Icon8888 Gossips About Stocks

(Icon) How You Can Become A Successful Full Time Investor

Publish date: Thu, 14 Jun 2018, 10:13 AM
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I follow the smell of money.

1. What Kind Of Return Should You Aim For ?


This is the first question you need to ask yourself. Fortunately it is not difficult to answer.


It depends on two things :

(a) how much is your annual salary ? and

(b) how much money do you need to sustain your family ?


Your targeted return should be the lower of (a) and (b) above.


For example, if your annual salary is RM100,000 and your annual household spending is RM150,000, your targeted return should be RM100,000. The reason is very simple : if you stick to your old job, your family is surviving based on your RM100,000 income anyway (maybe all this while your spouse is contributing the remaining RM50,000). There is no need to target for more income just because you have a new career (doing full time investing at home). It will only stress you out and make the whole thing unsustainable.     


Conversely, if your annual income is RM300,000 and your annual household spending is RM150,000, your targeted return should be RM150,000 only (being the lower of the two). There is no need to aim for RM300,000. It is the same reason again - aiming too high will only stress you out.



2. How Much Capital Do You Need ?


Of course, the more the better. The bigger your portfolio, the less percentage gain you need to achieve the targeted return.    


Based on targeted return of let's say, RM100,000 per annum, I would suggest start up capital of let's say, RM1.5 mil. This figure is not based on any scientific reasoning. It is plucked from the air : RM1 mil is too low (not enough cushion) while RM2 mil seemed a bit out of reach for most people.



3. Managing Your Cashflow


You are dealing with equity, not fixed income. So there is no certainty that the money will come in regularly. You need to manage your cash flow.


First of all, you will have dividend income. I don't purposely pick stocks that pay dividend. For me, prospective EPS is the main criteria as I am aiming for capital gain through earning growth. However, every now and then, I will receive dividend as a byproduct. If you have a RM1.5 mil portfolio, it is not difficult to receive RM20,000 dividend per annum. It represents yield of only 1.3%. Many PLCs pay more than that (don't punt rubbish stocks lah).   


Then you are left with RM80,000 to cover. Based on portfolio of RM1.5 mil, that represents return of 5.3%. Now the question has become : do you think you can generate that kind of capital gain per annum ? Different people has different answer. But in my opinion, many people in i3 can achieve that. 


The 5.3% return will not be delivered to you in a regular manner. In my case, I registered losses in my first year. Only in my second year did I hit pay dirt. That represents a drought period of closed to 12 months. During that 12 months, I drew down my capital to pay for expenses. It was a scary experience as you see your net worth gradually shrinks.


But the drought finally ended when the stocks I picked started bearing fruits (12 months after I quit my job). And the profit came in like a flood. It not only replenished my depleted capital base, but also allowed me to cover some of my future expenses. The feeling of relief is priceless. I will forever remember it.              


That is the nature of Full Time Investing. Profit comes in an erratic and lumpy way. There could be a period of drought before you get to enjoy the fruits of your labour. So be mentally prepared for it.



4. Growing Your Capital Base


So you are quiting your job and venturing out on your own. Are you going to spend the rest of your life trying to squeeze out RM100,000 every year from your RM1.5 mil portfolio ? Is that a sound career plan ? What happen if there is a market downturn that lasts for an extended period of time ? What will happen to your net worth ? Your portfolio size shrinks by 50% (from RM1.5 mil to RM0.75 mil) and you are drawing down RM100,000 per annum. Within one to two years, you are left with only RM0.5 mil. That is not a lot of money at all. Either you need to come out to look for a job again (which will not be easy after a few years' break) or you will be living in fear everyday worrying about your finances.       


At this point, it should be clear to you that doing full time investing to merely cover your family's expenses is not a viable undertaking. Due to volatility of the equity market, it is risky and likely unsustainable over the longer term. Your portfolio needs to do better then that. Much much better.





5. A Three Stage Process


To achieve the above, a Full Time Investor's career actually goes through three stages :-


Stage 1 - Scraping By

In the example above, a portfolio size of RM1.5 mil attempts to generates return of RM100,000 per annum. This stage is not fun. You are managing your portfolio to try to cover your daily expenses. Due to the small capital base, you will feel the pressure to achieve superior return, just in case next year you are not so lucky and you make less money.


