Past Experiences 5 – I Survive

Lucky Escape Does Not Bode Well for the Future

It was year 2006.

On my partner’s suggestion, I sold off all the holdings brought by Dave sometime in Feb 2006 when the market recovered and split some profit of about SGD 50,000 with my partner. At the same time, I made substantial profit from the sales of my personal Singtel holdings with a profit margin of $1 per share.  This more than covered my losses on Chartered Semi Conductor.

Later in Nov 2006,   I was able to sell the balance of my unit trust holding with very good profits.

But in “taking a gain,” we are actually stopping it.

A Simple Recipe for Making Money, by Jonathan Hoenig, December 21, 2009

http://www.smartmoney.com/investing/stocks/A-Simple-Recipe-for-Making-Money/

 In fact we sold off early as Singtel climb from $2.65 to $3.95 some months later.  

You can't let the winners run if you're always cutting them off at the first possible opportunity.

Staying Open, Jonathan Hoenig, July 17, 2006 

http://www.smartmoney.com/investing/stocks/Staying-Open-19773/#ixzz0hPkgvHLk

I am still holding to Intraco today. But holding to loser is different to holding on to winners.  The stocks has not recover after more than 10 years.

Ironically, many folks who find it impossible to take a loss end up selling later at exactly the wrong time: right as the rally begins.

Taking a Loss Is Harder Than It Seems, Jonathan Hoenig, August 27, 2007  

http://www.smartmoney.com/investing/stocks/Taking-a-Loss-Is-Harder-Than-It-Seems-21730/#ixzz0hPKesf3z

Kingboard Copper (average purchase price SGD 0.60) was only sold recently at more than 50% loss.  In 2009 Charter Semi Conductor was delisted but all loss has already been taken in as all along I take paper loss as real loss.  I never learned to cut my losses.

George Soros:  It is not whether you are right or wrong that is important but how much money you made when you are right and how much you lose when you are wrong.

Luckily my “wrongs” are usually with small stakes except for Chartered and my stakes are bigger on those that “rights”, Singtel.  This is actually quite risky.  In the case of WBL, my stake was small and capital gain was better than Singtel in term of percentage – 50% versus 38%.  Stock investment is big risk and we should listen to Peter Bernstein.

He counseled investors to take big risks with small amounts of money rather than small risks with big amounts of money.

Peter L. Bernstein 1919 - 2009 Remembrances, Jason Zweig, Jun 13, 2009

http://online.wsj.com/article/SB124486041357112031.html#mod%3Dtodays_us_opinion%26articleTabs%3Darticle

A very happy pig.  As at the end of 2006, I sold all my unit trusts and stocks.  It had been extremely profitable. 

In retrospection, I was simply lucky.

Because while Lady Luck might occasionally blow on your dice, you can't build a successful investment portfolio by being "lucky."

Investing is not gambling, but if you treat it as such, you'll find the endgame — empty pockets — is quickly the same in both endeavours.

Dictums like "let it ride" or "all in" tend to make for as short a night in the market as it does in the casino.

Investing is not Gambling, Though Both Carry Risk, J Hoenig, 9 April 2007 

http://www.smartmoney.com/investing/stocks/Investing-Isnt-Gambling-Though-Both-Carry-Risk-21064/?page=all#ixzz0hOoWnJgH

Or the way I have done it is simply a recipe for failure – losing BIG.

I think so.

Conventionally, we believe that we have a lucky escape, we would continue to be lucky

大难不死

必有后福

福 Luck

But in investment, if we have a lucky escape because of indiscipline or trying our luck, we are more likely to face disaster

必有后祸

祸 disaster

There's a bit of sage advice that suggests it's better to lose money than make it the first time you buy a stock, because that instills more respect and fear than making a quick buck on the first trade.

The problem on those occasions when you do succeed using undisciplined technique is that it reinforces exactly the wrong behavior.

 Although we might promise that our lack of discipline was a momentary transgression, the fact that we "broke the rules" and yet it worked makes us more likely to repeat the behavior in the future.

And sooner than later, it catches up and knocks you out of the game.

Of course, that sort of ruin only happens when you bet big at moments of weakness rather than strength.

Indeed, it's the one time you don't wear a seatbelt that inevitably leads to disastrous results.

One reckless indiscretion will likely cost them years of savings and consistent returns.

Keep Your Investment Guard Up to Avoid Knockout, J Hoenig, 5 Nov 2007  

http://www.smartmoney.com/investing/stocks/Keep-Your-Investment-Guard-Up-to-Avoid-Knockout-22088/