Short-term or Long-term Investing? Choose the One that Works for You!

Posted on July 10, 2017 Written by

Ein55 Newsletter No 071 - image - Long Term or Short Term (V2)

As much as I love investing, I believe that most of us invest with a similar goal in mind, i.e. to make money, to get our money to work for us, and to attain financial freedom. However, considering how different investors can be when it comes to styles and personalities, there is really no one rule that applies to all. Perhaps, that also explains why the stock market is so confusing and unpredictable in the first place.

There is no way to know what every single person thinks, but we can make our lives easier by knowing our own investing personalities and what floats our boats. Boiling down to the basics, you need to know whether you are a short-term trader or a long-term investor (though in real life, many of us are a mix of both).

 

Short-term Trading

You will like short-term trading if:

  • You are comfortable with keeping an investment for only a short period of a few weeks, or even days.
  • Your goal is to make quick bucks to reach a shorter-term goal, e.g. purchasing a car, funding a vacation, etc.
  • You are not a fan of doing extensive fundamental research on the businesses that you have invested in, but you are able/ willing to commit a significant amount of time to trading and checking stocks.
  • You are ok with taking risks and dealing with profits and losses due to short-term price fluctuations.
  • You can accept high transaction costs as a result of frequent trades, which reduces your income in a bigger proportion as compared to long-term investing.

 

Misperceptions of Short-term Trading

  1. Short-term trading does not require patience.

Truth: Even for a short-term trader, not every day is a trading day. We need to wait patiently for the best opportunity to long or short.

 

  1. Short-term trading is always about buying low then selling high.

Truth: Short-selling (profit from falling in share prices) is equally if not more important. Most people only know how to long the market, and therefore they lose money or end up doing nothing when the market is bearish.

Currently, there is still upside in the last phase of the bull market for short-term traders, possible to buy high sell higher but shorter term position should follow shorter term market signals.

In my free 4hr investment course, I will share with you high-probability trading techniques for short-term traders to profit from the rising and falling stock market.

 

  1. There is no need to read up on anything if I am trading short-term.

Truth: Short-term trading, being more speculative and volatile in nature, requires one to react quickly to market news and sentiments. In order to profit in both bearish and bullish markets, one would still need to read up to understand the impact of market-changing factors such as the US Federal Reserve interest rate hike, Donald Trump’s national policies, oil & gas crises, and global quantitative easing (QE), etc. It is important to know the impact of global economy on stock market.

 

Long Term Investing

On the other hand, you may like long-term investing if

  • You are okay with holding an investment for a long period of time, and buy or sell only once every few years.
  • You have a longer-term goal in mind, e.g. building resources for your retirement, and you are expecting your investment to increase in value over the long run, and/or also provide income in the form of dividends.
  • You prefer fundamental analysis to technical analysis.
  • You like value investing.

 

Misperceptions of Long-term Investing

  1. You do not have to hold a lot of cash if you are buying at a discount.

Truth: Even if you have met the “golden opportunity” where blue chips have more than a 50 percent discount in stock prices, you as an investor have to accumulate bullets (cash) to be able to make substantial profits when you buy low and sell high.

 

  1. If you are investing long-term, you can just sit on your stocks and not care about them for a long time.

Truth: While it may be true that you do not have to react to stock market changes immediately like short-term traders do, you still need to review and reevaluate your stock portfolio from time to time. Even in long-term investing, you would need to do spring cleaning regularly, classifying your stocks into different categories and treat them differently, for e.g. fundamentally-strong stocks for long-term holding, cyclical stocks to sell at a high, and junk stocks to sell at the right time, etc.

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Time flies, and before we realise it, half of 2017 has already passed. On a global level, stock markets have performed superbly for 1H2017, rewarding investors with attractive returns that have not been seen for quite a few years. How sustainable is the stock market rally then? Will there be a market correction?  Take actions now to position yourself for investment.

