Why is it not easy to invest in the long run

Why is it not easy to invest in the long run?

In the most recent webinar that I conducted, I asked the participants what are they concerned about when it comes to investing in the long run?

I thought that most people’s answer would the lack of time or the inexperience in the market. It turns out that for most people, they are not too sure if they are doing it right.

Why is it not easy to invest in the long run
Why is it not easy to invest in the long run

If you think about it using a proxy, it is like a person driving on the roads but unsure if they driving properly. If this is not risky, I don’t know what is.

The Why

Fear Of Missing Out FOMO
Fear Of Missing Out FOMO

As we get more plugged into the internet, social news gets spread very quickly. With more people getting stuck at home during the COVID-19 period, we log in more to these social platforms to keep updated on the world around us.

One popular topic is how people are getting rich during the pandemic. Topics like Bitcoin, NFTs, Value Investing or Growth Investing gets thrown around. Because it seems that every Tom, Dick and Harry is doing it, people fear missing out and started participating into these.

Redefine Basics

Investing is the act of allocating resources (usually money) to buy an asset, in hopes of reselling it later at a higher price (Definition from Investopedia).

For most people, they get the concept that they will make money when the price goes up. I believe there is a certain form of Social Investing (a term that I just made up) going around in the recent market. Reddit has made certain stocks like Gamestop pop. Elon Musk has certainly contributed to the popularity of Bitcoin and Tesla. One thing for sure is that prices seems to be influenced by social pressures.

While it has created some millionaires, some people are unsure what they are doing anymore.

The art of investing starts from buying an asset. This concept seems to have lost its’ way in this season.

Our Mind Plays Tricks

Let’s play a game. Find a place to record your answer for Quiz A and B.

Quiz A

Choice #1: You get a 100% chance of getting $50.

Choice #2: You get a 50% chance of getting $100, 50% chance of getting $0.

Write down which one will you choose?

Quiz B

Choice #1: You get a 100% chance of losing $50.

Choice #2: You get a 50% chance of losing $100, 50% chance of losing $0.

In a 1979 experiment by Daniel Kahneman and Amos Tversky, it is discovered that most people choose Choice #1 for Quiz A and Choice #2 for Quiz B.

However, if you understand it mathematically, you should be indifferent between all the 2 choices in Quiz A or Quiz B. The expected value of both Choices in Quiz A are the same (i.e. +$50), while the expected value of both Choices in Quiz B are the same (i.e. -$50), so there should be no difference (at least mathematically) between the Choices in either Quiz. (Thank you Kok Ming for your help)

This tells us that as humans, we feel losses more keenly than gains (loss aversion). That’s probably the reason why you might have taken gains off the table early out of fear and hold onto large losing positions in the hope that they will rebound.

Our minds are not wired to maximise performance but to minimize regret.

Anyway, that’s just one problem. These are other cognitive bias we need to overcome as investors.

Cognitive Bias Investing
Cognitive Bias Investing

So What Can You Do?

Now that you understand that the society and your own mind is against you, what can you do? I would humbly like to suggest 3 steps.

#1: Get financially educated and informed of the investment process.

#2: Focus on the controllable.

#3: Consider a multi asset class portfolio to minimise drawdown.

Why is it not easy to invest in the long run education
Why is it not easy to invest in the long run education

This graph records the S&P500 gains and losses over the past 60 years. The stock market can be considered like the following season (Spring and Winter). The average period for Spring (we love Spring don’t we) is 57 months and the average period for Winter (we don’t like the cold) is 12 months.

IF we are in a crisis now, it typically takes around 12 months before it is spring again. In the more recent COVID-19 crisis, the winter lasted around 6 months (Feb21 to Aug21) before roaring back into Spring again.

It is what you do during winter that determines your financial results. Getting financially educated allows you to prepare for such opportunities.

Dollar Cost Averaging VS Buying the Dips
Dollar Cost Averaging VS Buying the Dips

Let’s assume that you can predict each and every dip (technically impossible) and buy them (further assuming you have the mental resilience to buy at the lowest). Do you know that Dollar Cost Averaging (DCA) beats buying the dip in this time period? Instead of focusing on the unknowns or black swan events, why not focus on what’s controllable which is doing simple Dollar Cost Averaging?

