Tuesday, November 03, 2015

Are you a One Punch Investor ?

If you are a fan of Japanese Anime, you might have watched a few episodes of One Punch Man.



In spite of the fact that Saitama can kill any Kaiju Monster with just one punch, this is an eminently human story of how a person can cope with ennui and boredom when he finally attains god-like powers. I can definitely relate to that, being somewhat having no income for the past 22 months but being  able to hold out as a SMU student.

As  a student, my expenses have become really small and most of my time is spent reading my cases and managing this blog that I really don't have the time to really get into expensive hobbies. Consequently, with the exception of wanting more time, I have little wants and so have a life which would be boring compared to my friends who are always sharing a pic on their travels on Facebook. I have not even listened to some music I bought from iTunes.

But I digress.

The notion of the One Punch Investor is an interesting one.

When I was growing up, my dad always told me a story of his friend who was not a professional and did not know anything about investing. All he knew was that SIA was a company with a great future, so he bought lots and lots of SIA with his salary and inheritance starting in the 1960s. He also ate his dividends and reinvested it into SIA.

According to my dad, when his friend retired in the 1990s, he had about 500,000 shares of SIA. Currently worth over $5 million dollars today.

Naturally, I did not confirm this with my dad's friend who regularly visited my home when I was a JC student. And in spite of the story, I took a lot of steps to diversify my dad's portfolio and took the opposite approach - I diversified aggressively and focused on yields from multiple sources.

Here is what I think about this notion of the One Punch Investor

a) Highly dangerous to invest in only one stock.

Investing in one stock also makes the investor lose out on the benefits of diversification.

I can accept that there are many One Punch Investors in Singapore. At least one prominent financial blogger is almost single-mindedly invested in Keppel Corp which I do respect.

If Wharton professor Jeremy Siegel could invest in one stock, I would be that the counter would be Philip Morris although I would doubt that Prof Siegel would own only one counter his entire life. But investing is a marathon and stocks fall in and out of favour. Sometimes, a conglomerate with a sustainable competitive advantage can be run by managers who destroy value. Phillip Morris is constantly worried about lawsuits.

It might be better to look for about 8 growth stocks if you wish to emulate the investing greats like Warren Buffett.

b) You might be a One Punch Investor without knowing it.

While its fun to make fun of One Stock Investors. Many of us might be one without knowing it.

Some of us invest in Employee Stock Ownership programs which is practically investing in one stock. Worse, since you also work for the same company, you are also investing your entire human capital on that one company. May be wise to consider diversification if you fall into this category.

You will get a nasty double whammy if the stock tumbles and you get retrenched at the same time.

c) What would I do if I can only invest in one counter in SGX ?

If I have no choice but to invest in only one counter from SGX, only an ETF investing in global markets would make the cut. I would place all my eggs in the Lyxor World ETF that is currently being traded in SGX. This gives me the benefit of buying different exposure to stocks around the world.

Of course, if I had made such a choice I would have to pay for the ETF manager's expenses and expect a lower return from the index itself.

d) 100 sit ups, 100 push ups. 

Of course, the anime has some nuggets of wisdom. Whether you are a One Punch Investor or a highly diversified yield pig like me, we should never avoid the constant and never-ending improvement that all investors would need to subject themselves.

I do this by maintaining this blog, reading what my fellow bloggers have to say about investing and going through the Edge and the Economist every week - All that on top of my case load.

Of course, it would be very interesting if readers would share what stock they would buy if they were limited to one counter throughout their entire lives....






2 comments:

Kenji Fundmgt said...

I related to what you said.

Dividend Knight said...

I just finished reading the manga. It was awesome!

Consecutive normal punches!