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Friday, November 17, 2017

Venturing into the Crypto world

I finally included Crypto currency in my portfolio after months of reading, understanding the technology and creating lots of accounts. Creating accounts is free so I figured that there is no harm to just create account of exchanges and wallets to get myself accustomed to the crypto world. It turns out that there are a lot of photo taking for identity verification and a lot of passwords to remember. A good resource to get your feet wet with Crypto is from GMGH Crypto toolkit. I would recommend any beginner to have a read at that before jumping in.

After a lot of reading, I think the block chain technology behind crypto currency has great potential in the financial industry and potentially more. However, I feel that it is also highly speculative now. Being a value investor, I am kind of allergic to speculation and I am struggling to find value in the sea of crypto currencies (1200+ of them with more popping up every month). This is especially difficult since there are no P/E, D/E or any other form of matrix to value the coin. What you have are just technical charts which I am not very well verse with.

What tipped the scale for me to finally take the plunge to invest in Crypto is the QASH ICO that just ended on the 8th November 2017. I had created a Quoinex account and got an email from them informing me of their QASH ICO. I read their white paper (here) and think that what they are working on is solving a real problem in the crypto world. On top of that, the team's credential is strong and they are also making profit from their exchanges platforms already. Furthermore, the ICO is fully regulated by the Japanese government. That’s the closest I can get to some form of valuation and so, I took some allergy medication and made the jump with a small position.

During my participation in the QASH ICO, I joined the telegram group to keep myself updated with the ICO news. This gave me direct contact with the QASH team as well as it's community and also allow me to truly feel how speculative the current crypto community is. There are many people who participated in the ICO due to the hype. From their queries on telegram, I doubted they have read or understand the white paper. They are probably just hoping to ride the crypto wave to earn a quick buck.

The ICO was oversubscribed in the first 24 hours which is encouraging but like any oversubscribed IPO, I was only allocated 55% of my purchase instead of all of the amount which I subscribed for. QASH will be starting to trade on 21th Nov 2017 at their Quoinex and Qrypto exchanges and after 1st December 2017, it is planned to be listed on more exchanges. I am excited to see if my first Crypto investment turns out well to make my bouts of allergic reaction all worth it. 

Happy Value Investing
Value Warrior (VW)

Monday, November 6, 2017

Recent portfolio action

Hasn't been very active in the last few months.

Bought some Dutech to average down.
Share price of Dutech dropped quite a bit after their profit warning in July.  However, i feel that Dutech is still profitable and undervalued. Hence I have bought some during the July drop to average down.

Sold some Ellipsiz to realize some profit.
In fact for Ellipsiz, with the dividends received and the proceeds from the sales of some shares, I have covered the cost for the shares. This means that the remaining shares that is still vested is pure profit. Unfortunately, Ellipsiz just forms a tiny part of my entire portfolio and no I still cannot retire and shake leg at home. Still it is good to know that my current Ellipsiz holdings is FREE!!

Happy Value Investing

Thursday, October 26, 2017

Better than OCBC 360?

Love the 3% that OCBC 360 is giving? But too many hoops to jump through? How about the one below? 4% per annum and no hoops to jump through?

Wait! There is more!! On top of the 4% per annum interest, they will give you a one time 7% rebate for the amount you deposit!! Sounds too good to be true? Well there are some catches.

First, this is only valid for the first $7000. Next, you have to leave the money with them till you are 55. Some of you would have probably guessed by now that this is the deal that you can get with voluntary contribution to your CPF Special Account. The 4% per annum is the interest rate you will be getting from the Special Account and the one time 7% is the income tax rebate you will be getting. Ofcourse the percentage of tax rebate depends on your annual income and 7% is just a median.

For me this seems like a pretty good deal and a good opportunity for me to beef up my Special Account base so that I can have the government help me compound my retirement savings faster.

Happy Value Investing

Wednesday, October 11, 2017

When to sell my value stocks?

I have managed to follow a set of rules to buy about 15 to 20 equities in my value portfolio.  This is clearly set out in my earlier post, setting up the criteria. But as you can see from my previous portfolio update here and here, I am not very good at selling the equities that i had bought.

Buying an equity or stock is an important part to investing. Similarly, selling them is an equally important part. Without selling, any capital gain will just remain as unrealized gain and you never know when the price will retrace leaving you losing your gain.

I have been reading around and it seems the common rule of thumb to sell an equity is if it does not meet the initial criteria which you had bought the equity for. That means in my case, if the equity does not meet the value criteria i should be selling it. However, I have been trying to execute that for months now with no success.

