The flavour of life: stock market lessons from Utada Hikaru

Utada Hikaru is another jpop artist that I am listening to currently and her haunting and pure voice is simply out of this world. Utada chan is a very prolific and creative artist whose music videos blows your mind away with elements of anime, fantasy and also very real images of everday people.

Why listening to Utada Hikaru helps you in stock market investments
The recent market upheaval that has seen my stock portfolio drop almost 10% below cost made me feel scared, desperate and worried. Fear of losing the value of my stock investments was almost too much for me to bear... until I tore myself away from the poems stock screen to check out some of Utada Hikaru's videos.

Her cool, clean and crisp voice cuts through the stress, uncertainty and worries as you focus on her music and the images from her music videos, you find yourself being more centred and focussed on listening to her voice, her music, her expression of her feelings into her songs.

It is times like this where the asian stock markets are being sold down by hedge funds, fund managers and retail investors who are spooked by the sub-prime issues and possible credit crunch in the US financial markets that maintaining the rational mindset amidst the irrational fear and uncertainty that permeates the sentiments of the investor.

Maintaining your sanity in the midst of market "insanity"
In the stock market, traders make buy, sell or hold decisions all the time. As a longer-term investors, you want to generally buy and hold for the long-term, but the markets do not always keep going up in the short-term as the recent sharp corrections in the Singapore Exchange has seen a lot of the 2007 gains in stocks wiped out last week. One of the key lessons I learnt during this episode is that you cannot time the market. Hence, the ability to hold and the ability to analyse the fundamentals of the business underlying the stocks that you invest in is paramount.

During such periods of pervasive irrational sentiment, you may need to take a step back, breathe deeply and listen to Utada Hikaru's songs to clear your mind before you decide if you should continue to hold, to buy more or to sell. There is no right or wrong decisions, it's whether the decisions make you money (in the mid-to-long term) or lose you money.

May your stock investment choices be cool and rational ones. :)

Be well and prosper.

Steady: Riding the Market Upheaval

Jpop Group Speed
The picture on the left is that of the jpop group SPEED that was (and is) arguably one of the most popular Japanese female pop groups of all time in terms of record sales. According to Wikipedia, during their time from 5 August 1996 to 31 March 2000, each of their 11 singles sold at least 550,000 copies. That is a massive number by today's standards.

What does Speed has to do with the recent market upheaval?
The reason why I brought SPEED into this blog post is because I was inspired by their single, "Steady" which one of my favourite songs from their album "Moment". Since I cannot read or speak Japanese, it is the title of the single and the word "Steady" that is relevant to you (and I) during these times where the recent market turmoil from the sub-prime contagion on the global financial and equity markets.

The gut-wrenching market moves has reinforced how you should be steady in your investment approach and strategy and your objectives of your investment portfolio. If you are in the Warren Buffet long-term investor mood and go for value-investing in shares of companies that has strong fundamentals, then you would have been relatively steady in pursuing your investment strategy. However, not many of us can remain steady to our original investment objectives when faced with paper losses on our portfolio. I can remember how many times I was so very tempted to liquidate some of my stocks amid the turmoil generated from the fear, uncertainty and doubt and coursed through the investment forums, market chatter and CNBC market reports. It seemed like the end of the word was nigh !

Steady as she goes
After these moves for the last two to three weeks, this week sees the market starting to work out the subprime issues as now analysts have flipped from their positions where they were questioning the depth and breadth of its effect on Singapore equities and flopped to saying that the banks were oversold as the central bank (MAS) was ready to inject liquidity into the market and that all 3 local banks (DBS, UOB and OCBC)'s exposure to asset backed securities affected by the subprime issue was negligible.

We are the market and the market is us
Again we are reminded that the market is a mis-mash of market players consisting the big boys, the retail punters and every Tan, Muthu and Abdullah who wants to buy, sell and hold stocks and shares who are affected by emotions, facts and news that breaks all the time.

Remember to evaluate what is your investment strategy? Investor or trader and act according to how steady you hold your beliefs (or not)!

Be well and prosper.

