Author: Growing your tree of prosperity

Dealing with the hypocrisy surrounding academic achievement in Singapore.

The inspiration for the post came about because I am currently reading Private Education Singapore : Contemporary Issues and Challenges by Sam Choon-Yin, the Dean of PSB Academy. I picked this book up out of personal curiosity and, given my career plans, I really have no business sticking my nose into Private Education industry in Singapore but the information contained within the tome is too interesting for me to miss out on it. More details will follow once I finish the book but I just want to share some ideas surrounding Singapore’s inherent hypocrisy around academic achievements and how...

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Efficiently Inefficient #9 : The notion of Quality in Discretionary Equity Investing

As a follow to our previous article, we will delve deeper into discretionary equity investing. Remember that discretionary equity investing can be challenging task as the field is highly competitive and there are a lot of brains chasing the same few investments in the market. It largely boils down to what investors perceive as the quality of a company: a) Growth It’s easy to just reduce growth to one metric like compound annual growth rate of revenue, but I can hardly see it work when I back-test portfolios which use this criteria. Good sustainable growth can result in bigger...

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Slapping your face to look prosperous.

I am blogging from SMU where I am looking for textbooks to buy and read. ( By now, reading textbooks and academic papers have become more interesting than management books which are becoming just an endless stream of narratives with no unifying theme or point. Another point to select an ace engineer : Find out whether he reads IEEE papers. ) Two issues ago The Economist published a short article about folks belonging to the lower income group who have a propensity to overspend on branded goods. It was discovered that as we move towards the lowest quintile of...

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Personal update : Mid-term break is upon us !

It’s time for another personal update. I’ve been suffering from diarrhoea for the past two days but was only put on medication this morning. a) Part B preparations We’ve reached the mid-point for my Bar Preparation Course. I was still reviewing my course materials this morning and preparing for future tutorials until I found out that my mid-term break would last two weeks instead of one. This puts off a fair bit of pressure off me until next week. I just need to consolidate the tutorials I’ve been having so far. b) Bleak future for the fresh legal graduates...

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Efficiently Inefficient #8 : The promised backtesting results.

As promised, I tried accessing a Bloomberg terminal to backtest some of the ideas from TUB investing. Here are my findings : a) Dividends per unit P/B ratio was a strong screen. Dividends generally do well in backtests. Putting up a screen incorporating the cheapness of a stock makes it even better. There is some research done this year in the Financial Analysts Journals which back-up my findings. In fact, using Dividends divided by P/B ratio and setting it above a threshold value to target around 20 stocks yielded a return about 13.6% with a semi-variance of 13.51%. Returns...

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Anonymous insurance agents declare war on financial blogosphere !!!

The financial blogosphere was a friendly place. I’d like to point out that I did not start with a good general impression of some of my fellows financial bloggers such as Tim Ho from Dollars & Sense because, at that time,  I harboured some doubts about whether Dollars and Sense can be unbiased in light of their commercial interests. Over time, my respect for them grew and they seem earnest about giving the best possible advice to the readers. I should also mention that they often organise free events for bloggers to come together to give an unbiased look...

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Ancient wisdom from Kuala Lumpur made relevant for Investors !

I was in KL to support my mum for some family matters over the weekend and I was unable to put up articles on this blog, but now I am back an between my lectures and tutorials. KL is the land of great wisdom and my relatives have shared with me the ancient proverbs of Hakka/Cantonese origin. Unfortunately, while I am able to adapt these proverbs for investing, I am unable to transcribe their pronunciation on this blog. As of now, I can’t even tell whether they are Hakka or even Cantonese in origin. a) Flying a kite with...

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Efficiently Inefficient #7 : What kind of equity investor are you ?

Today’s article is short as we’re moving into equity investing territory and I don’t want to burden readers with too man equations on discounted cash or the residual method in equity valuation. Instead, when you read anther investment blogger, try to see whether you can lump him or her into one of the two categories : a) Discretionary equity investor Most financial bloggers fall into this category. These investors use their own personal judgment to decide which stocks to invest in. Typically such investors will use some equity valuation models but will often supplement it with discussions about firm’s...

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Ten Year Series Mentality Amongst Investors

I just experienced how tough it is to be in the investment education business. Like Brian Halim, I was invited to TUB’s value investing seminar. You can check out Brian’s account of today’s event here. A big problem which plagues the business is that investors have this Ten Year Series mentality. They want to skip the entire process of figuring out how to invest and go directly into buying the stocks that is  owned by the information vendor. Just like a secondary school student, they just want the model answers and do not really care for the process. This...

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Efficiently Inefficient #6 : On the costs of trading.

Some folks wrote to me concerning whether my back-testing models incorporate transaction costs. As of today, I kept the settings on transactions mostly default so I expect my models to over-estimate returns. To keep things safe, I always create a benchmark portfolio of equal-weighted STI stocks to compare investment return so that I do not get too carried away when I observe good back-test results. In today’s article, we will look at transaction costs. And as it turns out, it is hard to perfectly simulate transaction costs into a back-testing exercise. One of the most objective definitions of transaction...

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Why finance bloggers are not the prophesied heroes that you are looking for.

This post started out with Whatsapp discussion between friends who examined the difference between paper generals and entrepreneurs. The impression I got from a large part of the discussion is that entrepreneurs are heroes in Singapore society because they dare to take on business risks and very often take a personal stake in their enterprises. On the other hand, paper generals can broadly be used to reflect Singaporeans who were overladen paper qualifications and attain a degree of comfort without risking too much of their skin. This discussion reflects the dreams and desires of the common Singaporean. Everybody wants...

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It is time to harbour some doubts about the STI ETF.

It is now about the right time to start casting doubt on the STI ETF. At this time, a lot of my fellow bloggers have started to integrate the STI ETF into their primary strategies and it would be useful to consider counter-arguments against using the STI ETF as a primary tool to extract market returns from the SGX counters. Before I start, active managers have waged a media campaign against ETFs for quite a while now and you can easily find such articles all over the web. When I criticise ETF strategies, I am not suggesting that we...

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Efficiently Inefficient #5 : General principles of portfolio construction.

This books is really shaping up to be something that is good for novices and the experts. Today I will talk about six very basic principles of portfolio construction. It is actually quite humbling that my own portfolio does not make the cut for all of these principles. a) Diversification The first principle is to diversify your portfolio. This is the only known free lunch in finance. This is best done across asset classes and industries. For folks like me who focus on dividend yields, it is much harder to conform to these principles. I normally look at REITs,...

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New insights from Ramesh s/o Krishnan v AXA Life Insurance SingaporePte Ltd

Sometimes, a lawsuit sheds such interesting insights on the world of financial planning, it becomes impossible to resist making a small mention of it on this blog.   I will not write about the legal issues raised by this case as I expect a lot of more qualified folks to discuss this negligence case in the next few months.   Just two points before my classes start :   A) Persistency ratios.   The insurance industry tracks this very interesting ratio which tracks the percentage of policies sold by an advisor that are still in force after a certain...

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Efficiently Inefficient #4 : Backtest Noob musings.

There are some murmurings that I am emerging as some sort of back-test guru but that cannot be further from the truth. I am still very much of a noob and have a whole lot more to learn. Today I will take about some aspects of backtesting that I will need to straighten out to improve some of my own investing strategies. a) Understanding superior returns The book explains that there are just two sources of superior returns. First, acceptance of liquidity risk. And second, superior information. Back-testing may refers to obtaining of superior information that compares strategies against...

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