If you are visiting my blog for the first time, please read the following pieces first. It will provide you with important background information.
1. Why I created this blog?
2. How am I going to operate this blog?
There are many great books competing for the best ever investment book title. But if you only want to buy one book and one book only, you have to buy “You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits” by Joel Greenblatt.
If you want to pick stocks not to buy an index, you believe you can explore the inefficiencies of the market. We all know the market is fairly efficient. Inefficiencies does happen but rarely. At each transaction table, one side is the buyer and the other is the seller. It would be arrogant to assume the seller is uninformed or stupid. In most circumstances, today's seller has followed the security longer and more closely than the buyer has, has previously been a buyer. How can you be sure you are buying a really undervalued stock from the seller?
This book is a practice guide. Joel wrote a book to teach us to buy in special situations in which undervaluation of securities happen by design. It is all about event driven investing: spin-off, merger, bankruptcy, restructure, recapitalization and LEAPs. The best part is that you don't need to finish the whole book before you can try your hands in the market. For example, once you finish reading chapter 3, you can begin to tiptoe into some spin-offs. After you get the handle on spin-offs, go on to another approach that interests you.
It is easy to read. The book's format is well organized: each chapter explains the how and why of investing in one particular corporate event, and then give examples to drive the point home. The examples are so interesting that I feel like reading a novel. The tone is lighthearted and endearing throughout with frequent hit the mark jokes .
And it is not long. Other great books, such as Ben Graham's “ The intelligent Investor” and “Security Analysis” are long and the reader needs some determination to finish them. It doesn't make them less great. Actually it is probably better to have a sound framework built this way. But remember our topic is you only want to buy one book and one book only. Only reading Ben's classic without “Common Stocks and Uncommon Profits” gives me a sense of incompleteness. And if you only finish one of the three, you'd better not to try your luck in the market without finish the other two.
Now let's talk about how to buy the book cheaply. Let's buy used. For example, a brand new “ You Can Be a Stock Market Genius” from www.Amazon.com costs $11.70 and a used one costs $1.97. Remember, new printing offers no new information. And a new edition may not be as good as the old one. The used book vendors at www.Amazon.com, www.pricegrabber.com and www.Alibris.com usually give very good indication of the condition of the books. I bought over 10 books from those sites and I found the conditions were usually better than my expectations. Last but not least, it is greener buying used!
Tuesday, August 25, 2009
Sunday, August 23, 2009
Sell Your Mutual Fund
If you are visiting my blog for the first time, please read the following pieces first. It will provide you with important background information.
1. Why I created this blog?
2. How am I going to operate this blog?
Here is the speech I gave at a local Toastmaster Club. It is more inspirational than theoretical. But it can serve as the reminder of the danger of the unsuspecting minds. Some details have been altered to protect the privacy of the people mentioned.
Thank you, Toastmaster! Fellow member and distinguished guests!
Professional management is the biggest selling point for mutual funds! And here, I am going to pick on my little brother. First, he is not in this room. Second, there is a long enduring sibling rivalry between us. Last but not least, he makes a lot of more money than I do. He recently became a fund manager at one of the best selling mutual fund family -- Waddle Incorporated, focusing on Asian Pacific market.
Don't get me wrong. My little brother is a mathematical genius. When he was 8 years old, a group of John Hopkins researchers announced that only one of 20 million has his minds to handle high math. I believe, if my brother sets his mind to do search engine, we would not have "Google" or "Bing", we will have something better, perhaps called "Wang".
The problem, my little brother works at Waddle, is that it does not take a math genius to invest successfully. The successful investors, Warren Buffet, Larry Tisch and Carl Icahn, none of them know how to do calculus, linear algebra and matrices! On the other hand, those geniuses, the Nobel Price winners at long term capital, the world bridge champion at Bear Stone and the Quants at Lehman brothers, lost their shirts! Successful investing only involves discipline, persistence and common sense. If the professional doesn't have those qualities, the smarter he is, the more he eventually loses!
But the mutual fund industry keeps hiring those geniuses, and showers them with obscene amount of money out of shareholders' expense! Can't you believe after the fiasco of the long term capital in 1998, the same genius got funded only to be wiped out again ten years later! In 2008! And before long term capital, this guy ruined a perfect good party at Smith Barney. Sell your mutual funds!
