Lessons Learnt in 2014

We got it good here in Singapore, gainfully employed, have some savings (& HDB debt) and now making small inroad into value investing and compounding interests!

We are already making it better, start with ourselves, take good care of ourselves and our loves ones, bring old parents out for nice meal, chit-chat under the sun, buy roses & kiss your better half, run around freely with ur cute kiddos in botanic garden lawn! adopt a fish, dog or cat, start potting and grow some greens!

these cost very little, but meant soo soo much!

set aside a small percentage of your savings for onward forwarding to elderly support homes, child-cares, school funds etc..
start small, contribute where you can, cdac..etc...

I look forward to 2015 as i think life can only get better!! IT MUST BE BETTER b'cos we are getting BETTER!

Hurray Life!

(29-12-2014, 12:03 PM)Porkbelly Wrote: Agree with the concept of MOS ( margin of safety).

Price is subject to mood, perception, supply & demand

Valuation is subject to potential ( up or down )

Both play into each other.


But some other questions:

Why be a value investor, trader ?
What is the overall goal, objective?

How much is enough?

If I am able to have a nett worth of $5 million, that would be more than enough for me!
And maintain it till death.

Beyond that amount, it gets quiet meaningless... what in the world would I want more of?

Another Lamborghini, another residence in Argentina? another jet? Get invited to World Economic Forum?

But I believe that greed plays a very big part and the other part is ego.. the ultimate human motivation.

Quote:Price is subject to mood, perception, supply & demand

Valuation is subject to potential ( up or down )

Both play into each other.

Unquote:-
Well put.
Both play into each other because like 2008/2009 fiasco, nobody was sure of anything of any company. In other words how to estimate the MOS value of a company say, KeppelCorp then is definitely very much different now. Even then at that time oil price was not so low. (i suppose only)

During chaos time, i think MOS is still quite important but i think the most important question is, "Will the Emperor (company) be caught swimming naked when the tide goes out"? If he is, no MOS can save you.

I alway lamented all the good companies got bought to high already and the trick is to get them when they are not but you won't find them.

As i type, here's what i thought. If i am to jump forward 5 to 10 years from now, what are the holdings i like to have ?
The one who will shape our industry, our country and our market. Things can become crystal clear.

(29-12-2014, 12:03 PM)Porkbelly Wrote: How much is enough?

If I am able to have a nett worth of $5 million, that would be more than enough for me!
And maintain it till death.

Beyond that amount, it gets quiet meaningless... what in the world would I want more of?

Another Lamborghini, another residence in Argentina? another jet? Get invited to World Economic Forum?

But I believe that greed plays a very big part and the other part is ego.. the ultimate human motivation.

I would like to refer to a quote from Charlie Munger below

“Like Warren, I had a considerable passion to get rich, not because I wanted Ferrari’s – I wanted the independence. I desperately wanted it.”

Source: Buffett: The Making of an American Capitalist
http://www.amazon.com/Buffett-The-Making...0812979273

(29-12-2014, 10:02 PM)CityFarmer Wrote: “Like Warren, I had a considerable passion to get rich, not because I wanted Ferrari’s – I wanted the independence. I desperately wanted it.”

It's true - independence is something I crave for too. To be able to do what I love to do without feeling that I am obliged to do it.

To be wealthy is not to be draped in material riches; but to have fulfilling relationships, friendships and lots of love.

(26-12-2014, 11:35 PM)Musicwhiz Wrote: 4) Learning about asset allocation - Most investors don't pay much attention to asset allocation, and I have noticed this from blogs where people put up their portfolio, and also from forumers who may purchase companies in varying amounts to add to their portfolio(s). You should allocate the bulk of your funds into your highest conviction idea with the lowest risk, but it takes some time to figure out which company in the portfolio has the lowest risk. We tend to allocate capital by saying "oh I have $XXX to deploy and so I bought YYY". But the right way to look at it would be - should I sell position A to buy positions B and C as this will lower the overall risk of something going wrong with my portfolio. Noteworthy I feel, and every investor should think of this.

