Stocks VS Poker

Now that I've learn a lot more about stocks, I realize how much similar it is with Poker.



Stock: You can control company risk (by choosing the right ones), but you can't control the market risk (crash).
Poker: You can control the cards you choose to play (premium hands), but there's nothing you can do when you run into a cooler.



Both:  You can't be right all the time. You can, however, maximize your profits when you are right and minimize your losses when you are wrong.



Both: It is all about return on investment in the long run - not one or two sessions.



Stock: You can't control the emotions of the market. Even the best companies stock can plummet.
Poker: You can only make sure you get in with the best hand. The rest is up to the gods.



Stock: You need to know when to buy, and when to cut your losses and run.
Poker: You need to know when to hold'em, and when to fold'em.

Financial Education

Stepping up on my homework lately...

- Completed most of the important courses at Wall Street Survivor [Highly recommend their "Reading financial statement series].
- Spent a lot more time reading financial blogs and forums.
- Setting up a watchlist at Google Finance.
- Read through some company financial statements (never thought I'll do that).

I've also began attending some newbie seminars by CIMB.

For most investors (who made money from the price rising), there are 2 criteria you must ask before buying a stock:

1. Is it a good company?
2. Is it the right time? (aka right price)

The speaker gave his 2 cents worth on evaluating a good company:


1. Positive Net Income for the past 10 years

This is the company "take home" pay - what is left of their revenue after paying the workers, taxes, expenses etc...

Companies can sometimes manipulate this figure by playing around with stuff like depreciation to make it look nice, for a year or two - But for 10 years? Not likely. Any scam would have fallen apart.

This means the company is a money-maker.


2. Consistent dividends in good & bad times

This is important as it show that you are taken care of as a minority shareholder.

If the dividend payout ratio is reduced, what is the reason? Is it justified?


3. Positive operating cash flow (OCF)

This sounds very similar to net income, but it's not the same. A company may make lot of net income, but still run in cash flow problems. It only deals with cold hard cash on your hand right now. [Not receivables, buildings, machines]

If this is negative, check what the company did. Maybe it brought a new building/equipment for future investments.
 

When I Hit 100BI Below EV

Financial Summary

Been doing some financial research for the past few months - From reading investment blogs & forums, watching financial documentaries/books to comparing the interest rates of different local banks.

Now that I've been working for 1 year+, I think it's really time to look in these. Feel that it's already late, but better late then never, right?

Financially, I think I'm doing pretty well. At the very least, I'm completely debt free.

These are some of the financial actions I've taken in the past year:

- Consolidated and organized the insurance policies from childhood (Thanks mum).
- Purchased a private H&S insurance plan.
- Closed down redundant bank account.
- Diligently keep track of my expenditures for 6 months.
- Accumulated a healthy, more than recommended amount of emergency funds.
- Set aside the emergency funds into 2 of the highest interest rate saving accounts in Singapore (No plans to touch them from now on)
- Saved up a pot of investment fund that I think is now sufficient to make meaningful and efficient investments.
- Created a new securities account on a new platform (which I think is better than the old)
- Brought my first "Precious Metal"! (small one lah)

...

Now, the plan for the new year will of course be getting started in investments. Allocation, diversifying, learning about different securities...... It will be fun~

Cash Flow Statement

Sometime back (when I started working), I embarked on a mission to track my expenses. I feel that it's kind of important to know how much excess $ I have each month to save/invest.

It's really interesting once you get a substantial list of data, when you can start answering questions like: How much money are you spending on average on breakfast/lunch/dinner? How long can a month salary last based on your expenditures?

These insights into data... It's sort of like personal Business Intelligence! (My field)


...


It was EXTREMELY PAINFUL when I first started doing it, but I'm glad I managed to persevere and churned out half a year worth of data.

I've decided to omit all "major purchases", since they'll mess up what I really want to know - how much is my basic regular expenses.

Do give it a try (don't have to do it for life, just for like 3 months* or so) - I think it'll be worth it.

Estimations and intuitions are never that accurate compare to cold hard facts.

For example, I now know that 1 month of salary can roughly last me 6 months. From that, you can estimate how long your "emergency funds" can last you if you lose your job. Isn't that not only interesting, but extremely useful?














*Note: The more months you do it, the more accurate it'll be!