Today, I was invited by one of the remisiers from Lim & Tan Securities to speak at their event at SGX Auditorium. It was an encouraging sight to see people streaming in on an early Saturday morning, keen to learn about investing. But I cannot fail to notice most of the audience were in their 50s and 60s.
My main objective of the talk was to encourage them to look internally and search for obstacles which are holding them back to create successes in their investment. Most of us are interested in investing strategies and we would rarely do personal reflection. We will tend to claim it is the strategies that did not work and there is nothing wrong with us. Therefore, we think it is the strategy that we need to change and not the person applying the strategy that needs to be changed. It may be true to a certain extent that the strategy is ill-suited to the personality, but there are personalities that will not work with any strategy. To make matter worse, there is lesser resistance to change method and self.
I quoted the example of learning Kung Fu. If we were interested in Kung Fu, most of us would want to learn to fight immediately and ignore the foundation. We do see in movies where Kung Fu masters went through many years of foundation training such as maintaining horse stance (“ma bu”) for a long period of time. We also see them carrying buckets of water up the hill on a daily basis. This foundation training build up their mental and physical strength for them to fight effectively. The audience agreed with me that Yip Man was a good fighter because of his training and not because of his Kung Fu style, Yong Chun. Here is the irony, if we attribute poor fighting skills to the person, why do we attribute poor trading results to the method?
You would agree with me if I say there is no one superior Kung Fu style. It is the training and the honing of the skills in one particular style that makes a master. Likewise in investing, we have many strategies available at our disposal but we often hop from one strategy to another without first working on our foundation. The foundation is to prepare our minds to have the mental strength to deal with the stress that the market place on us, and do the right thing when it goes against our positions. Personal reflection and the understanding of the way we act in the market are necessary as foundation training. I think this is what Sun Tzu would say if he was a trader/investor, “if you know your method and know yourself, you will not be imperiled in a hundred trades.”
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About knowing self, I shared a story about my friend. He told me once he viewed the stock market as a zero-sum game such that someone must lose in order for someone else to gain. His perception of the market, coupled with his life value of compassion, have hindered him to invest in the market successfully. On one hand, he wants to make money, but on the other hand he felt bad when he made money. It is debatable whether the stock market is a zero-sum game. My personal opinion is that in short term trading, it is a zero-sum game. However, if one is to invest in companies that grow over time, it is not be a zero-sum game. Hence, he can choose to invest for the long term instead of trading. The latter style would have suit his purpose and values.
During the break, a group came up to me and asked me about STI ETF and Permanent Portfolio. They were not clear about how an ETF worked and it sounded dangerous to them. Most had not heard about the possibility of buying the entire STI and it had actually gained 9% annually for the past 10 years. For those with more questions about STI ETF, you can read more posts from here.
A common question was “when can I buy STI ETF?” If you know me enough, I will not give you a straight answer. This is because I do not know your investment time-frame and you do not know my investment time-frame. If I tell you how to enter, you may not know how I exit. To a trader who wants to make profit after a few weeks, STI may have a good buy signal. To an investor who wants to hold for 5 years, STI may be too high. Sadly, there will always be people who want to be told when to buy and sell.
As they were mostly retirees, I would not advise them to just invest in STI ETF even though it would be safer than picking stocks on their own. A Permanent Portfolio would be a better option since it has very low volatility and good track records of gains in all known economic conditions. Retirees would be able to sleep well with this portfolio. But I think I have covered too much topics in an hour’s presentation and it would be better off explaining about STI ETF and Permanent Portfolio in details. I gathered most of the audience were still unsure about the benefits of passive investing and how to go about setting up a portfolio to protect them from buying high and selling low. I will do better next time.