 

Filed Under: Fundamental Analysis, Macroeconomy, Market Cycle Investing, Market Outlook, Stock Market Tagged: ,

Ein55 Charity Courses with $70,000 Donation to Tzu Chi (慈济): REITs & Business Trusts Investing Strategies for Passive Income

Posted on May 24, 2017 Written by

Ein55 Newsletter No 069 - image - Charity - REITS

Dr Tee, Ein55 Mentor & Graduates have together organised 4 charity investment courses (REITs/Business Trusts in Nov 2015 and May 2017, High Dividend stocks in Mar 2016, and Discounted NAV stocks in Sep 2016) in the past 2 years, donating net income of around $70,000 to Tzu Chi 慈济 (Singapore). We hope to inspire more Ein55 Graduates to reach out the society, helping others who are in need.  More importantly, they have also learned the secrets of making money through investment. When more Ein55 Graduates are successful financially, they could also contribute back to the society to help more people in future.

Here are key learning points from the recent Charity Course on REITs and Business Trusts:

1) Invest for dividend income is one of the important criteria that stock investor must not ignore because historical data shown that

– S&P 500 (1932 to 2014) – dividend contributes to 45% of portfolio return

– STI 30 (2003 to 2013) – dividend contributes to 49% of portfolio return

 

2) What is REITs (Real Estate Investment Trusts)?

REITs are collective investment schemes that invest in a portfolio of income generating real estate assets such as shopping malls, offices, hotels or serviced apartments and hospitals.  It is also a type of security that can trades on major exchanges like other listed securities.

– Assets of REITs are professionally managed

– Revenues are derived mostly from rental payments, >90%.

– Net income generated from assets must be distributed at least 90%, quarterly to unit holder.

 

3) What is Business Trust?

Business trust is an investment vehicle structured so that a single company, known as the “trustee-manager”, holds and operates business enterprises for the benefit of its investors but the unit holders do not have any operational control or shareholders’ rights.  Business trusts allow retail investors to have a direct exposure to cashflow-generating assets, such as utilities, shipping, sea port and it is suited to any businesses involving high initial capital expenditures with stable operating cash flows.

 

4) 7 Risk factors for REITs & BTs analysis are

– Market Risk and Income Risk which are intervene each other

– Foreign Country risk especial currency exchange rate change

– Concentration risk – depend on single property or few tenants

– Leverage risk – revalue down of asset resulting hit gearing limit

– Refinancing risk – unable to secure new loan or new loan at higher cost

– Liquidity risk – difficult to buy/sell portfolio asset

 

5) 4 common growth strategies adopting by REIT manager are:

– Acquisition – from sponsor or 3rd party

– Asset Enhancement Initiative (AEI) – shopping mall to increase NLA

– Organic growth – positive rental revision and increase occupancy

– Development & re-development – cap limit increase to 25% from Jan 2017

 

6) Best timing to Invest in REITs and Business Trusts will be

– Long-term Optimism and Mid-term Optimism < 25%

– Average dividend yield over 8%

 

Filed Under: Uncategorized Tagged: , , , ,

2 Simple Steps of Investment

Posted on April 28, 2017 Written by

Ein55 Newsletter No 068 - image - Investment Direction

Many people thought investment is very complicated, only for smart people. Actually, there are only 2 simple steps of investment to bridge between knowledge and fortune.  Let’s learn together here.

 

1) Set the Right Direction

Knowing the right direction to go is very important for any investment. One could be very hardworking but running in opposite direction, will be further away from the goal.

In investment, we need to know what are the good businesses which are profitable, sustainable for a long term.  We could simply buy their stocks to have a share of this wonderful business.  If one knows how to buy a portfolio of giant stocks, the undervalued or growing business with help to support the uptrend share price over the time.  However, if one partners with a losing business, buying their stock, the direction will be wrong, share prices will be declining as well.

Share prices could be emotional but they follow the mega trend of businesses.  If we could understand the fundamental of business, we could control the wild horse of share prices.

