Friday, July 06, 2007

Some tips for part-time investors 5 comments



(P.S: Sorry for any disturbances the advertisements above may have caused you)
With the stock market at historical highs and retail investors getting into the groove, I thought I might as well join in the fun. A common question asked by many part-time investors is how to juggle their investments with their office work effectively without jeopardising either. Here're some suggestions, some tried, some theoretical, some partly tongue-in-cheek in the mood of a lazy Saturday morning, so tread with care (and don't blame me if you are caught with the smoking gun!).

1. Get your boss on your side. Get him/her interested in stocks. Many of them already are anyway, so you don't have to try hard. Once their views on the relative benefits/evils of the stock market are aligned with yours, they will be more lenient towards any minor offences of investing/monitoring investments on the job. They may even look to you for stock tips, hence cementing the win-win relationship.

2. Find like-minded colleagues and find strength in a group. Then you can exchange tips on stocks and on new innovative ways to juggle work and investments. Nothing bonds like sex and money, and if you can't have one, try the other.

3. Outsource monitoring operations to family members. Most often it's the wife, if she's not working. Now, not only are you both bonded by coital relations, you're also bonded by monetary interests. One more topic to talk about at the end of the day.

4. Be careful about using your office computer to check stocks. NEVER use it for online trading. Exception is lunchtime where companies are usually amenable to employee usage of PCs for whatever purposes. Note that the computer audit trail goes all the way to the IT department. If usage for stock market-related purposes is interpreted as overt evidence of using office resources, as well as paid time, to do one's own stuff, then it won't look too good. Not unless it's your ah-kong's company.

5. There are three periods in the day when the time belongs to you. Early morning, lunch-time and after-office hours. (For SAF personnel, insert in morning break and tea break for a total of five). Use them well. Early morning -- check out overseas market performances, and more importantly, read the papers to find out latest fundamental developments/trends. Lunchtime -- review mid-day stock prices and decide whether you want to buy/sell. After-office -- check out corporate developments and overall sector/stock performances, in order to decide possible action for next day.

6. Find a mobile device that enables you to monitor stocks. Check with your broker on what stock monitoring services they provide; they usually do. Don't monitor the stocks (using the mobile device) the office. Make full use of your time. Do it in the pantry when you're getting fresh water supply or in the toilet behind closed doors.

7. A good service to use could be Singtel's I-DEAS News/Finance service. You customise a list of stocks beforehand online; then send an info-requesting SMS everytime you want current quotes on these stocks. The service sends back the required information. Very useful except that it sets you back you 20 cents every time.

8. Familiarise yourself with various stop-loss/limit order options. You could place these orders online the night before or the early morning before going off to work, so that you limit any need for monitoring stocks during working hours. Some brokerages also offer SMS alerts if a stock hits a certain price from above or below. If you're chummy with your broker, he/she might also alert you to certain price triggers from time to time.

9. If one needs to place an urgent order and can't wait till lunchtime or end of the day, call the broker to do a broker-assisted trade. It costs more but don't penny-pinch; it's a matter of 0.1% more commission or so, that's all. Keep your reputation intact, don't use the computer.

10. Turn your weakness into a strength. Your job allows you insider knowledge to a particular industry; look around for new potential stocks in the industry that you know are doing well, in your interactions with your boss/colleagues/subordinates/peers/suppliers/customers. Not only does this confer an investment advantage over fund managers who will not have first-hand industry knowledge, it also makes you alert over time to industry developments and gives you a good overview of how various sub-sectors fit together within the industry you're in. Many companies/bosses fail to appreciate this fact and I genuinely believe that street-savvy employees are of more value to any organisation.

At the end of the day, the name of the game when using office time to undertake your market operations is: Be Discreet. Then you'll be alright. Because everybody does it, believe it or not.

PS: But please don't quote Danielxx and this column if you get into hot soup though. Danielxx does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information and opinion contained in this article and accordingly, neither Danielxx nor any of my affiliates nor my related persons shall not be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof.

 

 

5 Comments:

Blogger Raymond said...

Hi Daniel,

I'm a newbie in terms of investing.
However I am educated in finance coz I pursued the CFA charter - up till level 2 at least.
Like you, I am very much a fundamentalist and although I know all the PE and the DCM metrics, I don't have the know-how of finding the industry standards. As you have correctly pointed out, PE is meaningless unless u can compare it with rival firms or industry norm. How do veterans like you do this? Do you find all the balance sheets of e.g. 10 firms in the industry and sit down to calculate all their PE and DCM? Then pick the one that seemed most undervalued?

Sorry if I sound like I am all theory and no practice, because that's what I really am.

Thanks for reading till this pt.

Regards,
Raymond

8/02/2007 2:42 AM  
Blogger DanielXX said...

Hello Raymond,
You can let the brokerages do the work of comparison for you. Their analyst reports usually have that. Alternatively, you can flip through a copy of the fortnightly publication "Shares Investment" where they divide into sectors and list the PEs.

There is really no absolute "fair-value PE"; academic theory can only suggest the variables involved but if you look at the valuation equation (Gordon Growth for example) a small difference can lead to a vastly different result. As a rule of thumb, you may like to use Peter Lynch's guide when the PE reflects the long-term growth rate of the company; anything substantially below and it is undervalued. Another rule of thumb is to start looking for the exit door when PE>20, with an eye on the technicals. I always use trailing PE, as a margin of safety.

Often, PEs might be distorted by extraordinary items and you have to adjust for them. And seasonal factors. And cyclicality of the business complicates things. You will know that PE is often meaningless for cyclical companies.

You will know that PEs even within a sector can be different for a reason, and often picking the one with the lowest PE might not give the best results. I used to do so but now I realise that focusing on the business first (that it has a competitive strength and has a niche) and then ensuring afterward that the valuation is reasonable (anything below 12-13X) may be a better approach. But where exits are concerned, then valuation comes to the fore.

8/02/2007 4:16 AM  
Blogger Raymond said...

Yo Daniel,

Thanks for the lengthy reply!
Really appreciate all the tips :)
Is this only / best way to communicate with you?

8/02/2007 7:01 PM  
Blogger DanielXX said...

Hello Raymond,
Hope those were helpful. It varies for different people, because our risk appetites are different.

You can write to my e-mail address at simulation_2000@hotmail.com if you want a private exchange, or you could also join my chatbox at the HotStocksNot blogsite (www.hotstocksnot.blogspot.com).

Cheers
Danielxx

8/05/2007 7:18 AM  
Anonymous PENNY STOCK INVESTMENTS said...

Great tips

1/14/2014 10:28 AM  

Post a Comment

<< Home