You will also have to constantly worry about protecting your capital. RM1.5 mil is not a lot of money nowadays. Make one big mistake and you will need to go back to work for your old boss.


Stage 2 - A Comfortable Life

To reach Stage 2, your portfolio needs to grow to let's say, RM4 mil. At this size, your portfolio can easily generate RM100,000 to RM200,000 return per annum without having to try very hard. There is less pressure for you to score big. As a result, you can just relax and park your money in some quality second liners or blue chips.  


There is also more room for error. You can loss 20% and yet no need to worry too much about long term sustainability.


But you are still not quite there yet. You are still susceptible to 1997 style market meltdown that can break your back. You need to move up to Stage 3.


Stage 3 - Financial Independence

To reach this stage, you need let's say RM6 mil. That is RM2 mil more than Stage 2. RM4 mil will be used to generate return as per Stage 2. The additional RM2 mil will be held in cash form (FD, etc). It is for you to bargain hunt in the event of a CATASTROPHIC MARKET MELTDOWN like in 1997 (2008 is a walk in the park).     


The availability of RM2 mil capital during crisis will make you very very rich. In other words, you are now immune to any Financial Crisis. That is why reaching Stage 3 will make you forever Financially Independent. You have reached the Peak of Mount Everest. 



6. Managing Your Portfolio


Many of the things I said above are important, but they pale in comparison to what we are about to discuss in this section - how to make money from stock market. If you cannot make money from your investing activities, your Full Time Investing career will not be sustainable. FortunateIy I have already covered this topic before, in my article dated 12 June 2018.




One thing I would like to further elaborate is diversification. In that article, which is directed towards a broad spectrum of readers, I suggest that we should diversify our portfolio so as to eliminate risk and stress as much a possible. For Full Time Investor, I maintain the same piece of advice, but with a slight twist :- 


You should diversify during normal time. However, when the right time arrives, IF YOU SEE A CHANCE TO HOOT KAU KAU, MAKE USE OF IT.


Otherwise, you cannot grow big and achieve Financial Independence.


Did I confuse you ? Don't be. Let me provide you with an example :           


At the beginning of 2016, I spread out my investment in 15 different stocks, each with small position. As much as I want to grow my portfolio fast (for reasons as elaborated in Section 5 above), I did not dare to simply punt big on any particular stock. Not that I didn't want to do it, it was just that the condition was not ripe yet. I didn't have sufficient visibility.

In May 2016, Air Asia reported strong result. I allocated 15% of my funds for the stock (diversification is no more the top priority). In October 2016, Tony Fernandez proposed to subscribe for huge stake in Air Asia for RM1 billion. At the same time, there were news flying around that Air Asia will be disposing its leasing unit and pay out huge dividend. Shortly after that, Air Asia announced another set of strong result.

Putting all these positive development together, I increased my exposure to 30% of my portfolio.

As we all know, Air Asia subsequently went up to RM3.50. That helped my portfolio to achieve above average return in 2016. 


What I am trying to say is this : don't listen to people telling you to have a concentrated portfolio so that you can increase your wealth fast. It is risky because it can work both way. This is especially the case for Full Time Investors who are now relying solely on investing to provide for the family. Preservation of capital is equally important as growing your capital. As a result, it is advisable to have a diversified portfolio MOST OF THE TIME, and only ramp it up when visibility is good and opportunity presents itself.



7. Concluding Remarks


(a) At the beginning of this article, I mention that you need start up capital of RM1.5 mil to RM2 mil. However, it is not something cast in stone. It depends on many factors such as your age, your annual finanical needs, the ease of you getting back to work force, etc (if it is very easy for you to get back your job, you can go full time investing even if you have only RM100,000 capital, right ? There is nothing much to risk). In general, I would say that you need capital equivalent to 5 to 10 times of your annual financial needs. The more the better.


(b) We are talking about Full Time Investing, not speculating. The whole idea is to do it properly such that your portfolio can grow by leaps and bounds within several years (to reach Stage 3). I am not against speculating (intra day trading etc). Any cat that catches mice is a good cat. However, I doubt that speculation can allow you to grow your portfolio systematically. At most, it can help you to meet your daily expenses, which as mentioned above, is not sufficient and not a sustainable way to manage your finances over the long run, especially if you have a family to take care of.


