December to March is usually the period where working people get their yearly bonuses. How do you use your bonus?

Smaller Bonus this Year

This year, most foresee that their year end bonus will shrink.

The two-day poll of 100 people, conducted in both the Central Business District and heartlands, found that the majority of Singaporeans foresee smaller bonuses this year compared to last year.

Almost 75 per cent polled said they believe their bonuses will shrink, which is a prediction seconded by human resource managers.

- SPH

Like wise, I do not expect to receive much special bonus this year. Its likely to remain lower than norm consider the firm is hit with some bad results during the quarters.

Part of the overall compensation

I do see that your annual bonus be part of your overall compensation package. And as such it should be manage as a total annual package instead of treating it as something of a windfall.

The fact is that folks that work in Keppel will get their 7 month bonus while some companies will struggle to gain any. Yet the workers in Keppel may each be paid much much less than the standard monthly pay of bankers who will not get much bonus.

Reward yourself but save up for the rainy day

I used to be in the frame of mind that you should always save as much as possible. But life goals change and for some people they really work hard for it.

Rewarding oneself by going for a good holiday, buy some gifts for parents and loved ones are good ways to recharge your batteries and share the joy around.

Sometimes share and you will received more. However, do it in moderation. For some people, they may feel that their bonus is small, but when they add up in 10 years, it may be quite a substantial sum.

Pay off debts

Some folks might be incline to put these substantial amount to the stock market, however, I would suggest assessing the debts that you currently hold to see whether you are able to reduce them.

You can take up debt clearing methodology like Debt Snowball to substantially reduce the amount of interest paid.

Your returns from the markets may not be certain, but by paying down debts, you are certain that you will be reducing your outflow, which is indirectly a gain.

Get an education before investing

Some of my friends would rather put their money into the stock market and learn from it directly. There are pros and cons to it but I do see it as more cons.

The end state is they normally do more harm themselves to their portfolio rather than good.

Why not pick up $100 worth of books or education session? treat that as a commission. The difference is that you arm yourself with something that you can use over and over again ad possibility prevent you from making bigger mistakes.

An annual dollar cost averaging

Should you make it this far and still think it’s a good idea to invest your bonus then all the best to you. My take is that you do not have to split the amount out. If your bonus is rather consistent, what happens when you dump a whole lump sum is that if you buy at the market peak your next bonus may be bought at a discount.

Why I would not invest all my bonus

I made a conscious decision not to save as much of my bonus as possible. I made a 10 year goal that I may talk about in a later article.

The truth is that your life goals change and when your income progress to a certain state, you need to set aside money for other goals and that you need to share the wealth around more.

Its not easy to adjust but 30% of it will go to my family, other objectives and higher education.

How do you guys intend to use your bonus?

I run a free Singapore Dividend Stock Tracker . It  contains Singapore’s top dividend stocks both blue chip and high yield stock that are great for high yield investing. Do follow my Dividend Stock Tracker which is updated nightly  here.

Just found a portable java based stock portfolio manager that you guys might want to explore. It tracks stocks by transactions which includes dividend transactions as well.

We discussed a bit more over here.

I covered a wide range of stocks from dividend stocks with predictable cash flow like Starhub, CMPacific, SMRT, First REIT to blue chip stalwarts like Keppel Corp, DBS, SIA Engg to the really small value stocks like Boustead, Kian Ann, Adampak.

While doing the exercise, one of the stocks that grip my attention was Noble Group.

Noble Price 11 years

Here is a chart of Noble’s stock price since 2001. Notice that the stock price then was at 22.5 cents. This is during the 2001 to 2003 bear market. During this period, Noble went through some great growth. Like all stocks it went through another major bear market in 2007-2008 where it drop from $2.80 to $0.40 again.

Right now the price ended up  at $1.15. Looking at then price chart you would think that this stock is better for trading than investing in. If you had sold it at the high of $2.40 or $3.20 you would have gotten a really good deal.

Does that mean its not good to buy and hold?

Noble’s Bonus Shares and Stock Splits

(Click to view larger image)

Which is where my factsheet comes in. Basically, I simulate what will happen if you bought 1000 shares of Noble at the start of 2001 and what is your returns like.

