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26-06-2012, 03:53 PM
(26-06-2012, 03:37 PM)yeokiwi Wrote:(26-06-2012, 12:58 PM)mrEngineer Wrote: Hi yeokiwi,
Do you have a limit on how long your list of stocks should be? Care to share the rough number on the list? 10, 20, 30? Thanks
No. Currently I have more than 30 stocks.
I have a hard time deciding which stock is better and so I might as well take all that fit my criteria.
Just like investing in Singapore telecom sector. There are basically three companies, Singtel, Starhub and M1.
So how would you invest?
Some will do a detailed analysis of the three companies and put his bets on one.
As for me, I will naturally think that these companies are about the same.
Singtel is the strongest among all with international presence. But, its dividend yield is the lowest among three.
Starhub is the next stronger one with high dividend yield since it basically distributes all earnings to the shareholders.
M1 is the smallest with good yield. However, it is struggling to increase its presence in Singapore.
Since all three has their merits and in the long term, I really have no idea which will offer a better return. One of the ways is simply to allocate 1/3 of the fund to each one of them.
But if yield is preferred, then maybe it makes sense to reduce the investment proportion in Singtel to 20% or lower.
However, for above average return, investors require some special events to happen. Special dividend, spinoffs(business trusts??), privatization or whatever. The probability of capturing these events is likely to be higher if an investor owns the three stocks than one.
Of course, if you put all your bet on one and able to capture a special event. Then the return is significantly higher.
So Probability of special events happening vs Return. How do you balance?
Does owning three reduce your returns? May or may not.
The probability of choosing the right one is 33% if you choose only one.
If you choose the wrong one(66% probability), you will only be receiving the average return in that sector.
If you have three of them, 33% of your money will strike jackpot. The remaining 66% will return the average return.
Striking jackpot(special dividend, delisting offer, spinoffs, rerating..) does improve the investment return rather significantly.
And in most of my jackpot cases, I have no idea that they will give me such returns when I first invest in it. (who the hell will know????)
Lastly, I do not own any significant stake in any of the telecom stocks(except singtel in my CPF and 190 shares from the great singtel IPO.)
(who the hell will know????)
i like what you said. We are usually caught by surprise.
So don't be so cock-sure. Though i only have purchased Singtel so far.
WB:-
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.