Return On Investment vs Return On Luck
|image credit to mymoneyblog.com|
When buying TOTO, everyone thinks ( or at least hopes ) that they will be the “lucky” one to become the next “millionaire” and we all knew that winning 4D or TOTO is just pure luck, but how about investing?
My friend ( Chirs ) from (Growing Your Tree of Prosperity ) have blogged about it here which caught my attention to write about my case and “luck factors “ which have much impact on my of investing.
I have also written a blog about “ (How Much Luck in Investing Success? My Experience in 2008/09)”, on how the “luck factor” really played out during my early years of investing.
As I repeatedly mentioned in my previous blogs, I am not very good in figures and analysing the company’s P&L and Balance Sheet… till now, I am still not really clear why there is huge “ off-balance-sheet” figures sitting on most of the bank’s Balance Sheet. Try to figure out….
Off-Balance Sheet (OBS) < Investopedia.com>
I’m So Dumb but Damn Lucky!
I try to put things into perspective by plotting the chart for my ROI vs STI from 2008 – 2018, in a way that hopefully, it will be easier to compare by using all the trade data and dividends figure I have.
While waiting for the approval of our citizenship application, we sold all our shares/ house in Malaysia in 2007 and putting it into various tranches of FD. The different expiry date of my FD allow me to transfer the fund slowly back to Singapore, bit by bit. Eventually, I only bought 3 stocks in 2008 ( i.e Suntec Reit / MapleTree Log and ESR (Cambridge) ) with a total value of $147K, my subsequent fund transferred mostly in 2009 with total of $562K, with that, I purchased more Suntec/ K-Reit / MapleTree and added Starhill Global.
That’s turned out to be a “perfect timing” and show how lucky I am, it gave me return of +87.5% vs STI ( 73.4% ) in total 2010 & 2012.
I’m Damn Lucky That Hit The Jackpot Twice
You may still remember that in 2011 US Government Debts rating being downgraded and STI started to plunge from July 2011 onward and closed at 2646 with -17.1% by Dec 2011.
From May 2011 – Oct 2011, I have net sold of +$759,447 (cash inflow ) and subsequently bought back -$777,858 (cash outflow ) from Nov 2011 to Aug 2012. With profit-taking in 2011 + dividends, I managed to have positive returns in 2011 ( +12%) and the market rebounded strongly in 2012 which gave me an extraordinary return of +39.6% vs STI of +19.7%.
I am not so sure what you call it if is not “ LUCK “….
But again, I don’t think I will have such a good return again as I am more conservative now and depending on dividend income to survive. Also, the difference was that in 2011 my wife and I were still working and our risk tolerance was totally different at that time.
Case in 2016 ….Emerging Market & China Crisis
We have another smaller “crisis” in 2016 where the market corrected by more than -28.5% from peak registered in Apr 2015 due to “ Chinese stock market turbulence” -link. Obviously, I didn’t take drastic action like the one in 2011 as I have to be more conservative since I am not working anymore and depending on dividend income to cover my expenses.
I have blogged about how I staged my war-chest in early 2016 on AK’s Blog ( you may find the link here ).
STI closed flat in 2016 but around +4% returns inclusive of dividend. ( link here from Dollar and Sense.com)
With a bit more aggressive approach in deploying my war-chest in 2016, I managed to outperform STI by around +6% points. For the first Quarter of 2016, I deployed $140,339 (net cash out-flow) of my war-chest to buy few blue chips ( OCBC/Keppel Corp) and some REITs. Is a really good bargain to buy stocks during the crisis, my average price for OCBC was $7.79 and DBS = $14.47, I hope to buy more in next crisis :D
Again, ‘Luck “ was on my side in 2016…..it just that I am a bit “ Kia-si” this time around. :D
This is another good article on “Luck Factor” in investing which I would like to share:
Posted May 28, 2015, by Ben Carlson
STE vs STI ( Cumulative ) From 2008 -2018
STE ( Cumulative Return ) since 2008: 140.9%
STI (Cumulative Return ) since 2008: 27.04%
STI ( Cumulative Return / Inclusive of Dividend) since 2008 : 64.40%
STI ETF (ES3) ( Dividend Yield ) (link from www.dividend.sg)
My “Lady Luck” has gone in 2018 as my portfolio downed by -17.7% vs STI (-9.8%). The poor performance in 2018 was also partly due to “written off” of $127K Hyflux 6% CPS which I think the chance of getting back the money is slim, even with the latest saga of two new potentials “white knight” appearing to save the company from going into liquidation.
But Hey! Is ok, we have to accept that not every year you will have “luck” to beat the market, under-performing in some years is common and natural for all investors.
My current portfolio’s dividend yield is about 6.3% vs STI ETF (ES3.) TTM of around 3.6%, which is about 2.7% higher than STI. In the long run, I'm sure these “higher than STI dividend yield” may contribute significantly to my portfolio’s overall return.
The overall dividend received has attributed to more than 65% of my total returns, this is “The Power of Dividend “ which I have blogged about it (here Link ).
When you realize how much luck goes into investing, you might change your methods < from MarketWatch.com>
I am still waiting for my last stock ( i.e Accordia Golf Trust) to announce its result and dividend on 28th May 2019. By then, I should be able to tell how much I will be getting in total for my dividend in 2nd Qtr 2019.
Quote Of The Day:
“Whatever success I’ve achieved, I think I’ve achieved it because I’ve been very lucky.” Leon Cooperman, CEO of Omega Advisors