Lessons Learnt From My First 3 Months

Not too long ago, I was introduced to this portfolio tracking tool on Excel called the XIRR. I give up on using it as it don't seemed very accurate or perhaps I made some error because I don't fully understand it. Since I have compiled my trade history, I think it will be useful to share my wonderful experience with the market during my first 3 months. It was a really good experience and without with I think I will not have improved much especially when it comes to emotional balance.

Figure 1 - Trade History

So this is my trade history when I just started out in the market. The decision to take the plunge at the onset of the current Euro Zone crisis last September is a wise move as I started to get used to market gyration. So on 22nd September 2011, I got my trading account and bought my first 2 stocks - VICOM and Eratat. VICOM was a great choice and I bought it for I think it is a great piece of business. 

For Eratat, I thought it was being deeply undervalued and I was drawn into its story of going up the value chain to price itself as a premium brand.  Profit margin is growing and profit and revenue have been jumping higher each year. Coupled with its high cash position and low P/E of less than 2, it looks like an ideal value stock. I sold 2/3 of it in 10th November 2011 at a loss of 9.7%. Lesson Learnt - Accounting skill is extremely important when doing fundamental analysis. 

3 days later, I flew to Australia as part of military exercise and thus I did not do any trading until I came back   at the end of October. I bought into this stock called Sunvic Chemical as it has some share buyback programme and I think it is going to deliver a good quarterly result as price of the ester commodity seemed to be doing fine. Subsequently, I can no longer stand the price fluctuation and decide to sold it at a loss. Lucky, I sold it as it subsequently reported a 40% drop in quarterly profit. Lesson Learnt - Do not buy a stock if you cannot stand the price fluctuation.

While the loss was only 2.97% and maybe a few hundred, I cannot take the losses and was determined to get back into the black. Not long after, I got to know about this stock called Mewah through some investment website and blog. Basically, there was insider buying and speculation that it will have be a turnaround for the next quarter. I was hoping to be able to recoup my losses but I ended up losing money yet again though I was quick to cut my losses. Lesson Learnt - Don't buy on rumours.

As I continue to slump into the losses, I was even more determined to get out of it. So I went into Sunvic again, hoping to make some quick bucks. Luck was not on my side and I sold it off 4 days later at 4.94% losses. Lesson Learnt - Things get worse when you are speculating aka gambling...

Subsequently, I bought into UOL($4.26) since it seemed to be undervalued though I did not really do much analysis. 2 days later, ASSD was announced and all the property counter starts to crash heavily and I sold it at a 5% loss once again. Of course, if I have done my homework I might not have sold UOL given that it holds hotels, offices and retail malls. Lesson Learnt - Always do your homework.

I also bought into SIA Engineering as I want to reduce my "gambling" chips as I am quite scared about the losses coming from speculation. However, I did make a mistake in buying again the next day at $3.53, thinking that I was averaging down. Lesson Learnt - Averaging down target should at least be 10-20% lower.

After that, I bought OUE at $2.05 and sold it at $2.05 incurring brokerage losses. Once again, I was trying to recoup my ballooning losses but I cannot take it and sold it. Lesson Learnt - Even if you manage to sell away your stock at the original price, you will still be incurring brokerage losses. 

Then I bought into SMB United as a arbitrage play given that the original offer from Boer is a bit too cheap. I was thinking that even if the offer fails, the company is still worth more. Finally, Lady Luck smiled on me and I got away with a 13.2% gain though I am still quite in the red.

Getting away lucky, I venture into CD/XD play with UtdOAus which was trading in SGD but declared the dividend in Aussie. I got away with a 2.68% gain though I am sure I am still speculating.

At the end of the year, I bought into San Teh upon the declaration of dividend distribution the previous night. Not only was i speculating, I keyed in twice the amount as I was not aware that I failed to cancel the previous trade. Needless to say, I made ~8% losses again as I sold it within 3 days as I know I do not have enough money to pay for it. Lesson Learnt - Always check the trade that you have entered especially if you are doing online trading on your own.

In all, I made 11% in realised losses using NAV within 3 months and I told myself that I am going to stop speculating once and for all. I have read The Intelligent Investor before I have started, but I simply cannot control the very powerful feeling of greed and fear within me. 

However, I am glad that I have paid for the lesson and become determined to follow the proper path. I restructure my portfolio and sold the loss-making Eratat. I bought companies like HR Glass ($1.06) and additional stake in VICOM before the minor bull returned in 2012.

Summary of Lessons Learnt –

1. Accounting skill is extremely important when doing fundamental analysis. 
2. Do not buy a stock if you cannot stand the price fluctuation.
3. Don't buy on rumours.
4. Things get worse when you are speculating aka gambling...
5. Always do your homework.
6. Averaging down target should at least be 10-20% lower.
7. Even if you manage to sell away your stock at the original price, you will still be incurring brokerage losses. 
8. Always check the trade that you have entered especially if you are doing online trading on your own.

That's why I have always said that I am blessed to have started on September 2011 in the midst of the trial and tribulation ongoing in the market. The bear is where you learnt the most as it is akin to putting yourself on a survival mode out in the open sea. If I have started in a bull market, I supposed I will have made much better gain before my portfolio will get wiped out when the bear returns. I am happily waiting for the giant bear to come though it will probably not be any time soon. That will be where I can get to understand my character and emotional balance best.