Tag Archives: Investments

Five reasons why I do not want to convert my stocks to an investment property

A close friend of mine threw me a question – why don’t you divest all your stocks and buy a property instead. That was a few years ago, and the rental market was still relatively vibrant. That led to me ponder for a while. Certainly a few things crossed my mind to kill the idea:

(1) Tenancy
Without doubt, both stocks and properties are good hedge instruments, but they can differ very much in their usefulness. If they are applied inappropriately, one may even suffer as a result of holding them. Property, for one, is a high-ticket item. In all likelihood, we need to take a loan to own a property. In order to service that loan, we likely have it rented out to at least cover the monthly mortgage payment. Certainly, it is a question of the bigger the loan, the greater the pressure. Even if there is no need to service the loan, we still have to find a tenant so that we can derive an income (hopefully a passive one). Otherwise, the property is only a dead asset, just like holding an art painting or hoarding gold bars. The only way to gain from it is a huge appreciation in price some years down the road, which may or may not happen.

(2) Liquidity
Then there is a question of liquidity. It refers to the ease of converting the asset to cash especially during times of need. Unlike holding a portfolio of stocks, we can simply liquidate some stocks while leaving the other stocks un-touch. In other words, we can down-size our stocks portfolio to remain relatively liquid. In the case of a property, can we simply sell off a toilet or a bed-room? It is a question of either a whole property or no property, and not somewhere in between. Furthermore the time needed to liquidate a property during times of need may force us into selling a property at a not-too-ideal price. While we can also end-up in a fire-sale for stocks in times of need, we can at least time the sales such that all the stocks need not be sold out in a single go.

(3) Government curbs
Authorities around the world tend to be more decisive on clamping down property speculations and the Singapore government is no exception. Frenzy properties speculation usually end up miserably, just like what we have seen in the sub-prime situations leading to the global financial crisis, sky high properties that it takes three generations to fully pay for a property in Japan prior to the crash of Nikkei during the late 80s. Until today, the situations in Japan have still not fully recovered, and Japan had already suffered two ‘lost decades’. Whether in Europe, in China or in Hong Kong, the story is always the same. What about shares? Until today, I have not heard about curbs on shares trading, except for those on the watch-list imposed by the broking houses. They are not real government curbs so far. In fact, many governments would want to maintain their stock market as vibrant as possible. After all, the penetration rate is still very low, and to be seen as a real financial centre, it should be free from government intervention. Whether in China, in Japan, in Hong Kong or in US, we do not hear of government curbing stocking investing activities. In fact, they are the ones who help to prop up during a huge meltdown, just like what we seen during the global financial crises in 2008/2009.

(4) The exit
One of the considerations of a good investment, which a lot of people have overlooked, is that it can be exit as easy as we enter. (That’s why in the last two years, those held corporate bonds were not able to dispose their investments even at a loss because there were simply no buyers due to illiquidity! It was easy to enter by throwing in an enticing coupon rate, but to get out of it requires some form of cross matching between a seller and a buyer.) By the same token, it is also more difficult to get out of a property than on shares. It probably takes about 3-6 months to decently sell off a property at hand. In this period, there are a lot of advertising and selling activities such as bringing prospects to see the property, putting advertisements on the newspaper, talking to potential buyers and agents. It is only after all these ground-works that we are likely to find a prospective buyer to sell off the property decently. I admit that I have no patience for all these, and therefore getting a property for investment is out of question.

(5) Other considerations
Of course, there are other considerations as well. Leaked pipes, over-flow toilet bowls, electrical short circuits are teething issues that can make our tenants call us right in the middle of the night. Every night, we have to be on our toes and, every evening, we have to pray that nothing of that sort happens in the night.

After all these thoughts, I still want stick to stock investing. Unless, of course, I already have $2 million dollars cash sitting in the bank and is doing nothing for me at the moment. In that circumstance, sure, I may get a property without a loan.

Brennen has been investing in the stock market for 27 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.

Cash is not always the king

It is quite common to hear people mentioning that “Cash is king” especially during bad times such during a recession or a market crash. This is only half truth. Yes, during times of uncertainties, cash is king, but it is good only for that short time window. If it is not duly deployed, cash remains as cash and there is nothing that we can get out of it except for a paltry bank interest if we continue to put it in the bank. Therefore, cash is only a king when it is able to find its way in picking good-value investments that present themselves during those trying times.

