Tag: t_traction

My journey of as a reasoning investor, making sense of the rough sea

learning(as recreational investor) #fund^stock-pick #w1r3

Posted on by tiger40490

Q: How do I compare with my wife, as a stock picker? My view is likely biased, though I would try to counter-balance my bias
%%A: I think she dare not touch other names. Good for her.

… This question belongs to the end !

Q2: “learning” is a vague buzzword. What kind of thing can you learn? A vague question but be as specific as you can, please?

  • PP) (self + market) psychology  .. The crazy psychology of those investors… we just get used to it, without gaining insight. It’s a big rough sea.
  • EE) economists’ (like Shiller) analysis ..  including market valuation and timing. I took two modules under Mark Hendricks.
  • AA) security analysis as in value investing or quant analysis .. I only spend 10 minutes per name.
  • .. pre/post trade dividend analysis.
  • TT) trading techniques .. risk control, order placement, position mgmt,,,

中长线 analysis (I never did) sounds like learning in EE and AA, but if not applied on stock-picking, then I guess it is only applied on sector picking and market timing.

bccy market is so unstable and fluid that I don’t see any learning in terms of EE, AA,,,

Q6: what are your specific reasons for learning? A vague question but be as specific as you can, please?

  • motivation: intellectual curiosity — some people earn a degree in their 70’s, not to use the knowledge in some career. See also recreational investing
  • big motivation: total return (including current income and windfall far out)
  • motivation: better understanding (of the rough sea PP + EE), better control (of my little dug-out). [1]

[1] Is this motivation underneath the big motivation? Probably not. My twin brother, an ETF investor, could end up with higher profit at some point, but without any understanding/control. I don’t want to end up like him.

Q11: Do I gain any insight from hot growth stock picking? (Similar question can be asked on FX, FXO, gold, oil.)
A: not sure. Whatever capital appreciation could be due to timing or dump luck. In contrast. I gained AA/TT insights on div stock picking only months later, when my div stocks performed well during a downturn — unexpected success.

Q22: did I learn anything from years of mufu “research”?
A: close to zero in EE, some self-discovery in PP.

Q22b: with so limited learning, do I get any real joy from mufu/ETF investing?
A: I feel it’s like watching sex vs having sex. If you don’t know why you made money, then it’s mostly dumb luck with timing… no joy. Doesn’t satisfy my intellectual curiosity.

Q33 (Dahlan discussion): do you learn the most from investment failures, or do you learn more from expected success, unexpected success…?
%%A: I feel some failure is required learning (re commodifies and FXO..) in the PP, AA and TT domain. You won’t become competent swimmer without scary encounters with killer waves.

— The 10Y-question. Context: Like many investors, I started investing during my internship [commodities, UniFund…].
Q: with a 10Y career as an amateur investor ..  am I better than an intern?
A: No better, as a mufu picker. Answer is similar to Q22.
A: Yes as a rEstate and stock(?) picker, I had more frequent buying experiences than many. For rEstate, “Test Result” comes in very slowly. I did lots of research into EE/AA and some PP.

I don’t know Adam Khoo. I think he is an experienced motivational speaker, and trainer, where his talent and wisdom have sustainable value. I don’t know his investment skills.

Q: why does no investor give money to an intern as a fund manager?
A: because the intern shows no wisdom, no trec, and is mostly a blind follower of sentiment. In contrast, an intern can work as a junior but professional programmer, thanks to his technical knowledge gained over 3Y at least. Learning is an essential ingredient. Buffett: “Only when the tide goes out do you discover who’s been swimming naked.”

  • Q: Compared to many seasoned investors like me, an intern can achieve better return via SP500 ETF over 3Y. I think it is sustainable.  Is the intern better than me?
  • Q: Compared to many seasoned investors like me, an intern can achieve even higher return via ARKK over 3Y. I think it is less sustainable.  Is the intern better than me?
  • Q: Compared to many seasoned investors like me, an intern can achieve even higher return via BTC over 3Y. I think it is less sustainable.  Is the intern better than me?

ez2hit high return but..Sustainable@@ #luck #w1r3

Posted on by tiger40490

MOETF return is likely lower than Buffett, which is likely no better than sp500
Do I envy those with higher annual returns? Typically we are seeing BTC or growth stock investors.

——

See also

  1. ##hot^beloved asset classes 喜新厌旧
  2. MOETF: lower return than SP500 likely which points to beatIndex^absReturn: choose your goals
  3. j4 MOETF #w1r4

Background: I often feel my MOETF “system” is under fire when lots of fellow investors seem to make higher returns either quickly or over a short few years. Are their returns sustainable?

