Category: Personal Thoughts

Note: This article contains major spoilers for the popular Korean drama Hometown Cha Cha Cha. If you’re still watching the show or plan to watch it in the future, read this at your own peril! (You can always read this article after watching the show though!)

Together with my wife, I recently finished viewing a new Korean show, Hometown Cha Cha Cha, on Netflix. Thanks to her prodding, I discovered a series that I thoroughly enjoyed – it was not only heartwarming, heartbreaking, and funny, but it also managed to stir up my investing mind.

Two of Hometown Cha Cha Cha’s key characters are the kind-hearted and carefree male protagonist Hong Du-Sik, and the meticulously forward-planning and caring female protagonist Yoon Hye-Jin. Throughout the series, which was set in the beautiful but fictional sea-side town of Gongjin in Korea, it was heavily hinted that Du-Sik had a tragic past but the actual events were always a mystery until the penultimate episode.

Du-sik’s history

When Du-Sik was in university, he became roommates with a senior named Park Jeong-U and the two soon developed a strong brotherly bond. Being a senior, Jeong-U graduated from university first and became a fund manager at YK Asset Management. After Du-Sik completed his studies, Jeong-U roped him into the same firm. 

Du-Sik rapidly rose through the ranks at YK Asset Management. But despite his success, he always remained humble and kind towards everyone at the firm, even to the security guard at the office. Over time, the guard, Kim Gi-Hun, came to know Du-Sik better. Wanting to make money through stocks, Gi-Hun eventually asked to invest in the funds that Du-Sik was managing. Du-Sik, thinking that his funds were too risky for Gi-Hun, tried to dissuade him. Gi-Hun was persistent though, and Du-Sik eventually relented. But before Gi-Hun invested, Du-Sik strongly reminded him to never take unnecessary risks.

Soon after Gi-Hun invested in the funds, a seemingly major Korean company named Benjamin Holdings went bankrupt. The Korean stock market suffered a big one-day decline as a result, with the country’s major market indexes falling between 8% to 12%. Being worried, Gi-Hun sought advice from Du-Sik outside the office. 

During their conversation, Gi-Hun revealed that he had invested in one of Du-Sik’s riskiest funds, named ELF, despite Du-Sik having recommended less-risky choices. On the day of the big decline for Korean stocks, ELF was down by 70%. Du-Sik told Gi-Hun to hang onto the investment because the value of ELF should rise again with time. But – again unbeknownst to Du-Sik – Gi-Hun had poured gasoline into fire. The security guard invested in ELF with his security deposit for his house and so, had no holding power whatsoever. But that’s not all. Snared by greed, he even took up loans to invest in the fund. Upon these revelations, Du-Sik was called back to the office to deal with an emergency but told Gi-Hun that he would get back to him soon.

Back at the office, Du-Sik continued getting calls from Gi-Hun but he never picked them up as he was stressed and busy. A few days later, Du-Sik heard that Gi-Hun had attempted suicide and barely managed to survive. After hearing the news, Du-Sik immediately wanted to visit Gi-Hun at the hospital. But Du-Sik was in no condition to drive as he was suffering from a breakdown. Jeong-U volunteered to drive Du-Sik to the hospital and also share the responsibility for this tragedy. Unfortunately, they encountered an accident while on the road, which resulted in Jeong-U’s untimely death. 

Investing lessons

Gi-Hun’s experience with investing in ELF demonstrated two dangerous but entirely avoidable investing errors. 

First, he invested in something that was highly risky in nature. Hometown Cha Cha Cha did not explain what type of fund ELF was. But given the magnitude of its decline in relation to the broader market’s fall (-70% vs -8% or -12%) and its portrayal as being highly risky, I’m guessing it was an investment fund that utilised significant leverage. What amplified the damage was that Gi-Hun used borrowed money to invest  in ELF. The use of leverage can juice returns when the market is smooth-sailing. But when the waves get rough as they inevitably do, the downward movements are magnified substantially, to the point where you can drown. For example, if you’re investing $10 for every $1 you have (meaning you’re levered 10-to-1), even a 10% decline in your underlying holdings can wipe you out.

