Happiness

An article appeared in today's The Business Times Weekend (page L13) on the subject of happiness. I am not surprised to find us Singaporean faring lower than our counterparts, even worse than poorer nations like Vietnam. The main reason, if you have not already known, is social comparision.

I believe everyone who has lived in Singapore for one point or another should understand how competitive it is here. Fighting to be the best is what we are trained from young. First to top the class in every subject, then for the highest paying job and then fighting to be the best in your species to attract the best from the opposite sex. Never ending.

Having one of the highest living standards in the world also mean that we need loads of money to be termed as successful. And the problem really comes when we don't know how much is enough. A sentence from that article struck me hard, it says

Materialism leads people astray, because having money is a poorly defined aspiration. "When a student wants to graduate, there is a specific goal. But how does one know when they've made enough money?"

Indeed. This question was in my mind sometime ago when I was a bit lost in the midst of my career. Because this line has no cap on earnings, I asked myself how much is enough. Who should I benchmeark against? The top 20% of the industry, top 20% of the company or top 20% of the agency? I don't know what I want and it got me really unhappy as I hate to have unknowns in sight.

But when it comes to academic performance, it is really easy cos the cap is 100%. You know what to aim for when you know 100 is the end point. And that is also the problem for many students because most see 50 as their end point and a handful of them 70. They don't understand that what you want is what you get and nothing more.

Are you happy with what you have? I am happy with what I am going for.

Dollar Cost Averaging - Part 2

I posted on DCA recently (read here)and I was in a similar discussion with a friend but the difference is that we are not talking about funds, but a particular stock.

He told me that if a stock is good, you should not use up all your capital and purchase it at one go, i.e. showhand. It is wise to leave some of your capital so that when the stock drops, you can execute DCA.

So I asked him why is it that since he feels so good about a particular stock, and he is predicting that it might drop? Then he said that it would be naive not to consider market shocks, which means that some adverse news can bring a market down no matter how strong your pick is. True.

Then the real question comes. How do you know that the stock is good? Based on what? Historical price? Business model? Future growth?

Then what? How do I know how much it should be worth (intrinsic value) now? How much should I sell?

Take a look at the chart below. One of the scariest charts of all time... Cosco Corp



So here we address the first question: Picking stock based on historical price. The stock was selling at less than $3 for the first half of 2007, then it went up to $8 in Oct07, which got you so excited and ready to pounce. Less than a year later, it dropped back to $3, so you thought that the perfect time had came. You entered at $3 hoping that it will go back to $8, which will translate into more than 250% return and you can become the first millionaire made in the stock market. So you sell your house and play showhand. $300,000 in, and you are still sitting in a pile of shit today, with a loss of 60%. Too bad, your wife and children have left you.

Next question on DCA. One other stupid man also saw the opportunity. He decided to enter 10% of his wealth first, $30,000 in. One week later the price was $2.50, still convinced that his investment is sound and this time it's cheaper, he threw in another $50,000. 1 month later, price $2, "and this cannot be", he thought to himself, so he decide to dump 30% of his wealth into the sea, $100,000. The average cost works out to be $2.25 only!! "I found gold!"

October 2008, the price officially drop below the $1 mark. And he still believed that your stock is a good pick and the phrase "what goes down must come back up". So he also played showhand - $120,000 of remaining wealth all in. This time your investment really cheap liao, $1.50 per share only. Until today, the stock has never risen back to $1.50. By now I think his wife would have left him too.

The wise one would have spotted it and left that stock alone. He is the one who doesn't buy without looking deep into the company. And he would probably end up sleeping with the two homeless wives.

Note: Life is contradicting. Some methods that should be there to help you destroys you. And remember that wives leave not because you are a lousy stock picker, they leave because you spend all your money on companies that don't make LV bags.

Life Teachings

Sometime ago on a particular Saturday morning when I was back in office, my Director was also in. He shared some ideas on management and teachings with me, obviously hoping that I start recruitment and rise to manager as soon as possible.

He told me that men should be prudent and live within our means. Earning loads of money doesn't mean that a person should live a lavish lifestyle, drive big cars and look down on people. For you do not know where you stand in the future. When one becomes rich and famous, he tends to become arrogant and comfortable with what they have, which is the start of their downfall.

To sum it up, he said:

花没有百日红，

人没有千日好。

Loosely translated, it means that flowers don't bloom for a hundred days, men don't flourish for a thousand days. I was so impressed with this statement, especially when it came from a veteran who has lived two times as much as me. Now, when people talk about life and earning loads of money, this phrase constantly rings in my head.

The moral of the story is: Everything in this universe moves in cycles, like it or not. So remember that you can be earning $100,000 per year now, but you can also be out of job when I come back to visit you two years later. It is therefore important to save for a rainy day and don't pretend that life must get better.

In finance, we call that random walk. Today you might be up, tomorrow you have an equal chance of going up or down. This trend may persist for a prolonged period but eventually it will revert to the mean.

High Dividend Yield Stocks

Before we go into the content, let's look into what the title means. Dividend is a payout that rewards you for holding a share of the company. It is similar to the interest on your bank savings. The difference is that the company can choose not to give any dividend for the year.

The yield on the dividend, is the dividend divided the share price, for instance, a company's share is selling at $2.00, and dividend declared is $0.01 per share, which means the yield is 0.01/2 = 5%.

Is dividend yield important? Of course, that equates to your return on investment. Still don't understand? Imagine now that you hold Company A's stock that costs $4.00 per share compared to Jacky who holds Company Z's stock that costs $2.00. We have the same capital, which means that for every stock you hold, Jacky holds 2 times as much. So when Company A and Z both declare a dividend of 1cent per share, who would be happier? If you still don't understand, I suggest you go back to sleep now.

Ok back to serious business. This week, a number of companies announced earnings for the last financial year, which is also the time they propose dividends to be distributed to shareholders. On average, Singapore listed companies generally yield about 2% on dividend and 4% or more is considered generous.

So, take a look at the latest companies that are cum dividend (CD) currently, computed based on the amount declared for this period. Prices of stock fluctuate, so the denominator is not accurate. Therefore, dividend yield is accurate to not very accurate.

United Engineers - 4.5%
Sembcorp - 4.1%
Parkway Holdings - 4%
CSE Global - 4%
Rotary Engineering - 3.8%
Allgreen Properties - 3.6%
ST Engineering - 3.3%
SembMarine - 2.9%
UOL - 2.5%
Haw Par Group - 2.5%
Hong Leong Finance - 2%
Sing Holdings - 1.8%
ComfortDelgro - 1.8%
Golden Agri - 0.93%
SC Global - 0.85%
City Developments - 0.78%


Take note: Dividend yield computed is based on the most recent report, which may be dividends declared for the quarter, and may NOT be the dividend yield for the entire year, because I am not so free to find the data and I don't hold a dividend paying stock for so long. Call me myopic.

Important: Please do not take this as a stock recommendation. Life doesn't work based on one factor. Even when using dividend yield, you must also know when is the CD and XD dates and the effect on stock prices on these two crucial dates. More will be shared after you have lost money. Good luck and have fun.