It’s crazy to use (realized or unrealized) return alone to compare 2 portfolios, ignoring quality of return, fundamentals, crashes, and variouis risks (liquidity risk, credit risk, investor sentiment risk). Buffett’s portfolio probably shows better risk-adjusted return than sp500.

I would say if the investor pockets the realized profit and stand aside with detachment, then she is wiser than most. But such wise investors are rare.

Some investors make “enough” (like USD 2M) and then scale back risk capital level to $100k .. “cash out n quit”.  But such ungreedy investors are rare if under age 60.

— jolt: sustainable if buy-n-forget→ sleep]peace, focus@work. With high growth investments (including BTC), can you sleep in peace?

— jolt: Intern… Learning is an absolutely essential process (takes years) before people can have reason to believe your high return is sustainable.
There are various types of knowledge/experience to learn. Here I tend to think of EE/AA.

If higher return were sustainable without substantial learning and risk analysis, then this would be similar to an arbitrage or a Ponzi scheme.

— jolt: arbitrage or Ponzi/pump-n-dump
Q: deep down, do you really believe your SP500 ETF would show compound return at least 8% a year for the next 40Y, with at most one negative year in any 5Y window? I think many respected publication assume just that.

If you believe it, then to you this represents an arbitrage or Ponzi scheme. You should really borrow money to the max and invest in SP500 ETF.

— jolt: diversification .. A related perception is “To beat the broad SP500 index, you will need higher concentration on growth stocks.” — this perception is very dangerous. Look at Shopee. High-risk-high-return.

Diversify to international stocks .. is a recommendation for U.S. stock investors. However, if you allocate 30% this way, usually it would reduce your portfolio average return.

— eg: hot growth stock investors … even index investors can hit higher return than my div-centric MOETF system.
— eg: personal xp: 1997 commodity trading .. return too high. My agent said 18% a month. Clearly unsustainable.
leveraged trading !
— eg: dot-com boom-n-bust .. https://www.fool.com/investing/best-warren-buffett-quotes.aspx says “I can’t think of another period of time when it was easier to make money in the stock market. ”
— eg: bccy.. I think the believers of growth stocks would also consider cryptocurrencies (Zhang Jun?), even though they recognize the fundamental differences between bitcoin and growth stocks in terms of economic value.
— eg: leverage .. some investors even borrow money to trade stocks. With $100k capital, they get to trade $200k and hit higher returns on capital
— eg: xp of many non-US investors .. newbies tend to lose money in stock-picking outside the U.S. I guess this is worse with growth stocks. In contrast, index investing looks like safer.

dependable: blue-chips imt mufu/SDB #w1r5

Posted on by tiger40490

[21]SDB liquidity #selective cashout

See also (the Rebecca post) the affluent often favor Funds over stocks@@

Before I discovered my system of dividend stock picking in 2020, I was using mostly mufu (and FXO + Oanda).

Q: Over 10-20Y, which group is more solid and financially dependable ? Blue-chips (with or without div) vs mufu such as DIVA? (I won’t compare fixed-income.)

I would say blue-chips are more dependable. Warren Buffett (among many) gave Coca-cola as a shining example. You can analyze the Coca-cola business, the moat, the competitive landscape. No such thing with mufu. A fund manager can analyze and include such blue chips. Anyway, I don’t have energy/absorbency for such analysis.

I once liked and increased my commitment in 1) ShentonIncome, with 5% CDY 2) Unifund 3) AllianzUsHY but in each case, the fund performance was not sustainable.

You can buy-n-forget with a blue chip. You can sink in more fund with confidence. Although mufu also supports the same, there are some differences:

  • dividend stability .. see section below
  • Churn .. Within 10Y, a fund manager can decide to re-balance a portfolio, update “mandate”, or get closed (perhaps after a 30Y run) and replaced by another fund run by the same fund house. I have seen this many time. I think they do these things to maintain or increase AUM. If your favorite blue-chip is (partially) liquidated as a result, you won’t even notice. In contrast, a single blue-chip is a lot more stable and more dependable.
  • diversification improves dependability … A tricky point, deserving a separate section below.

— div safety .. is a key difference between blue-chips and funds. If the dividend income is steady (as with some blue-chips), then buy-n-hold is much easier. With mufu, dividend amount is far less stable. Also, management fee is forever erosive esp. when you invest a large amount like 20k. In terms of carefree buy-n-forget, mufu is less dependable.

Beware .. Most big names pay very low CDY, even cut dividends in bad times. In contrast, many steady dividend payers are small or lesser-known companies.

