STE's Stocks Investing Journey

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 :)