Second. Let's talk about internal conflict of interest between the shareholders and fund management.
Even if the fund loses shareholder's money, a lot of money, the fund management still has the audacity to charge the shareholders a fee! And as a shareholder, you will not notice the fee because the management will never tell you. Image this! For our outstanding effort of 2008 reducing your portfolio from $700, 000 a year ago to $400, 000 today, we will only charge you $8000! No, if you want to figure out how much you spend on your mutual funds, you will in the footnotes of the financial statement, find the total expense, divided by the total shares outstanding and times the shares you own. Then, if you add transaction cost, taxes and many other small items, you will be surprised at how much you pay for the privilege having someone else managing your money. The results, the management gets rich along with its employees, and you will be shocked how little staff those companies employ, and the shareholders lose! And I have not even mention all the scandals: market timing, soft money and Ponzy schemes! Sell your mutual funds!
Here is a true story. CY Lewis, before he became one of the biggest success in Wall Street, was a shoe salesman. Once he sold two, not one, but two pairs to a widow for her husband. Talking about something we will never need. I guess a dead man doesn't need two pair shoes.
Last but not least, we can do better. Anyone who ever goes to Las Vegas knows this game. Sometimes you win, sometimes you lose. The house always wins by design the odds and payout. Now let's say it is the stock market. Sometimes you win, sometimes you lose. But odds and payout are in your favor. Do it through a mutual fund is like giving money to a gambler, if he wins, you share the profit. If he loses, you bankroll him. Bad deal! I am always wondering why 40, 50, 60 years old gentlemen and ladies, well to do, doctors, lawyers and accountants, give their money to a twenty year old, fresh out of school, even the suit he is wearing is a rental. If you yield your responsibilities of managing your own money, why do you think someone never make a nickel out of his life will manage your money responsibly. Sell your mutual funds!
Let's summarize. 1st, the mutual fund industry always hires the wrong people. 2nd, the fund management is always working against your. Last, a common person will always do better to take the responsibility of managing his own money into his own hands. Get some self confidence! For your long term security, for the benefits of your retirement, your heirs, sell your mutual funds! When you go home tonight, you don't want to eat dinner, you don't want to talk to your spouse, you don't want to play with your dogs, you turn on your computer, log on to your account, you sell your mutual funds! And never, ever buy another mutual fund!
Thank you.
1. Why I created this blog?
2. How am I going to operate this blog?
Here is the speech I gave at a local Toastmaster Club. It is more inspirational than theoretical. But it can serve as the reminder of the danger of the unsuspecting minds. Some details have been altered to protect the privacy of the people mentioned.
Thank you, Toastmaster! Fellow member and distinguished guests!
Mutual fund becomes part of our lives. People rely on mutual fund to secure their long term financial perspective! Not owning a fund is shocking to the unobservant minds! Originally I was thinking of giving a speech on how to choose a mutual fund! I filtered the entire mutual funds universe with some simple criteria. We have tens of thousands mutual funds out there, as a matter of fact, we have more mutual funds than the listed securities the mutual funds supposed to buy. I am shocked to find only a handful funds passed the filter. That got me thinking about the entire mutual fund industry. Eventually, I changed my topic to: sell your mutual funds!
There are three reasons for this action: people, organization and us.
Professional management is the biggest selling point for mutual funds! And here, I am going to pick on my little brother. First, he is not in this room. Second, there is a long enduring sibling rivalry between us. Last but not least, he makes a lot of more money than I do. He recently became a fund manager at one of the best selling mutual fund family -- Waddle Incorporated, focusing on Asian Pacific market.
Don't get me wrong. My little brother is a mathematical genius. When he was 8 years old, a group of John Hopkins researchers announced that only one of 20 million has his minds to handle high math. I believe, if my brother sets his mind to do search engine, we would not have "Google" or "Bing", we will have something better, perhaps called "Wang".
The problem, my little brother works at Waddle, is that it does not take a math genius to invest successfully. The successful investors, Warren Buffet, Larry Tisch and Carl Icahn, none of them know how to do calculus, linear algebra and matrices! On the other hand, those geniuses, the Nobel Price winners at long term capital, the world bridge champion at Bear Stone and the Quants at Lehman brothers, lost their shirts! Successful investing only involves discipline, persistence and common sense. If the professional doesn't have those qualities, the smarter he is, the more he eventually loses!