Asset allocation can means differently for different group of people. I reckon in our context, it means diversification. Diversification related to risks, and a big topic. It is a topic of research for me in 2014, and will be extended to 2015. How much diversification is appropriate, with an expected performance, and a minimum risk level, is the quest of mine...

I have always fully vested. Will I miss out the occasionally "sales" from Mr. Market, comparing with those with cash hoarded? May be not. I learned from Peter Lynch on the rotation of stocks. It is not by mean of pulling out the flowers and watering the weeds, but a regular consistency check on portfolio with their initial stories, and replace them with better one from watch-list, if any.

Will I be worse off in performance comparing those with cash hoard? Well, I can't prove it now, but I reckon it may not be. One reason is I have a much lower opportunity cost.

Sharing a thought.

(30-12-2014, 11:35 AM)CityFarmer Wrote:

(26-12-2014, 11:35 PM)Musicwhiz Wrote: 4) Learning about asset allocation - Most investors don't pay much attention to asset allocation, and I have noticed this from blogs where people put up their portfolio, and also from forumers who may purchase companies in varying amounts to add to their portfolio(s). You should allocate the bulk of your funds into your highest conviction idea with the lowest risk, but it takes some time to figure out which company in the portfolio has the lowest risk. We tend to allocate capital by saying "oh I have $XXX to deploy and so I bought YYY". But the right way to look at it would be - should I sell position A to buy positions B and C as this will lower the overall risk of something going wrong with my portfolio. Noteworthy I feel, and every investor should think of this.

Asset allocation can means differently for different group of people. I reckon in our context, it means diversification. Diversification related to risks, and a big topic. It is a topic of research for me in 2014, and will be extended to 2015. How much diversification is appropriate, with an expected performance, and a minimum risk level, is the quest of mine...

I have always fully vested. Will I miss out the occasionally "sales" from Mr. Market, comparing with those with cash hoarded? May be not. I learned from Peter Lynch on the rotation of stocks. It is not by mean of pulling out the flowers and watering the weeds, but a regular consistency check on portfolio with their initial stories, and replace them with better one from watch-list, if any.

Will I be worse off in performance comparing those with cash hoard? Well, I can't prove it now, but I reckon it may not be. One reason is I have a much lower opportunity cost.

Sharing a thought.

Asset allocation to me.......all cash or all stocks...haha

(29-12-2014, 11:16 AM)CityFarmer Wrote: I am yet to conclude my 2014, and the corresponding review, but would like to share one of the small thoughts in 2014. I like Q&A style, thus I present it as a series of Q&As

Value investors know well a phase, "Focus On The Downside, And Let The Upside Take Care Of Itself". A couple of questions arises. Knowing their existence, will not automatically take care of the downsides. So what are the available means to "take care" of them?

There are many means, and the most important one is MOS. It is a well-known concept by most buddies here.

Should the MOS be the same for all stocks? The answer should be NO. Since the downsides are different between stocks, thus the MOS should be used differently on them. A unique MOS is derived after reasonably considered all the downsides of a stock.

Should the MOS take care of Mr. Market psychotic mood swings? The answer should be NO. It is difficult, if not impossible to "take care" of it. I often hear that no MOS is able to offset a crash of price. The statement is right, and MOS isn't suppose to do that either. MOS is a margin of safety for value, in case you are wrong on its valuation

Sorry for digressing in this thread, but how do you consider/calculate the downside of a stock?

(30-12-2014, 11:35 AM)CityFarmer Wrote:

(26-12-2014, 11:35 PM)Musicwhiz Wrote: 4) Learning about asset allocation - Most investors don't pay much attention to asset allocation, and I have noticed this from blogs where people put up their portfolio, and also from forumers who may purchase companies in varying amounts to add to their portfolio(s). You should allocate the bulk of your funds into your highest conviction idea with the lowest risk, but it takes some time to figure out which company in the portfolio has the lowest risk. We tend to allocate capital by saying "oh I have $XXX to deploy and so I bought YYY". But the right way to look at it would be - should I sell position A to buy positions B and C as this will lower the overall risk of something going wrong with my portfolio. Noteworthy I feel, and every investor should think of this.

