I have deleted 2 most recent posts by accident, when I wanted to delete 2 draft post.
Oh well, I must be getting more IT idiot, as I get older.
Sunday, September 18, 2016
Thoughts from A Decade of Investing
I have been investing for slightly more than a decade since 2004. In this post, I want to pin down some thoughts.
I used some leverage (around 10 - 20% of my portfolio) in the second half of 2000s, as I feel that the leverage can boost my returns. In addition, my total portfolio amount is small. If I lost the borrowed sum in investing, I can still returned the borrowed amount through my salary.
The leverage are monies borrowed from my parents and siblings at 5% interest.
The leverage also boosted my returns and enlarged my losses during the 2008 Great Recession. In 2010, I stop the leverage and returned the borrowed amount to my parents and siblings, as I can always increase the size of my stock portfolio via my savings.
Concentration or having a portfolio comprising a few stocks can boost the returns when your stock double. Concentration also increase the losses when your stock sank by half.
In 2011, my portfolio holds less than 8 stocks and a few are S-chips. Then, the S-chips declined severely, and the market in general is not good. My portfolio halved in 2011. One of my stock (Hongwei) went delisted due to fraud.
I have learnt from the 2011 losses that I should lower the concentration in my portfolio.
Since then, I have diversified to around 20 stocks and limit the stock's maximum proportion to around 15-20% of my portfolio. This reduce the possibility of large portfolio losses if a stock tanked suddenly due to some events (e.g. accounting fraud).
Of course, having more stocks in my portfolio may lower the probability of large returns. For example, if a stock is only 5% of your portfolio and the stock double, your portfolio only increase by 5%. Nonetheless, this is a trade-off that I am happy to make to reduce the chances of large portfolio losses.
Thought 3: Losses make me more risk averse; Winners make me more risk loving
I become very risk averse during the depths of Great Recession in early 2009 and in end 2011, after losing a large amount of money. That is, I tend to choose safer stocks after large losses.
I also become more risk loving and prefer more risky stocks in late 2010 after experiencing large gains. The risk loving behaviour may be a factor of the huge draw downs in 2011.
I doubt that I can control my risk preference very much after large losses or gains. After all, I am human. Nonetheless, the diversification of my portfolio should help to mitigate the effect of risk loving behaviour, if I have large gains in future.
Thought 4: My investing style must suit me/ My investing style changes
Recently, I came upon the Thumbtack Investor (TTI) blog. TTI is a deep value and concentrated investor. He emphasised that deep value investing requires lots of hard work, and it would take months for him to analysis a stock and deciding to buy it.
Well, TTI's investing style will not suit me. Because I am lazy. I don't study a stock for days before buying. If I examine the valuation and fundamentals of the stock for a few hours, I will buy the stock if I like the valuation and fundamentals. I may study the stock after my initial position. My total time spent on a stock will not be more than 8 hours, I guess. As I do not spend a lot of time studying the stock, I know that I will missed out certain things. To compensate for this, I tend to cut losses and sell the stock when the reported results goes against my expectations.
Over the years, I have tried out other style of investing. For example, I tried technical investing but it don't make sense to me. I tried day trading once and it makes my heart beat too fast for my liking.
Also, my investing style changes over time. Prior to 2012, I tend to buy stocks with very low PE ratio (hence the S-chips). In 2011 - 2014, I buy more stocks with low P/B ratio (usually property stocks). This year, I buy stocks with GAPP (Growth at Reasonable Price) characteristics.
Dividend investing or having a stock portfolio for their dividends never quite get to me. I can understand why a person wants to have a stock portfolio with high dividend yield for the passive income. However, over the years, dividend yield is not an important criteria in my stock selection. Well, except Reits, in which dividend yield becomes an important criteria in my selection. (Reits are less than 5% of my total portfolio now, as I think that the higher US interest rate will affect Reits.)
2004 - 2015 Returns
But first, I want to put the performance of my stock portfolio below, as it helps to illustrate my thoughts subsequently.
| % Returns | STI (Excl Dividends) | Remarks | |
| 2004 | 6% | ||
| 2005 | 35% |
Returns/Declines boosted with slight leverage.