But the mutual fund industry keeps hiring those geniuses, and showers them with obscene amount of money out of shareholders' expense! Can't you believe after the fiasco of the long term capital in 1998, the same genius got funded only to be wiped out again ten years later! In 2008! And before long term capital, this guy ruined a perfect good party at Smith Barney. Sell your mutual funds!
Second. Let's talk about internal conflict of interest between the shareholders and fund management.
Even if the fund loses shareholder's money, a lot of money, the fund management still has the audacity to charge the shareholders a fee! And as a shareholder, you will not notice the fee because the management will never tell you. Image this! For our outstanding effort of 2008 reducing your portfolio from $700, 000 a year ago to $400, 000 today, we will only charge you $8000! No, if you want to figure out how much you spend on your mutual funds, you will in the footnotes of the financial statement, find the total expense, divided by the total shares outstanding and times the shares you own. Then, if you add transaction cost, taxes and many other small items, you will be surprised at how much you pay for the privilege having someone else managing your money. The results, the management gets rich along with its employees, and you will be shocked how little staff those companies employ, and the shareholders lose! And I have not even mention all the scandals: market timing, soft money and Ponzy schemes! Sell your mutual funds!
Here is a true story. CY Lewis, before he became one of the biggest success in Wall Street, was a shoe salesman. Once he sold two, not one, but two pairs to a widow for her husband. Talking about something we will never need. I guess a dead man doesn't need two pair shoes.
Last but not least, we can do better. Anyone who ever goes to Las Vegas knows this game. Sometimes you win, sometimes you lose. The house always wins by design the odds and payout. Now let's say it is the stock market. Sometimes you win, sometimes you lose. But odds and payout are in your favor. Do it through a mutual fund is like giving money to a gambler, if he wins, you share the profit. If he loses, you bankroll him. Bad deal! I am always wondering why 40, 50, 60 years old gentlemen and ladies, well to do, doctors, lawyers and accountants, give their money to a twenty year old, fresh out of school, even the suit he is wearing is a rental. If you yield your responsibilities of managing your own money, why do you think someone never make a nickel out of his life will manage your money responsibly. Sell your mutual funds!
Let's summarize. 1st, the mutual fund industry always hires the wrong people. 2nd, the fund management is always working against your. Last, a common person will always do better to take the responsibility of managing his own money into his own hands. Get some self confidence! For your long term security, for the benefits of your retirement, your heirs, sell your mutual funds! When you go home tonight, you don't want to eat dinner, you don't want to talk to your spouse, you don't want to play with your dogs, you turn on your computer, log on to your account, you sell your mutual funds! And never, ever buy another mutual fund!
Thank you.
Why I created this blog?
I created this blog to measure my own progress, show ordinary people with limited resource how to build wealth and publish a tractable investment record.
1. Measure my own progress.
I take investing seriously. As pursuing any other serious matters, I don't want to kid myself. Since 2003, I began writing a review every 6 months against my stated financial goals. I have been keeping my records private. By putting my records under public scrutiny, I want to be more honest with myself. After all, there are more eyes to find inconsistencies in my thought process and more mouths to tell me these inconsistencies. I welcome my viewers to comment on my investment and my investment process. You can either leave a comment for everyone to see or email me directly.
2. Show ordinary people with limited resource how to build wealth.
I am disappointed at the financial service industry as a whole. After the massive bailout by tax payer's money, I found the industry little changed. However, a lot of people feel trapped since they find no alternatives. I believe at least for the asset management need, ordinary people with limited means have other options.
I came to US in 1998 with $1000 borrowed. While still in school, I paid back the $1000 and saved $10, 000. In June 2001, I began my first full time job with a annual salary of $50, 000. In November, a car accident wiped out all my savings and some. I never had a high paying wall street job and I only invested part time. I never had anything an ordinary American won't have access to. And I paid $7, 000 immigration expense most ordinary Americans don't need to spend. After the disastrous 2008, my net-worth stands at around $380, 000 comparing to median net-worth of $8, 525 at my age group(1). It also bests the median net-worth at my income group but I don't think that comparison logical or meaningful.