(c) To grow your portfolio big time does not mean that you should act recklessly and take risky positions. Don't always think of getting rich quick by betting big. It doesn't work that way. There is no direct correlation between risk taking and superior return. Be calm and steady - 80% of your time (let's say), you should have a diversified portfolio. Shop around, pick up small positions in good value stocks (3% to 5% of portfolio) to feel the pulses of the market. When the timing is right, unleash your animal spirit to try to make a killing. There is no textbook or formula on how to do it. You have to figure it out yourself, sorry.


(d) Stick to i3. I have mentioned many times before, through sharing information and opinion, many i3 members have become above average investors. Tap the wisdom of the forum. I would say that it is one of the most critical factors for becoming a successful Full Time Investor.


(e) Last but not least, by quiting your job and going full time investing, never allow people to accuse you of "lazing at home to play the share market". That is very demoralising. You don't deserve that. Tell yourself that you are venturing into a business. In a certain sense, that is true. You are coming up with sizable capital to nurture something so that one day you can reap huge economic benefits out of it. If that is not business, then what is business ? Treating full time investing as a business will give you a sense of direction and vitality. It makes you feel good. A positive mindset enhances your chance of success.


Good luck !!!

11 people like this. Showing 50 of 224 comments


I think 50 years later, people will still remember 509 as the start of a better Malaysia.

2018-06-14 22:57


yeah, is the day it changed the future of this country. Is very significant.

2018-06-14 22:59


i still remember, there were those who were still around when they voted in GE13 but they passed away before they could see the result of GE14. We are very lucky to be able to witness this significant day

2018-06-14 23:02


take note of july 16th, parliament first day in session, good show, don't missed it else u will regret.

2018-06-14 23:13


yes, I have relative who passed away in March......so sad they cannot see Era Baru.

2018-06-14 23:21


yeah, Ge13 bring back a lot of memories

2018-06-14 23:24


It's good to be in the same boat with Probability as I can save a lot of time to study n research....anyway dont fall in love for too long...2020 will do

2018-06-15 06:03


When is your turn ?

qqq3 yes, I have relative who passed away in March......so sad they cannot see Era Baru.
14/06/2018 23:21

2018-06-15 06:44


do you know when it is your turn?

2018-06-15 09:03


Lmao ^

2018-06-15 09:03


There must be hundreds of investments advisers news letters, weekly columns.....only one is respectable and educational.....

The Edge's Tong' columns....That is the gold standard for a responsible weekly column.

2018-06-15 09:28


^ yep fully agreed. That's the first thing I read every week - Tong's portfolio

2018-06-15 09:41


message to steel investors.....

why do you want to buy a share that depends on super profits from protectionists policies ( increased tarifs) ?

This is not the behaviour of logical investors....you are depending on a bigger fool out there to help you make money.

In the meantime, contractors and house buyers ( voters ) suffer....that is bad policy.

bigger dangers out there in the form of Alliance Steel, reduced infrastructures, slow property market...and changes in China policies that is beyond your control or even awareness.

There is really no good reason to buy steel counters except for made up excuses by people who are caught at higher prices.

Business sense should come first before PE ratios based on historical figures.

2018-06-15 11:07


"why do you want to buy a share that depends on super profits from protectionists policies ( increased tarifs) ? "

Uncle, do you know the domestic price of Chinese rebars are equivalent to Malaysian domestic prices? That means, domestic steel players do not need protectionist policies to make big money since it is uneconomical for Chinese steel makers to dump their products overseas. Before you shoot off your mouth sailang this sailang that, I suggest you use your grey matter a bit.

2018-06-15 11:13

Ooi Teik Bee

Post removed.Why?

2018-06-15 11:17

Ooi Teik Bee

Post removed.Why?

2018-06-15 11:24


I missed the earlier drama. Thank you for the kind words, and all the best in your investment. I think prospect is excellent, but q2 might be a bit soft, with 1 month puasa and 1 month World Cup, I think employees only work for 1 month only hahaha.

2018-06-15 11:33

Ooi Teik Bee

Hopefully the higher steel bar price can help to improve Q2 result.

Thank you.

2018-06-15 11:37


sifu otb. earned profit in bursa by your ownself need no to be defended. It stays in your bank account. BUT reputation need to be defended as you still intend to earn subscription from retailers based on trust term. so far, do your subscribers earn same as your percentile returns with certain median deviation only or great loses suffers??Did you check with them? to us, wrong or right calls on our stock selection directly affect our wealth. Reputation to us? just an ego massage only. for boostful purpose here in i3.

