On... KEN

Ever heard of the 10 Dollar Man? Probably not - because that's me. This was a name given to me back in my early working days because of my frugal spending habits - 10 Dollar per day for meals ( Dollars as in Malaysian Dollars when I was still working and living in Malaysia ). So, how it works is that I have a 10 Dollar budget  allocated for meals each day and I stick strictly to  the plan.  If I had overspent on breakfast, I would either scale down lunch/dinner or skip a meal. That was how cheapskate I was.   How did I manage to spend so little and why? Well, initially it was maybe out of necessity and it probably became a habit. Less than a year into my job, I had purchased a house and the mortgage was more than 50 percent of my take home salary. In addition, I was a little paranoid to how long my job would last, so I ploughed as much money as I can into...

When you visit a financial planner, you don’t ask questions first - the financial planner does . Why? Because everyone’s financial circumstances are different and the planner has to understand your situation to make  a plan that works for you. There is no one size fits all solution. After all, personal finance is personal. Here’s a few stories…. I have a friend who is rich enough to retire if he chooses to. However, he plans to build a mansion, and that would put him in debt for many years to come. Is living in a mansion better than financial independence and early retirement ? I don’t know. Maybe. My wife’s ex-colleague quit his job as a professional in a mining company to become a park ranger. He would probably be earning much less in his new job but he would be enjoying his new career more. Is job satisfaction more important than money? I don’t know. Maybe. My mother in law has a friend who has been separated from her husband for more than 10 years, living onl...

It is said that time is money . I guess they are different sides to a coin. When you’re young, you have time, but no money (exc luding the top 10% of people born to rich parents ); when you’re old you have money but no time. The best of course is to have a happy middle.     Technically if you work hard, you can earn lots of money and the sky is the limit. But no matter how much effort you put in, you can only have 24 hours in a day. There is no way that you can extend it to 25 hours. That much is obvious. If time is finite and scarce, why then do people live as if they have all the time in the world? I think its because people are generally over confident in nature. They over-estimate the time that they really have. People think they can live forever until they realize they can’t. Of course we have to work hard and earn money - How else are we going to buy the things we need to live? We should of course build up a nest egg for retirement as well. Otherwise, you may...

I shared my Quarterly Performance with a friend recently and he came back with the response “Why are there so many negatives ?”. That may be a polite way of saying - your result is quite poor. Its definitely better to have all positive returns and no negatives, but in the stock market, not only is that near impossible but it might not actually matter too much. If ( and that’s a big IF ), you had good portfolio/capital allocation, the negative return on single stocks don’t really matter much . Lets have a look at 3 hypothetical scenarios. Each scenario has a total investment of $100 split over 5 stocks - A, B, C, D and E, with different P/L ( profit/loss ) and portfolio allocation. Scenario 1 - each stock in the portfolio has a 10% return   Scenario 2 - stock A has 30% returns but the rest have negative 50% returns Scenario 3 - stock A has negative 30% returns but the rest have 50% returns Which scenario as an investor would you like your portfol...

I first came across the coin flip discussion in Nick Maggiulli’s blog post . Here is my simplified and slightly different take on the subject . Assume I offer you a coin flip bet, in which, you earn 60$ if the coin lands on head and you pay 50$ if the coin lands on tail, would you play? Of course you would. How can you lose money in such a game?  I simulated 10 scenarios of  10 consecutive flips; and Scenario 4 ( worst case scenario ) came out as follows:- HEADS, HEADS, TAILS, TAILS, TAILS, TAILS, TAILS, TAILS, TAILS, TAILS. Only 2 flips out of 10 came out heads, which is a probability of 20%. Whats happening? Is the coin rigged? Isn’t a coin flip supposed to have 50% probability? The chart above shows the results of all 10 simulated scenarios ( chart showing probability of flipping heads ); and it apparently isn’t 50%??!!!. In fact, the range is quite wide with scenarios ranging from 20% to 60%. The chart below  shows the money lost/gained for each c...

“If investing were all about math, mathematicians would be rich . If it were all about history, historians would be rich. If it were all about economics, economists would be rich. If it were all about psychology, psychologists would be rich. ” - Morgan Housel. So what is investing about then? I think its about these:-     Financial analysis . Accounting is the language of business  and investing is the art of picking and buying businesses. If you want to buy  something at the shop, you would want to know how much it is worth before parting with your hard earned cash. The same goes for buying a business, before putting your money in - you better know what its worth. Behavioral finance. To be a successful investor you need to be able to control your emotions - Patience and indifference is key. Be patient when waiting for your opportunities, and be patient to let your thesis play out. Be indifferent to your results ( Profit or Loss ), and follow your str...

Money can ’t buy happiness - so the saying goes. I politely disagree. There are some things money can’t buy - like love for example ( according to the Beatles anyway ), but it definitely can buy happiness. I had KFC with a bottle of coke and some fries just the other day, and boy was I happy. And guess what, I bought that with money. When you’re hungry and thirsty, money buys you food and drinks. If you need a roof over over your head ( the last time I check, most people do ), money buys you shelter. If its winter and the weather is cold, money buys you a jacket to keep you warm.  And the list goes on.     So, since money buys you happiness - the more money, the better? Absolutely not! For the very simple fact that money don’t grow on trees. Usually, there is a trade off to earn more money. Either you spend more time working ( time which you could spend with your family ) or you take on more responsibility ( which normally comes with stress ).   The questi...