Rainbow on FI

In a nutshell

Time flies and it's already a year since I have embarked on trading the US market . It's a small portion of my portfolio as I still deemed it as experimental. My result sheet, as mentioned before, is far from fantastic despite my better trade executions this year. This is because I have downsized my positions and used less CFD (margin) to trade, as a result, my gains are smaller compared to old losses on CFD last year. Looking back, I would attribute 50% of my gains this year to luck and 50% to discipline. Discipline to wait for the right signal before entering, discipline to set a stop loss and stick to it, discipline to keep the winner and not take profit too early. I would recommend this fantastic read about trading, with useful infographics -  Here is a secret why the more you want to earn Million Dollars from trading, the tougher it become (external link)

"As last year’s Berkshire Hathaway shareholder meeting, Warren Buffett said he has owned 400 to 500 stocks during his career, and made most of his money on 10 of them. This is common: a large portion of investing success often comes from a tiny proportion of investments." If we flipped enough stones, we might eventually learn to identify the 'touch gem'. If we hold long enough to the 'touch gems', they may eventually become our investing success! (That's when we say it follows Pareto's principle.) If only the touch gem will glow like this

[First published on 25/03/2016] This is very important stuff for making sense of the annual reports and I have summarized them below in simple terms for my future lazy brain. Making sense of a company's Balance sheet -  it should all balance up In a Balance sheet there's two parts of equivalent values: 1) Total Assets $ = 2) Total liabilities and Equity This is because  E quity = Total assets - Total liabilities , so both values would be the same. Equity is also known as net asset or  net worth of a company . It  comprises of two parts -   Retained earnings (accumulative net income) and Treasury stocks An important ratio which you can derive from the balance sheet data is the  current ratio . It is calculated as follow: Current Assets / Current Liabilities If it is more than  1.5 , the company is generally doing okay (its assets are able to cover for its debts). Statement of Cash flow -  show me the money $ Credit: Sabine Peters on Unsplash

Some metrics which I have mentioned in my previous FA posts include ROE, dividend yield, PE and PB. There's one metric which I have not talked much about is  Payout Ratio . Payout ratio is an important metric that give us a feel of how sustainable would the future dividends of a company be (related: The Dividend Trap ). This metric often gets overlooked because it is not a readily available ratio (unlike PE, PB, yield) on websites and requires some manual calculations. It's simple enough though, so we should really be taking it into account when making an investment decision. What it shows us is the net income that a company does not reinvest in the business, use to pay off debt, or add to its cash reserves (source: Investopedia ). Below is a screenshot from SGX website under the company's Financial data of Thaibev. From there we can see the net income for a particular year and the total cash dividends paid. We can get the payout ratio by this formula: (Total cash

I know it's a little early for weekend but since the post is ready I shall just share it. August was a turbulent trading month for me which started off with a big plunge to account value and it finally ended with a grand $0  gain / loss for all my time and effort. The plunge was because of entering a trade too early and I hedged my position too late. Given the volatile market these days, I set a 'take profit' this round and locked in some profit before the market closed over last weekend. (Now with my feet in the US market, I have to take note of its public holidays too, eg. first Monday of every Sep is labor day .) Trading outcome is heavily influenced by our money and mind management -  stay calm and execute with discipline. Method is just a theory without the two. Just an idea - perhaps we can think of the current volatility as mini episodes of market cycle. Investors / traders are reacting like what's in the image below whenever there's a good tweet or