The result? If you kept Noble since 2001 at a cost of $225, your dividends would be $2903 and your unrealized gains would have been $18517. The total return is approximately 9520% which is made up of 8230% unrealized capital gains and 1290% dividend gains.

Why was there such a wide gain?

Firstly, Noble since 2001 have had 6 bonus issues. Bonus issues typically do nothing much. Instead of paying out a cash dividend, a company like Noble pay you stock dividend.

Does your average share of the company increase? Not necessary, the pool of money to pay out as dividend is kept within Noble so that they can reinvest to make you more money. Since this pool is divided equally among all shareholders by increasing every one’s share of the company, the share of company stay the same, but you get more shares.

Noble also have one stock split of splitting up its share in 2004 to 4 shares. This does nothing on its own as well. Stock splits just means that instead of having 1000 shares at $4, you have 4000 shares at $1. The rational is to make the price of each share look lower so that people are more attracted to it.

The magic comes about when Noble make more money subsequently down the road. Your bonus shares that was issue to you these 10 years means you are entitled to more of the company’s return.

So instead of getting $1000 for each $1 earnings per share if you have 1000 shares, you would get $15300 for each $1 earnings per share because now after all the splits and bonus shares you have 15300 shares.

What we can learn from this

1. You can only gain this kind of astronomical returns if you invest in a company that generates increasing profits. The bonus shares and splits are not magic. Having more shares but when profits are falling or for the matter turned into losses would just make this a bad investment. The business, economics and operation matters if you want to hold a company this long.
2. Bonus shares and good dividends appears to be indicative of management that have confidence in their business and prefers you stick with them. In my brief exercise, not many would carry out a bonus share issue. Strangely those that issue bonus shares turn out to be rather sturdy companies that grows.
3. The price you buy matters but it is important to know the value you get. Why we kept advocating buy 50 cent 1 dollar is to buy value buys at reasonable prices. Comparing 2 commodities investment then, you may get more value simply because Noble choose to reward their share holders more.
4. I tried changing the first buy price from 22.5 cents to $3 or $6 and  turns out you still make money! You only start losing money if you have bought Noble at $22 in 2001. That to me is pretty amazing.
5. Compounding and time value of money will work if you spot a company that grows its earnings and reward you.
6. Reinvest only in companies with good business, sound management that consistently shows a willingness to reward share holders. Management retires and business environment changes. Noble is in a stage right now where the chairman is struggling to find a successor. We are entering another difficult operation condition. Your dividends will ensure that you receive rewards while waiting. A change from the policy these 10 years (cutting bonus issue and dividend policy) would signal that you need to relook into it.
7. Hindsight is a bitch. This exercise just shows me I missed a great deal.

I hope I gotten my figures right. Drizzt can get pretty wrong sometimes. Do comment if you think I have gotten it wrong.

Do you guys have similar companies like this that have so many corporate actions? How did they end up eventually?

I run a free Singapore Dividend Stock Tracker . It  contains Singapore’s top dividend stocks both blue chip and high yield stock that are great for high yield investing. Do follow my Dividend Stock Tracker which is updated nightly  here.

I came across this very interesting post that introduce us to a Living Bridge. A living bridge is one built from the roots of a tree trained to grow across a small river and take root on the opposite bank.

What happens is that you have a bridge that is very sturdy that strengthens itself naturally. Some of these construction is even double decker. This bridge will serve the people and the people’s children and the people’s children children.

To do that, every one ( you, your children and children’s children) will have to be taught how to maintain and create the bridge.

This is somewhat synonymous with what you want to do when you go about creating an income portfolio. A well structured portfolio not only will serve you, but perhaps provide a good income to  your children with your passing.

This is no joke as it means that the compounding takes place over a long period.

But in order for this to happen you have to

1. Learn and create a good portfolio
2. Teach your offspring how to manage money well
3. Ensure they subscribe to the benefits of delay gratification and maintaining such a portfolio
4. Mandate this legacy

I don’t think I can explain it as well as the article here. Do read it.

