1. Stock A had announced a dividend last month and I had bought Stock A to get the dividend. Upon the ex-dividend date, price dropped. This is normal. But the price dropped by more than the dividend and I knew that the price will come back up to a normal level. I had waited 7 days since the ex-dividend date. However, the market rallied and I was seeing a lot of stocks moving up in price. All except Stock A. I wanted to be part of the rally too. Against my better judgment, I sold Stock A at the Year Low price. In doing so, the losses had eaten into the dividend I have.

2. After I sold Stock A, market was already up more than 1%. I did not dare to buy into stocks that have already risen between 5% to 10%. Instead, I looked for stocks that have not budged from yesterday’s closing price. I assumed that when the market rallies like this, then stocks across the board will move up as well. I found one I liked, Stock B, and I bought it straight away. Why did I like Stock B? Because based on fundamentals, this business has good profit margin and the dividend yield is high. However, this stock is not one of those that attract active trading. I watched the counter for 1 hour and the price didn’t budge. Trading volume was thin. I was even more desperate to profit from today’s rally because time was running out. I sold Stock B at a loss.

3. I scanned my watchlist and found a stock that has fallen from the day’s high. This stock, Stock C, had strong buying pressure in the morning trading session and had pushed the price up by 20% and has since fallen back to 10%. I assumed that the sudden interest in Stock C is due to the interest from Fund Managers. These Fund Managers have been missing since the last week of last year and I thought they had come back. More importantly, it seemed to me they were buying up this stock. I bought Stock C immediately. I was right, there was strong buying interest, but the price didn’t budge either because the selling pressure was even higher. The price couldn’t move up and again, I sold all my shares.

4. Until now, I have bought and sold 3 stocks, all at a loss. I was disappointed with myself. I cursed myself and blamed it on my bad luck and impatience. I watched the other stocks that have risen between 5% to 10% continue rising to between 10% to 30%. Maybe I should have bought these stocks in the first place since the momentum appears to be there. I bought Stock D, a oil and gas counter. But I bought it at the day’s high and at almost the end of the trading session.

I hope come Monday, the market will rally like today and I could off load Stock D to recover some of my losses.

The important lessons I have learned.

1. Never assume or think that I am ahead of the market. Nor should I assume or think that I know which stocks will rise and fall.

2. Never put all my money into one or two stocks. If I had extra money, I wouldn’t have needed to sell Stock A in the first place at a loss to participate in the market rally.

3. Buy the stock. Don’t look at the market or the price. Just switch off and wait for the dividend. The more attention I pay to the market, the more inclined I am to trade, and the more likely I will make foolish decisions.

© 2008 by CashColor. This feed is for personal, non-commercial use only.

What better topic to start the new year than “My New Year Resolutions”? Last year was a good year for me. I hope this year will be even better. Here are my goals for 2009.

Financial
1. Save RM65k in CD by Feb 2009. This amount is allocated the down payment for buying property.
2. Buy insurance by Mar 2009 in anticipation of buying a property in May 2009.
3. Earn a side income of RM6,000/mth by Apr 2009.
4. Buy a property in May 2009. (Timing is flexible though.)
5. Earn a side income of RM8,000/mth by Jul 2009. Quit my job once this threshold is achieved.
6. Side income of RM10,000/mth by Oct 2009.
7. Trade up the value of my stock portfolio from RM8k to RM16k.

Love
1. Get out more often and get to know more friends of the opposite sex. This will increase my chances of finding The One.
2. Participate in speed dating, at least once

Friendship
1. I should start tracing my lost friends. If not, then I’d be lonely after I quit my job. What are friends for?

© 2008 by CashColor. This feed is for personal, non-commercial use only.

Short-term Goals

1. Increase my part-time income to RM4,000 a month.

(Review: Achieved. My part-time income now is about RM4,000 a month. Though there were some hiccups and setbacks along the way, I am happy that I was able to accomplish this feat.)