Personally, I have met people on several occasions who told me that they were “heng” (lucky) because they did not invest in anything and therefore did not suffer any financial loss during a crisis or a stock meltdown. Their ‘investments’ did not go beyond some insurances that they have been paying. Frankly, I am not sure if they are really that “heng” if they have not been investing in anything at all. This means that all this while, they have not been making money work hard for them. In fact, it even occur to me that a person who rides through his investments without selling out during a major stock crises may be better off than another who rides through it holding cash alone. Of course, that is very dependent on the quality of the investments as some of them do not regain their previous shine after a crisis. However that is not the critical success factor. It is likely that a person who rides on his investments during a meltdown actively sniff for good investments that have been battered down as a result of the general pessimism than the one holding cash during those fearful times.

Here, the best lesson is to learn from the billionaires both locally and abroad. Most of these people know that they are unable to time the market as they have more important day-to-day things to do. During times when there were major meltdowns, they continued to hold their company shares. When a crisis was brewing for some time, they accumulated either their own company shares or bought into investments that had never been on discounts. Yes, for a short period of time, their wealth may be hit and it is not uncommon to read reports that their wealth has been decimated by 30-40%. However, once the crisis period is over, they become richer than they were before the crisis. Of course, one may argue that a billionaire would become a lot richer if he were to sell out everything just ahead of the crisis, and then bought back everything when the crisis happened. But that was hindsight. We only knew when events have gone passed us. There are always possibilities that a small setback would not turn into a major crisis. Furthermore, he cannot be seen to be jumping in and out of the market trading his own company shares, and this will not be positively viewed by the minority shareholders. A good example was the fall of Bear Stearns in March 2008. When it fell, nobody thought that it was a precursor to a global crisis six months later. Everyone probably thought it was an isolated bank crisis, and businesses were going on as usual. Otherwise, many people would have sold out everything and come back six to twelve months’ time to buy them all back. It was only when Lehman Brothers Bank fell exactly six months later during mid-September 2008 in a perfect storm leading to the downfall of a series of banks and financial institutions that everyone discovered that a crisis was already underway.

So, bringing ourselves back to the original topic, cash is king is only half correct and it is only true when the cash is deployed into good opportunities. In extreme cases, there may be some people who have been accumulated too much cash, but only to discover that the cash is not working hard enough for them. So they start looking around for so called ‘value investments’.  Short of the necessary financial knowledge, they end up looking for the highest possible yield as that is the only evaluation criterion on their mind. Consequently, they may end up shortchanging themselves by buying into investments with mouth-watering offers that they simply could not possibly refuse. There were no short of examples. Over the last few years, people were buying into gold trading businesses, into land banking businesses, structured deposit products, mini-bonds and corporate bonds. The promise of these investments was very attractive, but the end point remains the same.  The value of these investments end up shrinking to 20% to 30% of their original investment. Worse still, they are also caught in the middle of legal tussles and court cases. Even that, there is no guarantee that they can even claw back the residue value of their investments. This further undermines their trust in financial products. While ignorance is main culprit of their losses, the necessary condition that set them into such a plight is they have cash.

While mentioning all this, I am not saying that we should immediately convert our cash into investments whenever we get our hands on it. What I advocate is that we should arm ourselves with sufficient financial knowledge and appropriately allocating the cash into the investments while leaving sufficient cash holding to tap on opportunities that may present themselves from time to time.

Happy investing!

Disclaimer – The above write-up is purely the opinion of the author, and it does not constitute an advice to buy or sell the mentioned stocks or the sector. Readers, who buy or sell stocks, if any mentioned on this article, are fully responsible for their own action.

Brennen will be conducting a one-day stock review for the past students of BPWLC on 11 March. A 2-day new course on Wealth Building in stocks investments will be conducted on 22 and 23 April 2017. Enquiries can be made via info@bpwlc.com.sg

Brennen has been investing in the stock market for 26 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.

Not all stock portfolios can be turned into cash easily

It was already quite some time back when a friend of mine showed me his Central Depository Statement (CDP) statement of his stock holdings. He hoped that I was able to provide some ideas how he could revamp his stock portfolio. Below was what I saw when I unfold the statement:

  1. The total sum of the stockholding was more than $200,000
  2. He has slightly more than 2 full pages of stocks. Yes, more than 2 pages.
  3. Many of the stocks are in odd lots. Some even less than 100 shares.
  4. The worth of some stocks was like $20+ to $30+ in total value.


