Saturday, April 28, 2018

Origins - How I started my venture into the stock market

Many people started their investment journey in many of their very own unique way. Some developed it from interest in business, some got into it from reading about how people struck it rich through the stock market, or developed a curiosity for it from their peers.

But what about my story? Curious about it? My blog has touched a little in About Myself and my first Reflection article, but never have I covered it in a consolidated article. I feel by sharing this personal account, it might also give some new investors an idea how they could start it off before dropping their hard-earned monies into the market for real.



An interest in secondary source of income
It all started from developing an interest in secondary sources of income back in 2009/2010 while I was serving NS. The seed is sown when I bought and read Adam Khoo's Secrets of Self Made Millionaire. While not my main goal, that was perhaps my very first exposure to investment as I learnt of some basic terms used such as "blue-chip". However, it stopped there and went to hibernate - life went on. I focused on my university education and later on, my work. It was not until mid-July 2015 when thoughts of stock market hit me out of the blue and made me recall this. And then I started getting absorbed into learning more about the stock market.

Learning about investing in stocks
For a good few weeks I was intensely educating myself of the many different terms used in stocks. I immersed myself in websites such as Investopedia, The Motley Fool, Morningstar etc during my break time and off-office hours. I learnt about terms such as Fundamental Analysis, PB Ratio, PE Ratio, Dividends etc. This was also a period of contemplating what my style of investing would be. Being someone inclined to developing a steady stream of secondary income - yep that's right - I felt I leaned towards income investing in spite of such style being touted more suitable for retirees.

I had the option to begin through Dollar Cost Averaging (DCA) via OCBC's Blue Chip Investment Plan. Eventually, I concluded such investment scheme did not appeal to me:
  • I had not saw the point in not having the flexibility to control price the exact moment I intend to buy or sell.
  •  The commission fee for lump sum investing is more economical.
Next it was thoughts about what would my target be if I did income investing. "How much am I willing to fork out to get $6000 annually?" "I guess probably 5% yield sounds reasonable." This later evolved to 6%+ as I thought it seemed expensive to invest 6-digit for $6000 annual passive income.

Shortly after, reading about the success stories of traders, short term trading also piqued my interest, being a potential secondary source of income as well.

The pushing point for me to decide on set up my brokerage account finally came about when the market suddenly took a nosedive on 24 Aug 2015 owing to the yuan devaluation fear.

I thought to myself "why are you guys panicking over the yuan devaluation when it does not affect the underlying health of the business?"

And then true enough, stocks largely rebounded the next day.

"I can definitely make money off such opportunities", I thought. Aside from yet having to develop a suitable mindset to take on investing, that also contributed to deviating my interest from investing and venture into trading.



Itchy Hands
Fancying short-term trading out, I had pushed the idea of long-term investing aside for the time being and begun trying it out. At the start, I got kopi-money on my very first trade. Alas it was short-lived.

I then come across an analyst report on Global Logistic Properties (GLP), mentioning about the Target Price being a good deal higher than its trading price and them issuing a "Buy" Call. The ignorant me did not know the dynamics of the market and the suitable use of analyst calls and then blindly bought into it. I saw it go up a few cents and thought to myself, "Oh yes I'm making money out of this!"

Boy I could not be more wrong as the price soon collapsed.

Panicking, I went out of the counter after taking a few hundred in loss, but silly me then went back in at a lower price thinking it will rebound. I rolled up about $1500 in losses from the counter alone. It was unfortunate

Going forward from then, I continued to try out trading in various counters, many unheard of, and I soon accumulated overall loss of $2800. I could not sleep comfortably for a few nights after taking all those cumulative loss and I discarded the thoughts of making it through becoming a short term trader.

It was the price I paid to develop my ability to stomach fear and panic, and set my threshold for paper losses I am willing to bear for counters I take a long position on.

My first step as a stock market investor - for real
I could not sleep comofrtably after those cumulative loss and I discarded the thoughts of making it through becoming a short term trader. It was then I concluded income investing is probably the way to go and I would recoup my loss via dividends. I bought 5000 units of Capitamall Trust at 1.875 each, seeing how it was slightly under-priced to my eyes. It was 80% income investing and 20% value investing, really. This paid off (unintentional pun) as it helped me somewhat with growing my savings until I finally sold it for my upcoming home.

Fast Forward to the present
While my portfolio since last year have had a major capital appreciation element added by means of investing in Alliance Minerals, and recently liquidating my positions in Capitamall and just today, Cache Logistic Trust (I will bring this up in my upcoming portfolio update again) even now I am still more of a income investor at heart. Nevertheless I saw a point in developing myself in different style of investing and had a desire to grow my funds at a higher rate so that I may accelerate my plan for income investing.

What about my capital losses? I actually reduced my loss significantly with a series of good trades in 2016. While I still sit on a net realised loss from capital differences, my dividend and distribution has gotten me positive realised gains.

Thanks for reading!

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