2. Double up my part-time income by end 2008. Then resign from employment to concentrate on my part-time venture.

(Review: Yet to achieve. I was not able to boost my income as fast as I had expected. Sometimes things just don’t go the way I want them to be. This will remain a goal for 2009.)

3. Save RM60,000 in CD by Jan 31, 2009. Currently I have RM30,000 in CD. I need to add RM5,000 CD a month until Jan 31, 2009.
(Review: On going. As of Dec 2009, I have RM55,000. I will bank in another RM5,000 into my CD account next month. So, I am very much on track with this goal.)

4. Buy life and medical insurance.

(Review: Yet to buy: I have decided to buy a life insurance when I buy a property. Because that is when I will start to have financial commitments. As for medical insurance, my employer has already bought medical insurance for me. However, since I am thinking to resign from my job, I will have to buy a medical insurance for myself. I should look into this together with my life insurance.)

5. Use my CD to buy a residential property by Apr 2009.

(Review: On going. I should start researching on properties already. However, the general consensus is that the real estate market will soften next year, hence the prices should be lower. I should be flexible on the timing of buying the property so I could take advantage of the market conditions. I should also not limit myself to buying residential properties, but also consider commercial properties.)

All in all, I am satisfied with my performance in 2008. This is also the first time that I have actually set goals for myself. Amazing isn’t it how a little financial planning and goals setting can contribute to one’s life?

© 2008 by CashColor. This feed is for personal, non-commercial use only.

Both the banks, in their computations, used 70% of my gross salary as the maximum repayment I could afford with the condition that I put up 20% of the property value as down payment. Could the banks be serious? If my gross salary is $1,000 then the bank would be willing to loan an amount whereby my monthly repayment will equal $700. This is insane.

The statutory retirement contribution is 11%. Tax is about 13%. This leaves me with about 76% take home pay. If my mortgage repayment is 70%, I will only be left with 6% to survive and pay my bills. Could people really live on only 6% of their gross pay? I suppose you could if your paycheck is enormous. However, I doubt the poor and middle class could.

The banks are encouraging people to spend beyond their means. No wonder the credit crunch has such a huge impact on the economy. Because people were spending and living on credit. Once the money supply (or credit) is cutoff, people have nothing to spend with.

We should not overstretch ourselves when buying properties. Else, we would be slaves to the bankers.

© 2008 by CashColor. This feed is for personal, non-commercial use only.

Many businesses fail because they did not get their priorities right. The business owners did not put in enough efforts on areas that are critical to the survival and growth of the business, but instead focused on non-critical areas. As a result, valuable funds, time and efforts are wasted.

The Pareto Principle, also known as the 80-20 Rule, states that approximately 80% of the effects are caused by 20% of the causes. For example, “80% of the company’s sales come from 20% of the clients.”

Very often we read about corporations spinning off or selling a small division or business segment. One can view these corporations as ridding business segments that eat up 80% of their resources but generate only 20% of returns for them. Therefore, it’s better to sell off these businesses and focus on the core business that generates the bulk of the company’s income.

I will say it again, if one wants to be successful in business, “Focus on what is important. And do it well.”

© 2008 by CashColor. This feed is for personal, non-commercial use only.

Value Investing: From Graham to Buffett and Beyond, is written for students of value investing. The author, Bruce C. N. Greenwald is a Professor and reading this book gave me the feel as if I was attending one of his lectures.

The first part of this book is about the different theories and valuation methods. Only when one is able to fairly value a business will he be able to judge if the business or stocks are selling below its intrinsic value. If you are the type who falls asleep listening to your lecturer, chances are this book is as good as a sleeping pill to you.

The second part of the book analyzes the different approaches used by different value investors such as Warren Buffett, Mario Gabelli, Glenn Greenberg, Seth Klarman and a few others. We see how these investors put their knowledge into use and how they value businesses.

My conclusion, this book is more suitable for readers who love academic theories and formulas.

© 2008 by CashColor. This feed is for personal, non-commercial use only.

