Two of the five investing principles listed, Uncle8888 can relate them well. LOL!
3. Constantly compare your outcomes to your goals
Do you diligently compare your investment outcomes to your investment goals? It is common to see investors boasting about their investment goals without having a real measure to evaluate how close they are. Without a clear measure in place, you are unable to receive feedback on whether your investment decisions are right or wrong. This deprives you of the opportunity to improve your investment decision. After all, if you don’t measure your outcome, you are just living in denial that every decision that you make is correct, isn’t it?
5. Pareto principle: Knowing where the 20% lies
Regardless of how successful you are as an investor, it is unlikely that every stock that you picked will be a winner. Successful investors have recognised that 80% of their portfolio’s return is attributable to 20% of the portfolio. Rather than diversifying their effort to find multiple stocks with mediocre returns, investors like Ray Dalio focus a great deal of time researching for great businesses to become that 20% in their portfolio. Read? Laws that are applicable to investing
Uncle8888 roams across the island of Singapore and many times he may be roaming in those "ulu" bus route where there is only one bus service plying in those roads. Only one bus service! This is the true test of a bus driver! While waiting for bus at the bus stop; many time he will be browsing his mobile while watching out for his bus service; a number of times while he was paying attention to his mobile rather than looking out for in-coming bus; the approaching bus drivers may horn him that bus is arriving at the bus stop when he was not paying attention!
For those bus drivers who horn him clearly tell him that their jobs are to pick up passengers and NOT driving bus!
How to count? One method is to look back at his past investment portfolio performance and achievement. Best period from 2000 to 2007 (Bull) : 12% CAGR Worst period from 2000 to 2009 (Bear) : 1.6% CAGR Current period from 2000 to 2018 : 7% CAGR Future period from 2000 to 2028 : 7% CAGR To achieve and maintain 7% CAGR till 2028; Total Return (ROC) on his current War Chest has to be at least 180% over the next 10 years!
As you can see in these examples, age is not the most important factor. The amount of money is the most important factor. Where do you fit in? What are your special circumstances? How much money do you have to support the life you want to live? How much money do you want to leave behind? Hmm ... in Uncle8888's plain and simple thinking on long-term investing is ... In investing, your account size really matters - CW8888
Uncle8888 doesn't fight Mr Market with both arms. He is one arm swordsman. Why need leveraged instrument in margin trading for shorting or leverage up for higher yield on own investing capital e.g. assets pledging to open overdraft trading with brokers. He doesn't have to polish his trading Craft for better Entries and Exits. He is Panda or Koala in the stock market; but his food is still not extinct yet! Knowing enough! Money is enough! Capital is enough! Risk is enough! Parroting Buffet .... it is insane to risk what you have and need in order to obtain what you don’t need.” Uncle8888 is already practicing it years ahead of his 2018 annual letter. :-) We take calculated risks and leverages to meet our objectives, wants or needs. It is like that! Right? Risk and Leverage are subjective. Knowing enough!
If you have NOT been through at least one full market cycle of Bull-Bear-Bull or Bear-Bull-Bear; you may not understand what Uncle8888 is saying ... Illusive profits during Bullish market but permanent losses in Bear market.
Over the years Uncle8888 have many coffee sessions with Readers/Starfishes who form the two groups of retail investors:
One group are newbies who have started out investing/trading for one or more years; but they didn't not achieve the investment return as expected. So they want to find out from veterans who have been in the market; and hopefully they can learn from veterans' experiences in the market; and see how to correct, revise or adapt their own investing method or strategies to achieve better performance.
The other group have been performing well during bullish market; but they couldn't clearly identify the phases of pull back, correction and stayed over-invested till market crash. Finally panic selling and locked in permanent losses to save whatever capital left on the table. They want to know how to survive market cycles and build sustainable retirement income or wealth for retirement.
Cash is rotting due to inflation so the opportunity cost of holding is to beat inflation rate. Uncle8888 is assuming 2.5% yearly inflation rate. His opportunity cost for rotting cash in his war chest is .... the number doesn't look too scary to beat it. To generate at least 68% ROC on war chest by 2030 i.e. another 12 years for the next Big Bear!
CW8888 Look like Uncle8888's observation and what he knew from conversation with many of his peers in the last few years is getting momentum from the Government's concern on current parents' or grandparents' retirement adequacy. The next decade or 1.5 decades we may see flood of housing downgrade and rental vacancy.