Second, he used his security deposit to invest in ELF. In my opinion, one of the most dangerous things an investor can do is to invest with money that he needs to use within a short span of time. If he does so, he may be forced to sell his stocks when prices are low, since the stock market is volatile and short-term price movements are incredibly hard to predict. Jeremy and I run an investment fund together that invests in stocks around the world. In our verbal and written communications to our investors, we highlight our hope that our investors will only invest with money that they would not need for the next five years or more. Even if it’s at the short-term expense of our business, we would not want to invest for someone if we learn that he needs the capital within this timeframe. The reason we do so is because we want ideally all of our investors to have holding power. We do not want our investors to suffer the unnecessary risk of having to be a forced seller at a time when prices are low.

An affinity

While learning about Du-Sik’s tragic past in the penultimate episode of Hometown Cha Cha Cha, I felt an affinity with the character. During the episode, Du-Sik said: 

“He [referring to Jeong-U] convinced me to work at that company [referring to YK Asset Management]. He was a fund manager there. At first, I was hesitant about taking the job. It had nothing to do with my major and was too money-oriented. I didn’t like that. But then he said, “Fund managers give ordinary people hope that even they can become rich.” I think… that made me change my mind.”

I graduated from university with an engineering degree, just like Du-Sik in the show. But unlike the character, I knew, even as a university student, that I wanted to be in the investment world. Where we’re again similar, is that I did not want to just be a cog in the machine and make money – I wanted to be in a role in the investment industry where I could positively impact the lives of many. This is why I was so thrilled when the opportunity to join The Motley Fool’s Singapore office landed on my lap in late-2012. I officially started in January 2013. Back then, the Fool already had a wonderful purpose to “Help The World Invest, Better.” A few years into my stint with the company, the purpose was upgraded: The Fool now wants to “Make The World Smarter, Happier, and Richer.” Both purpose statements are wonderful and resonate with me. 

When I had to leave the Fool’s Singapore office in late-2019, I embarked on a new adventure with Jeremy to set up an investment fund. Our fund’s mission is to “Grow Your Wealth, and Enrich Society.” I was thrilled to once again have the good fortune to be in a role in the investment industry where I could positively impact the lives of many. And although our fund can only serve accredited investors at the moment, we are working towards opening up the fund to all investors in Singapore in the future, if Lady Luck graces us with her presence and we gain the necessary scale to do so.

I never expected to feel an affinity with a romantic comedy such as Hometown Cha Cha Cha. But the character of Hong Du-Sik – and his thought process in deciding to be a fund manager – brought a smile to my heart. I hope Hometown Cha Cha Cha can inspire other young people to develop aspirations to build better financial lives for others – especially the less privileged – if they choose to enter the investment industry. This will give meaning, purpose and blessings to their lives, way more so than the build pursuit of money. 

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Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. Of all the companies mentioned, I currently have a vested interest in Netflix. Holdings are subject to change at any time. 

There’s a corner of the Twitter universe that has become a “digital hangout” for investors. Affectionately known as FinTwit, this is a platform where investment professionals, hedge fund owners, billionaires, and even retail investors express their thoughts on investing.

I’ve become an avid follower of many of these FinTwit accounts and have learnt so much from them. In fact, I consider FinTwit a great avenue to learn from investors from all walks of life.

Bad habits

That said, there are some well-followed FinTwit accounts that have developed bad habits. 

One of these bad habits is to sing about short-term gains on stocks.

For the momentum trader, this may be a justifiable indicator that they have made the right trades. But for the long-term investor (which is a strategy that most of these FinTwit accounts I follow prescribe to), short-term stock price fluctuations mean little.

Boasting about steep share price increases, without any meaningful change in the business fundamentals, is actually not a good indicator of whether your investment thesis was right in the first place.

Judging your investments

Just because a stock’s price has gone up significantly in the last day/month/year does not make you correct. If the stock price appreciation was not fundamentally backed up by strong business metrics, your investment returns could merely have been due to luck or simply a change in view among other market participants.

Two cases in point are the meme stocks: Game Stop and AMC. The two companies have seen their stock prices rocket this year as retail investors piled into them, artificially bloating their valuations.

If you made a big return on these two companies because you thought that they were good long-term investments and you think that the current stock price makes you right, then you are sorely mistaken. The stock prices of Game Stop and AMC increased largely because a hoard of retail investors pooled together to try to make a point. You were probably just lucky to catch the ride.

So how then should we judge if we are actually good long-term investors? 

