Taking risks

Throughout our lives, it is normal for us to take some risks, whether consciously or unknowingly. If the risk we took turns out to be a bad choice, the severity of the consequences is relative to your individual unique circumstances.

The way I personally weigh the risk as far as investment decisions are concerned is by asking myself the questions, 'If i turn out to be wrong, what is the very worst that could happen?' and 'If I turn out to be right, will it make a significant impact in my life financially?'. 

Its a buy for me if the answers are;

1. If the very worst that could happen is that the investment tanks, I sure better find an investment that pays me dividends while waiting for the market to reprice it again, presuming the company bought has been assessed and re-assessed to be a great business and unlikely to go to zero. In contrast, going to the casino and making a risky bet involving large amounts where your money can literally go to zero, I personally avoid. 

2. There is a high possibility that the investment is a 'multi-bagger' (at the least double, but ideally between 3x up to 10x). Conversely, if the risk taken will not lead to any positive life changing financial impact, then why adopt the risk in the first place? 

To be sure, everyone needs to come up with their own model based on their own unique situations. 

Global economy grinds to a halt, Covid-19 rescue package and is the worst over?

The Covid-19 virus shock triggered one of the fastest and sharpest market corrections in history, with global stock markets sinking about 30% in a matter of weeks.

Wall Street's "fear index" (VIX) at one point, surged to a record close of 82.69, exceeding the previous peak of 80.86 reached on 20 November 2008 (during GFC). This extreme, unprecedented volatility could be reflective that the markets are anticipating a global recession and the risks of a potential economic crisis have increased.

Recent data suggest that as segments of the global economy are synchronously shut down, the global recession might be a very deep one. The US, Canada and other European countries have reported a spike in claims for unemployment benefits.

Meanwhile, the daily number of confirmed Covid-19 cases continue to rise globally. How successful will the "circuit-breaker" policies be, in bringing the global pandemic under control? There are also concerns of a second wave of imported cases.

Is this a buying opportunity?

Savvy and experienced investors do not let a bear market go to waste and will certainly view this as a wonderful opportunity to buy quality businesses (shares in companies) at cheaper valuations during this virus induced sell-off.

Panic selling 09 March 2020

Today is the STI's worst trading day since Oct 2008, where investors/traders rushed to sell everything. The catalyst? Oil rout and covid-19 fears! The STI is technically into bear market. It was literally a sea of red in the equity markets today.

It is in times like this, if you did your homework, you choose the right stocks and have the nerve to buy some, fortunes could be made when eventually the stocks turn around and turn north. If you want to do well, stay stoic and adhere to your investment principles and plan. So...what's on your watch-list (shopping list)? 

Crash course in investing for a friend

My friend wanted to start investing which I welcomed and decided to share the following with him (in no particular order);

# Only buy shares of companies that you can hold indefinitely and later sell for a profit at the time of your choosing, rather than because you 'need to'. Put another way, don't invest capital you cannot afford to lose. Markets move up and down so you don't want to be in the position of needing to sell while share prices are depressed. We want to buy low and sell high, taking advantage of market gyrations, and we need the time and patience!

# Your core holdings need to be companies with a minimum 1Billion market cap and pay dividends of at least 4% so you can get paid while holding (especially if you get stuck in a down cycle). The PE ratio should ideally be below or not deviate too much on the higher side from the PE ratio of the STI index (currently ~12). An 'undervalued' company is one where the price to book ratio is below 1.

# In the market, you have the psychology- fear and greed. To simplify, when people are fearful, they sell (which drives the price down), and when people are greedy, they buy (drives price up). This may be easier said then done, but to be successful, one must buy when the market is overly fearful/pessimistic, and one must sell when the market is overly greedy/euphoric. Just think, wouldn't you much rather buy your BMW car if it had a 50% discount!? Hence, throughout history, the best times to buy shares in good companies were in times of crisis or a semi crisis. It is impossible to time the low, but you can accumulate using dollar-cost averaging strategy during the down cycle. In short, it is buying in tranches through time to average the cost price of the shares in the company you bought.

Currently, using the stock screener on the SGX website, the following companies fit the criteria above;

Date: 06Sep2019

Would I immediately go out and buy all the companies above? No. But it would be on my watchlist and when valuations become extremely attractive (market corrections/crash), I'd look to add to my portfolio indeed!

Legal Disclaimer: This is not an investment/trading advice or recommendation. The above content is for informational purposes only. Please seek the opinion of an expert or do your own research before making any investment decision or action.

How to do I prevent disappointment, frustration or anger?

