STE's Stocks Investing Journey

image credit to the straitstimes.com This might be my last blog post in 2016 and at this point of time, is very common to see many articles appeared in newspaper or magazine on peoples ( or so-called experts/economist) writing about “Outlook “ for stocks market, property market, economy, industrial, sectors etc… If you key in the “ outlook 2017 “ in Google, you will get 132 mil results about this topic !! Since the ancient world or mankind history, we like to do prediction and lookout for something which may affect our life. People have always yearned to see into the future, to peek around the corner and make sense of what’s going on .

Noticed that many friends and financial bloggers have been busy updating their portfolio’s performance recently, some are happy with outstanding & flying colours result which out-performed the market and some with lagging achievement. But one needs to take note that measuring performance is only meaningful in the long run and not by just a few quarters or years of investment and also the performance is to judge our ability to pick right stocks, not to compare with others.

image credit to asymmetryobservation.com Since early December, the stock price for some of the STI counters have increased much as compared to a few months back. Just to recall what I have written in August to explain the concept of “ Linear Regression and Reverting to Mean “ in my blog about “ My Investment Strategy “ ( Click here ). Of course, there are concerns about China’s economic situation & debt stress in the O&G industry which affecting the bank stocks and also some other concern in counters like GLP / ARA / HKG Land separately. *** ARA might be a different case as price increase due to propose of privatization.

Saving: A Virtue or a Vice image credit to mentalfloss.com The habit of saving always being referred to as a form of “virtue “ in our life and also being encouraged by our parents or financial planner almost universally. Classical economists regarded saving as a virtue and the act of saving virtuous, because according to them, when an individual saves more by spending less on consumption goods, he accumulates a surplus. This surplus can be utilized in the interest of the economy as a whole in term of the investment.

Hi  All, As written before, I will try to update the STE Smart Beta Index on a quarterly basis and re-balance the portfolio on a yearly basis. Append below, please find the latest update : The index just slightly outperformed the STI Index by merely  0.8%  since 28 Aug 2016, a one-quarter result may not reflect the long term trend, we may need to see this in longer time horizon to gauge the performance if there are any " smart factors " in this kind of criteria selection.

<from my bookshelf > The behaviour of the stock market is inherently so complex that no single variable can predict how the market is going to behave next or what would be its future returns - at least not on a regular and consistent   basis.  Market swing like a pendulum from optimistic to pessimistic and occasionally overshooting which resulted in a panic situation. In the long-run, corporate earnings and dividends have provided a steady underlying stock market return. 

As investor who has gone through many business and market cycles in the past 19 years of investing, Yes! I still made a  terrible mistake and succumbed to our own biases in trying to time the market. Although we still can feel some ripples effect from US Presidential Election from time to time but I think its impact on the stock market has mostly subsided, as we could see that Dow Jones Index rebounded strongly after that and keep trading at record high recently.

image credit to Izquotes.com Finally, all the financial result for my holding been announced and I’m expecting to collect this dividend amount in 4 th Qtr 2016. Total dividend to be collected in 4 th Qtr will be $ 39,345.39 ***TTL Dividend excluded Return of Capital from Sim Lian ( due to privatization ) and Religare Health Trust ( on partial asset disposal ).

《每个人心中都有一把尺 》 We often look at things by setting our own standards and base on our own yardsticks and the same applies to the company’s valuation. Everyone may have their biases when comes to valuation and value is more than just a number. All Valuation is Biased !! According to Aswath Damodaran ( a Professor of Finance at NYU’s Stern School of Business ) in his book “ The Little Book of Valuation “ try to warn us that “all valuation is subjected to biased “. “ You almost never start valuing a company or stock with a blank slate. All too often, you view on a company or stock are formed before you start inputting the numbers into the model and metrics that you use and not surprisingly, your conclusions tend to reflect your biases. The bias in the process starts with the companies you choose to value. 

These two pieces of news from The Business Time (Weekend) on 5 Nov made me think and write this blog post eventually. P2P Investors in a fix as car firm director “disappears “ “ Crowdfunding investors are likely on the hook for roughly $600,000 in loads to parallel importer named TLC Cars that failed to deliver on sold vehicles – and the director is now uncontactable . “ write the paper. P2P (peer-to-peer ) investment platform and Crowdfunding seems to get popular in Singapore with many platforms being established recently, like “ Capital Match, MoolahSense, Funding Societies, New Union, coasset.com etc “

From Tree to Kite  image credit to Economist.com A report compiled with the Japanese government’s co-operation a few years ago warned that by 2060 the number of Japanese will have fallen from 127 m to about 87 m, of whom almost 40% will be 65 or older.   The 2012 government report said that without the policy change , by 2110 the number of Japanese could fall to 42.9 m, i.e just a third of its current population.

The signal and the noise Who is Nate Silver? Nathaniel Read   " Nate "   Silver   (born January 13, 1978) is an American   statistician   and   writer   who analyzes   baseball   and elections. He is currently the editor-in-chief of   ESPN's   FiveThirtyEight   and a Special Correspondent for   ABC News.  Silver first gained public recognition for developing   PECOTA ,   a system for forecasting the performance and career development of   Major League Baseball   players, which he sold to and then managed for   Baseball Prospectus   from 2003 to 2009.