I realized that although the value criteria that was setup for buying a stock is a good indication of a well managed and undervalued company, it does not work very well for determining if the fundamental of the company had changed after i had bought it. For example, the price of the company could have increased such that the dividend dropped below 3% and does not meet the value criteria. To me this does not warrant a sell, if the company is still low on debt and still giving out dividend at low payout ratio, it is still a well managed company. It might just takes a while for the dividend to catch up with the price.

Using the value criteria as a sell indication might be too simplistic an assessment and I probably have to come up with another set of sell criteria. If anybody have any suggestion, please feel free to chip in.

Cheers! Happy Value Investing.

Wednesday, October 4, 2017

Which stage of Financial Independence are you at?

Came across an article today on "The Stages of Financial Independence". It's interesting to see how the author has split our life's financial journey into 8 stages starting from financial dependency and ending with financial abundance.

I guess I have come a long way in my financial journey starting from being financially dependent to being at a stage of trying to achieve debt freedom right now. Started from working and paying off students loans and subsequently getting married and getting into more loans (housing and car loans) and working to pay them off now. Seems like an endless rat race where we need loan to survive and work to pay off loans.

It was about 2 years ago when i realized this is not how i want to live the rest of my life. I don't want to be working just for the sake of working. I want to live my life at my own terms and i think that will only happen if i reach Financial Independence or Financial Freedom. And so i begin my search for alternate and passive income. Been reading a lot since then and so far only manged to appreciate and agree with the value investing approach. Hopefully this approach will lead me to Financial Abundance, the last stage of Financial Independence, and i can truly live life the way it's meant to be.

So which stage of financial independence are you at and do you have a plan to move forward in your journey to Financial Abundance?

Happy Value Investing

Wednesday, September 27, 2017

Effect of compounding

I was chatting with one of my colleague about investing and he brought up his investment on crypto-currencies. He was never interested in investing before so i was curious why the sudden interest in investing. He says that the return for crypto huge. Easily 20%.

I guess people are always looking for higher returns before they start investing.

A returns of 7% on $1000 is only 70 dollars while a returns of 20% on $1000 is 200 dollars. Surely getting 200 dollars is a more attractive incentive to start investing. Well if you gamble your money in Casino, the returns is 50% per bet. That's $1000!! Instant gratification! It's no wonder so many people are hooked on gambling.

Let's not forget about the risk on the above returns. You are not going to win every time in the casino. In fact, you are going to loss most of the time and the 50% return will not mean anything. Also, how consistent are you able to get 20% return from the Crypto market? The volatility of the crypto market is not something anyone can navigate through successfully. If you are able to consistently achieve 20% return, kudos to you. That's one golden ticket to Financial Independence.

7% is the long term average return of the STI. This mean that if you invest in the STI index and hold it long term (20 years or so), you are going to get a annual return of 7% (including dividend). This is very achievable for average investor.

So what does a consistent annual returns of 7% gets you? If you just start with $1000 and reinvest the returns yearly, you get about $5500 at the end of 25 years. This is not too far off from a simple return of 20% for 25 years. (See graphs below). Compounding starts slow..... Because of that its really not that obvious or interesting to anyone. However, with time, it rapidly catches up.

Hence I believe its important to start investing early regardless how low or unattractive the returns may seems and let compounding work its magic with the help of time.

Happy Value Investing.

Thursday, September 14, 2017

Importance of a basket of value stocks

I have recently come to realize the importance of having a basket of value stocks instead of concentrating on a few. I have also realized the importance of looking and tracking the returns at the value portfolio level rather than at each individual value stock.

As you can see from my portfolio, not all the value stocks are in green, I do have a couple that are in the reds. And this has always been the case for the past 1 year plus since I started. I always have some winners and some loser. Fortunately, at the portfolio level, the returns have been good so far.

I remember there was a time when my returns on Hock Lian Seng (HLS) was negative at around 15%. However, at the value portfolio level, the return was positive. This is the reason why I am able to overcome the emotion of panic selling and holding HLS till now. As you all can see, HLS has turned positive now.

I know many people will disagree on having too many stocks in a portfolio. As what Warren Buffet had said before. “Diversification is protection against ignorance. It makes little sense if you know what you are doing.” Well, I agree that diversification can hurt your returns and you shouldn’t do it if you know what you are doing.

However, I am not Warren Buffet and I know I will never be him. So, having a basket of stocks selected based on the value criteria to diversify my ignorance and still beat the market return sounds like a fair enough deal to me.

Well maybe when I learn more about how to truly value a company, I will hold a more concentrated position.

Happy Value Hunting.