On... KEN

Contrary to the title, this post is not about fishing. Having gone fishing only once, there's not much I can share about fishing.  What the post is about is the saying that goes "Give me a fish and it lasts me a day, teach me to fish and it will lasts me a lifetime, ". You see, my friend who had recently went on to the app Spaceship voyager had been sharing his equity returns with me and the results were astounding. A quick check on the Spaceship voyager  website shows that the fund has been compounding north of 20% P. A. Note that I am not recommending to invest with Spaceship voyager - I don't have an opinion for or against ( Do Your Own Research ). The question is - Why should I do my own investing?, rather than just allocate my capital to a fund manager who can compound my returns at a high rate. As a fellow investor would point out to me "Do you want to be right or do you want to make money? ". At the end of the day, of course I want to make money. But ...

How much capital should we risk? That depends on how much time we have.  Let's say we aim to achieve a million dollars ( by age 76 ) and we use 10% CAGR as an assumption for our rate of return, we can take a look at some scenarios to give us an idea. The below chart shows 3 scenarios. Red bars ( starts investing with 90,000$ at age 50 ), Yellow bars ( starts investing with 15,000$ at age 30 ) and Blue bars ( starts investing with 2,000$ at age 10 ). Note that to simplify the maths, a once off capital is used. In real life, you probably would add to your investments as you age.  I think it doesn't come as a surprise that the younger you start, the less capital you need to reach a million dollars; and the older you start, the more capital you have to risk. And that's a conundrum because the older people get, the less risk averse they become.  For example, if you're not starting at 10 years old ( and it's safe to say most people don't ), you have no choice but to r...

The purpose of trading is to earn an income. Or is it? Obviously, the final objective of trading is to earn money to support your living expenses. However, the initial objective is actually to grow your account. Because if you treat your trading profit as an income in the early stages ( and spend your profits instead of reinvesting them ), then your account will not grow or at best grow at a relatively slow rate. What's the point of trading then, if you can't spend the profits? It's a paradox. If you roll a snow ball down a slope, initially it takes a lot of effort. The longer you roll, the larger the snow ball gets. The magic happens when the snow ball reaches a certain size, and without effort it will roll downhill on its own. However, if you keep taking chunks of snow out and not allow the snow ball to grow, it will not reach the stage where it will self propel. A roller coaster requires energy to pull the coaches up in the initial stage. Once it crosses the first ...

Wealth is what you don't spend - Morgan Housel. Also usually equated as Wealth = Income - Expense. Earning money to increase ones wealth is one of the more stressful thing in people's life. I very seldom meet people who are not stressed about work. And this is probably driven by the need to increase ones income. How is it that people do not look at the Expense side of the equation? In my previous job, I used to travel on and off - for meetings, trainings, conferences, etc. And when we travel, we normally lodged at 5 star hotels. Needless to say, our stay comes with buffet breakfast and I must say buffet breakfast at 5 star hotels are pretty good, in terms of taste and choice. And what do I normally have? Bread, butter and omelette. That's silly isn't it, considering I have so much to choose from? Well, not really....  Because bread, butter and omelette is what I want to eat, so that's what I ate. I'm just a simple fella who eats to live, instead of those ...

Recently the ASX200 entered into a bear market and then reversed into a bull market shortly. Was that a true rebound or a bear market rally? As posted in the last blog , since we don't know the reason for entering a bear market, we sure will not know the reason for entering a bull market. If you don't know the reason, then you can't time it as there is no reliable signal to use ( Well, some people can pick tops and bottoms, but not me ). If I can't determine the reason for the start of a bull market, and I can't time the bottom, how do I know when to start investing again? I was lucky to go to a high cash level in February, but when do I start to deploy that cash? I have already missed the rally in April. Will this rally go on or will it fizzle out and retest the lows? Somehow, I'm suddenly reminded of the story of Noah's ark. In the story, GOD sent a flood to destroy most of the Earth except for Noah and his family ( and some animals ). For forty days...

Recently the global markets crashed, with the ASX200 index dropping about 30% in less than a month. What was the reason that sparked this crash? Most commentators blamed this on the COVID-19 pandemic as the catalyst, made worse with the oil price war between Saudi and Russia ( which sent Brent price tumbling as low as 25$/bbl ). If you ask my opinion, my answer is "I don't know ".COVID-19 seems like the highest probable cause but to be fair, news of the virus was not new and had been circulating in the news since January, yet the market still went on to reach All Time Highs . The only thing I know is that there are more sellers than buyers. To pinpoint why the market sold off, you probably need to go to Game Theory ( my favorite one being The Prisoners Dilemma ). In theory, regardless of the underlying reasons, IF stock holders decide not to sell at a lower price, the stock price will not go down. Imagine the following scenario happening in an alternate universe. C...

Wealth is like a bucket of leaking water - you need to constantly fill it up or it will run dry. I spoke to a friend and he thinks as long as you work hard and earn lots of money, you can outsource your financial management to your Superfund. Whilst some other people think that you should manage your own wealth. I don't have a strong opinion but I tend to favour the latter. Since it's your bucket, who better to look after it? I ran some numbers for comparison with the following assumptions. High Earner has a Lifetime Average Salary of 200K per year with 10% Super contribution. His Superfund returns 6% after fees annually. Lazy Compounder earns enough money just for living expenses - although he spends most of his time managing his investment resulting in returns of 15% annually. Assume they both have 200K invested by the age of 40. Let's see how they fare over the next 20+ years. The chart above shows their net worth by age. By the time they retire ( roughly 60...