Full disclosure: I own SPH stock.

Disclaimer: The report is meant to present a factual representation of the company’s business and is not a projection of how the stock will do. It is not meant to be an inducement to buy or sell the stock. As far as possible, I have tried to ensure that there are no errors. Any errors are my own. Please seek advice from an investment professional should you choose to use this information as part of your decision-making process on whether to invest in the stock or not.

 

So, I came across a report on SPH* that did a horrible valuation analysis on SPH. The main problem with the report is that they valued SPH on the basis that it was not a going concern, calculating it’s NAV and then taking a discount from there.

The report (more like blog post actually) also made simple factual errors like including Seletar Mall in SPH REIT…

So, I did my own analysis of SPH. You can download it for FREE. Leave me your comments and let me know how I can do better. (SPH (T39) report 10 Oct 17)

For those that don’t want to read through the entire thing, I’m listing some of the main points below.

Negatives:

  • The traditional media business is declining fast.
  • SPH is taking on more debt in order to fund other lines of business.
  • Other lines of business are not a sure bet.
  • New CEO not from industry nor has a good track record.

Positives:

  • Market’s current pricing of SPH seems to expect the worst.
  • Media arm’s decline seems to be bottoming.
  • Debt levels are still sustainable.

Neutral:

  • Management is trying its best to diversify away from the media business

 

*I’m not even going to link to it because it’s so bad and they are obviously trying to get you to buy something from them

Advertisements

This August officially marks ten years of investing.

Ten years is a long time and I’ve learnt some things along the way. However, my investing journey is by no means over and I’m pretty sure there are many more things I will have to learn.

This post is going to be a reflection of the steps, missteps and lessons I have learnt so far. (Beware: long post ahead)

How I got started

Investing was something I read about from Rich Dad, Poor Dad. I know the book is controversial (see the criticism the book got) but that’s the first time I even got the idea of being an investor.

However, that idea never really took any shape until one day in 2006 when I saw a flyer on campus that the business school at the National University of Singapore (NUS) was organising a talk by Robert P. Miles. Robert P. Miles was invited to give a talk about his book, Warren Buffett Wealth. That was my first introduction to Warren Buffett.

Subsequently, I read whatever I could find about Warren Buffett and Value Investing. Of course, it didn’t help that I had no idea how to read a financial statement. By nature, I’m not one to go through the details with a fine-toothed comb and I was studying for an undergraduate degree in Economics. Not exactly the kind of major that teaches much about accounting.

Thankfully, the mid-2000s had some resources online. I’m forever grateful to Value Buddies and its predecessors (Wallstraits and subsequently, Afralug). Some of the regulars there have been generously sharing their wealth of experience and that really sped up my learning.

I bought my first stock (technically, it’s a unit since it’s a Reit) in 2007 and still hold it to this day. To be honest, I didn’t buy it because I had great insights or superior analysis of its financial statements. I bought it because I figured that Singapore’s ageing population will be spending a lot more on healthcare in the years to come. Thankfully, that investment has paid off handsomely.

Of course, that investment wasn’t all smooth-sailing. Buying in Aug 2007 meant that basically, I was buying at the top of the market. For those too young to remember*, Aug 2007 was as high as markets got before things started to go to hell. End 2007 to September 2008 was just a long descent into hell and Lehman Brothers’ collapse just caused everything to fall off a cliff.

Getting through the Global Financial Crisis (GFC)

The GFC seemed so long ago but anyone who lived through that would have seen their investments get totally wrecked. I’m pretty sure some of my investments were down by 50-75% at one point.

The silver lining was that having just started out in the market, I didn’t have a lot of skin in the game. In fact, that was the best possible time to commit even more money. So did I make tons of money from that period? Not really. There was always this constant fear of whether the market would go down some more. And by the time, the market was in an uptrend, you start worrying about whether another shock will hit the system.

That, however, provided me with a good understanding and experience of classic market psychology. It’s a lesson that not everyone may learn or may even learn too late. A very senior colleague of mine who made his retirement nest egg in the GFC by buying tonnes of stock at what was almost the market bottom basically sold out in May 2015. He was vindicated by the horrible second half of 2015 but practically missed out on collecting dividend income in 2016 and the run-up in late 2016 till now.** On the contrary, I stayed in the market and my portfolio is roughly 7% higher based on pure investing returns for the same period. In short, market timing is a difficult business.

Investment Record

First off, a disclaimer. I’m not putting my investment record here to brag or in hope that someone will recognise my prowess and give me a job. In fact, you’ll see that my record is nothing to brag about. My objective is to show that any average person can achieve decent returns in the market with a solid plan, plenty of patience and a decent understanding of markets.