I struggled with this throughout my whole life, both in my personal and professional realm. The main reason is because I upheld a high standard and expectation in my relationships with people, be it with family, friends, colleagues, professional advisors, contractors and so on. Whenever, they did not meet my expectations, I took a very black and white approach, which was to totally disconnect from them (except for family) while holding on the baggage of disappointment, frustration or anger. Between my late 20s until now, I believe that I improved significantly in this facet of my life. I essentially adopted a new approach as outlined below;

-Give people 20% buffer (to make error, mistake, time allowance), as they may not meet your expectation all the time, much less exceed it-

You see, the thing is, all people have their own stress and challenges in life. This is to say, we're not always at our best version of ourselves. Being aware of this, I believe it is important to factor this in or account for it when dealing with people. As long as they are effective, responsible, and accountable 80% of the time- this is satisfactory. Nobody is perfect, and just as people have shown grace when I may not be at my best, I too need to be graceful back to others. This approach has proven to make my life filled with more happiness rather than filled with burdens and stress.

High on life

Richard Branson, the well-known billionaire of Virgin group, said something to the effect, "You either stick your neck out and do something and have an amazing life, or sit on the sofa and watch other people do it".

We all should reflect on this, if haven't done so already. If you are 20 years old, you'll be 30years old before you know it (in what may seem like a blink of an eye), and then 40 years old, 50 years old and so on. Every single day counts and if we aren't choosing every day to do something amazing and choosing to be high on life, we just may be full of regrets when the inevitable final day arrives.

 

Philosophy and Wealth

"Of course I do not forbid you to possess it [wealth], but I would have you reach the point at which you possess it dauntlessly; this can be accomplished only by persuading yourself that you can live happily without it as well as with it, and by regarding riches always as likely to elude you." Letters by Seneca (Stoic Master)

Recommended books on Stoicism

Perhaps you're wondering where to start. To know more about the Stoics, A Guide to the Good Life: The Art of Stoic Joy, by William B. Irvine, is a terrific introduction to the basic ideas and how they could be applied to daily life. To further your learning, read Seneca's Dialogues and Essays, Marcus Aurelius's Meditations, and Epictetus's Enchiridion.

HITTING BACK THE CURVE BALLS

We have all heard sayings like “Life will throw you a curve ball once in a while”, and, “When it rains, it pours”. 

Read the blog post Mindset for Success: HITTING BACK THE CURVE BALLS, from setyourselfuptowin.blogspot.com to find out 3 ways to stay motivated.
 

Why I like being stoic

Knowing the principles of stoicism is one thing, but it is through the opportunities presented in life where the principles learned need to be applied (practiced) that one can truly appreciate stoicism. It gives you a system if you will, of how to deal with extremely challenging, uncertain or stressful moments in your life. A fundamental principle is understanding and distinguishing what is within your control and what is not. Our emotion is an example. We can be reactive to situations or we can be rational and logical, ie the stoic way. Harder said than done, but there is a choice. After months if not years of practicing, the foundational principles of stoicism can be so deeply internalised that it is no longer consciously considered, but lived. That's my goal. The principles of stoicism has guided and helped me in various facets of my life from health and fitness, to my business and personal relationships. Adopting the stoic philosophy has really improved the quality of my life indeed!

7 things I do daily to ensure a better future for myself and my family

1. Morning routine. Start with health and set myself up to win. I have a daily goal and make sure it is part of my bigger vision.

2. Move the body. Full motion and mobility will keep you healthy and well. I do exercises that focus on alignment (balance), flexibility and strength.

3. Recharge the “battery”. I either take a 10-15min nap or do breathing meditation mid-day (usually around 2pm).

4. Invest mindfully. The definition of investment to me is allocating my resources (time, energy, money) mindfully to improve the quality of life for me and my family. For instance, I invest my money into valuable products, programs, and services that will move me forward toward one of my goals. Whether it is health related or professional growth, I ask the question "Will this investment add value to my life in a meaningful way?".

5. Grow your mind. It’s important to challenge the status quo and ask more quality questions. To seek out the answers, I read books, listen to podcasts or reach out to potential teachers/mentors.

6. Be of service to others. The simple equation is- when you add tremendous value to people’s lives, you add tremendous value and fulfillment to yours.

7. Take Action (speed of implementation). Procrastination is the enemy. It’s no surprise that high achievers are action oriented. You need to take action to bring about (manifest) what you think about.

Is your happiness cheap?

The reason why we get stressed or upset is because we try to control the things that we can't control rather than focusing on the things we can. 

