honchos, senior foreign govts etc, he's much better equipped to "move on" if he ever loses his ministership .... just like Georgey Boi ... a few difficult & shaky first few years before finding his comfortable niche.
Spur,
DeleteTrade and Foreign Ministries good, better, best :)
Better to find your own comfortable niche than to be like those failed MPs who were given pity-fxxk positions in big daddy linked companies...
This is how most of us started too ;)
To climb the mountain, we need to focus or specialise.
Once we've reached the summit, we suddenly have a change of heart...
Live by the sword, die by the sword :(
To avoid that fate, we diversify into "rojak"!
LOL!
Lots of listed companies are like that too.
From razor sharp single-minded focus to becoming huge ungainly conglomerates :)
Ah diversification, a key pillar of quantitative investing :)
ReplyDeleteMacroanalyst,
DeleteThat's where you can do a bit of contribution to those who attend your course ;)
Give a gentle poke to those koalas who think they are "diversified" becasuse they owned 100 SGX listed companies, and each position is not more than 1%, of their portfolios...
Or those panda passive specialists who put everything into a STI ETF ;)
Haha, that's assuming people sign up in the first place. We talk a lot about the proper way to diversify during our previews but I think it flew over the heads of people. Or maybe we are just lousy presenters...
DeleteMacroanalyst,
DeleteLOL!
Hence most retail bei kambings prefer snake-oils peddling 5 minutes a day or no need use brain strategies ;)
Passive even better!!!
temperament,
ReplyDeleteYes, it can also mean to prepare against invasion by others in times of peace ;)
If your current "liquid" networth is more than the payout of your wholelife policy, overkill ;)
But if you intend to cash out your wholelife policy during a market crash to pickup bargains in the stock market, then its another story...
Then again, if you have not acted during 2008, 2003, 2000, 1997, then its just say say only.
Personally, life insurance is great when we are starting out without a penny to our name in our 20s or 30s.
However, if one is financially free during retirement, why do we still need life insurance policies for what?
There's no inheritance tax after 2008...
Yes, over diversification is equally bad. Its a cover for not knowing what to do ;)
Can't decide?
Buy EVERYTHING!
LOL!
temperament,
ReplyDeleteWe all probably can empathise why you did what you did.
1. Have children late. Making up for lost time. Worry you not around when he haven't finish school yet... Sometimes the decision is never about money ;)
2. Even if its about money, that time everything yields BETTER than CPF - fixed deposits, wholelife insurance policies, etc. Who in their right mind would voluntarily contribute to CPF?
Today the pendulum has swung to the other side. I question who in their right mind would buy wholelife policies if the yield is less than CPF?
LOL!
P.S. I think your son will appreciate the shoe-box condo more than the wholelife policy ;)
And if you could do it all over again, you would have bought that
shoe-box condo when you were 40 as the better legacy ;)
Especially when you count in purchasing power, not in nominal numbers.
Who says property cannot be a form of "forced savings" too?
temperament,
ReplyDeleteThat's the strength of youth (or newbieness)!
We don't know what cannot be done :)
Now we front scared wolf, back scared tiger...
LOL!
Smol,
ReplyDeleteThis is the sense of insecurity. My take is that it is better to take action and get it done immediately. It's more practical and saves more time.
WTK
WTK,
ReplyDeleteThat's why we like to hide behind goal setting and planning, using them as shields to cover our inability to make a decision ;)
The early bird first mover on the other hand DO FIRST and figure out later!
Crash got sound :)
Active money managers who advocate concentration say diversification hurt returns. They also say concentration is for those who know what they are doing, diversification is protection against ignorance. Then, many of these active money managers proceed on to lose to S&P500 over the next 10 years. S&P500 is a diversified portfolio of 500 stocks. Check out Warren Buffett's bet against hedge funds.
ReplyDeleteIf the priority is to survive, then choose diversification. While diversification will hurt returns, it is not true that one cannot prosper with diversification.
The difference between those who advocate concentration versus those who diversify is that the latter knows what is unknowable whereas the former thinks that they know what is knowable :)
Deletehyom,
DeleteThere's a difference between passive diversified and active diversified ;)
Warren's bet with the hedge funds is active versus passive; not between concentration verus diversification.
The irony?
Warren is definitely active ;)
He is basically saying, active investing is not for everyone and anyone; but passive investing is for anyone and everyone (including his wife when he pass away)...
So rude!
LOL!
Hi Macroanalyst,
DeleteOne more difference. Those who advocate diversification had massive losses associated with over-concentration. Those who advocate concentration probably have yet to suffered the gut-wrenching losses that comes with disastrous over-concentration.
I'm referring to myself only, particularly when it comes to the losses:)
Hi SMOL,
DeleteRude but sound advice from Mr Buffett to those who want to invest but show no interest in investing. I'll do the same as Mr Buffett. I'll do it tactfully this way -> "I'm active, you'd better go passive not because I'm smart, you're dumb. It's because I love to invest while you love something else. So, please go passive and who knows, you might even out-perform someone like me who spends lots of time investing and in the mean time, you can have all the time to do whatever else that you love to do."
I quoted S&P500 to show that while diversification has been said to hurt returns, the performance can still be wonderful over the long-term. I'm not trying to show diversification is superior to concentration. My opinion is there is no one absolute approach that is superior in investing. All boils down to preference and what works for the individual.
At least you learnt hyom. You'll be surprised how many got burnt by over-concentration and yet still swear by it :)
Deletehyom,
DeleteI'm on the same page as you.
We are all different; we need to walk our own paths.
Psst. Its only a few stocks that are driving the S&P's performance today. Whether that's diversified or concentration, its more semantics ;)
As for passive investing, its more akin to faith-based investing.
Nothing wrong as its painfully clear faith-based investing has outperformed active management hands down for the past 10 years!
But when passive investing becomes a superstition...
LOL!