You may be a reader, a customer, a friend or a combination of all. Thank you. We wouldn’t exist without you.
I started the tradition of writing the annual letter 4 years ago as I thought to explain our perspectives of the business and to give you a better understanding of why and how we do things would give you more trust in us. Here are the 2017 and 2018 letters, if you missed them.
Who Are the Dr Wealth Trainers?
The common questions revolved around the myriad trainers we have under Dr Wealth – what is the relationship, how do we select the trainers, and why do we want to have so many trainers?
The trainers are neither staff nor shareholders of Dr Wealth. They are our partners whom we work together to offer courses under Dr Wealth. There’s a good dose of respect and camaraderie among us.
We are very selective on the people we choose to work with.
I’ve been in the investing and trading circle for over a decade and got to meet many people. I get a sense who are the real practitioners and have achieved results.
Dr Wealth is not a theoretical school as we do not train people to pass exams and become professionals in the finance industry. The universities do much better in this area. Our job is to get practitioners to train the man on the street who do not have a finance background and have no interest to become a finance professional. All they want is to invest and grow their own money.
However, not all proven practitioners are willing to teach. Either they are introverts who detest the limelight or they are against teaching investments because they believe ethically it isn’t right to teach.
We all have our own beliefs and we cannot force people to adopt our beliefs. Hence we can only get practitioners who are willing to teach.
The last focus we have for trainers is their ability to teach.
Our course participants often do not have a background in finance and many are complete beginners.
The problem with experienced practitioners is that they suffer from the curse of knowledge – they are unconsciously competent and may make too many assumptions about what beginners know.
We pick trainers who are able to translate difficult and abstract financial concepts into laymen language or relate with analogies. We also simplify and sharpen the trainers’ materials and messaging.
In summary, our trainers must be true practitioners who live and breathe their craft, be it day trading, bitcoin, dividends focused investing or our very own factor based investing. Trainers must be also be both willing and able to teach.
It is not easy to pick trainers who exhibit all three qualities. And we do not take a passive stance as we help polish our trainers in some areas so that we can improve the quality of the courses.
Why do we have so many trainers?
I believe you have encountered arguments about investment methods among individuals. So much ego was involved in this senseless dick-measuring contest.
If one is so disagreeable with an investment method, he should be happy because the person he is upset with would lose his money. So let him lose and don’t correct him!
Van Tharp said, “we don’t trade the markets, we trade our beliefs of the market”.
Investing is like religion.
Everyone has a belief about how one should go about it. Arguments arise when there’s a clash of beliefs and it is not constructive because people start to focus on differences instead of working towards improving their thinking or investment methods.
It becomes a game of proving who is right.
I have grown more tolerant and I believe there are many roads to Rome. There isn’t a best investment method in the world and every strategy has successful periods and poor seasons.
Personally I have witnessed practitioners achieving success using methods that were totally different from mine. Who am I to say they are wrong just because they invest differently?
Taking this broader view, I applied the thinking to Dr Wealth and we started to take in other trainers with the above qualities.
Investors now have more options to consider and everyone is likely to have his own belief and preference. Dr Wealth is not just about factor based investing.
Not everyone wants to invest for capital gains via value or growth stocks. Some may prefer to follow Chris Ng to invest for dividends and enhance yields by leveraging REITs. Some may prefer to do short term trading like Robin. Some may prefer to take a scientific approach and adopt quant investing like Eng Guan and Patrick. Others may want to dive into the world of cryptocurrencies instead of the conventional asset classes.
There are little overlaps among the courses so attendees should not have a hard time deciding which is more suitable for them. Different strokes for different folks.
Launch of Trade Signals and Newsletters
We have introduced two new product lines at the end of 2019 – trade signals and newsletters.
Trade signals are meant for traders who do not have the time to monitor trade setups or they may not have a workable trading strategy to rely on. These trade signals are generated by practitioners who trade their own money and they send the signals via the Telegram chat to the subscribers. It is basically shadowing the professional traders’ entries and exits from the markets.
Newsletters, on the other hand, are more for longer-term investors who believe more in fundamental analysis. However, they may not have the time or know-how to research stocks.
Hence they can leverage on investors who devote their time to identify opportunities and provide analysis for the subscribers. These are high-quality ideas that the authors will put their money in for themselves.
We decided to launch these two products because we realised not everyone wants to go through a course to learn how to do it themselves.
Some people simply do not have the time to sit through the classes and to put in the hours after graduating from the courses. Hence, the trade signals and newsletters would short cut their effort for them.
Also, we wanted to offer something for our overseas supporters as we do not have the time to conduct live classes in other countries despite several queries. Our schedule for local sessions is already pretty packed throughout the year. Such digital products can be consumed anywhere in the world without us needing to travel physically.
Currently, we have 2 trade signals services and 1 newsletter service.
