Friday, 21 August 2020

Good Investment Means Owning Good Stock/Asset - True or False?

On 18 June, 2020 I wrote an article “Will Silver Explodes in Price?”  when gold-silver-ratio is close to100 and Silver per oz cost USD17.3.

 

A READER’S COMMENT ON SILVER

 

A reader commented on my post and that such story of Gold/Silver ratio still exist!

 

The reader also shared his blog post on 2018, how he regretted buying into silver at 14+ USD and Gold, after his ORD in 2009 with no dividends and yet having to pay storage fees. And how he never looks back liquidating Gold/Silver completely on 2014/2015 and enter into SGX stocks that gave him handsome return and achieving his stock milestone of 100K. By the way, his blog post was written in July 2018, and his 100K milestone was in Jan 2018 when STI is at all time high of more than 3,500.

 

In less than 2 months now from his comments, Silver rises from USD17 topping at USD29 and Gold reaches all time high of USD2,000 per oz. Consider that back in late 2014/2015, Silver is ~USD15 per oz, and Gold is at 1,200 per oz, the return in USD terms today will have been 170-190%.  Furthermore, the exchange rate of USD to SGD is at 1.25 back then, while dollar appreciated another 8-9 per cent now.

 

Hence, if the reader did not sell his Gold and Silver, his return will have been ~200% in less than 5-6 years, less the storage fees. In stark contrast, STI tumbles more than 25 per cent from above 3,500 in 2015 to approximately 2,500 today, if we disregard the dividends.

 

THE STOCK/ASSET IS NOT “LOUSY”, WE ARE!

 

Disclaimer: I am by no means trying to mock or avenge on the reader. In fact, I am thankful that he read my article and have the courage and transparency to share his experience, and blog identity.

 

The point I am trying to make is that, for most times, the reason for our poor investment is not solely because the stock or asset we buy is “lousy”.

 

The same is with a failed marriage, is not because the husband or the wife is “lousy”.

Likewise, your career is not great is not always because your company or your superior is “lousy”.

 

Have we ever thought of ourselves as the MAIN CULPRIT of our failures?

Anyway, we are the one who make the choice of the purchase. We are the one who make the solemn vow to say “I do”. And, nobody forces us to accept the job in the first place.

 

LACK OF FAITH AND PATIENCE

 

Most amateur investors lack faith and long-term patience.

 

We measure investment win within a short period of time. Yet, most claim that they are investors, and not traders. We want to see short term returns, sometimes as short as within months.

 

We are emotionally affected by the rise and fall of asset prices. Immediately after we purchase the stock, if price goes up and we are in extreme good mood! We start to feel proud about ourselves, and think that we some stock guru. We feel invincible! Then, if the stock price fall after our purchase, we feel lousy and blame the stock as “stupid”.

 

We tend to forget the reason why we buy the stock in the first place! Our faith in the company’s fundamental is clouded by the movement of the share prices.

 

Remember: The best investment is those with sound long term fundamentals and how you are able to hold them over long term.

 

LACK OF UNDERSTANDING

 

Another reason for bad investment is the lack of understanding of the asset.

 

For instance, I buy gold and silver as a hedge. I envisage that when there is a crisis of depressed stock price and, the precious metals prices rise, then I can rebalance my portfolio. In this manner, I am not trapped in a single directional movement of asset prices.  

 

Unlike the reader who comment about the myth of gold-silver ratio, my investment in gold and silver back in 2014/2015 gave me good returns today. I am not proud of the winnings, neither am I boasting, but I am grateful to be able to hold on, for so many years. Also, the reason for my initial purchase, which is as a hedge to crisis, had usefully materialised today.

 

GOOD INVESTMENT COMES WITH GOOD LEARNING ATTITUDE AND CHARACTER

 

Many will think that, I invest or blog, solely because of earning money. It is not true. I love learning more about investment because it teaches me a lot about life and success and failure of businesses. Investment also help me to build my character, and allows me to learn more about the history of money, and the history of global financial system.

 

Rolf’s investment philosophy (Part 1) - Building a character!

Rolf’s investment philosophy (Part 2) – Understand the business!

 

And the further back I am able to look into the past, the farther forward I am able to look into the future, so as to prepare, to anticipate and not be caught in crisis, like now.

