[My Story]: Confessions of a 20 years old thousandaire…

Hi everyone, this is my first post since I got back from being deployed overseas for a month in Australia. Happy to finally be able to have some time on hand to do things I like. Recently, I read this article on Medium called “Confessions of a 23-Year-old thousandaire”. In the article, he wrote about his financial journey as a 20 odd years old individual in the US. I was inspired by it and thought I should do a Singaporean edition based off my own experiences. I hope teenagers or even those in their 20s will glean something off my CONFESSIONS. Haha so here goes…


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Chapter 1: Who says you got no money?

There is always this common misconception that teenagers like us have no money. True enough we don’t draw a constant salary unlike our parents. But we do draw a steady stream of pocket money from them. One thing I regretted when I was drawing pocket money from my parents was to draw it daily instead of weekly or monthly.

Drawing your money weekly or monthly is a better arrangement as it forces you to learn BUDGETING. You will need to learn how to allocate your money wisely throughout the week or month in order to have sufficient for each day.

Budgeting is a critical first step in learning how to plan your money wisely.  It was only until NS when I stop taking pocket money from my parents and start living off my own NS salary that I realise the importance of budgeting. On some days, you can very well spend a few times more than you are supposed to, so remember to always BUDGET!

Like they say:

“Failing to plan is planning to fail.”

 


Chapter 2: Save yourself by saving…

SAVING image

To tell you honestly, I didn’t even realise the importance of saving until I was 18.  I regret not saving up left overs of my pocket money into my savings account. Usually my leftover cash will stay in my wallet and mysteriously “disappear”.  Haha it probably went into my stomach with all the snacks or occasional Starbucks that I bought.

The lesson here is by not saving and leaving cash in the wallet, it exposes us to several dangers lurking out there. By dangers I mean temptations to buy things that you probably won’t need.

With the advent of cashless payment, it becomes even more important to be discipline in your budgeting and saving habits. You will not feel the pain when you just click a few buttons to purchase whatever things you see online. The pain only comes when you check your bank account at the end of the month.

Don’t belittle the small amount you save each day, be it from your pocket money or your monthly salary. It is these small amounts that will pave your way to financial freedom.

 

“The habit of saving is itself an education; it fosters every virtue, teaches self denial, cultivates the sense of order, trains to forethought, and so broaden the mind.” — T.T Munger


Chapter 3: Make your money work for you…

money work for you.jpg

Sadly, in our times, it is no longer enough to just save for retirement. Inflation is continuously eroding the value of our savings 10, 20 years down the road. Inflation is the reason why our $2.50 chicken rice is now $3.50. Here’s a chart showing the price of property for the past few decades.

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The one clear trend here is UP. Of course, wages have also been growing but the paramount question will be if wage growth can always outpace the rate of inflation. And even so, all those money you save up in the bank are only going to depreciate in value as inflation rate outstrips the interest rate gained on your savings.

Hence, we need to have some ways to make our money work for us. And that is through investing. Whenever I tell others about investing, many tend to look at me with fearful eyes. Even my mum advised me against investing, because to her its akin to gambling. What many don’t know is that investing can be a safe and fuss free way to grow your money.

Average inflation rate is about 2-4% per annum. Banks currently give you about 0.05% on normal savings account. To win the game of investing, all you need to do is to ensure your money grow at a higher rate than inflation. Sounds tough? It’s actually quite easy.

For those who don’t intend to actively manage their investments which usually yield higher returns albeit at a higher risks, index ETFs are safe and fuss free way to win the game of investing.

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The above are 2 of the indices that track a group of stocks. S&P 500 tracks the best 500 US stocks and FTSE tracks the best UK stocks. As you can see as long as you are able to hold it for a long time, the trend is only UP. S&P 500 annualised return since its inception is about 10% per annum which is much higher than the inflation rate. The FTSE return about 5% per annum for the past 20 years also higher than inflation rate. Hence putting your money in the best stocks in the world through index ETFs are definitely an easy way to make your money work for you.

