Tuesday, June 23, 2020

Random thoughts: Conversation with friends who are starting investment

2 close friends chatted with me about investment over the past few months. One only started investing recently, another contemplating to enter the markets. Just some pointers and thoughts which I thought might be useful.

1) My friend wanted to start investing somewhere in March. He ask me about my portfolio, my money habits when investment is concerned. I was very mindful not to give stock tips but I did say is a good time to start and learn at market low, but pace himself. I just ask very simple questions like how many months of emergency funds, how much one can afford to lose etc. Some basic ideas on risk management.

From the conversation, it makes me think that market returns really need to be contextualised. Had he enter the market, he would beat me hands down because he enter market low at small amount but I am already 40% vested before Covid 19 wave. Granted my track records is rather dismayed and any serious investor could beat it, but I am happy with my returns without sleepless nights, and I pride myself of having survive the market for a decade. 

So I guess starters should perhaps worry more about risk than returns, I am not sure if the recent robin hood traders are masters who came out of hibernation or just lucky, but I know I am not tempted to do trading or into bitcoins. Please note that I have nothing against traders or bitcoins investors, in fact, I respect those who are able to eked out their niche. I think the lesson really is, whatever u want to do, learn it deeply and apply it. 

2) BUY SCI and sembmarine is free. I made this mistake. I find it cognitively disonancing and check with buddies at valuebuddies. Basically, when the deal goes through, assuming SCM is worth 20 cents, SCI will go to 90 cents. So it is not really free. My friend also thought it is free. It is included and reflected in the shares price.

3) My friend told me he will enter the market at April. He was sort of laughing at me when I told him.i am 60 - 70.percent vested. Had the rate of plunge continue, STI will be perhaps at 1800 at April. 

But my same friend again ask me if he can start buying recently. I ask him why, when he thinks 2300 is high and he wanted to enter now. I told him he can invest anytime, but he just need to be clear and consistent in his plan. He decided to withdrawn his bid (recommended by friend) and he thanks me because the market went further down.

The funny thing is, I keep telling him I have no idea if the market goes up or down, and he doesn't have to thank me. 

From his activities, he seem more like a trader to me than my school of thoughts. So I told him to find a good mentor that suit his disposition. He like to do concentration play, spending hundreds of thousands and sell when he make a few bids gain. I ask him have he ever make more than 10 percent returns, he said no. 

Now the lesson here is not he is a bad investor and I am better. We are quite close friends, we share quite openly. I can tell u he is making outrageous returns from his trades. His win thus far is multiple times larger than my whole portfolio. I must say I have to check my jealousy. But being good friends, I did tell him to go fly kite and dun disturb me since he is making so much money and is making me jealous. The point really is, let's not be judgemental in investments. We should be cynical, stubborn/steadfast but at the same time accept Diversity. Remember, skills is just one component in investment, not matter how u disagree, there is the element of luck. When I say luck, I dun meant dumb luck for gambling, but having people and a council around? Your human capital? We should see returns beyond just a result of our skills, especially if and when our skills are not legendary 

4) Will market break new low? That the question posed by my friend. My honest answer is I dun think so, but I am.not going to burn my last 30 to 40 percent cash without market going near the bottom we had in march or beyond. But I told my friend, I dun really mind not going there actually. But if it goes down, I dun have some money to invest. I think he is still waiting for his hoot the kitchen sink moment. 

5) He ask me when China companies so dirt cheap, I explained that is a risk premium to pay. He told me that was in the past. I ask him to go SGX and look at C and S, and see how many companies starting with China and Sino are suspended. He got scare. I hope he never have to kena. 

That's all folks. Quite a long time since I talk about investment in a long post. Maybe I will do a mid year review after June, since this year is a year of many activities.


  1. You're absolutely right and I would like to just coin this as beginner's fallacy. When I see people who just started, they have no plan at all, and even if they do, its a plan they cannot sleep well with at night. Either they trade to often, or get jittery when markets tumble. The lesson learn here is that the cost of investing will have to be borne by oneself. Only through experience can one learn why experts advise certain strategies for retail advisors.

    1. Lol. But a plan is only as good as the results. Plan need execution and refinement.

      But even if we do all that... It might need to depend on up there

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