DPR (Div Payout ratio) explains why mufu dividend is far less sustainable or dependable.

See also my small debate on DIVA

See also My case study on AGD fund.

— high similarity between two funds ..

[1] Consider this analog: If you mix a bunch of distinct colors in 10 different “mandates” (allocation schemes), the 10 resulting colors all look similar.

Selectivity (subtle difference) …. enhances my confidence in a portfolio. Out of 10 broad-based funds I look at, probably 8 are very similar and equally “solid“, so selectivity is low.  It’s hard to find one clear “winner” among the 10. By contrast, my blue-chip stock-pick process is more selective, using more criteria. I tend to use my own criteria to identify my own solid and dependable blue-chip. Sometimes, you could stumble on one that fits like a glove.

Higher diversification (across lots of names) improves dependability of the portfolio, but diversification is defeated by correlation. Using two correlated names to achieve diversification is cheating. Two stocks are more uncorrelated than two funds… therefore a better scratch for the itch.

In a down turn, in my portfolio I am more likely to find one savior stock “above water”, and realize a profit.  The diversification (unimpressive between funds [1]) within a fund doesn’t help, since I can’t cash out one savior stock out of a fund!

The other factors below are less about “dependable”…

In theory, I can  check P/E ratio of a blue-chip and notice when a blue chip is undervalued relative to peers. Even if a mufu is as solid as a blue chip, with the mufu I am not allowed to decide when to buy a constituent stock ! To do that I have to break into the “brave new world” of stock-picking (pre-clearance, account mgmt, commissions…)

— Beware of hidden risks with “reputable” stocks … not always dependable.

  • Many China companies are state-controlled. However, Vance Chhoa told me China government clamp-down doesn’t target entire sectors.
  • Political factors influence many oil companies.
  • big tobacco stocks are subject to legislation risks.

— How about a fund consisting of blue-chips? Well, I have no time to analyze each constituent stock. I think many constituents are not good enough (dependable, solid) by my standard.
— how about solid gold? I’m generally negative about gold:

  • If fundamental of a business is sound, its price would eventually catch up with its dividend-derived value. The dividend is a constant beacon of dependability to all market participants.
  • bid/ask spread and other transaction costs .. reduces liquidity and hurts dependability
  • fundamentals .. is harder to assess. Gold is almost all about SnD, which is less dependable
  • holding effort (esp. -ve DYOC) .. makes gold less dependable over long term.

Gold has solid advantages over no-dividend blue-chip :

  • no competition no replacement
  • solid support by all governments

gain`traction {20Y wheel-spinn: eq investing

Posted on by tiger40490

See also [21] %%G9 strengths as investor #specifically

div-stock picking after years of disappointing mufu-research + FXO trading — this is my vision/traction.

I wrote this blogpost as a retrospective and also to highlight my presumably improving wisdom(?) and competence(?) relative to the lay public. Am growing to a wise investor.

A random list of my vision secrets:

  • Dividend is more reliable, higher ROTI. In contrast, dividend is dismal in mufu (mutual funds) + FXO.
  • Blue-chip stocks are more dependable than mufu
  • mentally segregate my stock portfolio into growth ptf + income ptf etc. Even the growth ptf could be fine without benchmarking against SP500.
  • — minor insights:
  • Easy to find rich research insights on individual stocks, much better than mufu .. With mufu (or FXO), the info available online is 1% compared to stocks. There’s no dividend history (My vision secret) to look at. The online reading experience can be fun but aimless, often time-consuming, but some other forms of analysis can be enjoyable as I feel accumulating a bit of insight and vision.
  • mufu would eventually lose out to SP500 due to expRatio cumulative erosion. Important to long-term buy-n-hold investors
  • eqMufu div yield > 3% is inevitably unsustainable. (I have multiple blogposts) Underlying CDY is up to 4% but expense ratio is 1.5%, so it’s hopeless to aim at DYOC of 5%.  Stocks are superior.

A random list of my traction secrets:

  • Favor US.. see U.S.beats other markets over3Y+ 
  • decent marginal ROTI, due to effort, not completely luck or dumb timing.
  • The effort has to be sustainable and compatible with my lifestyle.
  • sustainability .. buy-n-forget with firewall, without babysitting
  • zero commission + fractional .. permits quick and frequent experiments
  • 100+ stocks diversified .. made possible by buy-n-forget habit
  • recording annual return is futile and poor ROTI

==== historical review
For decades, I never really perceived equity as a suitable investment for my financial needs. Too unstable, unpredictable. Unacceptable liquidity by my definition (blogpost). A long trough could last 10Y+, so I never had the conviction to invest 10k (“$20k” later on). Even now, on Futu trading app or elsewhere, when I look at the 100 well-known stocks across my familiar countries [US, greater China, SG, Japan, EU, Korea], I see the same absence of long-term trend. Well-known stocks attract hot money, leading to boom-n-bust… that’s one of my theories.

