Author Archive

Posted on August 19, 2010 - by La Papillion

Old people don’t need life insurance?

I was browsing through some of the blogs when I saw Mr Tan’s post on insurance. It’s his usual style to advice people to buy term and invest the rest. But that doesn’t attract me – it’s this line:

“There is no need for people to have life insurance when they are old.”

By ‘life insurance’, I take it that he means the whole life variety – those plans that gives a lump sum pay out in the event of death and total permanent disability of the insured person from the inception of the policy till age 100.  This is very different from the very much cheaper term plan where a similar lump sum pay out will be paid out but it is usually up to age 65. However, life insurance these days come along with a critical illness (CI) rider that allows a lump sum payment when it strikes. Since this rider ‘rides’ onto the main plan of the whole life, which is up to age 100, the CI cover will also be up to age 100. I am under the impression that CI stand alone cover up to age 100 is either exorbitant in price or does not exist.

What do we need when we’re old? (more…)

Posted on July 26, 2010 - by La Papillion

How to catch the bottom?

It’s hard to buy right at the bottom. From personal experiences, if I ever bought a counter right at the bottom – the elusive inflection point just before it turns up – it’s just due to sheer luck rather than any godly skills in technical analysis or fundamental analysis. And because it’s just luck, it’s hard to replicate it consistently.

Reflecting from previous years in the market, I spent quite an amount of time and effort to learn the how to catch the bottom and sell at the top. Why the obsession over this? Don’t the masters say that one must “Buy low and sell high”? Yes, they did, but they didn’t say specifically that it must be the bottomost trough and the peakiest peak. Takes me some time to realise that… and I was wondering why I didn’t come to realise it sooner. Silly mistakes made in the past are just that, plain silly. But at that moment of time, you wouldn’t have the wisdom and experience to know otherwise. Optimistically, I take it as a learning process.

Knowing is quite different from doing, however. We all know that we have to lose weight but all the best laid plans set in the night before the morning jog will be laid aside when the alarm rings at 6am the next morning. Doing something requires more than just knowledge – it also requires a suitable dosage of motivation to start the engine going and another dash of determination to carry it through. But human beings being humans, there are always those who are good at starting things and bad at finishing them and vice versa. Read more…

Posted on July 17, 2010 - by La Papillion

When to buy?

I happened to see my buddy unicorn78’s comments that he wanted to get some reits/divy counters but is not sure if now is a good time to get in. I gave that question a fair amount of thought because I’ve asked myself that question a few times too. So, instead of sharing with him alone, I thought it’ll be good once I posted my views, the other more experienced market practitioners can share theirs in the comments.

As we learn more and read more about the market, I’ve no doubt that you’ll definitely come across conflicting advice. One camp would say you should never average down your losses just to get out as it is more risky, the other would say you should buy more as the price gets lower to get a lower average price. Frankly, I’ve done both before. For longcheer, I averaged down as the price gets down until finally I can’t take the losses anymore and cut off that gangrene in my portfolio at a huge loss. For HSBC, I average down and bought even more as the price falls, reducing a huge potential loss and it is now sitting around at breakeven level.

I think advice is one thing but the more important point in making the advice work for you is wisdom. You need to know when the advice is suitable. I believe all the advice works, given the correct condition. Thus, the hardest part is to know when to use which advice. So, that is my disclaimer for all my blog articles.

Here’s what I will consider when answering the question of whether this is a good time to buy reits/divy counters:
(more…)

Posted on July 14, 2010 - by La Papillion

To be a cat

I realised that I have a very relaxed stance towards investing my money these days. It’s not a lack of interest on my part – I mean who wouldn’t want to make more money right? It’s more of a change in attitude in me. Perhaps it’s the general lack of emotions towards my profits or losses that accompanied this change in attitude. This didn’t happen overnight. It happened in bits and pieces over the years, accumulating perhaps like water dripping into a cup until the final droplet of water pushes the surface of the water beyond the boundary of the cup.

In place of viewing my charts and reading up religiously on annual reports, instead of discussing fervently about the entry positions and the merits and demerits of a particular company, I chose to rest and relax. Initially I felt guilt, like I wasn’t doing my part in making the best out of my available time on earth. But as time goes, you see life and death of counters in the stock market and you see life and death of people on earth, and you cannot but realise that there must be a better use of time than being obsessed over all things financial. This epiphany must have hit me quite hard, because I always had a tight rein of things on monetary matters – trying to find the best deals, trying to make the most of my time, trying to beat this beat that… Read more…

Posted on July 7, 2010 - by La Papillion

To milk or to slaughter?

Having sold a dividend yielding counter recently, I was thinking about the age-old problems that plagued me. I was suitably reminded of someone’s analogy (bro8888’s?) that a dividend yielding counter is like a milk cow. Every other time, a milk cow will give off milk, so that you can drink some and sell some, thus giving you a good cash flow. Alternatively, you can sell the milk cow to someone at a good price and get several years worth of ‘future’ milk money now, so that if there’s a mad cow diseases floating around infecting other herds, your future cash stream will be secured because it’s in your hands now. This comes at a cost – you’ll lose your future cash stream and possibly the price of the milk cow might also increase in the future.

To milk or to sell – that is the question

Quite a good analogy to stocks, no? Read more…

Posted on July 4, 2010 - by La Papillion

CAGR II

Recently, I was given an opportunity by a reader to explain more about CAGR. It’s not a brand of cigar. It’s refers to compounded annual growth rate – a calculation to find out the compounded returns per year (note that this is different from simple interest rate). I actually wanted to share how silly this calculation is about but I had a feeling that I’ve written about it donkey years ago. After searching, I realised I did write an article about CAGR here, so I’ll just highlight or perhaps add some points to it.