Risks of Living on Dividend Income “ Dividend income ” investing has been deep-seated in most of investor’s mind, as ways to achieve Financial Independence and living off dividends in retirement is a dream shared by many.  In today’s environment marked by rising life expectancies, extremely low bond yields, and a 7-year bull market, retirees face challenges on all fronts to build a consistent income stream that will last a lifetime . But the questions is “ Can we really depend on just dividend income for our retirement or is it sustainable ?”.

The market always moves in Cycle image credit to livejapan.com There are numerous versions of views and ideas developed by various market pundits and investors on market cycles, including Robert Precher’s Elliot Wave Theory, Harry Dent’s long-wave theories and Ray Dalio’s debt cycle theories . The cycles could be as long as “ Kondratiev waves ” ( 45-60 years ) or  shorter as  “ Kitchin cycle “ ( 3-5 years ). These cycles are closely tied with large-scale economic business cycles and have an important impact on investment, financial, cash flow and personal retirement planning.

image credit to AZ Quotes.com John M Keynes may be famous for his metaphors of using “ Beauty Contest “ to explain and describe the investors' perception which caused the price fluctuation in the stock market  and “ Musical Chair “ of how investors speculate in the market. You may find these two interesting metaphors here ( Keynes on Beauty Contest ) and here ( Keynes on Musical Chair ) if you have never heard about it.

image credit to CPFBoard.gov.sg It has been continuously being a hot topic about whether one should transfer their CPF money from OA ( Ordinary Account ) to SA ( Special Account ) to earn a higher return of interest rate. Different people ( bloggers ) are having a different view about this issue and each might have their own valid reasons or argument to put forward. 

Game theory has been studied since the 1940s, it has only recently been applied to the world of finance. Game theory champions garnered the 1994 Nobel Prize in Economics, and today the theory is used to analyze everything from the baseball strike to spectrum and casino licenses’ auctions.  Increasingly, game theory is also making its ways to behavioural finance for better understanding and decision making in financial world. According to Financial Post, “ Game Theory is a powerful tool for predicting outcomes of a group of interacting firms where an action of a single firm directly affects the payoff of other participating players. 

SPH might be the best case to study the “ corporate reinventing “ in the local context as it tries to evolve from traditional printed media to a more creative digital world. Corporate Reinventing has happened at such long-term leaders as IBM, Xerox, and Samsung.  Over the past century IBM has gone from manufacturing adding machines to inventing the PC to earning the majority of its revenue from services. 

image credit to trumpexcel.com According to “ Fama & French Forum: “ Distributions of daily and monthly stock returns are rather symmetric about their means, but the tails are fatter (i.e., there are more outliers) than would be expected with normal distributions. (This topic takes up half of Eugene F. Fama's 1964 PhD thesis. Eugene Fama is the 2013 Nobel laureate in economic sciences )  In the old literature on this issue, the popular alternatives to the normal distributions were non-normal symmetric stable distributions (which are fat-tailed relative to the normal ) and t-distributions with low degrees of freedom (which are also fat-tailed). The message for investors is: expect extreme returns, negative as well as positive. “

How did you track your dividend income? I guess we all have ways to keep track of our stocks transaction in order to calculate our return, be it in the form of CAGR or XIRR .  But how about dividend income ? as an income investor, do you have ways to keep track on your dividend received? Concept explained: What is CAGR & IRR by Investopedia What are the main differences between compound annual growth rate (CAGR) and internal rate of return (IRR)?

Mean Reversion : image credit to asymmetryobservation.com Received inquiry from friends/readers about "plotting regression line " for major stock markets other than STI. Would like to reiterate here that the " regression line " is just a "statistical phenomena " same as other indicators in Technical Analysis where we are just using past price trend or movement to manipulate or so call " forecasting " the future price movement.

My Investing Mentor : We often seek our own “ Guru “ or mentors in our journey of investing and this person represents a role model, someone you look up to and wanted to emulate for all the right reasons. Some may pick international renowned and successful investment gurus like Warren Buffet, Peter Lynch, George Soros , Seth Klarman, Walter Schloss etc.

Time and Speed : What is the very first thing you do when you wake up in the morning? Washing up yourself? Draw your curtain and spring out of bed and do ten push-ups to get your blood pumping in the morning?  Thinking of the colour of a shirt to dress? No, the first thing everyone does, checks the time. ( some may argue that, no, is opening your eye first… kidding :) 

Did you see any patterns in below charts /images? Can you relate this to Investing? image credit to amazon.com.cg image credit to home.com image credit to amazon.com .sg

Stumbling upon this blog post from one of the famous Financial Blogger from HKG ( 取之有道 ) Other than the famous “Rule of 72” which is well known by most of the value investors, below are few more mathematical concepts which I think is also rather important for anyone who is involving in stock investing. Concept explained : Rule of 72 ( by Investopedia ) The ' Rule of 72 ' is a simplified way to determine how long an investment will take to double, given a fixed annual rate of interest. By dividing 72 by the annual   rate of return , investors can get a rough estimate of how many years it will take for the initial investment to duplicate itself.