Instead of looking at near-term stock price fluctuations, I focus on whether the investment thesis of the underlying business is correct. What I consider a good indicator of good stock picking is when the companies I have a stake in report growing revenue, profit, and free cash flow over a multi-year period. This is a better measure of whether I’ve picked the right companies to invest in. If a company can grow its free cash flow at a healthy rate over time, its stock price will likely keep growing, as long as the initial valuation was not too expensive.

The bottom line

Near-term stock price fluctuations merely reflect a changing appetite for the stock among stock market participants and usually only represent changing valuation multiples.

A better indicator of long-term investing success is whether the underlying business continues to outperform and grow over many years. Ultimately, business performance, and not investor perception, will be the main driver of long-term sustainable stock price growth.

Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. I currently have no vested interest in the shares of any company mentioned. Holdings are subject to change at any time.

Note: This article is a guest-post from Lee Leigh Ann. She is an intern at the investment fund that we (Ser Jing and Jeremy) are running. In this piece, Leigh Ann, who’s from Generation Z, shares her thoughts after completing one of our assignments, which is to read Peter Lynch’s classic investing text, One Up on Wall Street. Please enjoy!

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Being someone who is completely new to investment, my first impression when I saw the book One up on Wall Street was that it is going to be one of those profound books that only professionals understand. After all, books with the author’s picture plastered on the cover page do not seem all that attractive… to me at least. I was proven wrong very soon though, when I found myself already halfway into the book.

The book itself, contrary to its appearance, was actually an easy read. It was not packed with bombastic words and flowery language. In fact, many ideas were illustrated simply using analogy that could be easily understood. One small problem for me though was that I could not relate to certain terms used or examples given as easily. This is due to certain company names quoted that were unfamiliar in the local context. But this was not a major issue for me. 

Throughout the book, I was introduced to many new and refreshing perspectives. In school, though I was taught about investments, it was mainly theory-based and on a superficial level. This book provided me with new insights that are gained through 17 years of real life investing experiences by the author. There were many mind-blowing moments in the book.

From the book, I got to learn the difference between a speculator and an investor. To me, I just thought that anybody who invested in stocks is simply called an investor. Now, I realise that this is not the case. The difference between an investor and speculator is their difference in attitudes towards a stock. Investors want to generate long-term gains by holding onto a stock for more than a year while speculators go for quick capital appreciation. Investors conduct more in-depth research towards a stock and believe that the stock will eventually generate profits while speculators do not spend much time on their research and just jump at any opportunity to make quick money.

There is a main idea that is constantly enforced throughout the book: You do not always have to listen to professional fund managers or buy the hottest stock in the market. If one is able to observe surrounding businesses, one may find a company with high growth potential. 

Of course, this does not mean that you start to invest in any growing business that you see in your neighbourhood. Successful investing requires one to conduct adequate research about the fundamentals of the business – such as understanding the management style, looking through past years’ balance sheets etc – before you decide to invest your money into the stock. It is advised by Lynch that an individual dedicate at least an hour a week to research about a certain stock that they are interested in.

Investing in a familiar industry is recommended too as compared to an unfamiliar one. Let’s say you work in the healthcare industry. It is advisable that you invest in the same industry as you would have a professional edge over somebody else who does not work in the healthcare industry. Meanwhile, there is also a consumer edge where users of the product have an edge over non-users. To have an edge means that one has the upperhand knowledge regarding an investment decision that the others do not. Having knowledge on an industry/company that you want to invest in allows you to make a more informed decision on whether a certain company’s stock is worth investing in.  

Here, I would like to share some of my mind-blown moments:

1. “The average person is exposed to interesting local companies and products years before the professionals”
2. “Big companies have small moves, small companies have big moves”
3. “Look for companies with niches”
4. “When in doubt, tune in later”
5. “Invest at least as much time and effort in choosing a new stock as you would in choosing a new refrigerator”
6. “If a stock goes to zero, you lose just as much money whether you bought it at $50, $25, $5 or $2”

I would like to think that this book not only provided me with invaluable insights regarding investing in stocks, it also changed my perspective towards such “professional-looking” (for lack of a better word) books. 

As the famous saying goes, “Do not judge a book by its cover.” 

Like literally. 

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Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life.

We are in the middle of earnings season, yet it seems like the main thing investors are talking about these days is not the stock market, but Bitcoin. 

