Reading Habits

Reading used to be such a simple activity. I put commuting time to effective use through reading. However, it is increasingly difficult to do my reading on the bus/train.

Not because SMRT has reduced the number of train runs during peak hours, but rather because of the nature of the books I read are largely non-fiction. I tend to run into a lot of theories, concepts and personalities which are interesting enough to find more information on them.

Reading takes place in front of a computer now, where I can easily google for the required information. Of course, this is not a valid reason for not reading the targeted number of books for the month of February.

On a side note, ordering books from Amazon.com is pretty fun. I guess that is unavoidable because some books I've read simply resonates so much with me that I have to have a copy. I derive something new with every read. It's not that the books have changed. It's how life experiences have altered me. That's a good thing since it means I'm still capable of learning. No?

Hello Materialism

From Dictionary.com

ma·te·ri·al·ism

–noun

1. preoccupation with or emphasis on material objects, comforts, and considerations, with a disinterest in or rejection of spiritual, intellectual, or cultural values.

2. the philosophical theory that regards matter and its motions as constituting the universe, and all phenomena, including those of mind, as due to material agencies.

Unwittingly, I have been drawn into the world of materialism. It all began one fine day when I was browsing through the websites and I came across eBay. I know at least half the world has brought something from this online shopping portal. I happen to have just discovered the wonders of shopping online.

Just for fun, I entered a search for a Japanese brand of watches. To my surprise, most of the watches were available for bidding at substantially lower prices as compared to similar pieces in retail shops.

Some of you folks who have done bidding on eBay might agree with me. The system allows you to place a maximum bid. Whenever you bid for an item, the sytem will inform you whether you are the highest bidder or not. No problems with that. My only issue is that that make it so much like a game! People want to win when they play. No wonder people get addicted to eBay.

As usual, I like to get the best value for my bucks. I did the research required to determine a price which I would bid at. This was based on several considerations such as when the bidding will end, how much is the retail price of the watch, and what is the mean bid for similar watches.

Partly due to my impatience, I did not get the watch at the lowest possible bid. Nonetheless, I figured the price I paid would probably place me in the 30th percentile, i.e. 70% of the folks who bidded for a similar watch paid more than I did. At my bid, the watch is at a whopping 48% off retail price! Not at all a bad deal.

I got my package 6 days after I paid for it. It was sent to me on New Year's eve. The timing couldn't be better.

But now I'm left wondering - why did I get the watch in the first place? I could have got a cheaper watch which would have displayed the time as accurately. Looks like I have taken my first step into the world of materialism - I paid for the brand, not the function. I ought to be more careful with my spending since I'm just starting out.

Having said that, I'm still quietly pleased with the purchase of my titanium timekeeper. Incorrigible.

End of 2007

Yes yes. I haven't been diligent in updating my blog here. For the record, here's what I did/happened to me during the months between September and now in chronological order:


September/ October - Got real busy at work
September and October were pretty crazy months as my department was completing one of the bigger projects for the year. At the same time, there was some internal corporate stuffs to deal with. Having a unresponsive 3rd party in the project only created more tension among the department. Despite all that, the project went through successfully. Now I can add this item to my resume.


Mid - Late October - Got walloped by Mr. Market
I was taught another lesson by Mr Market again. This time round, the mistake was made because of my position size. When things went wrong, I went into a panic - a very serious and costly mistake. But I have learnt to avoid this by taking on smaller positions so that when things go in the wrong direction, I will still be in a clear state of mind.


Early November - Participated in the River Regatta
The River Regatta made me realise that it's better not to have any reserves in a team. Although it might be hard to believe, some people just don't like to play 2nd fiddler. Noted this in mind so that if I form any sort of teams in the future, I will know what to do.


Late November - Visited my ancestral tomb in China
Now I finally get to see what people has been telling me: China is really developing at the speed of light! The China trip with my family was to visit my distant relatives. I couldn't get used to the food there on the first day. But I grew to like it eventually. Went to Fuzhou and saw the young ladies there dressed fashionably and wearing jade bangles. Seems to me that you can change one's appearance but not the thinking. At least not so fast.


Early December - Attended a creativity and innovation course
The course was quite interesting as it introduced some hard and soft tools to encourage creativity and innovation. I do agree with the trainer that we are too constrained by ourselves most of the time. What I learnt was that the best ideas are usually the last few ideas in any "brainstorming session" and we shouldn't censor our own ideas during such sessions. After all, the last best idea wouldn't be possible without the earlier lousy ideas.