2008: Great Recession | |
| 2006 | 130% | ||
| 2007 | 46% | 15% | |
| 2008 | -70% | -49% | |
| 2009 | 147% | 64% | |
| 2010 | 78% | 10% | |
| 2011 | -46% | -17% | Declines in S-chips and excessive concentration into 5-6 stocks |
| 2012 | 25% | 21% | |
| 2013 | 15% | -1% | Diversified into 19 stocks |
| 2014 | 8% | 6% | |
| 2015 | 4% | -14% | |
| 2004 - 15 returns (IRR) | 15% |
Thought 1: Leverage is a double-edged sword
I used some leverage (around 10 - 20% of my portfolio) in the second half of 2000s, as I feel that the leverage can boost my returns. In addition, my total portfolio amount is small. If I lost the borrowed sum in investing, I can still returned the borrowed amount through my salary.
The leverage are monies borrowed from my parents and siblings at 5% interest.
The leverage also boosted my returns and enlarged my losses during the 2008 Great Recession. In 2010, I stop the leverage and returned the borrowed amount to my parents and siblings, as I can always increase the size of my stock portfolio via my savings.
Thought 2: Concentration is also a double-edged sword
Concentration or having a portfolio comprising a few stocks can boost the returns when your stock double. Concentration also increase the losses when your stock sank by half.
In 2011, my portfolio holds less than 8 stocks and a few are S-chips. Then, the S-chips declined severely, and the market in general is not good. My portfolio halved in 2011. One of my stock (Hongwei) went delisted due to fraud.
I have learnt from the 2011 losses that I should lower the concentration in my portfolio.
Since then, I have diversified to around 20 stocks and limit the stock's maximum proportion to around 15-20% of my portfolio. This reduce the possibility of large portfolio losses if a stock tanked suddenly due to some events (e.g. accounting fraud).
Of course, having more stocks in my portfolio may lower the probability of large returns. For example, if a stock is only 5% of your portfolio and the stock double, your portfolio only increase by 5%. Nonetheless, this is a trade-off that I am happy to make to reduce the chances of large portfolio losses.
Thought 3: Losses make me more risk averse; Winners make me more risk loving
I become very risk averse during the depths of Great Recession in early 2009 and in end 2011, after losing a large amount of money. That is, I tend to choose safer stocks after large losses.
I also become more risk loving and prefer more risky stocks in late 2010 after experiencing large gains. The risk loving behaviour may be a factor of the huge draw downs in 2011.
I doubt that I can control my risk preference very much after large losses or gains. After all, I am human. Nonetheless, the diversification of my portfolio should help to mitigate the effect of risk loving behaviour, if I have large gains in future.
Thought 4: My investing style must suit me/ My investing style changes
Recently, I came upon the Thumbtack Investor (TTI) blog. TTI is a deep value and concentrated investor. He emphasised that deep value investing requires lots of hard work, and it would take months for him to analysis a stock and deciding to buy it.
Well, TTI's investing style will not suit me. Because I am lazy. I don't study a stock for days before buying. If I examine the valuation and fundamentals of the stock for a few hours, I will buy the stock if I like the valuation and fundamentals. I may study the stock after my initial position. My total time spent on a stock will not be more than 8 hours, I guess. As I do not spend a lot of time studying the stock, I know that I will missed out certain things. To compensate for this, I tend to cut losses and sell the stock when the reported results goes against my expectations.
Over the years, I have tried out other style of investing. For example, I tried technical investing but it don't make sense to me. I tried day trading once and it makes my heart beat too fast for my liking.
Also, my investing style changes over time. Prior to 2012, I tend to buy stocks with very low PE ratio (hence the S-chips). In 2011 - 2014, I buy more stocks with low P/B ratio (usually property stocks). This year, I buy stocks with GAPP (Growth at Reasonable Price) characteristics.
Dividend investing or having a stock portfolio for their dividends never quite get to me. I can understand why a person wants to have a stock portfolio with high dividend yield for the passive income. However, over the years, dividend yield is not an important criteria in my stock selection. Well, except Reits, in which dividend yield becomes an important criteria in my selection. (Reits are less than 5% of my total portfolio now, as I think that the higher US interest rate will affect Reits.)
Monday, October 5, 2015
Cash to Stock Ratio
Markets seem to be stabilising.
