Saturday, 5 January 2013

2012 review and 2013 goals

2012 has just ended and it was a memorable year for me as an investor. So what have I done well and under-performed in 2012?

The Pluses
  1. 2012 marked the first year that I have finally committed to being a serious long term, value investor, without much trading and jumping in and out of the market. I have also started doing in depth analysis on the fundamentals of companies, even though I have the knowledge and capability of doing so since 3 years ago.
  2. I have also managed to stay away from the market for the large part of second half 2012. This complements point 1 above as it allows me to remain calm and indifferent towards daily price fluctuation. My emotions are kept in check and as a result, less hasty/erroneous decisions were made and I am able to sleep better at night. 
  3. I had also constructed my portfolio components, into 8 counters that cover the different type of businesses such as growth, asset play, cyclicals, stalwarts, dividend play etc. Several companies have been identified for inclusion into the portfolio and I will talk about them in a separate post.
  4. I adhered to the profit taking and cut loss strategy for my punting counters. This brought me satisfactory profit from Sakari and China Minzhong in a span of 2 weeks. 
  5. I did not panic and sell out, but had the guts to stick to my conviction on Midas and averaged down on my holdings at a price of $0.30. With the recent rise in its price, I am nearer to positive earnings for this counter. On hindsight, this seems to be the right decision.
Now for the misses:
  1. Again, emotion is still one self's biggest enemy. I was not patient enough to cling onto the good counters I bought and sold off too early just to see its price rised further. Example include Kingsmen and Singpost.
  2. Related to punting plays. I fell preyed to the lure of earnings and chased up Sakari soon after I profited from the short term trade. As a result I loss half of the earnings. 
  3. I also lacked the discipline to lock in price target that was set. Example: Wilmar. The profit could have been 3 digits instead of 2 digits had I been discipline enough, and emotionless and mechanical.
  4. I was not good with the concept of right position sizing, as I did not commit a sufficient amount to my swing trade. Even though there was profit, but it was too small to make any significant contribution. Example Wilmar at end 2012. 
  5. Lastly, the most important, or costly error, was that I was too particular on being precise to the cents. I forgot that investment is more an art than a science. Counters that came within touching distance of my target price fell through the crack because of my insistence to be precisely correct. And I bid farewell to my profit. Example Capitaland that came within 5% of my target price.
I must learn from my mistakes, built upon it and ensure I do not repeat them in future. The key lessons are:
  1. I must have the mental discipline and emotion stability to execute my cut loss/profit taking strategy. Will strive to develop strong conviction to my stock picks through repeat reminders and mental shout-outs. 
  2. I must develop the patience to wait for my investment to bear fruits. When there is nothing to do, do nothing.
  3. I must continue to stay away from market and not be bothered by the day to day price movements. Checking of stock prices can only be done at end of the week.
  4. Be bold to commit a meaningful sum of money to the trade that was identified through thorough TA analysis. Know when to enter and know when to exit.
And my goals for 2013 are:
  1. To achieve 12% growth in investment portfolio (shares and opportunity fund combined) excluding new capital injected.
  2. To receive at least $1,500 in dividends.
  3. To establish portfolio positions in at least one of the other dividend counters: ST Engineering or Starhub, albeit at the right price. 

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