22 Jan Successful Completion of How to Invest 2013
This event was meant to be held last December but I guessed it was a holiday season so the response was not good. We postponed the event to Jan 13 and within 12 hours, 60 seats were taken up and more people wanted to come! It was a happy problem and we managed to secure a bigger venue and we opened up another 50 seats. It was taken up within hours! Thanks for those who had come and I believe you have taken away something useful.
For those who did not manage to get a seat, I will be recapping some of the things I mentioned in the seminar. You can also view the slides.
Review of 2012
Stock market was bullish for the second half of the year. STI gained 23.5% after including dividends. The most bullish sector is real estate related stocks. REITs have gone up quite a lot and personally I will not invest in them now. REITs may continue to go up but I will not be willing to take that risk when most REITs are over-valued. Read this post.
PE ratios of the various indices are below 15 and hence, valuation is still cheap generally. Coupled with liquidity being injected by US, ECB and Japan Central Bank, the stock market is poised to go up. Although stocks have been rising, volume on SGX is decreasing. I believe most money are in property. The Singapore Government has just implemented the 7th property measures to curb property prices. If they are successful, we may see money flowing into stocks.
However, the future is uncertain and I may be wrong. Even if I am right, do not expect the market to go up in a straight line. There will be dips along the way and investors are better off picking stocks at cheaper prices.
Why most investors lose money?
Most investors lose money because they buy high and sell low. They make investment decisions according to their emotions. When they are comfortable to buy, the market would have gone up quite a lot. When stock price sinks, they cannot tolerate the pain associated with the losses and they sell to get out.
Greed causes you to be optimistic and willing to pay above value.
Fear causes you to be pessimistic and willing to sell below value.
I offered 4 strategies for retail investors which I believe will work out well.
The first strategy is to invest in STI ETF on a regular basis. This is good for people who have small capital and have no time or interest to do their research on investment opportunities. You can find out more here.
Second strategy is to build a Permanent Portfolio (PP). This is good for people who have enough capital (more than $24,000) and do not have the time or interest to do investment research. Most importantly, this is for people who CANNOT tolerate large drawdowns. This single characteristic of PP will prevent you from buying high and sell low. Read more about the portfolio here.
Third strategy is to invest with nil management fee Fund. This is only available for accredited investors (net asset of $2m or $300k annual income). Find out about the fund here.
The last strategy is to build your own all-stocks portfolio. This is only for people with a sizeable capital and are willing to spend a lot of time and effort to do investment research. It is important to pick 20 stocks or more for the portfolio as we are not Warren Buffett. We do not have the acumen to pick the right stocks all the time. We need diversification to protect us from the risk of ruin.
My closing remark was that every investor has to find a method that suits his or her time, capital, purpose and personality. I hope you can find such method in 2013.