I run a free Singapore Dividend Stock Tracker . It  contains Singapore’s top dividend stocks both blue chip and high yield stock that are great for high yield investing. Do follow my Dividend Stock Tracker which is updated nightly  here.

Now this plan is good in that

1. It acts somewhat like a force saving making you put aside the money
2. It ends up as odd lots (since each time you buy so little shares) making it difficult for you to sell it off
3. Takes the market timing out of the equation

Now note you can stop your DCA anytime. Which bring us to this article.

I have a relative who likes this form of structured investing or investing based on a portfolio manner. The worst thing I did was to seduce him into the benefits in investing in telcos such as Starhub and Singtel.

So we know the market hasn’t done very well recently and my relative, being a student of economics sees that there are just too much troubles out there.

The best time to invest is when the trouble clears.

So he was DCA into Singtel all this while after my persistent advocation but recently I understand he have stop DCA. The reason?

It is stupid to DCA when the trend is going down

Now this is interesting for me because there is no correct or wrong answer here.

Recession Sturdy Business Model

We have a DCA candidate here that have a strong utility like business model. It is unlikely to falter as in a recession, your handphone is your business and communication asset. You will still need this service.

Though profits may be affected, they are unlikely to go bust anytime soon. Lack of business will actually bring down capital expenditure.

Consistent trading price range

Since July 2009, it has been in a consistent trading range, the lowest $2.66 the highest $3.20. A channel of 16% drawdown maximum.

Price is not far off from bottom

The lowest price reached, discounting the spike at the end of 2009 recession was $2.30. That is a maximum of 25% drawdown

What are the likely scenarios

Now here are 4 scenarios that I can see drawn out and how DCA will be affected

1. In the green arrow, the price will trend upwards. Rather unlikely, as there are not much near term catalyst. In this case stopping your DCA will make you missed out on most gains. Yes, you can always restart it, but we will come to this later. You have to be nimble though.
2. On the opposite end you have the red arrow. This will be like the 2009 drop, where even all the good stocks drop in a matter of 2 months. If you stop DCA, you are likely to missed out on such a drop. You are likely to suffer from either paralysis (because you think it is likely to continue to go lower) or you will see this as an opportunity to kick start your DCA again.
3. The third scenario is the one my relative things, which is the orange arrow. It is a long drawn draw down. And stopping DCA means you do not suffer much capital loss. However, it is likely that in such a scenario, you get a lot of false hopes when you can kick start your DCA again.
4. The last scenario is in the blue arrow. This is when the bear market comes and goes, and Singtel still ends up in the same range! If you look at the market it is in a 13-15% correction, many stocks have fallen, yet Singtel is still at the same place. Stopping DCA will mean waiting and waiting and waiting.

What is my take on this

Essentially,

1. I think my relative is market timing. Like me he thinks he can outsmart the market. He will have to get his DCA right.
2. He is stopping his force savings plan. Is that desirable?
3. He is doing excessive work monitoring the market. Was this the original purpose of DCA?
4. The bulk of the move takes place in probably 2 weeks most of the time. He is equally likely to missed out on big gains and big fall.
5. Since 2001, Singtel have not cut its dividends. 70% of its returns are in the form of dividends. Will it make sense to missed out on these dividends?

What do you guys think?

I am sure there is no right or wrong answer to this but perhaps we can take this as a case study and put yourself in the shoes of my relative

1. Tell me what you are likely to do
2. Why do you take that route

I run a free Singapore Dividend Stock Tracker . It  contains Singapore’s top dividend stocks both blue chip and high yield stock that are great for high yield investing. Do follow my Dividend Stock Tracker which is updated nightly  here.

Why I created this

I began messing and creating Stock Portfolio Tracker 2 months ago to see if I can create portfolio tracker for keeping track and monitoring stocks.

Why do we need another portfolio spreadsheet? Well I have a few criteria and objectives:

As little lock in as possible

I have blogged about in the past that I use Intuit’s Quicken to budget and track monetary stuff. Well that causes money and intuit is not the only provider. Microsoft used to provide MS Money but they have stopped the support for it. Some folks may have concern with going too far with the app and difficult to switch to an alternative if another MS Money happens to their paid app.