My YTD return (August 23, 2009) is 27.2%(2), beating S&P 500 and the majority of the mutual funds with a wide margin (3). My one year return is -6.66%, beating S&P 500 and the majority of the mutual funds with a wide margin. And that's the combination of all my investments including my 401K plan and Ohio529 plan only having mutual fund options. I believe my own investments beat the mutual fund industry as a whole for the last five years hand over fist. Since my past record is not audited and published, the real measurement of the performance is in the future.
Since I believe my past performance stands up to the industry's, I believe almost anybody can do the same if he/she sets his/her mind to the task. And in my blog, I will share some experience and lessons learned. I will also share some of my thoughts on how the industry failed us beginning with my next post: Sell Your Mutual Fund!
3. Publish a tractable investment record.
One way to fight the bad practices of the industry is to show it how to do it right. I want to publish my records going forward. And the record is tractable and verifiable.
That's it. I can sacrifice some of my privacy to achieve the above goals. Let's keep our fingers crossed to see if I can achieve those goals. And dear reader, since you have already read this far, Thank you! Please move to the post “How am I going to operate this blog?" which will give you an idea how the blog will strive to reach my goals.
Thanks.
Tom
(1)Source: www.CNNMoney.com.
(2)Reported by Microsoft Money Plus.
(3)Source: www.morningstar.com
1. Measure my own progress.
I take investing seriously. As pursuing any other serious matters, I don't want to kid myself. Since 2003, I began writing a review every 6 months against my stated financial goals. I have been keeping my records private. By putting my records under public scrutiny, I want to be more honest with myself. After all, there are more eyes to find inconsistencies in my thought process and more mouths to tell me these inconsistencies. I welcome my viewers to comment on my investment and my investment process. You can either leave a comment for everyone to see or email me directly.
2. Show ordinary people with limited resource how to build wealth.
I am disappointed at the financial service industry as a whole. After the massive bailout by tax payer's money, I found the industry little changed. However, a lot of people feel trapped since they find no alternatives. I believe at least for the asset management need, ordinary people with limited means have other options.
I came to US in 1998 with $1000 borrowed. While still in school, I paid back the $1000 and saved $10, 000. In June 2001, I began my first full time job with a annual salary of $50, 000. In November, a car accident wiped out all my savings and some. I never had a high paying wall street job and I only invested part time. I never had anything an ordinary American won't have access to. And I paid $7, 000 immigration expense most ordinary Americans don't need to spend. After the disastrous 2008, my net-worth stands at around $380, 000 comparing to median net-worth of $8, 525 at my age group(1). It also bests the median net-worth at my income group but I don't think that comparison logical or meaningful.
My YTD return (August 23, 2009) is 27.2%(2), beating S&P 500 and the majority of the mutual funds with a wide margin (3). My one year return is -6.66%, beating S&P 500 and the majority of the mutual funds with a wide margin. And that's the combination of all my investments including my 401K plan and Ohio529 plan only having mutual fund options. I believe my own investments beat the mutual fund industry as a whole for the last five years hand over fist. Since my past record is not audited and published, the real measurement of the performance is in the future.
Since I believe my past performance stands up to the industry's, I believe almost anybody can do the same if he/she sets his/her mind to the task. And in my blog, I will share some experience and lessons learned. I will also share some of my thoughts on how the industry failed us beginning with my next post: Sell Your Mutual Fund!
3. Publish a tractable investment record.
One way to fight the bad practices of the industry is to show it how to do it right. I want to publish my records going forward. And the record is tractable and verifiable.
That's it. I can sacrifice some of my privacy to achieve the above goals. Let's keep our fingers crossed to see if I can achieve those goals. And dear reader, since you have already read this far, Thank you! Please move to the post “How am I going to operate this blog?" which will give you an idea how the blog will strive to reach my goals.
Thanks.
Tom
(1)Source: www.CNNMoney.com.
(2)Reported by Microsoft Money Plus.
(3)Source: www.morningstar.com
Saturday, August 22, 2009
How am I going to operate this blog?
