Lendevear's Blog

Lendevear's Blog

Postby lendevear » Sun Jun 08, 2008 11:50 am

Hi fellow friends, do visit my blog for my humble investment insights! http://sgbluechip.blogspot.com/

Do exchange blog links with me if possible! Thanks!
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Re: My Blog on blue chips and investment issues

Postby blid2def » Sun Jun 08, 2008 11:57 am

Welcome lendevear. I hope you'll enjoy your stay here, and you'll also benefit from the additional eyeballs on your blog through this forum. :)
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Re: My Blog on blue chips and investment issues

Postby lendevear » Sun Jun 08, 2008 12:20 pm

Thanks!
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Re: Lendevear's Blog

Postby lendevear » Tue Jun 10, 2008 8:52 pm

Who's the sucker?

As I was having lunch at a fast food restaurant today, I listened with amusement a conversation between a foreign bank insurance agent and her prospective client.

(I really do not mean to eavesdrop, but they were sitting just beside me and talking about my favourite subject.)

Let me give them fictional names of Jenny and Jeremy for illustration purposes.

Apparently the Jenny and Jeremy barely knew each other but Jenny was trying to convince him to take up an investment link policy (ILP) with low coverage, high premium and non-guaranteed return.

Another sucker, I thought, as Jenny started her sales pitch.

I was wrong.

Jeremy was actually a very savvy investor. Although he tried to conceal his knowledge on insurance and investments, the “blur” questions he posed was definitely not easy to answer!

Comments inside the ( ) denote my opinions.

Jeremy: How come ILP? The coverage is so little and yet the premium is so high. Why must we combine investment and insurance and not do it separately?
Jenny: Erm, like this saves time. (The commission is higher)
Jeremy: If I die, my investment might be liquidated at a bad time also right? (Aware of Murphy’s law)

Jeremy: Can I buy term and invest separately?
Jenny: For what? (Like this I have very little commission and cannot hit my June target!!)

Jeremy: How much is the management fees?
Jenny: 1.5% P.A

Jeremy: That’s very high!
Jenny: Quite ok what! No redemption charge leh! (It’s charged on you anyway)

Jeremy: The stock markets are quite attractive now. I want to invest. STI is still falling before I left home.
Jenny: Oh is it? (I don’t invest in stocks and unit trusts actually)

Jeremy: Can you tell me why I should invest in UTs through your bank and not just buy single stock equities?
Jenny: Because… (I am pretty and I am spending time to talk to you) it’s safer.

Jeremy: I know! Diversification right?
Jenny: Something like that.

I can go on and on, but although Jeremy appeared stupid and blur, in actual fact he is aware of “buy term invest the rest” concept, pitfalls of ILP, has been actively monitoring the stock markets and quite familiar with investment and insurance.

It is Jenny who with poor financial knowledge and only concern about sales target has been taken a ride for.

I smiled as I left for two reasons. One, Singaporeans are getting financially more savvy; two, people like Jenny who focuses only on products and sales targets will have to find another job, sooner or later.
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Re: Lendevear's Blog

Postby helios » Tue Jun 10, 2008 10:19 pm

oh my ... dear Lendevear,

why r u having fast food? did u read our Food Thread?

your article is damn good, v expressive.

(thank you for it)
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Re: Lendevear's Blog

Postby kennynah » Tue Jun 10, 2008 10:25 pm

oh yes...i read and was quite entertained and also became more knowledgeable as a result... thanks...

on a separate note...Lendevear....would you consider putting up this link up at your blog...sorta like quid pro quo arrangement?

www.wookup.com/huatopedia
Options Strategies & Discussions .(Trading Discipline : The Science of Constantly Acting on Knowledge Consistently - kennynah).Investment Strategies & Ideas

Image..................................................................<A fool gives full vent to his anger, but a wise man keeps himself under control-Proverbs 29:11>.................................................................Image
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Re: Lendevear's Blog

Postby lendevear » Wed Jun 11, 2008 4:00 pm

kennynah wrote:oh yes...i read and was quite entertained and also became more knowledgeable as a result... thanks...

on a separate note...Lendevear....would you consider putting up this link up at your blog...sorta like quid pro quo arrangement?

http://www.wookup.com/huatopedia


Hi, done!
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Re: Lendevear's Blog

Postby kennynah » Wed Jun 11, 2008 5:37 pm

lvd : many thanks for reciprocating...please enjoy yourself here :!:
Options Strategies & Discussions .(Trading Discipline : The Science of Constantly Acting on Knowledge Consistently - kennynah).Investment Strategies & Ideas

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Re: Lendevear's Blog

Postby lendevear » Mon Jul 07, 2008 5:25 pm

Cutting loss is extremely painful thing to do. Not only it shows that you have made an error judgment on investing in a particular stock or fund, you also face the reality of losing your hard earn money by acknowledging this mistake. You will also face the dilemma to wait for “a few more days” to cut loss or to terminate your relationship with the loss-making investment immediately. There will be a number of “what ifs” resonating in your mind when you are contemplating to cut loss.

What if the stock rises after cutting loss? I already feel stupid for buying that stock at a lousy price. Now I feel even more stupid to sell the stock at a lousier price.

What if I don’t cut loss now and if falls further? Now I feel stupid not to sell earlier. Do I cut further losses immediately then or wait for recovery? Either way there is risk of feeling even more stupid if things do not go my way and I cut my loss anyway.

Is it possible NOT to feel this way?

YES!

Investors that face such dilemmas often only have an entry strategy (ie to buy stock) but no exit strategy (ie to sell for profit or cut loss).

One of the maxims in value investing is that you only exit when you make money. In value investing, you NEVER cut losses. You buy more when your stock drops. The rationale is simple from the illustration below.

Assume you believe Singpost is a value stock (like me).

It has long operating history, high profit margins, consistent dividend payout history and policy, high ROE and low debt. It is currently trading at below historical PE.

If you are willing to buy 10 lots of Singpost at $1.10, when Singpost dips 10% to $0.99, you should buy at least the same number of lots or even more. This is because for the same amount of price I spend on Singpost originally, I can now buy more with less money. I will collect more dividends with the same amount invested and at the same time, dollar cost average my investment.

Assuming I bought another 10 lots at $0.99, my average cost will be $1.045/lot. Singpost only need to rebound 5.6% from $0.99 to breakeven. It will take Singpost to rebound more than 11% from $0.99 for me to breakeven at $1.10.

You must believe in the companies you have initially invested in. Do not lose faith just because others have bought and sold it at a different price you had bought. The price changes all the time, not the fundamentals. Hence, do your homework thoroughly before you take the plunge and only invest in companies you believe in.

Then, you will never need to cut loss. You will be happy to buy more.
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Re: Lendevear's Blog

Postby winston » Mon Jul 07, 2008 5:35 pm

Sometimes, the reason for the plunge in share price, would only surface after some time.

It could be due to an Analyst Report, a change in regulation, short-sellers etc.

The question then becomes do you Buy, Sell or Hold ?

I prefer to cut half my position and then wait and see what is the reason for the drop...

Even though you are a full time investor, the reason may only surface after a week and by that time, the share price could have dropped > 30% .

Happens to me many times and I'm a full time investor with access to a lot of newswire...
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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