Stock Portfolio Tracker do not have this problem because it’s stored as a spreadsheet in Google Docs in the Internet cloud. You can always download the data as an excel xls or xlsx workbook to backup locally or if u intend to port it to another platform.

Manage portfolio based on transactions

Actually I don’t want to do this portfolio tracker. I searched around the net to see if someone came up with this simple excel sheet to track my portfolio this way. I would only need to do little modification.

It turns out that most portfolio trackers track based on one stock and the number of units needs to be calculated ad hoc by the user.

Lets just say that there are quite a few investors that hold stocks for a long time. They want to review their holdings, see how much they have gain or loss, how much income in total.

This kind of portfolio should be constructed based on an aggregation of their buy, sell and div transactions.

With these transaction data, user can then construct different review perspective whether it is return on investment or different portfolio category.

Portfolio access anywhere

One problem with Quicken and local excel spreadsheet is you only can access your portfolio on your computer.

With Google Spreadsheet, your workbook is stored on the Internet. That brings advantages.

1. You can access your portfolio from any computer with Internet access. Right now, smartphones are powerful enough to power a web browser and it’s HTML and JavaScript pages, which Google Spreadsheet runs on.
2. It acts as a backup should your laptop or desktop gets trashed.
3. If you would like to share the viewing and editing of the portfolio with friends, family and associates you can do that with the sharing feature.
4. If you are a finance blogger you can append these data on your blogs.
   Part of me was thinking: how bad is Google Spreadsheet versus Excel. It turns out that they are generally very similar when it comes to formulas but those that I need they do not provide. Still you can cook up a smashing portfolio with what Google provided and they are constantly improving it.

How to use it

The Google Spreadsheet can be found here [Link to spreadsheet >].

The spreadsheet you see is my portfolio of stocks listed on SGX and NYSE.

1. To assess this Google Spreadsheet you will need a Google account. [Sign up for Google account >>]
2. At my Google Spreadsheet page in the link above, go to the top right corner and click the “Sign In” link.
3. Once you are signed in , make a copy of this document by doing the instructions in the image below.

Once you have made a copy you would need to understand a few things.

Version history and notes

The “Read This First” contains instructions on how you can make use of this spreadsheet.

It also contains notes on amendment that I constantly do to this spreadsheet.

Legend

Yellow cells – these are cells that user will need to fill in appropriate data input.

Light blue cells – these are cells that will be computed by Stock Portfolio Tracker automatically. Do not fill in your own input here!

Drop down selection – these cells are user inputs but they are fixed values that are derived from “Ref” sheet or other cells.

Define the stocks you want to track

Stocks are defined in the worksheet “Stock Summary“. This is where you define the stock name and symbol. Upon viewing it for the first time, you will see rows of already populated stocks. Those are mine. What you need to do is clear row 3 onwards if you are starting afresh by populating your stocks one by one.

For each row of unique stock, make a copy of row 2, and then enter the stock name, quote [optional], manual price [optional] and expected dividend yield [optional] in “Stock Summary”.

Note: The stock name is used not just in this sheet but also “Transactions”, so whenever you make a name change here do change the corresponding stock transactions tagged to this stock name.

The “Last Price” is determine by which data source is available. For this to work you will need to find out the stock quote of the stock you want to track in Google Finance or Yahoo Finance.

We provide 3 options for updating of current last done stock price.

Should your stock belong to exchange supported by Google Finance (e.g. US exchange), entering the quote will enable Google Spreadsheet to automatically update your stock data every time you review your spreadsheet.

Should your stock be unsupported by Google Finance, if you specify the stock symbol in Yahoo Finance, Stock Portfolio Tracker will automatically update your stock data with values from Yahoo Finance.

If you are unable to get live prices from Google Finance or Yahoo Finance, you will need to update the last done price manually every time you open this spreadsheet to review.

One of the main purpose is to track dividend stocks so there is a column that yield investors can make use of to track for this stock how much yield on cost (yield on your average cost of stock purchase) you expect.

