Sunday, February 10, 2019

Insights and observations from Dr. Wealth Graduates Session.

Yesterday I gave a talk to 200+ graduates of Dr Wealth programs and it was really fun !

I have a different approach towards conducting investment training, very much preferring to learn from my students as my students learn from me. As such, this blog readers can benefit from the positive interaction I have with my audience.

Most of the content of my talk yesterday was to describe the results of the portfolios built by my trainees and how successful I have been so far when I invested in our co-created portfolios. But as a crazy science experiment, I also wanted to test the idea of The Wisdom of Crowds. I employed an online presentation tool that allowed me to work with 250+ and get real-time feedback from them as the course progresses.

First of all, I just want to give blog readers an idea of who can possibly be so money-obsessed to show up for an investment talk on the 5th day of Chinese New Year.

As you can see the word cloud was absolutely shocking. I have always known that a lot of engineers see the value of my course. However,  I did not expect to see that engineers form such a huge bulk of the audience. I feel quite glad because I know that engineers generally detest bullshit and this clearly shows that Dr.Wealth is a reliable and practical brand.

The next experiment I did was to spend one slide explaining the basics of market cycles and then I got the crowd to guesstimate which part of the market cycle the Singapore market is in. This is the feedback I was able to get only after explaining market cycles with one simple slide.

This crowd is clearly very smart. According to a Business Times article sometime in December 2018, the crowd is spot on and Singapore is somewhere between the Peak and Contraction part of the market cycle. This means that a serious investor cannot avoid having bonds in his or her portfolio.

Finally, I made the made the audience perform an asset allocation based on what they know about market cycles. I don't think it is necessary to get into the Markowitz Efficient Frontier to figure out an optimal asset allocation. A crowd-sourced asset allocation would do fine, and for the purposes of yesterday's session, the wisdom of this crowd has chosen this asset allocation.


In spite of acknowledging that bonds play a fairly substantial role when markets begin to contract, this crowd continued to be very aggressive, allocating about 76% in equities and even up to 7% in commodities.

This raises interesting questions - Was this crowd over-confident in the face of a contracting market ?

I will probably need some more time to think about these results.











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7 comments:

  1. WTK10:26 PM

    Hi Chris,

    My take is that you may not need to take the result so seriously. I believe that this is due to individual's perception on the existing markets.

    Ben

    ReplyDelete
  2. CreateWealth888810:58 PM

    How percentage of the crowd was in the market at the last cycle? Then their allocation will be different

    ReplyDelete
  3. Unknown11:27 PM

    Numerous studies have shown that most investors underperformed the average active funds (which of course underperformed a plain vanilla index).

    People tend to be overconfident of their risk profile at the start, and become overly pessimistic & risk averse after stocks have crashed.

    It is the mental, more than the technique that dooms the typical investor.

    ReplyDelete
  4. ghchua1:53 PM

    Hi Chris,

    There are different types of stocks listed around the world and also on SGX. By heavily weighted on stocks is not necessary wrong during the contraction market cycle. For me personally, I am still heavily weighted on stocks but with higher allocation in deep value and M&A opportunities type of companies.

    Ultimately, your asset allocation is still more important, rather than the type of assets, be it stocks, bonds etc.

    ReplyDelete
  5. focustime9:05 PM

    Hi Chris,

    I am keen to buy bonds to diversify my portfolio, my financial planner recommended Franklin Templeton Investment Funds Templeton Global Bond Fund, according to him this fund has a projected return of 8% pa. sound too good to be real ? any recommendation on bond fund ?

    ReplyDelete
  6. Christopher Ng Wai Chung8:02 AM

    Thanks for the participation guys, I really don't want to conclude that the crowd is wrong or stupid. I'd like to think that the low bond allocation was probably due to everyone's CPF allocation. As to the question of whether they have gone through market cycles, my survey show a significant number of participants over their 50s.

    Also I do not know of a bond fund per se but SGX has at least two decent Bond ETFs and maybe you should just avoid listening to a financial planner.

    ReplyDelete
  7. Faith10:46 PM

    Thanks, Chris.

    ReplyDelete

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