Friday, November 12, 2010

Worth over a hundred millions, and get paid in tens of millions a year

1. Is it possible to be millionaires from employment?

2. How about getting paid in millions a year from employment?

3. How about getting paid in millions a year before 40 years old and worth at least 100 millions in Net Worth purely from employment, and that company doesn't belong to your parents (or relatives) ?

Take a look at Value Partners Group. In the year 2007, the executive directors of the company (with their age) is as below:

- Cheah Cheng Hye, aged 54
- Law Ka Kin, aged 47
- Ho Man Kei, aged 41
- Choi Nga Chung, aged 36
- Ngan Wai Wah, aged 34
- Renee Hung Yeuk Yan, aged 33
- Louis So Chun Ki, aged 32

Below is their total compensation for the year 2006 and 2007.

Compensation and Benefits of Executive Directors for the year ending 31st Dec 2006

Compensation and Benefits of Executive Directors for the year ending 31st Dec 2007

Their annual salary is slightly above HK$ 1 million (about RM 440k) , but look at their bonus (for year 2006 and year 2007)!

In 2007, 5 of the Directors were paid about HK$ 40 Million plus (about RM 18 Million), while Cheah Cheng Hye was paid HK$ 234 Million (about RM 103 Million) !

How are they paid so high? There's a quote that says, "The best way to get what you want, is to deserve it."

Do they deserve to get paid so high?
Value Partners manage Value Partners Classic Fund, which have gained 2,173.0% from 1st April 1993 up to 29th October 2010, an annualized return of 19.4% over 17+ years! They manage USD 4.5 Billion and USD 7.3 Billion for the year ending 2006 and 2007 while earning 41.8% and 41.1% for their Classic Fund investors (A Units) for the year 2006 and 2007.

Since they add value to their fund investors, i believe they deserve such high pay (they're paid 1.25% management fee + 15% performance fee).

And how much are they worth in Assets?

At the end of 2007, the each share is priced at HK$ 7.63 (about RM 3.3572), while as of this posting (12th Nov 2010), the share is priced at HK$ 7.27 (about RM 2.908). So, they're worth above RM 100 Million each (except for Mr. Law, who joins the company only in the December 2004).

Cheah Cheng Hye is a Billionaire in HK$ as well as in RM. And he's a Malaysian (Penangite, and an old frees, not to mention he's also one of the top chess player in Penang Free School back then.)

Source of the information: 2007 Annual Report of Value Partners Group
Value Partners Group's Website
Value Partners Classic Fund
Value Partners Investment Philosophies

Thursday, October 21, 2010

About Gold

Is Gold a good investment?
It depends what's your definition of "good". When compared to cash, i think Gold is a better choice, since government have the legal license to keep printing money and thus diluting our cash while we're not compensated enough from interest earned from our cash. That is assuming you're not buying Gold at an overvalued price.

But i don't keep my surplus in "cash". I don't enjoy being "poor" slowly but surely.

To me, keeping Gold is like running on a treadmill. Yes, you're running, but you're going nowhere (after adjusted for inflation). On the other hand, keeping cash is even worse! That's like walking up slower than the escalator coming down, and thereby you're moving slower and slower down.

Question : Where do you think gold will be in five years and should that be a part of value investing?

Buffett : I have no views as to where it will be, but the one thing I can tell you is it won't do anything between now and then except look at you. Whereas, you know, Coca-Cola will be making money, and I think Wells Fargo will be making a lot of money and there will be a lot--and it's a lot--it's a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that. The idea of digging something up out of the ground, you know, in South Africa or someplace and then transporting it to the United States and putting into the ground, you know, in the Federal Reserve of New York, does not strike me as a terrific asset.

Source: Ask Warren Buffett on CNBC's Squawk Box - Part 7 (9th March 2009)

Buffett also says "You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all -- not some -- all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?"

Benjamin Graham in The Intelligent Investor also expresses his opposition to investing in gold.

Jeremy Siegel in Stocks for the Long Run writes how gold has barely beaten inflation over the past 200 years.