 

2) Take Action

Knowing the direction but if one does not take action to move, the goal cannot be reached.  Some may take smaller steps, some may walk faster, so the pace will vary for each person to achieve the goal, just sooner or later.

In investment, we need to learn to take one of the actions: Buy, Hold, Sell, Wait or Shorting, eg. for stocks.  Ideally, the choice of actions could be aligned with investment clock and personalities for best results.

However, even the simple action of “Buy” stock now and hold permanently could make money, if one knows how to set the direction correctly, buying a portfolio of giant stocks which could overcome all the cyclic stock market.  If one still hesitates without any action, despite hundreds of excellent plans with so much investment knowledge learned, there will be no fortune.

Still considering?  Don’t be just a knowledge collector.  Practice these 2 simple steps of investment: set the right direction and start your investment journey now!

Filed Under: Fundamental Analysis, Stock Market, Value Investing Tagged:

System Formation of Personalized Investing Styles (破茧而出)

Posted on March 31, 2017 Written by

Ein55 Newsletter No 066 - image - Cave

Throughout our investing journey, we may have learned many fragments of skills along the way, a bit here and there, some fundamental, some technical, a little on property, a bit on trader psychology, etc.

Halfway in the exploration journey, we may focus on certain direction, eg. forex trading, property investment, REIT dividend investing, etc, depending on the interest and opportunity of one person.

Each advanced trader or expert investor will need to digest and generalize all the styles, forming into a trading or investing system which aligned with own styles. It may take years or even whole life to refine these investing habits which eventually become part of our life styles.

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I have done the same process before with formation of 55 Ein55 Investing Styles. Many years ago, I closed myself in a room for nearly 1 month, day and night working through my 20 years of trading and investing experience, aiming to form an universal system of trading and investing. The Ein55 styles of investing system is subsequently applied and tested with over 2000 graduates with diversified background, refining each day until now. It could be a lifelong process as I am also enriching my knowledge each day.

I also did something similar for my PhD degree in engineering many years ago, integrating all the scientific knowledge learned into a computer model, which is similar to a system. Subsequently in my professional engineering career, I have published over 150 technical papers before I could be recognized as an international expert in the field of engineering. As an extension of my interest, I have been integrating science and engineering into investing world.

This is similar to ancient time, a kungfu master has to hide in a cave for years, tidying up and integrating all the thoughts and styles, one day finally breaks open the enclosure when one has mastered the skills with formation of a personalized system, could be on kungfu, engineering, investing or our whole life.

闭关修炼、破茧而出。

 

Filed Under: Personal Analysis, Stock Market Tagged: ,

Invest in Golden Goose or Golden Egg?

Posted on March 26, 2017 Written by

Businessman holding a goose that lays golden eggs

In the investment world, a golden goose can be a giant stock with growing or highly profitable company.  The golden eggs could be the quarterly or yearly dividend distributed by the business to shareholders.  The golden goose or business could grow in size and therefore could produce bigger golden eggs in future.

If one could have a golden goose which could lay a golden egg once a year, should the investor sell the golden goose to exchange for a big sum of money in short time or collecting the golden eggs patiently over a long time?

This is exactly the dilemma of some investors who hold on to a stock which has both passive income (eg. yearly dividend which is a golden egg) and capital gains over the time (golden goose becomes larger in size).  They may get disappointed at later time if they keep the golden goose (stock) but the size (market cap and capital gains) could vary over the time, sometimes could have a weight loss or price loss of 50% during global financial crisis.

On the other hand, if they decide to sell the golden goose, it is a one-time profit, they may regret later when the golden goose becomes larger with more eggs laid consistently each year.