Novel Investor Asset Class Returns TableSource: NovelInvestor.com

As you can see, different asset class performs differently every year. Because our minds are loss averse in nature, we might not be able to weather through each storms if we are only into one asset class. Consider a multi asset portfolio might make it easier for our minds to weather through each storms when it comes.

Final Thoughts

Personally, I’m invested in the long run. In investment, there will be volatility and it is something we have be comfortable with either through education, experience or both.

Do you related to the above? Let me know in the comments below.

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

Biggest Crash In History By Rich Dad

Greatest Crash In History? By Rich Dad

Biggest Crash In History By Rich Dad
Biggest Crash In History By Rich Dad

You probably would have known him. Robert Kiyosaki is famously known for being the author of “Rich Dad, Poor Dad”. My friends and I religiously read his books and I felt that it was a good place to start off with for financial literacy.

The concepts he came up with was simple, easy and gamified. You might have played his Cashflow 101 game in your pursuit of earning knowledge.

This time round, he has gained media attention again for crying the the market will be crashed in October 2021.

A disclaimer as usual. This is by no means a recommendation to buy or sell any securities or financial assets.

His Predictions For October 2021

His thesis: The Evergrande looming default will spread it’s way to the USA market. Debt positions in the US is worsening. Therefore, he feels like it will be good to buy gold, silver and bitcoin but later changed it to keep some in cash.

The above is a possible interpretation from his twitter.

Robert’s Track Record

If you read his books, you will get an idea that Robert is a big fan of debt. He used debt to create huge amount of passive income by purchasing properties.

He also believes that fiat money is worth lesser and lesser due to the extensively QE. As a result, savers are being punished and that hyperinflation will come in future. He is a big believer in Gold because there is value in Gold and have recently talked more about cryptocurrencies.

The very first time (in my memory) when he talked about market crash was in 2015. He believes that a huge market crash will happen in 2016. Of course, it didn’t really happen.

In 2018, he believes that market is going to get a lot worse and we are heading into bear territory. This was the period of time when the FED was raising interest rates.

In 2020, he believes that COVID19 was the final catalyst for the market to move away from traditional assets like stocks and bonds. However, market has already crashed at the time so there wasn’t any prediction for this.

In 2021, he believes that the market will truly crash in Oct 2021.

It is also no secret that he has been talking about investing into Gold, Sliver and Bitcoin.

Biggest Crash In History By Rich Dad Tweet Gold Sliver Bitcoin
Biggest Crash In History By Rich Dad Tweet Gold Sliver Bitcoin

What I Think About His Predictions

Next year, I will be celebrating my 10th year in the financial industry. I read extensively, upgraded my knowledge and here’s what I think about his predictions.

While there is nothing wrong about having a prediction, I personally feel that Robert has a deep sense of distrust in the financial system and he is extremely bearish in nature.

I don’t know whether he is right about this prediction and I’m in no position to say so. However, his money script (more on this in the articles in future) caused him to react very negatively to money. His focus is on money being money. He will be right if people start to question the existence of fiat money and stop using fiat money altogether. As a results, gold silver and bitcoin may become storage of value then. It is a long shot but who knows.

Over the last 5 years, Gold has been doing relatively okay. If he have bought it 5 years ago (as he said he did), Gold would roughly 38% up or around 6% CAGR depending on his entry.

Biggest Crash In History By Rich Dad Gold Prices Trend
Biggest Crash In History By Rich Dad Gold Prices Trend

Final Thoughts

Personally, I’m invested in the long run. In investment, there will be volatility and it is something we have be comfortable with either through education, experience or both. Are you looking to learn about investment?

What do you feel about Robert Kiyosaki’s prediction? Let me know in the comments below.

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

My SRS Portfolio Sept 2021

My SRS Portfolio and Thoughts [Sept 2021]

My SRS Portfolio Sept 2021
My SRS Portfolio Sept 2021

We are done to the last quarter for the year. Have you accomplished your goals? Hope that things have been going well for you. In any case, this article is a simple reporting for my SRS updates.