Read? No One Can Teach You Conviction. You need to Acquire It Yourself Ask any retail investors who have average down their stocks until recovery to break even is near impossible. Are they ever short of conviction? Uncle8888's money management and risk management limited exposure to any single stock to not more than 10% of his total capital since inception in Jan 2000. From the chart below; where is his conviction over the last 18 years? Hoot tua tua or Let it be and then tua tua?
Ask your parents, grand-parents or great grand-parents how did they survive years and years of inflation? Did they break down due to inflation? Ask your parents or grand-parents who were serious retail investors pre AFC days and did they break down due to their investment losses and chopped fingers and never never touch the stock market ever again?
It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level, which should show the greatest profit - Jessie Livermore
Financial advisers love to scare their potential clients on inflation! So scary meh? For younger folks; did you see your parents, grand-parents and great-grand-parents broke down due to inflation? Honestly; Uncle8888 since started working in Aug 1977 till Sep 2016; he didn't really feel the pains of inflation hitting him hard; but the real heartache came from seeing his investment portfolio collapsing so fast! LOL!
Losses in your investment portfolio is far more scary than year on year inflation.
We need language Master like SMOL know the difference. Right?
If you look closely from left to right year on year and always wishing for more to come. Seductive yield trap or yield hog? After 14 years; DBS also becoming sexy yield of 16% from 2018 and sustainable for the next few years. On the other hand; we have When a Giant Gain Causes Pain (4) . Investing may be simple but never easy to handle emotionally! It will be continuous struggle even in winning game! Why? Many of us are not so mechanical or Automatic. Time for Robo investing? LOL! But; that is outsourcing like buying a Robo floor sweeper to do the job; but Robo can't lift or move away your chairs to sweep it.
These three quotes; Uncle8888 can relate better. No parroting! Really doing them! 2. “But Charlie and I sleep well. Both of us believe it is insane to risk what you have and need in order to obtain what you don’t need.” Buffett and Charlie Munger’s aversion to using leverage may have “dampened” their returns over the last 53 years, but the long-term focused investors don’t seem all that bothered by it. 5. “When major declines occur, however, they offer extraordinary opportunities to those who are not handicapped by debt.” Leverage might boost returns when prices go up, but it’s devastating when prices go down, which is when solvent investors are able buy cheaply. 6. “Though markets are generally rational, they occasionally do crazy things. Seizing the opportunities then offered does not require great intelligence, a degree in economics or a familiarity with Wall Street jargon such as alpha and beta.”
SMOL prefers Verb than Noun in his trading if Uncle8888 is not mistaken.
For investment portfolio management; many Gurus are advising retail investors not to concentrate (Verb) as it is very risky since most retail investors don't have that level of competency to concentrate (Verb) yet. But; for Uncle8888's portfolio management it is currently concentrate (Noun) with a few freehold core holding and a large war chest. How risky? Concentrate as verb or noun? See any difference? Read? Investing Made Simple by Uncle8888 (6)
CW8888: Even you are the world's greatest investor; Mr. Market no hew you during market crash!
Warren Buffett believes investors should avoid using borrowed money to outperform.
The Oracle of Omaha explained the perils of using debt and leverage in his 2017 annual letter to Berkshire Hathaway shareholders released on Saturday.
"Berkshire, itself, provides some vivid examples of how price randomness in the short term can obscure long-term growth in value. For the last 53 years, the company has built value by reinvesting its earnings and letting compound interest work its magic. Year by year, we have moved forward. Yet Berkshire shares have suffered four truly major dips," he wrote.
The investor shared the data which revealed Berkshire Hathaway's stock declined by a range of 37 percent to 59 percent multiple times over the last five decades.
"This table offers the strongest argument I can muster against ever using borrowed money to own stocks. There is simply no telling how far stocks can fall in a short period," he wrote. "Even if your borrowings are small and your positions aren't immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions."
Buffett predicted the company's stock will fall again by similar large declines in the next 53 years.
"No one can tell you when these will happen. The light can at any time go from green to red without pausing at yellow," he wrote. "When major declines occur, however, they offer extraordinary opportunities to those who are not handicapped by debt."