In 2007, I started with a portfolio of roughly $6,000. This may not seem like much but I can assure you that it was a substantial sum to a university undergraduate at that time. Unfortunately, I was young and not smart enough to know what records to keep and where to keep them (this was all before we had cheap gigabytes and cloud storage) so I only kept records of how much my portfolio was growing. It was only in early 2011 that I began to keep records of both my investment returns (that is pure investing returns not inflated by me adding more money) as well as the actual growth of my portfolio.

From 2011 till now, my investment returns (capital gains and dividends reinvested) or what’s more commonly known as Compound Annual Growth Rate (CAGR) is about 7.51%. However, the actual growth of my portfolio is 18.85% p.a. for the same period.***

So what gives? As I’ve said before elsewhere on this blog, that big difference is down to mainly two things: (1) I started from a low base. In early 2011, my portfolio was below six-figure territory. Just by saving $1,000 a month, that would increase my portfolio by somewhere about 12%. (2) Savings are key to building your portfolio because that acts as a buffer or insurance. When markets are down, that continual addition to the war chest helps you add positions when the markets are cheap. When markets are expensive, you just build up your cash position to take advantage of when markets (eventually) get cheaper.

Obviously, as time goes by, your savings will contribute less and less towards your portfolio growth. The growth in your portfolio will come to consist of only your investment returns and that shouldn’t really be a cause for concern because when that time comes, you will probably have reached your financial goals. In fact, the more you save each month, the quicker you will reach financial freedom assuming of course that your spending stays the same after having zero income.

Three steps to get started

Step one, read as much as you can. You should not be reading about the theoretical or technical knowledge regarding investments but as much of the history, different schools of thoughts, and the different participants in the markets. In other words, don’t just know how to read the financial statements of a company and be able to do all the not-so-fancy calculations but start to appreciate how markets used to be and how they are now.

Also, not everyone in the market is an investor. Even among investors, there is substantial variation with regards to how long-term an investor’s view is. Get to know how traders and speculators behave because invariably, the siren song of being a speculator is tempting and you need to know when you call yourself an investor while acting more like a speculator. Traders have their place in the market but you have to know if you have brains and fortitude to be one.

Step two, just do it. I’m sorry for borrowing Nike’s slogan but there is really no better time to get started. As long as you are using money that you are prepared to do without for 10 years or more, being in the markets should not be an issue.

Step three, keeping learning and getting continuos feedback. Feedback doesn’t just come from the markets. You should seek out like-minded individuals who want to better themselves. ValueBuddies.com is a valuable place. There are plenty of investment bloggers (e.g. kyith at Investment Moats, Dividend Warrior) out there as well who maintain a good conversation with people who leave comments on their blog.

Environmental factors

A note of caution for those trying to replicate my model. Your investment portfolio cannot exist in a vacuum. If my wife was a high-maintenance trophy wife, the portfolio definitely wouldn’t be where it is today.

Fortunately for me, my wife was raised in a very practical household with parents who are the most down-to-earth people one would ever meet. Our expenses are minimal and our housing expense is way below our means. In a world where mortgages can stretch up to 30 years, we only have 5 years left on your mortgage despite only having bought the place a few years ago.

Of course, circumstances vary among households but I believe that contrary to what most people say about the average person living in Singapore, we are living proof that staying in Singapore doesn’t have to be an exorbitant affair.****

What’s the end goal?

My personal goal is to have my portfolio provide enough income for me and my wife to meet our expenses. These could range from daily expenses such as utilities and groceries to one-off expenses such as medical emergencies and holidays.

Once that goal is met, we will have much more options on how we want to live our lives. I don’t know about my wife but I certainly would explore my creative side much more. I have dabbled in some of these things recently but I really would want to pick up some skills like drawing/sketching, creating web apps, dabble a little in simple DIY tech-related craft (like using a raspberry pi as a security cam), baking bread and cooking at a more advanced level.  Or as my students might put it, I want to become a pro at these things.

If you’ve been following this blog, you will realise the slowdown in postings. I won’t be blogging as much as before because of impending changes on the job front as well as this minor obsession I’ve developed on programming.

Good luck investing! Here’s to the next 10 years.

Endnotes:

*I feel weird saying this but I do have some students who have just gotten in the market and for whom the GFC of 08/09 seem like a distant memory.

**Of course, financial planners will rightly tell you that your age profile matters when it comes to asset allocation. However, converting almost your entire portfolio to cash is not a valid retirement strategy either with interest rates on cash being so low and inflation for seniors (healthcare) being higher than the general inflation rate.

