Saturday, November 22, 2014

Low hanging fruits season

POSB is giving another low hanging fruit for us to pick again.


I've blogged about a previous exercise here and here where POSB celebrates National Day with a 1.5% pa bonus if you put in fresh funds for 3 months, up to a cap of 10k. Well, it must have been hugely successful and drawing a lot of new funds for POSB, because they are doing it again with some conditions upsized.


This new exercise that POSB is doing is a little different. It gives 1.5% pa interest for a period of 6 months, up to a cap of 20k. To qualify, you must:




1) Register here by 22nd Dec 2014 (inclusive of that day)

Take note that the sequence is a bit different from the last exercise. In the last one, you have to deposit your funds first THEN register. For the current one, you have to register first, THEN deposit in your fresh funds. So don't screw up!

2) Complete a one time top up by 31st Dec 2014.

Put in fresh funds between $1k to $20k, in multiples of 1k into any existing DBS/POSB bank account by 31st Dec 2014. Do note the definition of 'fresh funds' cannot include those that are transferred intrabank from one DBS/POSB account to another. But the mode of transfer can be through cheque, cashier's order, demand drafts, cash deposit, FAST. For more details, do read the terms and conditions.

3) Maintain top up amount for a period of 6 months.

This is an example quoted in the terms and conditions.

Customer A registers via online through DBS’ website during the Promotion Period and successfully top-up a lump-sum of SGD 20,000 to a CASA by 31 December 2014.

Cash Gift earned by Customer A under the Promotion as follow:
SGD 20,000*1.5%p.a.*181/365 days = SGD 148.77

(Note: 6 months period is from 1 January 2015 to 30 June 2015 = 181 days)

4) Wait to get your 'cash gift', up to a maximum amount of $148.77, which will be transferred to your registered DBS/POSB account between 1st June 2015 to 30th June 2015.




I know it's might not be much, but hey, it's not hard to do this also. I still have 10k locked up until 30th Nov 2014 from the last exercise. I'll see if they are 'smelly' or not by looking at whether they will pay up. By then, I'll still have more than enough time to put in 20k to get this extra interest.


Low hanging fruits? I'll grab it.

Friday, November 21, 2014

The 10 functions of money

What's money good for? From Richard Templar's book, "The Rules of Money", money is good for 10 things. I found the list quite exhaustively, though some points are really be lumped together as a single point. But here it is:

1. Security

I think money provides a huge security for me. I need to have a certain amount in my bank before I can feel safe that I can tide through the month. I also need to save up a certain amount for my future retirement, and also a bit at hand to tide through life's emergency. I guess this is my number 1 priority in wanting to get more. It could be more psychological, I understand.

2. Comfort

Money can't buy everything, but for the things that it can buy, it does it really well. Don't think of just big cars and huge condominiums to stay in, it can also be a comfortable and good medical facilities for your loved ones and a warm bed and food for your children. I realised I don't need too many comfort items, but money does what it's supposed to do - to satisfy those creature needs. Like a really nice bed to sleep in, and a warm and tasty food afterwards, haha

3. Luxuries

I find that this point is the same as point 2, just on a different scale. It can be grouped together as one single point. Fine wines, good meals at top-notch restaurants, a good relaxing holiday overseas, a branded bag etc...these are what money can buy that you may want, but not necessarily need. Still, life is not meant to be survived - it's meant to be lived. So indulge yourself in such things, especially if it creates an experience that you'll remember for a long time.




4. Mobility

The author put first-class trains seats and plane tickets, as well as trips on cruise ships and chauffer driven cars in this point. Hmm, somewhat like point 3 to me as well - good to have but not necessary. For all purpose, I'll treat this as a luxury items. But money does buy you mobility. I've a student whose parents are very very wealthy. She practically flies in and out of Singapore maybe every 2 weeks or so - sometimes as short as a weekend trip, sometimes as long as a month long holiday. It's disruptive to my lessons scheduling, but hey, I can't help but be a little envious when the furthest country I've ever been is Australia on a NS month long war exercise! With enough money, you can book a ship to Antartica (I heard it's about 16k for a month long journey) and even a space flight. Of course, once Richard Branson's company settled the underlying issues with his space shuttles first.

