chokleong.comRandom Thoughts | Small step, big discovery.

Random Thoughts Small step, big discovery. Menu Skip to content Home About Bursa Insight Privacy Policy Project Reading 2020 The Shape of Net Worth Growth Leave a reply Today is the last day of the year 2020. It is time for reflection. Net Worth Curve since 2012 Life throws us a curve ball. Covid-19 makes a big dent to the chart. 9 March 2020 marked the darkest day of my investing life. Market was in free fall. Two weeks later at 23 March, the market started to bottom. It almost set me back one year of growth back to the beginning of 2019. Crisis accelerates wealth transfer. The sun will continue to shine after the storm. The net worth is growing at roughly 33% year-over-year since 2012. This growth is driven by: human capital via working and financial capital via investing. Here, the human capital played a bigger role in the growth. Your ability to work is the safest and highest returning asset. Carolyn McClanahan An average person’s lifetime earnings are around $ 2 millions assuming $ 50 k earning per year for 40 years. In another words, human capital is worth millions of dollars. Everyone should take advantage of it while contributing to the society to improve human living condition. You win and the society wins too. Human capital converts time and effort into financial capital via saving. The power of saving: 1% increase in saving rate has more impact than the same increase in investment return when the net worth is small. Saving is within my control whereas investment return is not. Strive for higher saving rate rather than higher investment return. As the net worth reaches a certain level in the future, the financial capital will take over the human capital as the main contributor to the growth. That is the point where financial independence is achieved. Thinking vs Sitting Which skill is more important when it comes to investing? Thinking or Sitting? It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! Jesse Lauriston Livermore, 1877-1940 Reality and my thinking sometimes don’t overlap. It is also called delusion. This happens when my ego clouds my thinking causing me to overthink my investment. My thinking makes no big difference to the return. The market does not know I am investing in it. What I think does not impact nor influence the market. The market does not care about what I think. I can’t bluff the market. It is better to let data guides my thinking rather than thinking in vacuum when making investment decisions. The biggest risk of investing does not come from the market. It comes from the investors themselves who can’t sit tight during market crisis. Market is here to serve us rather than the other way around. Sitting skill matters. It is the time in the market that makes most of the difference. Missing a few best days in the stock market can derail the investment plan. The longer the money stays in the market, the harder the compounding effect works for me. Compounding effect works best when it is uninterrupted. There is little correlation between investment effort and investment results because the world is driven by a few tail events. Morgan Housel Within a portfolio of stocks, some will do badly, most will do fine and a few will do extremely well. The problem is I don’t know which is which in advance. Any stock could have its days. Invest for dividend I am investing for dividend. Started with Malaysian stocks in 2013. Then moved to Singaporean stocks since 2017. Next year, I will be exploring Hong Kong stocks for dividend. Below are some statistics about stock markets in Malaysia, Singapore and Hong Kong as of 2019: Country Number of Listed Companies Market Capitalisation (USD) Malaysia 919 $403.96B Singapore 470 $697.27B Hong Kong 2272 $4899.23B Stock Markets in Malaysia, Singapore and Hong Kong Hong Kong stock market is larger than stock markets in Malaysia and Singapore combined in term of number of companies and market capitalisation. Go fishing where the fish are. Mohnish Pabrai Go to where the money is to grow the net worth. Life is a blank check, waiting for you to fill in the numbers. Anonymous This entry was posted in Investment and tagged Finance on December 31, 2020 by Chok Leong . 2018 Stock Market Returns of Lump Sum Buy-and-Forget Investment Strategy for The Last Five Years 1 Reply This is a documentation about an on-going experiment that I started since November 2013. In November 2013, I opened a separate HLeBroking (Hong Leong Investment Bank Berhad) trading account to do a lump sum (one time) investment in Bursa Malaysia. I chose buy-and-forget as the strategy for this experiment because it requires the minimal effort to maintain. The portfolio contains 11 stocks from different industries for diversification purposes. Among the stocks that I bought are from consumer products (APOLLO, DLADY, MAGNI, NESTLE), trading/services (BTECH, MARCO), properties (HUAYANG, UOADEV), finance (MBSB), industrial products (SKPRES) and REITs (TWRREIT) sectors. The portfolio is skewed heavily towards companies in consumer products sector. This is the sector that is the most immune to negative market volatility. The amount I had at the time was RM 35008 and was distributed about equally among all stocks (except BTECH which was bought with the remainder of the available sum). I bought most of the above stocks during the period between November 2013 and January 2014. And I never touched the account since then. From the date of the first stock purchase (on 20 November 2013) till now (8 September 2018), it has been roughly 4.8 years (1753 days to be exact). So how is the performance of the buy-and-forget portfolio? Below is the snapshot of the account as of 8 September 2018 (you can click on the image to get a closer look): HLeBroking Trading Account as of 8 September 2018 The current market value of the portfolio is RM 53799.86, an increase of 54.03 % from invested capital of RM 35008. This translates to roughly 9.36 % CAGR (Compound Annual Growth Rate). Here is the formula to calculate CAGR: It is derived from this formula: Where: is the current market value, is the invested capital, is the rate of return or CAGR, is the number of years. Things to take notes Based on the screenshot above, we can see that some stocks have done poorly (e.g. HUAYANG -70.09 %, MBSB -54.89 %, TWRREIT -37.25 %) while some stocks have done extraordinarily well (e.g.: SKPRES +315.87 %, MAGNI +206.53 %, NESTLE +116.2 %). This is consistent with the saying that there are ups and downs in the market, which is absolutely normal and expected. We should have the stomach to withstand the price drop of the companies in our portfolio. However, even with the ups and downs in the market, the portfolio turns out fine with more than 50 % gain till date. This is due to the fact that the downside is limited but the upside is unlimited. The most a stock can drop is to zero while there is no limit to how much a stock can grow. The upside has more than covered for the downside which is the case here. Another way to interpret the result is that there are more value being created in the market than the value being destroyed in the market. Human is a highly creative living being and there is no limit to how much value can be created. This means there is an infinite value waiting to be released in the market. In a nutshell, stock market is a favourable game to play. It gets even better because I haven’t taken into account the dividends paid by these stocks. Dividends received Here is the table that shows all the dividends received during these 4.8 years. Dividend from HLeBroking Date Company Code Type Payment (RM) 09/01/2015 APOLLO 6432 150 06/01/2016 APOLLO 6432 150 09/01/2017 APOLLO 6432 First and final 180 09/01/2018 APOLLO 6432 First and final 150 23/06/2016 BTECH 0011 Final 6.3 28/09/2016 BTECH 0011 Interim 7.3 23/06/2017 BTECH 0011 Final 8 28/09/2017 BTECH 0011 8 22/06/2018 BTECH 0011 Final 8 20/05/2014 DLADY 3026 11...