***My investment portfolio consists only of stocks and cash. I haven’t included my property, CPF monies and other assets such as insurance-based financial products that could be surrendered for cash.

****We are by no means extremely frugal people. If I wanted to go to that extreme, I would not have gotten a car and we wouldn’t be taking yearly or even twice yearly holidays to places like Japan, London and my favourite retreat off Bintan.

For the life of me, I can’t remember where I read it but I’ve found sources that provide more of less the same arguments that were made.

Basically, what I read was that automation hasn’t really caused job losses (yet). After all, if automation and robots were the reason for job losses, then why is productivity so low? In economics, productivity is measured as the output per unit of input. Inputs can be either labour or capital which means that if more and more jobs were automated, productivity should start to increase.

That hasn’t been the case, even in Japan, where robots play a huge role in manufacturing. In Japan’s case, there are alternative explanations (for example, see here) such as Japan’s corporate culture but that doesn’t explain the similar observations made in other developed countries.

Singapore’s attempts at increasing productivity haven’t been all that great either. So, where is the evidence that automation and robots are taking our jobs? Well, I think economist David Autor (nice, long essay) has made a very compelling argument that automation and robots, at least at this point in time, have not caused job losses or the end of employment as some people say they will. (For a nice background on what happens as technology replaces labour, see here and here)

The historical relationship between technological improvements and labour

It’s an indisputable fact. As technology has progressed, jobs have been displaced but that often leads to job increases in other areas. As farms used more capital (think tractors), the amount of labour on farms has decreased. That led to increases in employment in other sectors such as manufacturing. And as manufacturing started getting more high-tech, that also led to increases in employment in services.

Paradoxically, improvements in technology have also led to increased employment in the same jobs. The often-cited example in labour economics is the role of the bank teller. As ATMs were introduced, many people thought that that would spell the end of the bank teller. Interestingly, the number of bank teller jobs in the US actually increased after the introduction of ATMS. What gives? Well, it turns out that the ATM reduced the need for tellers per branch and that meant that the ATM made it cheaper to open up new branches. Since branches were cheaper, banks opened up more branches, increasing the need for tellers. Bank tellers were still necessary to perform certain banking functions as well as guide customers on how to use the machines.

What lies ahead?

If the above holds true, we should expect that the coming age of automation and robots will bring about some changes but it won’t necessarily spell the end of work as we know it.

(1) Augmentation of labour

First, automation and robots will definitely replace some jobs. Off the top of my head, in the more severe scenario, drivers (as an occupation) will no longer be necessary. Instead, they may be employed to sit in self-driving cars just to hit some emergency button or take over manual controls in the event the whole system goes down. In the less severe near-term scenario, drivers may still be needed to take over in certain driving conditions much like what goes on in modern passenger aircraft.

Any labourer lifting heavy loads (such as nurses or constructions workers) may use robots or exoskeleton suits that help them in their work. If it helps them to their work quicker, then obviously, there will be less of these labour needed given the same level of demand. However, it’s probable that nurses will see a greater demand given the level of ageing in developed societies while construction depends on different demand condition altogether.

(2) Growth in other/new industries

Let’s not forget that it’s not just blue-collar jobs that are at risk. In fact, due to the digitisation of information, software and AI can probably do repetitive, routine functions that people are used to doing. Administrative functions like filling forms, templates and other such bothersome activities can be automated.

As AI developed, even less routine jobs can be replaced. In the world of finance, trading, to some extent, has been replaced with AI and software. Robo-advisory, or being advised by software, is also increasingly being used by money management firms (see here).  The days of buying insurance directly from your insurer are here but dare we go one step further and leave the endowment and investing portions up to software as well? This would eliminate the so-called financial advisor whose only value-added service thus far is the relationship built between the advisor and client. It may be argued that many such ‘advisors’ exploit the relationship for a commission. While advisors may say that they bring clarity to the otherwise lengthy and complicated terms and conditions, it is difficult to take that stand when your income depends on it. Much better is the independent advisor who compares all the offerings available and provides balanced advice.

So, where are the likely pockets of growth? Leaving out the sectors that only the truly visionary can imagine (hyperloop anyone?), we can already see a greater switch to sectors that depends on creativity and novelty.

In Singapore, this has manifested itself in the form of various restaurants and cafes that offer products slightly different from each other. Some tout a special item on the menu while some brandish the fact that they were trained at famous schools, restaurants or bakeries or the fact that its the outpost of a celebrity chef. The ones that really get ahead though, are the ones that grind it out on the ratings (informally on platforms like Yelp or HungryGoWhere or formally in the Michelin guide). In retail, it’s even tougher. Competition based on price happens on platforms such as Qoo10.sg while a novel idea can help you out on Etsy, Kickstarter or Indiegogo.