5. Status

Rich people will have different status, that's for sure. You'll get invited to special occasions and exclusive clubs. But these are none of my concerns. However, money does get you special status - I'm just not sure that status will still be there when your money is no longer around. I highly suspect that acquired status will be gone too. This is never my priority in wanting to get more money, but I think some people might see this as quite a motivation.

6. Influence

Money can buy you influence. Influence will get you power. It's a little more subtle than the previous point of money giving you certain status. A lot of powerful rich people get pull enough strings to make even government bend to their request. America history of wall street is full of such people. A few big names comes to mind - Rothschild, Rockefeller, Astor, Vanderbilt and so on.




7. Freedom

This is what most people want to acquire enough money for. Once you have the capital, you get generate enough passive income so that it will exceed or match your expenses, so you won't have to work for money again. Financial freedom - that journey that begins all journey.

8. Leisure

I think this point is tied to the previous point on freedom. With freedom, you will have leisure time, so in effect, your money buys you time instead of paying time to get money in your earlier part of your life. My take is, don't wait till you are financially free before you start enjoying your leisure time. Hedge your life by taking small leisure with your loved ones every now and then, just like you are hedging your future life by saving up in the present.

9. Popularity

Money can buy popularity, but I doubt the kind of acquaintances and friends are the kind that you really wish to associate yourself with. Still, money does its job of making you more popular - you just have to exercise your own judgement to see who will still be around when you have no more money.

10. Philanthropy

Money enables you to give more. It's strange, isn't it? Spending time and effort to get more money, so that you can give to more people. I think money makes you more of who you are. If you're a jerk without money, you're a bigger jerk with money. Likewise, if you're a generous person without money, you'll be even more generous with more money.


Is there any more uses or functions that money can serve as?

Friday, November 14, 2014

The role of parents in an uncertain world

The hardest thing about bringing up a kid is the values that you want him to inculcate. It's never a straightforward equation, where you put in the right input and you get the right output. Different kids respond differently to the same input and produce vastly different outputs.


Take for example a parent who always tries to teach his kid to save up and be frugal. He did it in a way that forces his kid to scrimp and save and the kid grew up having the mindset that money is very important. Here's two diverging paths that might happen; extreme but entirely in the realm of possibilities. The kid either grows up spending crazily to 'make up' for his lost childhood and his whole adult life will be about reclaiming some parts of his life that he didn't experience but other kids did. Or, he will continue to save and scrimp like his parents did, perhaps to gain their approval and therefore their affection. It's hard to tell in advance which paths the kid will take. It's like the Schrodinger's cat phenomenon where both outcomes are possible but it'll be determined only when it's determined.


Extrapolating this idea, a frugal parent might or might not come from extravagant grandparents. But folklore always mention about having a generation of alternating characteristics. For example, you have a grandparent generation who are frugal, then a parent generation who are extravagant (to make up for their frugal upbringing), then a current generation of kids who are frugal again. This, of course, is not fixed in stone, and the unpredictability of the next generation to follow what the previous generation values are, is what I'm talking about here in the first place.




Given this, can we really engineer the kind of values that we want out kids to have? I guess we can only try our best. This is important because trying our best is the only thing we can do. In light of this, it's also important not to blame our parents for whatever ills that this current generation is suffering. More likely than not, when it's time for you to become a parent, who knows, maybe your kids will also blame you for whatever nonsense you've taught them that works for you but utterly failed on them.


A good example will be the "study hard then you'll be settled for life" myth. I use the word myth because it's a socialised fact; everyone knows it and follows it, but nobody really question why or how effective it is. Until now. Parents growing up without much education, and thereupon seeing their peers who are fortunate enough to study and landing well-paying office jobs, are the ones perpetuating this myth. It's the right thing for their generation because having a O'lvl cert back then is as good as having a degree in university. If you had a university degree back then, you must be the top 1% of the most highly educated, and by extension, the most sought after job seeker in that generation. Is it going to work for this generation now? I doubt so.