It is impossible to put an intrinsic value on gold. Companies or properties can be evaluated in numerous ways based on earnings, assets, growth etc. However, gold is just a metal which has no intrinsic value. Any time you are buying without establishing a margin of safety you are more likely speculating than you are investing.

If you buy gold at $1350 an ounce and it drops 50% there is no way to tell if it is trading above, at, or below its intrinsic value. That is why you will have no idea what do to if there is a sharp decline in gold prices. On the other hand, if you buy a property or stocks of a good company, you can check to see whether the earnings is affected as much as the drop in the price.

Take for instance, if you buy a property at RM 200,000 that gives you a Net annual rental of RM 20,000, giving you an annual rental return of 10%. If after 3 months and the property price drops to RM 100,000, we can check to see if the rental drops or not. If the rental did not drop, then we'll know that the property's intrinsic value did not drop. In fact, we can confidently buy more provided that the property price drop while rental remains. I don't know how we can say the same thing with Gold.

Owning a goose that lays eggs vs a goose that does nothing

From the green line of the graph above, it shows that Dow grows at a higher rate than Gold. Owning Equities represents ownership of companies and owning good companies is like owning a Goose that keeps on laying eggs.

Does Gold price keeps going up?

No! Infact, if you have bought at the "peak" in 1980, you have to wait 27 years to breakeven, and that's not including the depreciation of money over these 27 years. At this high price of gold currently, it's quite hard to justify recommending investing in gold.

Saturday, September 18, 2010

Letter to a fund manager of a local Insurance Company

Here's a letter i wrote to a fund manager (investment-linked) of a local insurance company. Until today, there's no reply from them.

In the year ending Nov 30th, 2007, A** Equity Fund had 92.6% in Equities. That time, the index was 1,396.98. 1 year later, when KLCI is at 866.14, A**'s Equity Fund's equity exposure drop to 42.5% ! Isn't that "buy high, sell low"?

Put it another way, the summary is as below:
Date ------------------- KLCI ---------------A** Equity Fund's Equity Exposure
30th Nov 2007 --------1,396.98 ---------------------------92.6%
30th Nov 2008 ---------866.14 ----------------------------42.5% !!!

Shouldn't it be the other way round? And if the fund manager can't time the market (which i believe nobody can), shouldn't A** Equity Fund maintains as an "Equity" Fund with 70% to 90% in Equity? Having 42.5% in Equity is less than what a balanced fund is putting! And having 42.5% in Equity when prices are low is even more unexplainable!

Please explain this when i can't see any logical reasons for it (other than the fund manager having "buy high, sell low" syndrome, or join the herd mentality to be fearful when prices are low or trying to gamble the market's direction).

And in year 2009, KLCI earned 44.7% while A** equity fund earned less than 2/5 of KLCI's return! And the annual report don't even mention the reason for such poor performance! If the unit holders are truly the owners of that fund, don't they deserve an explaination for such poor performance?

And please don't say that A**'s equity fund return of 17.5% is better than FD! If you travel from Penang to Singapore by flight, and reach there after 7 hours (when other air planes can reach within 1 hour), do you accept excuse as "At least our flight is faster than going by car" ?

As a result, A** under perform KLCI during these times. Am i right to say that? If that is so, then what's the point of hiring A** as the fund manager for their equity funds? Might as well they just buy the Index or ETF and save the 1.5% management fees, and don't earn a return WORSE than KLCI (not to mention savings on the huge upfront service charge, or ended up being tied up to the terrible fund for 6 years to enjoy 0% service charge).

And also, please don't say A** equity fund beat benchmark since launch. The comparison is simply not fair because KLCI doesn't include dividends into their price. Had KLCI add between 3% to 4.5% yearly dividends to the price, A** Equity fund would under perform by a wide margin!

Waiting for an explaination for me to explain to my unhappy clients.
Lesson Learned:
Don't find mechanic regarding your health.
Don't find doctor regarding legal issues.
Don't find investment companies for insurance.
Don't find insurance company for investments. They Suck!