This is understandable, given that Bitcoin’s price has increased by around 400% in the last 12 months.

The cryptocurrency has been gaining steam with companies, with Square and Tesla being two examples of companies that recently announced large purchases of Bitcoin.

Even the popular online investment advisory portal, The Motley Fool, announced last week that it will be buying US$5 million of Bitcoin with its own balance sheet.

But is it really a good investment?

First off, how much is Bitcoin actually worth?

Assets are usually valued based on a discount to the future cash flow it can produce.

For example, a property’s value is based on its future rental income, while stocks are valued on their future free cash flows to shareholders. Although stock and real estate prices may fluctuate (sometimes irrationally), they eventually tend to gravitate towards their intrinsic value that is based on their future cash flows.

Bitcoin, however, does not produce any cash flow. And despite the revolutionary blockchain technology backing Bitcoin, it also offers very little utility to most people (unless you are trying to make illegal purchases or live in a country with an unstable currency). This is unlike actual useful things like real estate or even commodities which can be valued based on their utility. As such, valuing Bitcoin is a lot more tricky.

Unsurprisingly, there are numerous opinions on how much Bitcoin should be worth. Some believe that the total value of Bitcoin should be similar to that of gold, while others argue that Bitcoin should be valued based on the value of transactions made using Bitcoin.

But as we have seen since its founding, Bitcoin’s price has not been based on either of these. Instead, Bitcoin’s price is based solely on speculation and has no anchoring toward any form of valuation method.

Lacking any fundamental way to value Bitcoin, the price of Bitcoin at any point in time will simply be how much the average market buyer is willing to pay for a Bitcoin and how much a seller is willing to sell it at. 

All of which is based purely on overall market sentiment at the time.

So.. what is driving the price now?

The influx in demand for Bitcoin, and ultimately the price of Bitcoin has been fueled by more investors believing it will go up in price.

This is possibly in some part due to endorsements from influential people in the business and investing world, such as Cathie Wood from Ark Investments, Elon Musk of Tesla, Jack Dorsey of Square, and The Motley Fool.

These influential figures have put their support behind Bitcoin, leading to other investors scrambling to get in on the act, thinking that it will continue to rise in price.

Can it continue?

The question now is whether Bitcoin’s price will continue to rise or will we see it fall back down to pre-2020 levels. We’ve already seen how a swing in sentiment in 2017 led to a massive decline in Bitcoin’s price.

To answer this, we will need to assess current and possible future investor sentiment.  

From what I am reading online, it seems that the positive sentiment toward Bitcoin is still going strong.

The endorsement of Bitcoin by so many respected investors and entrepreneurs have resulted in Bitcoin investors having even greater conviction.

As such, many Bitcoin owners are increasingly willing to see out the innate price volatility associated with the cryptocurrency market and continue to hold on to their stake in Bitcoin (They call it Hodl- hold on for dear life).

In addition, investors who have yet to buy may be increasingly getting FOMO (fear of missing out) and may be willing to pay a higher price simply to get in on the action.

But that’s not to say that Bitcoin is without risk. As Bitcoin’s price seems to be based almost solely on sentiment, its price can fall as quickly as it rose.

One event that can crush sentiment toward Bitcoin is regulation. Regulators were quick to respond when Facebook announced that it planned on launching an asset-back cryptocurrency called Libra in 2019 (the cryptocurrency’s name has since been changed to Diem).

If regulators do come in to control the way Bitcoin is transacted, Bitcoin investors may get cold feet.

Similarly, if a new “shinier” cryptocurrency enters the market that is more energy-efficient or transaction friendly, Bitcoin’s popularity may wane.

We should also not underestimate the influence that respected figures such as Elon Musk has over Bitcoin’s price. Should Musk decide to sell Tesla’s Bitcoins, the feel-good factor towards Bitcoin may fall just as fast as it rose.

Bottom line

The bottom line is that Bitcoin has very limited utility currently, and produces no cash flow to holders. Given the absence of a true intrinsic value anchor, Bitcoin’s price will fluctuate based only on market sentiment.

Investing in Bitcoin can be rewarding if more investors hop onto the bandwagon, driving the price up. But if sentiment wanes, investors left holding the bag may end up with big losses.

Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. I currently have a vested interest in the shares of Square and Tesla. Holdings are subject to change at any time.

I need to get this off my chest. Over the course of January 2021, the financial markets saw the incredible Wallstreetbets vs Hedge Funds battle play out. The battle arena included stocks (or is it “stonks”?) such as Gamestop and AMC. I won’t rehash the whole episode. 

What I want to get off my chest is something I’m saddened by: The danger that many retail investors could lose their faith in the financial markets because of what’s happening in Wallstreetbets vs Hedge Funds. I’ve already seen people commenting (read here and here) that the market is “rigged” and that they are losing their faith in the system. Well the thing is, the market has been rigged for a long, long time but – and this is important – it does NOT matter. Two examples come to mind.

A long, long time ago…

The first involves Joseph Kennedy, the patriarch of the famous Kennedy family in the political scene of the USA. The family includes the US president, John F. Kennedy. 

In the 1930s, Kennedy played an actual con-game with the US stock market. This is recounted by Morgan Housel in an article he wrote for The Motley Fool:

“The repeal of prohibition in 1933 was bound to benefit companies that made supplies needed to make alcohol. One was a bottling company called Owens-Illinois. Rather than investing in directly in Owens-Illinois, [Joseph] Kennedy purchased shares of a company called Libbey-Owens-Ford.

“Libbey-Owens-Ford was an entirely separate company, which manufactured plate glass for automobiles, not bottles, but its name was close enough to the bottle glass company to fool unwary investors,” writes biographer David Nasaw. On news of the repeal, Kennedy and his partners traded shares back and forth between each other, pumping up trading volume to draw attention. That caused other investors to buy shares “on the mistaken belief that they were buying shares of Owens-Illinois, the bottle manufacturer.” After a surge, Kennedy dumped Libbey-Owens-Ford with a $1 million inflation-adjusted profit and invested the proceeds in his original target, Owens-Illinois.”

Not so long ago

The second involves convicted con-man Jordan Belfort, of The Wolf of Wall Street fame. In the late 1980s and early 1990s, Belfort used a similar technique – buying and selling the same block of shares between partners to manipulate share prices – to run his fraudulent stock market brokerage firm, Stratton Oakmont.

One of the companies that Belfort and his cronies ran his scams on was the shoe-fashion designer outfit Steve Madden. Belfort and gang took Steve Madden public in December 1993 via a pump-and-dump scheme. They owned up to 85% of Steve Madden leading up to the IPO, and dumped all the shares right after the listing, raking in US$23 million in a very short amount of time. Big money. But is it really?

Stocks, not stonks

This is where it gets interesting. According to Yahoo Finance, Steve Madden’s share price was less than US$1 right after its IPO in 1993. Today, Steve Madden’s share price is nearly US$34, and 85% of the company would be worth nearly US$2.4 billion.

Belfort could have been a legitimate billionaire had he held on to his Steve Madden shares, instead of being a convicted con-man who had to spend a few years of his life behind bars. And all that happened because of Belfort’s inability back then to see what the stock market really is – a market for participants to own pieces of living, breathing businesses.

Coming back to the deplorable behaviour of Joseph Kennedy, Housel wrote in the same article for the Fool (emphasis is mine):

“Companies didn’t report much information in the 1930s, but archive documents show Libbey-Owens-Ford earned somewhere around $1.1 million in profit in 1933. By 1985, profits were more than $70 million. Getting tricked by Kennedy didn’t matter much if you were willing to wait.”

Unrigging a rigged game

The stock market has been a rigged game for a long time. But it doesn’t matter for investors. This is because stocks – not stonks – have still managed to build tremendous wealth for investors legitimately despite the presence of the rigging. Since 1930, the S&P 500 (a broad stock market index in the USA) has turned a $1,000 investment into a massive US$4.97 million, including dividends. This works out to a handsome return of 9.7% per year.

There’ll likely be no end to having unscrupulous stock market manipulators pop up to rig parts of the market. But having patience, being diversified and disciplined, and having the view that stocks represent partial ownership of real actual businesses that will do well over time if the businesses do well (and that will crumble if the businesses crumble) makes it possible for you to unrig a rigged game. And, like we’ve seen with Libbey-Owens-Ford and Steve Madden, even companies that are the victims of manipulation can still do great things for investors – if the companies have legitimately good businesses and crucially, the investors are willing to wait.