I have been in stocks for quite some time. I always wonder how much cash (or bond) I should hold relative to stocks.
A few books like "Random Walk the Wall Street" may recommend 40% bonds to 60% stocks ratio or 50-50, and rebalance every year.
I believe that the 60-40 or 50-50 ratio should be for older people. When you are young, you have cashflows from income and should take higher risk. Hence, when I start investing in stocks, my cash to stock ratio was like 10% cash (including emergency cash) to 90% stock.
Bloggers, who have been in the market for sometime, advocate having a warchest i.e. cash on standby. Some prefer a large warchest, so that you can take advantage of stock crash. A few think otherwise; they prefer a smaller warchest, as having a large warchest means losing out on the potential dividends.
I am thinking that when you are young, your warchest should be small given that you have income flows from work. When you are older or retired, your warchest should gradually be larger, so as to soften the impact of stock portfolio losses from market crash.
Currently, I am 1/3 cash (excluding CPF) to 2/3 stocks. This is an unintended outcome, as I did not really follow any fix cash-stock allocation.
I have been in stocks for quite some time. I always wonder how much cash (or bond) I should hold relative to stocks.
A few books like "Random Walk the Wall Street" may recommend 40% bonds to 60% stocks ratio or 50-50, and rebalance every year.
I believe that the 60-40 or 50-50 ratio should be for older people. When you are young, you have cashflows from income and should take higher risk. Hence, when I start investing in stocks, my cash to stock ratio was like 10% cash (including emergency cash) to 90% stock.
Bloggers, who have been in the market for sometime, advocate having a warchest i.e. cash on standby. Some prefer a large warchest, so that you can take advantage of stock crash. A few think otherwise; they prefer a smaller warchest, as having a large warchest means losing out on the potential dividends.
I am thinking that when you are young, your warchest should be small given that you have income flows from work. When you are older or retired, your warchest should gradually be larger, so as to soften the impact of stock portfolio losses from market crash.
Currently, I am 1/3 cash (excluding CPF) to 2/3 stocks. This is an unintended outcome, as I did not really follow any fix cash-stock allocation.
Monday, August 24, 2015
Further Drop, Further Purchase
I bought into Singapore banks today -- UOB and OCBC.
Interestingly, this is my first purchase of UOB. I have not bought UOB before. Both banks, I believe, are yielding at 4% which is sufficient yield for me.
I also added to Religare Health Trust. It fall another 7 cents after purchase. Hope that it can fall more, so that I can get to buy more.
Given the large drops over the past few days, I feel that a technical rebound should be seen soon.
Looking at the 2011 drop, it started in late Jul and end in late Sep. After that, it went sideways till the end of year.
The current drop starts in mid Jul. If the current drop mirrors 2011 (it most likely won't), it may start to stabilised around mid Sep and probably go sideways for a few months.
Looking around the forums and blogsphere, the forums seems to have more dread. But the blogsphere (including myself) seems un-fearful.. This implies that we have not reached the point of maximum pessimism and further drops is in order, I guess.
Interestingly, this is my first purchase of UOB. I have not bought UOB before. Both banks, I believe, are yielding at 4% which is sufficient yield for me.
I also added to Religare Health Trust. It fall another 7 cents after purchase. Hope that it can fall more, so that I can get to buy more.
Given the large drops over the past few days, I feel that a technical rebound should be seen soon.
Looking at the 2011 drop, it started in late Jul and end in late Sep. After that, it went sideways till the end of year.
The current drop starts in mid Jul. If the current drop mirrors 2011 (it most likely won't), it may start to stabilised around mid Sep and probably go sideways for a few months.
Looking around the forums and blogsphere, the forums seems to have more dread. But the blogsphere (including myself) seems un-fearful.. This implies that we have not reached the point of maximum pessimism and further drops is in order, I guess.
Saturday, August 22, 2015
Market Correction
Market is correcting. STI (Strait Time Index) fell 15% from 3500 in Apr to 2970 on 22 Aug. HSI (Hang Seng Index) fell 20% (harder) from 28,000 in May to 22,400 currently.