On paper, it appeared that he had a net worth of more than $200k, which is quite a decent sum. However, on a closer look, I told him that he will have a hard time cleaning up this stock holding. Some of the stocks are either I do not know them or they are so illiquid that it is quite difficult to sell out totally given the odd lots that he had. In fact, it may even be better to ‘ring-fence’ the stock-holding and re-start a new one than try to micro-manage those stocks that are not even worth the while to have a second look. I felt painful for him that he was not able to convert his stocks quickly to cash without taking a significant ‘haircut’ on his more than $200k of stocks.

What I believe could the problems in this stock portfolio?

The first obvious mistake was that he probably held too many stocks. Imagine CDP statement list out the stock counters in single-lines, ie. without any line-spacing in between. Just within the first page, it could have accommodated a listing of 30 stock counters. I do not know how many stocks are on page 2, but let us put an estimate of 50 counters to occupy full page, and several stocks listed on page 3. In all, they should add up to about 85-100 stock counters. That means he owns about 10% to 13% of all the stock counters listed on the Singapore stock exchange. Just by the sheer number of stocks, I personally think it is too much for him to manage. In fact, in my opinion, the number of counters that can go beyond page one of the CDP statement is probably far too many. Think about it. Many indices around the world are made of about 30 components stocks, and this is already very representative of the respective markets. Surely, we do not need to own more shares than what is needed to form the index. With the advance in technology, it is of course possible to include more stocks in indices, but that cannot be said if we want to formulate a stock portfolio manually. In fact, according to past literatures, by the time when we hold about 12 to 18 stocks, we have already reaped 90% of the benefits of a diversified portfolio.

Another problem of his stocks holding is that many of them come in odd-lots. This means that he is not able to buy or sell efficiently. And because some of the odd lots are less than 100 shares, he may even have to buy in some shares and the sell out all the shares to combine the total shares to reduce the brokerage charges.  As expected, it does not go down well on him because the fact that he reduced his holdings by selling out the full lots and leaving the odd lots, we cannot simply expect that he will make a reversed move to buy more shares of those counters in the near future. Furthermore, I do not know if he had made any money when he sold the full lots as he might have reacted out of fear to sell out the full lots during times of impending crises. In summary, he could have write-off all these odd lots, which would otherwise impede his move to clean up his portfolio.

As a stock investor, it is important to understand that the stock market is a quasi perfect competition and many of us have no control over the on-going transaction price. In other words, we are price takers. The only thing that we can possible control is the quantity to buy or sell.  Even that may still be a limitation because, as individuals, we have limited resources. We simply cannot buy or sell any quantities of shares that we like. So it is important that whenever we buy or sell, we are mindful of the next move and how to react when something unexpected happens. It is like playing chess. We are not able to anticipate all the moves of our opponent. What we can do is to limit our damages when we encounter an attack by our opponent and leap on a strong attack when we see an opportunity. Trying to build a stock portfolio without some kind of strategy in place is doomed to fail.

Wish you luck in your investing!

Brennen has been investing in the stock market for 26 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.

Business model

When I first read about a business model to better understand why it was entangled in the bond feud with the note-holders, I felt quite loss. I read it again, but still I did not get a good picture of the working business relationship among the companies involved. Reading at the first level to understand the working business relationship among the various partners was quite a challenge actually. If comprehending just the working relationship among the business partners cannot be understood by a person who reads passionately about business news, I wonder how many people out there can fully understand it, let alone the legal and accounting aspects that the company had with its business partners. Certainly, not all the note-holders and shareholders are corporate lawyers and accountants to fully appreciate the legal and accounting aspects to fully understand the risks involved when investing in the company. In fact, when business partnerships get very complicated among business partners, it surfaces more links, and if any of these links weakens and give way, it is likely to cause a domino effect to bring down the company as well as a lot of companies associated with it.

By the same token, prior to Alibaba’s launch as an e-commerce website, Jack Ma, the chairman pointed out that he personally made fool-proof tests of the system. It means that he tried to mimic a fool trying to use the system. His argument was if a fool knows how to use the website, then it should be widely understood and useable by the commoners on the street. That brings me to the point – If one cannot understand the business model of the company, why bother to take the risk to invest in it. Why do we need to invest our money to buy headaches?

Brennen has been investing in the stock market for 26 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.