 

WRONG TIMING

 

Towards the end of 2017 early 2018, the most talked about investment topic was the buying of crypto-currency. The news of Bitcoin is everywhere. Even aunties and uncles talked about it. My wife who knew nothing about investment told me about Bitcoin (BTC) and how her colleagues and friends mentioned to her.

 

Many people invested into Crypto during the frenzy and lose money after that.

 

In Mar 2019, I was talking to my child’s classmate’s parent about how unloved Bitcoin was, and with a very attractive price to buy.  He told me he was burnt with big losses in 2018 and will never touch Crypto again.

 

I bought into BTC early Mar 2019 and realise my profit this year.

 

Read: Bitcoin, Then & Now – Loving the unloved?

 

YOUR WORST STOCK MAY BE ANOTHER’S BEST STOCK

 

To many who bought into Keppel and Sembcorp in the past few years, and is reeling with paper losses may have think that both stocks were their worst investments.

 

However, to some, like CW8888, these two stocks are part of his all-time favourite stocks, that may have even help to pay off his children’s university school fees.

 

CONCLUSION

 

To conclude, good investment does not entails good stock/asset picking alone. It requires more than that. 


I feel that there are many Singaporeans who are very smart and have a lot of potential to do well. Most of us, especially the younger-Gen are more opinionated today, have good analytical skills, resourceful in research, having good communication and writing skills (especially “keyboard”) etc.

 

Nonetheless, there are room for improvement for most of us, when it comes to faith, patience, perseverance and endurance. Together with humility and acknowledgement of mistakes, these are very important factors for successes in life, marriage, parenthood, career, wealth etc.

 

I also feel that we as a nation has become more conceited by short term and small successes. Constructive criticisms have a much lesser place in Singaporeans nowadays. Sometimes, if there is no one telling that we are wrong, we can never have the required feedback loop to improve the system.

Read: Three important traits that most retail stock investors need to have for good success

 

Do not be muddled by Short-Term successes. It is over the Long-Term, weathering through several crises, that truly set apart the winners and the losers, through Faith, Patience and Perseverance. And it is over the very long term that you can really look back at your good memories.

 

 

13 comments:

  1. Rolf,

    Cannot agree more about the learning part. Interesting.

    If we look in comparative advantage theory, we are better off monetary investing in our human capital.

    But it is a interesting world. I recently starting looking at HK.

    Before this, windows shopping put on a new lense for me and is more bearable doing it .. lol

    ReplyDelete
    Replies
    1. Hi SI, guess within our blogosphere circle many years back, we always talk about better off investing in our human capital, and I tend to agree on that.

      Glad that you expand your horizon to HK. It is always interesting to learn something new, it just intrigue our minds and keep us going.

      Learning is the most important things. We can be a pauper for most times, but if we keep on learning, I believe, one day, there will be a flip of fortune. :-)

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  2. Boss Rolf

    my previous comment contain 0% mockery.

    I am just sharing my GoldSilver investment journey only.

    No hidden/evil meaning behind.

    ReplyDelete
    Replies
    1. Hi CDC,
      In all fairness, I truly respect your transparency and openness. First, you are not Anonymous and second you shared your journey.

      Apologies about the mockery part, if u dun mean it. I removed off my article.

      I may appear harsh at times, but if u know me in real life, I actually love intriguing exchanges, and that is where we learn the most, and like u, I have no hidden agenda.

      Frankly, I see that both of us learn about through the owning of gold / silver. Whether the returns is good or bad, that is secondary.

      *Handshake*!

      Lastly, I reiterate, when I wrote this article, I was inspired by your comm ent, rather than angered. I meant it.

      Delete
    2. *Handshake*

      Really enjoy and learnt alot from your article :D

      Looking forward for more..

      Delete
  3. Our long term view of investment strategies may be shaped by our short-term successes and failures; and also often influenced by our close investing circle if we are part of it.

    ReplyDelete
    Replies
    1. Hi CW, true. Short term shaped long term, but ST is not LT.

      For e.g. a biz that is NOT earning money for 30 yrs, suddenly boomed during good times, and a foreign MNC spends hundred million to buy it.

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