Disclaimers: This is not and should not be taken as a buy/sell recommendation.

If you would like to see my past quarter thoughts, you can refer to March2021 and June2021.

It is also close to the end of the year, you might be considering SRS investment. Please refer my most read SRS article, 5 Things You Need To Know About SRS to learn more.

My Thoughts And Consideration

My SRS Portfolio Sept 2021 Data
My SRS Portfolio Sept 2021 Data

The elephant in the room is the exposure into Chinese Technology Stocks (SGX:HST). It has obviously pulled down the entire portfolio as 50% of my portfolio is invested into it. Unfortunately, this SRS portfolio is still small and there is a concentration risk that I acknowledged.

Policymakers in China announced regulatory reforms that has impacted sectors like construction (think Evergrande), private education (think TAL Education Group) and Technology companies that are handling data (think Didi).

In the case of my SRS impact, it was due to the technology sector. As you can see in the Top ETF holding for SGX:HST, it haven’t been doing well year to date.

SGX HST ETF Top 25 Holdings
SGX HST ETF Top 25 Holdings

I remain positive in this exposure as this ETF is invested into quality Chinese companies that can deliver sustainable growth in the next 3 to 5 years. With high internet penetration in China, I believe the performance of the companies will follow suit.

SGX: BTOU is a recovery play in the portfolio. The recovery will depend on COVID19 recovery attempts in US. I’m optimistic that the recovery towards working in office will come in 3 to 5 years time.

Lastly, I’m still considering if I should inject new capital into the SRS portfolio.

Final Thoughts

Disclaimer: this is not and should not be taken as a buy/sell recommendation. Like what Charlie Munger famously said: the big money is not in the buying or selling.. but in the waiting.

We have be having a 3 parts webinar for last quarter of the year. Feel free to reach out to me for more information.

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

 

 

Jack Ma's 5 Best Quotes On Life, Business and Relationship

Jack Ma’s 5 Best Quotes On Life, Business and Relationship

It is amazing how a man’s destiny can be changed in one year. Jack Ma, more famously known as the Founder of Alibaba (BABA) has disappeared from the public eye around the time when Ant Group was unable to list on the US stock exchange. China stocks are not having a good year ever since the CCP started to have impose regulations on various sectors. There might be times where you might think dollar cost averaging is not working on Chinese stocks.

That being said, Jack Ma has spoken wisdom on life, business and relationship. I have compiled Top 5 quotes which I particularly enjoy.

Hope that Chinese stocks turn around soon.

Jack Ma's 5 Best Quotes On Life, Business and Relationship
Jack Ma’s 5 Best Quotes On Life, Business and Relationship (Photo Source)

#1: On the path to success, you will notice the successful ones are not whiners, nor do they complain often.

After thinking for a long time, I personally felt that this should be the first one on the list (or on any list). If you ask someone what are the ingredients of success, you might get answers like family background, intelligence, the amount of money they have, the school they come from or being hardworking.

I believe that one point stands above all of those listed above. I’m not undermining any of them but without this one point, the rest might fall short.

The Right Positive Attitude.

In my industry and in the previous companies that I worked for, I noticed a similar pattern. The top performers are usually silent (of course they will be loud performers too) and they do what they are suppose to do diligently. Most of them look at the bright side and are often grateful for what they receive or accomplish in their work. Don’t be mistaken though. They do complaint (they are not saints). After releasing the negative energy, they will pick themselves up again and continue preserving in what they do. In time, most of them find success.

Observe the “more successful” colleagues that you have. Are they like what I have described? Do you want to be like that too?

 

#2: You need the right people, not the best people.

I was inspired by this book called Good To Great by Jim Collins. Jim Collins put together 5 years of research to explain how a company can grow from good to great. In one of the chapter, Jim Collins writes about “getting the right people on the bus“. He didn’t say the best people, but the right people.