There are also many other methods to invest for beginners which I shared in this article 

“An investment in knowledge pays the most interest.” — Benjamin Franklin


Chapter 4: Compounding is the key to financial freedom…

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The key to a fruitful retirement in the future is through compounding. Imagine someone were to give you 10% every year on the $1000 you put with them.

Screen Shot 2017-10-05 at 9.20.21 AM.png You will realise that you do not just get $100 every year. The amount earned increases exponentially with time!

Now imagine 2 individuals, Adam and Smith. Adam starts investing with his $5000 savings at the age of 20 by buying into the index ETF that return 10% per annum. On the other hand Smith started slightly later at 30 buying into the same investment product as Adam.

Assuming they both aim to retire by 65, how much retirement sum would they have?

For Adam:

Screen Shot 2017-10-05 at 9.29.06 AM.png

Wow a sum of $364,452.

As for Smith:

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The difference is HUGEEEE. A 10 year difference means your results are reduced to about HALFFFF!!

So who says you can’t start investing with a few thousand dollars? The magic of compounding usually sets in the longer you hold onto your position.

The lesson here is start picking up investing EARLY and have PATIENCE to let your money do the work for you.

“Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.” — Albert Einstein 


 

Chapter 5: Enjoy the process…

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The most important thing of it all is to enjoy the process. There’s no point to save up such a huge amount of money but lead a miserable life of cooping yourself at home in order to save up a few penny. At the end of the day, you can’t lug your bag of cash with you to the grave. I ever once tried to save 90% of my NS salary and only spend 10% of it. It was tough and I found that I wasn’t happy. That is not to say that you abandon saving altogether, but rather plan your budget around your lifestyle and find a healthy amount to save and invest.  This is so that you can both enjoy the PRESENT and the FUTURE!

“Enjoy the process. You will get there, you might as well enjoy the journey!” 


 

In conclusion,

the whole idea of me setting up this blog is to educate young people to take charge of their financial journey early. You don’t need a lot to start From Ground Zero, I started out with $300 in the stock market. You just need to be patient and disciplined in budgeting, saving, investing and the rest will take care of itself. Hopefully this will encourage more young people to take charge of their finances! 🙂

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[My Story]: My Investing Strategy

Hi all, apologies for not posting for a while now. Peak period of outfields week in week out made me procrastinate for quite a bit haha. I realised it’s been about 1 year since I started investing. A lot had happen and I am thankful for the many lessons I have learnt over the course of the year. All that happened, made me stronger and allow me to continuously revise my own investing strategy. Today, I shall share about my own investing strategy. How I identify potential investment targets, what I use to time my entry into a stock and when to sell.

1) Investment Objectives

Previously, I shared the importance to know your own investment objectives before being able to craft out your own investment plan.

my-investment-objective

Your own investment strategies are the actions you are going to take in your investment plan. Just a recap, for now my investment objective remains to grow my capital. From a measly sum of $300 at the very start of my investment journey, I am targeting to grow it to at least $10k before I enter the university. (Of course along the way, I added more money into my investment.) As of now I have about $6k vested in the stock market and sitting on a 20% realised return so far. Below is my investment strategy I am using to reach my objectives.

2) How I pick my investment targets

Personally, I like to look for companies with low Price to Earnings (PE) ratio with huge growth catalysts ahead. Companies that are of such qualities fill up about 60% of my portfolio. The reason why I adore such a company is because it is both undervalued and have ample of growth characteristics. (Killing 2 birds with 1 stone!)

Of course, sometimes it’s hard to find such a company. But all you need is that 1 or 2 opportunities to give you astronomical gains. Examples are companies like AEM which was previously PE of 8-9 (undervalued) and had a innovative product (growth). When the market comes to realise the company’s potential, the share price will readjust upwards.