Mid December - 4th In-Camp-Training (ICT)
Donning the green uniform, I went back to my favourite camp for my 5 day ICT. Things seemed to run pretty smoothly this time round. I guess now I'm slightly better off at delegating tasks as compared to in the past. But I must admit that my brains are really rusty from the lack of use, and it's affecting me quite seriously. Anyway, things might have been better this time round because my own perception has changed.


Now - Clearing work. Dental Visit. Looking at various insurance products.
After being away for 2 weeks (in China and ICT), there were lots of work to be cleared. So I spent the past 2 weeks clearing my stuffs before the year ends.

Last week, I went to seek dental treatment for my tooth as it became very sensitive. I subsequently did a Root Canal. The experience wasn't as bad as the Wisdom Tooth episode. But nonetheless, it was still pretty traumatic to have small iron rods filing away the nerve/pulp in the said tooth.

After months of procrastination, I finally got down to looking for insurance products. I am a firm believer of the "Buy Term and Invest the Rest" approach, contrary to the majority of whole life policy supporters. Right now, I am waiting for the agents to get back to me on the different products available and their quotation before making a decision. Maybe I'll talk about this topic in another post next time.

One-Third

I was looking through my calender for this month only to realise that I have been on my job for 4 months.

So far, my intitial assessment of the organisation, its people and culture were not too far off. Indeed, I think this is a good place to hold a first job after coming out from the protected environs of student life.

At this stage, most of the inability to cope with problems stem from a lack of knowledge about the industry and its practices. I wanted exposure into certain areas when I got in, and I am getting it.

In fact, everything is almost as I have imagined it. Most people have a perception about their jobs and how it'll be like, only to find that there's a gap (sometimes huge) between their expectation and reality. The gap in my case would be around 5-10%. So I must say that the 2 interviews before the job offer helped prepare me well for the job.

I remembered what my HR module coordinator told me. If at first sight you don't like the interviewer, and talking to that interviewer doesn't change your perception, get out immediately. Else you should be prepared for a difficult time.

It's funny how things I asked for turned out. Early in the year I wanted to try out the property market without risking my working capital and to learn the works related to it. Now I am in this area, learning about it, and with no use for my working capital since I'm dealing with corporate assets. The "downside" is of course, I don't stand to gain anything from the sales. I got what I asked for.

Valuable Lessons

I learnt a few valuable lessons today through the stock market.

1. Only buy stocks which are fundamentally sound
   
2. Decide your investment horizon (long term/short term)
3. Do not chase after stocks (a.k.a the Greater Fool game)
   
4. Exercise discipline and cut loss immediately once the level is reached
   

Although the stock I bought was of reasonably good fundamentals, I think I paid a premium for it. Definitely not worth it. Will not commit the same mistake again.

I'm usually in for the long haul. In fact, I have not done any short term trades since I started.

I'm still not good enough in terms of reading the market. Lack of practice. Point 4 is really not that easy to achieve. However, it tells me that I am more suited for long term investments rather than short term. Better stick with all the ratios and numbers at the moment.

Fiction for a Change

Of late, I am taking a break from reading non-fiction books. I have been focusing too much on the hard knowledge without balancing the need for soft skills. Too logical and cerebral. As such, the new flavour are fiction titles. Yes yes. You can see that my sentences are getting shorter, an indication that I haven't been exercising my imagination enough. Reading some imaginary stuffs could probably spark the engine again.

As coincidence would have it, a friend of mine recommended "The Eyre Affair" (NLB Call No.: FFO-[MY]). Not a particularly exciting story (you can find the plot summary here). But some parts are quite witty. For example, the protagonist is called Thursday Next. When other characters say "You're Next", they can mean either that Next is Next or Next is next. I must say I wasn't paying close attention to the captital lettered Next the first time round.

I'm about three quarters done with this title. This book is the first of a series. So I probably will go on reading the others, if I am still uninspired.

I used to think (erroneously) that fictionous stuffs are a waste of time. Although I can't say that I'm a convert, I admit that novels and stories bring on another dimension to the reader. A dimension which I probably will not be able to experience in the normal day circumstances. Having said that, I tend to like the bad and evil characters in the stories more. Happy endings are pretty boring, don't you think?

Yes, I made a mistake

I admit that I made a mistake.

The last post suggest that I will not take up the offer. However, I did. Apparently, I am not an idiot.