In short, if you aren’t a big company reaping economies of scale (lower average cost of production as output increases) are opening outposts all across the world, it seems that for individuals, we’re back to the age of a craftsman where uniqueness and emphasis on dedication triumph mass production.

This isn’t unique to just physically creating products. We have robots that can now produce articles that transmit the facts of the matter. However, in the blogosphere or on YouTube (if you prefer), superstars are being made of those whose opinions provide clarity, prognostication or simply, a breath of fresh air. The software and AI haven’t gotten there yet.

Industries will change

If demand for goods and services change, obviously there will be winners and losers from it all. After all, what good is it to a manufacturer if costs are reduced by saving on labour but that also leads to a reduction in demand? In econ 101, we learnt that households provide labour and it is also households that form the demand for goods and services. So, companies and corporations have a vested interest to ensure that whatever labour is displaced gets employed once more. Hopefully, they get employed in a higher value-add job and therefore, draw higher wages than before. Realistically, that would take a lot of training and in meantime, the unit of displaced labour would depend on dissavings and/or handouts from the government.

The industries that will weather all these relatively well will be those that have income inelastic demand for their products. After all, even if one loses his/her job, one still needs to eat. Therefore, the basic triumvirate of food, shelter and clothing will do well. They will do even better if they are large enough to reap the cost savings of adopting new technology bearing in mind that labour gets cheaper relative to automation and robots as more and more labour gets displaced.

The likely scenario is that this pace of change will be more acceptable in developed, ageing countries where labour gets more scarce with each passing year. In developing countries, there might be possible problems as highlighted in this article. When you have a young, growing population without jobs, that’s just a recipe for disaster.

There’s a mystery in my current organisation that I’ve been trying to solve.

Currently, my organisation offers employees who reach the official retirement age of 62 years a one-year contract for the next three years. There is even an option to have that extended to 67. Of course, the employee has to meet certain performance requirements before these options are offered.

Some additional context

My organisation doesn’t offer a pension upon retirement. Singapore has a compulsory savings scheme called the Central Provident Fund (CPF) where workers have a certain portion of their monthly salary socked away until they hit a certain age.

Also, the colleagues in question are not low or even average-pay workers. They would easily be considered middle to upper-middle class folk for the last 20 or 30 years of their careers.

The mystery and my theories

The mystery for me is not what my organisation offers but why would my colleagues want to take that offer up in the first place. I have a few theories but none seem to be wholly satisfactory.

Theory #1: They need the money

One possible reason could be that some colleagues who work until 62 and beyond do so because they need to. In other words, if they retired at 62, they would have problems funding their retirement.

I’m not very satisfied with this theory because I’m pretty sure most of my colleagues have enough put away for the rest of their lives. Furthermore, most of their liabilities such as housing loan(s) and children’s education (yes, in this part of the world, parents usually pay for their education if they can afford to do so) would have already been settled.

Also, if you can’t afford to retire at 62 years old, then is another three to five years going to matter? It might also have been that many moons ago, these colleagues planned their retirement up till 65 or 67 and therefore, they are near the end but not quite. In that case, isn’t that level of planning a little suspect? What person plans to the exact year without having a buffer of some sort?

Theory #2: Retirement is boring

I can understand this sentiment. If you look around, there are many people who say that once their professional lives are over, their minds degenerate quickly because there is nothing to keep them engaged. This is a particular statement many elderly businesspeople make.

The flip side for my older colleagues is that interests can be cultivated or expanded. In fact, most of us have other interests outside of our professional lives. Wouldn’t retirement free up a lot of time to pursue those other interests in a bigger way?

Many older colleagues also tend to be grandparents and I’m sure their children would appreciate their help in taking care of the grandkids. Or maybe it’s finally time for my older colleagues to go out and see the world.

Theory #3: They love the job

Truth be told, there are some colleagues who fall into this category. They love the interaction with their students so much so that they don’t want to step away from it. However, the job isn’t all fun and games. There are many mundane administrative aspects to the job as well as the boring and utilitarian committee work that we’re all forced to be a part of. If they really love the job, they could always become a freelancer. This would allow them to focus on the teaching without having to be a huge part of all the administrative machinery.

If they love the administrative machinations, then that’s a whole other story but which begs the question- why not be part of an administration somewhere else instead? Other administrations would probably pay better.

Also, teaching doesn’t have to be confined to the classroom or the school. Sharing knowledge and guiding others happens digitally and in other venues such as religious organisations as well.