After finding that few value-growth companies, I like to diversify across themes. By that, I like to research their growth areas and see if it fits any major trends happening in the world or in Singapore. For instance, now the One Belt One Road is quite a big thing, companies (construction, railway builder etc) that are undervalued and have operations in this area will potentially stand to gain from the growth opportunities available. Here’s another example, I may want to look at a more defensive theme. Companies that are undervalued and are in the industry that provides services to consumers, governments etc are all plausible candidates.

Of course, after shortlisting the few that make the cut. Checking their fundamentals is next and even better if there has been insider buying. (Here’s how I evaluate a fundamentally sound company)

3) Timing my entry

After all that filtering process, you should probably be left with a list of less than 4 companies. Timing my entry to buy into the stock is next. How should I buy at the correct timing. For me, some technical indicators and the chart have helped me quite a bit.

I like to enter my first position after a period of consolidation (where the price have been around the same level for a few weeks) and with low volume.

AT chart

I use the weekly chart for a better long term view since I usually hold my position for a few months at least. The red rectangle is the period of consolidation where prices close in very tight range. And if you look at the blue circle, the volume is below average for those few weeks. This represents a rather good opportunity to enter. I like to see consolidation period as a spring board to propel you upwards. But, how do we tell if price will go up after consolidation and not down?

AT chart1.png

I use the MACD indicator to see if there’s a possible uptrend coming. (I am not going to go too in depth into indicators) When the blue line cross the red line as shown in the circles, it is a possible indication of an uptrend. For me, I only use indicators as an additional reference after I spot a consolidation zone.

4) When to sell?

Haha to be honest, this question always baffles me. I myself am also not a good seller. There are a few times a stock raced upwards after I sold away all my position. Sometimes, I get to emotionally attached to a stock and tend to sell too late. Hence, this portion is something I am constantly still learning. However I do have a few ground rules to follow.

  1. Sell when the undervalued stocks become overvalued.
  2. Sell at your stop loss.
  3. Sell when the business is no longer attractive or fundamentally sound.

I don’t really use technical indicators to predict when to sell, because I believe that as long as the business’s value and growth aspects remain intact, a downtrend should be temporary.

In conclusion,

planning your own investment strategies to achieve your own objectives is important.  You need to know what stocks you are looking into, when to enter and when to sell. Only then will it translate into gains in your portfolio. Hopefully for those who started investing, you will be empowered to write out your own investment strategies after reading my own strategies. Writing it out is really effective, as it makes sure you do not get flustered when anything happens in the market.

[My Story]: How I managed to regain all my losses with one solid stock

Hi everyone, it’s been about 3 weeks since I last posted. Was away for a military exercise in Thailand. A lot have happened while I was in Thailand, the weather was crazily hot, GID outbreak in camp and I also sold one of my stock holding that gave me a 100 percent return on investment. The profits made from that investment was able to cover out all my losses incurred when I just started out investing. Today, I will be sharing more about the characteristics of that stock and the things I have learnt from this episode.

1) 100% return in just 3 months?!

Yup I was equally surprised! Some of you may have noticed that in most of my recent posts, I have been using AEM Holdings as an example. Yup this is the company that have became my very first multibagger (a stock that returns more than 100%). It all started out when I was screening for low PE stocks in the SGX. (Value approach). This company popped out in the screener which caught my eye. It has innovated a cutting edge product that no one in the world has been able to and back then its PE was less than 10 (relatively undervalued). The company have also just returned to making profits and are planning to ramp up the production of this product which means that further earnings growth is guaranteed.

Since it fulfills the basic principles I set out for a fundamentally sound company and I read an interesting piece of analysis by the guys over at thelittlesnowball.com which reaffirmed my beliefs, I vested into the company at $0.885 per share.