Monday, August 16, 2010

Walter Schloss by Warren Buffett

This article was extracted from Warren Buffett's letters to Berkshire Hathaway's shareholders in 2006. It's available at :

Let me end this section by telling you about one of the good guys of Wall Street, my long-time
friend Walter Schloss, who last year turned 90. From 1956 to 2002, Walter managed a remarkably
successful investment partnership, from which he took not a dime unless his investors made money. My admiration for Walter, it should be noted, is not based on hindsight. A full fifty years ago, Walter was my sole recommendation to a St. Louis family who wanted an honest and able investment manager.

Walter did not go to business school, or for that matter, college. His office contained one file
cabinet in 1956; the number mushroomed to four by 2002. Walter worked without a secretary, clerk or bookkeeper, his only associate being his son, Edwin, a graduate of the North Carolina School of the Arts. Walter and Edwin never came within a mile of inside information. Indeed, they used “outside” information only sparingly, generally selecting securities by certain simple statistical methods Walter learned while working for Ben Graham. When Walter and Edwin were asked in 1989 by Outstanding Investors Digest, “How would you summarize your approach?” Edwin replied, “We try to buy stocks cheap.” So much for Modern Portfolio Theory, technical analysis, macroeconomic thoughts and complex algorithms.

Following a strategy that involved no real risk – defined as permanent loss of capital – Walter
produced results over his 47 partnership years that dramatically surpassed those of the S&P 500. It’s particularly noteworthy that he built this record by investing in about 1,000 securities, mostly of a lackluster type. A few big winners did not account for his success. It’s safe to say that had millions of investment managers made trades by a) drawing stock names from a hat; b) purchasing these stocks in comparable amounts when Walter made a purchase; and then c) selling when Walter sold his pick, the luckiest of them would not have come close to equaling his record. There is simply no possibility that what Walter achieved over 47 years was due to chance.

I first publicly discussed Walter’s remarkable record in 1984. At that time “efficient market
theory” (EMT) was the centerpiece of investment instruction at most major business schools. This theory, as then most commonly taught, held that the price of any stock at any moment is not demonstrably mispriced, which means that no investor can be expected to overperform the stock market averages using only publicly-available information (though some will do so by luck). When I talked about Walter 23 years ago, his record forcefully contradicted this dogma.

And what did members of the academic community do when they were exposed to this new and
important evidence? Unfortunately, they reacted in all-too-human fashion: Rather than opening their minds, they closed their eyes. To my knowledge no business school teaching EMT made any attempt to study Walter’s performance and what it meant for the school’s cherished theory.

Instead, the faculties of the schools went merrily on their way presenting EMT as having the
certainty of scripture. Typically, a finance instructor who had the nerve to question EMT had about as much chance of major promotion as Galileo had of being named Pope.

Tens of thousands of students were therefore sent out into life believing that on every day the price
of every stock was “right” (or, more accurately, not demonstrably wrong) and that attempts to evaluate businesses – that is, stocks – were useless. Walter meanwhile went on overperforming, his job made easier by the misguided instructions that had been given to those young minds. After all, if you are in the shipping business, it’s helpful to have all of your potential competitors be taught that the earth is flat.

Maybe it was a good thing for his investors that Walter didn’t go to college.


His record:

A good writeup on Walter J Schloss :

Monday, May 31, 2010

How to know whether you're adequately insured ?

Do you need life insurance? If yes, how much life insurance do you need? Why would a person wants to buy something that they won't be benefiting from it when they're alive?

The truth is, you don't need life insurance. However, your dependence might need it! So, purchasing life insurance (especially when it's bought for the right reason) for your dependence, be it your parents, spouse or children(s), is a very generous and thougtful act.

In this post, i'll focus on the insurance Needs rather than What type of Policy, which i've posted about it here.

First, do you have any loans that you're responsible for? For example, if you're single and have housing loans, car loans, and credit card loans, you might not need to have any insurance to cover it, since you don't have any dependant. However, if you have spouse or children or parents who depends on the house or car, then you might want to insure that loan amount.