Managing fear and greed with your investments

Volatility is the name of the game
The recent two weeks have seen extreme volatility in the equity market world-wide. The NYSE Dow Jones gyrated violently for the last couple of weeks due to the sub-prime issues in the USA and this sub-prime slime as the CNBC analysts refer to it has tarred even the Singapore Exchange. Our shares, especially the banking shares and penny stocks have been battered beyond all recognition despite most analysts saying that fundamentally, the Singapore economy is on very sound footing.

Fear and greed strikes us
It is during times like this that fear and greed rapidly takes hold of our emotions. We are in fear of losing our gains in our portfolio and seeing double digit percentage paper losses in our equity investments. Some weak retail sellers who bought into the rumour that the sub-prime slime was affecting our local big banks DBS, UOB and OCBC were caught by the onslaught and many sold off their holdings only for them to see that the big players (institutional buyers) are mopping up the floor of the SGX by buying the bank stocks on the cheap.

This episode has reinforced my view that you need to be extremely focussed, have a clear investment objective and invest within your means when approaching the equity market. Volatility is something you have to stomach because you are buying and selling to another human being. Your counterparty who buys or sells from you is also affected by the twin terrors of fear and greed that strike especially when the market reacts to good or bad news.

On this occasion, the bad news from the USA should not have fundamentally affected sentiment to the extent that it did in Singapore because our housing market is vastly different from US. There is hardly sub-prime lending unless you count the illegal money lenders or loansharks. Hence, in terms of rational analysis and later clarified by our local banks, the sub-prime does not materially affect their investment portfolios or funds under management. Thus, it is really the irrational bearishness that descended as opposed to the irrational exuberance that has seen our market climb up so fast since the beginning of 2007.

Back to basics
If you manage your own money and some of it is in the SGX. Remember your investment basics:

1) Invest what you can afford to lose
2) Have a clear investment objective
- Are you able to articulate your reasons for holding the stock for the medium to long term
3) What is your investment horizon
4) Have diversified asset classes
- E.g. treasury bills/fixed deposits

Above all, remember that investing is for the long term while speculating is for the short-term. If you want to speculate, by all means do it within your means and with prior knowledge that you can make a lot of money and you can lose a lot of money and sometimes all in the same day.

Be well and prosper.

Money makes the roulette table go round

When I was in Perth I visited the Burswood Casino to check out what it was like. It was my first time inside this casino and believe it or not, I have visited casinos but never wagered in one. I have bought lottery tickets before but never made bets in a casino.

Retirees and pokeys
The first thing that struck me when I entered Burswood Casino was the number of elderly people who were there. There were many elderly folks who were playing the pokey machines as well as the various assorted gaming machines spread out in the sprawling casino gaming hall. They were glued to the screens as they pressed the buttons that spun the wheels, allowed a ball to drop on a video screen into boxes where prizes could be won. I am a PC gamer myself and I was amazed at the range of machines they had. Poker machines alone there were many variants but one thing was similar for them, the odds they gave were poor compared to the payouts.

Poker and Card Games
There were young players too and I spied a few who were at the poker table. I am not sure what version of poker they were playing as I am not a real poker fan myself but each player was dealt two cards and the dealer would open up to 5 cards if the bets were called or raised until the "flop". The expression on the various players face was interesting. Some older players hardly had any expression while others were smiling all the time. But what really enthralls you even as an audience is the stress and tension when one party raises the ante puts more money into the pot. The look of tension and stress on each player's face is real and when the cards are played out, you can make out sometimes the disgust of the person who loses although some of the players have truly poker places.

Roulette Table
The way some of the punters played the roulette table was amazing. They walked from one table to the next and put their bets on all 2-3 tables at one go! What was even more amazing was how one guy betted on "0" and hit it twice in a roll! What are the odds of that?

Odds and Ends
There in lies the trap of the casino. The house will always win in the long-run because of the odds. They are always stacked against the player. Take roulette. You can bet on any of the 36 numbers including 0. However, if you bet on 1 of the 36 numebrs, your payoff is 1-35 which is less because there are 37 possible combinations. For a fair game, you should be rewarded 1-37 but that is not how the game is structured. The same principle applies to all the other games. The odds are stacked against you.

