Archives for category: Investing

Bill Ackman’s short on Herbalife isn’t new but here comes this super long-form article on the entire saga courtesy of Vanity Fair. (h/t The Big Picture)

After reading it, I got a few thoughts:

  • Ackman’s investors ought to be worried. Very worried. He’s the kind of guy that bets big on ideas and unless you’re savvy enough to measure whether he’s good or just lucky, you may end up either very rich or very poor.
  • The hedge fund world is like any other industry- you have friends and you have enemies. You probably want more friends than enemies because, at some point, you’re going to need help.
  • Managing a fund is a different ball-game from being a retail investor. Ok, I confess that this article didn’t make me think this way but this saga is a good example of how one must contend with other sharks in the market, investor withdrawals, public relations and your reputation if you want to be managing a fund professionally. As a retail investor,  you just find your method and apply it.

Leave any thoughts you have in the comments below.

Bonus Read: The link to The Big Picture has a link to an interview with Ben Bernake (on Vox) that looks interesting too.

Well, we’ve already hit June so it’s a little bit late to be talking about this but there’s a common adage in the market that tells people to sell their positions in May and ‘go away’ or stay out of the markets until October or November.

The question is, should you believe it?

There seems to be a compelling case as demonstrated by some academics from the University of Miami as highlighted in this CNBC article.

Fuerst, along with fellow University of Miami professors Sandro Andrade and Vidhi Chhaochharia, reported in a 2012 paper that stock returns were 10 percent higher in the November-to-April half of the year than in the May-to-October period.

 Importantly, this result isn’t solely based on historical American stock returns. In that case, the academics could be making the all-too-common mistake of “proving” an adage by using the same evidence that was used to bring about that line of thinking.
Rather, they examined returns across 37 markets within a 14-year time period that was not tested in a prior paper that also found support for the sell in May effect.
The problem with the paper is that it doesn’t consider any other alternative. After all, the alternative to “sell in may and go away” isn’t just to hold equities from October/November to May. Another more common alternative is to just hold your positions through it all.

Buy and Hold vs Sell in May

Another study found that while “sell in May” may beat “holding from May to Nov”, what’s beats “Sell in May” by a mile is Buy and Hold.



Just don’t go away.

Obviously, with all studies, there are assumptions made and whether actual investors could get the exact returns calculated is another question but I think with this, there’s no doubt that certain myths can be quite costly.

I can’t seem to find it but I distinctly remember a thread on (or one of its earlier incarnations) talking about this exact same thing and it was another forummer who pointed out the problem with studies like the earlier one mentioned. What I also thought I remember is someone posting the calculations of Buy-and-Hold vs. Sell-in-May for the Singapore markets and the results were similar to the one above.

Some anecdotal evidence

I have a colleague who happened, for a personal reason, to sell his entire equities position almost two years ago in May and that saved him from experiencing quite a bit of the downswing in 2015. The problem is that he never really got back in the market and that meant that he’s missed the entire run-up in the market since then plus the dividends distributed.

As for myself, although my portfolio took quite a beating in 2015 all the way up to 3rd quarter 2016, sticking to an investment strategy, the opportunity to deploy more funds into equities as well as collecting dividends along the way meant that my portfolio is actually larger than ever.

Valuations Matter

However, I’m not saying that you should always be fully invested in the market. What’s important is to be able to identify when valuations are getting expensive. During such periods of time, you want to either allocate more of your portfolio towards cash or fixed income.

After all, it’s just mathematics that a 50% fall in your portfolio means that you’ll need a 100% increase in the market in order to break even. Even Warren Buffett closed his partnership in the late 60s when he couldn’t find any more compelling investments. He was also ridiculed in the late 90s/early 2000 for not understanding the dot-com boom. All that were just some signs that the markets were getting too rich.

In short, don’t believe strict rules which make no sense such as “Sell in May and go away”. What you want to do is get a good understanding of how to tell if markets are overvalued or not.


Every first Sunday of June, I get reminded of the fact that it’s CFA exam day.