Frankly, I’ve not used CAGR for years because of I realised that with one calculation, the whole story can be quite distorted. Basically the calculation of CAGR depends on three variables – Future value, present value and time period. The most significant gripe I have about CAGR calculation is the fact that you can get hugely wide differences in value by just changing the variables. Essentially it boils down to a GIGO (garbage in garbage out) system where the output depends firmly on the input that you put it.

CAGR CIGAR is a stick used for smoking, giving a pleasurable feeling afterward

Take a look at this example. Let’s say these are the figures for yearly profit from year 1 to year 4 respectively:

10, 15, 20, 25

Present value: 10
Future value: 25
Time period: 3
CAGR: 35.7% per yr

Here’s another example of yearly profit from year 1 to year 4 respectively: Read more…

Posted on June 15, 2010 - by La Papillion

The velocity of money

I was re-reading this book by Garrett Gunderson – Killing Sacred Cows. It’s a very wonderful book with very refreshing concepts, so I make it a point to revisit some of the concepts espoused in the book every year when I have the time to do so. It’s so easy to read that if you only have time to read one financial book this year, make it this one! You can have a sneak preview of the book here. Since it’s the preview, not all the pages are shown, but I think it’s enough to showcase it’s attractive typesetting and page layout.

I remembered this particularly interesting concept, called the velocity of money. It is borrowed from the discipline of economics but in this case, it’s applied to the field of personal finance. Basically, it’s just an equation that is somewhat similar to the the mathematical form of efficiency. No wonder the concept feels similar to productivity.

This is extracted from the book Killing Sacred Cows by Garrett Gunderson

Basically, the concept is talking about how to keep input at a minimum while increasing as much output as possible. The point here is how to continually extract more output and yet at the same time reduce your input. One example of this is to use the savings you had to buy into financial instruments that gives you a passive income. Then you use the passive income to buy more such instruments that will generate even more passive income. While the input remains the same (which is the initial amount of savings that you put into the instrument in the first place), the output keeps getting higher and higher. This is because the principal and the interest both earns you an interest, thus creating a self feeding loop – exactly how compounding works. Read more…

Posted on June 10, 2010 - by La Papillion

A little reflection

These days I hardly look at the market. I remember when I started, I keep staring at the prices, as if by some eye power, I can change the prices of the stocks that I owned. These days, it’s just a waste of time.

I suppose as I get more mature and hopefully wiser, my feelings and emotions are kept more constant. There are a lot of things that require my time and presence, and I certainly do not want to spend my life staring at numbers jumping on the screen. It’s such a far cry when I first started (on the wrong foot obviously) in the market by trading with warrants. It requires so much time and effort, with my emotion going up and down according to the ups and downs of the ticker. It’s very stressful, not to mention distracting, when you have a job to do as well.

I think going forward, I would reduce the time spent on looking at the watchlist. I foresee that I can only get more busy in my work, thus more of my stocks holding had been changed to hold more dividends. Basically I intend to hold more dividend yielding stocks, such as reits and the standard ‘defensive’ fare, and leave a few bullets here and there to either buy more upon crisis, or trade when I see the opportunities. (more…)

Posted on June 4, 2010 - by La Papillion

SGX – trade review

I was reviewing some of my past trades. This is one of them. The counter here is SGX. It’s not exactly good for trading because the cost of 1 lot is quite high, so while the absolute value might be the same, a higher amount of capital is tied up in case the trade goes wrong. But I do like the cannot-die type of company for trading, so SGX fits perfectly.

Here’s my two trades all depicted in the chart shown below:

What a roller coaster ride we have here…

I had 2 full round trips of SGX. The first was in 15th June 2009, bought at a price of 7.54 (the chart did took into account the drop of the price after its final dividend declared, hence it looks ‘funny’) and sold on 23 July 2009 at a price of 7.84 (again, the chart took into account the drop in price after its final dividend). Since the holding period is rather short, I did not get to enjoy any dividends declared.

Profit: $0.30

The second trip was in 5th Nov 2009 bought at a price of 7.88 and sold on 14th April 2010 at a price of 8.05. I managed to hold for a round of dividends declared at 0.0375, hence it boosted up my profits a little. Read more…

Posted on May 15, 2010 - by La Papillion

Musing over my options for noble

For some strange unfathomable reasons, noble had decided to issue a bonus exercise of 6 bonus shares for every 11 shares held before ex date. Why 11 – a prime number? Wouldn’t it round off nicer if the exercise is 6 for 10, or even 6 for 12? In order to round up nicely, investors must hold shares in multiples of the lowest common multiple of 11 and 1000 (who say maths is useless?). However, 11 is a prime number, so you must have 11 lots at the minimum in order not to end up with odd lots. If not, I think the trailing decimal places in the calculation of your bonus shares will be rounded down.

Each share is trading currently at around $3, so 11 lots will cost $33,000. Not a small sum of money at all for retail investors.

I am holding 2 lots of noble, so I’m trying to find ways to circumvent the problem of odd lots. I knew about the unit share market from poems trading platform. It’s used to trade shares lesser than the board lot size of (usually) 1000 shares. I think somehow, I’ve got to use this feature in order not to end up with odd lots.

Here’s a few ways that I can think of:
(more…)