The right people or team will figure out how to drive the bus to the direction they want. I believe that everyone gives out a different kind of energy and it is your job (as a leader) to manage that energy. In the world, there are really smart people/best people out there. But if they won’t be able to have the right resonance with the team, they are not right at all. The bus might be driven in a different direction or be broken down entirely.

The right culture takes time to build up and seconds to be broken down. You might have friends who “overstayed” in a role because they enjoyed their colleagues company too much. You probably might have heard of friends who quit their jobs immediately because of a bad manager.

The book Good To Great will give a different dimension in explaining this.

 

#3: When people think too highly of you, you have the responsibility to calm down and be yourself.

One word can summarise this entire sentence: Ego. This comes as a bad joke because I felt that ego might have gotten better of Jack in the last few years.

As we become more successful and people start looking up to you, I believe it is important to remember our roots and how we get there. I have met people who got successful very quickly and (very quickly as well) became arrogant. I like this quote from Will Smith: Money and success don’t change who we are; they merely amplify what is already there. People will see how you treat people and that is an indication on who you are as a person whether successful or not.

The price of ego could be a heavy one and it is up to us to have humility whether successful or not.

What kind of person do you want to be?

 

#4: When doing sales, the first people who will trust you will be strangers. Friends will be shielding against you, fair weather friends will distance from you. Family will look down upon you. The day you finally succeeded, paying the bills for every get-together dinner, entertainment, you will realised: everyone else is present except strangers.

I don’t blame them. As Walter Bradford Cannon once said fight or flight is a physiological reaction that occurs in response to a perceived harmful event, attack, or threat to survival. A sale may seem like a harmful attack to their wallets (whether or not the product/service is useful for them or not). Any and every exposure to a sale person might seem daunting for some.

I know of some friends who put down everything to start a business. It isn’t as glamorous as it seems. Behind the nice Facebook post lies hard work, sweat and tears (not exaggerating). There are also countless heart aches that they (myself inclusive) have experienced in the course of running a business.

  • Working well beyond 9am to 5pm. Some quit their jobs and suddenly they are working 24/7
  • Some might face discouragement from family or their close ones. Some very hurtful sentences include “You have a degree, why do you want to do this?”, “Why don’t you find a proper job?”, “Why are you not setting aside time for the family, is money that important?”, “Why are you not working hard enough (when things are not going well), do you know we have a family to support?”, “I can get this cheaper from Taobao”, “I can do this myself by reading up” etc

Yet, the day you succeeded in the world eyes. Suddenly, the applause comes in. Comments like “I knew you could do it all this time”. I heard this first hand from a friend who successful sold away his business for millions of dollar. However, I would have to say it is not easy. It is hard to suddenly trust someone to buy something straight away. It is even harder to refer them to someone that you know. But for those of you who did, a big thank you.

Do you know someone who is running a business or a practice? Lend them a helping hand. Here are some from I know run great business and I would like to extend to them a helping hand.

Disclaimer: I do not get any referral fees for promoting them. I personally feel that their products and services are great.

Platter With Love: Luxurious Handcrafted Artisanal Gourmet Platters with a Social Mission

OlaBakes: Sweets Made Fresh

Oriental Remedies Group: Bilingual TCM Physicians You Can Trust – #FeelBetterFaster with TCM x Technology

 

#5: Buying Life Insurance cannot change your life; instead it prevents your lifestyle from being changed. After tolling for decades, an illness can wipe out an entire family’s saving by medical bills incurred.

You will not turn bankrupt because of buying insurance but you will cause your loved ones to turn bankrupt if you don’t.

There are certain things we want to happen and certain things we don’t want to happen. In the 21st century, humanity is facing one of the greatest war ever: the war against critical illness. Mortality has improved over the years because of medical innovation. At the very same time, the cost of medical provision has also increase. What seems to be like a death sentence decades ago can now be cured.. but you need money to have access to that treatment.

After chatting with past critical illness survivors, I realised that concern of falling ill runs deeper than just the cost. At the end, affording the treatment is the start. Recovering from the illness is the end game. Give yourself a chance to win this game by having the adequate insurance.

 

Final Thoughts

Let’s all thrive in our lives, business and relationships.

Stay Safe.