Not too long ago, I would have been just like all the would-be candidates, fretting about what’s going to come out on the exam as well as cramming as many of the arcane formulas into my head as I possibly could.

In fact, as I write this, candidates are probably going to stream out of the exam hall at the Singapore Expo Halls 7-9, trying to grab lunch from one of the few possible options. The last two times I took the exam, the queues were so horrendous that I bought chocolate bars and a can of coffee from the 7-11.

That’s how winning is done

If there’s one thing I can offer to anyone thinking about getting the CFA Charter, it’s probably to tell you to hang in there.

Every end of semester, I show my students a clip from Rocky where he says this.



Ok, it’s suppose to be “keep moving foward”. Go watch the full thing for a dose of inspiration.


Unless you’re a hardworking, determined genius (and I personally know one) that can get all the material easily and pass all three exams on your first try, that’s exactly the mentality you need to get through all three exams. I remember taking the first exam with a lot of friends and familiar faces but by the time I got to Level 3, I was alone.

I can’t count the number of times I asked myself things like “Am I really cut out for this?” or “Is it a sign to give up?” when I got back the result that I didn’t pass. However, when you eventually do, the feeling is incredible.

As I told a friend who asked me why I kept trying, this charter was my Everest. It was my personal challenge and for many years, it remained so.

So what’s next after getting the CFA charter?

Personally, not much has changed.

I’m not the best person to answer this because I’ve never even worked in finance. I guess a certain level of recognition comes with it which is nice but more importantly, on an intellectual level, the subscription to the Financial Analyst Journal has been awesome and the events organised by CFA Institute Singapore have been great (if only I had the time to attend more of them).

If you want to work in finance, your best bet is to start there and get your CFA charter after. No one’s going to hire you if you have a CFA charter but lacking in relevant work experience – you would be overqualified for entry level positions even if you were willing to take a pay cut and you would be underqualified for mid-level positions.

I guess what’s more important is the content I learned from studying for the exams. If not for the exams, I doubt I would have heard about MM’s Dividend Irrelevance Theory, learned how to calculate the value and payoff of swaps and other derivatives (which is nice to know but a nightmare to work out in an exam) as well as other pretty interesting stuff.

To all candidates, do your best!

No, I’m not that gifted an investment writer to give you such a resource.

Instead, pop over to this gem by Investment Moats to learn more about Real Estate Investment Trusts (REITs).

“The chains of habit are too light to be felt until they are too heavy to be broken.”

I don’t know who to attribute the above quote to because the first time I read it, it was something that Warren Buffett said but online sources say that it’s probably something that Samuel Johnson said.

Anyway, what’s more important is how true that saying is. We are all creatures of habit and particularly when our willpower is low in times of stress, we revert to the very things that we do without much thought. The danger is when some people fail to realise that their habits have taken them down a dangerous path that increases their chances of permanent ruin.

This morning, I watched an episode of a programme called “My 600-lbs Life”. The show follows the lives of extremely obese people in their bid to lose weight and regain their lives. This particular episode featured a man named James K. from Kentucky who is probably the heaviest person ever to appear on the show.

What struck me over the course of the two episodes that aired was that this guy and his girlfriend made all these bad choices that they basically couldn’t unwind. He’s so fat that he was basically bedridden and therefore it was his girlfriend who kept bringing him both the wrong kinds and wrong quantities of food. Her justification was that if she didn’t do so, he would get grouchy, argumentative and basically a pain-in-the-ass.

I know the guy has a food addiction problem and his girlfriend was obvious taking the easy way out by giving him what he wanted when his willpower was depleted. It didn’t help that they seem to be in poverty because at one point, her car broke down and she couldn’t get it fixed and that prevented her from going to get fresh produce which James needed in order to stick to his diet. Seeing all that, it’s obvious they weren’t going to be very successful in their goal.

Which is why I’ve realised that more than anyone else, I’m a creature of habit. I go to the same canteen every day to order the same cup of coffee, I have pretty much the same thing at the canteen in my school. When I’m home, my wife and I are watching the same few channels. Most importantly, I channel a part of my income into my portfolio automatically each month when I get paid.

