Aboi's Updates For Feb\Mar 2013

Here's the link for the previous month's market sense: Aboi's Updates for Jan 2013

For those who find it hard to follow I suggest reading through my previous posting on how I am using technical indicators as a trend seeker.

1. First Attempt on Tech Analysis Part 1
2. First Attempt on Tech Analysis Part 2

I was SPOT ON last month for a correction to hit Bursa. What caught me BY SURPRISE as well as to analysts is the DEGREE of correction. Bursa lost a whopping 50 points in a few days while I was only anticipating it to hold around the support line of 1670 wooohaaa. It was indeed a VSA type shakeout to panic investors and traders out of their perfectly good positions from the market. I am NOT DETERRED. Despite Bursa losing points, my portfolio managed to grow by RM2000 for the past month. For the coming 4-6 weeks with General Elections looming I'll pay more attention to the support line of 1600 as well as the new resistance line of 1655. IMO Bursa has potential to climb a little more for the coming weeks with ALL indicators showing TURNAROUND. Remember the feel good factor!

Notes

*Revised benchmark to be more accurate to reflect my actual portfolio composition. Equities 50%, Mixed Assets 15%, REITs 10%, Bonds 5% and Cash 20%.
*Added TWRR for each counter/fund. My targets for returns p.a. Equities type 12%, Mixed Assets 8%, REITs 6%, Bonds 5% and 3.75% for cash.
*As such the overall target p.a. to be met would at least be 8.8%.

Comments

#1 With some of the proceeds from selling JOBST, I've added two new funds to the list. Asia Quantum (Equity fund) and Dynamic Bond (Bond fund).
#2 Portfolio target for third year @ RM128k for April 2013 and fourth year @ RM140k for April 2014. Revised in accordance to actual portfolio composition.

Yes this is a BIG CHANGE in direction. With 8.8% RM100k can only grow to RM1.255 million in 30 years. One cannot strike to have 15% per annum to grow to RM5 million in 30 years if the portfolio is NO LONGER purely equities. Though RM1.25 million may not seem to be enough for retirement, we have other sources of funds e.g. EPF, endowment/surrender value policies, other assets e.g. properties. I placed a lot of thought in this for the last 2 weeks. It is difficult to have purely equities in one's portfolio yet alone risky as we age older. Should I change my blog description? I don't know yet.

Disclaimer: The reports, analysis and recommendations in this blog are solely my personal views. I do not link to any investment body or company. As such, I will not be responsible of any of your investment decision. Consult your investment adviser or come to your own conclusions before making any investment decision.

A Review of The Compass of Pleasure

The Compass of Pleasure

This is a second book by the author and also neuroscientist David J. Linden (though I never had the chance to read his first book: The Accidental Mind: How Brain Evolution Has Given Us Love, Memory, Dreams, and God). It touches upon the pursuit of pleasure by man and how such pursuits can become compulsive and ultimately lead to addiction. He makes a point. Too much pleasure is replaced by desire while liking becomes wanting. It maybe well-explained and not so much dumbed down but it is still rather a challenging book to read because there is hardcore biology inside. 

He explains much on how we pursuit pleasure in many ways. We spend a tremendous amount of our time and resources pursuing them. Pleasure being a key motivator of our lives is a keen to learning; we find food, water and sex in order to survive as a species.  

There's commentaries on gambling, drugs, meditation, exercise, spicy food, fast food, smoking, giving to charity and how they can all be linked to pleasure and in extreme cases: addiction. Some things activate a lot of our pleasure circuit and is carries a substantial risk of addiction (heroin, cocaine & certain medical drugs). Others carry little or no risk of addiction such as alcohol, smoking cannabis (weed), smoking tobacco or gambling simply because they weakly activate the pleasure circuit. However they can have the same effect as the first if done too frequently. He explains it all with his abundant use of personal anecdotes and penetrating observations.

Still some his commentary made it difficult to comprehend. One good example can be found here along the lines of "The author argues that addiction is a disease and addicts should not be held responsible. Because they are blameless victims of e.g. heart disease they should however be ultimately be responsible for their own recovery." Huh? He argues that some individuals have greater risk to addiction due to their genetic makeup and he tries to expose the science behind our vices and virtues. 

It's roughly 200 pages thick and I finished it in two days, it was pleasurable to read but don't try to read when you feel sleepy :) Overall I would recommend this book to anyone who loves non-fiction titles with a touch of biology plus if you like watching documentaries like Discovery Channel's Curiosity. 

Happy Reading!!~!

CLSA Feng Shui Index 2013

Once again the popular CLSA Index is out! The 2012 index was quite accurate if you need to know :) Anyway this is a “tongue-in-cheek” guide so treat it with more fun than seriousness.

About the CLSA Feng Shui Index (as stipulated from www.clsa.com)
The CLSA Feng Shui Index began life as a Chinese New Year card for clients in 1992, with a simple summary of forecasts by feng shui masters and the views of our own consultant. To flesh it out, we also predicted the performance of the Hang Seng Index based on the investment omens. No one paid much attention to the contrarian chart, but by year’s end it had correctly called all seven of the Hang Seng’s major turns. Now renowned by investors globally, the CLSA Feng Shui Index took a break during the bull run from 2005 to 2008. Much missed, it was revived in 2009. This year’s CLSA Feng Shui Index is our 18th edition.

