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Lost $1m and left with $4.2m. What should I do? (Part 2)

Monday, November 24, 2014

Here is part 2 of the email exchange:

Hi AK,

You may publish my correspondence without my email address.

To help you help me more, these are the answer to your questions:

1. I invest or speculate for the sake of making double what i take home every month, over the last few years, i actually make 40k a month from market when timing is good.

2. I would like to do what you do as a income investor, but i just cannot get over the fact that you actually allow your buy price to drop and continue to average down during a crisis. that does not make any sense to me.

3. that is why i resorted to punting hit-and-run style of most time the last 7 years as a speculator. but now that i got slap twice both on the left and right cheek, it seems pointless to continue this style of punting in market.

So i hope to revert to the income generator like you. Just wondering does all income dividend player ignore dropping share price? I need to know, because I cannot seems to get over the fact that if i didn't have entered the stupid market, i would have another 1mil more in my bank account. This pain, till to date, i am feeling it inside me, without anyone knowing. really felt like a loser but can't show it.


AK's reply:

Hi L,

It is all in the mind. :)

If I am interested in the income an asset is generating for me, if the price drops but the income being generated is the same as before, why wouldn't I buy more of this asset? If the asset has a life of decades and is able to make money for me for decades, what is a paper loss of 10% or 20% in the short term? I am still being paid dividends regularly.

However, if we can avoid losses, we should. This is why entry prices are important. Like I said before, we don't want to overpay. Bear in mind that even if we pay a fair price or a price undervalued, price could go lower. We cannot explain Mr. Market's moods. We can try, of course.

I do a bit of trading myself. So, I understand the pain you feel from your trading losses. I did a bit of speculating as well but I am not a very good speculator. So, I have lost money too.

In the end, I settled for what works best for me. It is a journey of self discovery. You will have to discover for yourself what suits you best too. To me, if it gives me peace of mind, it cannot be too far from being right. :)

Best wishes,
AK


Related post:
Lost $1m and left with $4.2m. What should I do?

7 comments:

Singapore Man of Leisure said...

"But here comes the problem, due to the fact that it is quite relax as the top man in town, I began dabbling with shares in 2007 out of boredom and also in hope to 'fight' inflation."

"This pain, till to date, i am feeling it inside me, without anyone knowing. really felt like a loser but can't show it."


Boredom, pain, feel like a loser are emotive words.

Emotions of the heart are not fixed by things external.


The man achieving things too quickly or easily is constantly 2nd guessing himself... Am I good or am I just lucky?

Whether speculating or investing is just one attempt to seek affirmation from others. See? I didn't do it by pure luck! I can duplicate my "smarts" outside of my career!


Until the hole in the heart is put to rest, there will be other "activities" to attempt when the man is bored again... After making back what he had lost.

Just to feel alive and meaningful.

Those who have gone through mid-life crisis will understand ;)

B said...

Hi AK

I think at his wealth he is much more comfortable playing the big money. Cashflow income can come in pretty slow at times and given that he probably does not really need this cashflow for his daily use, it becomes less important to him.

Its like asking a vip player in casino to play the slow game available, it doesnt seem to have any kick for them.

Just my 1 cent take.

Low Paul said...

For purposes of legacy planning i will place it in the biggest names worldwide with unblemished dividend paying record
eg mcd colgate jardine mathason..perhaps 10-20counters. Entry price doesnt matter too much if we r talking of decades of conviction. Use dividends to compound.
keep personal expenses down. Use active income whereever possible. Get insured adequately for whole family.
My 2 cents

cbd said...

Punting is gambling. one should aviod speculation at all costs

qook said...

L, I think you feel compelled to continue trading in the market because you think that you ought to have made money, and not lost money. But actually, with 4.2m and leading such a simple life, why do you even feel the need to have to generate even more money? Most people will never hit that amount in their lifetime and can still retire comfortably. In other words, you have "won the game". The goal now should be capital preservation, and not putting money at risk unnecessarily for returns that may not be worth it. If you do feel that you *must* try to put your money at work instead of just sitting idle, you could try dipping your toes in some dividend stocks or bonds at good entry prices. But you may also want to take note that prolonged QE and low interest rates have led to an inflation in asset prices globally. Once interest rates have normalized, asset prices are likely to correct. Just my opinion :)

owq said...

From ValueEdge: "If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef?"

The market price can be different from the value of the stock. If the market price decreases while the value remains the same, would you buy more of the stock? (of course, this is assuming quality stock...)

Kah May Wong said...

owq ... that's a good one, well written.

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