Notice there is a “category” field, this is a drop down validation whose data is defined in the “Ref” sheet. It is to help an investor better segregate the stocks that he or she is tracking.  The user can change and add more category by going to that column in “Ref” to manage.

Enter your stock transactions as they take place

The transactions are managed under the “Transactions” sheet.

Note that the most important row is row 2, which is the first transaction row. Each new transaction you create is done by selecting the previous row and dragging it down one row and then amending this new row.

Note: Do Not Delete this Row 2! For your first transaction, amend the yellow cells in this row. Only input values for the yellow cells and the “Type” field.

Stock Portfolio Tracker supports 4 kinds of transaction “Type” currently: “Buy”, “Sell”, “Div” and “Split”. From the drop down select the type you are entering.

For all transactions, enter the date of transaction, select the stock by name and select the type.

For “Buy” transaction, enter the “Transacted Units”, “Transacted Price”, “Fees”. Ensure that the value in “Stock Split Ratio” is 1.0.

For “Sell” transaction, enter the “Transacted Units”, “Transacted Price”, “Fees”. Ensure that the value in “Stock Split Ratio” is 1.0.

For “Div” transaction, enter the “Transacted Units”, “Transacted Price”. Ensure that the value in “Stock Split Ratio” is 1.0 and “Fees” is 0.0.

For “Split” transaction, enter the “Stock Split Ratio”. Ensure that the value in  “Transacted Units” is 0.0, “Transacted Price” is 0.0 and “Fees” is 0.0.

The Stock Split Ratio is calculated as follows:

If it is a 4 to 2, the ratio is 2/4 = 0.5.

If it is a 1 to 5, the ratio is 5/1 = 5.0.

Note: At times after you insert one row below the formula will go astray. That can be easily solved by re-propagating the formula again by dragging the light blue cells in row 2 to the rest of the transactions row.

Reviewing your portfolio

Once all the data are entered whenever a transaction is made, reviewing your portfolio is easy.

Aggregate transactions in stock summary view

The “Stock Summary” provides you with an aggregate view of your realize and unrealized gains or losses. You will also be able to see your average cost of current shares for each stock.

If you learn from my formulas you can insert more columns possibly to calculate XIRR or total gains or losses.

Aggregate Stocks in multiple portfolio in Portfolio View

The “Portfolio Summary” sheet provides more aggregation. This is an aggregation of “Stock Summary” and “Stock Summary USD”

I did not fully develop this at the time of writing because different investors track different set of information. Should you be comfortable with it you can modify this to make it more powerful.

Dividend Collected, Realised Gains and Losses by Months and Years

We also provide 2 worksheets so that as bloggers you can easily tell your readers how much dividends you collected each month and how much gains or losses you realise.

This is the monthly dividend and realise gains sheet

This aggregates dividends and gains on an annual basis

FAQ

Q: I created a new stock / asset in stock summary with a valid Yahoo stock quote but the price does not seem to be updating!

This happens to be a strange bug that i cannot get rid of and i have to apologize for not being able to solved this. That said, the work around solution is very simple.

The reason the price shows wrongly is because the Stock Portfolio Tracker fails to grab the last price from Yahoo. Follow the instructions below to refresh any new stock added.

This means that every time you add a stock such as Intel that you have not keep track of previously, you do this. Once you are keeping track of it, you do not have to do this.

1. Go to the worksheet “Yahoo Data Ref“. This is where the data is retrieved.

2. Click on cell A2.

3. At the top formula bar (fx), click and use Ctrl A on your keyboard to select the whole formula string.

4. Use keyboard Ctrl X to cut the whole formula

5. Click on a cell that is out of range like what is shown in the picture above. This should make the rest of the cell computation disappear

6. Now click on cell A2 again. Use Ctrl V to put back the formula you cut away just now.

7. Now check your Stock Summary that the last price is updated. On the Yahoo Data Ref, you should also see that the new stock is correctly retrieved.

Q: I am still confuse by the terms use in the headers of each field in each sheet could you make it simpler for me?