In fact, there is no right or wrong choice. They key is to ensure it must be a golden goose or a strong business.  Whether buy low sell high (selling the golden goose) or buy & hold (growing the golden goose and collecting the golden eggs) is just a choice, matching own’s personality. In general, we should have 10 golden goose in our investing farm. Sometimes we may sell a goose for immediate gains when the goose grows faster than expected.  When the crisis comes, we may use the cash from the gains to buy other golden goose at cheaper price.  At the same time, the farm has some other golden goose which could lay eggs consistently even during the global financial crisis, providing stability to our overall investment.

One has to learn how to choose a golden goose, knowing when to buy / sell the goose and whether to keep the goose for golden eggs.

 

Filed Under: Stock Market, Value Investing Tagged:

Key Learning Points of Ein55 Traders Psychology Course with Charity for Lighthouse School

Posted on March 19, 2017 Written by

 

Ein55 Newsletter No 064 - 2017-03-19 - Donation to Lighthouse School

Congratulations to Ein55 Mentor James Hon who has successfully completed the full-day PA #1 Course on Traders Psychology. Who could believe he is over 70 years old, able to talk loudly nearly non-stop without a microphone to over 100 students for the whole day!

The students have learned the power of PA (Personal Analysis), understanding the importance of personality based trading plans and investing strategies.  Here are some of the key learning points:

1) Develop Wisdom by combining Knowledge and Life Experience:

Knowledge + Experience = Wisdom

2) ECP = Experience leads to Confidence, which enables your willingness to apply your system with Persistence.

3) The 3S of Trading Success:

Survive -> Sustain -> Succeed

4) Knowing where you want to be (Goal), you will be able to follow through (Persistent); persistence keeps you calm, calmness enables you to let go of emotional stress (Detach), then you will be able to attain result through careful deliberation.

“知止而后有定，定而后能静，静而后能安，安而后能虑，虑而后能得”。《大学》

知道应该达到的境界才能够使自己志向坚定；志向坚定才能够镇静不躁；镇静不躁才能够心安理得；心安理得才能够思虑周祥；思虑周祥才能够有所收获。

5) Gain the Awareness to define your own roadmap to develop the right Habits.

Ein55 Newsletter No 064 - 2017-03-19 - PA Course

 

Life is not just making money. To encourage successful Ein55 Graduates to help other needy groups, Ein55 Mentor James Hon and Dr Tee take the lead to donate to a charity organization, Lighthouse School. The school has been helping children with vision and hearing impairs to gain confidence in life through special education.

Ein55 graduate, Grace Poon, who is a volunteer and donor to Lighthouse School, has shared her experience in helping these special needs children through a choir. One of the motivation factors for Grace in learning investment is to help other needy group with the gains from investment. We hope her sharing could inspire more Ein55 Graduates to help other needy groups one day!

Let’s hear the beautiful sounds of these children in Purple Symphony, we could feel how the music has given a new meaning in life to them:

 

Filed Under: Personal Analysis, Stock Market, Trading Tagged: ,

3 Special F&B Stocks in Singapore

Posted on March 17, 2017 Written by

Ein55 Newsletter No 063 - image - F&B

Food & Beverages (F&B) stocks are usually cash cows, collecting cash or credit cards for payment after meals. It is easy to monitor the business, even if one does not know how to read financial reports, you just need to be a customer one time, see whether you will go back again to the same restaurant. Let’s analyse 3 different types of F&B stocks.

Jumbo (SGX: 42R) is a young giant stock to be proven further in the next few years.  I still remember a few years ago when I visited this restaurant, they requested the dinner must be completed by 8pm when we went there around 6:30pm, this is how they could maximize the capacity by giving fast service.  Its business fundamental has been reported strong since IPO, one way which earning could growth is through more successful expansion plan overseas. Now we could also enjoy their chili crabs in 3 branches in China.  Perhaps one day it may be like Breadtalk, can be found in global major cities.

 

Breadtalk (SGX: 5DA) will help Ding Tai Fung, the famous Taiwanese Restaurant (usually full house or long queue), to enter the UK market.  Market is no longer limited to the small 5 millions population of Singapore, whole world is the market but the judgment of taste could vary from one country to another country.

