Friday, August 30, 2013

Market Outlook 30 Aug 2013

So, the US economy looks to slip up, but not before there's a uptown in the S&P coinciding with the start of the war in Syria. This should propel the S&P up for about a month before another deep correction is made, while finally cruising in to year end at ~1640.

Europe only seems to be recovering because all the hot money that's been yanked out of bonds and EMs that head back to the US, gets rerouted over back to Europe. Once things in the US heats up, it could go either way. Transferring money from the US into the Euro, or yanking out from both sides and just sitting down. I think it depends on the rate of it. If it's gradual (I think it will be), Europe will slowly go up. If it's panic, well then shit's all over the place.

EMs by all means are being oversold, which solid predictions for the future, assuming they manage to tide over well when tapering starts. Only once the aftermath is settled and the damage is done, assessed and cleared to go, then BFTD is in motion. Solid looking EMs to me seem to be Thailand and Brazil. We'll have to wait and see.

I've just opened my live account with CMC doing CFD trading. I lost $2 yesterday and now I'm in the green for $10. You can mock me if you want, but I think that the concept is still the same regardless of the scale.

Just only 1 main thing to keep in mind. Preserve capital, stop loss just behind the first line of fluctuation, not anymore. Instead of waiting for the price to go back in your favour and have unrealized losses, just realize your losses and get back in when the volatility dies down. Gotta do that. Capital preservation!

Right now, my main bet will be on the AUD/SGD and AUD/USD going down. I'm more inclined on the AUD/SGD, because I know that the Singapore government won't do anything crazy to screw things up. The US govt on the other hand, well they cray cray. Although, the war news can really swing in the favour of the USD. I'll be going in largely based on technical indicators, Aussie news and policies as well as the general news. Most likely, I'll be having most of my guns on the AUD/SGD going down and down.

I'll be keeping my eyes out looking for a right time to enter when the S&P and STI reverses again. My indicators to watch are the US 10Y, Gold and Europe.

To me, it seems when Euro goes up, the S&P and STI goes up as well. When 10Y price goes down, the S&P and Europe goes up, bringing along the STI. While all these goes up, Gold goes down.

I'll be entering short into the S&P and STI when I see that:
1) Euro is down
2) 10Y is up
3) Gold is up

Naturally, I've ranges that should indicate when these will happen, plus I'll use 15 min, 1 hour and 1 day TA to optimize my entry points.

Just got to remember my damn stop loss to preserve capital

Tuesday, August 27, 2013

The Big Bet

Hi guys,

Please remember that the information presented here is "as is", it is my opinion and thoughts, and I am definitely not encouraging you to follow my actions. What I present here should not be taken as financial advice.

This plan that I have takes into account the limited investment options available to me as a Singaporean investor.

The aim of this plan is to take advantage of the current global situations, which in my opinion, does not happen very often. Due to the conflicting and rare nature of the many situations, I think that many investors are now confused and in a state of panic, and will not be able to react well.

The investment vehicles that I will use are, mutual funds, CFDs and forex.

I have, as of today, zero actual real life investment experience. I have traded forex on a demo account on and off for the past few weeks, both making and losing money. I have researched extensively about mutual funds, and I just discovered CFDs today.

Actually, the mutual fund isn't really a big bet about it being risky. The annualised returns over the past 10 years stands at 5% on the dot, and that's pretty good. In the past few years, gold miners hasn't been doing too well, and honestly now is the bottom since the last recession. Hur hur, the last recession eh? Anyway, YTD it bottomed at -44%, but now it's only -28%. When war breaks out, hyperinflation, currency depreciation, this could actually be the winner over the next few years. So, for my first long time investment, I'm going into UOB United Gold and Gen Fund.
"Further research has made me believe that Gold is not in a bull market, mining equity will not stand to grow, and Gold will head back down to be in sync with the miners with all the geopolitical commotion is over." - 30 Aug update

Okay, next up is my actual crazy risky day trading shit. I'm going to go short on S&P500, STI and the India Stock Market. They are all related to each other by a factor of 1, 2 and 3 respectively. My plan is touch the water going into the S&P500, looking for a nice sweet technical entry. If that holds up, on the next technical entry, I'll be increasing my position in the S&P500 to my maximum allotment. After that, once it's heading back down again, I'll buy into the STI for half and wash and repeat. If the market plummets, I'm jumping straight in. Definitely setting stop loss to lose a maximum of 10% of my capital, or 0.5% in terms of the market.