Please don’t lose faith in the markets!

Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. I do not have a vested interest in any companies mentioned.

There are many ways to make money in the stock market. There’s no right or wrong.

But given all that is going on in the markets at the moment (Game… *cough*… something… *cough*… Stop…), I had the sudden urge to share my preferred way of operating in the stock market.

I gain joy from the growth in value created by companies that are making the world smarter, healthier, happier, and richer (in any combination), by being a steadfast long-term owner of their shares.

(The Motley Fool deserves a big hat-tip for the statement just above. The Fool’s purpose is to make the world smarter, happier, and richer.)

I don’t want to profit by selling a hot potato to a greater fool so that I would not be the one “left holding the bag,” even if I know the hot potato is very much in demand. I simply derive no joy in doing so.

What’s your preferred way to operate in the stock market?

Investors are prone to behavioural biases. I am guilty of some, which have caused me to commit investing mistakes and miss out on some of the best deals in the market. Here are two biases that have cost me dearly.

Avoiding mega-cap companies

One investing fallacy is that mega-cap companies can’t grow much. 

Today, Apple, Amazon and Microsoft are each worth more than US$1.5 trillion. For those counting, as of 17 July, each of the trio was worth more than the entire South Korean stock market, which had a market capitalisation of US$1.4 trillion.

Can companies of that size realistically grow much more?

I used to shy away from mega-cap companies simply because I believed in the law of big numbers. It is much harder to grow meaningfully when a company reaches a certain size.

However, when I looked back at records, I realised that the biggest company 25 years ago is not considered big today.

Back in 1994, the largest US company by market cap was General Electric. At that time, it had a market cap of US$84.3 billion.

Back then, you would have thought that a company of that size could not grow much more. Today, Apple is worth more than 20 times as much as General Electric was at that time. This illustrates that there is no limit to how big a company can get.

25 years from now, a trillion-dollars might look like what a billion dollars is today.

Instead of focusing on the size of the company, we should look into the company’s fundamentals. 

Can the company grow its revenue, profits and free cash flow meaningfully over time from today? Does it have the right management team in place to take it to new heights? Is the company reasonably valued? These are more important than the size of the company. Sometimes, the biggest companies may still turn out to be the best investments.

What goes up must come down

I prefer buying stocks that are below their all-time highs. Who doesn’t?

However, sitting on the sidelines can sometimes do more harm than good, especially if you have identified a quality company to own at a reasonable price. 

For example, Amazon is one of the best-performing stocks of the past two decades. Although there have been steep drawdowns along the way, its stock price also often reached new all-time highs, as top-performing companies naturally do.

It is very likely that most investors who managed to buy Amazon’s shares in the past, had to do so at (or close to) an all-time-high-price at the time.

Because of my aversion to buying in at a new high, I never got the chance to buy Amazon shares for my personal portfolio. I first wanted to invest in 2017 when its shares were trading around US$720. However, as it was near a peak then, I decided to hold out to try to get a bargain. As luck would have it, and because Amazon’s stock was likely worth much more, the stock price rose instead of falling. 

Not wanting to buy at US$720 meant I couldn’t pull the trigger when it reached US$900 either. Nor could I do it when it reached US$1200. By then, even though the stock experienced drawdowns, it never reached the price I initially wanted to buy it at. Consequently, I never bought Amazon for my personal portfolio and I missed out on market-beating returns. Today, Amazon trades upwards of US$3100 per share.

Lessons learnt

Behavioural biases affect our decision-making and often cause losses or result in us missing out on big returns.

I’ve learnt from these mistakes the hard way. My takeaway is that it’s more important to focus on company fundamentals and buy a company at a good price, regardless of the size of the company or recent share price movements.

Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. I have a vested interest in Apple, Amazon, and Microsoft.

Commission-free trading has skyrocketed in popularity in the US. Pioneered by Fintech startup, Robinhood, commission-free trades has revolutionised the world of investing there.

It removes the frictional cost of investing in stocks and ETFs, making investing accessible to anyone and everyone. 

For long-term investors, commission-free trading is great. Zero trading fees mean higher returns. It also “democratises” trading such that anyone, even those with a few hundred dollars to spare, can start investing in a diversified portfolio.

But what’s the catch?