Asset allocation can means differently for different group of people. I reckon in our context, it means diversification. Diversification related to risks, and a big topic. It is a topic of research for me in 2014, and will be extended to 2015. How much diversification is appropriate, with an expected performance, and a minimum risk level, is the quest of mine...

I have always fully vested. Will I miss out the occasionally "sales" from Mr. Market, comparing with those with cash hoarded? May be not. I learned from Peter Lynch on the rotation of stocks. It is not by mean of pulling out the flowers and watering the weeds, but a regular consistency check on portfolio with their initial stories, and replace them with better one from watch-list, if any.

Will I be worse off in performance comparing those with cash hoard? Well, I can't prove it now, but I reckon it may not be. One reason is I have a much lower opportunity cost.

Sharing a thought.

i have chosen to invest almost 80% opposite of your "style"(aka estimation only) since day one. And i have been wondering the same which is better? (Your neighbour's grass always look greener leh-apply here too). May be there is a "middle path". i mean my 80% may be reduced to 30 - 40 %.
But i think consistency is more critical than which style we have chosen.
We know WB makes money. So is Peter Lynch. i think WB doesn't sector or stock rotate so much like P. L.

Me i am just trying to survive in all markets by hook or by crook.
Opps! Sorry!
Not by crook, i mean by all legal and proper ways i can think of & use. Like why i am here. Don't want to stay FOC in "CHANGI HOTEL"
NB:-
i can tell you my style costs me to miss some dividend payments and some multi-baggers. But compensated by having more cash as a limitless option to be deployed anytime. Now i am looking for the "Middle Path" that may lead to "NIRVANA" . Is that what a Buddhist would say?
Shalom.

(30-12-2014, 11:35 AM)CityFarmer Wrote:

(26-12-2014, 11:35 PM)Musicwhiz Wrote: 4) Learning about asset allocation - Most investors don't pay much attention to asset allocation, and I have noticed this from blogs where people put up their portfolio, and also from forumers who may purchase companies in varying amounts to add to their portfolio(s). You should allocate the bulk of your funds into your highest conviction idea with the lowest risk, but it takes some time to figure out which company in the portfolio has the lowest risk. We tend to allocate capital by saying "oh I have $XXX to deploy and so I bought YYY". But the right way to look at it would be - should I sell position A to buy positions B and C as this will lower the overall risk of something going wrong with my portfolio. Noteworthy I feel, and every investor should think of this.

Asset allocation can means differently for different group of people. I reckon in our context, it means diversification. Diversification related to risks, and a big topic. It is a topic of research for me in 2014, and will be extended to 2015. How much diversification is appropriate, with an expected performance, and a minimum risk level, is the quest of mine...

I have always fully vested. Will I miss out the occasionally "sales" from Mr. Market, comparing with those with cash hoarded? May be not. I learned from Peter Lynch on the rotation of stocks. It is not by mean of pulling out the flowers and watering the weeds, but a regular consistency check on portfolio with their initial stories, and replace them with better one from watch-list, if any.

Will I be worse off in performance comparing those with cash hoard? Well, I can't prove it now, but I reckon it may not be. One reason is I have a much lower opportunity cost.

Sharing a thought.

As I am now in the learning process of constructing my equity portfolio by screening undervalue stocks. Most of the undervalues belong to small and mini caps.

I found out that there are 29 counters were put under watch list or delisted by SGX in the last 5 years ( my investment horizon). This is about 5% out of the total companies under 750 mn cap. So I used 5% failure rate to calculate diversification and design expected returns. Does it sound logical?