AEM stock chart.png

From the chart, I entered AEM at $0.885 per share, added more shares at $1.055, before selling them at $2. If you were wondering why did I decide to sell it instead of holding onto it longer, it was because this stock was about 60% of my portfolio. I have about $2000 invested in it. As this stock catches the attention of more people, it will become more volatile as big players come into the fray. Since I am just a small fish in this, I decided to take the money off the table and only enter again when there is a dip in prices.

Not all company can be like AEM, which gives a 100% return in just 3 months but there are certain characteristics that the company possessed.

  1. Growing earnings
  2. No debt
  3. Frequent share buybacks
  4. Undervalued

and most importantly it has major catalysts (in the form of their cutting edge products) coming its way.

2) Lesson learnt from this episode

I think the most important lesson I learnt from this episode is to be consistent in your approach. A lot of times, young investors like us tend to be swayed by our emotions. For instance, chasing the next hot stock etc etc. When we are swayed by our emotions, we tend to forget all the framework that we set in place for ourselves. Hence being consistent in our approach and calm minded are very important when we are investing.

This episode also shows that you do not need to be in many trades to profit from investing. Sometimes, all you need is that 1 stock to do the magic. Hence, when you are disappointed because you had to be force to exit a stock due to the stop loss in placed, remember that 1 win can easily make up for many small losses if you exit them early. Personally, I was down about $600 since I started investing and this was still when I didn’t learn to cut loss. In that $600 includes the 70% lost incurred from my Noble’s debacle. I am glad that my revised approach, have led me to recover from my losses and rake in a small profit.

In conclusion,

I would like to say that not all stocks can be like AEM. However, many stocks do have some resemblance to it. With enough due diligence, and a small leap of faith you may just stumble upon the next AEM. Most importantly, do not forget the framework you built for yourself while investing. Personally that has been the most important rule that led me to find this undervalued gem!

 

[My Story]: Investment takeaways from my first few trades

Hello everyone, it’s been a while since my last post. Sorry about that, haha was busy trying to learn coding. Haha I have to say that the activation energy to learn something completely new is super high! Going back to today’s post, I will be talking more about the first few trades that I did after my “Noble” failure. (Haha you can read more about it here) If you think that my next few trades should be much better, you may be wrong. I decided to try to trade in a few different stocks to understand how it works. Some work against me, while some earned me a pretty good return. So here goes…

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Closed Trade

The picture above was taken from my Stock Portfolio page from last year . Haha just look at the sea of red! Each closed trade in red are definitely scars I will bound to remember in years to come for experimenting in different types of stocks . Of course, I did draw some meaningful lessons from it, allowing me to update my list of things to NOT DO when choosing certain stocks. I will be sharing with you those lessons today.

1) Never look for stocks that are too “penny”!

Penny stocks are those that probably only cost a few cents sometimes not even 1 cent on the SGX. Different stock exchanges around the world have different meaning for penny stocks. For instance in the US, penny stocks are normally less than $1-2. Penny stocks are even more dubious if their fundamentals are not good. No strong record of earnings , questionable management etc. Also, penny stocks tend to be played by professional traders. They may buy up a lot of shares, since it is cheap and thus create a sign that the stock is trending up. Retail investors may get into the stock and when the pros sell the stocks, these retail investors tend to get trapped with a higher price paid for the penny stock. Hence, the risk for penny stocks are definitely high!

As for me, the 2 stocks that I bought into which were penny status were Cedar Strategic (530.SI) and GCCP Resources (41T). One cost me $0.004 and $0.06 per share respectively. Cedar Strategic had a troubled management in the past, and the new management came in ,divest away its loss making businesses and went into property development in China. The sales of the property seems to be going well and to be honest I was a little greedy, here’s why. If I bought $400 into Cedar, an increase of 0.001 will earn me a $100 profit. Of course that didn’t turn out well haha, the stock was so illiquid that the price of the stock can be the same for a few weeks. After a while I thought it was a bad investment on my part and decided to sell it away for 0.003. See what happened here? By selling away at 0.003, I incurred a $100 loss + a commission expenses of $43!