Once, I'm totally invested into all 3 indices, I'll set my stop loss to ensure that no matter what, I don't lose my capital. I will progressively inch down my stop loss (gain) to make sure that my returns would be maximised.

Concurrently, I will also buy into the USD/SGD long, and the TRY/USD short. The SGD and TRY are both currencies that are susceptible to volatile shifts.

If all my positions are doing well, I will gradually transfer in more capital to the accounts and scale up my positions. My initial start value will be $5,000 into the account.

My confirm stop losses will be the nearest resistance when the market has move 5%, 10% and 20% down from its total value. This will ensure that I will definitely make some profit. I can always enter back in once it is trending downwards. Once the markets have bottomed out, I will capitalize all my positions and enter in long.

How's that for an idea? :)


NEW UPDATE!!!

So guys, screw my investing plan so far, a new world order is in place.

Firstly, the economy is going DOWN, not up. It's going to be a horrible time to buy anytime with hopes of holding it long term now. It'd be much better value to buy into the market once everything has come down. I'm talking mega massive all savings in to all my pre-recession allocations.

But now, the order of the day is capitalizing on what is going on now.

Firstly, to make money off the bear market, it's not easy. You need to know the market that is going to crash. You need to know the stocks that are going to crash. You need a broker that will short sell you the stocks. You need to buy into an inverse ETF fund of your market in choice.

Sadly, for a Singaporean like me, my options are severely limited. If I could have it my way, I'd buy into leveraged inverse ETFs of India, Thailand and Malaysia. However, all that's available for us on the market now is the inverse S&P500. We don't have brokerage access to those markets to short stocks from there too. SO WHAT NOW?

Hope that the S&P500 will come down as well? Go long on the US against EM currencies? Honestly, with the US going loco with their tapering and now warmongering, I'm honestly confused about what is supposed to happen. Tapering means that the economy is improving right? Many signs point at a worsening US economy.

I've realised a way out of this rut though. CFDs. CFDs aren't real stocks or indices, so it's possible to short them. CFD providers have indices as well as currencies, but of course, not those exotic EM ones.

So I guess my current plan of action is to ride the recession downwards, reallocate funds when I see signs of recovery. When either a time is just too tempting or when there are no more opportunities downwards, I'll capitalize all my gains, and I'll start going long into the opposite direction. Hopefully this time, with much more capital to begin with! My plan in the next post!

Wednesday, August 21, 2013

My New Test Portfolio

So, the US 10T has just hit a new high. US equity is going slow. Europe is uncertain and only half of them is doing well. Asia ex Japan is doing shit. Japan is doing their own crazy QE. Emerging markets are getting their currencies raped. Interest rates seems like it's going to rise and statistics point to a global recession within 2 years.

Shit, now if that doesn't sound bad to you, I don't know what does. All the markets seem bad, so equity could be risky. Interest rates are on the rise, so bonds are going to get slaughtered (more). What then, can we do in the face of these big big problems. Money markets and fixed deposits? Commodities? Well, gold does seem to be going up, though it is at a historical high.

Anyway, since I'm obviously no expert, I read a lot to steal other people's knowledge. I like Blackrock. It sounds like an awesome powerful name for a company. Plus, I've been watching their World Gold get slaughtered and literally watched it rise from 5.3 to 6.95 over a course of a month. If that ain't fantastic, then you obviously don't get impressed easily. Anyway, here's the link to a market outlook issued by Blackrock. http://us.ishares.com/content/stream.jsp?url=/content/en_us/repository/resource/market_perspectives_september_2013.pdf

I guess after all my yammering, I'm going to come up with a simple portfolio now, let it weather some Bloomberg tests, and get ready to jump in when the time is right. And of course, dock, duck and hide before 2015 rapes everyone.