  1. How much is the outstanding loan balance that you're liable for currently?

Next is the current needs of you dependants. Is there anybody rely on you for their financial needs? If yes, then ask yourself these questions below for each group of dependants.

  1. How much do they need from you every year (excluding loan installments, since it's covered in a lump sum above) ?
    A good start is the amount you give them currently.
  2. How many years do they need from you?
    If your dependant is your parents or your spouse, a good guide is to provide them for their entire life (age 85 and above).
  3. What is their investment rate of return, conservatively estimated?
    Note that it's "their" investment return, not "yours", since insurance company paid a lump sum (generally), and they will invest the money when you're no longer around. If they currently put most of their money in FD, then use the current FD rate.

Besides providing for current needs (as above), our dependant might have a future need too. For example, our children(s) might need a lump sum for their tertiary education. If you have any future needs, then do answer the below questions for each "future needs".

  1. What is the purpose of the future needs ?
    Examples are like Education fund, Purchase/ upgrade home, World tour for your loved ones. For education fund, seperate each child's education fund.
  2. When do your dependant needs it?
    For education fund, they would need it usually at age 18.
  3. When you're no longer around, what would your next-of-kin's investment return?
    Warren Buffett's return might be high, but when he calculates his life insurance needs, he can't use his compounded return, since i doubt his wife would be able to earn his high rate of return from investments.

With these information, your total needs can then be calculated.

Then, calculate how much is your Net Worth (excluding your home, and your car).

The difference between your total needs and your Net Worth is your shortfall, which should be covered by insurance.

If your insurance is not enough, read this post to buy the right kind of policy. I'm personally insured for RM 1 Million, payable upon Life or 36 Critical Illnesses and paying a premium of not more than RM 200 monthly, at my current age of 29.

Wednesday, May 5, 2010

Company that offers ways to reduce your housing loan interest?

Before i tell you the TRUTH behind those "The Truth about Mortgage Reduction", i would like to share with you a story:

'Once upon a time, a Young Engineer with an income of $3,000 per month noticed he had extra time (after work). Thus, he decided to use the extra time to work in Mcdonalds as a cashier, earning RM 5.00 per hour. In a month, his part-time salary was around RM 500, since he worked 4 hours a day for 6 days a week.

Then one day, he went to his Mcdonalds boss to get higher pay. The conversation was as below:

Young Engineer: Boss, how can I earn more money from this job?

Boss: Simple, just work full time here, you'll double your pay! If that's not enough, u can work full-time and over-time! All in all, you'll triple your pay! (by tripling your working hours).

Young Engineer: But if I work full-time in Mcdonalds, don't I lose my income as an Engineer (which pays higher)?

Boss: We don't count your pay elsewhere. We ONLY count your pay from Mcdonalds!

Young Engineer: Thanks! If I were to take up your recommendation (to quit a higher paying job to earn in a lower paying job), how much should I pay you for "consultation" fees?

Boss: It's only 1.5% of your total pay you'll get over 30 years plus RM 1,500. (And boss show some confusing softwares calculating how much you'll earn by working in Mcdonalds over 30 years, to confuse you that it's really worth it to pay the boss 1.5% + RM 1,500 and quit his engineering job!).

Young Engineer: Wow, that's really worth it!'

There's a few lessons you can learn from this (which I'll link to so called "Mortgage Reduction Company")

  1. There's opportunity cost for your time or your money.
    For every hour you spent earning money on one job, you've lost the opportunity to earn money on another job with that time you spent. The same applies to your money! For every dollar you spent on reducing your loan (and thereby reducing your interest charged), your money have lost the opportunity to increase your assets (and thereby lost the opportunity to earn return on those assets).

  2. Earning more by working more isn't smart!
    Smart people earns more by working more productively (spending same time, earning higher pay per hour). Likewise, when you allocate your money, what's important is NOT how much money you get (or save). What's important is how much you get (or save) in relation to how much capital you put in!