Buy-and-hold strategy does not mean buy and don’t sell

For those who may not know, buy and hold strategy is a proven strategy and is used by long-term investors in hope to benefit from the capital appreciation of the component stocks in a portfolio. It is often associated with Warren Buffet (WB)’s style of investing, especially when he mentioned that the holding period for the Berkshire Hathaway portfolio is FOREVER. It is probably a sweeping statement, but many people had taken it to the extreme that when we buy a stock, we should not sell it. Of course, if we look at the ST index from its all-time high and compare it with today closing of 2869.74 as of 30 September 2016, one would have thought that by adopting the buy and hold strategy, one would have lost more than 25%. But does it really mean that buy-and hold strategy does not work anymore? Not quite. Otherwise, why would fund houses and insurance companies still continue to adopt such a strategy? Remember, these are big fund managers and when they hold a stock, they do not just own 2,000 shares. They probably own 200,000 shares or even 2,000,000 shares even if it means $20 per share. For the fact that they continue to use this strategy means that it is still relevant even with the advent of high-frequency trading computers. In my opinion, if it works for big funds, it should also work for individuals as well. And because big fund managers hold large quantity of stocks, we simply cannot expect them to empty their portfolio of, say 200,000 of OCBC in one day, and then buying it all back on another day on a short-term basis. In fact, most of the time, their portfolios do not change at all. In the way, they are practicing buy-and hold strategies. These fund managers have to think long-term in order to pay the clients and retirees, who are long-term stake-holders. The key here is to think long-term. (Sometimes, I am quite bemused by people who mentioned “Aiyo, must think long-term ah!”. Thinking long term does not mean that we do not sell a stock at all!)


Given the relevance of buy and hold strategies for large funds, can small retails players like us mimic the actions of these fund managers to make money? Certainly yes. The fact that we do not hold too many lots per stock, it is sometime easier for us to manoeuvre better than the fund managers.


Allow me to go back into my history. After falling and recovering from the bad experience in the Asian Financial Crisis (AFC). (Click here for the detailed history), my aim was to hold this great stock called DBS. On my record, I purchased 1000 shares at $14.80 in February 2004. (In fact, it was less than 10% below yesterday’s closing at $15.39 considering that they are more than 12 years apart.) My long term plan was to have at least 10,000 shares in 10 years. Based on this objective, my shortfall was 14,000 shares. The period between 2004 and 2007 was a fantastic time for stocks because the ST Index advanced all the way from below 2000 to its all-time high of 3,875.55 in October 2007. The global economy was doing so well that one very significant local political personnel was said to be saying “All the pistons are working at full force”, pointing to the perfect functioning of US, Europe and China. (Of course, we know in hindsight that Global Financial Crisis (GFC) came one year later and everything got imploded.) Needless to say, in between 2004 and 2007, if one were on the buy side and sold 1-2 months down the road, or simply buy and hold all the way, he should be able to make money. This is especially true for DBS, which is a good proxy to the stock market. Even though I have a long-term plan to continue to accumulate DBS in the long run, the speed of price advancement was so rapid that each time when I bought it, it became attractive to sell it off some months down the road. In fact, it was prudent to take money off the table because rapid advancements are very often met by rapid pull-backs. In such a situation, I could even say that I was trading, though not exactly short-term trading because each time my holding period was a few months. The share price of DBS in the period between 2004 and 2007 advanced from $14.80 when I bought it to a peak of $25.00. By the end of 2007, however, my shareholding in DBS did not increase at all because I had sold just as much as I had bought it. It was probably with some luck that the Global Financial Crisis (GFC) came along that I was able to pick up a lot more shares and subscribe more rights at $5.42. While I did lost some money on paper on the 1000 shares that I kept, it had been more than offset by the capital gains in the ‘trading’ that I made off from the DBS shares that I had bought and sold along the way. Furthermore, the GFC was probably a once in a lifetime chance to accumulate DBS. It came glistening right in front of my eyes. Such opportunities should not be missed at all cost. This was even truer for someone who had been bashed badly during the Asian Financial Crisis (AFC), and only to see opportunities slipped through the fingers from a low of 805 on the ST Index to more than 2000 within a matter of 15 months or so. (Click here to view my background).