1) Low duration bond funds
2) Larger equity allocation
3) Low debt sectors
4) Large cap companies

I've identified low debt sectors to be: Technology, Energy, Retail and Healthcare.

Okay, I'm gonna go get this shit started! I'll update soon!

Monday, August 19, 2013

Predictions for the rest of 2013

Honestly, things aren't looking too well.

Right when I want to enter the market, lots of shit seems to be flying all over the place. So, with all the data that I've read and all that I understand, I'm going to make some wild predictions about this year.

1) Asia Pacific ex Japan will do badly

2) Japan's QE will push it up to end 2013 well, but 2014 just won't happen

3) US is going to decline until the end of the year, and go strong for at least half a year safely

4) Europe is going to have a slow recovery alone

The end of the year sounds to me like a good time to enter all the depressed markets all over and exit by mid 2014.

Again, these are merely my predictions. If you follow them without your own research, you're a dumbass.

Monday, August 12, 2013

My Investment Strategy

I will have 2 portfolios of mutual funds, a money market fund to float my money and a savings account.

My first portfolio of mutual funds will be called my Tactical Allocation Portfolio. I'm going to call it my TAP fund!

Basically, it is going to consist of mutual funds which employ the tactical allocation method. This method allows the fund managers to invest in any sector or region that they see fit, with only a handful of rules to constrain them. For example, they may have a fixed percentage of asset allocation, or a maximum limit of allocation within certain sectors. The aim of the fund managers is to ensure returns and to try and take advantage of their freedom to take opportunities when it arises, and to scramble if they see trouble coming. The freedom given to the managers to just try and make money appeals to me.

The ideal portfolio will be defensive in nature, with average return.

The main aim of my TAT fund is long term, aggressive growth (well, as far as being defensive goes), with close to no effort on my part. My duty is to research well and select the right kind of tactical allocation funds that will suit me. After that, I will merely monitor the funds and top it up periodically through value averaging.

My next portfolio of mutual funds will be called the Active Portfolio, or AP for short.

In this portfolio, I have will a wide range of different funds. These funds will help me make up my desired asset allocation, sector allocation and geographical allocation. These funds will be handpicked by me, and I will continually monitor each specific funds performance and compare it to other similar funds. Should a fund continually underperform, I will replace it with similar funds, so that I will not skew my desired allocations.

Currently, the ideal portfolio will be 85/15 in equity and stocks, equally spread amongst all the sectors, not overweight in any particular country, leaning more towards emerging markets. The portfolio should have a high R2, but a low beta. Compared to benchmarks, it should overperform in the long run, and have reduced volatility.

This portfolio will require me to select my funds, consistently compare them to alternative funds, as well as monitor the entire market outlook so that I can adjust my asset allocation accordingly. I will have an asset allocation for different market outlooks, ie. increasing interest rates, recession, etc. Essentially, I will be my own tactical allocation fund manager! I will periodically top it up based on value averaging. Because of all the involvement and more work involved on a regular basis, I have to be disciplined and actively manage it!

Next, I will have my Money Market Fund (henceforth known as MMF), which I will have all my excess money which I am deliberating to invest. The money here will be safe, and generating returns better than in my savings account. Plus, it is easy to move the money here into funds once I have decided to top up a fund.

Lastly, I'll still keep my current savings account with DBS, just because it's the most convenient bank. Every month when my salary comes in, I'll transfer a large portion out into my MMF, which will then filter down into my funds once I've done my value averaging calculations. Soon, I'll come up with the exact numbers!

And the winner is.....

Mutual Funds!!

The reason that I've decided to invest in mutual funds are plenty.

1. I do not require stock selection skills
2. I do not have the time to monitor my own stocks throughout the day
3. I do not have the experience in investing in anything
4. I still have some free reign over deciding where my money should go to
5. It is very liquid
6. It has a low start-up cost
7. Benefits of economics of scale
8. Instant diversification within the fund's scope
9. Competition has driven down commissions and fees
10. Requires minimal attention
11. Returns seem attractive considering the amount of risk

Sure, my returns might not have crazy double digit growth year on year, but I think considering the skills that I have and the time that I will be devoting into looking after my investments, I think the returns are more worth it!