  3. Your resources (be it time or money) are limited.
    If you can earn RM 100 per hour doing a job you like, it's ok to hire person to do something you don't like for RM 10 per hour! Stop thinking about the "loss" of RM 10, but instead, compare it with the savings of your limited resources. With loan, instead of "worrying" about Debts and interest charges, compare it against the investment return that you can conservatively get elsewhere. Not all Debts/ Loans/ Liabilities are bad (then again, not all "Assets" are good). The key is not to be afraid of Debts, but to understand it, and at times, you can make use it to help you achieve an earlier financial freedom.

Now, let me get back to the main topic. Let me share with you some statements from a Mortgage Reduction website that seems to "mislead" people, and mislead them to focus on the wrong stuff.

  1. "Since this sounds like a gift from the heaven to me, I then made up my mind that one day, I could also help others to become debt free."
    Notice he uses "debt free", and not "financially free". Do you need to be debt free to be financially free? CRAP! A beggar is debt free, but is he financially free? Donald Trump might have debts more than what most people can earn in their lifetime, but he is financially free! So, STOP equating debt free with financially free!. Both are different, and a person who can't differentiate the two often find themselves stuck in rat race.

  2. "If you have a $100,000 Mortgage amortized for 30 Years with an Interest Rate of 10.50%, Monthly Compounding and the Monthly Payments are $914.74."
    As of this writing, housing loans in Malaysia charges less than 4%, while that website quote 10.5%. Isn't that trying to "inflate the interest charged" so that it looks more than what it's suppose to be?

  3. "Do you know that only $39.74 (4.24%) of the $914.74 payment is used to pay the balance? This means that a whopping of $875.00 (95.66%) of that FIRST payment goes toward interest."
    While that statement based on the interest of 10.5% interest is true, BUT that statement mislead people to focus that interest payment in relation to monthly installment. Interest charged depends on the interest rate, NOT on monthly installment!

How does the $875.00 interest come about? Easy!

  1. Your outstanding balance at the beginning of the Month is $100,000.
  2. Multiply that by the interest rate (10.5%), and you'll get $10,500. This is the interest charged in a year (if your outstanding balance is $100,000 throughout the year).
  3. Then, divide the interest charged ($10,500) by 12, and you'll get $875.00!

Notice the calculation of interest? It doesn't care what your monthly installment is! And, whatever in excess of the interest ($875), the balance goes to reducing the principal.

So, your outstanding balance reduces the following month, and thus, the interest charged reduces too (in $, but not in % of outstanding balance)!

What happens if your monthly installment is $ 5,000 per month? The interest charged on the 1st month would still be the same, which is $875 (and more than 80% of your installment goes to principal reduction!). Notice it?

If not: Here's the answer. Stop relating interest charged to monthly installment!! Instead, relate interest charged to outstanding balance (in fact, this has already been calculated for us, which is the rate told by the bank, (duh...))

And at current housing loan rate at less than 4%, the interest charged is less than half what is shown on that so called "mortgage reduction website"!


So, the question is NOT to "save" or "reduce" your housing loan, but rather to Optimize it! No point saving/ reducing your housing loan if your investment return earns better than housing loan. If you still don't understand, read the story of the Young Engineer above again.

The only way to save interest is getting lower rate from the bank! Like the Young Engineer above, the only way (that makes sense) for him to get higher pay is to increase his pay per hour, not working more hours (and lose the time to do something else!).

Personally, I'm happy to borrow maximum loan, maximum tenure, since at current housing loan rate (BLR-2.25%) , I believe my investments can conservatively earn at least twice that rate over the loan tenure (which is 40 years).

Instead of prepaying more of my housing loan to save less than 4% interest yearly, I rather invest the excess to earn at least 8% yearly, conservatively estimated. And that surplus will earn more surpluses over time, and compound the effect over time.

But if you don't know how to earn a return higher than your housing loan, then there's nothing wrong to use the surplus to reduce housing loan. Either way, comparison between housing loan's interest rate vs. your investment returns, conservatively estimated, and NOT blindly pay just to save housing loan interest!