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

Why Dollar Cost Averaging is Not Working On China's Stocks

Why Dollar Cost Averaging is Not Working On China’s Stocks?

Why Dollar Cost Averaging is Not Working On China's Stocks
Why Dollar Cost Averaging is Not Working On China’s Stocks… yet.

The last 2 weeks was a bumpy one for China’s stocks. Technology companies ranging from Alibaba, Tencent, Didi and all the way to the educational sector pretty much spooked investors all over the world. There was massive selling and it seemed to have paused after JD reported good earnings.

Some of these company’s valuation are getting attractive once again as prices corrected in the last 2 weeks. This wasn’t music to the ears for those that are already invested. On the ground, I heard of many investors who took this opportunity to average down (buying at lower prices to lower the average prices). However, some investors seemed to have cracked under pressure and started asking why dollar cost averaging is not working.

Today, this article seeks to explain why dollar cost averaging is not working on China’s stocks… yet.

What is Dollar Cost Averaging (DCA)?

You probably have heard of this term Dollar Cost Averaging (DCA) from a friendly Financial Services Consultant as he was talking about investment. This strategy was made popular to retail investors as a way to invest by reducing the impact on volatility (the ups and downs) in the stock market.

“Time in the market, not timing the market”. This quote always serves as a reminder that investing (not speculation) is about being in the market and not timing the market. (Read More: Why Buy Low And Sell High Is Useless Advice).

Dollar Cost Averaging
Dollar Cost Averaging (Source)

The power of dollar cost averaging is making volatility your friend by buying at regular intervals. It is your objective to own as many shares as possible. In the above example, you are invest $1000 for 6 months.

Month #1: Share Price $10. You will be able to buy 100 shares ($1000/10 = 100)

Month #2: Share Price $13. You will be able to buy 77 shares now ($1000/13 ≈ 77). You have 177 (100+77) shares now. The total capital is $2000. The total value of your shares $2301 (177*$13). At this moment, you are profiting $301.

Month #3: Share Price $6. You will be able to buy 167 shares now ($1000/6 ≈ 167). You have 344 (100+77+167) shares now. The total capital is $3000. The total value of your shares $2064 (344*$6).  At this moment, you are losing $939. Most people starts to open their warchest now.

Month #4: Share Price $10.98. You will be able to buy 91 shares now ($1000/10.98 ≈ 91). You have 435 (100+77+167+91) shares now. The total capital is $4000. The total value of your shares $4776.30 (435*$10.98). At this moment, you are profiting $776.30 again. You are happy again.

Month #5: Share Price $7. You will be able to buy 143 shares ($1000/7≈143). You have 578 (100+77+167+91+143) shares now. The total capital is $5000. The total value of your shares $4046 (578*7). At this moment, you are losing $954 again. Some people start to freak out and wonder why dollar cost averaging is not working. In the case of China, the chart has been one direction downwards and “the moment” in the time for losses are prolonged.

This is the reason why people feel that dollar cost averaging is not working… yet.

Month #6: Share Price $10. You buy 100 shares. In total, you would have 678 shares. Total capital $6000. The total value of your shares $6780. You are profiting again.

You are making volatility your friend

Dollar cost averaging works when there are ups and downs. Currently, as the Chinese market is down, you will feel that it is not working. When the market recovers, DCA will suddenly “work again”. At this point, you will often hear people start talking about their investment gains.

“Time in the market, not timing the market”. 

I had to copy the quote again. Remember that investing (not speculation) is about buying shares of the companies/funds/assets you want through time. Dollar Cost Averaging is just one way that you can consider to invest.

Final Thoughts

You are not alone in this journey. I believe that there are many who have invested in the Chinese market because of good valuation. Of course, there will be non believers of Chinese market because of their tight regulations. At the end of the day, it is about investing with the strategy that you are most comfortable with.

You can buy stock tips. But you can never buy conviction.

Ask yourself if the asset allocation strategy fits your profile. Engage a professional to finetune the strategy. Lastly, do start. With every crisis, comes an opportunity.

With every crisis comes an opportunity
With every crisis comes an opportunity

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.