What does this mean for me
So what does this mean for you the investor who wants to achieve financial freedom? The key takeaway is that you cannot find financial freedom in a casino. If you want to make a small wager and you are a legal adult (>18 or 21 depending on the country), by all means do so as see it as a game and expense. Gambling in a casino is NOT investing. :) In the long-run the house wins in a casino. In investments, e.g. treasury bills, in the long-run you will win through the accumulated interest yields paid to you. It is slow but it is sure so make your choice - investments or gambling? They are two different ballgames, don't mix them up :-)

Be well and prosper.

Panzergrenadier's stock portfolio

A reader JK has asked me to list down my stock portfolio to give an idea of what my investment preferences are. I thought that it would be a good idea to share. This is currently what is inside my equity portfolio that comprises wholly shares in companies listed on the Singapore Exchange:

In no order of merit or preference:

1. Ascott Reits
2. OCBC Bank
3. SingPost
4. Suntec Reits
5. Singtel

My approach to picking stocks on STI has been to look out for blue-chip type of companies as well as those that have a track record of dividends. You will notice that I have both Suntec Reits as well as Ascott Reits. The serviced residential segment represented by Ascott Reits should still be doing reasonably well given the tight supply situation for higher-end rentals. However, I didn't get into this stock early in the game. Am holding mainly for dividends.

Going for any of the banking stocks will not get you too far wrong. Both DBS and UOB are a bit pricey so I am holding onto OCBC as the prospects for the local banks are still quite good given the rising property market. In addition, wealth management products are starting to make more inroads into the heartlands and mass market and I think the banks will continue to do well.

SingPost is a very strong monopoly in both postal services as well as agency payment services. Their moneylending business bolstered by the introduction of EZcash and James products are doing very well and basically allows this defensive stock to stay strong and pay very good dividends.

Suntec malls are still very packed during weekdays as well as weekends and it is still prime real estate for retailers as well as for businesses to set up their offices. I think their prospects are still good in the current supply crunch for office properties.

SingTel is a legacy from the group A and group B days and I think I will keep this for the long-term and bequeath it to my future generation. :-)

There you have it, my equity portfolio at this point in time.

My current investment approach is to buy and hold and all my equities do pay dividends so unless I need to sell them to fund something new, they should stay this way for some time.

The rest of my investible savings goes into iSavvy time deposits and treasury bills.

How does your own portfolio look like? :-)

Be well and prosper.

How to invest in listed securities in Singapore Stock Exchange

P1010025
Originally uploaded by panzergrenadier

In today's buoyant stock markets in the Asia region and in the US equities market, people are thinking, should I jump into the market? With the Singapore Exchange's Straits Times index at historic highs, many first-time investors are asking basic questions, how do I get into the market?

Start to investing in securities
Let me share how you can participate in this market. But please perform your own risk assessment and analysis if:

• Do you have an investment objective?
• What is your investible savings available?
• Am I prepared to accept the risk of losing it all?
• What is my investment time horizon?

If you answered "No" to any of the questions above, may I re-direct you to my post on investing in treasury bills which are much safer though they yield a much lower potential return as compared to equities. If you accept the risks that come with investing in equities, here is how you can go about applying be a share investor in Singapore.

The steps are simple.

How to start investing in stocks and shares

1. You must first be old enough to invest - are you at least 21 years old?
You must be 21 years old to open a Central Depository (CDP) account as the SGX uses a scripless book-entry system for recording your share transactions.

2. You need to open a CDP account with the Central Depository
The detailed instructions are here. It costs nothing except a bit of time to open one and anyone can open a CDP account, you just need to produce a form of identity be it your NRIC or passport.

3. You need to open a stock broking account
Having a CDP account will enable you to apply for initial public offers for securities listed on the SGX. If you intend to sell or buy securities on the SGX, you can open a stock broking account with any of the members of the Stock Exchange listed here.

I myself use Phillip Securities with their POEMS trading platform. It has served me well for the past 4 years or so. Most of the stock broking firms do not charge for opening up an account but may have some minimum deposit required (e.g. $1,000 or $2,000) which is refundable. Check with the stock broker you intend to use about the details. Stock broking firms earn commissions when you buy and sell shares, so check which one is offering a competitive price. Internet trading accounts are a must nowadays as the commissions are lower than broker-assisted trades.