That’s the trick with habits- habits can be both good or bad. What you want to do is develop good ones that help you meet your goals. And if you have bad habits, you want to make sure that they are inconsequential ones. If they are big, bad habits, then the first thing is to recognise them and set out a plan on how to correct them. It’s the old zen tale of a master who poured tea for his disciple until the cup overflowed. When asked why he was still pouring the tea, the master replied that new ideas cannot take root until old ones are uprooted.

I’m not perfect. I have many bad habits that I should work on. But at least I’m aware.

PS: There are so many people I know of that have developed terrible habits that they aren’t even aware of. Even if they’re made aware, they become defensive and think of all sorts of reasons to justify their behaviour. If you’re aware of your shortcomings, then kudos to you, you’re on the first step to putting things right.

Holy cow! 1/3 of the year has come and gone. So how’s your portfolio doing?

I just wanted to share a great insight on investing prowess vs. building wealth. Obviously, the better an investor you are, the quicker you’ll build your wealth. However, for mere mortals like most of us, I want to assure you that it’s still possible to build wealth.

Enter exhibit A. (Actually, this is the only exhibit.)



NAV per share (in blue) vs. Growth of actual portfolio (in yellow)

The blue line (NAV per share) shows how much $1 invested in the portfolio would have grown to. So naturally, this involves removing the effects of adding more cash to the portfolio which basically shows us how good an investor I am.

The yellow line (Actual growth) shows how many times the portfolio has grown by relative to the starting date. Of course, this includes savings and additional cash added to the portfolio.

If you’re aiming to be financially free, I can’t think of why building wealth would be inferior to being a good investor. Sure, being a good investor gets you there quicker and probably allows you to enjoy consuming more at the same time but if the goal is to eventually not have to worry about working for money, then getting a big enough portfolio that will allow you to live off a safe withdrawal rate (3-4%) should be your main priority.

My experience so far is that being an average investor will help you get there too.


PS: Of course, once your portfolio gets huge enough, your savings will hardly matter. An average household in Singapore makes something like 80-90,000 SGD a year. If the portfolio reaches 2 million SGD, saving half a year’s income (which is near to impossible for most people) will only move the needle by about 2%. Having said that, if your household can’t retire in Singapore on a 2million SGD portfolio with your house fully paid for, you have a spending problem.

An update on the Singapore property market. For background on this, read here. All data from SRX.


Using the price of HDB flats as the benchmark, we can see that prices for private property in all categories are at a sizable premium to HDB flats. Among the different classes of private property, the premium for private landed remains the highest although the index seems to be on a downward trend. For non-landed, it appears that resale units are at a lower premium than new units.


As for sales of all (new and resale units) non-landed private property, it appears that the area commanding the highest premium to HDB flats are in the RCR (Rest of Central Region).

Of course, prices will vary for individual projects and units but from a macro perspective, it’s going to be much easier to bargain hunt during periods like the early 2000s and ’09-’10 where there was hardly any premium over HDB flats. In fact, times like 1999 would have been a godsend to property investors.

I guess my two main takeaways are (1) despite the Singapore property market supposedly being in a doldrum, private property prices are not cheap right now and (2) HDB flats do keep their value quite well being the cheapest form of housing in Singapore and therefore is a reasonable benchmark for evaluating priciness (or cheapness) of the private property market.

In not-so-latest news, Minister of National Development, Lawrence Wong came out to caution people from buying older HDB flats* in hope that the government places the flats under a SERS programme under which owners of the old flat get compensation in the form of cash (with the flat valued at market rates) or a choice selection of a new flat in the vicinity.

Of course, the good minister didn’t want his words misconstrued as “all other flats not selected for SERS, which make up a majority, have a chance of their value plummeting should the leases be allowed to run its course” so he came up with additional thoughts on why HDB flats retain their value.

First thing to notice is that the good minister did not say that HDB flats are a good form of wealth enhancement. He only said “store of value” which everyone who has done econs 101 would interpret as keeping its “real value”. In other words, any monies sunk into an HDB flat will retain its purchasing power should you wish to monetise your flat. If you make money from your HDB flat, then count yourself lucky.