Let's say your definition of 'happiness' is- you are happy when things or life events that unfold hits your expectation but unhappy when it misses your expectation. This implies that your happiness is cheap because it doesn't require much effort to be taken away from you by a life situation that's not in your control. 

You expected great service at the 5 star hotel, but received hardly any attention much less a smile- you are unhappy. You expected a nice room but not only did you get a nice room, but you got an upgrade to the presidential suite- you are happy. You expected hot water in the shower, but you get only cold- you are unhappy. Your feelings and emotions, going up and down like a yo-yo being controlled by your environment rather being guided by your ability to focus and control your mind and thoughts about it.

The comedian, Kyle Cease said- "the only way we're hurt is not that someone broke our heart but broke our expectations." Does this mean we should lower our expectations or don't have one to begin with? I know that letting go of expectations is difficult because we've been conditioned to control everything but there is also a world of possibilities when we move with the music and embrace the unknown.

The mindset of winners

When you look at the high-achievers in this world be it in sports or in business, study their mindset. Winning begins with mindset.
'I'm going to be #1...'
'I'm going there to win not just any medal, but to win a gold medal...'
'I'm going to make an indelible impact...'
'I'm going to solve a problem that can affect the quality of lives of more than a billion people...'
...and so on.
They have amazing clarity, discipline and focus. They are hungry to 'win' regardless of major setbacks, the pain of training, oppositions and against all odds. They never give up on the single thing they can fully control- their mindset. It is amazing to observe the things that our physical body is capable if our mind is fully behind it.

Below is a link of a touching story of an Olympian, that shows just how important and powerful mindset is;

Getting upset won't help things

We may like to emulate highly successful CEOs and entrepreneurs when things are collapsing before your eyes. Many of you probably know Matt Mullenweg, CEO of Automattic, and original lead developer of WordPress? According to Tim Ferris in his book Tools of Tians, Matt is 'exceptionally calm and logical under pressure.' He's the epitome of 'getting upset won't help things.' Lets put this into perspective. His company is valued at more than $1 billion, has 500 employees and multiple data-center around the world- what are the chances that someone, somewhere has messed up right now?! 100%!! Yet, he is exceptionally calm! Wow!

Quickly shift your focus on the things you have control

After listening to a highly motivated, hard-working and successful individual whom I consider to be one of my mentors- this was my take home message; Everybody will be subjected to the 'unknowns' that present itself throughout our lives. But here is the thing- we're not in control of the 'unknowns'. We're only in control of what we decide to do when the unknowns hit our lives. What action we take in these situations are what separates the good from the great! It's taking 100% responsibility for our lives. Having the mindset that, 'nobody is coming to save us' except you! That is power!

How to prepare for a bear market

Just finished listening to Tony Robbins on a podcast where he discusses how to prepare for a bear market and be unshakeable/fearless. It was a fantastic interview and a timely reminder. To put this into context, the last bear market (crash) was in 2008 and market crash happens on average every 5 years, so we're overdue for one. The question is, are you prepared both financially and mentally? From a financial strategy point of view, he advises everyone to take a percentage of their money (income) that they'll keep forever, grow and compound, and provide passive income for the rest of their life without working (trading their time). 

"You're never going to earn your way to wealth."

To be financially rich, he says that we need to be owner of businesses. We can do this through owning a index fund and being well diversified.

Mentally, we have to be prepared because we know "winter" is coming and winter is the best time on earth. It is the greatest opportunity of our lifetime to leap frog financially. The strategy is, you don't need to panic. When markets go up and down, you don't go up and down. Apply stoic philosophy here.

What is the difference between a market correction vs a crash? A correction is when it drops from the high of 10% or more up to 20%. A crash or bear market is when it drops 20% or more up to 80%. Yes! 80%, like in the great depression. 

So when the winter comes, will you be financially and mentally ready?

Mr. Money Mustache blogs about Stoicism

So here is an overview of what, Mr. Money Mustache learned from reading the book "A Guide to the Good Life, The Ancient Art of Stoic Joy";

- Stoicism is a series of mental techniques and ways of life.
- To have a good and meaningful life, overcome your insatiability.
- The practice of negative visualization technique.
- Optimize what you can control and stop worrying about the things you can't.
- Experimenting with Voluntary Discomfort/Badassity.
- Fulfilling all of our life's obligations to our best ability.
- Have rewarding social interactions to maintain balanced happiness.
- Let reason triumph over reflexive emotions.
- The difference between pleasure and happiness.