Which Investment Vehicle should I take a spin in?

With all the different types of investment, how does one make a choice about where to put their money?

I thought that I'd make a table to show you my perceptions of the different kind of investments, but then I realised that I'm lazy, so I'm just gonna do it in text!


Cash, Fixed Deposits and Money Market
There are all low risk, low returns. Money Market funds are by far the best of the 3, since it is just as liquid as cash (but not as instant). FDs have your money locked in and gives horrible returns.

Penny Stocks, Non-dividend Stocks, Dividend Stocks, Penny Stocks, Preferred Stocks
Equity, now this is where all the big bucks are made. Most stocks go up in value over time, some fall too (penny stocks). My view on preferred stocks is that you might as well get dividend stocks instead. Then you'll be sure that you'll receive dividends, since I doubt you're planning your stock to liquidate.

Treasury Bonds, Corporate Bonds, Junk Bonds
Bonds are interesting because they are seen to be mostly safe. However, bonds can actually give you negative returns under special market circumstances, such as rising interest rates and high inflation. The fixed income that comes from bond is a definite plus point though, plus its low volatility.

ETFs, Index Funds
Based on the preachings on Grahm, if you can't beat the market, you might as well just go along with it. ETFs and Index Funds are pretty much the same thing, with slight differences. However, I feel that both these methods have already given up before even trying. As a first time, young investor, I think I have the risk appetite to try and perform beyond the market average.

FOREX
Forex is worse than gambling. The leverage is insane, which makes your profits, and losses, go through the roof. Unless you're able to see the huge picture and can predict currency movements, I don't really think forex is considered an "investment".

Real Estate
Not many investments are as steady as real estate. Plus, real estate is one of the few investments that you can actually enjoy while watching it increase in value. However, the huge huge amount of starting capital is the major deterrent for most people. 

Mutual Funds
Going into mutual funds is admitting that you don't know how to look at the individual investment types and assess them compared to others in the same category. Basically, you're paying a fund manager to be your proxy and have put your money and faith into his hands, because you believe that you definitely can't do better than him.

My Investment Pledge

If you fail to plan, you plan to fail?

Well, I'm going to write down my thoughts about my investment philosophy and I'll probably update it as and when, to make it better, of course! But for now, I think I will just simply write a pledge, something that I can look at every once in a while and see if I'm really following it.

My name is _________,

I want to be financially free in my life.

To be financially free, I must both save and invest.

I pledge to live within my means.

I will not not spend more than I make.

I will not borrow unless I have the means to repay.

I will consistently save money.

I will invest my savings with prudence and dilligence.

I will not take any action, without fully understanding the risks involved.

I understand that time is money, and I will always strive not to delay actions.

I will not make any action as long as I am awaiting crucial knowledge pertaining to my investing.

I will preserve my capital.

I will try to grow my principal.

I will not be greedy, average performance is ample for me.

If possible, and with the supporting information, I will seize the opportunity to make a sound investment.

If I am ever uncertain, I will withdraw my money and cut my losses.

I will recite this pledge to myself before I make any investment decisions.

Sunday, August 11, 2013

Things that are not investments, things that are investments

So, what is an investment, and what isn't? Let's start off with the basics - defining investment. Lucky for all of us, we can count of good ol' trust Investopedia!

"Investment: An asset or item that is purchased with the hope that it will generate income or appreciate in the future."

Basically, if it's not worth more in the future, it's not an investment. Buying a TV, a car, a watch, jewelry, all these things generally don't increase in value. I don't know about you, but I'd want to pay less for a 2nd hand car or TV, haha. Actually, pretty much anything that most people buy are not investments.

I think it's much easier to think about what actually is an investment, and by elimination, the rest are not investments!