1. Read This First > Basic version history and introduction
2. Portfolio Summary > You do not need to edit this. This pulls data from the other sheets to show an aggregate portfolio view. Once you get the hang of it you can edit to put more things you want to monitor here
3. Stock Summary > This is where you will define your stock e.g. General Electric, Macdonalds, Total SA
   1. As in all places, cells in yellow means you need to input things, cells in light blue or colored generally means it is computed by the spreadsheet.
   2. Category > this drop down specifies which category this stock is under. You can increase the drop down in the Ref sheet.
   3. Stock Name > The name of the stock. Note that this will impact the dropdown in the Transactions sheet, and how the stocks transaction tracks back to this stock in this sheet
   4. Google Quote > This is where you will specify your google stock quote. Go to google finance and find the stock quote and enter here e.g. TEF for telefonica, VXX for Vix ETF
   5. Yahoo Quote > Similar to (4) but only this one is the quote from Yahoo. Actually Google and Yahoo’s quote look pretty similar if you look at my sheet!
   6. Manual Price > If for some unfortunate reasons your stock cannot be found on these 2 platform you can enter it manually
   7. Last DPU > For dividend stocks you may want to track the annual dividend payout. Here you can manually enter it.
   8. This is all you need to enter. The rest is auto computed. Note the Last Price use will be in this order: If you enter a Google quote it will use the Google Quote then follow by Yahoo Quote then follow by Manual Quote
4. Transactions > This is your transactions of the stock in your Stock Summary. You will input buy, sell, div and splits here
   1. As in all places, cells in yellow means you need to input things, cells in light blue or colored generally means it is computed by the spreadsheet.
   2. Date > the date of the transaction
   3. Stock > the name of the stock. select the name of the stock from the drop down. if your stock is not seen here it means that you have not specify it under Stock Summary.
   4. Type > what kind of transaction. currently you can choose the drop down with the following
      1. Buy > an accumulation of that stock
         1. Fill in the amount of stocks you bought under transacted units
         2. Fill in the price you buy under Transacted Price (per unit)
         3. Fill in the commission or fees under Fees
         4. Keep the Stock Split Ratio as 1.0
      2. Sell > a distribution of that stock
         1. You have to do a check to ensure you don’t sell more until your total units left is less than zero. My sheet does not take care of that.
         2. Fill in the amount of stocks you sold under transacted units
         3. Fill in the price you sell under Transacted Price (per unit)
         4. Fill in the commission or fees under Fees
         5. Keep the Stock Split Ratio as 1.0
      3. Div > a cash dividend distribution
         1. Note: ensure that transactions to be in chronological order. for dividends use the ex-dividend date for the transaction instead of the date you get paid.
         2. Fill in the amount of stocks under consideration for cash dividends under Transacted units.(for reference you can take a look at Previous Units which shows the last amount of units you have for this stock.)
         3. Fill in the dividend per share under Transacted Price (per unit).
         4. Leave Fees as 0 unless you get charged for dividends
         5. Keep the Stock Split Ratio as 1.0
      4. Split > there is a stock split or a reverse stock split
         1. Keep Transacted Units at 0.
         2. Keep Transacted Price (per unit) at 0.
         3. Keep Fees at 0.
         4. Enter your split ratio under Stock Split Ratio. If its a 1 to 5 split the ratio is 5.0. If its a 5 to 1 consolidation the ratio is 0.2
5. Stock Summary USD > When i come up with this spreadsheet i only have in mind local currency which to me is SGD. So i have a sepearte one that is similar to (3) here.
6. Transactions USD > This is the transactions to Stock Summary USD.
7. Mthly > This sheet splits Transactions and Transactions USD into total dividends and gains/losses collected by months.
8. Yrly >This sheet splits Transactions and Transactions USD into total dividends and gains/losses collected by year.
9. Allocation > Just a chart showing a pie of how much each stock i have. Once you are familiar with google spreadsheet you can create many of these to show to your readers.
10. Ref > This sheet contains data found in the drop downs in the other sheets.
    1. Stock Category is some categorization that i set for my stocks. You can change them next time when you get comfortable.
    2. REIT Category – ignore this
    3. Price Tolerance – some warning indicator under Stock Summary to change the color of cells should it breach a certain level
    4. USDTOSGD - this you may find useful if you are new to Google Spreadsheet. I use this to convert USD to SGD via a formula in Google Finance. This will be used under Portfolio Summary to convert US portfolio to SGD portfolio
11. Yahoo Data Ref > Here is where we get the data for the stocks under Stock Summary from Yahoo Finance.
    1. Do this right and your data from yahoo finance auto updates.
    2. There is only one cell that you need to edit here which is the cell A2. Take a look at it. It basically aggregates all the stock quotes in Stock Summary and then asks to return it in a CSV file and then display it in the cells below.
    3. You can request for more things. for more information take a look at http://www.gummy-stuff.org/Yahoo-data.htm
    4. There is a bug here but it is not something big. i will tell you about it below.
12. Yahoo Data Ref USD > Same as (9) only for (5)

