Author Archive

Posted on March 4, 2010 - by La Papillion

Daring to dream big

After a night of chatting with AK, who is truly inspirational, thoughts began to come to me until I can formulate a 10 yr plan. This plan occurred to me while I was on my way to work this morning. As a ‘big-picture’ kind of plan, it must be simple enough for me to be able to work out the sums with just a handphone or mentally, and also simple enough to be able to explain it to someone without that person going ‘duh’.

Let me share with you:

The goal of the plan is to be able to stop working when I wish to, that is to reach financial freedom. Since my average monthly expenses is around 2.5k, let’s put a good passive income as 3k per month. I thought of 2 plans.

Plan A:

Since I need to get 3k per month, the sum goes like this:

3 k per month x 12 months = 36k per year

If I’m able to invest at 10% yield, I’ll need 360k of capital base in order to get 36k of income stream. So the question is how to get that 360k capital base. For simplicity, let’s round to 400k. Let’s ignore all the complicating compounding and keep it simple. If I’m able to save 50k per year, I’ll need 8 yrs of savings to reach that capital base.

10%?? Too much? Let’s put it at 8% – which means I need 450k and that will take 9 years. Let’s put it as 10 yrs savings at 50k per year. Read more…

Posted on February 18, 2010 - by La Papillion

The curse of Sisyphus

After watching the movie Percy Jackson and the Lightning Thief, I was inspired to relate another greek mythology to modern life, specifically with relations to the market. I’ve blogged about Odysseus and the siren’s song previously and had much fun doing so :)

It was said that there was a king named Sisyphus who was cursed in Tartarus (a place darker and worse than Hades) by Zeus. The nature of his crime is immaterial here but suffice to say, it is a punishment for Sisyphus’s hubristic beliefs, for this punishment is a grave one. He is tasked to roll a bounder up a hill but always, just before the boulder reaches the top, it will roll back down again and Sisyphus would be forced to repeat the task again and again for eternity. Essentially, it’s a task doomed to fail – a punishment meted out for an eternity in frustration.

Have you ever had a stock that you ride up all the way above its 52 week’s high and ride it down all the way down below your buy price? Read more…

Posted on February 10, 2010 - by La Papillion

The siren’s song

Recently, I’ve heard a lot of people wanting to get into the stock market. They really think the market is their mother, who is there to give them milk. These people do not have an emergency funds set aside, do not have adequate insurance, and worse of all, do not have savings. Yet they are all too ready to jump into the market after reading some rags to riches success stories displayed so prominently every sunday in the newspaper.

Alas, they got the sequence all wrong.

First, you need a good job that pays reasonably well, so that you can begin to save up a big amount. Then you need to protect that amount from unexpected circumstances. After which, you can then start thinking on how to best grow your savings. I see many people going straight to the ‘growing’ part without the first and second foundations laid properly.

But you know, I’ve been ranting on and off about this, I don’t think I should talk more about it. Let them find their own mistakes to learn from. When the musical chairs end, they will realise that there are not enough chairs and someone had to be left standing. Read more…

Posted on February 5, 2010 - by La Papillion

Endowment plan option for education fund

I was here and there discussing endowment plan, as a viable option to save up for child’s education, with a few other bloggers. I had already shared my views in my previous posting here, so I would just like to substantiate with actual benefit illustrations. I would withhold the actual benefit illustrations, but will put up a summary of three companies that my very hardworking girlfriend had put up for me. She did the entire comparison herself, kudos to her!

A few key assumptions:

1. The endowment plan is bought on the life of my hypothetical kid, aged 1 on the next birthday

2. The proposer of the plan is me, aged 33 on my next birthday, non-smoker

3. The plan is bought with a rider, which waives off all future premium in the event that the proposer (aka me) kena death, TPD or CI

4. The plan has a sum assured of 30k over a duration of 20 yrs.

Okay, with the key assumptions laid out, here’s the summary of the three plans that my gf had done up for me. I will mosaic the names of the three companies mentioned. If you need their names, liase with me and I’ll fix you up with my gf. She’s an independent financial advisor, just to sell her koyok here.
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Posted on January 29, 2010 - by La Papillion

Begone idealistic youth!

When I was younger, I was quite idealistic. This kind of idealism must have come from a limited world view due to underexposure to reality, or simple a sheltered kind of environment. As I get older, I realised that things don’t always go according to what I think. Here are some things that was idealistic about:

1. I wanted to get 10-12% returns from the market per year, because I read from books that the equity returns over the long term is around 8% for average investors. And I’m above the average investors.