Of course, one may argue why I did not even sell off my 1000 shares that I had been holding. The reason is simply that I am not GOD. (There is a Cantonese saying – 早知就没黑衣) I can’t predict the future. If I could predict the future, I would have even sold my 1000 shares and bought it back at the peak of the crisis. My long term plan, however, was clear that I needed to accumulate DBS shares in the long run, and the GFC provided me an opportunity to do so.


Then another opportunity came knocking again. After the GFC, DBS advanced again past $20 by late December 2014. Having come up from a relatively low base during the GFC, I managed to sell some shares at $18.50 in October 2014. At this share price, it would have translated to more than the market capitalisation of DBS before the GFC when it was at $25.00. (The reason was that DBS raised rights of 1-for-2 shares during the GFC.) I would have thought that the share price would not go beyond that point, but the general optimism pushed the share price further up to past $20. I sold again at $20.20 in December 2014. It finally reached $20.60 in early 2015. Of course, the crash in the oil price and a series of ‘scares’ in the last 18 months or so, made the share price of DBS came tumbling down again to less than $16, which now becomes a super strong resistance level. When it reached a level of around $13/$14, it allowed me to buy back those quantities and even more than I had sold.    


In a similar way, I have been reducing my SPH shares for the past 1-2 years because I felt that the fundamentals of SPH are weakening. It is not because of bad management or SPH was making wrong investments. In fact, I believe that the management has been quite good, peppering shareholders with good dividends. That was why the share price has been quite well-cushioned enabling me to sell a bulk of my stocks off at above $4.00, except for the last 2,000 shares which I sold recently.  The fact is that media and publishing business is under a huge threat from the internet, which is highly accessible locally. The threat is beyond their control and that is why the profit from the print business is dwindling. The only thing that probably helped them along is the SPH REIT, which probably had already hit a plateau. Of course, SPH is not sleeping and is on a look out for fantastic investments that may pop out along the way, but until today, it is still not there yet. Of course, when the price becomes attractive again, Perhaps, I may be back in again.  

So in summary, buy-and-hold does not mean buy and don’t sell. Sometime, it is prudent to sell and take money off the table even if the stock has not reached its full potential. Very often, there is a need for stocks to digest a bit before they can climb further. In fact, as it is DBS is now hovering for the past six months or so below $16. If I had not sold anything and stood only on the buy side from 2004 till now, I probably would have made only from my dividends and not too much from the capital gains. It is the long-term strategy and, of course, some luck that counts. It does not mean buy and don’t sell.

Good Luck!


Disclaimer – This post is not a recommendation or an advice to buy or sell the stocks mentioned here-in. These are past performances. They do not reflect future performances. 


Brennen has been investing in the stock market for 26 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.

The real cost of averaging down

“I do not like to lose”. Joseph Schooling who recently won an Olympic gold medal for Singapore mentioned this, possibly several times, during interviews. In fact, nobody likes to lose. Whether we are in school, at work, in games or investing in stocks, we never like the feeling of being a loser. If anyone tells us that he trades stocks to lose money, then I think there is really something wrong with him. He must well take the money and donate to charity and make a name for himself.  The fact that we trade or play (whatever we can call it) stocks, is that we want to win, and of course, the reward for being a winner in stocks is the dollars and cents that come along with it.

So, from a human psychology point of view, we get into stocks because we want to win. It is that simple. Consciously or unconsciously, trying to win in every stock becomes our guiding principle. To keep the subject in focus, I shall leave investing in stocks as a portfolio in another session (or my conducted courses or another forum) and concentrate on our reactions to the individual stock price movements. The fundamental fact about investing is that not everyone is a winner all the time. No matter how robust our selection system and how well-timed our entry points are, there bound to have occasions when we bought a stock and the share price tanked, maybe for several weeks or even months. For some unlucky ones, they could have bought a stock right at a peak price, and never able to see any higher price for the foreseeable future. Now what do we do if we happened to be one of those unlucky ones. A lot of people mentioned about stop loss, cut loss, sell into strength whatever we can call them. But in reality, how many people really are willing to do that? Being human beings, we do not like to lose, and that actually inhibit us from selling stocks at a loss (or even to buy stocks in the first place). It’s very extremely easy to sell at a loss for paper trading with no emotions involved, but to sell at a loss with real money really takes a lot more courage to do so.

Guided by this ‘not-to-lose’ principle, it is not uncommon that people average down in hope of a turn-around in the stock price somewhere in the future. But there is really a cost in averaging down.

