The past few weeks have been a downward slope. Some companies have started to cut senior management’s salary, some have been asked to take unpaid leave while others struggling to survive.

With the world’s economy in a standstill, some companies will not be able to see revenue coming in until 2 quarter later (optimistically). An example would be the airline industry. During the coronovirus episode, governments around the world has stopped air planes from entering into their country to stop the virus spread. As a result, airlines all over the world practically stopped. Not only has revenue have stopped, they might need to do a refund for air tickets for people that are supposed to fly for the next few months. To add insult into injury, some airlines have massive debt!

Can these companies survive?

Navigating crisis is never easy. It will be good to prepare for an emergency even before one happens. For discussion, I’m assuming the business from these companies are affected by this current crisis. For companies to survive, they can do either of the followings.

• Pray that the government will bail them out (let’s hope we don’t get there)
• Borrow money from debt (which will just push the problem into the future)
• Borrow money by issuing new shares (which will dilute shareholder’s equity)
• Have enough cash to get over these crisis 😉

Read more: (Life Hedge: How to prevent your life from being a roller-coaster (Part 1), Life Hedge: How to prevent your life from being a roller-coaster (Part 2))

How do I know if companies have enough cash to get over these crisis?

In personal finance, most of us are familiar with emergency funds. Typically, the sum makes up around 6 months of our basic expenses. It is the same for companies. I want to know if they have emergency funds? Do they have enough cash to pay off their current liability? Does it means if the company have more assets, the better it is? That’s where we can dig into the balance sheet of the company.

Let’s look at Company A. Company A has $50000m worth of quick assets and $25000m worth of current liabilities. This means that is able to meet near term liabilities using it’s quick assets.

PS: Quick assets are assets that can be converted to cash very quickly.

Company B has $100,000m worth of quick assets and $100,000m worth of current liabilities. Even though Company B has more quick assets than Company A, it has more current liabilities. It means that Company B is not as “comprehensive” in preparing to handle its current liabilities as compared to Company A. If we want to compare between 2 companies, we compare their Quick Ratio.

Quick Ratio

The quick ratio indicates a company’s ability to pay its current liabilities without needing to sell its inventory or get additional financing. The higher the ratio, the better a company’s liquidity and financial health; the lower the ratio, the more likely the company will struggle with paying debts.

In the case, Company A’s Quick Ratio is more ideal as compared to Company B.

In my own personal investment, I look at companies with a good quick ratio. This is because I want the company to be able to survive whether in crisis times or not. The health of the company is one way to find out how well the company is run. Why would you want to invest in a company that is heavily in debt?

Bottom Line

No one will care about your money as much as you do. Before you invest in any company or popular investment opportunity, be sure to do your own due diligence. If you wish to learn more about investing, I hope to nurture genuine relationships with all of my readers. Please feel free to contact me on my Instagram (@chengkokoh) or Facebook Page or my Telegram Channel! Or subscribe to our newsletter now!

Life is a series of ups and downs. We go through different seasons in life, explore different emotions and without fail, we make mistakes in life. Some mistakes can be funny to remember, some cringe worthy and some.. just not worth it.

To prevent our life from going out of control, we have certain hedges that we placed on ourselves like not spend our entire bank account on one meal or slapping another person’s face when we are angry. Put simply, a hedge is a way of protecting oneself against financial loss or other adverse circumstances (the people you slapped could be a UFC champion). This protection is important for us to feel safe so that we can live our lives without feeling like it is out of control.

Let’s talk about Amy, her parents are avid gamblers. There was once her parents had to borrow money from her (at that time, we were just 18) to repay the loan sharks. Eventually, the amount that her parents owed was so large that they had to sell away their HDB in Toa Payoh to payoff the debt. In one night, Amy no longer had a roof over her head. Her life just turned 180 degrees and she live her life shuffling between different relatives at different times. That was the last I heard about her.

John Locke, an 17 century English Philosopher once said: “When there is no law, there is no freedom”. If there is no certain laws in place, life could be messy and out of control. Taking things a little recent, Ronald Reagan said: “Law and freedom must be indivisible partners. For without law, there can be no freedom, only chaos and disorder; and without freedom, law is just but a cynical veneer for injustice and oppression”. To use this one a personal level, I can rearrange the above to be “To achieve freedom, there are certain limits I have placed on myself.” (IE: How Can You Stop Buying Shit You Don’t Need?). Without going too deep, let’s limit the discussion to Investing hedge.

Investing Hedge

Unless you are living under a rock (you probably won’t be reading this), there was a global selloff in the market (Covid19) in the last 2 weeks. We are officially in the bear market territory. If you are a millennial, congratulations! You can finally boast that you will live through your first bear market!

Being in the investing scene for a while, I met different types of investors. There are people celebrating this moment and they are also people panicking at the moment (Investing Mistakes I wished I knew).