Breadtalk has been recovering from low optimism over the last 1 year when price was below $1.10.  Congratulations to Ein55 Graduates who have taken action, recent share price is around $1.30, more than 20% gains.  For Ein55 Graduates, they have learned how to position for Breadtalk through a homework.

 

Auric Pacific (SGX: A23), another F&B stock, is acquired by the main shareholder.  This is truly a F&B stock in Singapore, covering our 3 meals, owning familiar brands of Sunshine Bread (breakfast), Food Junction (Lunch) and Delifrance (Dinner).

Auric Pacific is not really a giant stock (based on Ein55 Giant Detector) but the share price dropped to half in the last few years, creating opportunity for main shareholder to buy low and fully own the company.  The offer price of $1.65 is at 100% Optimism, a selling price worth consideration for existing minority shareholders.

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There are about 50 F&B stocks in Singapore, we should only consider the Top 5 stocks. Super Group is rated as No 3 F&B Giant, acquired a few months ago.  How to know which are giant F&B? Ask yourself, where will you and your friends go for breakfast, lunch and dinner?  Too subjective?

Alternatively, apply Ein55 Giant Detector to identify the F&B giants in Singapore and globally, then use Optimism Strategy as investment clock to own these cash cows when other people are fearful or not interested. Investing is as easy as that but not everyone has the patience to wait for the “meals” to be served for so long!  Know yourself, finding the right business partner for you by owning their shares.

 

Filed Under: Stock Market, Stocks A-Z Tagged:

Blessing in Disguise: US Interest Rate Hike

Posted on March 16, 2017 Written by

Ein55 Newsletter No 062 - 2017-03-14 - Interest Rate Hike

We could observe the emotions of market, how it affects the stocks in both ways. Last few years, when global economy was lagging, news of US interest rate hike is a negative factor. Now, interest rate hike becomes a neutral or even positive news as the market assumes it means the economy is strong, therefore stock market and other investment market (property, etc) will follow the uptrend.

Stock market is emotional, people interpret the market based on the mass market sentiment, following the herd mentality. If we are one of the herd, our investment performance could be average. If the market is a zero-sum game, who will pay for the people who are making money?  Unfortunately, some people need to lose money.

Ein55 Investment Style #22 (Blessing in Disguise) describes exactly the stock market and economy relationship in the last few years till now. When I taught this principle several years ago, some graduates may not fully understand why it is a blessing disguise until they observe the QE tapering about 2 years ago and then US interest rate hikes over the past few years. Ein55 Investment Styles will be appreciated more if we could relate to stock market behaviours. This is the reason of my sharing from time to time here.

I have also pointed in many earlier public workshops and investment eBook (Market Outlook) that both QE tapering and US interest rate hike would become blessings in disguise. However, this opportunity is more suitable for a trader to ride the uptrend and one must know when to get out from the uncontrolled roller coaster at new peak one day.

A blessing in disguise could become a real crisis when more people are optimistic.  Pay attention when US interest rate is over 2-3% range, a black swan may swim in quietly while others are celebrating for the bull.

 

Filed Under: Macroeconomy, Stock Market Tagged: ,

Power of Compound Interest

Posted on March 10, 2017 Written by

Ein55 Newsletter No 061 - 2017-03-10 - Compound Interest

Albert Einstein is my idol, his scientific mindsets could be applied in investing world (inspiring me to establish Ein55 Styles of investing). He said “Compound Interest is the 8th Wonder of the World”.  It is important for an investor to know which role to play, receiving or paying the compound interest.  The results can be very different.

 

1) Receiving Compound Interest

Growth stocks receive compound interest with growing business and share price.  An investor could become richer at faster rate because the growth stock may not pay dividend. Instead, the earning is invested back to the business to enlarge the market share, revenue and income.  Even after a business has reached its maturity, the excess income could be redistributed as dividend to shareholders who could invest in other growth companies.