The first trade signals service is based on the established trend following strategy. It is applied to Dow Jones Index components and the signals are generated by a quant model built by quantitative investment professionals, Eng Guan and Patrick. They also run our Quantitative Investing Course (QIC).
The trend following signals have so far generated 3.9% or grew $20,000 to $20,788 over 2 months. The portfolio was leveraged by 1.5x.
The second trade signals service is provided by Raymond Tan, a full-time trader who trades for a living, Raymond Tan. He does day trading which means his trades are open and close on the same day.
The frequency of trades is much higher than that of the trend following signals. Those who love more action and who do not like to hold positions overnight would prefer this. Raymond applies it on the Hang Seng Index and the German DAX index only.
Trading 1 standard contract for HSI and DAX, the returns would have been US$15,678 and US$57,585 respectively in 2019.
We have recently launched our first newsletter and it specifically covers growth stocks in China. We believe in the unstoppable rise of China and itself is a tremendous opportunity for us to invest and take part in the growth.
China is misunderstood by the world and being exposed to both east and west culture in Singapore, we believe we have an edge to pick gems from the chaff. The Chinese capital markets are maturing as we speak and foreigners are allowed to buy ‘A’ shares a few years ago. The time is ripe to venture into the world of the next superpower.
Markets in 2019 and Outlook
Under our I3 programme, we built a real-money portfolio to put money where our mouth is. We invest in value and growth stocks and our current positions are in Hong Kong, Singapore and Malaysia.
The U.S. markets continued to rally and defy gravity while Asian markets are still in the doldrums. Without having any U.S. stocks or specifically U.S. tech stocks, our portfolio would have poorer returns compared to the S&P 500. Our portfolio was concentrated in Asia with 60% exposure to the Hong Kong market because it was the cheapest in the world (and still is). The protest kept a lid on the upside to our portfolio and the value factor didn’t perform in 2019. The portfolio didn’t have a fantastic year but it still managed to outperform over the past years. We have a couple of right stock picks and it depends on what our graduates weigh their investments in, we believe some of them would have achieved better returns than us.
Chris Ng had a bumper year in 2019. REITs had a good run and being substantially exposed to the sector with leverage, his portfolio did very well.
To have skin in the game, he would invest at least $10,000 in every batch’s portfolio with 2x leverage. Below is a screenshot from stocks.cafe:
To quote Chris:
The XIRR which is the unleveraged internal rate of return across portfolios built by all batches of students is 15.73%. In practice, assuming a 3.5% financing fee, returns for the leveraged portfolio is (15.73% – 3.5%) or 27.96% – a significant number.We recommend all attendees minimally have $10,000 ready to be invested. 27.96% returns on a $10,000 sum represents $2796, a sum that would have covered course fees and still left you enough to book tickets to Japan for two. Not too bad. We recommend staying in Singapore and ploughing all of that money back into your portfolio however to compound your gains. Future you will thank you.
Thus even in a stock market bull run, not all countries and sectors do well. It is easy in hindsight but not easy looking forward into the future.
I guess the biggest concern is when the U.S. stock market would crash and bring the whole world with it because all the U.S. indices have been breaking new highs and the bull run has run longer than what most people expected. I agree the end is around the corner but I won’t be able to guess and I think it is very expensive to make that guess by shorting the markets.
But what I do know is that it is still better to stay invested in stocks. I have heard people talked about market crashes since 6 years ago and I wondered how much gains they would have given up sitting on the sidelines. Yes, crashes are scary and opportunities are obviously better after a crash. But at the same time, everyone needs a bull run for a lift in returns.
My view is that the U.S. Presidential Election would take place in Nov 2020 and Trump would want to keep the stock market buoyant by releasing better news (get more deals with China for one) and pressuring the Fed not to raise rates. Economic figures are strong and should have more legs to go. So I would say we should be safe until Nov 2020. So stay invested for now.
Investing and trading are never easy. A big institution has many people to carry specific investment tasks. For example, there is the overall fund manager who oversees the entire operation, there are several portfolio managers to assist him. They are often tasked to uncover stocks and opportunities in an assigned area (by geography or style). There are also analysts to dive deeper and conduct research on individual securities and recommend to the portfolio managers. Once approved, the trades are sent to the traders for execution.
As an individual, you are everybody. You are your own fund manager, portfolio manager, analysts and trader. Yet, most likely, you are doing this part-time and without a finance background.
This is why we exist – we help you short cut a lot of learning with our courses, as well as the idea generation and research work with our signals and newsletters. Most people don’t DIY their investments but you chose to. If that is the case, you should make the best of it.
We have myriad strategies, styles, asset classes, time frames for you to pick what is most relevant, understandable and relevant for you. We are here if you need help from us.
Good luck to all of us in 2020.