Sunday, April 11, 2010

How to Become Wealthy - by Joshua Kennon

How to Become Wealthy
Nine Truths That Can Set You on the Path to Financial Freedom

#1: Change the Way You Think About Money

The general population has a love / hate relationship with wealth. They resent those who have it, but spend their entire lives attempting to get it for themselves. The reason a vast majority of people never accumulate a substantial nest egg is because they don't understand the nature of money or how it works.

Cash, like a person, is a living thing. When you wake up in the morning and go to work, you are selling a product - yourself (or more specifically, your labor). When you realize that every morning your assets wake up and have the same potential to work as you do, you unlock a powerful key in your life. Each dollar you save is like an employee. Over the course of time, the goal is to make your employees work hard, and eventually, they will make enough money to hire more workers (cash). When you have become truly successful, you no longer have to sell your own labor, but can live off of the labor of your assets.

#2: Develop an Understanding of the Power of Small Amounts

The biggest mistake most people make is that they think they have to start with an entire Napoleon-like army. They suffer from the "not enough" mentality; namely that if they aren't making $1,000 or $5,000 investments at a time, they will never become rich. What these people don't realize is that entire armies are built one soldier at a time; so too is their financial arsenal.

A friend of mine once knew a woman who worked as a dishwasher and made her purses out of used liquid detergent bottles. This woman invested and saved everything she had despite it never being more than a few dollars at a time. Now, her portfolio is worth millions upon millions of dollars, all of which was built upon small investments. I am not suggesting you become this frugal, but the lesson is still a valuable one. Do not despise the day of small beginnings!

#3: With Each Dollar You Save, You Are Buying Yourself Freedom

When you put it in these terms, you see how spending $20 here and $40 there can make a huge difference in the long run. Since money has the ability to work in your place, the more of it you employ, the faster and larger it will grow. Along with more money comes more freedom - the freedom to stay home with your kids, the freedom to retire and travel around the world, or the freedom to quit your job. If you have any source of income, it is possible for you to start building wealth today. It may only be $5 or $10 at a time, but each of those investments is a stone in the foundation of your financial freedom.

#4: You Are Responsible for Where You Are in Your Life

Years ago, a friend told me she didn't want to invest in stocks because she "didn't want to wait ten years to be rich..." she would rather enjoy her money now. The folly with this school of thinking is that the odds are, you are going to be alive in ten years. The question is whether or not you will be better off when you arrive there. Where you are right now is the sum total of the decisions you have made in the past. Why not set the stage for your life in the future right now?

#5: Instead of Buying the Product... Buy the Stock!

Someone once asked me why they weren't wealthy. They always felt like they were putting money aside, yet never seemed to get any further ahead. The answer is simple. I told them to stop buying the products companies sell and start buying the company itself! A survey of America's affluent (those who make over $225,000 a year or own $3,000,000 in assets) revealed that 27-30% of all the income the wealthy earned went into investments and savings. That isn't a result of being rich, that is why they are rich. When the pain of getting out of the bondage of financial slavery is greater than the pain of changing your spending habits, you will become rich. Either change, or be content to live as you are.

#6: Study and Admire Success and Those Who Have Achieved It... Then Emulate It
A very wise investor once said to pick the traits you admire and dislike the most about your heroes, then do everything in your power to develop the traits you like and reject the ones you don't. Mold yourself into who you want to become. You'll find that by investing in yourself first, money will begin to flow into your life. Success and wealth beget success and wealth. You have to purchase your way into that cycle, and you do so by building your army one soldier at a time and putting your money to work for you.

#7: Realize that More Money is Not the Answer
More money is not going to solve your problem. Money is a magnifying glass; it will accelerate and bring to light your true habits. If you are not capable of handling a job paying $18,000 a year, the worst possible thing that could happen to you is for you to earn six figures. It would destroy you. I have met too many people earning $100,000 a year who are living from paycheck to paycheck and don't understand why it is happening. The problem isn't the size of their checkbook, it is the way in which they were taught to use money.

