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

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?

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

Here is a long email exchange with a reader which might be of interest to other readers:

Dear AK, i followed your blogs constantly. Now I would like to write you so to seek seek your views on my situations. I am writing from my wife's account, so pardon me for the difference in email name.

I am 41, married and have 3 young school going kids with a home maker wife. Over the last 20 years, I worked my ass off to come to where I am today. I am a very frugal person where I do not spend on anything unnecessary in life except on my family members and my loves for cars. I do not invest in properties as I believe it is at the whims of the government policies, hence I stay in a 3 room flat since married bought resale. I do not like taking large debts nor insurance (other than health insurance for all family member) too. To date, I have S$4.2 million cash and S$400k CPF saved. It could have been more if I have not dabbled with STI stocks over the past 7 years. So this is my story and I hope to share with you perhaps to get some views on how do I move forward in life now.

 

My work life is reasonable well and not very stressful since about 10 years ago. I got promoted fast due to my capability and brains. 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. So there I was opened up the trading account and attempting my 'brains' at the local market. At first, it was some micro broken penny that lead to small cut lost of lesser than S$5k. Then come the 2008 August panic where I had to cut lost almost S$700k of 'specu-vestment' of s-shares and bluechips. Along the way, I am still in full cash and no other investment asset mindset have changed. Since the GFC completed in 2009, from 2010 to 2013, I 'made back' the lost S$700k using my sell-profit-keep-lost day trading last-in-first-out strategy. That is to say, I do not invest long term like you do in dividend generating stocks but scalp the market in big amount to make money. It was going well all along from Oct 2013 when the penny market in singapore to a turn for the worst due to the ABL saga, all liquidity seems drain from pennies in STI and there is when my paper lost in those pennies start amounting. And I cut lost again this year al the sick counters for a lost of S$600k and now still stuck with some holdings in a illiquid counter, DMX (5CH). Not willing to admit defeat, I went short on the SP500 and end up with another paper lost of S$100k now still running due to the Bull ramp this October.

 

So here I am, lost and shame. My wife understands and do not scold me for my mistake, same goes for my kids. I have many questions now that I am in my early forties and not having done any right thing in investment make a fool out of myself though no one in my circles of associates and friends knows. I have seek books for opinions but they don't seems to have my similar experience and how they deal with it. So after much thinking, I turn to you to seek a friendly view of what I should do now?

 

So I thought to myself at this juncture of my life:

 

1. Should I be messing around with stock speculation, or wait for the next recession to invest like you in value stocks? I have since stop taking positions in the market other than holding the illiquid counter.

 

2. Should I cut the paper lost in SP500 short and quit bucket shop for good? Many told me that bucket shop are made in such a way, that you will lost even if you win over the long run just like casino. Is this true? I feeling so now.

 

3. What are my chances with the illiquid counter DMX? Can you help do a review on it?

 

4. I read your blog and notice that as a investor, you do not bother about the share price and DCA down whenever there is lower price? Isn't this catching a dropping parang?

 

5. I am currently putting every saving in high deposit saving account of 1.35% pa to wait for the right opportunity.

 

6. Should I buy property in Singapore? I really dont like the small market here and the fact that the future may not hold well for singapore. Who is buying from us buyer whom herd into surplus supply of properties? Aging population or foreigners?
 

If it is not so much of a trouble for you, do hope to hear from you soon.

Cheers

L

 

 

 

 

AK's reply:

 

Hi L,

I have a friend who says that some of us have luck in some areas and some of us have luck in other areas. Although it is probably debatable, I feel that luck is very important in all areas of life.

In your case, I feel that hard work, brains and probably a dash of luck have helped you accumulate what is quite a bit of wealth. At 41, to have about $5 million in assets is admirable. The fact that you did not make any of the money from your investments and speculations makes the achievement even more admirable. Singapore needs more hard working people like you.

I know someone who told me before that if we had a good career that pays well, we will not need to invest for extra income. I look at what you have achieved and I am reminded of that. However, I would add to that by saying if we had a good career and saved most of our income, then, we might not need to invest for income. You have saved a lot of money, by any standards. I am impressed!

You seem a bit lost now and you have listed many questions for me but you will have the answers once you know what motivates you.

Are you investing for income which is what I do mostly?

Are you investing for growth or a mixture of income and growth?

Are you mostly a speculator?

Depending on what you are after, you will use different sets of tools. I won't tell you what you have to do because that is not my style but do you know what the tools are and do you know how to use them properly? If you don't, you want to get educated and there are tons of free resources online to help you.

For example, if you like what I have done, then, you have to subscribe to my philosophy as an income investor which is to invest in assets which can generate meaningful income sustainably. Try not to overpay for these assets and you should do well enough over time.

Finally, I could modify some personal information which you have revealed in your email to me and publish our email exchange in my blog to see if we might attract comments from others. There are hidden dragons amongst my readers, I believe, and you are one of them. ;)

Best wishes,
AK

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