Dear Reader;
Please read this post carefully as it lays out the guidelines on which I am going to operate this blog. I also encourage you to keep it as one of your reference links since I will update it if I changed some of the guidelines.
1. Portfolio.
This is a long only portfolio aimed for long term investment. Most of the holdings have been held for more than three years now. I generally only sell a holding if it rises way above my calculated value or if I realize I make a mistake calculating. In very rare situations, I will sell a holding below my calculated value to buy something else much cheaper. I don't think I have done that so far, but I can't rule out the possibilities.
I will not use stop loss orders or some of the fancy trading techniques. And I think I have no clue on how to get rich quickly.
This is a real portfolio and all the transactions recorded are real. Besides some home equity and cash operating my household, this portfolio is all my investment. I will not make major investment outside this portfolio.
I believe three years is a very minimal test of performance. And any reasonable time frame should be at least a whole cycle including both bull and bear markets. I will use S&P 500 as my yard stick and I will only buy securities ordinary person can easily get in US.
While I want to update you as soon as possible, I can only try my best to post my transaction and the reason behind it within three weeks after the fact. For obvious reasons, I will not post my thinking on impending transactions. I am not a full time blogger. If this status ever change, I may shorten the lag time. Therefore, I don't encourage people to duplicate my portfolio. The most important thing is to show people how to fish not to fish for them.
2.Advertisement.
Ads are provided by Google/Adsense. I would like to raise some money so that I can home my blog in an independent website one day. Because of the matching techniques Google is using, I am afraid that some of the Ads will be contradicting the goals set up in my “Why I created this blog? “. And some of the Ads will be irrelevant. Once I have my own website, I can better control the Ads. But certainly I will remove any of the Ads are harmful to my readers using the Google filter. Please inform me any offending Ads and I will remove them within a week of reporting. I don't want my reader be ripped off by any of the Ads.
3.Other topics I may cover.
I will update my blog two or three times a week. Since I don't do a lot of transactions, I will post some topics relevant to my investment process, such as: the bad practice in the financial industry, where to learn good investments and which broker to use. I may also post some book reviews on the books I read. I am an active reader reading thirty or forty books a year. I will also tell you how to buy good investment books cheaply. If any of the readers want me to comment on something, as long as it is relevant and I have some knowledge on it, I will comment. Please email me.
That's all for now. Enjoy my blog!
Thanks.
Tom
Please read this post carefully as it lays out the guidelines on which I am going to operate this blog. I also encourage you to keep it as one of your reference links since I will update it if I changed some of the guidelines.
1. Portfolio.
This is a long only portfolio aimed for long term investment. Most of the holdings have been held for more than three years now. I generally only sell a holding if it rises way above my calculated value or if I realize I make a mistake calculating. In very rare situations, I will sell a holding below my calculated value to buy something else much cheaper. I don't think I have done that so far, but I can't rule out the possibilities.
I will not use stop loss orders or some of the fancy trading techniques. And I think I have no clue on how to get rich quickly.
This is a real portfolio and all the transactions recorded are real. Besides some home equity and cash operating my household, this portfolio is all my investment. I will not make major investment outside this portfolio.
I believe three years is a very minimal test of performance. And any reasonable time frame should be at least a whole cycle including both bull and bear markets. I will use S&P 500 as my yard stick and I will only buy securities ordinary person can easily get in US.
While I want to update you as soon as possible, I can only try my best to post my transaction and the reason behind it within three weeks after the fact. For obvious reasons, I will not post my thinking on impending transactions. I am not a full time blogger. If this status ever change, I may shorten the lag time. Therefore, I don't encourage people to duplicate my portfolio. The most important thing is to show people how to fish not to fish for them.
2.Advertisement.
Ads are provided by Google/Adsense. I would like to raise some money so that I can home my blog in an independent website one day. Because of the matching techniques Google is using, I am afraid that some of the Ads will be contradicting the goals set up in my “Why I created this blog? “. And some of the Ads will be irrelevant. Once I have my own website, I can better control the Ads. But certainly I will remove any of the Ads are harmful to my readers using the Google filter. Please inform me any offending Ads and I will remove them within a week of reporting. I don't want my reader be ripped off by any of the Ads.
3.Other topics I may cover.