Conclusion

Must say that I thoroughly enjoyed this experience while creating this spreadsheet. I hope I am able to help someone who was having the same problem as myself.

Take a look at the spreadsheet, make a copy and modify it to suit your needs.

For those interested in tracking my most current holdings, you can review my portfolio over here. Since I am updating this together with my Quicken (yes still using that)

I hope you can make use of this tracker to help you fulfill your financial dreams. This spreadsheet is free, however should you want to contribute to my efforts in developing this tracker into something even better you can donate to me here!

Want to read the best articles on Investment Moats? You can read them here >

What happens if you want a really puny cap company like OKP Holdings or Starhub holdings?

The solution is to use Bloomberg’s app on both iPhone and Android.

Bloomberg has a vast database of up to date prices of any exchanges around the world and if you want to keep track of Singapore, Brazil or Taiwan stock prices on the go, this is an app to get.

Here I show you 4 examples:

OKP a Stock on SGX that is not even in the main Singapore index.

Starhub a Singapore telecom stock

Chunghwa Telecom a Taiwan telecom stock.

The app is still abit fuzzy as show by the line across the icon but its very very speedy and functional.

Get it here:

Dylan Grice wrote a very comprehensive article @ Investment Insights on a Top Down vs Bottom up portfolio manager and the risk involve in both. Its rather lengthy as well.

A few interesting thing caught my attention.

Hindsight Bias:

The classic study on hindsight bias was done by Fischhoff and Beyth⁵ who asked their students to estimate probabilities for possible outcomes during Nixon’s visit to China in 1972 before it occurred (for example, “what is the probability that the USA will establish a permanent diplomatic mission in Peking, but not grant diplomatic recognition”). What the subjects didn’t know was that they would be later asked to recall those probabilities. But when they did, between two weeks and six months after the visit, they recalled that their estimate of events that did happen was much higher than their actual estimate had been, and likewise that their estimate of events that had not transpired had been much lower.

This hindsight bias helps explain our inability to see outliers. If you were perfectly rational in forecasting returns, an unexpectedly positive or negative number would widen your volatility estimate. But if you “knew it all along” you wouldn’t accept that the return was unexpected. Your estimate of potential price volatility would be unchanged and you’d continue to disregard the possible outlier events as too unlikely because your forecast range would remain too narrow. This was actually evident when I put the data together for the QQ charts above. The standard deviation of the actual exchange rate changes was 5.7%; that for the forecasts was only 1.8%.

Of Berkshire’s management of insurance risks:

At this year’s Berkshire Hathaway conference, Charlie Munger said that while most people and firms do whatever they can to avoid large losses, Berkshire Hathaway is designed to take them. “That’s our edge”, he said. When asked about his successor at the helm of Berkshire, Buffett said that the most important thing his successor at Berkshire must be able to do is “to think about things which haven’t happened before.” Most insurance companies lose money on their underwriting operations but make money on the float. Berkshire Hathaway makes profits on both. They haven’t been able to do this because they’ve been better at predicting the future than the competition – they openly admit to not even trying – but because their whole approach is grounded in a) the understanding that “outlier” events happen every few years, and b) being patient enough to hold capital in preparation for deployment when such “outliers” inevitably arise.