2. I thought that the market only have two kinds of stocks – dividends or growth stocks. Dividend stocks means that there is no growth anymore while growth stocks means that there is a huge chance of capital gains. I used to like growth and detest dividend stocks. Read more…

Posted on January 2, 2010 - by La Papillion

Bored old man on a new year’s eve

New year’s eve, I’m back home at 9 pm already. Let all the hot gals and hunks cheong their heads off while I’m back home, nice and comfy typing an article. Haha, getting old I suppose, but I never really like the crowds and the cacophony that follows in such a countdown event. If you spot me in such events, most likely you’ve got the wrong person.

As I was walking home, I was thinking about the problems related to using dividend yielding stocks as a passive stream of income.

These are the things I think are worth thinking about:

1. Longevity of the passive income stream.

I think this is the most important thing when buying divy stocks like the one I had, CIT. It can give you 10% or 15% per annum, but how long can it last? Don’t give me the bull about defensive stocks either because in a bear market, nothing is defensive and in an accounting fraud, nothing is immune. I’m just thinking that if I have to bank my passive income on a bunch of diversified stocks yielding good dividends, I’m not going to sleep soundly at night. I mean really really soundly.
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Posted on December 27, 2009 - by La Papillion

Christmas day’s reflections

The more I stay in the market, the more I realised that being calm and steady is the only way to win consistently. I’ve dealt with higher volatile instruments before and the conclusion is that you don’t want to be too happy when you win and too sad when you lose. In the short run, what you see is the variability of your system, not the returns. A short run of good wins will be interrupted by a short run of bad losses.

Since today is Hohoho day, I use the opportunity to hammer in some reminders for myself with regards to my love-hate-relationship with the market. Not in any particular order of importance,

1. Be zen. Treat both your wins and your losses with equanimity.

For the boh tak chek, equanimity describes the unattached awareness of one’s experience as a result of perceiving the impermanence of momentary reality. It is a peace of mind and abiding calmness that cannot be shaken by any grade of both fortunate circumstance and unfortunate one.
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Posted on December 22, 2009 - by La Papillion

A friend and his guru friends

I heard this story from a friend of a friend. He was walking along Raffles city, on the way to run some errand when his broker texted him, saying that NOL is a good buy because of some news or some reports. Whether it’s actual news or just rumors is not important, it’s sufficient to know that there are some catalyst to trigger the price and he promptly told his broker to buy 10 lots of it.

After he crossed a road, he met his friend, who is known to be a guru at technical analysis (TA). This TA guru told him that NOL broke out of range, and the macd lines are going to cross over. Yesterday’s candlestick shows a bullish engulfing pattern, with the volume being at least 20% higher than the average volume for the past few weeks. This, the guru told him, is a good sign to buy more. Our hero in this story, let’s call him Joe, called up his broker again to buy up another 10 lots on hearing this very positive review of NOL’s charts. He is going to make some money! Read more…

Posted on December 17, 2009 - by La Papillion

An uncertain world and its asymmetrical payoffs

I read a silly post about critical illness. That person commented that there’s no need to get critical illness coverage because the probability of claiming such things are very low, to the tune of 5% during their working life. A hospitalization and surgery plan (H&S) is enough. I disagree fully with the comment that having a low probability of claim means that there is no need to cover for it. I shall not comment on whether a H&S plan is sufficient.

The comments made me wonder if people are confused with the probability and the payoffs. The consequence of an event happening are often more important than the probability of occurrence.

Let’s play a very sick game of russian roulette. Inside the chamber, there are 6 slots with only 1 live bullet. If you press the barrel against your temple and squeeze the trigger, you’ll immediately be given $5 million SGD if you survive. The probability of getting the bullet is 1/6 and you have 5/6 chance of getting the $5 million SGD. Would you play? Read more…

Posted on December 8, 2009 - by La Papillion

The blind men and the elephant

This is probably one of the strongest post I’d made on the TA vs FA topic. If you feel offended, I’m sorry.

When I started out in the market, I had no clues what is FA (fundamental analysis) and TA (technical analysis). I basically just buy based on broker’s reports and hearsay. I remember scanning through CNA forum everyday to pick out those hot counters that people are punting on. Eventually I noticed that the top 30 volume in sgx are these weird little counters that looked like this: STI2750SGAeCW100128 and their % changes each day are superb. I started buying and selling these and eventually started out on TA so that I can understand better the movements of these warrants (notice the order that I learnt TA).

So I started on TA, work out alright and not as magical as I thought. You know, when you just started on TA, I’m looking out for the magic parameters, the magic indicators so that if I knew what those were, I could predict the market. I didn’t realise that TA is just a way to see the market. There’s no magic parameters and magic indicators to make big bucks. I gave up on it after some time when someone introduced me to value investing.
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