小小想法

想当然而……我觉得

投资就好像出海捕鱼，你永远得冒着没顶的危险，所以每分准备都不能少，每份收获都是恩赐。

投资就好像武术，宗派林立各有特色，如何海纳百川自成一派最重要。

Book: Wise Investing Made Simple

[Wise Investing Made Simple - Larry E.Swedroe]

I am putting what I understand from this book, by picking up meaningful sentences and restructuring it accordingly. I don't know if I am putting too many sentences here, but it's a good book that worths your time, so go borrow or buy and read it.

I drafted my originial summary last October accordingly to Chapters.

This book is pretty easy to read with good analogies.The author has strong belief in "passive investing by building a globally diversified portfolio". He builds his arguments around two central themes:

1. Efficient Market Hypothesis (EMH)
- Efficient market is a market in which trading systems fail to produce excess return and it is difficult to persistently exploit mispricings. Everything currently knowable is already incorporated into prices.

- Even the market is not perfectly efficient, it's close to. It is not impossible to uncover mispricings (incremental insight), but cost of efforts are likely to exceed the benefits.

- Successful trading strategies self-destruct because they are self-limiting

2. Risk and expected return should be positively related
- Value stocks are stocks of risky companies, hence it provide large and persistent premium over growth stocks to compensate the risk.
- High price reflects low perceived risk, and thus low future returns should be expected.

From these, he thinks that
- Active investing is loser's game. The odds of success by competing against the collective wisdom of the market are so low that it is imprudent to try. Of course there are survivors, but is it by skills or by chance? It's purely random. Outstanding performance does not persist. As an evidence, the top list of funds or top fund managers are different each time. Will you believe that there are coin-tossing gurus?

- Active investing is myth created by Wall Street because broker earns no matter you win or lose. Brokers make the overall game a negative sum game. They made active investing exciting but investing, however, was never meant to be exciting. It is meant to be about providing you the greatest odds of achieving your financial goals with he least amount of risk.

- Most market forecasts are based on economic forecasts and economists' forecasting skill is about as good as guessing. Investors should treat economic and market forecasts by so-called "experts" (gurus) as investment graffiti - the only value they have is as perhaps entertainment. And "You make more money selling the advice than following it." [Counter? Isn't him one of them?]

He also debunk the following myths:
a) Stocks in the long run will surely earn - Stocks are risky no matter the length of investment horizon. And that's exactly why its returns are high. [Counter? It is not about how long or how short, it is about timing. But then again, how do you know?]

b) Buy what you know - Familiarity breeds investment by creating an illusion of safety. People over confidently confuse familiarity with knowledge.

c) Buy what everyone knows - Mistake of confusing information with knowledge that you could use to generate above market returns. Trends tell little about future profits. Demand may rise but market can be over-supplied.

Whether you believe in passive investing or not, two important advices are:
* There is nothing new in investing, only the investment history you don't know.
* Never treat the highly unlikely as impossible.

Great examples are:
# The Nikkei index hit 40,000 in 1989 and now it's below 10,000.
{Fueled by low-interest mortgages, real estate prices in Japan had risen so high that by the end of the 1980s just the land under the Imperial Palace in Tokyo was nominally worth more than all the real estate in California. Then, in late 1989, the bubble burst and real estate prices plummeted, leaving Japan's financial institutions saddled with toxic mortgages and facing bankruptcy.}
Read more.

# In 1900 the Egyptian stock market was one of the largest in the world. Now it's no where. {It was public knowledge that when lumped together, the Cairo and Alexandria Bourses rated among the world's top five Stock Exchanges. Egypt's economy was at an all-time high and the number of companies traded in the Cairo Bourse alone had reached 228 with a combined capital of 91 million pounds.

But like the swing of a pendulum, the high state of euphoria disappeared overnight. Prudence having given way to high-risk speculation, what had started out with a real estate boom in Egypt, ended in what became known in the annals of speculative history as the Crash of 1907.

Some historians concede that the money panic of 1907 started in Alexandria, Egypt, with the failure in July of a large bank - Cassa di Sconto. Japan was hit next, then Germany, then Chile. By October, the fallout reached Europe and the United States. In Egypt, the overextended banks folded up one after the other. }

The First Step

From this moment on, I will start to write something about investment. This is not because I have mastered it and can start giving lectures, but on the contrary, I have just made the first step and like to save my knowledge gained and observance along the future journey. I do not mind if you find my "eureka" moments are like "what-so-big-deal" or "so-what", as everyone has their own journey to explore. I would feel glad if you could grab something out of them, and even better if you could share out yours or point out my mistakes or misconceptions.

The first step has always been important, and subsequent few steps are even more important as they serve as the soil to grow. A rock solid foundation is the key to everything. I feel sorry to my partners that you may find me like to dilly-dally, talk more than walk or putting more emphasis in other aspects, but this is really my style. I always want to change, and in fact, I am the greediest one who want to change to become better in every aspects, but I believe there is a right time for every change, risen out of the need or consequences. Before I could sense that the moment has come, I preserve my determination and keep my memory well. But when I finally sense it, and I say I want to change, I do really mean it. The dilly-dallying is just the prelude for the main plot. Just like my English, like my Excel skills, like my emotional balance, like my expense management, like my exposures...(Oh...I don't mean to brag...please forgive me)

I am setting my mindset right first before stepping out. To me, investing is just a tool to set myself free financially to move on to do great things; no doubt I need to know how to excel in using this tool but I would not like to see myself get addicted into numbers and alphabets at the expense of life's balance and beauties. That is easier said than done as consequences do change people and money has the cunning power to twist even the purest soul, so I am putting a reminder here for myself, for myself in the future.

I shall now begin to walk, and talk the walk.

意阑

投石落无声 倦鸟归无处

Meaningful environmental photographs by OnAsia

These exhibition photographs are currently shown in NLB Singapore Level 7, very meaningful and full of insights. Too bad I could not disseminate them over the internet due to copyright infringement, but you could enjoy them by just clicking the link below: 

http://www.onasia.com/content/showcase.aspx?showcaseID=635&page=1