The investor shared an excerpt from British Nobel laureate Rudyard Kipling's 1895 poem "If—" to illuminate the investing lesson:
"If you can keep your head when all about you are losing theirs . . . If you can wait and not be tired by waiting . . . If you can think – and not make thoughts your aim . . . If you can trust yourself when all men doubt you... Yours is the Earth and everything that's in it."
Buffett blasted the belief that bonds were a lower risk investment over the long-term. He recommended investors stay in equities due to negative impact from inflation on the purchasing power of fixed income holdings.
"I want to quickly acknowledge that in any upcoming day, week or even year, stocks will be riskier – far riskier – than short-term U.S. bonds. As an investor's investment horizon lengthens, however, a diversified portfolio of U.S. equities becomes progressively less risky than bonds, assuming that the stocks are purchased at a sensible multiple of earnings relative to then-prevailing interest rates," he wrote. "It is a terrible mistake for investors with long-term horizons – among them, pension funds, college endowments and savings-minded individuals – to measure their investment 'risk' by their portfolio's ratio of bonds to stocks. Often, high-grade bonds in an investment portfolio increase its risk."
Peter Lynch: You don't need a lot in your lifetime. You only need a few good stocks in your lifetime. I mean how many times do you need a stock to go up ten-fold to make a lot of money? Not a lot.
I think the secret is if you have a lot of stocks, some will do mediocre, some will do okay, and if one of two of 'em go up big time, you produce a fabulous result. And I think that's the promise to some people. Some stocks go up 20-30 percent and they get rid of it and they hold onto the dogs. And it's sort of like watering the weeds and cutting out the flowers. You want to let the winners run. When the fun ones get better, add to 'em, and that one winner, you basically see a few stocks in your lifetime, that's all you need. (CW8888: That few fun ones; just hoot and hoot. Rounds after rounds until game over! Pillow stocks!) ---------------------- CW8888: Chun bo? Uncle8888 is lousy stock picker! Total stock pick : 56 No of losers : 26 or 46% His success rate for positive stock pick is just over 50%! In long-term investing; it is all about 3Ms - Method, Mind and Money Management! and yet Uncle8888 over heard in the investing forums, chat rooms or Facebook so many retails keep on debating on the best or right Method.
This small boy came up alone to enjoy his double decker bus ride. Hmm ... nowadays Uncle8888 is also behaving like this small boy whenever he takes double decker; he will take the front seat when they are not occupied. No hurry and nothing much to think or worry about. Just enjoy the full screen ahead!
SembCorp Ind cuts its final dividend from last year $0.04 to $0.02. Total dividend = $0.05 Over the last 17 years as Dividend "Warrior" or "Lover" or "Patient"??? The lowest dividend yield on investment cost is still at the time of purchase through out the past economics and market cycles. Kep Corp (2001/2002) : 11.4% SemCorp Ind: (2002) : 6.1% DBS: (2003) : 3.5% Uncle8888 believes in himself that is BOTH market timing and time in the market are NOT mutually exclusive and are indeed important as long wrong term retail investor. Always look at dividend yield and dividend payout ratio as a pair!
This afternoon; Uncle8888 has kopi session with one new Starfish who wanted to restart her investing journey at the next Bear market and wanted to hear directly from Uncle8888's mouth on surviving market cycles and of course with paper and pen. Here is the real investing lesson on market cycle for newbies! Starfish started trading (investing) in 2015 and winning easy money and progressed into contra trading and winning easy money all way to 2007. More or less like Uncle8888. LOL!
Doesn't matter DCA or VCA or simple average down. Don't try it on single stock! If your single stock price doesn't hit the bottom and does price reversal on up trend; you are going to collect dozens of Panadols to ease your heartache over the next decade or more just to break even. You may still like to call it wrong long-term investing!
Real Positioning Simple average down in 2014 @ $9.67 which is 20% lower than $12.14 @ 2007. The difference in taking doses of Panadol in 2007 position is 7 years more. The one in 2007 has already break even while other one in 2014 which is 20% cheaper is still sitting on paper loss. The Moral of Story ... When you bought any dividend stock; it has already being decided whether you will be taking Panadols or receiving passive income. You either pom pi pi or sibei sainz! LOL!