Going forward, what other values or ideas have you tried teaching your child that works for you by might not work for them? Who can tell? It takes a rather long time for the kid to grow up before you can say for certain what works and what doesn't. By then, it's too late. It's like you bought into a share to hold it for the long term and looking at it after 20 yrs, you realised it's a dud. By then, the period of remediation is long gone and you have a kid who might have blamed you for what you've taught eons ago.


The physical part of parenting is never easy, but it can be easily outsourced. The ideological part of parenting is the tricky part. Firstly, you don't know whether what you taught them is still going to be helpful for them in their future that you no longer belong to. Second, even if you know for sure, whatever you try to inculcate in them might turn out to be quite opposite to what you intended. Thirdly, it's not like you have many chances to go through trial and error. Unless you have a kid now and after 20-30 yrs you have another kid, you pretty much only have 1 chance. Given the circumstances, how can someone ever say that they are ready to be a parent, don't even talk about being a good one?


Still, in the light of all the uncertainty, we have to make a choice:


1. It's important to teach your kids adaptability and resilience. How? I don't know. I just know that it's important to prepare them for the future they are going to inherit, not yours.

2. Don't blame yourself as a parent if things don't go right. Don't blame your parents if things don't go right for you. Nobody knows what is happening and in the thick of the battle where there's a concealing fog of war, you can only do the best you can taking into account all the information available to you at that moment. Point 1 comes in mind - adaptability and be resilience.

3. Beware of unintended consequences. Beware of it, but ultimately what else can you do?

4. Be prepared to fail as a parent. Be prepared to fail as a person growing up in this world. There's no perfection to be attained, only improvements. In spite of all this, love yourself, love your parents.


After this internal dialogue, I end up still being uncertain. I know nothing but I have a feeling being uncertain and knowing that you know nothing is the destination of our journey.

Tuesday, November 11, 2014

Valuation of ST Eng based on order book

ST engineering had been dropping like crazy the last few weeks, and very recently in the last few days, the sell down persisted at a much greater pace. I know that they had a weak quarter, and possibly they will end this financial year with similar revenue but weaker net profits. My class got cancelled, so I had some time to crunch some numbers.

Here's a fancy 5 yr key financial data taken from their site:


A few things to take note:

1. The net profit margin (Net profit/Revenue) hovers around 8% in 2009 to 9% in 2012.

2. The number of shares taken to calculate the earnings per share (EPS) increases from around 30 units to around 31 units.


(What units? EPS is net profit over shares, so if you manipulate the formula you'll get shares = net profit/EPS. And that's what I did. I took the net profit for each year divided by the EPS to get the shares, but I can't be bothered to convert to the proper units. Not that it mattered later on when I use it for calculations.)


The 10 yr order book is provided in the annual report 2013 too. Here it is:


Since the share price of a company should be forward looking, knowing the current order book for the next 10 yrs should determine the current price of the shares now. What I wanted to find out whether I can use the order book to guestimate future revenue booked. Since I know the historical net profit margins, I can guestimate the future net profits. If I divide this by the number of shares unit by the company, I'll have the future EPS. Multiply EPS by the historical PE ratio, I'll have the future price range, and I can decide from there what to do with this garbage-in-garbage-out number so expertly calculated.

Let's go.

First, a little back testing. Since they have the 10 yr order book data for 2003 and 2008, I can use it to see if this is even worth the bandwidth posting. Here it goes:

Assumptions:
1. Share units of 31 (more conservative than 30)
2. Net profit margins of 8% (more conservative than 9%)
3. PE range from 10 to 20 (theoretically it should be 10 yrs, isn't it, since it's a 10 yr order book)

10 yr order book for 2003: $4.6b
Net profit for 2013: $368 mil (4.6*1000*0.08)
EPS for 2013: 11.9 cts/shares (368/31)

Using PE of 10, share price = $1.19
Using PE of 15, share price = $1.78
Using PE of 20, share price = $2.37


So, based on this order book estimation model, I get around the price range of 1.78 to 2.37. Let's tally it with the historical share price around mid 2002 to mid 2005. You can see that from mid 2002 to end of 2003, the price hovers around a range of 1.6 to about 2. Alright lah.




