Driving Test Passed!! What's next?

Okie, this is not any related to investments stuff but i'm on cloud nine today cos never will I expect to pass my driving in the first attempt!! My first practical lesson started on Jan 05 hence I took merly 4 months to pass it however it does not come cheap; a total sum of $2.2k (*ouch*). In investing terms, this is relatively useless because it does not have any potential returns and in additional, this sum takes up a large portion of my total portfolio value however I do believe this is a essential skill that one must acquire.

How not be the first to sell and last to buy (BT weekend article)

Over the weekend, I read an interesting online article titled "How not to be the first to sell and last to buy", and I believed most of the investors encounter this problem too.. To combat this, we have to first understand the human psychological factor. An example quoted from Business Times, "If a book makes it into the international best selling list, more people will be enticed into reading this and that in turn will boost sales. So apparently one trick employed by publishers is to buy the books they want to promote from the retail outlets themself."

Similarily, the same mechanics works for stocks and shares too. Personally, my style is that I would search for undervalued stocks using fundamental analysis and hopefully, my entry will be earlier than the fund houses(simlar to the publisher in the example that I quoted earlier). This may maximise the stock potential and also provide one a good margin of safety too but one downside is that there is a chance that the stock's price may stay stagnant hence patient is the key for this approach's success.

Regardless of whether you are an investor or trader, they share the same objective which is avoiding being the first and last to sell. I will share the approach that I have adopt and also my portfolio in my next few posts... Time for me to sleep and hopefully I can pass my driving test tomorrow else it will result in unnecessary expenses and time!

Importance of a budget plan

Ok. guess it is time for me to draw up a budget plan so as to limit myself from spending too much but having said tat, most important of all is to adhere to the plan with discipline else no matter how well the plan is drawn up, it still wont help..

Currently, I'm having some difficulties figuring out the reason of my sudden depletion in my saving account this month as I do not have a habit of keeping track of all my spendings. I guess food makes up the most of my spendings as I have been patroning several restaurants and each visit costs me an average of $30.. This may not be considered a significant amount but if it is compared relatively to my allowance which is only a mere $420, the "value" of the money is magnified..

I always tried to keep track of my daily spendings, with various degrees of success. Right now, I'm considering carrying a small notebook around to jot down my daily spendings. I guess there are better alternatives which are more efficient just that I have not thought of any yet ...

Well, I guess I will post up my budget plan and spendings here in the future so as to constistently remind myself the importance of it and also restrain myself from spending too much!!

Thats all for tonight, time to dunk myself into the dream chamber .....

Compounding Interest

I just realised I have spent nearly 2k on my driving lessons and yet I'm still not confident in passing it first time.... Sometimes , I do sort of envy people who can pass first time with only a few pratice lessons... Guess that's my life and hopefully luck will be on my side during my test which is on the coming monday :).....

Coming back to the investment topic, I believe one should always start to invest early to maximise the potential of the concept compounding interest. The power of compounding was said to be deemed the eighth wonder of the world - or so the story goes - by Albert Einstein.

While it is never too late to save but putting it off too long can take out of your retirement money.. Hence a conclusion is that to retire comfortably, one should start to save at first opportunity..

Example

Tom and Dick, both age 21, start their first job where they receive the same salary. They share the same apartment and split their household expenses equally. Tom decides to start saving $100 from each month's salary. Dick, however, wants to wait until he is older before starting to save. If we assume an annual rate of return of 6%, Tom accumulates approximately $16,700 after 10 years. Dick starts saving at age 31, and like Tom, decides to save $100 per month. By the age 65, Tom's retirement account would be about $253,000, while Dick's account balance, started 10 years later, would be about $132,000. (Quoted from investopedia)

An annual rate of return of 6% is nearly impossible with merly allocating your money into the bank saving account.. From what I have gathered, currently the highest interest rate offered by bank is only 2% and with factors like inflation, changes in interest rate and etc, it may undermine your savings which may result in a deficit.. Therefore I will like to emphasise the importance of investing in stocks and etc. Risks and gains have a direct correlation therefore the higher potential of returns, the riskier it is but with some investing rules, I believe the risk can be minimised.

I vaguely remembered an article was mentioning that the first thing one should always invest is books and I strongly agree with them.....

My first blog entry

Okie, this is my first blog entry and the main intent of creating this blog is to share my investing strategy and also to gather some feedbacks on it.. Personally, I'm a avid believer of fundamental analysis although this concept has been questioned by many whether if it is still applicable in today's market...

Currently, I'm only investing in the Singapore market because firstly, I am residing in singapore hence it is easier to get hold of news and etc. Secondly, while the singapore market is growing at a tremondous speed, I still believe that there is still room for mistakes compared to the US market where a small mistake can get myself "burnt".

My portfolio is make up of 90% stocks and 10% cash.. This may not be a good way of allocating my funds; a suggested guiding rule is that an investor portfolio should be diversified accordingly by bonds, cash, and commonstock with the weightage 70%, 20%, 10% respectively. But I have decided not to adopt this guidline because of the following factors :

1) Bigger appetite for risk due to my age.
2) Won't be using the funds allocated to my portfolio for any other purpose..

That's about it..... will be attaching my portfolio in the next few days if time permits.