All these thanks to a friend of mine. He reminded me that I should look at the offer as an entire package. Yes, I can be short-sighted at times. There's no reason why I should reject it besides the issue of remuneration (and that the HR personnel in charge made things considerably worse). But I take stand in my case that it is really below what is minimal for decent survival. That has since changed when I re-evaluated the components which I took into account.

I like the organisation. It gives me a good feel as compared to its "richer and more popular cousin" where I did an internship. My interaction with its people gave me some confidence about the working environment that I'll be in. They make me want to be part of them.

This is unlike one of the oil majors which came down to my university for a career talk last year. The moment I saw them and heard them speak, I vehemently objected to applying to it. I just didn't want to be part of them, unlike many other hopefuls. To be fair, I probably wouldn't qualify anyway.

Never mind that I won't be doing what I have learnt. I am confident that I can handle it when I start.

So, you are a graduate?

So, you are a fresh graduate?
And you expect the World to bow to you.
You think your certificate is worth more than its weight in gold?

Yes I will be graduating.
But never have I thought of making the World bow at my feet
Not even once did I believe that a certificate was a passport to a better life.

What do you mean you've studied Chemical Engineering?
We're looking for an equivalent in Real Estate or Economics!
What chance do you stand here among other candidates? What makes you so special?

It means just that - I underwent training for Chemical Engineers
Which is vaguely if at all related to land and houses, supply and demand.
I'm not sure about my chances - I never bother. Which is exactly why I'm unique.

Are you up to it?
What are you expecting?
Your degree classification and pay?

Of course I am.
I expect sweat and toil and nothing less.
I'm a 2nd lower, if you want to put a price on me.

What are your expectations?
Just say something to keep us entertained!
Don't you have a figure plucked out from the sky?

Based on my calculations.
And I am dead serious about the figure.
It should reach XX00 without a hitch!

A bargain, we must say!
Of course it is reasonable!
A suitable price for a suitable man!

Apparently, I've just become a statistic unknowingly. I am one of the graduates who are "unhappy" with their pay package. It never struck me that I'll ever belong to this group of people.

Loss Aversion

It is true. Without realising it myself, I am no better than the normal irrational investor. Not that I believe I'm smarter than most people. I know I am very much the average Joe.

I was casually browsing through the book "The Warren Buffett Portfolio: Mastering the Power of the Focus Investment Strategy" when I came upon the chapter of The Psychology of Investing. In it, Loss Aversion was mentioned. I hereby reproduce it below:

According to behaviorists, the pain of a loss is far greater than the enjoyment of a gain. Many experiments, by Thaler and others, have demonstrated that people need twice as much positive to overcome a negative. On a 50/50 bet, with precisely even odds, most people will not risk anything unless the potential gain is twice as high as the potential loss.

This is known as asymmetric loss aversion: the downside has a greater impact than the upside, and it is a fundamental bit of human psychology. Applied to the stock market, it means that investors feel twice as bad about losing money as they feel good about picking a winner. This line of reasoning can be found in macroeconomic theory, which points out that during boom times, consumers typically increase their purchases by an extra three-and-a-half cents for every dollar of wealth creation. But during economic slides, consumers will actually reduce their spending by almost twice that amount (six cents) for every dollar lost in the market.

The impact of loss aversion on investment decisions is obvious and profound. We all want to believe we made good decisions. To preserve our good opinion of ourselves, we hold onto bad choices far too long, in the vague hope that things will turn around. By not selling our losers, we never have to confront our failures.

This aversion to loss makes investors unduly conservative. Participants in 401(k) plans, whose time horizon is decades, still keep as much as 30 to 40 percent of their money invested in the bond market. Why? Only a deeply felt aversion to loss would make anyone allocate funds so conservatively. But loss aversion can affect you in a more immediate way, by making you irrationally hold onto losing stocks. No one wants to admit making a mistake. But if you don't sell a mistake, you are potentially giving up a gain that you could earn by reinvesting smartly.

I cannot agree more. I am holding to some stocks which will not see significant capital appreciation in the short term. However, I am unwilling to cut my losses and invest in other stocks which are garnering more attention from investors (such as in the property and construction sector). So in short, I am not selling my mistake, hence forgoing my chance of a better return on other stocks.

I keep giving reasons (excuses...) to myself that this stock has a large float, is defensive, and gives dividends (even though it's just about S$0.005 per share before taxes and I only got it once since it was listed in May 2006).

