Wikinvest

These days everyone goes to Wikipedia for a wide range of info.... and now there's Wikinvest! By investors, for investors, the Wikinvest has information on individual companies, wikicharts, and other interesting stuff that I do not yet have time to check it out.

Here.... check it out yourself : Wikinvest

Recession? Where to put your money now?

I came across a rather interesting article by CNN Money which advises how one can profit (in the long-term I assume) from all the nose-diving stock prices we see these days. I've extracted the summary of the market survival guide below for a quick glance in-case you do not have the time to read the full article.

There's another statement in that article that I thought was particularly good and hits the proverbial nail on the head for investing (of course, trading is similar but also has many other different rules) :

"As an investor, you face two challenges in today's tumultuous market: First, you
have to choose bargain stocks while recognizing that the overall averages are
still extremely pricey and have plenty of room to fall. Second, you must
assemble a portfolio that will protect you from the claws of inflation, while
keeping plenty of funds in cash so you can grab the beaten-down buys when they
appear."

Basically, it means choose good stocks to buy, but also always becareful to keep your captial liquid, otherwise, you'll not have the resourses to that advantage of opportunities when they appear.

Well, do read the article if you have the time, I think its pretty good. :)

----------------------------------------------------
Market Survival Guide

1. Keep costs down
In the new era of low returns, it's important to keep fees down to build a winning portfolio. Buy index funds and ETFs, and don't pay for Wall Street's often unreliable advice.

2. Go for dividends
A big gift of today's rocky market is a surge in dividend yields. If you want income for life, grab solid but beaten-down names right now. Two good bets: pharma and utilities.

3. Take a chance on battered stocks
Sure, it takes courage, but the best investors pounce when sectors are bloodied and expectations in the cellar. Two reviled sectors: banks and homebuilders.

4. Look abroad
Diversification is the foundation of a strong portfolio. One way to get there is with a big allocation in international stocks. But true diversification is tricky. We'll tell you how to do it right.

5. Be smart about bonds
You need fixed-income investments for ballast, but the trick is staying ahead of inflation. The three picks for an inflation-racked world: munis, TIPs, and CDs.

Market Updates

I'd been looking at various forms of investing for awhile. Now with the possibility of a US recession becoming more real, what kind of markets would be the most viable?

Personally, I still think trading is the most viable, and especially so for trading Forex. Now, that is not to say that I had been profiting on my FX trades. Quite the contrary, I'm actually losing or have lost quite abit. Its part of the learning process I guess. So why do I think FX is the most viable? There's good volatility, and there's always a trade no matter which market is rallying or dropping.

The other tools however, aren't doing too well. My mutual funds are steadily dropping, but at least my Financial Advisor (FA) had the sense to shift half my portfolio into bonds for the time being. This is a good time to see if Dollar Cost Averaging (DCA) is effective. Unfortunately, DCA will take awhile to see results, sometimes as long as 7 years.

Stocks are even worse I think. Just look at the US markets. With the Fed making rates cuts of 125 basis points within a span of 8 short days, the markets are not showing signs of recovery. Even though the Dow did rally a short while when the Fed announced the rate cuts (of 50 basis points), the markets eventually gave up its gains before the close. This, I think, shows how negative the market sentiments are. Will this overflow to Singapore and Asian markets? I think it already has to some degree. Stocks all over the globe are experiencing some form of shock due to what's happening in the US. There are talks however, that markets are decoupling from the US economy, and even our Government says that Singapore will see growth this year. Markets are unpredictable.... lets see how it turns out.

P.S. For updates on my forex trading, visit my Forex blog.

Investing : Lump Sum or Dollar Cost Averaging

After reading up on investments for quite awhile, I realised that there are many schools of thought. Amongst this include those who time the market in an attempt to pick highs or lows, and those who put in a fixed amount of money over long periods of time - a practice called dollar cost averaging (DCA).

People who do DCA believes that markets generally moves up. While that might have been true for the past 30 years or so, people like Pretcher from Elliott Wave Institute believe that the markets are heading for a long term bear market. In such an event, DCA would yield terrible results.