 

2) Paying Compound Interest

Junk stocks pay compounding interest with declining business and share price.  An investor could become poorer at faster rate because the company business could be in crisis, not making money but still need to pay high interest of debt yearly. The worst is the company may still pay dividend to the shareholders with past saving while the company is still losing money, need to borrow more money externally at highest interest rate.  This is a process of burning money.  Eventually, the company could go bankrupt and the investors could lose all the money invested in a short time.

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Compounding interest is a double-edged sword, if we use it correctly, the business could grow faster, an investor could benefit from larger capital gains and passive incomes from dividends.  If this weapon is generalized, it is not limited to “interest” literally, it could be any method which could give the special edge to an investor or trader, eg:

1) Optimism Strategy – Reward/Risk ratio

2) Fundamental Analysis (FA) – Business Strength

3) Technical Analysis (TA) – Momentum / Trend Following

4) Personal Analysis (PA) – Contrarian to Herd Mentality

Ideally, we could integrate all the 4 weapons of (Optimism = FA + TA + PA), into a mega compound “interest” to accelerate the growth in investment.

Filed Under: Fundamental Analysis, Stock Market, Value Investing Tagged: ,

3 Right Ways of Long Term Investing (Buy & Hold)

Posted on March 8, 2017 Written by

Ein55 Newsletter No 060 - 2017-03-08 - buy & hold

Long term investing does not guarantee success. Why investors such as Warren Buffett could make a lot of fortune with simple buy & hold strategy but some investors become poorer with investing over the long term?

“Buy stocks and hold for long term” is not sufficient.

Here are 3 right ways of Long Term Investing, depending on the expertise level:

 

1) Beginner Investors

“Buy good stocks and hold for long term.”

By adding a condition of “good” stocks, the long term investing strategy becomes 10X stronger because it has additional edge from FA (Fundamental Analysis) with strong business.

Even one does not know how to select good stocks, a no-brainer way of investing is to buy stock indices of growing economies, eg. S&P 500, Dow Jones Index, China A50, Hang Seng Index, or even Singapore STI.  This provides sufficient diversification with strong country (Level 3 giant) as protection of investment.

Property in certain countries (big cities, limited land, growing populations), by default is a giant. Therefore even if one does not know how to choose property, majority of property investors could make money if having the holding power more than 1 decade.

Stock is different, careful selection of strong business is critical. Weak stocks could make us poorer with time, while giant stocks will grow stronger with holding for long term.

This group of investors need to master strategy to select giant stocks.

 

2) Intermediate Investors

“Buy good stocks at lousy price and hold for long term”

On top of the Strategy #1, if one could integrate the TA (Technical Analysis) weapon to buy low, only then hold for long term, this will help to maximize the capital gains.

One could integrate trading (eg. trend following) into investing, after buy low, there is no need to sell high. After the stocks have recovered from correction during market crisis, the capital gains will help to strengthen the confidence to hold for long term.

This group of investors need to master strategy to buy low for giant stocks.

 

3) Advanced Investors

“Buy good stocks at lousy price and hold for long term, aligning to own personality”

The risk of “Beginner and Intermediate Investors” is to overcome own’s fear during global financial crisis because they may have capital loss if enter the investment market at a wrong time.  Warren Buffett’s Berkshire share price drops more than 50% in subprime crisis 2008-2009 but he could overcome the crisis because he has a portfolio of strong giant stocks. More importantly, this buy & hold strategy is aligned to his personality.  For others who blindly copy and paste this strategy, it may not work because there is a mismatch with personality (risk tolerance level, emotional control, investment knowledge level, etc)

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In short, investing could be very simple (buy & then do nothing, holding for life), it could also very complicated if one does not have the right weapons of (Optimism = FA + TA + PA).  Before we envy of those simple investment methods, we should check if it is suitable for us.

Filed Under: Value Investing Tagged: ,
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