#8: Unless Your Parents Were Wealthy, Don't Do What They Did
The definition of insanity is doing the same thing over and over again and expecting a different result. If your parents were not living the life you want to live then don't do what they did! You must break away from the mentality of past generations if you want to have a different lifestyle than they had.

To achieve the financial freedom and success that your family may or may not have had, you have to do two things. First, make a firm commitment to get out of debt. To find out which debts should be paid off before you invest and those that are acceptable, read Pay Off Your Debt or Invest?. Second, make saving and investing the highest financial priority in your life; one technique is to pay yourself first.
Purchasing equity is vital to your financial success as an individual whether you are in need of cash income or desire long-term appreciation in stock value. Nowhere else can your money do as much for you as when you use it to invest in a business that has wonderful long-term prospects.

#9: Don't Worry
The miracle of life is that it doesn't matter so much where you are, it matters where you are going. Once you have made the choice to take control back of your life by building up your net worth, don't give a second thought to the "what ifs". Every moment that goes by, you are growing closer and closer to your ultimate goal - control and freedom.

Every dollar that passes through your hands is a seed to your financial future. Rest assured, if you are diligent and responsible, financial prosperity is an inevitability. The day will come when you make your last payment on your car, your house, or whatever else it is you owe. Until then, enjoy the process.

Copyright © 2001 Joshua Kennon
(from )

Saturday, April 3, 2010

Quotes: "I don't throw darts at a board. I bet on sure things"

Gordon Gekkon on the movie "Wall Street (1987)" says, "I don't throw darts at a board. I bet on sure things"

Sun Tzu says, "Every battle is won before it's ever fought.”

"You make money when you buy, NOT when you sell."

Think about it!.

Thursday, April 1, 2010

Quotes: "A man should practice what he preaches, but a man should also preach what he practices."

Confucious says, "A man should practice what he preaches, but a man should also preach what he practices.". After reading this, i believe i should preach more what i practices for the society to see things the way i see it (and condemn on my mistakes too!).

He also says, "If you think in terms of a year, plant a seed; if in terms of ten years, plant trees; if in terms of 100 years, teach the people. "

More quotes from Confucious:

Saturday, March 6, 2010

Some Questions (Q) and Answers (A) about investing

Q: Calculation of Intrinsic value depends on how accurate is business evaluation on projected income growth
A: I don't use that, because i don't forecast/ project. I don't see any difference in forecast vs speculate, which to me, both are gambling. Ask any person who does business/ in the sales line, and ask them to project their income growth "accurately" (some so-called analyst even project to 2 decimal point), which i find it amusing.

Q: What is the Risk free Rate for Malaysian stocks
A: There is no such thing as "risk-free rate for stocks". All stocks have Risk (and depending your definition of "risk", all financial instruments have risk, including FD which have one of the highest risk of inflation "depreciating" your money).

Academicians and Statisticians defines risk as "volatility (or fluctuation) of its price around their return". Based on such definition, Risk Free Rate in Malaysia (if you're asking that) is the FD rate. Depending on your definition again, it could be 1 month FD, 1 year FD, or even the FD rate that you're getting.

Q: Identify good companies
A: A good company is one which consistently generates high Return on Equity on its normalised earnings. A good company might not mean a good investment (if you're paying a high price for it), though it's a good place to start.

Wednesday, January 27, 2010

Integrity & Investment Performance

“Index funds are imperfect, but they provide the best outcome for most know-nothings, in order to avoid being misled by fools and liars.”

Quote by Charlie Munger

From the article of Stableboy Selections, i borrow his definition of Investing. "Investing is the process of putting money away now to be sure of getting more money back in the future."

If you agree with this definition, then you'll realize most people Speculate rather than Invest. No wonder they have poor long term results. (Do you know any gamblers who have good long term results? However, I know a lot of Casinos that earned a good long term results)

Read his article here:

Tuesday, January 26, 2010

Warren Buffett on long term value investing

I came across a very interesting article about Warren Buffett's method of investing, and thought of sharing the link here:

A must read for Buffett wannabe!