I'm predicting if the markets will move up or down for the next decade. I'll leave that to the experts. But below is an extract from a CNN Money article that I actually agree on with regards to Lump Sum v.s. Dollar Cost Averaging:

"...While I disagree with those that use math to show that dollar cost
averaging delivers superior returns to investing all at once, I am a strong
believer that dollar cost averaging has significant psychological advantages.
You don't have to worry about any worst-case-scenario market timing like the one
described above. If you dollar cost average in over a long period of time,
say two or three years, you are actually more likely to stay in the market. If
the market goes down, you'll feel better you didn't sink it all in at once, and
because you're buying more shares at a lower price...."

Investment Learning Resources

I had been subscribed to the MorningStar newsletter to get some market sentiments about mutual funds and stocks. Morningstar is a very good reference site for anyone wishing to do some investigation into the various types of funds available, and it also appears that they touch on stocks too. Not Singapore stocks unfortunately.

The recently sent out an advertisement on some workbooks they had come up with for stocks investing. It looks quite interesting and seems like a good resource for learning how to invest in stocks. I'm horrible with stocks investments (everything is in the red now), and will consider getting these workbooks only after I've perfected my FX trading.... that means... in a long long long long time. :P

e$avers Interest Rates Drop again

Just received another letter from standchart informing me that the interest I receive on my e$avers account will drop again. Doesn't seem too long ago that the interest rates was revised downwards. Since I have less than 50k in the bank, that will be the rates I'm looking at.

Previously, the rates were 1.8%, then in dropped to 1.5% and in Nov in will drop to 1.2%. Of course, the email also states that "despite this revision, e$avers remains one of the best savings accounts to earn higher interest on your savings."

At 1.2%, it is still a competitive rate compared to many savings accounts provided by many banks. But does this mean its the best option to keep your cash? I think it may be time to look around again and see if there are any other people who offer higher interest to keep your cash. Just for the purpose of illustration, if you had 49k in your bank, these are the interest you will receive.

1.8% : $882
1.5% : $735
1.2% : $588

That's a drop from $882 at 1.8% to $588 at 1.2%. Or in other words a drop of 33% in returns!
Of course, if its still the one offering the best rates, then we'll have to live with it, else you may want to consider some other options of where to park your cash. Perhaps you could cycle it through really short term T-Bills. These typically return about 2% per year.

This is what a friend's friend did: Invest in T-Bills with a holding period of 3 months, and cycle through them. So it looks something like that:

Month 1: Lot 1
Month 2: Lot 2
Month 3: Lot 3
Month 4: Lot 1 matures -> Reinvest
Month 5: Lot 2 matures -> Reinvest
... and so on.

Not sure if I'll go through the trouble for that.... but I might be worthwhile to do so if the interest rates keep dropping....

Checking up on Financial Companies

I posted earlier on being careful on your investments and doing background checks. And recently, Sunshine Empire has also made the news with MAS on doing its checks to make sure that what the company is doing is legit. MAS has posted a list of companies under checks, and you may want to check against this list before dealing with any new finance-type companies.

Link: http://www.moneysense.gov.sg/check_our_list/Consumer_Portal_IAL.html

Diversifying my finances

I did some thinking over my finances again, and I think I shall start a small regular savings plan for unit trusts (or mutual funds). The front load is 3% and the maintainance fee is 0.25% per quarter. Been having some hesitations over getting into mutual funds because most literature says that funds generally do not out-perform indices. But my (independant) financial advisor is a friend, and I thought I could let someone manage abit of my cash for now. The draw-down and risk I think I can withstand, and if anything goes wrong, I'll just take the cash out and consider any losses as sunk costs.

So my upcoming portfolio comprises
a) Savings - To build up to 6 months worth of wages
b) Funds - To contribute about 10% of wages per month
c) Forex - Fix amount allocated for trading.
d) Stocks - Minimal amount of stocks being held. No intention to purchase more at this point.

The savings provide a safety net in the event of any emergencies, the funds provide a means for diversification and accumulation of cash over the long term, forex allows me to learn how to trade for profits, and stocks... well, that I'm just holding on because they aren't doing too well although some people project them to rise over a longer horizon.

So there you have it! My slightly modified approach to my finances. Actually, I really need to spend more effort and time on my other aspects - Career, Fitness...etc. But at least I'm getting some satisfaction knowing I had at least been moving steadily towards one of my goals.

Trading Learning Points

There's a general rule for trading out there - Cut your losses and let your profits run. In theory, that's a pretty good rule to follow. But its often easier said than done before letting your profits run also means the potential for a winner to become a loser.

