Question on war chest and market timing

[Temperament]

We can't read the future. What you did is reading the past. True that stay at sideline will avoid those losses, but that is only on hide sight. We won't really know if we will be avoiding losses, or missing out gains for the next 2 yrs. Thus I still prefer a "partly invested - partly cash" position.

You can be right, but I can be right too. In 2 yrs time, we will know.

Agree with you on being partly invested. I'll still buy if i can find value stocks. What I'm commenting on we need not feel bad on not fully invested. Holding cash is not that bad from what we see in past history

Maybe we are barking at the same tree from a different side. Yes, one need not be fully invested, but one should not be fully cash too, which is what we can see in the past history.

Just for laugh.
Fully in cash is not too bad now if you have up to 800,000.00 to 1,000,000.00 $$$ total in CPF after 55 years old. Then you can "Tang KU KU" for the market. Don't closed your CPFIS that is.
Dream on.

[CityFarmer]

I find a lot of skills needed for gambling useful in investing as well. The most relevant is probably the need to manage the risks of a streak of bad runs.

Suppose one plays a truly random game, and gets into a streak of bad run where one loses 10 in a row, how does one size up your capital so that one can relive another day? The ultimate disaster is to get caught in such a streak and end up with too little of capital that one never gets back. Most of the time, people caught up in these situations end up borrowing and doubling down - leading to ultimate catastrophe.

A more quantitative thought is just that after losing 50% of one's capital, one will need 100% returns to end up square.

I think the biggest obstacle behind the adaptation of the mindset is that people tend to treat gambling as luck and investing as intellect (I cannot lose at investing since I am so smart!!!) Also, people tend to gamble too big in investing with too little of capital (which some VB has raised i.e. the importance of the first pot of gold) Perhaps a good way to think abt investing is that it's a casino for many years, so longevity in the markets is prob much more important than the performance in the last/next 5 yrs.

Personally, my philosophy is to stimulate the a likely case scenario for my ptf when dirt hits the fan and correlation hits one (i.e. equities fall, corporate bonds spreads widen, USD rallies etc) and make sure the net ptf is still of a size that I feel comfy with so I can continue to play. Else it's time to de-risk.

Good for you. It is similar as "Focus On The Downside, And Let The Upside Take Care Of Itself", which most VB here are practicing.

[Temperament]

I find a lot of skills needed for gambling useful in investing as well. The most relevant is probably the need to manage the risks of a streak of bad runs.

Suppose one plays a truly random game, and gets into a streak of bad run where one loses 10 in a row, how does one size up your capital so that one can relive another day? The ultimate disaster is to get caught in such a streak and end up with too little of capital that one never gets back. Most of the time, people caught up in these situations end up borrowing and doubling down - leading to ultimate catastrophe.

A more quantitative thought is just that after losing 50% of one's capital, one will need 100% returns to end up square.

I think the biggest obstacle behind the adaptation of the mindset is that people tend to treat gambling as luck and investing as intellect (I cannot lose at investing since I am so smart!!!) Also, people tend to gamble too big in investing with too little of capital (which some VB has raised i.e. the importance of the first pot of gold) Perhaps a good way to think abt investing is that it's a casino for many years, so longevity in the markets is prob much more important than the performance in the last/next 5 yrs.

Personally, my philosophy is to stimulate the a likely case scenario for my ptf when dirt hits the fan and correlation hits one (i.e. equities fall, corporate bonds spreads widen, USD rallies etc) and make sure the net ptf is still of a size that I feel comfy with so I can continue to play. Else it's time to de-risk.

"LONGEVITY, DEEP POCKETS and LADY LUCK - the 3 best things to have in the Stock Markets".

By a > 25-30 years veteran financial author.

i agree. WHY?
Maybe because i know my IQ is very average only. And LADY LUCK is GOD's BLESSINGS if you are a believer or You believe entirely in YOURSELF as you think you can be one of the GURUS like WB, PL, Howard, George, etc.....

i think one of the Great Gurus also wrote something about LADY LUCK and his investing career before you think you believe in YOURSELF only.
i think it is Howard (IIRC). Goggle lol!

NB:
Stock market may not be a CASINO but our life is. Who knows what is going to happen next to his life?
Shalom.

Confirm it is Howard Marks.

[specuvestor]

I have posted about the psychological bias for properties in several other threads. Most people have good experiences from immovable properties because:

1) 4X leverage with low interest cost as collateralised. Hence ROI very high
2) Able to withstand downside as long got job and cashflow to pay relatively constant monthly mortgage. Compared to erratic cashflow demands from margin trading for example.
3) Mostly stay-in properties which means holding for the long run and timing of liquidation is not a major issue
4) Inflation will increase the price of properties in the long run. People don't measure against real returns. Properties are the best example fo how compounded returns can work big time.
5) People don't experience prolonged depreciation of property cause most HDB yet to hit 70 years old threshold where the 99 lease effect will kick in big time. I suspect the perception will change if govt allow these HDB to run the full course of 99 years instead of acquiring back.