My eqMufu journey since 1997 has been long and wide. It confirmed those “theories”. Instinctively, I always cash out my mufu at some modest level of profit, because I felt that the profit is impermanent. In hindsight I tend to blame the expRatio — forever erosive. 2% over 5Y means 10% erosion.

Then in 2013 it occurred to me (unknown to the lay public) that US large-caps exhibit much better long-term trend than other regional markets.

In 2019, I discovered Robinhood. Thanks to the one-share minimum I was able to pick dozens of stocks, rather than “handful” in a typical portfolio.

Only in 2020 did I create my “system” based on DYOC/firewall/buy-n-forget.

How about non-eq? With FXO and FX, I did a lot of research but did rather few trades, largely due to per-trade commissions. My traction secret? Robinhood lets me act on my research more easily

— gambling?
FX, commodities, futures, options are zero-sum games, more gamble-like than equities. Index investing is actually just as gambling as stock picking, but div-stock picking feels less gamble-like. Blue-chip div-stock picking is esp. thrilling, even though my picks are sometimes unspectacular.

Remember many retirees rely on dividend stocks + bond coupons. Investment-grade bonds are comparable to annuities (least gamble-like)

 

div ] MOETF^DIVA #learning

Posted on by tiger40490

In 2021 I had a brief “debate” with a DBS consultant after a Takashimaya seminar. He is conversant with stocks.

DIVA shows 10%+ compound return (assuming DRIP) over a decade+. Impressive, but most of it probably is capital gain, rather than dividend income from constituent stocks. The presentation by DBS/OCBC etc is probably misrepresentation of DIVA dividend dependability.

Q: if an equity mufu like DIVA can pay 4% dividend, then what’s the advantage of MOETF hitting DYOC 4% after tax?
A: This blogpost on DPR is the big picture. I doubt a mufu can generate 4% DYOC consistently without eroding NAV. I have yet to see an example.
A: An big point of confusion — when I say 4% DYOC I’m referring to my entire portfolio, where 80% of t could be earning 5% and the other 20% earning close to 0%. For a mufu investor, DIVA would be part of her portfolio, so her portfolio DYOC is unlikely to be same as DIVA.
A: an equivalent ETF will probably beat the mufu in terms of expense ratio. However, mufu manager can trade better than the ETF robot. Over the decades, countless papers have demonstrated that virtually all eq mufu’s under-perform the index in the long run.
A: MOETF will beat ETF on a few fronts. One financial reason — MOETF gives me the option to liquidate individual constituent stocks.

However, I do agree that dividend tax is a disadvantage of MOETF. Luckily, as U.S. tax payer, my annual income would be so low that my marginal tax rate would be far below 20%.

Tcost is another disadvantage but as an recreational investor I treat it as recreation and learning. Anti-aging.

By the way, the DBS consultant made another misrepresentation implying “10% return every year.” I challenged him “Are you sure there’s not an annual return below 10%”? I believe 2011 and 2018 are negative.

the affluent often favor Funds over stocks@@

Posted on by tiger40490

In this blogpost “the affluent” refers to anyone qualifying as clients of SG wealth mgmt,  having SGD 200k account balance.

Rebecca of UOB suggested that many of his affluent clients prefer (mutual or ETF) funds rather than stock trading.

— reason: professional mgmt (with the mgmt fee) .. highly questionable value-add in reality
“Peaceful sleep” is a major selling point of professionally managed funds.

Active fund managers analyze individual stocks and hand-pick them. I criticized it in bluechips=slightly more dependable than mufu
— reason: professional assistance from financial advisor .. probably a key factor.
In contrast, these advisors will not help them trade stocks because there’s no fee to be earned !
— reason: no interest no time no expertise .. I think more than half of these affluent clients lack enthusiasm (risk appetite), free time or expertise to pick stocks by hand.

Q: in terms of Funds vs stocks, how do I compare to the affluent? I only have some very vague presumptions about the age, nationality distributions of “the affluent”.
A: I guess many of them favor ETF or mutual funds, rather than stocks. The Vanguard 2020 report is an analysis of investor preferences.

Q: how relevant is it to understand fellow investors?
A: I think the relevance may grow.

