No Magic like Alibaba's

Purchased more of Alibaba.

101 reasons why I think its a good choice, but more importantly, why not.

Uncle Jack Ma's got my back.

'Nuff said.

Mid-August Short Update

I have been pretty busy with work lately, so keeping this short.

Dividends for Barclays has come in and I am converting it into shares. Honestly, I will have to admit it's based on my initial analysis of Barclays earlier. I did not consider the dollar to dollar equivalent or whether it was worth it to re-invest the money elsewhere; the dividend isn't large.

No new stock purchases, as I replenish my warchest and prepare to enter a new position. A lack of time to research and also frankly quite highly valued stock prices for great companies means that I have to settle for either undervalued and mediocre companies, or wait for Buffett's "great company at a fair value."

Design Studio tanked recently and I might take a look at the reasons why in a few days time and update. Overall not concerned, that's what the margin of safety is for. Also, time will tell whether it was a good choice or not.

Cheers all!

Livin' in Singapore (Money Talks!)

Let's talk about some numbers here living in sunny Singapore. I always considered Singapore a great place to live... assuming you have tons of money. 

Breaking It Down

Now let's assume you don't have that money and are, like me, recently working and looking to achieve the adult goals of home, marriage and family. Some simple numbers as of 2018 (obtained from various websites with a quick google search.)

A 4-room HDB flat, even with grants, can cost around $280,000, give or take, according to location. We have the more expensive flats in the central location and the cheaper ones around Woodlands and Punggol. 

A wedding can set you down by maybe $30-40,000,  children even more. a 2016 article by Today highlights the cost of  raising a child, which cost on average $260,000. Two or more if you can afford it indeed.

Those are the numbers if you want a child, a house, a wedding today.  That does not include good ol' inflation, which in the past 40 years averaged around 2.60% from 1962 until 2018. You may just about break even if you invest all your money into a DBS Multiplier account, or just shove the money back to the government as saving bonds. That's in a way better than putting it under your pillow, but only marginally better.

Cars. Even the cheapest cars currently cost around $80,000. Correct me if I am wrong here, with all the taxes, COE, fuel rate and stuff, its probably going to be higher than that. 

If we want the adult goals mentioned above, and assuming having two kids, it will be nearly 900k assuming we want two children in our lives messing up our sleep. Those numbers do not look good, especially since the median pay of Singaporeans in the job market is at $4,232, and that amounts to 55k. If we want the full package, it will require nearly 20 years of working just to get those things, and thats assuming we neglect every other aspect of life including eating and drinking. Not that possible of course. 

Now, I may sound extremely negative about all this, but that's not saying I am not happy to be Singaporean. There are some perks that allows Singaporeans to benefit as well. 

I especially like the lack of any taxes on investments. I for one do not need to worry about any capital gains nor dividend tax in Singapore, and that's one beautiful thing. The numbers above may be disheartening, but are entirely possible to clear and still have good savings left, if we embark on the active journey to invest and make our money work for us. 

And I guess that's what this blog is about. Knowing the numbers above, I would say there is a motivation to just hit the brakes on what we think we may want (a car? nah) and focus on how to spend our money and time wiser. It may not be easy to retire at 35 or even 40 unless there is a constant growth in our portfolio, but I would say that if one could retire even 10 years earlier just because of sound investment making, that would legitimately be worth it.

Don't waste your time. Start investing now. Pick up that book that you have been thinking about reading. Read Investopedia. Devour annual reports. Throw some money into the stock market, even as a trial, just so you know how to buy stocks. Stop thinking about doing, and start doing. 

Cheers!

July Update

It's been awhile since I updated the blog. Most of it was due to a near full utilization of my resources, and also due to the fact that I started a new job.

The plan right now is to move at least 50% of my post-CPF salary into various equities, bonds and other investment options.

Truthfully, though, I am pretty disinclined to place my money into bonds, just because I believe a better utilization of my resources can be through ETFs or just choosing common stock. In order to achieve my goal of early retirement, I have to take on a riskier position in terms of my finances, but I would still consider my investment portfolio fairly defensive. It is also imperative that over a longer period of time, we can expect a stable and strong company to be able to consistently outperform most bonds, which is also backed by what Warren Buffet has mentioned multiple times, especially with the low interest rates (albeit growing).

Growth Stocks?

The truth of the matter is that many of the FAANGs and other growth stocks can be very appealing, but the fact is that they can be extremely double-edge swords. Valuations tend towards intrinsic price over time, and overvalued stocks tend to crash down. I know this can be a little hypocritical considering my choices of Alibaba and Alphabet, but these two stocks were chosen for their strong viability in sustaining growth and for their transitions into mature companies. The moats behind the two companies are not something I foresee other companies taking over in the long run. In comparison, the recent facebook drop highlights the fragility of growth stocks, especially in the tech sector. Facebook as a social media site may seem to have a moat now, but it can be argued that it could be easily replaceable just as Myspace was in the past. We can look towards the transition towards instagram and snapchat (granted, of course instagram being bought over), but if in a few short years the transition can be so big, what will be the next thing after instagram?