Here is the link to the full blog post titled, "What is Stoicism and How Can it Turn Your Life to Solid Gold"

A strategy as a retail investor

Note to self based on what I learned from Mr. Chua Soon Hock, an investor with remarkable consistent results;
Overcome and control basic human weaknesses (greed, fear, impatience, pride and laziness) when put to the test in an uncontrollable market. Pay detailed attention to the process of applying sound investing methods. Focus on time, size and price  management- all within our control. Shares will be at basement prices when bearish psychology is extreme and liquidity is tight. Be patient.

Strategy for retail investors by Chua Soon Hock (Asia Genesis Equity Fund);
Timing- For situations where share prices are low due to a weaker economic cycle... "based on my experience it is best to buy on the day following the national government's admission that the economy is in a recession and gives a negative GDP forecast for the rest of the year." 
For a market crash due to a special event "it is normally right to commit 50% of capital on the same day of the event and rest of the 50% within a week."

Type of shares to buy- "Buy the top two of the best-managed institutions from each of the key sectors of banking, media, telecommunications, healthcare and computer software."
My Watchlist:
Banking- DBS, OCBC
Media- SPH, MM2 Asia
Telecommunications- Singtel, Starhub
Healthcare- Raffles Medical, FIRST Reit, (Riverstone?)
Computer software- Silverlake Axis, ? 

When to take profits- "Shares bought resulting from a market crash due to special events (ie it is a one-off situation), one can take profits when profits are between 50% to 100% within a six months period. However, for shares bought as a result of an economic crisis or economic downturn one should keep them for years."

Frequency of participation in the market- "Assuming a 35-year investment life, one can expect to participate in three to four complete economic cycles, with each cycle of about eight to ten years, yielding returns of at least 200% over capital...in addition be rewarded with about five event market crashes, which should yield at least 50% for each event."

Source: SG Thumbtack Investor

How to flourish

According to the famous American psychologist Martin Seligman, in order for an individual to truly flourish, you need 5 areas fulfilled;

1. Positive emotions and pleasure (eg. material and toys). *From a stoic perspective, while you can derive pleasure from material things have the ability to abstain. Must have self-control. Another note to mention is that things that give positive emotions and pleasure for you don't necessarily have to come at a steep price like possessing a Ferrari. Pursue the things that you enjoy and care about.

Ferrari or the Lamborghini?

2. Engagement (eg. work, training).

Health Talk at the Health Promotion Board

3. Positive relationships (eg. with your spouse, best friends). *Connection, good counsel, learn and grow, encourage and inspire, fun and laughs.

With my best friend

4. Meaning (eg. a cause or a purpose, something bigger than the self) *Identify your path, be clear with your vision and stay the course.

Quite alone time to look inward, reflect and examine.

5. Accomplishment (the fruits of successful work, training). *Oh the joy of finally being able to do my first muscle up...you can see my excitement in the video attached below :)

If you lived everyday like it was your last, the chances are that you'll fill your day with the 5 areas aforementioned and care less about the things that really don't matter. This will let you fully enjoy your life and allow you to flourish. If you detracted from it today, think about what could be improved for tomorrow.

Marcus Aurelius said, "Approach each task as if it were your last, because it very well could be."

Define financially free from a stoic thinker perspective

How do I define financial freedom? If an individual has the choice at any given moment to stop working for an active income and still maintain their chosen lifestyle throughout their entire life - then he (or she) is financially free. By 'active income' I mean having to do the work themselves to produce the income. The common misconception though is that to be financially free, one must possess monumental wealth. This is not true for everybody. As long as you are in keeping with this simple formulae, whereby your recurring monthly passive income is always greater than your monthly expenses (based on your lifestyle), then you are still considered financially free. 
However, life throws curve balls at us once in a while. We've all been there. How about our car that suddenly breaks down and requires $500 in repair/replacements, or $1500 airplane ticket because of an unexpected family emergency? In this situation, you'd be out of balance if your monthly passive income is usually only slightly above your average monthly expenses.
So to refine the above definition, to be completely financially free, not only should your recurring monthly income be able to cover your expenses (based on your lifestyle) and then some, but you need to have enough cash reserves saved up for 'emergency' fund.
The ideal situation would be to be working in your current 'job' because you simply love it and not because you have to. It's a calling whereby you get abundance of joy and fulfillment from your contribution and making a difference in the world. The active income from it (if any) is simply a bi-product but not a necessity to 'make a living' from it. If one is in this position, I think this is where real creativity and productivity resides. One does not need to be distracted by thoughts of worry about how to pay their bills next month, but rather pursue excellence and fill their minds with things that they care about most. Interestingly, people in this kind of position end up with more financial abundance.