Let's try for order book for 2008.

10 yr order book for 2008: $10.6b
Net profit for 2018: $848 mil (10.6*1000*0.08)
EPS for 2013: 27.3 cts/shares (848/31)

Using PE of 10, share price = $2.73
Using PE of 15, share price = $4.10
Using PE of 20, share price = $5.47

I attach the historical share price from 2007 to 2009 here. Price ranged from about 2 to 4. A little unfair cos it's the global financial crisis, so the PE is depressed by that event. I leave it to you to decide if you can use the order book as a suitable model of valuation based on this 2 samples.




Ah ha, here's what we've been waiting for. Let's try for order book 2013.

10 yr order book for 2013: $13.2b
Net profit for 2023: $1056 mil (13.2*1000*0.08)
EPS for 2023: 34.1 cts/shares (1056/31)

Using PE of 10, share price = $3.41
Using PE of 15, share price = $5.11
Using PE of 20, share price = $6.81


A big caveat here here is that this is of course a simplified model. I'm using net margin of 8% on any revenue booked, but it will change when the composition of the revenue is changed. It could be higher or lower. There's also another consideration - the dividend. Let's say the dividend, which is 15 cts now, will drop to 14 cts in the future. Based on 10 times PE, the yield will be a reasonable 4.1%, with the possibility of the share price 'upgrading' to a PE of 15, possibly booking another 50% capital gain.


My second tranche of averaging down will be a little more pessimistic. Here's a chart that I did quite some time ago before all the plunging of the share price recently.




3.3+ to 3.22 will be where my bullet is aiming. I'll see how it reacts around 3.3+ first before deciding further. And how did I react to the falling share price? Nothing. Unlike the past, I didn't put in more than what I can afford to lose, and this is not an s-chip like longcheer or china milk or ferrochina.


What a journey it had been from then and now lol!

Friday, October 31, 2014

52 books a year challenge

2 more months before the year 2014 is over.


I still have one last major thing to tick off in my goals for this year. This is something pleasurable - reading 52 books per year. I've been doing this for quite a number of years already, so it's nothing new. However, it's always a challenge because I'm operating at a zone just between the impossible and the just possible, which makes this a really good challenge because there's a good chance it may fail unless I change myself. Challenges like these are very satisfying to complete. It has the Goldilock's standard of not-too-hot-not-too-cold optimization.





52 books a year means 1 book per week, regardless of length or thickness. The intention behind the challenge is not for me to read as many books as possible (thought that will be achieved), but to complete as many books that I started as possible. It's very easy to begin a book but after a few pages, you realised that maybe this book isn't as exciting as it looks in the beginning, so you procrastinate and read lesser and lesser before ditching it for another brand new 'exciting' book. If I do that all the time, I'll never finish my 52 books a yr challenge. To prevent myself from not finishing a book when I started it, I set up the challenge. With that target number always in mind, it'll force me to complete books instead of starting them. And thank goodness I did so, because there's a lot of gems that are boring at first but gets better and better as we go along. Imagine how many gems like these will be thrown aside if I didn't adopt this challenge.


I noticed that if I borrowed books from the library, I also tend to finish them faster. I'll plan my schedule such that I'll have time to read them. Books that I had bought, however, are usually left on the shelf. It's silly, but it seems that if there's a time constraint to reading a book, you'll actually finish them faster. I guess it's psychological - it's like you're rushing against time and thus the pressure to complete them. 52 books a year challenge seeks to replicate that time pressure.


Had a chance encounter with this book at NLB Bishan. Been wanting to read this for 1 yr!

So, how many more books do I need to complete the challenge? I'm currently on book 35 now, which means I have another 17 books to go before 31st December 2014. Let's say I've 20 books to complete in 60 days (2 months). That gives me 3 days to finish reading a book.


Challenge accepted!

Saturday, October 25, 2014

Which one suits you better - earn more or spend less?

