Wednesday, 25 February 2015

My Beginnings

Many people have hopes and dreams of being financially free or being able to retire early. But few people actually set out to learn how to be. Fewer still are those who eventually take action.

It all started with a thought. The thought of not having to work for a living ignited my interest towards the financial world.

I was introduced to “Rich Dad Poor Dad” by Robert Kiyosaki when I was still in the Army and subsequently the finance section in the library became my next best friend. It took a lot of effort as I always had problems staying awake with a book in my hands. But I persisted and borrowed more than 3 - 5 books at any time. Most of the time I would borrow books about Warren Buffett, dividends, trading, FOREX, REITs, properties and options.

While I was flooding myself with the information from the library, I was saving about 50% of my NS allowance (Army provided food, clothes, and bunks for 5/7 of the week and I have a simple girlfriend who does not spend much). I went over the newspaper and attended almost all the previews that I could find that talks about money. But I never paid to attend their courses as I wanted to grow my funds first.

In 2012, I deposited my first 5K SGD into my brokerage account and bought my first stock, Mcdonalds (I love to eat Mcdonalds since my Poly days). When I told my mum about it, she kept telling me how dangerous the Stock Market was. She also started sifting through the daily newspaper to look for scams/ fraud/ any other bad news about the financial world and put them on my table (talk about being committed). Thinking back, I was hoping my first stock to have a good start. I ended up holding Mcdonalds for a little more than a year with profits of $32.64 USD including dividends.

After I cashed out towards the 4th quarter of 2013, I paid for a Wealth Creation course after hearing a friend giving good reviews about it (That was the only paid course I attended till date).

Maybe because I was lazy, I only started applying what I learned in 2014.


31-Dec-13
31-Dec-14


Total
Long
Short
Total
Change
Cash
10,291.32
3,840.72
0
3,840.72
-6,450.60
Stock
0
7,429.46
0
7,429.46
7,429.46
   Total
10,291.32
11,270.18
0
11,270.18
978.86

Time Weighted Rate of Return
9.51%

Although I did not earn back my course fees yet, I have to admit that the course gave me the strength and conviction to continue my financial journey. I was more committed to striving for my own financial freedom. That was when I heard about options selling from 1 of my friend’s recommended previews.

It took me more than 6 months to understand and another 3 months to try on a demo account. Nonetheless, my options journey took off at the end of July 2014 (also the time when my bonus came in so there was another cash injection of 10K USD into my brokerage account).

The rest is as follows.

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


Sunday, 22 February 2015

Feb 2015 Portfolio

Month of February  
  
Happy Chinese New Year to all! Hope everyone have a wonderful Goat Year.

On Feb 6-8, Singapore Exchange (SGX) held its first ever carnival “My First Stock Carnival” as part of a campaign to educate new investors. I personally think this is a good idea as more people need to know about the wasted opportunities if they just keep their money inside their banks, earning less than 1% interest p.a. But hopefully they would continue to give more educational talks to better equip the new investors. If not, it won’t be long before they start treating the market like a gambling den and eventually lose all their hard earned money.

Greece is still trying to buy time with their creditors to prevent a default…Again.

Stocks 
Basically I have done nothing with the account since the last posting and I am just letting my profits in AAPL to run. Turns out, the earnings report was better than expected and shot my position from negative to positive. Also there has been news that Apple may be looking to produce cars. Are they serious?

Because I’m lazy to keep manually typing in all the numbers, I have decided to just use my broker’s account statement. Also it is less complicated than me trying to make it simple.

Symbol
Open
Quantity
Cost Price
Cost Basis
Close Price
Value
Unrealized P/L
AAPL
2015-01-12
38
110.426316
4,196.20
128.45
4,881.10
684.9

Net Asset Value






31-Dec-14
19-Feb-15


Total
Long
Short
Total
Change
Cash
3,840.72
6,848.04
0
6,848.04
3,007.32
Stock
7,429.46
4,881.10
0
4,881.10
-2,548.36
   Total
11,270.18
11,729.14
0
11,729.14
458.96

Time Weighted Rate of Return
4.07%

Dividends
Last year I received some dividends from some of the stocks I bought and sold. I’m not in the US market for the dividends as foreigners have to pay a 30% tax for dividends received. Hence dividend investing in US is not a very good idea. Good news is that dividends were received from AAPL in Feb. So maybe I would add on a column for Dividends earned so as to keep track.

12/02/2015
AAPL(US0378331005) CASH Dividend 0.47000000 USD per Share (Ordinary Dividend)
17.86
12/02/2015
AAPL(US0378331005) CASH Dividend 0.47000000 USD per Share - US Tax
-5.36
Total Dividend 2015
$12.50


Options on Futures 
3 of my contracts expired this month and manage to credit me $1,725 in total. But there was a loss of $537.50 when I went in and my account couldn’t handle the margin when the market fell hence I had to exit even before the market hit my target stop loss. Overall Net $1187.5 ($1725-$537.50). Currently trying to see if the market will make another small dip to get more positions.

End 2014
$1,017.50

Jan 2015
$1,102.50
($1402.5 - $525 + $225)
Feb 2015
$1,187.50
($1725 - $537.5)

Total Invested Capital
$10,000.00
Starting Capital of 2015
$11,017.50
Cash and Sweep
$14,124.32
(Includes money held as margins)
Total Gain/Loss YTD
$2,290.00
Total Gain/Loss YTD %
20.79%


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


Tuesday, 17 February 2015

Warnings about Selling Options

Dangers of Options Selling 

Option selling might seem like a good way to earn recurrent profits but if used wrongly, will always cause more harm than good. Hence the reason why I do not recommend anyone to just blindly jump to selling right away. The risk of blowing the account is too real and if you ignore your pre determined rules, you are very likely to suffer the horrible consequence that follows. Below is just 1 of the examples which has strike my heart even to this day.  

Those living in Singapore may or may not have heard of Alvin Chow of Big Fat Purse (http://www.bigfatpurse.com/). He posted an article on 29 Jan 2014 about how he ignored his rules and eventually blew a full year's salary selling options. His article could be found here: http://www.bigfatpurse.com/2014/01/how-i-blew-up-105000-in-my-trading-account/ . 

In the post he mentioned the all too real risk of how greed and ego can undermine months of profits  and eventually cost him a huge portion of his account. That is the reason you should print out your trading rules and paste it at a prominent place to remind us daily of the rules that we set to protect ourselves.  

I always tell those who are interested in Option Selling that the risk is unlimited, but having unlimited risk just means you have to manage your own risk as the market is not going to do it for you. It is not the same as buying Options where you can only lose the premium you invested in. The only other person who will limit your risk by closing your position is the broker (by means of the dreaded margin call). Once he calls you, you know your account is in deep trouble. 

Therefore, I have always tried to stick to my pre set rules to prevent any mishaps from occurring. That being said, I myself have received 1 margin call before when I just started out. But by the time I received the margin call, I had already bought back the losing position and my account was in the green. I called my broker and he told me that the margin call was not valid as I had already corrected the error of my accounts. Hence, it did not affect me. That episode taught me to keep a healthy portion of my account in cash in case of any mishaps and to close the losing position when it reaches my rules. 

Always take calculated risk. 
Always know what is the worse possible outcome if the trade does not go as expected.
Live to fight another day.

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