The big killer for equities is that one has to liquidate at specific times including daily allowance, wedding, education, etc or even margin calls. If one can keep good businesses with good dividend yields as Buffett did, the experience should be better than properties on an UNLEVERED basis.

This works when you are randomly buying shares and have no specific stocks in mind. The thing about waiting for market to fall drastically before buying is you may have to wait for unknown number of years. Then when the market drop actually happens you may freeze in inaction.

At least for property, every year you are vested you win by X amount, the longer you vested the bigger your margin of safety and profit : ) For property I think it is about the length of time vested, think this is similar to investing in stocks.

Haha yes properties is one of the nice investment type unique to Singapore (and a few other cities).

This is just a general perception. The value of properties can drop and keep dropping too. On short term basis, look at those properties in Sentosa. I won't know if their prices will recover in future or not. In many parts of the world, due to the country or cities' economy, the prices of the properties are on a downhill, never to recover. Singapore had been enjoying 50yrs of prosperity, thus you can see the prices of properties going up on a general trend. The population growth also play a part to this. However, can we guarantee that Singapore will continue to grow in the future? Buying a property can be seen as buying a "share" of the country. Buy only if it is worth buying, ie look at the P/B, dividend, future cashflow potential. Sell when it is fully valued, or when the economy changes.

[valuebuddies]

I have posted about the psychological bias for properties in several other threads. Most people have good experiences from immovable properties because:

1) 4X leverage with low interest cost as collateralised. Hence ROI very high
2) Able to withstand downside as long got job and cashflow to pay relatively constant monthly mortgage. Compared to erratic cashflow demands from margin trading for example.
3) Mostly stay-in properties which means holding for the long run and timing of liquidation is not a major issue
4) Inflation will increase the price of properties in the long run. People don't measure against real returns. Properties are the best example fo how compounded returns can work big time.
5) People don't experience prolonged depreciation of property cause most HDB yet to hit 70 years old threshold where the 99 lease effect will kick in big time. I suspect the perception will change if govt allow these HDB to run the full course of 99 years instead of acquiring back.

The big killer for equities is that one has to liquidate at specific times including daily allowance, wedding, education, etc or even margin calls. If one can keep good businesses with good dividend yields as Buffett did, the experience should be better than properties on an UNLEVERED basis.

What about to commit lower capital amount on reit where you can have diversification in tenancy and assets, better exit strategy, zero administration, partly offset with 1% fee and lower leverage? I think for people who has few hundred thousands of hard cash and lesser, reit is still better option?

http://www.investopedia.com/articles/inv...-reits.asp

[Temperament]

I have posted about the psychological bias for properties in several other threads. Most people have good experiences from immovable properties because:

1) 4X leverage with low interest cost as collateralised. Hence ROI very high
2) Able to withstand downside as long got job and cashflow to pay relatively constant monthly mortgage. Compared to erratic cashflow demands from margin trading for example.
3) Mostly stay-in properties which means holding for the long run and timing of liquidation is not a major issue
4) Inflation will increase the price of properties in the long run. People don't measure against real returns. Properties are the best example fo how compounded returns can work big time.
5) People don't experience prolonged depreciation of property cause most HDB yet to hit 70 years old threshold where the 99 lease effect will kick in big time. I suspect the perception will change if govt allow these HDB to run the full course of 99 years instead of acquiring back.

The big killer for equities is that one has to liquidate at specific times including daily allowance, wedding, education, etc or even margin calls. If one can keep good businesses with good dividend yields as Buffett did, the experience should be better than properties on an UNLEVERED basis.

What about to commit lower capital amount on reit where you can have diversification in tenancy and assets, better exit strategy, zero administration, partly offset with 1% fee and lower leverage? I think for people who has few hundred thousands of hard cash and lesser, reit is still better option?

http://www.investopedia.com/articles/inv...-reits.asp

i agree.
The only set back is Reits will surely ask for more capital (aka rights issue). And the worse case is it (right issues) may not be yield accretive.
Now almost all REITS have had at least one right issues. Some definitely more than one.

Vested only in Keppel DC REIT & SPH REIT by IPOs now.

[NTL]

I have posted about the psychological bias for properties in several other threads. Most people have good experiences from immovable properties because:

1) 4X leverage with low interest cost as collateralised. Hence ROI very high
2) Able to withstand downside as long got job and cashflow to pay relatively constant monthly mortgage. Compared to erratic cashflow demands from margin trading for example.
3) Mostly stay-in properties which means holding for the long run and timing of liquidation is not a major issue
4) Inflation will increase the price of properties in the long run. People don't measure against real returns. Properties are the best example fo how compounded returns can work big time.
5) People don't experience prolonged depreciation of property cause most HDB yet to hit 70 years old threshold where the 99 lease effect will kick in big time. I suspect the perception will change if govt allow these HDB to run the full course of 99 years instead of acquiring back.

The big killer for equities is that one has to liquidate at specific times including daily allowance, wedding, education, etc or even margin calls. If one can keep good businesses with good dividend yields as Buffett did, the experience should be better than properties on an UNLEVERED basis.

