Reflection (Kind of)

In December of last year, one of the co-writers of Stockify suggested me to conclude 2017 with a reflection. It is difficult for me to share a meaningful reflection especially while I still consider myself as an amateur in this field. I started manage a portfolio for a good  friend since beginning of last year. I hope my email to her can also be a contribution to this blog.

Happy New Year, this email should have reached you on 1st January 2018 to serve as the beginning value of your portfolio in year 2018. I apologize for the delay due to the usual busy schedule during year end.

Putting leveraging effect aside, stock market is historically proven as the investment vehicle that generates highest return over the long run. Most wealth was created through stock market, the other side of the coin of course is that most wealth was lost in here too.

To participate in stock market, there are two ways to do, 1) To do it yourself, 2) To have someone to do it for you.

Interestingly, all the Brokerage Firms / Brokers / Remisiers would try to convince you that “You can do it yourself.” On the other hand, the Mutual Fund / Fund Managers/ Insurers would try to convince you that “Don’t be stupid, let the expert handle it for you.” Of course, none of the statement are completely right or wrong, they are just promoted merely by self-interest.
So what do I personally think?

You should always do it yourself PROVIDED you have got the TIME and PASSION.

TIME – We are not talking about time spent on checking price, neither about following daily financial updates, both of them are equally toxic. Most of your time should be spent on reading annual reports, financial reports, articles, journals and books, and then start applying, practicing and experiencing, to refine your analytical skills, determine your investment strategy and shape your investment philosophy. Invest your time to acquire long-term knowledge, not expiring knowledge (see more at

PASSION – Sacrificing your time alone is not enough. In some pursuits in life, for example getting in shape or getting good grades, it means more time in the gym or the library. But in investing, it calls for more perceptive thinking, at what Howard Marks calls second level thinking. This is a cold hard truth that I find it hard to swallow. As investment performance can’t be fairly measured without enough years of data, so it takes certain degree of blind faith to keep yourself going on and believe that one day you will develop such second-level thinking, and such faith can’t last without strong passion.

Now you say you are through with 1st Option, how about the 2nd Option? To have someone to do it for you? You just have to select the right guy right?

I feel sorry to say it is not easier. Mutual Fund Industry is notorious of selling Past Performance, with a small disclaimer: “Past Performance is No Guarantee of Future Results”. The reason is simple, not only because top fund managers tend to be headhunted by other fund houses, but more importantly what made those “Top Fund Manager” top in the first place? by their past performance?Imagine you had the opportunity to meet an Iranian guy called Anton in a private event, one of you suggested to play poker to pass time. You beat this Iranian guy at the first two round, but later as the night ended you lost a fortune to him. You later realized the guy is called Antonio Esfandiari, one of the top professional pokers in the world, and learned it a hard way that beating Anton in the first two round doesn’t mean you were better than him, only because you had better lucks, or had taken excessive unmeasured risks. The same goes to investment. How do you know the few years of “good performance” was not a result of taking excessive risks? or just being lucky? And similarly, how do you know the “bad performance” was not the due to the exact opposite reason? As the matter of fact, legendary value investor Walter Schloss fund performance was once beaten by S&P 500 for 10 years.

You are receiving this email because you have chosen for Option 2, which I would say there has been a certain degree of blind faith involved. From year 2018 onward, I would update you about your portfolio semi-annually (instead of previous monthly update), which suits better to our notion of value investing, and so that I will be able to provide better quality write-up, and from time to time we are able to make sure our direction, strategy, and philosophy are aligned.
As at 1st January 2018,

FBMKLCI index was 1796.81 (this will serve as the benchmark of your portfolio performance)(details of portfolio I prefer to leave blank until I got the consent to do so.) Return since Inception = -7.4%

“By three methods we may learn wisdom: First, by reflection, which is noblest; Second, by imitation, which is easiest; and third by experience, which is the bitterest.”

This is a quote from Confucius (according to internet, yet to be verified because I can’t seem to find the original in mandarin), which can be easily applied in stock market. Most of us have experienced, and still learning through the bitter and easy way, and going forward I wish to learn more wisdom by reflection. Reflection could mean serious thought and consideration, or the production of an image by a mirror. In this context, I am referring to the latter.

As mentioned, over the short run, luck plays a part in your portfolio, and this is actually the source of ignorance and foolishness in stock market, where most people take credit for good performance and blame luck for bad times. I would like to use their reflection on myself, so in this year let’s set a little target, whenever the portfolio is doing good, I would ask myself: Is this because of me being lucky? or is it because of excessive risk taken? On the other hand, whenever the portfolio is doing bad, I would re-examine the portfolio, to see if there is something that I have overlooked, or just too blinded by my ego?

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