Conclusion

Those are my theories and none of them seems particularly satisfactory. From the viewpoint of a 30-something year old who’s been here for about five years, I can’t imagine why anyone would want to stay until 62. The only sane thing is that they really can’t bear to leave this place because of the joy of work. Therefore, my money is on theory #2 or #3 although there are some holes in that argument.

Having said that, if I could, I would go when I’m ready. After all, age really is just a number. If I was financially free, I would be doing what interests me or what is meaningful regardless of the amount of money it brings me.

“Despair is the price one pays for self-awareness. Look deeply into life, and you’ll always find despair.”
Irvin D. Yalom, When Nietzsche Wept

So I woke up this morning (14 June 2017) to find the beginnings of a soap drama playing out on my Facebook feed. The entire blogosphere basically got into a frenzy about this news and the mainstream media was caught off-guard with the post released in the wee hours of the morning. This is just the beginning of the entire affair.

 

LWL_fbpost

The post that started the drama.

 

In case you missed it

 

So it appears that Lee Wei Ling (LWL) and her younger brother, Lee Hsien Yang (LHY) are not happy with PM Lee Hsien Loong (LHL) and his wife, Ho Ching’s behaviour with regards to the late Lee Kuan Yew’s residence.

The statement started off with some very serious allegations of misuse of power and harbouring political ambitions for PM Lee’s elder son. However, that part was very short on details and most of the statement centered around PM Lee and his siblings’ differences with regards to the treatment of their late father’s house at Oxley Road.

What does it all mean?

After reading the full 6-page statement and PM Lee’s response, here are my thoughts:

  • It seemed petty to be arguing over a house but I guess the larger picture here is not so much the house but LWL and LHY’s attempt to paint LHL as a power-hungry person to the extent that he is willing to go against his father’s last wishes. And in doing so, would be detrimental to the future of Singapore.
  • LWL and LHY are obviously not very good terms with LHL any longer. Going public with what is essentially a family matter is damaging to well-known personalities as all three of them are. Arguably, this is most damaging to LHL as compared to LWL or LHY.
  • The allegations of big brother being omnipresent are most probably exaggerated but if true, is a worrying sign of a paranoid personality who needs to be in control at all costs.
  • LWL seems to be the one with the least to gain or lose from this. LHL has quite a bit to lose- he can’t sue his siblings (can he?), those anti-PAP or even fence-sitters may see the allegations as somewhat truthful since it is ‘insider info’, the general public may question his ability to lead if he can’t even get his own brother and sister to back him, and most crucial, his son’s entry into politics, if at all, is now going to be tougher to push through. However, the upside is that he probably plans to step down sooner rather than later anyway.
  • LHY is the question mark here. Given that his son, Li Shengwu has also spoken out on the matter, could it have been a case of LHL not helping his nephew enter politics or is this setting the stage for Shengwu’s entry later on?
  • LWL and LHY’s naming of Lawrence Wong as a figure in all this, if true, just confirms most people’s suspicions that LHL’s cabinet has some yes-men in there. The question is who else and how many? Not the best vote of confidence for the whoever takes over from LHL.
  • In my opinion, LHL’s official response wasn’t the best. It sounded sad and defeated and although he tried to say that his siblings’ hitting the nuclear option tarnished his dad’s legacy, I’m not sure many people would connect the dots. After all, his siblings were accusing him of departing from the path his dad took and he didn’t really do much to refute what they said.
  • LWL and LHY were pretty nice actually that they didn’t bring in any personal anecdotes on Ho Ching overstepping her boundaries. Why? To help their big brother save some face? Or to not give LHL any ammo to sue them for? I guess we’ll never know.

I can sympathise with LHL because I have witnessed some drama in my own extended family. Of course, my own family is nothing like the Lees but the similarities in terms of the clash of egos and views are there. No one would ever wish that the full story gets out and to be honest, no one’s going to be interested anyway.

All in, LWL and LHY really hit the nuclear option with this one. LHY is never going to come back to Singapore after this and dropping this bombshell of a statement while LHL was away on holiday shows how much of a calculated move this was. Bringing LHL’s son into the picture also blocks his son’s entry into politics, if it was on the cards, for the short term. With the upcoming presidential election and next General Election, this release was designed to inflict maximum damage. As for LWL and LHY, I guess they don’t really have much to lose in the first place which explains why they did it in the first place.

The plot twist now would be that this was all done so that whoever manages to bring the family back together will be the next PM.

 

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.

 

SellMayFig11.jpg

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 Valuebuddies.com (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.

 

rocky.jpg

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).