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Two kinds of skill sets

Desa20201956
Publish date: Tue, 23 Feb 2016, 02:02 PM
Desa20201956
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Two kinds of skill sets 


One, the stock picking skill sets. The ones followed by internet gurus and sifus , the self taught investors, those who read some books about Warren Bufett 

Two, the skill sets needed in managing portfolios. The kind of stuffs universities and CFA courses spend a lot of time on. 
Once you are on borrowed funds and margin accounts, once you buy more than one stock , you are in this territory. 

All the Warren Bufett wannabes and copy cats just repeat what they read.......and become sifus......how about teaching the basics of portfolio theories? 


Margin accounts remain very popular. You cannot be complete sifu by focusing on 1 and completely neglecting 2.  


Margin account too risky is not a good answer. 

Assume a portfolio of two stocks.....perfectly and negatively correlated. Where got risk one? 
It will be silly not to margin this portfolio if the dividend income is higher than the interest cost. This will , then , be your perfect compounded growth, exponential growth portfolio at zero risk....why cannot margin? 


Chong.....don't just criticize margin accounts, be creative. 

If done well, it can be a popular course. The people wants margin accounts.....what they need are some basics of modern portfolio theories.....even Koon Yew Yin would attend. His portfolio is too focused and therefore too high risk for a margin account. But how do you tell a guy that unless you are equipped with all the knowledge of modern portfolio theories? 


For those who are innovative and creative, there are business opportunities....but only for the creative and innovative.

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Discussions
3 people like this. Showing 6 of 6 comments

speakup

borrow kau kau from margin account.
when market crash, MARGIN CALL, then we all can buy CHEAP CHEAP! :-)

2016-02-23 14:10

Desa20201956

No right way, no wrong way
Every thing is about risk and return.

You are not entitled to criticize another guy just because he trades on margin.

His risk tolerance is higher than yours.

But those who want to be future tycoons, and who doesn't?......you need to take on borrowings, learn to manage the risks.

2016-02-23 14:13

3iii

Desa short and to the point. Stock picking is only one part of investing. The other equally important parts are asset allocation and portfolio management.

2016-02-23 17:16

JT Yeo

1. During market crisis, the correlation of every single stock and asset class goes to 1.
2. If I buy PBB at $80 and Harta at $20, they have negative correlation but boy, the risk is bigger than whale

2016-02-23 18:02

PlsGiveBonus

Promote everyone use margin account
Later we will see many millionaire bornt in just a few months

2016-02-23 18:15

shinado

JT Yeo raised valid points. For his point no.2, a more diversed portfolio is needed (i.e. 10 stocks or more). But when point no.1 comes, everything will go down south.

In my opinion, margin call can be used when the following is observed:
1. Your risk tolerance is very high. Many business owners/entrepreneurs share this trait.
2. When market hit rock bottom. So deep down that prices will not go down further. But do you know when will that moment come?

Also, going for margin call when prices are high or when market in general is very bullish amounts to suicide as well. More downside than upside.

Just my 2 cents.

2016-02-23 23:08

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