4. You need to understand the stock market
Investing in stocks and shares on the stock market is not gambling. It can turn into speculation or gambling if you do understand the risks and what is your targeted returns and time horizon for investment.

The stock market is a market where securities are listed for buyers and sellers to buy and sell securities at a given price. As the market is made up of people and facilitated by computers and networks, why the market moves up and down really is based on the sentiment and information available at any point in time to the market players. As retail investors, we tend to be nimble but we may have less information available to us compared to the big players such as fund managers. The internet has helped to level the playing field a little bit but still because of the volumes bought/sold by the big players, they can literally "move" the market.

Depending on your investment objectives, you pick the stocks that you want to buy, sell or hold. Caveat emptor, let the buyer beware. The stock market comes with opportunities but also risks as well. In general, if you are new investor, do not use margin trading or leverage to buy shares. Use only money you can afford to lose. Read books such as "One Up on Wall Street" by Peter Lynch or "The Intelligent Investor" by Benjamin Graham before you plunge into the exciting and risky world of stock investments.

Be well and prosper.

5 ways not to lose money on the stock market

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Originally uploaded by panzergrenadier

The recent bull-run in the Singapore Exchange and regional stock markets led by China has fueled an euphoria in equities. People ranging from working professionals, businessmen, office ladies, students, housewives are all talking about how to make money in the stock market.

But wait, how many of us really understand how a stock market works and what is it that we are risking our monies when we venture into it?

I started out investing in the SGX around 2003, just when the SARS crisis hit in Singapore. I was fortunate in that I got into SGX when the stock market in Singapore was on a bullish trend up to today. So what are the 5 ways I learnt not to lose money in the stock market？ （In fact, I have made decent returns each year for the last 4 years plus from investing in blue-chips on the SGX.)


5 ways not to lose money on the stock market

1. Decide how much you have to invest
2. Determine what is your targetted investment returns and time horizon
3. Read and learn about the stock market
4. Hold for the long-term
5. Review your portfolio

1. Decide how much you have to invest
This is possibly one of the most critical decisions you need to make as it is dependent on your income level, your expenses and the leftover for savings and investment. You may realise that you have not actually sat down to calculate how much investible savings you have. Some financial planners recommend that you should have at least 3-6 months in cash savings as a buffer before additional savings accumulated beyond this buffer can be used for investment.

If you have not decided how much investible savings you are willing to invest (and potentially lose - at least on paper), you should do it as the discipline and knowledge in knowing that you have holding power allows you to be more rational and less affected by the two emotions of fear and greed that strike all of us who invest in the stock market.


2. Determine what is your targetted returns and investment horizon
When I started out buying shares in the stock market, my targetted returns was to beat time deposits (fixed deposits) interest rates. Now that I have accumulated some experience in share investing, I raised my target to double that of time-deposits. Now time deposits yield about 2% plus for tenures of 3-6 months, hence my returns annually should be 4% plus. In addition, you need to know how long you want to keep your money. My strategy for the last 4 years had been to invest my savings into the market with an eye at selling and using the proceeds plus my bonus from my job to pay off my loans. Hence, my time horizon was relatively short around 1 year to 2 year horizon. That resulted in me doing more buying and selling of shares to realise the capital gain and use that to make regular partial redemption of capital for my mortgage.


3. Read and learn about the stock market
As I bought and sold shares, I also used the trading platform (in my case is poems) to learn more about the shares and the market characteristics. I also took time to go to the library on weekday nights or weekends to borrow books about investments and equities. You may want to consider investing your time in reading about investments and personal finance.


4. Hold for the long-term
Now that I've gotten past the phase of having a short-term view on the stock market, my investments have turned into buy-and-hold approach. I tend to buy blue-chips because such shares are of companies which have a large market capitalisation, are relatively liquid in terms of trading volume and very importantly, have sound profitable businesses and have a dividend policy that rewards shareholders for investing in them. Some shares I have include SPH, Singpost and OCBC bank.

