What matters is how much you have invested when you make money and when you lose money

My friend Melvin always tells me its great to make money  no matter how little you make. I think that’s partially true.

The number 1 rule is not to lose money. The number 2 rule is not to forget the first rule.

I would like to add another permutation to this.

What matters is how much money you are invested in a good trade and how much little money you are invested in a bad trade.

Don’t understand this? Perhaps this case study is best.

Noble Group

I got invested in this at $1.70 when it corrected and I thought Noble was one of the well managed companies around with excellent investor relations. A supply chain commodities manager like this would do well.

Alas I made up to date 35% from this. I should be happy but I am not. Why? I only got 1000 bloody shares in there.


Contrast this to my recent purchase of Singtel. It is 10 times as large as this Noble purchase. Sure the worse it hit during the 2007-2008 recession was 2.30 to 2.40. that’s 23% below current price of 3.07.

But my losses will be much larger than the Noble Group explained above.

Granted, Singtel is not a trade but rather more of a passive income dividend play, but you get my point. I could be frustrated with how little I made from the lesson learn about that Noble trade that I plonk in SGD $20k and it turn out to be a bad trade.

Perhaps the way to solve this is to use a uniform trade size. Not too little to really not make an impact and not too large that you will kill yourself over it.

I run a free Singapore Dividend Stock Tracker available for everyone’s perusal. 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.

  • http://createwealth8888.blogspot.com/ Createwealth8888

    3M’s: Method, Mind and Money.

    Money – fewer investors spend enough time seriously thinking about it and they tend to spend too time thinking on Method; but Money management is important too. You have provided a nice example on money management.

  • Derren

    Hi Drizzt,

    I agreed that to use of uniform trade size to do trading and also on Creathwealth8888 on money management.

    In additional, if we trade at $8900 and above, we will be paying the minimum % of transaction cost.

  • http://singaporemanofleisure.blogspot.com/ Singapore Man of Leisure

    True true.

    We can boast to the world we have a 10 bagger, but if our investment is 1,000, then 10,000 is not exactly life changing….. And vice versa for a 90% loss on 1,000. It won’t kill us (OK, the planned trip to Hong Kong is off!).

    But if we invest with 500,000 (which is the portfolio of some bloggers), “even” a 2 bagger wil turbo-charge our financial freedom journey!

    You don’t trade or invest the same way with 1,000 and 500,000. That’s why it’s easy for those “gurus” selling trading courses and seminars to get huge % gains testimonials from their ex-students. Smoke and mirrors.

    I like to read Createwealth8888 and Drizzt comments and blogs. I prefer to listen to what people do, not what they say.

    Thanks for the real life example Drizzt!

    Createwealth8888, I am glad I’ve some basics on financial literacy to appreciate your comments. Dr Alexander, time to vist you again for therapy….

    For me, I am focusing on the mind part, and more and more on the soul too (but that’s nothing to do with investing, or is it?)

  • Drizzt

    Hi Createwealth8888, i learn alot from the Getting Things Done methodology that i blogged about here >> http://www.productiveorganizer.com/getting-things-done/

    To be an effective implementer, you not just have to excel in a single module but have to be well balanced in all aspect of that subject.

  • Drizzt

    Hi Derren, thanks for bringing that up. Does that mean 9k is the magic number to invest?

  • Drizzt

    Hi SMOL, thanks for sharing. I believe you should really focus on the soul portion when you really retire. Looking forward to it.

  • Derren

    Hi Drizzt,

    I use brokerage fee of 0.28% to calculate the minimum sum to hit above the minimum brokerage fee of $25.
    $25 = 8930*0.28%

    So if we invest $9000, the cost of transaction come out to 0.35% of the contract sum exclude fee & GST. This 0.35% will apply till 50k.

    If I use your 1000 shares at $1.70 as an example, it would turn out to be 1.62% of the transaction cost. The return will be -3.25% to begin with at $1.70, or need to rise to $1.76 to break even.

    At the moment, I’m restrain myself to using a minimum sum of $9k to trade or invest, so as to avoid over trade and accumulate more cash for any good opportunity

  • Drizzt

    Thanks Derren i shall remember that soft limit and invest accordingly.

  • http://tradingeducationprogram.org/ Value Investor

    Stop looking at Singapore stocks for the next 3 months. The risk outweighs the potential returns.

  • Drizzt

    hi Value Investor, what is your take on commodities currently?