Precious Items (Gold, Art, etc.)
Businesses / Stocks
Bonds
Real Estate

Well, other than these main ones, there are tons of variants of these investment vehicles. There's preferred stock, convertible bonds, money markets, timed deposits, REITs, mutual funds, CFDs and etc... The list is really quite long. The main thing though, is that you can be pretty sure that the things that a normal person purchases on a day-to-day basis, are not investments. Rather, you can call them expenses, haha.

To make money, just make sure that your expenses are trimmed down to the necessary, and that you're putting money into complicated things that does sound like an investment!


Saving vs. Investing

Saving, investing, they are both the same thing, isn't it?

Actually, I would beg to differ. Saving is mindset, habit and behaviour that requires discipline. Saving is the act of actively putting aside money, as hard as it is to resist the temptation of using it to buy something. Investing is a skill. Investing is making your money generate more money for you. It is a skill because many people attempt to do it, but only the people who are skilled are successful at it. It is a skill that may be talent to a rare few, but it is most slowly developed and trained by most people.

All my life I have been a fantastic saver. When I get my pocket money, I never spend it down to the last dollar. Somehow or rather, I always try to save a part of it. After every Chinese New Year, I will take all the money I saved throughout the past year, add in my angbaos and birthday money, and I will ask my father to put it into the bank for me.

It is a really strange process. I put money in, and I never take money out. But then again, I have never felt compelled to purchase something that required me to withdraw money from my bank account. With the amount that I save from my weekly pocket money, it is usually enough for me to buy simple things I want, or to buy gifts for family and friends.

Well, the point of this story is mentioned above - I'm a fantastic saver. I get money, I spend less than what I got, I save the rest. I have never borrowed money to buy something that I could not afford. If I ever borrowed money, it has only been because I did not have that amount of cash on hand.

Wow, fantastic. Good job, So I'm going to be rich because I'm so good at saving? Well, I think the answer is both a yes and no.

My money all my life have been sitting in the bank, earning the pathetic rates of a savings account. When I was 21, my father generously asked me if I would like him to help me invest some of my savings. Since I was going to be in the university, I wouldn't be spending any large amounts of money anytime soon, so I passed my dad some money for him to help me invest. Last month, he gave me back my principal with the interest earned. Over the past 2 years, he had helped me grow it by 2.4%, or annualised at 1.2%. I wouldn't say that this is bad, bank rates are 0.25% a year?

Now, with my the money that my father had helped me invest, together with the remainder of my savings and my monthly income, I am now going to embark on a plan to continue saving well, and now take the investments of my own money into my own hands!

About Me

So, let's start with myself. I mean, this is why I have this blog. I'm going to come back here years from now and chuckle at the things I write here. Hello future me!

I'm currently 23, going on 24. I've recently graduated from a local university with a simple bachelor's degree. I am employed full-time and I have a office desk job. I don't work for any big banks or MNCs, just a simple private company.

I have no student loans. I don't rent because I live with my parents. I don't have a girlfriend. I have a small respectable amount of savings because I've always liked the feeling of security knowing that I have money in case of any emergency. I am debt free with close to no expenses, save the occasional party and maintaining a social life.

I have spent the most part of my life living simple and well within my means. Perhaps the only luxury that I would definitely pamper myself with is Internet, Air Con and hot showers.

I am happy with my life right now.

I want to start saving and investing for my future. I want to be financially free in the future. Free to quit my job and change my career if I want to, free to pack up and head for a holiday if I feel like it, and free from a life of hardship that could be plagued simply by the lack of money.

Money is not everything in life. But with money, it can sure make a lot of life's problem disappear.

Blog Introduction

Greetings errrbady!

I've decided to open up this blog, so that I can record and keep track of my investments, as well as rant about anything money related.

Please know that all information posted here is solely for my personal use, but I am allowing it to be publicly scrutinized for your EDUCATIONAL purposes. Please do not act on anything that I write here, because you should make your own informed decisions, not follow the advice of a novice investor. This is solely my unprofessional opinion on things that I clearly do not understand.

With that said, I hope that you might find my rantings and posts useful, if not, it doesn't matter. This is just my own blog, which I will come back to read in 20 years time, when I'm a millionaire!