Let’s take a hypothetical case. The on-going price is $2 and we make a purchase of 1000 shares. Not including brokerage and all the other charges, the cost to us is $2,000. Let say each time when the stock tanks by 50%, we make purchase to average down our purchase price (see table). By the time when the price became a penny stock of $0.125, we would have made several rounds of purchases, and even that our average price is $0.38, which is 3 times more than the on-going trading price. Of course, this case is one out of infinite possibilities of what can happen in reality, but the point here is that the whole exercise were carried out totally relying on numbers… no emotions, purely mechanical and well-disciplined.  In this example, I am assuming that we purchased more stocks each time the stock price dropped 50%, if one starts to average say at a drop of 20%, then it would be a lot harder to average down.  So in reality, there is a cost in using the ‘averaging down’ technique especially when a turn-around is not in sight.

Perhaps, you may argue that the assumption that the stock price drops from $2 to $0.125 is not realistic. But if one were to be diligent enough to check on the stocks that have dropped 90% from its peak value for the past 5 to 10 years, perhaps we can already find quite a number of them. Furthermore, given the flagging economy, and with a series of bad news affecting some sectors of the economy, it is can be quite common to see some stocks giving up  90% of its peak share price. (Click here for the video clip)

While there are some costs involved for averaging down, there are also some categories of stocks that are worth applying the average down strategy. They may not be sure-win strategies, but they certainly worth at least a consideration.

In summary:

  1. Stocks that are not worth to average down – These stock prices tend to trend downwards. They are companies that are incurring losses, bad cash-flow, high-debts, poor management, consistently difficult business environment or any combinations of them. Averaging down on these stocks is usually quite suicidal unless we are very sure that the fundamentals have changed for the better. Otherwise, there is really no point in averaging down.
  2. Stocks whose share price do not change very much – Frankly speaking, there isn’t much benefit to average down on stocks whose share price does not change over time. The apparent incentive to buy more of these stocks is we are attracted by its dividend payout. Basically we are in accumulative mode and not applying the average down strategy. The REITs and some high yield stocks exhibit this nature.
  3. Stocks that worth to average down – The average down strategy is best applied for stocks that show some degrees of volatility, but appreciate in value over time. The volatility enables us to buy subsequent stocks at lower prices, and hence averaging down the share price. However, over a longer period, it gains in value. Certainly, the average down strategy is best applied to stocks that are classified as blue chips. Of course, this is a sweeping statement as the share price of some blue-chip companies still trade within a tight price range. Frankly, we should be thankful that the SGX had changed the trading board lots from 1000 shares to 100 shares. This will allow more trading liquidity among in retail trades and make the averaging down technique more efficient. Yes, there will be more brokerage cost involved, but it will be more or less cancelled out as we accumulate more stocks at a lower prices.

Happy investing!

Brennen has been investing in the stock market for 26 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.

ST article – Over 4 out of 10 have not saved for retirement (1st May 2016)

I came across this article on the Sunday Times, 1st May yesterday. It was a poll made by insurer, Aviva entitled “Over 4 in 10 not saved for retirement”. One column that caught my attention was “Wish someone else sort out their financial affairs”. The percentage for each age group was quite substantial, in view that those in the poll were young adults to seniors. The first thought that came to my mind was “were those people simply lazy or they deliberately chose not to deal with money?” Out of the sample size of 1000 people, there should a high percentage of educated people in view of Singapore’s relatively high literacy rate.

ST- Over 4 out of 10 have not saved for retirement - 1 May 2016_cr

To me, this segment of people is likely the most vulnerable to quick rich scams. The fact they chose not to sort out their own finances means that they can be easily moved by financial carrots dangled out by unscrupulous individuals or organizations. They can easily be skewed to believe by sweets talks that promised them high returns. They are likely to be the people buying bonds issued by Lehman brothers or gold trading schemes that promise them no lower than 20% return only to find themselves becoming the victims after they lost their capital. Basically, allowing others to sort out our financial affairs could easily make us lose control over it. For those extremely conservative ones, it is likely that their ‘investments’ do not go purchasing insurances. They are also likely to work longer in their lifetime as they are not making money work hard for them.

Personally, I am a strong advocate that we are the best people to manage our own finances. We are the best people to know our incomes and expenses. If we have to leave to someone else to sort out our financial affairs, we could be selling away our financial freedom. I wish this group of people – Good luck!

Brennen has been investing in the stock market for 26 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.

