Investment principles that resonates

Earlier I told that I bought 2 taiwan books on investment.

The first book was on understanding financial news. The second book was on technical analysis.

I will touch on the 2nd book. I am biased about technical analysis mainly because Warren Buffett doesnt believe in it. He studied technical analysis but he realised that the charts were right even if it was upside down.

Because of this, i didnt want to waste my time studying something that was not going to be useful. So i turned to fundamental analysis.

A large part of the book is on technical analysis which i skipped.

But there were parts that resonate with me. The author advocates that

1) investment period - minimum 10 years to reap good results

2) divestification - with only a few hundred or thousand dollars, you cant divest by buying different stocks. Hence he advocated just buying one stock each time

3) buying only good stocks - for me, i buy sg long established companies

4) dont look at the stock price daily - this is not easy

One of the stories shared was of people who did not earn alot but they conscientiously accumulate stocks with the extra money saved each year. Over 10, 20 or even 30 years, the dividends can become substantial.

For me, the dividends from my investment is about a month of my takehome pay. This is akin to me receiving one more month of bonus every year.

Although it is still quite far from replacing my income, it is a goal that i continue to pursue coupled with capital appreciation.

Many people are afraid of investing in stocks. But they wouldnt think twice when it comes to property investment.

Indeed I heard stories from friends or colleagues of someone they knew whom have accumulated passive income from buying and renting out properties.

For me, buying an investment property involves coughing up huge cash outlays. It takes years to build up the cash. The risks of buying an overpriced property is similar to paying too much for a stock.

There is a chance that the stock company will go burst and one is left with worthless shares. Whereas for property, the property would still be worth something.

A question that I constantly ask myself, if given 1m to invest, what will I invest the monies in.

In the past, my answer would be to buy a 500-600k property and rent it out. And invest the remaining 400-500k in stocks.

But the above is just my wishful thinking. I didnt consider the reno costs, stamp duties and the hassle of finding a good tenant etc.

Considering that there is little hassle in buying stocks, my answer would be investing 70% in stocks. Remaining to settle my hdb loan.

Taiwan trip

Spent the past 8 days in kaohsiung and tainan, not for vacation. But for family medical reasons.

During these 8 days, I realised

1) I should be grateful to have a stable job. Heard from the locals that the economy in taiwan is bad and the unemployment rate is high. The night market at liuhe is very empty (i went there on a weekday). Felt mixed feelings because if it was crowded, i will be damn pissed. But if it is empty, felt sad for the food vendors.

2) grateful to have a healthy body. My family stayed in a ward in tainan hospital for 5 days. During those 5 days, i were bombarded with scenes of sick elderly and young people. It was saddening to realise I am wasting my life when these sick people are desperately clinging to life.

3) tried to learn some financial knowledge from their books. I bought 3 books , 2 on financial related.

Read some chapters on one book which is focused on technical analysis. I still do not really understand the technical analysis portion but some of the principles that the book teaches resonates with me. Will share them in my next post.

The right price

The common adage in stock investment is buy low, sell high.

How low is low, how high is high?

If it is common sense to buy low, sell high, many investors would have made money in buying stocks.

For me, I also have some difficulty in determining the price of stock to buy and when to sell.

To buy - Once I identified a stock that I am keen to own, I would first comb the latest financial results to get the net asset value figure (NAV).

Once I get the figure, I would check the current stock price.

So if NAV is $2 and the price is at $1.50, I would be jumping with joy. But before I rush to buy the stock, I would google to see if I could get the historical prices of the stock for as long back as possible.

Using back the same example, if after checking the history, the current stock price of $1.50 is at an all time high, I would not make the buy. Because this would be akin to buy high in the hope that the price will rise even further which is a gamble.

The ideal scenario would be the history showed that the current stock price is either at an all time low or the stock has declined. This would signal a buy for me because this is when I can buy low and sell high later.

However, there is some caution here. Do not just buy into any stock just because the stock price is falling or at an all time loan. I had some selection criteria (which I have shared in my earlier post) to pick established companies with good track records. So on top of this selection criteria, I used the above methid to determine the price that I would buy the stock at.

To sell - in my early days of investing, I sold my stocks after making 30% profit.  When I looked back at my decisions, I regretted because I could have made 100% or even more if I had held them longer.

Hence now I invest monies which I could afford to hold in stocks perpetually without needing to sell. This gives me no time limit to realise as much gain as possible. It would be too stressful to try to make some gain with a set period since the behavior of the market is unpredictable and beyond our control. The greatest gain could only be realised if one is patient.