This taught me that:

  1. Penny stocks are usually businesses that may not have sound fundamentals.
  2. Penny stocks are usually illiquid and most of the time we have to sell lower due to low demand for the stock.
  3. Just as penny stocks have huge potential to double your money, it can also lose your money in double quick time.

2) For beginners, don’t buy into mining companies.

Mining companies are normally bad investment for beginners as they usually carry huge debt and have little or no profits. This is due to the nature of business. Mining companies borrow huge capital to buy equipment for mining. Furthermore, there are a lot of uncertainties in the mining industries.

  • There ore mined may be low quality and of no commercial value.
  • The mining company may not be profitable before their debts are due.
  • The profitability of mining companies are heavily dependent on the prices of the commodity they mine.

All these mean that the volatility in the mining industry is very high. For me I bought into CNMC Goldmine (5TP), Alliance Mineral (40F) and GCCP (41T).  All are pure mining stocks while GCCP is also a penny stock as mentioned earlier. But I would like to talk more about CNMC.

cnmc-goldmine

CNMC Goldmine mines for gold in Malaysia. The good thing about this company is that they have become operational and are actually mining gold from the ground. The company also benefitted from higher gold price. So I bought into this company at 0.425, it eventually rose to a high 0.50 cents mainly due to better production and increase in gold price. However, key events like the rates hike in the US eventually cause it to drop to a low of 0.40. Also, recently CNMC announce that the quality of gold ores they mined are of lower quality hence it affected their earnings too. I didn’t sell when it hit its high but sold only when the bad things start to hit the company and eventually I sold for a loss. Hence it was a painful lesson for me about the mining industry.

From this we can see the difficult industry the mining companies are operating in. Thus, in my opinion, for beginners it is best to avoid this industry altogether unless the company present a very promising growth catalyst in the near future.

These are the 2 lessons that I draw from the next few trades that I did after Noble. Although, it is not a rosy picture, I definitely learn a lot from it. Hope you guys get some insights from my humble sharing.

[My Story]: My Investment Objectives

Hello! Hoped everyone had a great New Year Day holiday. As mentioned in my previous post, today I will be sharing with you about my own investment objectives and my reasons for it.

My Investment Objective.png

I have done up a simple diagram of my own investment objectives. I prefer splitting my investment objectives in period of 5 years so I can have a holistic view on how my investment style changes with the years.

In 5 Years:

Why: As some of you may know, I did not start out with a huge upfront capital in investing. The average size of my trade is only a few hundred dollars per transaction. The multiplier effect of investment increases when more shares are bought. Hence, I decided to dedicate my first 5 years of investing to aggressively growing my capital. Since, I am in the army and will be in the university during this period, my tolerance for risk is much higher.

How: I will do so by looking into growth and value stocks which have higher potential for price per share appreciation. I will try to lock in at least 20% gain in price before selling the shares completely. Hence my holding period is not very long term. With that, it is also important to protect my down side. When I started investing, I did not actively pursue a stop loss and caused a great deal of problems for me. With such high risk pursuit of capital growth, having strict stop loss is important to protect your downside risk.

Characteristics:  

  • Look for growth and value stocks
  • Sell when stocks appreciated at least 20% in price 
  • Strict stop loss to prevent down side risk

In 10 Years:

Why: After the 5th Year mark, I should be out in the working world and making a regular income. Although I would still be young, its important to start saving for retirement. Hence, the percentage of my portfolio changes with an extra element of preserving my capital. Overall, I am still growing my capital but less aggressively compared to 5 years ago.

How: Likewise, I will continue to look for growth and value stocks to fulfill my investment objective. The added component would be to source for income producing assets, like blue chips, bonds, fixed deposit to preserve my capital.

Characteristics:

  • Look for growth, value and income stocks
  • For growth and value, same rule of selling when price appreciate at least 20%
  • Same strict stop loss for growth and value stocks
  • For income stocks, look for blue chips that pay regular dividends. Preferably reinvest those dividends. 