No surprises that I am more interested in HK-listed stocks, since HSI has fallen more. Over the past week, I bought some HK stocks e.g. HSCEI ETF (02828). Yes, I am losing money over my purchase in the past week. But it is ok to lose money in a market correction. It is more likely that I will gain in the medium term of 3 years. Hopefully.
Despite the correction, year-to-date (ytd), I am still eking out a minimal gain of 0.3%. YTD, STI fell by around 10% while HSI fell by 5%. I fare much worse than the indices in 2011 correction. Probably it is because I have diversified into more stocks. Or, I am lucky to avoid the worst hit Oil & Gas stocks this time.
I still have bullets to spare. Looking at my cash in bank and my stock portfolio, I am 1/3 cash and 2/3 stock. My cash could have been higher, if I have followed the temptation to cash in some CWT when it was at $2.36. (Now, CWT is at $1.98.)
My strategy is to add to a few of the existing stocks if they fell 10% from my last purchase price. Each addition is not large -- probably 1% of my stock portfolio. The existing stocks I am looking to add include HSCEI ETF, Valuetronics,
I am also planning to initiate new stocks (e.g. Singapore bank stocks) if they fell further. If the correction turns heavier into a crash, I will start looking at REITs which may offer high yields then. I recall that First Reit fell to 40 cents in 2009, offering 15% yield then. However, I don't think I will see any 15% reit this time.
I don't feel that this market correction will turn into a crash like 2009. It is more likely to be similar to 2011 correction, especially since the US and Europe economies are improving.
Nonetheless, I will never know when the market will bottom.
No surprises that I am more interested in HK-listed stocks, since HSI has fallen more. Over the past week, I bought some HK stocks e.g. HSCEI ETF (02828). Yes, I am losing money over my purchase in the past week. But it is ok to lose money in a market correction. It is more likely that I will gain in the medium term of 3 years. Hopefully.
Despite the correction, year-to-date (ytd), I am still eking out a minimal gain of 0.3%. YTD, STI fell by around 10% while HSI fell by 5%. I fare much worse than the indices in 2011 correction. Probably it is because I have diversified into more stocks. Or, I am lucky to avoid the worst hit Oil & Gas stocks this time.
I still have bullets to spare. Looking at my cash in bank and my stock portfolio, I am 1/3 cash and 2/3 stock. My cash could have been higher, if I have followed the temptation to cash in some CWT when it was at $2.36. (Now, CWT is at $1.98.)
My strategy is to add to a few of the existing stocks if they fell 10% from my last purchase price. Each addition is not large -- probably 1% of my stock portfolio. The existing stocks I am looking to add include HSCEI ETF, Valuetronics,
I am also planning to initiate new stocks (e.g. Singapore bank stocks) if they fell further. If the correction turns heavier into a crash, I will start looking at REITs which may offer high yields then. I recall that First Reit fell to 40 cents in 2009, offering 15% yield then. However, I don't think I will see any 15% reit this time.
I don't feel that this market correction will turn into a crash like 2009. It is more likely to be similar to 2011 correction, especially since the US and Europe economies are improving.
Nonetheless, I will never know when the market will bottom.
Wednesday, August 5, 2015
Never lose money?
Many roads lead to Rome. I don't believe in "Never lose money".
I don't do much downside assessment, I don't aim for minimum losses. Losses to me is ok.
For me:
If the probable profit is much higher than probable loss, I buy. Else I don't buy.
If probable loss is higher than probable profit, I sell.
I don't do much downside assessment, I don't aim for minimum losses. Losses to me is ok.
For me:
If the probable profit is much higher than probable loss, I buy. Else I don't buy.
If probable loss is higher than probable profit, I sell.
An interesting stock
Valuetronics is $0.385 today, with EPS of 7c and PE of 5.5.
Its gone ex-div recently. Dividend was 3.5c. Its cash after excluding div paid out is around $0.20.
PE ex cash will be at 2.7.
To me, Valuetronics is more interesting than oil-related counters such as Keppel, Sembcorp, Penguin which are trading at higher PE.
And of course, I bought some today.
Its gone ex-div recently. Dividend was 3.5c. Its cash after excluding div paid out is around $0.20.
PE ex cash will be at 2.7.
To me, Valuetronics is more interesting than oil-related counters such as Keppel, Sembcorp, Penguin which are trading at higher PE.
And of course, I bought some today.
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