<Edited with additional info and video clip > Investment Success: Skill or Luck? We always attribute our success in life or any aspect in life ( e.g career development /doing business / investing ) to our skill or performance but does  “luck”  has any place in these successful events. If we think that  skill  ( talent ) play a very important role in investing,, then you may find that some very talented or intelligent people fail in investing ( e.g Newton ), and if you think that investing is purely on luck, then we may have a puzzle to explain the success of great investors like Warren Buffett or Peter Lynn and others in beating the markets for multiple years.

Will there be another market crash in 2017? The unlucky 7 Whenever there is a year ending with 7, the stock market will collapse and have a crisis. For example, the name for the   1987   stock market crisis is Black Monday. Interest parity arbitrage trading and currency war fueled the   Asian Crisis   in   1997 . It involves borrowing a cheap currency with low yields and investing in a stable currency with higher yields to earn spread income, known as  positive carry.  Hence the name,  carry trades.

I guess most investors also having experience of buying a unit trusts (aka mutual fund) or maybe having unit trust in their portfolio at a certain point of their investing life.  Depending on the situation, some may have bitter experience and few lucky one may have made money from their investment in unit trusts.

Forecasting or predicting the market movement Sometimes I have been asked by friends on how well the market or certain stocks perform in coming months or what will be the direction of index moving towards in next year or so.  Even in every investment seminars, one may notice that the most question people like to ask those investment “ Gurus “ will be “ how do you think the prospect of STI index in 20XX ? or What do you think about the performance of the Bank / O&G / property sector in the next few months?

How to Lie with statistics! As an investor, we have been bombarded by news and statistics every minutes and second, as we know well, some of this news been exaggerated and statistics or figures used also questionable.  We need to understand the figure behind these statistics and how is it derived to ensure that we have not been lied by statistics.  “ How to Lie with statistics “ is a fascinating and short book ( only 122 pages ).  Although this book is written in 1954, the contents & principles still very much relevant and just as valid in today’s context  (perhaps even more so, as it's so easy to acquire statistics due to our current technology). Darrell Huff gives people the tools to talk back to statistics.

祝大家“ 中秋节快乐！”  No posting about investing today and I would like to wish all my friends and readers a very happy  " Mid-Autumn Festival "  and enjoy your gathering & bonding with your loved one & family members.

what if ? This is a fascinating and interesting book by Randall Munroe , a former NASA roboticist with a degree in Physics and also the author of xkcd: volume 0 ( a stick-figure webcomic ) . Munroe get thousands of questions submitted by readers and he answers a modest subset of those that not only pique his interest but are amusing and offer the potential to use real science to explore concepts, the world around us, and day-to-day mysteries of life and the universe.

Saving vs Investing : Everyone wants to be the genius investor who would beat the market and turn a small amount of cash into a fortune.  We continuously search for “ multi-bagger “ in our investment portfolio, unfortunately, it's pretty difficult to do that and hard to achieve “ Alpha “ by most of retail investors.

Dividend vs Share Buyback Why the US market is trading upward even as investors big and small are selling? According to an article from Fortune, most people assume what has kept the market afloat this year after sinking 11% at the start of the year was a mixture of better news out of China, oil prices stabilizing, and indications that the Fed won’t raise rates as much as a thought. But the real thing buoying the market could be something else: stock buybacks.

What is the 'Gambler's Fallacy' image credit to lanieshope.org The gambler's fallacy is when an individual erroneously believes that the onset of a certain random event is less likely to happen following an event or a series of events. This line of thinking is incorrect because past events do not change the probability that certain events will occur in the future.

Yes, I’m a “ speculator “, is really hard to differentiate and draw a dividing line between “speculator and investors “ as both words being used interchangeably from time to time, depending on the situation, one was in. Sometimes I noticed that people buying certain stock in anticipating the price will move up soon,, but when the price dropped eventually, he suddenly became an “investor “ that claiming to hold the stock for the long term. Hence we say in Chinese: 投资 投机 只是一线之差 ！

孟子 曰： 天时不如地利，地利不如人和 。 According to Mencius studies, the “ 人和 “ (or People’s Harmonization ) is the most important part of any war game or the battle, same apply for investment, I think this is the most difficult and challenging  part, yet the most vital to ensure the success of our investing in stocks. The Art of War ( 孙子兵法 ) , Sun Tzu, a Chinese military philosopher and the strategist in the 6th century BC, he mentioned : 知己知彼 , 百战百胜

When Alpha Becomes Beta What is Alpha? The concept explains: ( From Investopedia ) As a measure of   performance   on a risk-adjusted basis. Alpha, often considered the   active return on an investment, gauges the performance of an investment against a   market index   used as a   benchmark since they are often considered to represent the   market’s   movement as a whole. The   excess returns   of a fund   relative to the   return   of a benchmark   index are the fund's alpha.