I came across an article at MarketWatch explaining why people squander their windfall, whether it is lottery winnings or inheritance. In my opinion, this article did not answer the question, which is “Why do these people squander their windfall?”

The answer is simple. It is because these people were not ready to become millionaires. Rich people have different mindsets compared to the middle and lower income group. A person who does not have the millionaire mindset will not be able to manage the windfall and hence, he will squander away his money and end up where he was before. To keep his millions, he would have to change his mindset. He would have to think like millionaires.

Here is a simple analogy. Imagine a 1 liter bottle. This bottle can only keep up to 1 liter of water. Suddenly you receive a windfall of 5 liters of water. But your bottle can only keep 1 liter. The other 4 liters are spilled as you pour the water into the bottle. To keep more water, you need to change the bottle to a bigger bottle.

In this analogy, the bottle is your mindset and the water is your wealth. If you keep thinking you are worth $1 million then you would only be able to keep $100,000 even if you receive a windfall of $500,000. To keep the $500,000 you need to change your mindset. If you keep your mindset at $100,000, you will manage your money in such a way that you will only be left with $100,000 in the end.

Let me share my personal experience. For many years, I have been chasing wealth. I was greedy. I wanted to be wealthy as quickly as possible. I invested my money in get rich quick schemes and also gambled with all my wealth to the point I was borrowing money to gamble with. I gambled all my wealth away and was only a step away from being a bankrupt.

The problem was my mindset was a poor man’s mindset. Rich people do not gamble with all their wealth. Rich people do not leave their fate to others. I was not managing money like rich people. My mindset was “either zero wealth or double my wealth”.

After this period, I changed my mindset to, “$10,000 wealth”. I began clearing my debt and saved some money. Eventually I saved $10,000. Then, as if history repeats itself, I found that I was squandering money again. For months my wealth would not rise above $10,000. Because my mindset was at $10,000, I managed my money in such a way to achieve the $10,000 figure in my mind. I saw this problem and increased my mindset to “$20,000 wealth”. Immediately I saw a change in the way I manage my money.

Over time, I have gradually increased my mindset and my wealth has followed suit. I recommend you to read “Secrets of the Millionaire Mind“.

© 2008 by CashColor. This feed is for personal, non-commercial use only.

Recently I have started trading stocks. I notice that a lot of stocks are undervalued. I invited my sister several times to buy shares but she has refused. She is not convinced that she will earn money from owning these shares.

This has also reinforced the argument that people invest in stocks based on market sentiments instead of basing on the fundamentals of the companies. During bull runs, people buy shares even when they are overvalued. And when the bears rule, people are reluctant to invest in shares even when the shares are sold at bargain prices.

Another point of view is that many investors are now waiting at the sidelines until the market has bottomed out. Their reasoning is, “Why buy now when I can buy later at a cheaper price?” True, but how many of us can spot the bottom when it comes?

© 2008 by CashColor. This feed is for personal, non-commercial use only.

There must have been more than just a handful of customers voicing out their dissastisfaction. Recently, I made two withdrawals and Paypal no longer converts these withdrawals to my local currency. This is good for me because my bank will convert these withdrawals at a cheaper exchange rate.

© 2008 by CashColor. This feed is for personal, non-commercial use only.

My first trade has all the hallmarks of a speculative trade. I bought the shares of Zelan on the rumor that MMC will privatize Zelan. I targeted to dispose the shares on the same day with a gain of 1.5 cents a share. However, market momentum soon waned and I wasn’t able to sell the shares as intended.

Luckily the following day, market buoyed on the news of Citibank bailout and the Central Bank lowering the borrowing rate by 25 basis points. I was able to dispose off my shares. Hours later, the market was abuzz with news that MMC will not privatize Zelan.

This experience has taught me how easily it is to fall into the pitfalls of stock investing. I was tempted to speculate because I wanted to join the crowd and the temptation of a quick gain. If the positive news had not come out at the right time, I could have been stuck with an overvalued stock.

© 2008 by CashColor. This feed is for personal, non-commercial use only.