Sunday, 22 March 2015

Mar 2015 Portfolio

Mar 2015 Portfolio

Month of March 

A quarter of 2015 is just about to pass by. It seemed to pass by so quickly this year. :) I'm always looking forward to the next portfolio review as it allows me to know how I've done for the past month. I’m also looking forward to the end of the year to know how much I have progressed since last year. FED mentioned that rates will remain the same at least until the next few FOMC meeting. Might be a good sign but also means the outlook for a drop prices will be later than expected. In Singapore, the IT Show has just passed and I got a new laptop for myself (old one was showing signs of dying when i played games).

Updated 23/03/15: Although I do not care about politics, Singapore's first PM has passed away. Finally, he can be free from any pain and suffering. RIP LKY.


So this month I went into another 2 stocks after my AAPL got stopped out last month. These 2 were brought to my attention by my friends. After reviewing their financials and charts, I decided to go into them. ALK is basically an airline stock. It has been persistently earning despite all the competition (believe it or not…). TTWO is basically a game maker (mention Grand Theft Auto V and you will know it appeals to gamers).

Overall, there was a 2% growth since the last review which is not bad considering I did not concentrate much on stocks.

Cost Price
Cost Basis
Close Price
Unrealized P/L



Net Asset Value

December 31, 2014
March 20, 2015


Time Weighted Rate of Return


No dividends collected for this month.

AAPL(US0378331005) CASH Dividend 0.47000000 USD per Share (Ordinary Dividend)
AAPL(US0378331005) CASH Dividend 0.47000000 USD per Share - US Tax
Total Dividend 2015

Options on Futures 

3 positions expired this month earning me a total of $1502.50. This brings up my total returns YTD to 34%. Been waiting for a market correction but it doesn’t look like it is coming in the next few weeks. Hence I do not have a huge position for next month. If it turns out well, I would only collect about $260 for April unless I see an opportunity. Even if the correction doesn’t come until the end of the year (which I highly doubt), having 34% for 1 year is a good accomplishment. The idea is to not risk money in trades unless I have confident it will work out.

Jan 2015
Feb 2015
Mar 2015

Total Invested Capital

Starting Capital of 2015

Cash and Sweep
(Includes money held as margins)
Total Gain/Loss YTD


Investing Wolf 
Disclaimer: This is not a recommendation to buy or sell any mentioned stocks or securities in this blog. 

Thursday, 12 March 2015

Dollar Cost Averaging Model for the Long Run

All along I've been wanting to do about a write up on Dollar Cost Averaging (DCA) as an approach for new or busy people who are either not sure what to buy or have no time to monitor the markets. 

Good News for all! I just chanced upon this article written back in 2014, click here for link. I believe that this is a good method to enter the market if appropriately used. The only thing to take note is to use this only for instruments which will go up in the long run. So which instruments will go up in the long run?

Indexes of course! If you are based in Singapore, then mostly people would be familiar with the STI (or Straits Times Index) which tracks the market capitalisation of the top 30 Singapore companies over the different sectors. If you are based in other countries, like in US, you can invest in the Index of that country (like the S&P 500). Well, you cannot really just buy the index, you would have to buy the Index ETF through the stock market. The ETF can be traded just like any other funds in the stock markets. The only difference is that the Index ETF tracks closely to the components of the Index. Sounds complicated? I'll explain.

When you buy any fund, the fund managers will decide which stocks to buy and sell. Most of the funds fail to beat the market index (which is the reason why Warren Buffett is willing to make a million dollar bet against 5 hedge funds, click for the link). Those that do perform as well as the index will still lose after the fees are added into the calculations.

When you buy an Index Fund, the fund managers will adjust their stock portfolio according to the constituents of the Index. This means that they cannot choose what to buy or sell. They would have to follow closely to the stock market index. Most of the indexes do not switch out their constituents unless they have a better stock to replace ( ).  So if you are buying the STI ETF, you will know that you are always holding the top 30 companies ranked by market cap in the Singapore stock market and any stock that is not performing as well will be replaced with the next best stock.

The only caution is that you need to choose the country you want to invest in carefully. You do not want to buy into a country’s index when you are unsure of the country’s future (if they get taken over or wiped out).

Investing Wolf 

Disclaimer: This is not a recommendation to buy or sell any mentioned stocks or securities in this blog. 

Sunday, 8 March 2015

How to Profit with 50% Win Rate?

In my last post, I mentioned that if you control your downside, your upside will take care if itself. Some of you will be wondering how could that be! Then I believe it's time to explain trade expectancy. This is a concept most commonly used by the casinos, high frequency traders and forex traders.

Before we go on, (for those who have not yet read my previous post) , A Thing Called Risk is the first part of achieving profits with 50% win rate. If you do not understand or have not made it into a habit to set your maximum risk per trade, it is best to go to the link to read and re-read until it is second nature before continuing.