CW8888: Look like the fight in Singapore is between Grab and Comfortdelgro. Did Comfortdelgro got screwed by Uber? Uber is preparing to sell its Southeast Asia business to Singapore's Grab in exchange for a sizable stake in the company, according to two sources with knowledge of the matter. No deal has been reached yet, and the timing of any such deal is uncertain. Grab provides private car, motorbike, taxi and carpooling services in more than 100 cities across Southeast Asia. The company claimed to have 95 percent market share in taxi ride-hailing when it announced plans to raise more than $2.5 billion from SoftBank and other investors in 2017. The move would mimic Uber's strategy in China, where the company sold its ride-hailing operation to Didi for 20 percent ownership, and Russia, where the company merged its local business with Yandex's ride-hailing business for a 37 percent stake. The objective would be to help Uber reel in its costs in preparation for an IPO as soon as next year, said the sources, who asked not to be named because the discussions are confidential. Since taking over for co-founder Travis Kalanick in August, Uber CEO Dara Khosrowshahi has focused on cleaning up the company's battered reputation and instilling financial discipline to push toward profitability. Uber's loss surged 61 percent in 2017 to $4.5 billion, according to numbers released this week, though its loss in the fourth quarter narrowed from the prior period. A tie-up with Grab would also play into SoftBank's efforts to exert greater control over the global ride-sharing market. In January, the Japanese tech conglomerate bought about a 15 percent stake in Uber, mostly buying shares from existing investors. SoftBank also owns shares in Grab, Didi, India's Ola and Brazil's 99, and has publicly expressed interest in Lyft, Uber's main U.S. rival. At the Goldman Sachs Technology and Internet Conference in San Francisco this week, Khosrowshahi said that competing against local players is very hard. "I think the team ran through an inventory of where we competed, and if we compete on let's say even on a dollar-for-dollar basis against the local player, paying the same amount to drivers, collecting the same amount from riders, in general where we are now is, if both players are kind of spending equally we tend to win share. We've got a better brand, we've got better technology, better network, etc. Whatever it is, we tend to win share. There's certain markets, China and Russia, where that wasn't true. And if your only competitive advantage, or the only reason you can be in a market is because you can spend money, that's not exactly a reasonable proposition." Reuters reported in November, citing industry sources, that a SoftBank investment in Uber would make it possible for the company to consolidate some of its ride-hailing assets across Asia. An Uber investor told Reuters that shutting its Southeast Asia unit would allow the company to "print money" and make an IPO more realistic.
You can call it index investing or passive or outsourcing. When you outsource the task; you don't feel the heat, dirt or the heavy lifting; but you got to pay some fee. Worth paying this fee to managers or pay ourselves when we get our own hand dirty in the market? Can we DIY mini subset of STI ETF as blue chips uncles or aunties?
Updated in response to Singapore Man of Leisure17 February 2018 at 13:45:00 GMT+8 CW, You sneaky, sneaky ;) Your example is a good test on whether one can read "numbers"; especially if readers call themselves "fundamental investors". 1) Right off the bat, someone who invested in unit trusts or ETFs (and know what they are buying into) would know your percentages were off. Where got management fees 8.9% one!!!??? Management fees are usually charged as a % of AUM (asset under management) - usually in the 1-2% range ;) Most people who "invest" in unit trusts and ETFs are in it for the capital gains. 2) On the other hand, your example is great for those who "invests" in unit trusts and ETFs for income. Yup, its like buying a rental property but you too lazy to deal with the tenants. So you hired a property firm to handle the tenants for you - no free lunch - at 8.9% commission of your rentals ;) Ar ber then? Passive what? LOL! From the number below; how many retail investors are trading their STI ETF shares for capital gains?
Read? Randomness, Chance, Luck And Co-incidence??? (4) Is this a small world or what? The window of opportunity to bump against someone is just 10 to 20 seconds! This morning; while Uncle8888 was heading to tap out of security gate in the lift lobby; someone was seen stopping him and called him. He looked familiar; but Uncle8888's old brain cells was trying hard to recall who? Another Starfish! :-) Let see on records how many will happen in the future. Are randomness, chance, luck and co-incidence co-related to the Law of Large Number? Uncle8888 tends to believe so! If that is true; it will be like investing. Randomness in the stock market and how we should seize that very short window of opportunities to accumulate high single or double digits yield and multi-bagger stocks.
Read? The Power of Saving Read? Do you have $30K? If he doesn't have that financial discipline or resources to meet that saving goal of $30K. How to learn investing from Uncle8888? Never mind! He can still look for that few local bloggers who say you can early start to invest with $10,000. Go, go and learn from them!
