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How I Manage To Profit From The Market With Minimum Effort

More often than not, we might have heard of stories of people who got "burned" investing in the stock market.


I had my fair share of such experience as well.


Thankfully, because my first experience was a very positive one, I decided to give a go again after wiping out in 2008.


I re-started the portfolio in 2018 putting aside some money on a monthly basis.


I'm proud to say that my portfolio is in the green as of now.


US portfolio: +14.9%

SG portfolio: +2.9%

Unit Trust portfolio: +7.91%


Here comes the question, how did I achieve those results?


My philosophy is simple.


Instead of trying to buy at the bottom or sell at the top, I regarded investing as buying a piece of the businesses.


This means that whenever the prices jump, I don't panic. I remind myself that I'm going in for the long haul. Patience is very important in this game.


As the Oracle of Omaha, Warren Buffett, once said,


No matter how great the talent or efforts, some things just take time. You can't produce a baby in one month by getting nine women pregnant.

How true indeed.


Are there days where I'm tempted to sell?


You bet there are. There are days where the stocks jump and I jump too. The temptation to sell is high when the stocks are in the red.


There was one stock I held that was down 50% during the final quarter of 2018. As the market picks up in the first quarter of this year, it rebounded very quickly.


In hindsight, if I had "cut loss" and re-enter at a cheaper price, chances are, I wouldn't have been able to do it because I don't know where is the bottom nor do I know at what price to buy back in.


The reverse is also true.


Case in point, I invested in Trade Desk (TTD) on 30 Oct 2018.


This is a US that helps companies to manage their digital advertising. In less than a year, the company had more than doubled.


Source: Yahoo Finance

It is indeed tempting to cash out and "lock in the profit".


However, as mentioned earlier, I find that it is difficult for me to identify a good entry again since the company is likely to continue to do well and the stock will rise in tandem.


What are some key factors to consider when investing?


Before I plow in my money, I ask myself these questions,


  • Is the business profitable? If it's not, is it cashflow positive?

  • Are people raving about their products/ services?

  • Is there a huge market for the company's products/ services?

  • Am I using the company's products/ services?

  • Would I want to own a piece of that business?


With that mind, I dig into the financials of the businesses. And thanks to the internet, much of the information is readily available online.


For local stocks, you can refer to the SGX website.

For US stocks, you can refer to Yahoo finance.

For unit trusts, you can refer to Morningstar.


There are, of course, additional nuances when investing in different markets or instruments.


Unit trusts are a different animal. There are many restrictions, one of which is the UCITS,


However, because unit trusts are often managed by professional fund managers, the amount of work required is also much lesser.


But aren't unit trusts returns average and charge high management fees?


Firstly, average returns and high fees are very subjective.


As such, it makes more sense, to compare the opportunity costs in my opinion.


If one were to invest in a safe instrument like Singapore Savings Bonds (SSB), then I reckoned a unit trust that invests in high-grade corporate bonds may be better.


The current return for the SSB is 1.76% on average for 10 years (based on 22 Dec 2019 check).

A unit trust that invests in high-grade corporate bonds gives between 3 to 4% returns.

Even an endowment is ranging from 2 to 4% returns.


Of course, you can say the underlying assets aren't the same and may not be the best comparison.


SSB has very high liquidity and the capital can be withdrawn without any penalty. On top of that, it is backed by the Singapore government. Very strong indeed.


Most endowments are capital guaranteed (yes, you may be surprised to learn that there are some endowments that are not capital guaranteed). They give higher returns than SSB but they require lock-in.


High-grade corporate bond unit trusts have the flexibility and give higher returns, but their returns and capital are not guaranteed.


As such, it is very difficult to have an apple to apple comparison.


On the other hand, we also need to recognize that our capital is limited and we need to choose the ideal vehicle to grow our money, given our respective risk profiles.


I'm more of a risk-taker, so high-grade corporate bond unit trusts is more of my cup of tea.


(If you aren't sure what profile you're in, you can comment below or drop me a text on the pop-up box for a diagnosis.)


Conclusion

Different strokes for different folks.


I know of some colleagues who can afford the time to monitor the market on a daily basis, reading and consuming news as though they are AlphaZero. And I'm truly amazed by them.


Did I mention they have kids to take care too? :)


For me, I'm a lazy guy.


I prefer the market to do my work. All I need to is to do one-time thorough research on the funds and stocks, then check-in on a quarterly, half-yearly or yearly basis to ensure things are in order.


And that's how I've achieved the returns you had seen.


Too simple?


Perhaps. Then again, results don't lie.


And simplicity is often the key to many of our "difficult" problems.


P.S: if you want to find out more about how to pick good unit trusts, comment below so I will write an article on it in the near future.

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