Remember that money is made when we buy during pessimism

In the last few months, the stocks markets in many regions were reeling down from their highs around April. Several months have passed and many investors seemed to have distanced themselves from the stock market. Some even vowed not to come back again. Just a few days ago, the STI hit below 2800. it had fallen more than 20% from its recent high, putting it in a bear regime. But, then the question is why so downbeat when these may be  opportunities that we can buy back stocks that we had sold off during the highs. If the stock prices did not drop and remains high, it would be impossible to pick up the stocks again. Yes psychologically, we tend to be more pessimistic when the market goes down and less optimistic when the market goes up. But isn’t it that we have often been told and be reminded that stocks can go up and down. It’s only that we accept that there is volatility and willing to embrace this volatility that we will become more emotionally detached when dealing with stocks. Frankly, it’s not easy in the beginning of my investing journey, but over the many years of investing, after going through many cycles of ups and downs, I start to detach emotionally from the stock market volatility as I know I have no control over it. I just continue to focus on my long-term goals irrespective of the market conditions. Instead of crying over the losses, we should focus our attention on things that we can control, such as doing our day jobs, completing our projects and working on something productive and enlightening. That’s essentially why I am never in trading and, very embarrassingly, I have never had the first-hand news of the stock market. And, very certainly, I admit that I can never be a good trader.

To me, stock investing should not be a standalone activity. It should be  part of personal finance that also embraces money management. We should ensure that we have sufficient liquidity such that we are not be put into a forced-sale situation or be missing buying opportunities simply because we do not have sufficient funds. Just 2 day ago, it was reported on The Straits Times that $40b have been pulled out fom the emerging market. Certainly Singapore is one of the discarded victims as well. As mentioned in my earlier post, due to the relatively small size of our stock market (and in fact regionally), just taking away a few billions dollars off the stock market could bring down our stock index drastically. Yes, there is going to be a technical recesson ahead. Yes, the China economy is not performing well. Yes, the currencies of our neighbours are hitting historical lows, Yes, the writing is on the wall that US is going to hike the interest rate. But then, aren’t these yesterday’s news that have already been priced in the stock index. So while some funds might have left us, opportunities may present themselves such that by the time when funds do come back again, we can ride on the rising tide. Of course, I have to qualify that I do not mean that we should buy aggressively starting today. What I mean is that after all these brawls, isn’t it time to open up our eyes to look at the stock market again? Frankly, I am not expecting that the stock market is going to turn sharply in the next 3 months or so, or perhaps not even two years down the road, given so many issues that we have no control of. Neither do I dare say that this is the lowest point and that the stock market cannot go further down. What I am saying is that to make significant money, we have to buy during times when there is extensive pessimism when everybody is looking away from the stock market, and sell during euphoria when even those who have never been in the stock market are in it by herds and droves, not the other round. Perhaps, look back into your stock portfolio now and try to recall when you had bought and sold those stocks that you had made big money (at least percentage wise). Very likely, those that you had made big money were bought during bad times and sold during euphoria, unless you are a big-time speculator trading $100k each time without a blink of your eyes.

Also read:

  1. Market psychology – Are we at the market bottom? – 19 Aug 2015
  2. STI – Is it better to be on selling mode now? – 9 June 2015

(Brennen Pak has been a stock investor for more than 26 years. He is the Principal Trainer of BP Wealth Learning Centre LLP. He is the author of the book “Building Wealth Together Through Stocks.”) – The ebook version may be purchased via www.investingnote.com.



Market psychology – Are we at the market bottom?

Many people seemed to believe that the market is low now because we tend to anchor the stock price at where the stock price is at its maximum. Just a few months ago, it was 3500 on the STI and now we are at 3050. DBS, a good proxy for the local economy, was recently at its high around $21.50 a few months ago. Right now, it is trading at $18.70 and it appears sufficiently low  to buy. After all, the difference is a whopping $2.80 per share. But things have changed. The economic fallout in China and the falling currencies in ASEAN countries will shift the fundamentals leading to the steep fall the share price. Brace tight! The market has not bottom out yet. It should undershoot(1).

(1) See investing psychology on Building Wealth Together Through Stocks.

(Brennen Pak has been a stock investor for more than 26 years. He is the Principal Trainer of BP Wealth Learning Centre LLP. He is the author of the book “Building Wealth Together Through Stocks.”) – The ebook version may be purchased via www.investingnote.com.