That sorta means that that they understand that after a few years you are presented with great buying opportunities and are willing to sit on the sidelines when prices do not get there

2 Strategies for an insurance based approach to portfolio management:

The first and most simple is the avoidance of the purchase of overvalued assets. Ensuring an adequate margin of safety against the unknown and unknowable future – rather than trying to predict it – is the central philosophy behind Ben Graham’s concept of value investing and one of the simplest differences between investment and speculation. It’s as important today as it has always been and is why a careful and prudent analysis of valuation is so important. This is why I spend what some might think is an unusual amount of time on equity valuation for a macro strategist

The second approach is to focus on the “grey swans” – the tail risks which are predictable – by devoting time to thinking about them and to finding effective and efficient protective insurance should they happen. Most of the research Albert and I write aims in this direction. It is for most of us, I believe, a more fruitful use of macro research than trying to predict various markets’ short-term moves. There is a very big difference. Some have interpreted my work on government solvency as a reason to short government bonds, and JGBs in particular. I’ve actually never suggested doing this. To get it right you have to get your timing right, and ? well ? see the above on how confident most of us (myself included) should be about that.

In essence, as an active portfolio manager you have an idea where the market is going or you might be riding on a trend, but at the end of the day, your purchase price is important and after experiences of 2 bear market in less than 10 years, you might want to start thinking about outlier events and protecting your portfolio against that.

The name “Minibonds” itself is a misleading word for investors. Whatever money you have invested in this “Minibonds” are not invested in bonds of the six reference banks or bonds issued by Lehman Brothers. This is how it works.

Lehman Brothers may or may not buy any bonds from the six reference banks but it is just using these banks as “reference entities”, some sort as a “bet” with Minibonds holders. There are basically 5 entities involved in the Minibonds arrangement.

1) Lehman Brothers as the credit risk swap partner.
2)Lehman Brothers has created an empty shell company Minibond Ltd which will issue the Minibonds to investors.
3)TThe investors.
4) The money taken from investors will be invested in a basket of AA financial products from 150 companies which includes CDOs which is basically collateral debts obligations, some of them are related to SubPrime debts.
5) The reference entities which have nothing to do with investors’ investment other than being a betting reference: i.e. if any one of them failed, it would be a credit event that make investors lose money to Lehman Brothers.

For simplicity to understand the whole arrangement, just take it that Lehman Brothers has bought some bonds from these six reference entities and it needs somebody to insure its risk of exposure to these banks. It did not insure its risks from insurance companies like AIG but instead, via this Minibonds arrangement, bought insurance from investors like you.

Through the Credit Risk Swap, you as an investor has agreed to sell insurance to Lehman Brothers with regards to the reference entities. In order to become an insurance agents of Lehman Brothers, you will need to come up with money as collateral. This money is collected from you via the financial institutions that you bought the Minibonds and given to Minibond Ltd to invest in a basket of CDOs issued by 150 companies.

[Read more of minibond here >>]

Tan Kin Lian has this to say [horror story]:

This type of investment allows you to bet on currency movements. You stand the chance of a big loss when the currency moves against you. You only get a small return (in the form of a higher interest rate) when currency moves in your favour.

Recently, the AUD dropped by 30%. Those who were “long” in AUD lost 30%. But those who were “short” in AUD did not gain 30%. They only gain 1% or 2% in higher interest. The bank keeps the remainder of the profit.

I learned to my horror that unsophisticated investors were asked to invest in “leveraged” dual currency investments. The bank lends them 4 times of their investment, so that they can take 5 times of the risk. If the currency drops by 20%, their total investment isstrong wiped out/strong (i.e. 20% X 5 times).

The relationship manager of the bank who sold the leveraged DCI earned 5 times of the commission on this product. But, it wiped out the total savings of the investors./p pSomeone told me that her monther lost $500,000 on this type of investment. Another retiree told me that he lost $150,000 in 2 months, out of the invested sum of S200,000.

Do not invest in any of these products. Be careful about the advice of the relationship managers.