We all know there are only two ways to save money. The first is to reduce your expenses. If you spend less, then whatever is left is your savings. The second is to increase your income. If you keep your spending to be the same, what you earned after your spending will be your savings. But which way works better?


I think the key point here is whether your income is scalable. If your income can vary according to the amount of work that you produce, then it's scalable. If that's the case, then you might want to focus on earning more income. My job as a tutor is scalable. A salesman job whose income is tied to the commission earned from the sales made is also scalable. Focusing your energy on an active income stream which is scalable makes sense because there's a lot of benefit besides having a higher income (therefore, higher savings).


1. When you're busy, you can't be shopping. 

I'm not sure about others but when I'm in my peak season, I can't wait to go back home to rest. I understand that some others might go on compensatory shopping to alleviate the stress and pain of working so hard, but to each his own. The months that I spend the least correlates to the months that I earn the most. It's during those months that I've half or a quarter of my work load that I spend more time shopping, watching movies and eating out at restaurants.


2. Working harder might lead you to a higher base salary or a better job

If you work hard enough, you might be noticed by your superiors because of your output. This might lead to a better job prospects/promotion which can lead to higher base salary. Certainty in income is better than variability, so if your hardwork leads you to secure a higher base income, why not? Makes it easier to plan ahead too. If that doesn't work out, perhaps you'll be noticed by headhunters who can direct you to a company that pays you better. If all these doesn't happen, surely there's going to be a better bonus towards the end of the year? Still no? Then maybe you should just switch your company.


3. There's a sense of achievement from career satisfaction or from a job well done

It's not just about savings. A feel-good mentality about your work can lead to a multitude of desirable side effects that makes you happier. Imagine you're the top producer in your company. Beside earning the extra income, you'll also be regarded highly by your peers. Just don't take it that you've arrived and buy yourself an expensive car to go along with that status. A feel good feeling is internal, not necessarily externalized by material goods.


What happens if you income is not scalable? That means that the more hours you put in, not withstanding a possible promotion, you're actually getting less on an hourly basis. I think after some years in your company and looking around at your colleagues who are your seniors, you'll more or less know your chances of promotion. If you still want to stay in your company, then working so hard at work doesn't really benefit you. They know it, you know it too.


If that's the case, working on cutting cost is the option to saving more. Cutting cost forms a good foundation in which you can leverage on. Here's a few good points about the cutting cost path towards increasing your savings:


1. You live on less, so that you don't have to accumulate so much upon retirement

This is perhaps the most important reason. If you reduce your expenses until you can no longer cut without sacrificing minimum comfort, you'll increase your savings on a month to month basis. Even if you have bonus, you'll be able to squirrel that away. But in the future, this habit won't likely go away. This means that upon retirement, you don't have to use up so much per month, hence you also don't have to save up so much now. It's about living on less.


2. You can focus on a simple life

There's joy in simplicity. If you don't have the budget to go out and shop and eat out frequently at restaurants, you'll find a substitute for it. You'll find that there are pleasures that you don't need money to enjoy. A simple cup of kopi with a good book or good companionship won't cost much, but you will won't derive less joy from it. You'll be surprised by how much you need and how much happiness you can get from the simple things in life. I can foresee a healthier lifestyle, with more focus on family and relationship and also nature. What's bad about this, seriously?


3. Less stressful at work

I think once the stress of producing more is relieved from you, you might actually start to enjoy your work once again. No longer do you have to play political games to secure a better position so that you can have a higher pay. You can really say no to a couple of networking sessions. And you know even if you're not needed at work, you can survive with very little and still be sane. That's a very powerful psychological advantage out there.



For me, I focus more on earning more because my income is scalable. I also think that there's only so much cost you can cut, so the better option for me is to increase my income to offset against inflation and also save more. I already know my own spending patterns after a couple of years of detailed tracking, so lifestyle inflation (spending more because of earning more) doesn't work on me. The extra amount of spending that I do to reward myself after a month of hardwork is but a tiny fraction of the amount of money earned, so cash-flow wise, it's a net net gain. I know myself hence I can make an informed decision on where to focus my energy on.


Do you know yourself too? Which method of saving suits you best?