Is my eq/bond investment skill improv`@@ #R.xia

Posted on by tiger40490

— some areas of visible improvements

  • focus on div yield, not windfall appreciation. See mail to Ashish on 2 Oct.
  • usage of limit orders
  • usage of zero-commission broker
  • experience with high-yield Reits
  • experience with name-brand vs unknown stocks

In Nov 2014 (email below) I set a target of SGD300/month cash payout from equity+bond investment. I did hit that target using my rental properties, but my original target was “using equity+bond”. Now I see a way.

My Unit trust experiment was disappointing and too time consuming so I just left some SGD 50k in there unattended. I guess my dividend yield was 3-4% but NAV was highly unstable, often dropping more than 4% a year. So I think my overall average return was below 3%/year. In conclusion, my experiments show that Singapore unit trusts are ineffective tools for generating cash income.

What I need is a portfolio with reliable dividends + more stability in NAV than I have seen. I believe it is possible — with U.S. dividend stocks. Many retirees seem to rely on stock dividends.

I’m sure those high-dividend unit trusts also invested in these same U.S. stocks, but the killer is management fee. If the portfolio generates 4.5% dividend payout, I can only get 3% in the form of cash payout.

Now 3% dividend yield is not very high in the U.S. stock market. I think I can earn more than that.

Another advantage with stocks is, i can choose my allocation , and take on riskier dividend stocks, to generate 6-8% dividend annual payout. SGD 300/Month = USD 2666/Year = $38k x 7% so I only need about USD 40k. Over the next few years I plan to deploy up to 50k in U.S. dividend stocks, to generate SGD 300/M.

On Sun, 30 Nov 2014 at 13:04, Bin TAN (Victor) wrote: >

> “Going forward, perhaps i will invest more aggressively, take on more risks, > > lose bigger amounts, learn more lessons, before I cut down.” > > Rong: “lose bigger amount” != found cutting edge. I lost a lot. When I look > > back what I did, my lesson is it’s unnecessary to use real money to try and > > error. Reading more books has the same effect but cost much less. >
In order to justify the 3H/week precious time spent, i need to > generate higher profit, which usually comes with (the chance of) > bigger losses.

So what dollar amount is “higher profit”? Right now, my dividend cash > (deposited into my bank account) is $500 – $600 a month.

The other investment profit (mostly unrealized) amounts to $20 – $100 > a month. The actual average is close to zero because some months my > portfolio loses value.

For me, higher profit means average monthly non-dividend income of > $300, to be achieved by 1) a bigger eq portfolio, and 2) a bigger bond > portfolio.

I have to say it’s not straightforward to measure my monthly > non-dividend income. So I don’t spend too much making accurate > measurements. $300/month is a rough (and tough) target.

FSM(+Trading): y ROTI so low@@

Posted on by tiger40490

 

In terms of personal ROTI efficiency, AA) trading (+FSM) is inferior to BB) property (+HY/PE) investment process. BB is more suitable for me:

  • I only need one big due diligence. Then buy-n-forget.
  • No monitoring required. No distraction to work. Often no price updates available anyway. Unable to transact on-my-own
  • Profit/Effort ratio is 10 times higher

Let’s compare Chip’s no-load fund to trading+FSM. The latter’s ROTI is lower because

  1. daily distraction
  2. too many research sessions compared to just once for the no-load

— guideline with FSM periodic checks,

  • reduce holdings to reduce the need for periodic checks
  • aim at one check per 48 hours

##eg: time well-spent@investment research

Posted on by tiger40490
  • property research has the highest tangible value due to the quantum
  • Jill’s private equities — I spent many hour-long sessions before the German investment, until I felt comfortable
  • energy12
  • life/term insurance products in Singapore

negative eg: FSM — research is way too time-consuming and the funds are mediocre and simply lack quality. Most of them are unspectacular, so anyone spending hours and hours every week comparing them would eventually realize these funds are all very similar. Very few can beat SP500.

 

disillusioned with stock/bond mufu

Posted on by tiger40490

I used to spend hundreds of hours on FSM, researching on stock/bond funds. I always found very few funds different from the norm.

  • 90% of mainstream equity funds have very high correlation with SP (short for SP500 and Dow Jones.)
  • Some non-US equity funds or commodity equity funds can have slightly lower correlation, but always under-performing SP
  • Virtually all bond funds show dismal long term growth
  • The “balanced” or “multi-asset” funds are invariably uninspiring combinations of the above.
  • No genuine commodity funds exist. Always a mining stock fund in disguise, always under-performing SP
  • Virtually all the high-dividend funds under-perform SP and often shows no long term growth