Wednesday, January 26, 2011

Finding a style that suits me

After being in the market for quite some time, I realized the style that is most suitable for me. The style that one adopts is important, because it caters to the different needs that one craves for and yet able to make a decent return. Due to the nature of my work, I cannot have access to internet all the time (nor do I wish to), hence intraday trading which I used to do when I first started is out of the question. That includes things like warrant trading, which occupies most of my time when I first started in the market circa 2006-2007 period. I've not dealt with warrant trading since, because it's just too excited and too distracting to me, to the extent that it takes concentration off my work. So, intraday trading (and warrants trading) is out of the question.

What about value investing? I took to that after recommendation by a few people, read the necessary accounting books (I have no prior background at all in accountings) and the mandatory books in value investing. Tried my hands on plowing through the many research materials available publicly in the form of annual reports and through the internet. The results isn't spectacular. Most likely it's the time period when I'm doing value investing - I didn't give it enough time to see the results come to fruition. Given more time and less work, I think I might have enjoyed researching in depth on any particular companies. There's a certain joy in carrying out detective work on company - I realised that when I tried it out on several companies (hongguo, most notably). However, I find that this is an uphill battle for me as I struggle with difficulty in analysing both the company's business (I don't have practical business knowledge) and the numbers that quantify the financial health of a company (I'm not good at accountings). I can be okay with it but I'll never be good in it - that I realised. For basic accounting, everybody with a mind set to do it can read it up, but without real practical knowledge and years of immersion in working on it, the knowledge is at best superficial. I'm not quite prepared to spend my time on it, hence I realised that this route is not for me. There just isn't enough time at hands to deal with so many things in life, and I can do with one less on my hands. I figured that as one grows older, the commitments that take away one's time will only get heavier and heavier, never lighter. Time being a precious commodity that I have requires me to allocate it to places where I can get the maximum result with minimum effort.

I think I'm a ranger - one who does long range sniping (long time frame trading)
and a touch of ranger spells (FA). The spells cast are used to aid in sniping.

What about trading using TA? Oh, this I can do. The system that I'm trading (it's counter trend trading, for those who are curious) with doesn't require much time to pick up (though it requires a lot of time to master, and I'm not a master) and most importantly, it doesn't generate signal all the time. Funny right? People would have thought that a system that generates signals frequently is a good system. I think that a system that fits into one's routine and is also robust is a good system. I don't have the time to check out the prices every time and I might not be there at THE moment when the timing is at the best, hence it's important that any system that works for me doesn't generate a signal frequently. My ideal trading period is anything from a week to a few months and what's really comforting is that there'll be more signals when the market is down, which fits into my psychology of buying cheap, rather than chasing after high (e.g. breakout). I'm definitely going to do this as and when the signals generate as it had provided me with the occasional 'ang pao' to settle the necessities in life.

Knowing that I have to concentrate on my career where I can get the maximum returns (though not necessary min effort), I'll have to put more money into getting passive streams of income. So far, this is in the form of reits where in this low interest environment and their leverage form of business model, they are thriving pretty well and giving a returns of anything from 5% to nearly 10%. This will not go on forever so there's a time I'll have to give up the passive streams and get my capital out again. The ideal case would be the most inspiring case blogged recently by bro8888 regarding his kepcorp - a blue chip bought cheaply at high double digit yield. Those are the kind of passive income that would be more resilient through the inevitable ups and downs of the market. Still, there is a time and tide to do everything. With the bull market raging on, it's foolish to get blue chip now and I only hope that I'm strong enough to buy it when the bear market comes.

That's it for me - a bulk of capital into dividend yielding counters (Saizen, Aims, SP ausnet, FCT, First Reit, HSBC pref shares A), a dash of trading (ah hock, singpost, sabana) and another bulk of capital at a international blue chip (HSBC). There's a few dud counters that I'm still holding and it's not taking a lot of capital, so I'll just see what surprises it can throw at me (sitraH, sunning tech).


Musicwhiz said...

Hi LP,

Good post, just do what you are comfy with, and feel happy about. As long as you get a decent return and can sleep well at night, then it's a good method.

For myself, I've never felt more comfortable with value investing, so I think I've found my "niche" so to speak haha. I can sleep well at night knowing I like what I do and I can earn a decent return on my investments.


la papillion said...

Hi mw,

Indeed indeed...I know you are very comfortable with value investing, haha :)

Thanks for dropping by :)

Anonymous said...

Just remember bulls make money, bears make money, but pigs get slaughtered is a motherhood statement that is true no matter what method you use in the stock markets.
I am using so called "life-cycle" investing. I use my "whole life" to invest as long as I have my wits and I am still enjoying it. I started very late at the age of 40 when my son is borned. Now I am 62+ but still enjoying investing.I monitor the markets everyday but very superficailly since day one. So far so good I have survived many bear markets quite well.
Now as I am older, I became bolder(actually greedier;hope I won't turn into a pig).
Ha! Ha!
Actually no laughter matter it is very serious to be caught by the bear because of greed.
If I can recalled correctly(correct me if I am wrong ) there is a quotation by the Rothschild family, "Always leave the last ten or fifteen % to the market".
Another words don't turn into a pig.
But it seems only pigs will at least see the peaks of bull markets. The.....?
Don't be a pig-hope not.

Dividend Tech Warrior said...

Hi LP,

Just be patient and build up ur capital.

For me, I dun trade at all bcos I know myself. I am not a huge risk-taker and I have no time to monitor the stock market everyday.

So, I decided to go the dividend investing route.

You may wanna check out my blog ^^

Peace out,
Dividends Warrior

la papillion said...

Hi Dividend warrior,

Visited your site, nice :)

Ya, I'll take your advice and be patient, and to build up my capital so that I've bullets to shoot when the opportunity arises :)