Sunday, October 19, 2014

My service standards in tuition

A student asked me a question that I thought is quite interesting. She had been messaging me through whatsapp, spamming (her words) me with questions throughout the day because of the O'lvls and I had been answering them as and when it comes. She asked if I'll be pissed off because of the spamming of the questions and why I'm so free to answer.


The short answer is that I won't be angry. In fact, I'm actually glad that people asked me a lot of queries. It shows that they care about their work and want to do well. If so, then why should I stop them and inhibit them? I should go all out to support their effort! Do I get pissed of answering at odd hours (some can be as early as 8am and as late as 1130pm)? Nah, I won't be, but I might not wake up so early, oops :)


Actually I'm not that free. But not free doesn't mean cannot take some time out to do some problem solving. I take it as a trivial quiz that pops in my phone every now and then. Oh, what is natural number? What is formed when ammonium nitrate reacts with limewater? How to do this question? How to do that question? Luckily I don't mind solving questions on the go - I actually find it quite fun.


I'm one of the lucky few people whom I know that loves his job. To me, my job is not a job - it's more like a hobby where I meet interesting young people and I will try my best to help them. I get paid for doing this and for solving their problem. To me, it's the interaction and mentoring part of the job that I love, and anything that supports that career goal for me, I'll do it.


My service standard in my website states this:




And I clearly mean to fulfill it. So ask away :)

Friday, October 17, 2014

Prepare yourself mentally for bear market

For those of you who had not seen a real mother bear striking down at the market, here's a sneak preview from the past. Unfortunately, I've lost some of the pics when the server I've uploaded them crashed and died. The pictures I saved is meant to serve as a reminder for me when the next bear comes...which might be now.

This one is taken from 2009 Sept 10.



Just look at the Nasdaq and SP500, you'll see why we haven't reached 'there' yet.


This one is for STI. A drop of 5.61% in one day is no joke.



Lastly, this is for the rest of the exchange. As you can see, it's not called the global financial crisis for fun.


Can you stomach this kind of draw-downs in your portfolio value? Surviving is one thing. You must also thrive in this environment. That's how the cash-rich gets richer in every financial crisis. START saving up your warchest now!

Thursday, October 16, 2014

How do you feel in a jittery stock market?

I noticed a big difference in how I handled the bearish stock market sentiments recently. STI had fallen from a high of around 3300 in early-mid Sept to about 3160 in mid October 2014, roughly about 4%. STI closes on 2nd Jan 2014 (the first trading day of this year) at 3180 and now it's slightly under, wiping all all the gains made so far.


Market is getting more delicious 

How do I feel?


Nothing. Is it calmness or simply bo chup? A bit of both I think. If anything, it's slightly hovering on a excitement, because I can get some company at a bigger discount. I remembered vaguely I was quite agitated when I saw that my portfolio drops a few k per day during the deepest parts of the bear market. I was just trying to see if I should cut loss to preserve my limited capital. From thinking how to survive then, I am now trying to see how I should capitalise and thrive during bearish market. It's a 180 degrees change in mentality.


Just fire slowly. Everyone has limited bullets, so getting it all in isn't going to be good to your psychological well-being. So what should we do?


Shortlist a few companies and do the necessary due diligence. Determine the key levels of support or key levels of acceptable yield to buy in. Look and account for how much capital you have (remember to set aside some liquidity for emergency uses). Apportion your capital into several tranches and buy slowly at these key points, close your eyes, and just wait. It's hard not to do anything, I know. Just imagine you are depositing this amount of money into a fixed deposit and you can only look at it 3 to 5 yrs from now.

Monday, October 13, 2014

Bullythebear's 3 Steps Guide to Stock Market (for newbies!)

There’s a lot of people in this last quarter of the year on how they can start investing in the stock market. I always tell them to read up and I’ll get back to them. If there’s a market truism that you need to remember, it’s this:

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." 
Alexander Elder

You must not expect the market to give you money without working hard for it. In most cases, the worst thing that you can do to yourself is to make yourself some money without any knowledge, then proceed to throw your entire savings into it only to lose that initial profit plus a lot more. Without ill intent, I always wish stock market newbies to have small failures initially, if only to learn the lesson that the stock market is not your mother who is that to provide and give.




