On... KEN

Last blog , I talked about taking up a job or having a Plan B that is antifragile or at least robust.  I have picked up trading as my insurance. One that I think can be antifragile. So which kind of jobs are fragile and which ones are antifragile? This is one of the topics that I first came across when reading the book Antifragile by Nassim Taleb. In his book ( chapter 5 ), he talked about two types of profession - one with predictable income and the other extremely variable. So, which one of those would be considered a fragile profession? First thought would be the one with extremely variable income. But that's not the case at all.  I used to work as a white collar professional and that would put me in the first category. I had a predictable income and I could plan ahead easily. That's what I thought until I was retrenched when the oil crisis hit in 2015. My 'stable ' job turned out to be pretty unstable and fragile. Finding a new job was hard as the oil price would ta...

The money is not the most important, the making of the money is. What does that mean?  Having a stable job and accumulating wealth is a must for retirement, however the ability to make money is even more important. I can probably rely on my wife ( who has a stable job ) to keep us going and saving her salary to prepare for retirement. However, I feel that just gives me a false sense of security. Two things happened in my life that led me to think this way.  I used to have a good paying and relatively stable job. At some point in time, I left that job and moved to Australia. At probably the worst time as the oil price tanked and I got laid off. My professional skill was not in demand anymore, which highlights just how fragile it is.  I own two houses. One was wrecked by the tenants and the other got broken into. That shows how easily your wealth can be taken from you.  So, I had money before and was building my wealth. But wealth can disappear easily. My ability to ac...

Told my wife that we will have a million dollars in 10 - 15 years time. Her reaction was pretty muted.  Whether it was disbelief or she was unimpressed, I'm sure she ( and others ) would be even more in disbelief if I told her I can earn a million per year.  It doesn't matter how long you take to accumulate your first million. For our discussion, let's assume you have a CAGR of 10%. As soon as you accumulate your first million, it will take just another 7 years to get your next million. The table below shows the progression of your net worth over time. Using the rule of 72, you double your net worth roughly every 7 years ( with 10% CAGR ). The chart above shows the increase of your net worth over time. You double your net worth every 7 years or to put it another way, one cycle of net worth doubling is 7 years. And the next cycle, you double your net worth again. Meaning, in 2 cycles ( or 14 years ), your net worth has increased from 1 million to 4 million. This also means i...

A commonly quoted statistic in trading is that 90% of people lose money or break even and only 10% of traders make money.  Is that really true and where did the numbers come from? Intuitively it seems rather pessimistic considering the stock market index has only gone up over time, if you zoom out. If the stock market is an average of all the participants return, then wouldn't at least 50% of traders make money? I would expect that at least 50% of participants make money, or even more. Probably just me being optimistic.  I think if it were really true that only 10% of traders make money and the rest break even or lose, I would pinpoint it down to one main reason. Of course there are many reasons like trading is difficult, most people don't have the personality to trade, people are not taking trading seriously, etc. Those are all valid reasons but they are general reasons why you don't succeed in any activity and not trading specific. The reason I think many people fail is b...

Just because you're 'doing nothing ', doesn't mean you're not doing something.  In my previous job as a geophysicist, I do spend quite some time thinking and reading, instead of tapping the keyboard all day long. Reading and thinking is actually a very important part of the job. Although when you're thinking and reading, it actually looks like you're not working. Contrast that to jobs that require physical activity like a waiter, labourer, etc., you can actually tell when someone is working or not.  In the realm of investing/trading, most of the time you seem like you're not working. Except for day trading, the other forms of trading and investing don't really require a lot of time clicking on the buy and sell buttons. Clicking buy and sell probably makes up only 10% of the activity. The other 90% of the time would be spent on reading, looking at charts, listening to podcasts, thinking, etc... Activities that doesn't show youre actually working o...

If there's nothing to do, then do nothing.  In my previous post , I mentioned that everytime I see a signal, I should take it. This implies that I have to be very active. In essence, it is, but only when you see an entry/exit signal. Otherwise, you should not do anything. You see the investing business is quite different from any other business or career. In your normal activities, business, career, etc.... The more you do, the more you gain - it pays to be active. However, in investing, the less you do, the better. Laziness ( bordering on sloth ) is actually an edge. To quote Jesse Livermore - "It was never my thinking that made the big money. It was my sitting. Got that?" The first instance where you should sit on your hands is not to put trades where there are no good trades to put on. Don't force yourself to trade for the sake of trading. Be patient! Of course, no trades = no money. But that's much better than putting on bad trades and lose money. In the last ...

