About Me

Disclaimer: All analyses posted on this blog are not intended to be recommendation to buy or sell any stocks, ETFs, bonds and etc, but solely to supplement and sharpen your investment decision making process. I firmly believe that all investors should be adequately informed and do their own due diligence prior to undertaking an investment decision.

My philosophy

Financial freedom is just a subset of something greater. Investing has always been a means to an end for me. While I have always desired financial independence, it was just a puzzle piece (albeit a very vital one) in completing my mosaic of freedom. From a very young age, I have always dreamed of transcending society; soaring above the suffocating pressure of expectations imposed by family, friends, colleagues and broader society. I also desire nothing less than to rise above the burdens and concerns that plague society. Political discourse- issues of racial discord, left-right wing polemics, wealth and class disparity and etc, piques my interest only to the extent that it affects my portfolio. Possessing financial freedom is certainly a big leap in that direction. Yet in my eyes, freedom means more than just having financial security. It is being able to life a live free from the shackles of society and government at large.

My investment portfolio is an integral component of my personal income statement and balance sheet. It may seem to be stating the obvious, but its implications are not trivial. When making investment decisions, I account for its overall impact on my income statement and balance sheet. One should take note of the correlation between one's investment assets with various other assets and liabilities that are on his balance sheet.

A simple way to demonstrate this is to consider a person who works in the oil & gas industry. He should diversify his investment portfolio AWAY from the industry even if he has good reason to think that he has an informational edge when investing into the sector. This is because should there be a slump in oil prices, not only are his job and income prospects affected, but his portfolio will likely decline too. An investment portfolio containing consumer staples, healthcare stocks and utilities would be a good way to hedge against his career risk. Adding some bonds to his portfolio would not be a terrible idea either. Conversely, a medical practitioner of similar age and risk profile can afford to take on more risk by adding exposure to these cyclical industries.

Immunize liabilities. Immunization in an insurance context refers to matching one's liabilities with corresponding assets. While challenging for an individual to immunize all his liabilities in the technical and professional sense of the word, an individual investor can attempt to build up an investment portfolio that will sufficiently cover his liability needs. A simple example would be to hold a portfolio of bonds and stable dividend stocks that generates sufficient coupons and dividends to cover one's monthly mortgage payments. Investors who are pursuing FI/RE are intuitively embodying this concept, as they are attempting to build up sufficient passive income to match their pension liabilities, ie monthly draw-down needed upon early retirement.

My investment style

Top Down approach - macroeconomics first, then microeconomics. I take a bird's eye view with regards to my portfolio. Macroeconomic factors such as economic data, major central bank policies, population demographics and interest rate environment play a key role in my investment decisions. In my hierarchy of investment decision making, these factors take precedence over company or asset specific factors. This is not to say that microeconomics do not matter, but the average investor tends to neglect to consider that a company is just a cog in a much larger machinery, that is the economy. While being able to analyse a company is a vital skill, lacking the ability to read the economic climate is akin to a blind sportsman who is able to dribble a ball expertly but is unable to visualize the landscape of the playing field.

Maintain a global portfolio with as much diversification away from my home market. In my case, I am a Malaysian based in Kuala Lumpur. I have always maintained a low exposure to the Malaysian stock exchange, Bursa Malaysia since I started investing in 2010. Eventhough my primary goal was diversification, I have not just enjoyed consistent FX gains from the steady depreciation of the MYR against major hard currencies, but my portfolio has allowed me to hedge against the political vagaries of the country. As it stands currently, my career and personal well-being is tied to the fortunes of the country. Why should I keep all my nest eggs in the same currency and market? 

Thus far, I am thankful to have maintained a global portfolio over the years, more so in the aftermath of the 2018 Malaysian General Election which saw several Malaysian blue chips becoming a lot less blue due to arbitrary policy changes by the new administration. It is precisely at moments like that, that I was thankful to have moved the bulk of my financial assets abroad. It is not that I have something against my own country, but I feel a need to hedge away my country-specific risk. Should Malaysia fare well in the long run, I expect it to be reflected in my career, real estate holdings and what little local stocks in my portfolio. In the longer run, my goal is for my global portfolio to overshadow my domestic assets so that I will not be held hostage by any particular market or government.

100% fundamental analysis. I am a medium-to-long term investor, and am a strong proponent of fundamental analysis. Though I do not dismiss the possibility of generating profits from day trading, you are probably at the wrong blog if you expect to find any advice on technical analysis here. I am a firm believer that in the long run, the price of a stock will ultimately track the trajectory of its profit and cash flow.

Cash is king. No, I do not believe in holding much cash. Instead, I am referring to a business' cash generation ability, which I consider to be more important than its reported paper profits. I have a strong preference for businesses that are generating a steady and growing cash flow. From the perspective of a business owner, the end game is to extract cash from the business in a sustainable manner. It is pointless to own a business that reports substantial profits but yet is unable to generate a steady stream of cash flow. Why does cash generation matter? Because a company that generates a steady flow of cash is able to pay out dividends in a consistent manner, which leads me to my next point.

Slow and steady does it - dividends. While I am not adverse to making an occasional quick buck by trading, my portfolio is primarily driven by a stable income generation engine. In years where the stock markets go nowhere or even downwards, a healthy dividend portfolio will still be able to churn out steady income. I favour stable dividend stocks with earnings growth potential as the anchor of my investment portfolio.

Generally, I avoid punting on stocks and shy away from sectors with low and volatile profit margins. Using the Porter's Five Forces framework, I work to identify companies which are able to preserve their profit margins in the long run. Typically, my portfolio is skewed towards REITs and companies operating in monopolistic/oligopolistic industries. I usually avoid commodity producers due to the thin and volatile profit margins and intense levels of competition that characterize the industry.

1 comment:

  1. Found your blog from investing note. Your write up for 3 REITs are quite comprehensive, though i am not vested for all 3.

    I have added your blog into my link list, do visit my blog when you free. I found very coincidentally because we both started on 1st Jan 2019 and we both love REITs. My blog title is REIT-TIREMENT and address is https://reit-tirement.blogspot.com/

    Please continue to post your analysis and hope can learn from you. Keep in contact.