So how do you go about doing it? You can try Bullythebear’s three step method for newbies listed below. I think reading is extremely important in learning how to invest/trade the stock market. If you can’t sit through a reading because it’s very boring or ‘technical’, then maybe you are not ready to delve deep into the subject matter. You might, to borrow the Marine’s jargon, get up and ring the bell to signify that you give up and call it quits. There’s a season for everything.  Perhaps for you, it’s not now.


1. Learn Accounting

If you want to enter the stock market, you cannot help but read. If you do not have the discipline to read, then you might as well just do a dollar cost averaging and keep buying STI ETF.  Whether you are going fundamental or technical, you always need to read. That’s the source where information is passed from one to another.


Why accounting? Accounting is the language of business. If you can’t differentiate between a balance sheet and cash flow statement, then you owe yourself to learn how to do that. But you’re not trying to be an accountant, so learn the basics but ultimately, your job is not to consolidate accounts or trying to balance your accounts. Your job as an investor is to interpret and analyse the company’s health and prosperity by the 3 statements: balance sheet, income and cash flow statements.


If you can’t sit through reading it, maybe you should ring the bell and call it quits from here.


2.Learn FA and TA

There are two branches in stock market. You can be one or the other, or even both. But you need to learn how they operate. If you’re new, you should read up on both to see which side you lean towards. Unlike Harry Potter, we don’t have a magical hat to tell you which ‘house’ you belong to, so you've to learn both to find out your own inclination.


If I’ve to summarise in one sentence what fundamental analysis (FA) is, it’ll be this: The analysis of financial statements and business in order to derive a valuation of a company’s worth to aid in the decision of buying/selling the shares of a company.


Similarly, if I’ve to summarise in one sentence what technical analysis (TA) is, it’ll be this: The use of market psychology in the form of charts and/or indicators to derive the direction and trend of how the price of a company’s shares will move in order to aid in the decision of buying/selling the shares of a company.


Still blur? Read up on both. If you can’t sit through the reading and find it too tedious or boring, maybe you should ring the bell and call it quits from here.


3.Learn stock market terminology and rules

When I started, I struggled to find information regarding the mechanics of buying and selling in SGX. I remembered I was ridiculed by a broker when I told him I wanted to get like 10 shares, because I didn’t know you need to buy 1 lot (which is 1000 shares but going to be 100 shares next year). Little things like this that everyone knows but nobody says it.


That’s why I compiled a list of newbie's FAQ here, in the hope that it’ll one day help others who also walk the same journey as me. I should have update it but I didn’t find the time (and effort) to do so. But these days, with information so widely available, and even local writers publishing books, it’s hard not to find the information you need. There’s a dearth of local books in the past when I started, which always makes me wonder whether the information stated in the book is applicable in our local context.


Here’s another useful FAQ from SIAS, based on local context that I find it very useful for beginners.


As mentioned earlier in the two points, if you don’t want to read, you’ll be severely disadvantaged. If you find it hard to read ‘technical’ financial jargons, just start somewhere. The journey of a million miles begin with by putting one foot ahead of another. Eventually as you read more and more, you’ll soak in all the jargons and can rattle off terms like a pro. But really, just soak up the information whether you understand it or not. You'll reach a critical mass whether things just connect.


Having more knowledge doesn’t mean you’ll make a killing in the market, but having no knowledge will definitely get you slaughtered.

Here's a few books (that I've read) to get you started:

On accounting
(seriously, any books that teaches you how to read and interpret financial statements will do, but I'll highlight the ones that leaves the best impression on me)

1. Accounting Demystified: A self teaching guide - Loita A. Hart
2. Financial statements: A step by step guide to understanding and creating financial reports - Thomas R. Ittelson
3. Financial statements for non-financial people - Ron Price
4. Warren Buffett and the interpretation of financial statements - Mary Buffett & David Clark

On fundamental analysis (FA)


On technical analysis (TA)