What about to commit lower capital amount on reit where you can have diversification in tenancy and assets, better exit strategy, zero administration, partly offset with 1% fee and lower leverage? I think for people who has few hundred thousands of hard cash and lesser, reit is still better option?

http://www.investopedia.com/articles/inv...-reits.asp

i agree.
The only set back is Reits will surely ask for more capital (aka rights issue). And the worse case is it (right issues) may not be yield accretive.
Now almost all REITS have had at least one right issues. Some definitely more than one.

Vested only in Keppel DC REIT & SPH REIT by IPOs now.

Rights issue for REITs is still ok. You can either put in more money, and get more dividend every quarterly. If don't wish to participate in the issue, can just sell off the units, and wait till the issue is done then buy back at a lower price.

What I see worse than right issues is Private Placements, the unit price drops immediately if the placement is big enough, and as you say, it will be even worse if it is not yield accretive.

[ValueMushroom]

At least for property, every year you are vested you win by X amount, the longer you vested the bigger your margin of safety and profit : ) For property I think it is about the length of time vested, think this is similar to investing in stocks.

This is just a general perception. The value of properties can drop and keep dropping too. On short term basis, look at those properties in Sentosa. I won't know if their prices will recover in future or not. In many parts of the world, due to the country or cities' economy, the prices of the properties are on a downhill, never to recover. Singapore had been enjoying 50yrs of prosperity, thus you can see the prices of properties going up on a general trend. The population growth also play a part to this. However, can we guarantee that Singapore will continue to grow in the future? Buying a property can be seen as buying a "share" of the country. Buy only if it is worth buying, ie look at the P/B, dividend, future cashflow potential. Sell when it is fully valued, or when the economy changes.

Yup the very first decision to make when you invest anywhere is that you are comfortable with the future of that country. This I believe applies to both stocks and properties -- only when you are comfortable, then can you stay vested for long term and reap the full benefits. For properties, I choose Singapore : ) For stocks, I also choose Singapore. Because I believe in the long term prospect of Singapore.

Once you iron out the first point, the next thing is to choose the property or stock to stay vested for long term. A good thing about property investment in Singapore is that all future plans are freely available and published -- all on our dear URA website : ) once you study the plans and spotted where to buy, the next step is to see which property in that location you can afford and is profitable : ) then you buy and stay invested, wait for your piggy bank to fill up or someone to come along to offer you a price you cannot refuse : )

[Temperament]

I have posted about the psychological bias for properties in several other threads. Most people have good experiences from immovable properties because:

1) 4X leverage with low interest cost as collateralised. Hence ROI very high
2) Able to withstand downside as long got job and cashflow to pay relatively constant monthly mortgage. Compared to erratic cashflow demands from margin trading for example.
3) Mostly stay-in properties which means holding for the long run and timing of liquidation is not a major issue
4) Inflation will increase the price of properties in the long run. People don't measure against real returns. Properties are the best example fo how compounded returns can work big time.
5) People don't experience prolonged depreciation of property cause most HDB yet to hit 70 years old threshold where the 99 lease effect will kick in big time. I suspect the perception will change if govt allow these HDB to run the full course of 99 years instead of acquiring back.

The big killer for equities is that one has to liquidate at specific times including daily allowance, wedding, education, etc or even margin calls. If one can keep good businesses with good dividend yields as Buffett did, the experience should be better than properties on an UNLEVERED basis.

What about to commit lower capital amount on reit where you can have diversification in tenancy and assets, better exit strategy, zero administration, partly offset with 1% fee and lower leverage? I think for people who has few hundred thousands of hard cash and lesser, reit is still better option?

http://www.investopedia.com/articles/inv...-reits.asp

i agree.
The only set back is Reits will surely ask for more capital (aka rights issue). And the worse case is it (right issues) may not be yield accretive.
Now almost all REITS have had at least one right issues. Some definitely more than one.

Vested only in Keppel DC REIT & SPH REIT by IPOs now.

Rights issue for REITs is still ok. You can either put in more money, and get more dividend every quarterly. If don't wish to participate in the issue, can just sell off the units, and wait till the issue is done then buy back at a lower price.

What I see worse than right issues is Private Placements, the unit price drops immediately if the placement is big enough, and as you say, it will be even worse if it is not yield accretive.

i agree in general. i only find it very "exhaustive" to our limited capital. Besides, sometimes if you don't have enough capital reserve (in this case a-must-reserve for reits), your shareholdings will most probably be diluted. Aka losing money lol.
Another words, Reits can not grow without new capital. In fact most reits will die if most of the properties are lease hold. Correct me if i am wrong here.
For most other types of company, rights issue is not so common.

[opmi]

^ REITS is dying if there is no fresh acquisitions.
In the real world, things wear and tear. If you pay out
your income without upkeep, things will go down.
Only thing keeping asset prices is rising asset prices. If
Asset prices goes south, income cannot mitigate asset deflation
and depreciation. Then that when they ask shareholders to cough up.