To me, he is more of a TA person because he is always taking about red line, blue line and pink line. For some time, I keep wondering if he is taking about our MRT station (Just kidding!).
Joke aside, as many of you have known, I know nuts about TA or any of the coloured line. This is where Wellhandy has always been helping me along the way. He will give me hints of what to look out for. Every advice has provided me with additional insights of how each counter's share price may move.
Without further ado, let's get straight to the interview questions and "Wellhandy" answers!
1. Tell us more about yourself.
Wellhandy: I see myself as inclined similarly towards both FA and TA and as a 'buy and hold'er: I buy and hold different things for different periods at different times.
In terms of buying and selling transactions, they are more discretionary leaning towards systematic.
My body of work in technical analysis is well represented when you follow me in investing note.
2. How did you get into investing?
Wellhandy: In my early years working, the company I worked for, had a system whereby they matched every share you bought with a bonus share.
It felt like free money.
When I first started, I bought shares on recommendations by analysts. When the prices of shares in the recommendations promptly went the opposite direction of the recommendations, I learnt to be more interested in the details of this particular enterprise (buying and selling of shares).
3. What is your thought process when it comes to investing?
Wellhandy: I don't really think of investing as investing in a company when all we are doing is simply buying and selling shares of a company.
'Investing as Retail investor' is different from 'Running a Business'.
When we run a business, we are responsible for the day-to-day smooth operations of a business.
We literally have to account for each and every entire day to make sure it is well spent and the company is well run and solvent.
We take responsibility for people being employed by our businesses.
We put our reputation on the line for delivery of paid for services.
We answer to all stakeholders.
We pay ourselves a salary from the returns of company and reinvest the rest either back into the company or elsewhere.
When we invest, we are responsible for the decisions of our transactions.
We have to account for each and every buy and sell decision to make sure it is made as properly as we can and that our portfolios has limited risk.
We take no responsibility for people being employed by businesses we have shares in.
We put no reputation on the line for delivery of paid for services by businesses we have shares in.
We try to make the companies answer to us.
We do not receive a salary directly but obtain dividends that the company decides to pay out from the returns.
I leave it to the reader to infer "running your 'investing' as a business".
Profiting from shares as a retail investor is thus different from profiting from business.
I see the share price as a proxy of the market sentiment of the company worth.
It is decided upon by a variety of people: some look at the operations of the companies, some look at the decisions of the companies, some look at the integrity of the companies, some look at the environment affecting the companies, some look at how others look at the companies and so.
In the present, the valuation of the company is what the market is currently willing to pay for it.
When we 'invest', what we want is to increase our networth and that is more directly from what we can get from what we own.
But we can't ignore the fact we may be wrong.
The first order of business in 'investing' is to decide on our risk management; then select the highest profit potential asset class and then buy up to our eyeballs what our risk management allows.
When there is a different asset class that gives more returns faster, we switch to it.
4. What is your best investment and worst investment since you started investing?
Wellhandy: The most used cliche is the best investment is in yourself.
And it happens to be right.
And the worst investments are every moment we slack off in matters of importance and 'pinch pennies' in matters of little consequences.
Ergo, we may be making the worst investments daily.
The most valuable 'cost' in investment terms is time. Time and effort.
There are quite a few millionaires.
There are no immortals.
That tells you everything you need to know about the value of time vs money.
When we put in the time to build the foundations to save our future time, that is the single best investment anyone can make.
Someone once asked me in InvestingNote: How to be more efficient in investing when we are juggling with multiple commitments?
I believe when the foundation is done right, the efficiency flows from there.
This is the same thing throughout life. We mastered walking and suddenly, walking is effortless. We mastered addition of numbers 1 to 10, suddenly we stopped using fingers. We mastered dribbling, suddenly we don't look down while taking the ball across the football field. We mastered work, suddenly we don't have to check references whenever we need to answer a work query.
The list goes on.
Mastery is efficiency.
5. How many stocks do you think one should hold for diversification?
Wellhandy: We have a post in InvestingNote that talks about position sizing. And that to me, along together with risk management, is the answer to number of stocks a person should hold. We should hold as less counters as our risk management allows. That is the short and long answer of it.
Diversification, to me, seems to imply branching out for the sake of variety.
At least, instead of its proper understanding, that is the more commonly used implied meaning.
Diversification, in the above meaning, is nice but it shouldn't really exist for the active 'investor', only the inactive 'investor'.
When we say we want to 'diversify', we should admit that we don't really know what we are doing or we don't know if what we are doing is working.
Because I cannot imagine a kid, in answering to the question "1 + 1 =", giving many answers instead of a single '2'.
(For the prideful, if it hurts our ego to say we don't know or we are wrong, then it helps to say to ourselves, we don't know the future.)
More operationally specific regards to diversification, it is never about the number of stocks a person should hold.
For example, if you hold $STI ETF(ES3), you would be quite diversified for STI stocks.
If you hold $SPDR S&P500 ETF TRUST CDI NPV 1:1(SPY) , you would be quite diversified for S&P 500 stocks.
If you hold Berkshire Hathaway for instance, you would also be plenty diversified.
6. What do you think of short term trading?
Wellhandy: Short term trading is an extremely competitive endeavor (there are some outstanding individuals though). Great if you can make money consistently. Stop doing it if you can't.
What is Trading?
If we break it down and look at the pure mechanics of the actions, it is buy and sell transactions.
How is that different from investing which may also be just buy and sell transactions?
Some will say that in investment, we hold it long enough to derive gains from coupons or dividends.
Then is 'investing' in Berkshire Hathaway not investment?
So it boils down to timeframes and time horizons really.
But what is short term? What is long term? What is normal term?
In eyes of the 'buy and hold forever', most of us are short term traders.
In the scope of infinity, there is no difference between one month and 10 years.
In the scope of a century of stock prices, there is little difference between six months and 1 year.
So further to the point, time horizons and timeframes matter only regards to derivable profits and price changes.
And that also involves costs and charges and opportunity costs.
If a person can competitively make outsized gains from trading the 30min time frame without leverage, I say kudos.
The problem however is costs and risk of blowout.
With costs and risk management in view, most would definitely benefit instead from buying and holding to go for bigger moves as long as it shows good speed of gains.
7. What are your advice for those that are worried about the possible-but-may-never-come crisis?
Wellhandy: Buy/hold half, keep other half in cash, be prepared for less than benchmark gains.
Stay fully invested, with no hedges and predetermined hard stop loss prices, get outsized gains.
Go in and out of the market to time short swings (weeks long or months long) in prices, get lousy/mediocre/outsized gains according to your ability.
8. Finally, any advice for newbie interested to get into investing?
Wellhandy: Be a 'buy and hold'er - stay in the market for extended periods of time.
Stay open minded.
and the advice in https://www.investingnote.
Hope you like this interview series and please do remember to like our Facebook page (T.U.B Investing) and follow me on InvestingNote.