Every trader would have had the experience of holding on for too long without taking profits and ultimately ending up with losses. I know I've had that.

So how do I use that in my trading? As far as I can, I'll take profits for most of my positions and then let a much smaller amount run so that I'll not lose much if the market turns on me. But that also significantly cuts down my profits, and my risks of course. I'll probably take some time to see what works for me. For now, keeping my eye on my outcome.... profits!

Money as Debt

How was money created? Does money represent value, or actually debt? Here's an interesting video if you have about 40mins to spare. :)

Land Banking

I went to the SMART Investment & Property Expo over the weekend and came across many different companies selling properties, land and alternatives form of investing.

One of it which attracted me was profitable plots. The sales representative told me that they will be obtaining planning permission for the land they are selling within the next 2 years and I can be looking at a hefty return of 300+%. Sounds like a pretty good deal yeah?

I was quite convinced and went back to share with my parents and asked if they were interested. My Dad being the sceptic that he was told me to hold back. I'm glad he did, and that I did not enter this implusively.

I did a search on the internet and found that Profitable Plots has some rather dubious history, and it appears that they have many dissatisfied customers. In addition, I've also found that the plot of land they are selling (Hounslow, London) is a conservation green-belt and has a next to nil probability of getting planning permission in any near future. If anyone cames across this company, or any other company for that matter, pls do your due diligence and check up the facts before participating. You could save yourself alot of pain!

Trading workshop

Attended my first day of Chris Loris' Forex Essentials Workshop. He's a nice person who really does seem to be sharing everything he knows. The sincere type with no airs, and seems really approachable.

Hope that these few days I'll learn even more on how to trade and get my trading skills up. The markets had been volatile lately and even Chris is taking more of a backseat. Hey... if a pro trader is making less trades, we as noobs should follow suit. hahaha.

Oh well... waiting for tomorrow's session to learn more!

Hedging Strategy (Forex)

I was just going through my daily RSS feeds today and I came across this interesting Hedging strategy. It may not be new to the market, but it certainly is new to me.

Its pretty much range trading, and I suppose I could use other oscillating indicators to buy/sell overbought/oversold areas, which is another range trading strategy.

I'm actually tempted to test out the hedging strategy, but the down side is this: If the market breaks out of the range immediately after you hedge, you will lose money once it breaks out eitherway. So the timing better be good, and you never know when prices are going to move in a range or going to break out.

Well, if you are trading... you might want to give it a shot.

FX Trading - Month 1 Update

I've just completed my official first month of live trading. Notwithstanding that I was on reservist for about 3 weeks, I did have a few opportunities to trade.

As of right now.... the total account is making a loss of 2.6%. I want to blame it on the volatile markets these days, but can only blame myself for not being able to hold back from entering the markets knowing that it is volatile.

Hoping that next month's performance will be better. :)

First Trade

I've finally activated my account and made my first trade! That was yesterday. Lets just say things have started on a positive note! Unfortunately, I'll be on reservist for the next 3 weeks (haven't even packed yet!) and am not sure if I'll be able to trade.

Haha! Trading is so cool!

My first cheque

I hate to use cheques, especially when there's a charge to maintain a current account, or the cheques are for things like ready credit that comes with a hefty interest.

That's why I forgot I even had my extrasavers account which provided cheque services for free (for now at least). Today, I'm forced to write my first cheque to open my trading account with Saxo.

Basically, Saxo only takes cheques or wire transfers (MEPS). Since wire transfers will cost me, I decided to go wtih writing a cheque. I wish that they start implementing internet banking services soon, that will make things so much more convenient.

Trading!!!

I think I'm going to open a live account to trade very soon. Returns on the demo account has been great! All I need to do is to make sure I can replicate those results on a live account. And more importantly, be able to repeat its performance consistently over long periods of time.

Meanwhile, I'll be cool if I could get people to chip in and pool the cash together. Its like a mutual fund kind of thing, but just different. Any friends out there willing to take the risk with me?

Here's the system. Everyone who's willing to chip in will put their cash into a pool that... ahem... I will manage. The pool then be used for trading. The profits will be split according to the percentage contribution each person has in the total pool, and I'll take a tiny small 5% commission on the profit.

To make it simple, here is what it looks like from the viewpoint of an individual. Lets say John (imaginary character) contributed 5k.