Let's play a game of coin flipping. If you win, I will pay you $1. If you lose, you will pay me $2, After >100 rounds, I would always be profitable. Why? Because the expectancy ratio is better for me. A coin has a near 50-50% chance of being either heads or tails given enough flips. If you try it only for 10 rounds, you may get 7-3 or 8-2. But try it for 100 rounds or even 1000 rounds and you may get around 50% (may not be exactly 50%).

Apply this game to your trades. Let's say you have a $100 account and by limiting the risk per trade mentioned in the link above, you set the maximum risk as $1. But your only enter trades which you have a possible reward of > $2. This is what we call a Risk-Reward Ratio of 1:2 where you risk $1 for a reward of $2.

Steps for developing expectancy

1. Calculate % of Winning trades and Losing trades
2. Calculate Average Win and Average Loss
3. Obtain Trade Expectancy = (% Win x Average Win) - (% Loss x Average Loss)

Lets determine a 50% win rate (either you decide by flipping a coin or base it on you gut feeling)
1. % Win : % Loss Ratio = 50% : 50%
2. Average Win : Average Loss Ratio = 2 : 1
3. Trade Expectancy = (50% x $2) - (50% x $1) =  $0.5 per trade (0.5% of a $100 account )

Trade Expectancy Ratio means that you are expected to win $0.5/trade in the long run. Everything is just a numbers game in the world of trading. If you got a negative number, you need to review your numbers (Win : Loss %, Average Win or Average Loss) and concentrate on making your numbers better by limiting your losses while letting your profits run. 

In fact, with a winning ratio of 34%, you can also be profitable. Because the Trade Expectancy = (34% x $2) - (66% x $1) = $0.02 per trade.

Although this has very little to do with investing and is more relevant to traders, it is important to limit your losses before your blow up your account.

Below is a chart to illustrate the effects of drawdowns on the account. As you will see, the more you lose, the more difficult it becomes to regain your original capital. So the important lesson is to Limit Losses before they take you out of the game.

Investing Wolf
Disclaimer: This is not a recommendation to buy or sell any mentioned stocks or securities in this blog. 

Thursday, 5 March 2015

A Thing Called RISK!

“The Stock Market is Risky!”

I believe most of us would have heard the above phrase or something like that at least once in our lives. Most of the time, it is from our loved ones or friends who care about us. So let’s go through what is risk and how we go about mitigating a thing called risk.

The definition of risk is (according to Merriam-Webster Dictionary):
1) possibility of loss or injury
2) someone or something that creates or suggests a hazard
3) a :  the chance of loss or the perils to the subject matter of an insurance contract
        b :  a person or thing that is a specified hazard to an insurer
        c :  an insurance hazard from a specified cause or source
4) :  the chance that an investment (as a stock or commodity) will lose value

A fairly easy to understand example would be driving a car. If you drive a car without attending driving school and getting the appropriate license, it is very risky as you do not know how to handle the car in case of a situation or read the road signs. But if you attended a driving school and obtained a license, the risk is minimized as you now know how to handle a car in a situation and read road signs, etc. Now, does it mean that there is no more risk? NO! You are still at risk of an accident (most probably caused by other reckless driver or yourself for ignoring the driving rules).

Risk is always present and most people do not realise it. Every day, your life is filled with risk because you do not know if something may happen while you are walking, eating or even sleeping. The same is true for the stock market. You do not know what will happen the next day.

No one likes to lose money (I’m very sure!). But why are there people who succeed and make money and many who lost money in the stock market? It’s because those who succeed knows how to manage their risk. Those who do not, are destined to lose their hard earned money.

"It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong." -George Soros

The goal of managing risk is to be able to sleep at night, knowing how much is the maximum I could lose if the position goes the opposite way. Here are a few steps which is commonly found in stock books.

Step 1: Determine maximum risk you can take yet still be able to sleep (eg: 2% of total account)
Step 2: Determine a stop-loss level (even before you enter a position)
Step 3: Number of shares to buy (Step 1/ distance of stop loss to entry price)
Step 4: Maximum position size = Step 3 x entry price

So if you have a $10,000 account, is willing to risk 2% of your account, determined your stop loss to be $2 from the entry price of $10 per share. Below is how it would work out.

Step 1: Maximum risk per trade = 2% of $10,000 = $200
Step 2: Stop loss = $2 from entry price
Step 3: Number of shares to buy = ($200/$2) = 100 shares
Step 4: Total position of  trade = 100 share x $10 per share = $1000

Hence, you can purchase 100 share at an entry price of $10 and have a stop loss at $8. Maximum loss on trade is only $200 which is what you are comfortable to lose. Once you control your downside, the upside will take care of itself (will explain more in the next post).

Investing Wolf
Disclaimer: This is not a recommendation to buy or sell any mentioned stocks or securities in this blog.