In 15 Years:

Why: After the 10th year mark, I would be in my 30s with much more responsibilities. Most of us would also get a HDB in our 30s. This will incur more expenses and hence it is more wise to be less risky and protect more of your capital. Hence, preserving capital becomes more than half of my portfolio.

How: Pursuit for growth and value stocks become less important. Looking for stable income producing asset becomes paramount.

Characteristics: 

  • Look for more income producing assets
  • Same rules applies for growth and value stocks

In conclusion,

its important to know how your investment journey will span out. Having a investment plan with clear investment objectives should help you make accurate investment decisions. When I first started out, I did not have such a plan, I plunged myself into different trades like a headless chicken and incurred heavy losses. Do not make the same mistake I did haha. Of course, life is not smooth sailing like you want it to be. Things change and crisis may emerge, thus it’s important to always review your investment plan and objectives yearly and tweak them accordingly. For those who may have yet to have an investment plan, feel free to try out my method of planning and let me know if its helpful. Here’s to a great 2017 for all of us!

[My Story]: My first investing mistake… 

Sorry for not posting for quite some time. Have been busy with trying to pass my TP test haha which I unfortunately didn’t :(. Alright back to sharing with you my investment story. This is a story about my first investment mistake which caused me to lose about 70 percent of my initial capital. Before going into that let me share with you the background of this story.

This stock was my first stock ever since I successfully created a DBS Vickers account to trade stocks for real. It was in April 2016 when there was a lot of uncertainties in oil prices where we saw prices drop to a low of $30 per barrel. My initial reasoning for buying this stock in the SGX was that I predict a turn around for oil prices. This is partly because given oil as a limited resource keeping prices low will be damaging to oil dependent countries. Hence, with that reasoning alone, I searched for a stock in the SGX which dealed in the oil and gas sector. And guess which stock I picked?

Noble Group Limited (N21)

Investment experts would laugh at me for buying this stock and hoping for a rebound. Which was unknown to the innocent me back then.

To me, Noble used to be in the STI which comprises of the Blue chips companies in Singapore. It had a strong footing in the Oil and Gas sector. Hence, back then the innocent me bought 750 lots of Noble Group for $0.420 per share. Guess what happened next?


(The stock price is different due to the rights issue they did)

The stock price stumbled like no tomorrow!! I eventually sold at $0.126. (What a painful loss!!!) So what’s the problem here?

1) I did not check its balance sheet thoroughly.

If I did a check on it’s balance sheet I would have discovered that Noble had accumulated huge debt. This was the latest financial report before I bought the stock which I did not check.

Looking at the Current Liabilities column, it had an astonishing USD 2,127,814,000 of Bank Debt!! It’s cash and cash equivalents is only USD 1,953,270,000. Which means if the Bank were to ask back for their money, it is hard to say if Noble can return the bank debt without having to liquidate their other assets. This should definitely had set off some red flags had I knew back then.

2) Failure to cut loss

It may be good to have confidence in your reasoning for your purchase of a stock but refusing to cut loss and hoping for a rebound is a costly mistake that many investors make. We tend to think that if we do not sell our stocks we would only suffer paper loss. However, looking at it in another perspective if it’s a good stock it should never breakdown too much. (Meaning the price would not drop 70%!!!) Thus, keeping a good stop loss is very important. Know when to cut loss, after all there is a myriad of stocks out there for us to choose from!

In conclusion, 2 important lessons here. First, we must learn to study the company very carefully before buying into their stocks. After all buying of their stocks means owning a small part of the company. Do you want to own a successful or a failing business? Hence, remember to do your homework! Next, always have a firm and steady plan for each stock you buy. For instance, when to cut loss, when to take profit etc. That’s all from me today! Hopefully sharing this story can help aspiring investors in some ways 🙂