I will update my blog two or three times a week. Since I don't do a lot of transactions, I will post some topics relevant to my investment process, such as: the bad practice in the financial industry, where to learn good investments and which broker to use. I may also post some book reviews on the books I read. I am an active reader reading thirty or forty books a year. I will also tell you how to buy good investment books cheaply. If any of the readers want me to comment on something, as long as it is relevant and I have some knowledge on it, I will comment. Please email me.
That's all for now. Enjoy my blog!
Thanks.
Tom
Tom's Portfolio in September, 2009
If you are visiting my blog for the first time, please read the following pieces first. It will provide you with important background information.
1. Why I created this blog?
2. How am I going to operate this blog?
1. Why I created this blog?
2. How am I going to operate this blog?
Account | Symbol | Last price | Qty | Mkt. val. |
IRA | ||||
aib | 5.96 | 400 | 2384 | |
coh | 28.75 | 100 | 2875 | |
DEO | 63.81 | 100 | 6381 | |
dfs | 13.51 | 500 | 6755 | |
fce.b | 8.02 | 100 | 802 | |
ge | 14.21 | 200 | 2842 | |
lm | 28.63 | 200 | 5726 | |
MHP | 29.67 | 200 | 5934 | |
mhk | 47.45 | 100 | 4745 | |
pfe | 16.64 | 700 | 11648 | |
sny | 33.88 | 300 | 10164 | |
$5,619.72 | ||||
$65,875.72 | ||||
ohio 529 authority | ||||
vdmix | 9.05 | 473.15 | 4282.03 | |
vwnfx | 21.89 | 114.92 | 2515.53 | |
$6,797.56 | ||||
Roth IRA | ||||
axp | 32.85 | 100 | 3285 | |
coh | 28.75 | 200 | 5750 | |
INTC | 18.89 | 200 | 3778.02 | |
kft | 28.81 | 100 | 2881 | |
$5,277.56 | ||||
$20,971.58 | ||||
ScoTTrade Investment | ||||
aib | 5.96 | 400 | 2384 | |
axp | 32.85 | 100 | 3285 | |
aauky | 16.41 | 200 | 3282 | |
bac | 17.46 | 182 | 3177.72 | |
bcs | 23.47 | 400 | 9388 | |
brk.b | 3329.5 | 3 | 9988.5 | |
bam | 21.03 | 300 | 6309 | |
kmx | 17.14 | 400 | 6856 | |
cx | 12.86 | 312 | 4012.32 | |
CHEUY | 12.79 | 800 | 10232 | |
coh | 28.75 | 200 | 5750 | |
COP | 44.2 | 100 | 4420 | |
crh | 26.95 | 300 | 8085 | |
dfs | 13.51 | 400 | 5404 | |
faf | 31.19 | 100 | 3119 | |
fce.b | 8.02 | 100 | 802 | |
ge | 14.21 | 500 | 7105 | |
gsk | 40.03 | 300 | 12009 | |
hog | 22.21 | 100 | 2221 | |
igt | 20.79 | 600 | 12474 | |
jpm | 43.66 | 300 | 13098 | |
lm | 28.63 | 200 | 5726 | |
ltd | 15.35 | 400 | 6140 | |
L | 33.15 | 200 | 6630 | |
lvmuy | 18.78 | 100 | 1878 | |
MHP | 29.67 | 100 | 2967 | |
MDT | 37.8 | 100 | 3780 | |
mco | 26.05 | 100 | 2605 | |
NVS | 45.49 | 200 | 9098 | |
rai | 46.12 | 100 | 4612 | |
sny | 33.88 | 200 | 6776 | |
SYY | 25.2 | 200 | 5040 | |
var | 40.04 | 100 | 4004 | |
zmh | 47.24 | 100 | 4724 | |
$13,380.34 | ||||
$210,761.88 | ||||
UHG Employee Stock Purchase | ||||
UNH | 28.92 | 510.93 | 14776.08 | |
$1,378.63 | ||||
$16,154.71 | ||||
United Health Group | ||||
DODIX | 12.7 | 123.09 | 1563.18 | |
viiix | 94.3 | 366.49 | 34559.9 | |
$776.17 | ||||
$36,899.25 | ||||
$357,460.70 |
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