Ivy is a newly minted investor. She started investing in July 2019 after attending one of the investing programs in Singapore. On 31 Dec 2019, she looked at her P&L (profit and lost) for the year and smiled to herself. Ivy made 35% that year and she started in July. Ivy thought if she could do this for a few years, she could retire in 5 years time. She shared her results with a few of her friends and she REALLY felt good doing so. The happiness continue until the coronavirus came in early 2020. Initially, she saw her portfolio went down by 10%. She thought that was just a small drop and it was normal. After that, her earnings last year was wiped out. Ivy started to feel regret as she didn’t take profits earlier. On 12 March 2020, she saw her portfolio is at -30%. She is starting to feel that investing is a mistake. During my conversation with her, I asked if she had any hedging strategy. She said she was 100% invested as she felt it was a good time to invest. She refused to open her trading account now and feels like investing is like a roller coaster ride! Poor Ivy!

Excellent investors I know have a Plan B. Plan B is a plan to allow us to enjoy the ride. Excellent investors knows that the market will present certain opportunities for them and because of that, they can take certain actions to allow them to enjoy the ride. In this way, they feel excited even when the roller coaster takes them up or down! They do so in three ways.

1. A Cash Hedge

   Excellent investors know the importance of having money during a sale. Can you imagine if the $1,000,000 Dream Condo that you want to buy is now worth $100,000? How many will you buy? Or rather, the more important question is, how many can you buy? When life presents you with the opportunity of the lifetime, are you ready to buy and are you ABLE to buy?
   Imagine if you seized the opportunity and bought 5 $100,000 Condo units. When the market recovers and the price reverts back to $1,000,000. You will now be $4,500,000 richer!

2. An Alternate Asset Hedge

   Some assets class have an inverse co-relation to the stock market. It means if the stock market prices go down, these assets prices will go up. Some people use gold, bonds or bitcoin as an hedge to the stock market. Personally, I don’t think they are perfect hedges. But they work generally well most of the time (disclaimer here). Ray Dalio is famous for his “All Weather Portfolio”. He believes that by combining different asset classes together in different percentage, he can beat the market by doing a re-balancing of his portfolio due the co-relationship between the asset classes.

3. Buy a put option on the stock market

   Put Options is a derivative which advanced investors use to protect their portfolio during a crisis. Essentially, it is like an insurance contract. You pay a premium for a certain protection that we call a strike price. If the stock falls below the strike price, the put options buyer will have to pay you the difference of the strike price to the actual price. This allows their portfolio to remain stable during a crisis. Eventually, they will close their put option contract and allow their portfolio to go back to their previous prices.

Wishing you the best in this period of time. We hope that everyone can remain calm and healthy during this season. It is a season of crisis but it is also a season of opportunity. Invest with what you have and don’t borrow money to invest in this period of time. If you are new to investing and need help, do talk to me using the contact form or any methods listed below.

God Bless.

If you read until here, thank you again for your patience and your support over in 2019. I hope that in 2020, Wealthdojo can continue to value add you. Let us know what you think in the comments below. This is a working article. The above doesn’t represent my stock recommendation in anyway. Please read our disclaimer for more information.

I hope to nurture genuine relationships with all of my readers. Please feel free to contact me on my Instagram (@chengkokoh) or Facebook Page or my Telegram Channel! Or subscribe to our newsletter now!

2020 started with a BANG. At least, it seemed that way for people on Facebook. There were many posts about eating healthy, saving properly and also books to read for 2020. In the posts that was shared, I realised something in common. They were all very positive!

I have been a fan for positive messages. I like reading articles that are motivating because I get motivated just by reading them (Let’s do it people!). However, I noticed that while it works. It only works in a while. (Damn. Don’t you wish it lasted longer?)

Meet Adam (you probably know a version on him in office). Adam is an average office worker who goes to work from 9am to 5pm. After Christmas, Adam folded his arms and realised to his horror that his stomach has gotten bigger. He don’t remember it being that big the last Christmas. Looking at the calendar, Adam sees that it is just 7 more days into the new year and decides that he will start to exercise ONCE the new year begins.

As the year begins, he is MOTIVATED. He starts eating at salad joint. He finishes his work at 5pm and go for a run at night. He tells his colleagues that everything is working well and he has just lost 2 kg in the last 2 weeks. If he is on track, he will reach his fitness goal by the end of June.

In February, work starts to pile up and he starts to do overtime (OT). He barely have time for lunch so he eats chicken rice as it is a quick fix. When he goes home, he feels so tired and just want to sleep.

Guess what. By March, Adam has given up on his fitness goals. (I hope he has done his reflections)

Adam is motivated. However, it is only for the start of the year. Sometimes, life throws us a spanner and things get out of control. Today, instead of talking about positively like all other posts on Facebook, I want to start the year together with you by telling you TO QUIT.

Yes. I want you start the year by QUITTING. I want to share you 3 things to quit this year so that you can improve your life for the better. The below 3 tips are my personal experience and I hope it can be valuable and relevant to you.

Quit Finishing Books

This is massive. I’m an avid reader. I practically eat books for lunch. However, this has been one of my most painful lessons that I had to learn last year. I had to QUIT FINISHING BOOKS.