Value investing?
Design Studio is still something I am keeping my mind on right now, in terms of adding towards the shares. While not necessarily a company with a moat, this company goes more in line with the traditional Graham stock. You can refer to my earlier post on my logic behind the purchase, but I see it as something I may consider adding to, in spite of the small cap and the possible low liquidity.

Moving Forward
Starting a new job means that my focus is fully on doing well in my career path and to obtain a high enough salary to secure my early retirement. Investing however is still paramount to achieving this goal, and I am looking forward to the time when I secure enough REITs and dividend stocks that I can retire on them alone. The magical number for me is $5000 monthly, post-payment of any housing costs, so I look towards achieving that in the next 10 years.

The sky is falling!

Expansionary monetary policy by the Chinese. Trade wars, tariffs. 1997, 2001, 2008, and now maybe 2018?

Is the bull market over? Are we going into a great recession that will leave our stocks destroyed, our savings burnt, our retirement plans over?

Sell, sell, sell, sell everything!

Just kidding.

Price is what you pay, value is what you get.  Frankly, at this point, I see many of my stocks going into the red, and personally, of course, I am slightly concerned. At times like this, I have to wonder whether I have purchased the right stocks, at the right price.

It isn't fun to see the money that you have worked hard to save burnt on the whims of someone's twitter account (*cough*). Funds are slowly retreating and withdrawing and building up their cash reserves, preparing for the bear market that hundreds have predicted for awhile. It is quite evident that the market of 2017 is probably not going to repeat itself in 2018. Or will it? 

The point of all this is that at all times, we just have to remember this : do not let our emotions get the better of us. If the fundamentals of the stock one has purchased is still there, valued properly and with decent enough analysis, one just has to remember that emotions get in the way of our wealth.

I will refer to this white paper by Barclays that showcase the issues with emotional investing: https://wealth.barclays.com/en_gb/home/research/research-centre/white-papers/Behavioural-Finance/Cycle-of-investor-emotions.html

In a bull market, it can be such that it seems like you can close your eyes, randomly choose a stock and it will shoot to the moon. It may not be so as stock prices are overvalued, going to astronomical levels without financial justification for the numbers.

At this point, I would just suggest to people to remember that even those who, if they had held on to their stocks in 2008, and just added more as time went along, would not have bore the brunt of the market's nastiness, but may have recovered from it and even did pretty decently with their portfolio.

In fact, it might be good that the market is now finally correcting itself. There might be more good value purchases and one might find great stocks at great prices, something that has not been that possible for awhile now. 

Buy the right stocks, and close your stock watchlist app so you don't panic and make the wrong choices. Doing nothing may often times be better than trying to do something when it comes to investing.

The Great Singapore Sale is coming soon!

On investing principles (Peter Lynch)

Over the course of my learning in stocks investing, I have a few people that I look up to a lot in understanding their investing methods.

Today's post will be about Peter Lynch and a brief summary of parts of his investment strategy.

As an investor, one should definitely learn about Peter Lynch and his Megallen Fund, which during his management between 1977 and 1990, had an annualized return of 29.2%. By the rule of 72 (it takes you 72 over %returns = number of years for initial investment to double), your money with him would have doubled every 2.5 years. He has thus gone down history as one of the legendary investors of our time.

Lets take a look at some of his core investing principles.

#1: Buy what you know.

Peter Lynch believed in purchasing stocks you will know about well. Inherently, he believes, that if one was working in a company, such as in logistics, for example, one would be better suited in understanding a logistics/3PL company and hence would have an advantage over other investors in this sector. Alternatively, if one uses Netflix, per say, one would probably understand the product well and benefit from it. I will expound on this a bit, as Peter Lynch, of course, did not just meant this in the most basic of terms.

#2 The "Story" behind the company.

Another aspect of his investing principle was that of tackling every nuance of the company to understand what is their appeal over another company. Each company has a story to tell, in terms of its product, its sales, its managers, even the target segment. In line with this, he believed that one's stock investments can be divided into different segments, namely:

The slow growers, the stalwarts, fast growers, cyclical companies, turnarounds, and asset opportunities.

Slow Growers : Large and aging companies, likely to be paying large dividends as growth has become stagnant. I would give an example of Singtel in the Singaporean context. Lynch is not particularly fond of these types of companies.

Stalwarts: Large companies that are still able to grow at 10-20%, in large because the companies have great products but have penetrated the market very well. I would consider a company like Alphabet as a company to put here.

Fast-Growers: the feisty small to mid-cap companies that grow fast, and may not always need to be in fast growing industries. In fact, Peter Lynch prefers that they are not, mostly because attention on a company can push prices up to unreasonable rates (more on this in awhile).