5. Review your portfolio
Even with a buy-and-hold strategy, you should review your portfolio periodically. I make at least a weekly review of my shares against the market. I actually have a personal net worth excel worksheet that computes the lower of cost or market price for my share holdings. I will review the paper gain/loss each week and on a yearly trend to see how I am doing. In general, if I feel the market is going crazy, I may reduce my holdings but will stay invested in the market. Currently I am 56% invested in the market with the remainder of my investible savings in time-deposits, treasury bills and cash.

Our hard earned money is our responsibility and we should invest time in looking after our money. Nothing beats seeing the dividend credits into the bank account and to know that I am achieving a better return on my savings that time deposits and the CPF ordinary account rate.

You can do it too!

How To Buy Treasury Bills Issued by MAS Without Going to the Bank

Today's wired society with internet access 24x7 sees everyone working at the speed of thought, as bits and bytes are transmitted virtually simultaneously through computer networks and systems.

How can we leverage on the available technology for our personal investments?

Let me share how we can buy and sell 3 month Singapore Government treasury bills issued by MAS using Poems. For those who have not heard of poems, it is Phillips Securities Online Electronic Mart system. Those who buy and sell stocks and shares in SGX online will know what is poems. The beauty of poems is that it is one of the more progressive electronic trading plaforms catering to retail investors and they have added the feature of being able to apply for the 3 month treasury bills issued every week by MAS.

The steps are simple:

1. Apply for a poems trading account - you can download the form online and sending it them them along with the required documents and deposit. You can also do it at any of their investor centres.
   
2. Apply for a cash management account online using the Online Forms option under > Stocks > Account Management
3. Once Phillips Securities has approved your (1) and (2) you are ready to participate in the 3 month treasury bills issuance market

Do note that poems does charge a bid-ask spread between what is offered by MAS on the cut-off yield vs the actual yield you receive. This is effectively the commission that Phillips earns from allowing you to do this electronically. Personally, I think this is worth the effort since it saves us time and effort and time IS money.

Take note that you should have sufficient funds when you are buying the treasury bills. Once purchased, you may sell the treasury bill anytime before maturity to Phillips of course at a slight discount. As treasury bills work as a zero coupon basis, this means if you deposit buy $1,000 worth of treasury bills, you will be deducted upfront for say, $990 and when the treasury bill matures, you will receive $1,000. Hence, your yield (or interest) is computed by this formula:

• Yield = 365 x (100-Price) / number of days.

Example. A 91 day treasury bill is priced 99.30. Hence yield = 365x(100-99.30)/91= 2.808%

Transferring money to and from poems is also quite easy. Once you have set up the poems account and also the EPS (electronic payment for shares) with Poems, you may:

1. Transfer money to Poems using internet banking or ATM via EPS feature
2. Transfer money from Poems using Online Forms to pay via direct credit (POSB/DBS) or via quick cheque to any local bank in Singapore
   

For those of us who wish to have more alternative lower risk investment instruments, treasury bills are a good complement to fixed deposits and savings and let your fingers help you do the investing!

May you live long and prosper.

Treasury Bills: Getting a yield that is close to fixed deposits for low balances of $1,000

Many risk-adverse salary-man/women tend to only know of fixed deposits and savings accounts as the main instruments we can use to put away our savings and to see them grow. But if you had checked out the interest rates given by your local bank, you will be appalled at the low interest rate being paid by them. It is even lower than inflation, i.e. your savings is shrinking every year in terms of the amount of things you can buy as the Consumer Price Index is increasing.

I learnt from surfing the Hardwarezone forum that Treasury Bills are another form of instrument available to us small investors to pool our monies into relatively low risk and reasonable yielding instruments. The Singapore Government borrows money from the market by issuing Singapore Government Securities. These come in the form of treasury bills (typically with period of 3 months to 1 year) or Bonds.

You can get reasonably safe returns that are even safer than Fixed Deposits by applying for Treasury Bills at the local banks or buying it through a financial intermediary such as Philips Securities through POEMS.

Make your money work for you. Consider treasury bills issued by the Singapore Government through MAS.