How will the New Lease Accounting Standards impact my view of retailers?
Roger Montgomery has kindly published my contribution in his blog around recent changes in accounting for Leases
Friday, October 29, 2010
Thursday, October 28, 2010
Gambling vs Investing
For the next series of posts, I am going to share thoughts from my investment journey. I recalled slightly more than a year ago, a friend told me he is investing in the share market and my immediate reaction is "No thanks, I am not a gambler".
As such, this post begins by trying to differentiate gambling and investing.
http://www.investorguide.com/gambling-vs-investing provides a in-depth discussion on this topic which is worth a read. I have taken a few key points from the article and listed them below.
According to dictionary.com website,
"Gamble: To bet on an uncertain outcome, as of a contest. To take a risk in the hope of gaining an advantage or a benefit."
"Invest: To commit money or capital in order to gain a financial return."
In Wikipedia, "the stakes" is being referred to in gambling and the time frame is short. In contrast, Wikipedia used the word "commitment" to refer to the initial cash outlay in Investing.
Now here's my take on it now (a year later).
What they have in common?
- Both involves money;
- Both has possibility that one of outcome is receiving more money; and
- Both contains risks
So what's the different?
Time horizon: Gambling has a shorter time frame than Investing.
Effort and homework: Investing demands more analysis and thought behind the investment choices compared to Gambling.
Intention: Gambling is a risk-taking activity that you enjoy the thrill of winning. Investing is a risk-adverse activity which you want to "protect" your money (capital).
Outcome: In Gambling, it doesn't matter if you loose your money as it tends to be associated with entertainment. In Investing, if you loose your money, it matters more. This a very interesting point since it is easier to walk away from gambling, but for investing, the fear of losing money and therefore wanting to recouped your losses may change your behaviour to become a risk taker (i.e. you are no longer rational).
Because of the perception that gambling is a bad thing, some people (like me a year ago) shy away from buying shares in the stock market since the concept of taking risk, when associated with gambling, is bad. That said, why would anyone invest significant amount of their retirement funds in the very financial product they won't buy themselves.
It is not the physical act of buying/selling shares, but the process an individual go through that differentiate Gambling and Investing.
If you have done all the analysis and research with a long term view, and have no intention to make a quick buck. Not executing the trade just because you think it is gambling is an irrational thing to do.
The next challenge I faced is how do I know my research that supports my investment decision is "right".
As such, this post begins by trying to differentiate gambling and investing.
http://www.investorguide.com/gambling-vs-investing provides a in-depth discussion on this topic which is worth a read. I have taken a few key points from the article and listed them below.
According to dictionary.com website,
"Gamble: To bet on an uncertain outcome, as of a contest. To take a risk in the hope of gaining an advantage or a benefit."
"Invest: To commit money or capital in order to gain a financial return."
In Wikipedia, "the stakes" is being referred to in gambling and the time frame is short. In contrast, Wikipedia used the word "commitment" to refer to the initial cash outlay in Investing.
Now here's my take on it now (a year later).
What they have in common?
- Both involves money;
- Both has possibility that one of outcome is receiving more money; and
- Both contains risks
So what's the different?
Time horizon: Gambling has a shorter time frame than Investing.
Effort and homework: Investing demands more analysis and thought behind the investment choices compared to Gambling.
Intention: Gambling is a risk-taking activity that you enjoy the thrill of winning. Investing is a risk-adverse activity which you want to "protect" your money (capital).
Outcome: In Gambling, it doesn't matter if you loose your money as it tends to be associated with entertainment. In Investing, if you loose your money, it matters more. This a very interesting point since it is easier to walk away from gambling, but for investing, the fear of losing money and therefore wanting to recouped your losses may change your behaviour to become a risk taker (i.e. you are no longer rational).
Because of the perception that gambling is a bad thing, some people (like me a year ago) shy away from buying shares in the stock market since the concept of taking risk, when associated with gambling, is bad. That said, why would anyone invest significant amount of their retirement funds in the very financial product they won't buy themselves.
It is not the physical act of buying/selling shares, but the process an individual go through that differentiate Gambling and Investing.
If you have done all the analysis and research with a long term view, and have no intention to make a quick buck. Not executing the trade just because you think it is gambling is an irrational thing to do.
The next challenge I faced is how do I know my research that supports my investment decision is "right".
Monday, October 18, 2010
Thursday, October 7, 2010
The Rich List
I came across the world wealth report by Capgemini and Merrill Lynch which is a compilation of insights to High Net Worth Individuals (or simply 'the rich list')
High Net Worth Individuals ("HNWI") is defined as those having investable assets of $1million or more, excluding primary residence, collectables, consumables, and consumer durables from their report.
In the 2010 report, the headlines includes HNWI allocating more asset to fixed income instruments, North America being the single largest home to HNWI and Asia-Pacific's continual increase which has surpass Europe. One of my observation is that most HNWI are diversified across equities, fixed income, real estate, cash and alternative investments (including collectables). The concept of diversification seems to run consistently across HNWI in various geographical regions.
However, Rome is not build in a day. The question that got me thinking is how did they build up their portfolios? My logical answer is that besides inheriting a lump sum of money (windfall gains), be the CEO of a huge company, or a famous pop star, the majority of these individuals are people like you and I.
Assuming that HNWI are active investors, their strategy must have started with one asset (e.g. equities security, term deposit or investment property) and accumulative more and more assets through time.
In my opinion, the concept of diversification or 'not putting all your eggs in one basket' is not something you apply at the start of your investment journey. Instead, it is more efficient to focus on a particular asset class and progress to another through time. Efficiency is achieved through knowledge and understanding of what you are investing.
It may seems like a lot of work but I firmly believe in being actively involved and taking control of my investment decisions . Alternatively, you 'play it save' and put your money in a diversified funds just like everybody else. That said, there's a reason why the rich are getting richer; and the poor are getting poorer
High Net Worth Individuals ("HNWI") is defined as those having investable assets of $1million or more, excluding primary residence, collectables, consumables, and consumer durables from their report.
In the 2010 report, the headlines includes HNWI allocating more asset to fixed income instruments, North America being the single largest home to HNWI and Asia-Pacific's continual increase which has surpass Europe. One of my observation is that most HNWI are diversified across equities, fixed income, real estate, cash and alternative investments (including collectables). The concept of diversification seems to run consistently across HNWI in various geographical regions.
However, Rome is not build in a day. The question that got me thinking is how did they build up their portfolios? My logical answer is that besides inheriting a lump sum of money (windfall gains), be the CEO of a huge company, or a famous pop star, the majority of these individuals are people like you and I.
Assuming that HNWI are active investors, their strategy must have started with one asset (e.g. equities security, term deposit or investment property) and accumulative more and more assets through time.
In my opinion, the concept of diversification or 'not putting all your eggs in one basket' is not something you apply at the start of your investment journey. Instead, it is more efficient to focus on a particular asset class and progress to another through time. Efficiency is achieved through knowledge and understanding of what you are investing.
It may seems like a lot of work but I firmly believe in being actively involved and taking control of my investment decisions . Alternatively, you 'play it save' and put your money in a diversified funds just like everybody else. That said, there's a reason why the rich are getting richer; and the poor are getting poorer
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