Imagine this: you start watching a new TV show. It has four seasons and nearly 50 episodes of content. You get four episodes into the show and are not enjoying it. Would you force yourself to plow through the show, finishing all four seasons? Or would you just quit?

Most of us quit. Yet, when faced with the same situation with a book, most of us feel as though we should POWER THROUGH and finish 500 pages. This makes no sense at all! Last year, I bought several investment books that I wanted to read. I was all excited when the books arrived from book depository. It has take 3 weeks to arrive and I practically rip the package to dig out the book. After reading for 5 minutes, I felt that there was this huge disconnect between the author and I.

Did you think I gave up?

NO! I POWER THROUGH ALL 500 PAGES SPENDING 3 MONTHS OF UNPRODUCTIVE READING. 

Our ability to read quickly mostly depends on FOCUS. Our ability to retain information mostly depends on memory. Humans focus on things they enjoy. They also remember things they enjoy. Therefore, the first and most obvious rule of reading and retaining more information is to be ruthless and only reading books you truly enjoy reading.

My personal guide is to give a book a chance. I will give it 10% of its length to win me over (500 page book means I read the first 50 pages, 250 pages means I read the first 25, etc.) If I’m not won over by 10%, I check the table of contents to see if I want to skip to a later chapter that looks interesting. If that chapter doesn’t grab me, then I QUIT.

Quitting books goes for chapters or even sections. Investing books repeat themselves a lot (A.K.A Definition of PE Ratio/The power of compound effect etc). If I’m reading a book I’m already familiar with that chapter… I QUIT that chapter! No regrets. Books are meant to serve you, not the other way around.

QUIT CHASING RESULTS (OTHERS) 

At the start of the year, I saw many of these results on Facebook. 39% is an respectable return on investment. If we take the rule of 72, it will just take slightly less than 2 years to double your money! That’s incredible. Imagine you have $100,000 and it becomes $200,000 in less than 2 years. For someone new to investing, this might seem like the holy grail to your financial freedom. That’s fantastic results. Before you get light headed, let’s look at a research done by Bank Of America.

This shows that in 2019, the entire stock market is expected to be up 30% to 40% anyway! If you see their ROI is 39%, it doesn’t mean their results is exceptional and in fact it is expected! To be a great investor, he should have to perform ABOVE the market norm.

We might be seeing people chasing a 39% return this year as people already feel that they can get it last year. QUIT CHASING RESULTS (without knowing the context).

This could apply to many things to life as well. I know people who are chasing after a nice Condominium, a nice Mercedes Ben or a nice trip to U.S.A. It is usually all over Instagram. Personally, I believe that life is short and we should enjoy every moment of it. However, CHASING AFTER THINGS WON”T MAKE YOU HAPPY.

If you are chasing after what other people have, if you are chasing an unrealistic goal which you set for yourself, QUIT CHASING THEM. Find out what truly make you happy.

QUIT SIDETRACKING

I woke up this morning and plan to go for a run. This year, my fitness goal is to get GOLD in my IPPT. I then decided to go to the kitchen to fill my bottle up. 2 hours later, I’m out meeting my clients.

Did I run? NO.

Why is that so? Because, my mind was occupied by other things. (I need to fill my bottle up now)

Have this happen to you before? You wanted to do something but then life suddenly takes over and the opportunity to do is gone. I was having a chat with my friend, Christina Ho (who is obsessed with productivity) and we were sharing on things that we plan but DID NOT DO. If you meet Christina, she’s one of the most enthusiastic person who will scrub all the seashells on the beach to prove her point. We were frustrated and sometimes discouraged when we were unable to achieve what we set out to do. We don’t have the lack of motivation. But why does this happen to us?

From a corner of Yakun that I met her, a young father blurted out to his son “You have to pull up your sock“.

Whatever context the young father has said it in, the phrase “PULL UP YOUR SOCK” was stuck to me. I decided to experiment on myself and that experiment helped me achieve my fitness goal last year. It is very simple. When I want to run, I will PUT ON ONE SOCK. That awkward sock on my feet helped me remember that I have to go running and it kept me from constantly being sidetracked!

It worked so well, that I decided to use this in various aspect of life!

If you have goals this year that you really want to achieve, QUIT SIDETRACKING and PULL ON ONE SOCK!

Conclusion

I QUIT! Today, make it a point to quit 1 of the above.

If you read until here, thank you again for your patience and your support over in 2019. I hope that in 2020, Wealthdojo can continue to value add you. Let us know what you think in the comments below.

By the way, we are having the first Wealthdojo Seminar in 2020. We hope to see you and your friends in this seminar. Seats are limited and available on a first come first serve basis. You can find more information regarding the seminar here.

-> R.E.V. v2: Create Passive Income without Financial Knowledge <-

We will be having a 16% discount for readers of this post. Simply quote “IQUIT” to be eligible for the promotion price for the seminar.

I hope to nurture genuine relationships with all of my readers. Please feel free to contact me on my Instagram (@chengkokoh) or Facebook Page!