Although is it hard to argue with the obvious benefits of commission-free trading, there’s a catch: It creates short-term trading behaviour.

In the stock markets, there’s data to show that long-term investors tend to do better than those who move in and out of the market.

Investors are traditionally bad market timers and tend to buy during a market peak and sell at a market bottom. This short-term trading mindset has caused retail investors to often lag the overall market, far under-performing investors who simply bought to hold.

Encourages poor trading behaviour

Just because something is free, does not mean we should be doing more of it. This is the case for trading. 

Unfortunately, the rise of commission-free trading platforms has created more short-term trading mindsets. People trade frequently just because it doesn’t cost them anything. So while investors save money on trading fees, their investment returns suffer due to poor investing behaviour.

In the book Heads I Win, Tails I Win: Why Smart Investors Fail and How to Tilt the Odds in Your Favor, financial journalist Spencer Jakab discussed how poor investor behaviour led to poor returns, even though the underlying asset performed well. An interesting example he gave was the case of the Fidelity Magellan Fund managed by legendary investor Peter Lynch. Even though the fund earned around 29% per year during Lynch’s tenure as manager of the fund from 1977 to 1990, Lynch himself estimated that the average investor in his fund made only 7% per year. This was because when he had a setback, money flowed out and when there was a recovery, money flowed in, having missed the recovery.

Good investing behaviour is the most important factor to improve long-term returns

Commission-free trading is undoubtedly a good thing for investors who are able to stick to the long-term principle of investing. However, for those who are tempted to trade more often due to the zero trading fees, commission-free trading may end up doing more harm than good.

Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life.

A reader of The Good Investors sent me a message on LinkedIn recently asking what my daily routine is like. The reader mentioned that there’s likely to be strong interest in what goes on in a typical day for me. 

I have no idea if there really will be reader-interest in this topic. But I thought why not write about it anyway. A few years from now, it will also be fun to look back at this. 

So, I’m usually up by 7am or earlier. There are two things that I tend to do once I’m awake (besides washing up!): (1) Meditate, and (2) catch up on my favourite Twitter accounts. 

I don’t have an active Twitter account. But one of the great things about Twitter is that anyone can still access the platform and read tweets. Over the past 1.5 years or so, I’ve found Twitter to be an amazing place to catch up on great articles on life, business, technology, and more. It is also a wonderful resource for condensed pieces of knowledge. Some of the people I follow on Twitter are (in no particular order): 

• @cullenroche
• @morganhousel
• @DavidGFool
• @aaronbush100
• @SuperMugatu
• @IntrinsicInv
• @patrick_oshag
• @awealthofcs
• @michaelbatnick
• @ritholtz
• @jasonzweigwsj
• @GavinSBaker

Usually, there will be a lot of good articles shared through these accounts. I will then read through them.

As for meditation, I have found it to be profoundly useful in helping me deal with the stresses in life with equanimity. Sometimes, I meditate first before catching up on Twitter. Then there are days where I catch up on Twitter first, read the articles that pop up there, and then meditate. 

When both activities are done, it’s usually around 9:30am. This is when I start my reading/research/writing on companies for my just-launched fund’s investment activities, or for articles for The Good Investors. The wonderful thing about investing for a living, and writing an investment blog as a passion project, is that the work done for both activities often overlap in huge ways. I see it as killing two birds with one stone! 

I will usually stop around 12:30pm or 1pm for lunch, then resume the research/writing. Some days, I start working out around 4pm. But if I’m not working out at 4-ish, then I will continue my investment research/writing till 6:30pm or so and then work out. I try to exercise every day.

Dinner typically starts at 7:30pm for me. After dinner I will hang out with my loved ones. After which, I carry on reading till I sleep. Some days I will be watching Youtube before bed. It depends on my mood. But even when I’m watching Youtube, I often will think about something like “Hang on, from my morning reads, I remember Company ABC having a unique management team. Let’s do some research!”… And off I go into a rabbit hole. 

Bedtime for me is around 11:30pm or 12 midnight. And then it all starts again! 

My daily routine has changed over time. Just 3 years ago, exercising at the gym would be the first thing I do in the morning after waking up. But now I prefer to exercise at a time when my energy is waning (late afternoon or early evening). I prefer to use the time when my mind is the most alert for reading/research/writing. Who knows when my routine will change again. But for now, this is what works for me! 

Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life.