Cyclicals: companies that have cyclical stock prices. An example I would have thought of was that of Micron, but the stock gains by the company in recent months may have relegated it more to that of Stalwart.

Turn-arounds: companies that have battered stock prices, due to many reasons that might or might be temporary. The ability of the stock to turn around may cause the stock price to shoot up. I would consider Design Studio as a company that is in this area, in my own personal opinion.

Asset Opportunities: companies that have great asset opportunities that is hidden from a Wall Street analyst, perhaps found in medical drugs, metals, etc. Lynch has opined that this is where the "buying what you know" comes in best, as one may know about the opportunities inside a company that might help one to benefit from it.

On top of the above, Lynch also believes in finding out more about the opportunities, the pitfalls and to investigate a single stock as much as possible until the story is fleshed out. Even if it is, one has to consider whether the story is able to be played out, or there could be possible problems that will make the story an awful one.

#3 Reasonable prices
Truth be told, as much as the story can be perfect and all that great, there needs to be the right environment for an investment to enter. While Lynch may be considered by some as a growth investor, one can see when reading further that people tend to look at #1 and #2 that they forget that Lynch looks heavily into value as well. As much as he is much more of an active investor than Warren Buffett, both of them agree on the need to find reasonable stocks at reasonable valuations. Even if the story of Amazon may sound amazing, even if the story of Netflix, Tesla, may be so, one has to consider the aspects of earnings and be wary of buying in too late. Never forget the 2000s, when highly valued tech stocks ended up crashing due to unreasonable valuations. As much as I personally am a fan of Elon Musk, for example, I am reluctant to invest in Tesla due to its valuations.
Ultimately, as much as one may understand how Starbucks can sell their coffee, or its atmosphere, we should never just take that as a reason to buy a stock. There needs to be a bigger in depth look into the company, even for a layman investor.

Boring stocks are a favorite of Lynch as well. There is an added benefit to buying boring stocks, such as companies selling cement, elevator manufacturers and etc, as "ugly ducklings" tend to have that reflected in their stock prices, allowing for cheaper bargains.

Ultimately, when one choose to invest in stocks, whether you may be a fan of Buffett or Lynch, always remember that price is what you pay, value is what you get.

Let the Future You Be Happy

Many have questioned my goal on retiring by 35. Some consider it ludicrous and some may smile and nod but think that it is impossible.

I think otherwise, of course. Why else would I commit to this journey?

Yet, there is a part of me that nags at me about whether its possible. Self doubt, you see, can be a great impediment to choosing to retire young. That, and of course, many people who have failed to do so. 

Money talks. Thats the name of the blog. I like this particular explanation of the phrase, which is that of "Money gives one power and influence to help get things done or get one's own way." While some people may scoff and wonder if it is actually possible to retire so young, the whole point of me being on this investing journey is that I want the future me to be glad I did this, so that when future me wants to do the things he desires, he can choose to do so. 

In life, there are so many objects, activities, luxuries that call out to you every second of the day. We are attracted by the Rolex watches, the Kate Spade handbags, the Adidas kicks, and yet we fail to realize that at the end of the day, all these things don't matter. Spending a few thousand dollars, possibly a majority of your salary, to buy luxury goods oftentimes seem crazy to me. I cannot fathom working 40 hour work weeks, day after day after day, just so I can have a watch that tells me time, (or honestly, for many, to show off their "wealth"). To me, money is essentially obtained by trading our time. It does not matter whether we have a job being a cleaner, or earning tens of thousands as a banker, but time slowly ticks away, and by the time we might want to spend the money we have earned, it may be too late.

We trade time for money, and we end up spending our time on random things that most of the times don't really add value to our lives.  The rich man does not need to flaunt his wealth; it is obvious most of the time, through his actions, his command oftentimes in his business. Honestly, why the need for a Rolex?

Many love shopping due to the fact that it can be a good escape from the humdrum of working. Some like to eat at expensive restaurants, because it can be a great escape from working hard for the week. I will not deny that there is an appeal to shopping and dining my days away; they are luxuries, and can be enjoyable to a certain extent. I just, however, would want to ensure that my future self is happy too. I would buy a cheaper watch, if it means that the money could be used in buying my house. I would skip a expensive meal, if it means I had the time to sit back and just relax at home because I have retired early. To me, retiring early is the essence of choosing to no longer trade time for money, and to better use this time to enjoy my life. In the mean time, though, I choose to invest, to use my money as prudently as I can, while still spending enough to make myself and my loved ones around me happy. Someday, hopefully, with the dividends and the returns from my portfolio, I can retire and sit, and just have a nice cup of tea at 3pm somewhere that is definitely not my office.

I would spend enough to make my present self happy, but always make sure that my future self will be satisfied too.