Those Hero stocks of 2009 - 2011 that helped to recover from 2007 to 2009 draw-down of - 53% Top two past heroes are dead! Noble (Wrote off) Olam (All sold) Kep Corp (Top 1 holding) Semb Corp (Top 2 holding) Semb Marine(All sold) Hyflux (Wrote off) Biosensors(Taken Private) CPL (Reduce to minor holding)
Heroes will come and go! So next Bear; new heroes will emerge to save Uncle8888! He will have to look out for them!
Can we define crash as bear market i.e. technically STI drops 20% from its recent high? Every time when Uncle8888 read investment writers brushing off market timing. Uncle8888 smiles! :-) Of course; you can say this may be you haven't start practicing RIGHT at top of the market and then the market started to crash over time! Unlucky? Uncle8888 started practicing from Jan 2000 and what happened then ... 3 Jan 2000 to 24 Sep 2001 : -53% (This will require more than 100% rise to break even) 24 Sep 2001 to 05 Mar 2002 : +54% 05 Mar 2002 to 11 Mar 2003 : -35% (Crashed again!) Not scare meh? Still don't believe in market timing meh?
Read? On why sound investing principles will always work??? Real People. Real Story on DBS! This ex-colleague who was some time also Uncle8888's lunch kaki. During GFC 2008/2009; he was very keen to invest bigger on DBS; but in Mar 2009 he was still waiting for DBS to reach $6 before accumulating slowly! When the market recovered he regretted big time; but; he did learn important lesson on investing! This time in Jan 2016; when DBS went below $15; he started to accumulate slowly using his CPF fund as he has already reached 55 (Feeling rich with his bigger War Chest? How often can we beat CPF OA 2.5% with blue chip yield?) In Investing; Your Account Size Really Matters! - CW8888
When DBS has crossed $19; he began to divest slowly. Uncle8888 last heard that he has fully divested all his DBS. ------------------------------------------- Now; he sianz! Real life example of retail investing. It is never easy! Who can analyze that DBS drastically raises its dividend from past year of 66 cts to $1.20 from 2018 onwards! Institutions invest along with their rules and policies; but for retails it is all in their Mind and Heart! Less Analyzing. More Investing - CW8888 Read? Yield of dreams: Investors have "a once in a lifetime opportunity" in blue chips (5)
Read? What did I share with a guy called Noobz on our first meeting? We don't have to learn or re-learn on how to retain losers till zero-baggers! This is already naturally in us as retail investors. Recently; Uncle8888 happened to chat with one very senior uncle in his 70s during drinking free coffee and reading Business Times when he asked him : "You retired? You invest?". Later, he said he gave up investing as he has lost too much. Few of his stock holding were consolidated and will never recover his losses! The moral of the story : Once your stocks have been consolidated; it is extremely difficult to recover your paper losses! Why retail investing is so difficult? Selling! The Art of Selling and at the same time The Art of Holding as well for cash flow! This is CONTRADICTING Art! Paper gains are NOT real; but dividends are real and NOT ALL type of dividends are for you to spend. Beware of some types of dividends that are put temporary in your hand; and after sometime you may have to return some past years dividends which you have received. Read? When a Giant Gain Causes Pain (4)
Terribly NOT easy! Touchstones, Pillow stocks, really high yield, dividend payout ratio, retained earning and growth dividend story line! Simple FATA may be even more helpful over market cycles. No need for fanciful stuff! Know them well! Read? You Know Company's Balance Sheet In Its Simplest Form???
I am 61 yrs old uncle living in HDB heartland who has achieved financial independence @ 56 and retired @ 60 from full-time job as employee.
Single household income since 1995 with three children. Eldest son and daughter are now working and youngest son still in his 2nd year uni in SUTD.
I have been doing long-term investing and short-term trading in Singapore stock market only since Jan 2000 so I am that Panda or Koala in the investment world; but I am still surviving well in the wild.
I am now executing my Three Taps solution model to maintain sustainable retirement income for life till 2038.
Last updated: 3 Sep 2017
Disclaimer: Stock trading involves significant risks. Create Wealth trader is not a licensed Investment Adviser and will not be responsible for any losses which you incurred. You are advised to always do your own homework before making any trading decision.