Which brings me to another point. I used to like stocks that give dividends. But now, I think I'll sell the stock at a price where the dividend is factored in. It just isn't worth it to wait for the dividends. The government takes away 20% of it in taxes and it didn't even undertake any risks! At least capital gains from stocks are not taxed here in Singapore (as far as I know).

For the 2 years I've been in the stock market as a novice, my profit/loss statement doesn't record any loss, precisely because I hold onto the stock until it rises above my buying price before selling off!

I am a very conservative investor. My principle is capital preservation. No money, and worse, no guts to do contra trading or sell short. Probably that's why I still haven't managed to be as profitable as other people. But I shall use this to my fullest advantage. I'm sure there's an investment strategy that suits me and lets me earn comfortable amounts of money while I'm at it.

Hobbies and Interest

The other day, I attended class at the university. As usual, there were some get-to-know each other kind of ice-breaker. We were required to ask our partners some questions. How big their family is and some background information about themselves.

"What are your hobbies and interests?", my partner asked.

"Making money," I told her straight in the face.

I don't know why, but she just gave me a smile, the kind which you give when you hear a bad joke but it's just too rude not to feel tickled by it.

And so she told the class that my hobby is making money. The whole class just burst into laughter. I wonder what's wrong. What can be so funny about making money? The lack of money is defintely not a laughing matter to me.

I think the only person polite enough not to laugh was the module coordinator. He said, "So we have a budding entrepreneur here?". This guy here has been through 2 start-ups in his life. The first one failed miserably as he put it. But the second one has been around since the 80s, which is quite something.

What I find interesting is that after his first failure, he got involved into some marketing team for other company. That seems to fit in what the book "Automatic Wealth" talked about having financially valuable skills. With such skills, you'll never have to starve, or so it claimed.

I am inclined to believe that this is true. My personal experiences with other people tells me the simple fact which I saw happening around me, but could not pin-point what it exactly was.

I really wasn't joking when I said that my hobby is making money. Maybe that is not totally correct. I like to find ways to make money.

A lot more to learn

Despite reading up on the topic of stocks for the past 2 years, I realise I am not any better than the average man on the street.

I've read up topics relating to both fundamental and technical analysis. I must say that my approach is a pretty common one - research everything I can find about the company and when the time comes for me to buy, I attempt to be a part-time technician.

My first buy into the stock market took me 3 months before I sold off at a profit of about $200. That was when I learnt what a "laggard" was.

Subsequent tries saw some profits as well but it was also over a relatively long time span. It hardly qualifies as speculation!

Just two days ago, I had the chance to let go of a stock at a premium price. However, I stopped short of executing the trade. Now the stock is down by 6% with a possibility of slipping lower when the SGX opens in the morning. I lost the chance of locking in the returns yet again.

Simply put, I have no idea when is the optimism overflowing and what should be the right price to let go. I don't think I should set myself some arbitrary targets since it's groundless and I may be cutting the flowers prematurely.

Has anyone a good idea on how to tackle the problem?

Personal Net Worth

I read a book titled "Automatic Wealth" by Michael Masterson (NLB Call No.: 332.02401 MAS-[BIZ]) recently. I find the book quite practical judging from what is written, unlike some other authors with more than 1 dad.

Of the 6 steps it recommends to financial independence, one of them involves calculating your net worth. I'm sure most of you smarts guys know it by now. The formula for net worth is

Net Worth = Net Assets - Net Liabilities

Net Asset include everything that you have in your banks, insurance products, stocks, bonds, mutual funds etc. Whenever there is a discrepancy between the value of the item, take the lower value for a more conservative estimate.

Net Liabilities would be any debts which you have to service at the moment. This will encompass any housing loans you have taken or credit card debts which are still unpaid. For me, the only liability I have at the moment is my tuition fees at the university. Living with my parents means that I have no housing loans as of yet. Credit cards are good ideas when approriated correctly, but being a full time student means that banks will not let me sign up for one.

I wasn't very surprised when I calculated that I have an negative net worth. The tuition fee is a really big component. But I am determined to increase my net worth every month I check the balance sheet. I will do this my means of prudent saving, stocks investing and probably housing investments when I reach a critical value. Foreign currencies is also another avenue. I will also keep my eyes open for any possible income-generating ideas.

However, through some exposure with the local stock market, I know that I am very conservative in my investments. Hence, I do not think I will put money in places where I think there is high risk, no returns.

On a side note, I found an abandoned supermarket trolley on my way there yesterday. So I decided to wheel it back and add $1 to my current net worth!