Month Start
John's contributions : $5k

Month End
John's profits: $100
John's account less commission : $5,095

Commission charge: $5

See! Who wants to come on board??

Disclaimer: Contributers are advised to understand the risks involved. The worst case scenario is losing all your cash put in. You will not lose more than what you have contributed.

Planning

I had been doing some planning since some time back. This includes what books to read, how much money to save, what interests to pursue...etc.

Taking a brief stock check, I realised that everything is skewing towards my finances. I had been reading quite abit before I had my coaching camp, but I had hardly read any self-improvement type books since. So where had I been spending all my time?

Reading investment books, planning my cashflows for the coming months/year ahead. Re-defining how much to spend, or rather type of lifestyle that I want. Lamenting about how I need more job satisfaction....

Bottomline is, reduce spending as much as possible. It is possible to live on 8 bucks a day if I become a minimalist. Of course, there's the occasional (or not so occasional during holiday periods) movie and expensive lunch/dinner. But I can actually save quite abit by living that way.

Then, I can channel the cash to investments.

As for investments, I'm still one confused individual as to whether to put my cash with a unit trust/mutual fund. The front load charges aren't appealing, and there are always ETFs that we can consider. The question is, is the financial advisor good enough to deserve that 3%.

But on the other hand, unit trusts/mutual funds provides the diversification that would be difficult to achieve on our own if we have limited capital. The transaction charges alone is enough to suck up any potential profit you may have.... so will I put my cash into a unit trust/mutual fund? No idea yet.... I must just channel the cash into trading.

Is that a wise move?? Not sure. I know I'm supposed to diversify. So perhaps I'll have a mixture of unit trusts, stocks, and FX trading. Sounds good?

On the other hand, I really should be looking another other areas of my life.... like my fitness. I'm getting fatter and fatter! haha.... I need to spend some time exercising instead of starting at charts!!! oh well....

Setting up a Trading Account

Man! I swear that POEMS has one of the worst customer service around! ok, that sets the tone of this blog... :P

I was planning to get myself a CFD account on top of the normal cash management account, so I decided to go down to Boon Keng Investment Centre (heck! There's one near my office too, but I thought that wasn't a service type outlet.). Well I was served by a new lady who knew nuts about practically anything. She had the nerve to tell me everything is on the website, and for more info on CFD, I can call the CFD hotline. If that's the case, what's the point of hiring her?? Pissed....

Anyway, so my cash management account is finally up, but the instructions on how to settle payment is highly unclear! So how?? Rubbish right?? Argh.... so I just dropped them an email....

ok... enough ranting...

Fundamental vs Technical

I'm referring to investments, just in case some of you are wondering.

Some of you may recall me writing about wanting to go into investments sometime back. Afterall, living from paycheck to paycheck doesn't really help you build your capital or help you with your retirement plans. Some of you are thinking... what? Planning for retirement already? I kid you not.... if I could, I'd retire tomorrow. :) Wouldn't you?

We need to look for ways to increase our pay, ways to build passive income, and ways to grow capital. So investments is really one of the ways to do so.

And by investments, I don't mean like just buy a stock or share because you think it might go up.... and its kind of an intuition thing.... that's how my mum trades. And no matter how much I nag her, she insists that she hadn't lost much, and had infact gained some. Strange thing is... most people only remember their wins and write off their losses. I wonder how much to believe her... haha

So how else to go into investing? There are two schools of thought. One is Fundamental Analysis, the other is Technical Analysis.

Fundamental Analysis
Fundamental analysis checks the health of a company to identify if the stock is a good one to hold. Generally, stocks with good P/E ratios (that's Price-to-Earning ratios) and good financial status...etc, tend to grow over long periods of time. At least 5-7 years I think... most recommend 20 yr timespan (See why planning for retirement starts now?? haha)

Most people will recommend a long term, 'lazy' investor approach. And use something called dollar cost averaging. Generally, with a good portfolio (this means good selection of stocks, indexes, mutual funds, bonds...etc for diversity as well), one can expect about 10% per annum returns over the long run.

Technical Analysis
Technical analysis is the subtle (or not so subtle?) art of reading charts. Basically, it identifies trends and rides on up and down trends to maximise returns (Something fundamentalist strongly disagree with). Personally, I think there's some truth in TA. So I'll give it a short.

I'm still pretty new to all these... but I'm going to test these things virtually on my virtualstockexchange account to see which is better. :)