You can get the full report here for your reading pleasure.

Spend time with Family, Kung Hei Fatt Choy!!

EPF Member's Investment Scheme. WHAT, WHY, HOW..SURE OR NOT? (Part 5)

This is the last installment for the series. If you miss the others, here's the links:
EPF Member's Investment Scheme. WHAT, WHY, HOW..SURE OR NOT? (Part 1 - Intro)
EPF Member's Investment Scheme. WHAT, WHY, HOW..SURE OR NOT? (Part 2 - Bonds)
EPF Member's Investment Scheme. WHAT, WHY, HOW..SURE OR NOT? (Part 3 - Equities)
EPF Member's Investment Scheme. WHAT, WHY, HOW..SURE OR NOT? (Part 4 - Mixed Asset Class)

Putting on Your Monitoring Googles

The good news is you don’t have to this everyday unless you want to be in hardcore mode.  A year would suffice because you can use that newly computed 1 year return to perform Step 1 to Step 3. This will determine if the fund you are holding is performing on par or has declined relative to its peers. This is the reason I do this every December and so happens I have the chance to write it down in article this time. It only takes a cup of coffee and a good Saturday afternoon ONCE A YEAR!

The second method here can be used for an existing fund to solely gauge its historical performance. Some mutual fund ads quote their amazingly high one-year rates of return. Your first thought is "wow, that mutual fund did great!" Well, yes it did great last year, but then you look at the three-year performance, which is lower, and the five year, which is yet even lower. What the duck is going on? Yes just replace the d. Go to http://www.trustnetoffshore.com, key in your fund name, go to FE Performance tab and scroll down till you see Annualized Performance. Let's look at a real example of the performance from one of the biggest unit trust fund in Malaysia:

Last year, the fund had excellent performance at 13.01%. But, in the past three years, the average annual return was 7.32%. What did it do in years 1 and 2 to bring the average return down to 7.32%? Some simple math shows us that the fund made an average return of 4.48% over those first two years: 7.32% = (13% + 4.48% + 4.48%)/3. Because that is only an average, it is very possible that the fund lost money in one of those years.

It gets worse when we look at the five-year performance. We know that in the last year the fund returned 13.01% and in years 2 and 3 we are guessing it returned around 4.48%. So what happened in years 4 and 5 to bring the average return down to 5.49%? Again, by doing some simple calculations we find that the fund just barely made money, an average of 2.73% each year of those two years: 5.49% = (13% + 4.5% + 4.5% + 2.73% + 2.73%)/5. Now the fund's performance doesn't look so good! To further confirm your doubts, take a look at the graph. Public savings’ performance is very volatile. Your fund agent might ask you buy low sell high AS USUAL LA it’s their rice bowl but are you willing to bet that this will work all the time?? And do you have the guts to sell or the wits to buy when emotions run high during bad economic periods?

In a Nutshell

The best bond funds will net you at least 8%, with equities funds 15% is not impossible and if you chicken a little bit try mixed asset funds which will give you a middle ground of 10%. Either way they are all better than just stashing your cash away into the EPF. Even if the funds are not on the appointed list, you can very well use your own savings to invest. You can use the same method to hunt for insurance linked funds. The key concept here is The Power of Compounding! And to get the most of out of this power is to Maximize Your Returns!

This concept is so SIMPLE that most engineers and university graduates CANNOT understand it because most professionals can only understand COMPLICATED things but not simple things. They know how to calculate e = mc2 but tell you 1 + 1 = 3. They can measure the speed of light and the number of electrons in a piece of silicon plus the amount of laser required to cut your eye without blinding you but they cannot grasp this simple concept. I’ve tried to explain this to a lot of people for years and most of it is one ear in and one ear out.  Some even feel so sleepy that they open their mouth as BIG as the mouth of a hippopotamus so I decided to blog everything out once and save my saliva.

I’ve shared my knowledge here, I don’t make a single cent from it and I don’t have the responsibility to make you rich. It took me more than 8 hours to finish up this installment of 5 parts. I could have watch movies OR sleep OR pak thor OR walk my dog OR lepak at mamak stall for those 8 hours. I have nearly 4 years of investing experience (which includes going through the most recent financial crisis) and have read several books on investing and this is the essence I have for you. Plus many more in this blog and more to come. Whether you want to make use of this knowledge is totally up to you =) Happy Chinese New Year!! It's not time to Snake, looking forward for another year of great returns in 2013 because the world did not end ma, aiyo did u believe it would? Problem laaa like that…

When it is not raining :)

Disclaimer: The reports, analysis and recommendations in this article are solely my personal views. I do not link to any investment body or company. As such, I will not be responsible of any of your investment decision. Consult your investment adviser or come to your own conclusions before making any investment decision.