The second problem, which other netizens have pointed out, is that Mr. Wong’s example doesn’t reassure buyers who bought older flats which have already run through a good chunk of the leasehold life. (For details, see this link)

This brings me back to a point I made some time ago. Most Singaporeans sink their CPF monies into their property. If your property is going to, at best, hold its value, you better think twice about counting solely on your property to retire.Even

Even monetising your HDB flat through the HDB’s lease buyback scheme where you trade the remaining years of the lease for a monthly income has problems. First, the payouts are not inflation-indexed. Second, inflation for retiree households tends to be higher as healthcare and transportation are two of those components in CPI that rise faster than the average component in the basket. In short, fixed incomes and rising costs don’t make a sound retirement plan.



*HDB or Housing Development Board flats are Singapore’s form of public housing. The flats are of decent size (compared to places like Hong Kong), decent quality and generally cheaper on a dollar per square foot basis compared to private property. However, all HDB flats are on a 99-year lease from the government. At the end of the lease, the flat is returned to the government. However, with Singapore being such a young country, there hasn’t been a single case of whether the government pays any compensation for taking the flat back or the value of the flat goes to zero.


In case you haven’t heard, there’s a new documentary on Warren Buffett. If you don’t even know who Warren Buffet is…well, it’s time for you to find out.

HBO’s documentary on Buffett is a fantastic introduction to the living legend of a man. Why’s Warren Buffett a legend? Well, he’s not just one of the richest men on the planet but he’s pledged and has already started giving, a substantial portion of his wealth away.

For me, there isn’t much that I haven’t already heard before (the part on him buying breakfast from McDonald’s was interesting) but it’s always refreshing to see it on a screen rather than from the pages of a book. For a more detailed account of his life, check out his authorised biography, The Snowball by Alice Schroeder.

Why Warren Buffett is such an inspiration to me is a more personal tale. It started sometime in 2006 when I was still studying at the National University of Singapore. The NUS Investing Society (or Finance Society), which probably stems from the Business School, was organising a book sharing by Robert Miles, author of Warren Buffett Wealth, and I guess they wanted a wider audience and so they were putting up all these advertisements around the Faculty of Arts and Social Sciences where I was.

Prior to the talk, all I knew about Warren Buffett was that he was one of the richest guys on the planet but other than that, I knew nothing about him. I knew nothing about the stock market. Heck, I didn’t even know what I wanted to do after university. That talk changed everything.

After that talk, I started reading up on Buffett, Graham, Value Investing, the stock market, financial statement analysis, stock valuation and so on. And there’s something new to learn about the markets every single day. I’m now approaching the tenth year that I’ve begun investing for myself and it’s all thanks to that talk back in 2006. Probably the most useful thing that came out of my university education. Watching Becoming Warren Buffett just might do for you what attending that talk did for me.

PS: I’m not sharing a link to the documentary because I’m pretty sure that goes against copyrights but I’m sure whoever’s reading this will know where to find it.

The CFA Institute Research Foundation just released a monograph titled “Financial Market History”. I haven’t had the time to go through all the essays but the first one alone is a gem.

Written by Elroy Dimson, Paul Marsh and Mike Staunton (DMS), “Long-Term Asset Returns” is a look at the historical returns over the last 116 years over a whole bunch of different countries. This is largely a continuation of their work “Triumph of the Optimists: 101 Years of Global Investment Returns” and an extension of their work on the Credit Suisse Global Investment Returns Yearbook 2016.

In this essay, DMS use the data that they have painstakingly collected to promote three things:

  1. Technology can render some industries obsolete but some industries haven’t actually changed much over the last 116 years.
  2. Equity returns are still the best bet for investors with a long time horizon.
  3. Don’t be too concerned with exchange rates as they tend to have almost zero effect in the long-run.

In fact, this one chart in the essay says it all.


I encourage everyone to take a look at their work and examine the assumptions or the intricate details of their data collection but I think their main message isn’t too hard to decipher.