Scaling solutions always beat non scaling solutions and that's what we should pursue in my opinion. In my opinion, fast food chains like McDonald's  Kentucky Fried Chicken, etc... Are better business models compared to boutique restaurants or niche cafes, because fast food chains have the ability to scale easily. If you run a boutique restaurant, your ability to expand the business is dependent on your chef/cook. Assuming your menu has been a hit and your customers are increasing, you won't be able to easily set up a new restaurant as you need the chef to pass on his skill to another person. Compare that to a fast food chain where the recipe can be easily replicated and you can set up new stores easily as long as you continue to be profitable.  Another example of scalability is whether your endeavor is capital dependent or time dependent. If you're selling your time, I.e. being paid as an employee in a company, your upside is limited. You can only work a certain amount ...

Recently, my wife asked whether I'm making money in investing. If I am, then it's easy money and I should continue? Otherwise, quit?  How soon should you be investing before you conclude that you're making money or not? Sure you can invest for a week and see if you're up or down. But does it carry any conclusions whether you're a profitable investor? To the layman, if you tell them you're making money after a week, the conclusion might be investing is easy money and you should continue investing. Or if you're not making money, investing is hard and you should quit.  In my "previous life", I was a geophysicist. My degree took 3 years, and after that I took 1 year masters before I got a job. Even after joining the workforce, I was in the graduate program for 3 years. That is a total of 7 years before I was considered a "fully trained " geophysicist by my company.  A doctor takes many years of education before they can practice medicine. Wou...

 Last post , I wrote that trading should be done like you're running a business. If so, what kind of business would I be running?  The business model that I best want to replicate is a casino business ( see this video , if you want to skip the rest of the blog post ). Most people that I talk to, thinks that investing or trading is a form of gambling. Is trading or investing really gambling? This topic is rather divisive and it depends on who you ask. Well if it truly is gambling, I would want to play the part of the casino, because as they say, the house always wins.  How does the casino make money? By having a positive expectancy.  They don't have to make money on every bet, but over large number of bets, the profit has to be bigger than the loss. In terms of trading, my winning percentage is not really that great but as long as the average winners are bigger than the average losers, that is good enough. Year to date for 2021 ( over 133 number of trades ), my winnin...

Trade like you're running a business, not like it's a hobby. Because business makes money and hobby costs money.  Well, to be honest, a lot of business don't make money and they go bankrup, but that's not how we want our trading/investing to end. So what is the criteria of running a successful business? To me, three things come to mind. 1.Money, 2.Time and 3.Luck. 1.Money. Every business require money. Capital Expenditure to start the business and Operating Expenditure to keep the business running. So, if we want to run our trading as a business we should be prepared to fork out some capital to get it started and also to expect some monthly expenses to keep our trading business running. Example of Operating Expenditure can be our trading losses. If we're not prepared to take losses, then we can't run our trading as a business. Of course we would like the profit to more than the losses over a long period of time, but in the short term, losses are inevitable.  2.T...

There is always some sort of respect and admiration in my family for people who runs a business.  Business people surely deserve our respect for stepping out of their comfort zone and taking risk in pursuit of their goals ( usually that goal = to make lots of money  ). However, there is often a stereotype when it comes to defining what a business is. Usually when you say someone is running a business, the first thought is of someone who 1) employs people, 2) is selling something and 3) is making lots of money. Although we know all 3 criteria is not necessary for someone to be labeled a businessman.  Why not? Perhaps I would use a money changer as an example. In Malaysia ( and I believe in most developing countries  ), you don't have to change your money at a bank or a money exchange chain. There are small private businesses where you can exchange currencies. So most of these small money exchange business 1) employs people, 2) is selling currencies and 3) are making l...

The bad news is I am not able to beat the market in 2020 ( ROI since inception ASX200: +8.52%, Me: +6.8% ). The good news is my return is positive this year, which is good because making money is more important than beating the market. For the latest portfolio update, see Portfolio Update . This year has been very tough for investing and trading due to the Covid 19 pandemic. The market crashed in February but rebounded strongly at the end of March. I was lucky to go to mostly cash when the sell-off started but found it hard to re-enter the market. I can still remember the fear of investing at that time. I truly thought that my investment ( about 30% invested, 70% cash ) would go to zero. The fear is real. I started to re-enter the market slowly in April but the market was too volatile and my stocks kept getting stopped out. My performance started to pick up only in the last quarter of 2020. The best performing stock ( ROI since inception ) of the year was WBT, +70.9%. This is a stock t...