2018-06-15 11:46


one of the reason i prefer icon more than ____

2018-06-15 11:47


Post removed.Why?

2018-06-15 11:47

Ooi Teik Bee

Posted by cheoky > Jun 15, 2018 11:46 AM | Report Abuse

sifu otb. earned profit in bursa by your ownself need no to be defended. It stays in your bank account. BUT reputation need to be defended as you still intend to earn subscription from retailers based on trust term. so far, do your subscribers earn same as your percentile returns with certain median deviation only or great loses suffers??Did you check with them? to us, wrong or right calls on our stock selection directly affect our wealth. Reputation to us? just an ego massage only. for boostful purpose here in i3.

Ans :
I am not really affected in this crash.
All those old followers are ok because the gain in 2014, 2015, 2016 and 2017 are a few hundred %, can afford to suffer the losses in 2018.
My followers especially the new one suffered. I feel sorry for them.
I just try my best to help to recover the losses. It may need a bit longer time to recover.
I am very transparent on this matter. I checked with some of them.
Thank you.

2018-06-15 12:25


WOW...cant wait to know what is Icon sifu's super stock.@@

2018-06-15 12:29

Ooi Teik Bee

Posted by qqq3 > Jun 15, 2018 11:47 AM | Report Abuse

when a cyclical stock is traded at low PEs, it is because its earnings are deemed to be of low quality and not sustainable.....that is business sense.......

Ans :
Please wait for result at the end of 2018.
I have my own strategy to follow.
My strategy is based on FA.

I am glad that you are very gentleman this time.
Keep up the same good spirit.

Thank you.

2018-06-15 12:30


how to make 1 mil in bursa now? anyone including datuk ooi please can answer this? hehe

2018-06-15 12:32

Ooi Teik Bee

You buy 2 million shares of Lionind at 0.70, you will make 1 million if the price hits 1.20.
Best of luck to you, apolloang.

Thank you.

2018-06-15 12:39


I buy 2 million later the directors dump for me 4 mil mah die? hehe

2018-06-15 12:40


where got 70cts now? already 89cts

2018-06-15 12:42


Posted by shortinvestor77 > Jun 14, 2018 01:55 PM | Report Abuse

Can Ayoyo also share your experience and knowledge as a full time trader through an article? TQ.


I am a full time trader and write only for the fun and when I'm in the mood...

Here's the short of it...

The tools
Bursa station professional
Minimum brokerage with cash account (0.1% or some even get lower)

The pain
Download EOD data from bursa station every evening
Run MetaStock
Sift thru stock charts on breakout or on the verge of it with some self tweaked filters on MetaStock..
Run thru tick charts on Bursa station professional to determine 'quality' of the smart money breakout moves
Set traps or price alerts on bursa station professional on the stocks on watch
From 9 to 5 during market hours, sit and watch the screen like an idiot

The gain
70% of my trades are within contra period of which,
90% will give at least 2 bid gain
60% 5 bid gains
30% 8 to 10 bids
15% home run momentum trades of above 15 bids

Stop loss is dynamic and depends on my assessment of why it went wrong.. Example, I don't hold a rigid price stop... When you want to trade with the smart money, you must learn to trade LIKE the smart money... Was the stock down because of its inherent weakness or was it in sympathy with the poor market conditions at that moment?

Always remember, trading is an art, not science... You cannot affix rigid rules to human emotions

I rarely hold stocks for long term.. Long term to me is defined as more than T+3 LOL... More than 70% of my trades are closed within T+3 and usually no longer than within 2weeks ..so,im usually in cash

Even in these market conditions, I'm still up 40+% up to this year, and have 70% in cash up to now ...of course, the converse is also true, I will rarely, read probably never, get the multi baggers because I trade in out of momentum and never fall in love with any stock

Read up
Reminiscences of a stock operator (the book that started everything for me... Fascinated how Jesse Livermore traded without computers.. Discovered tape reading, read price and volume exclusively, NOT a single indicator)
Tape reading and market tactics
Volume spread analysis - written by Tom something? Who used to work for stock operators and he has detailed how to interpret some common operator moves
Lastly, your mindset... Tune the IMPOSSIBLE to I M POSSIBLE... I'm a ardent follower of Law of Attraction and what the mind can conceive, it can achieve, only if you ALLOW it...

Talk too much cock already... Good luck

2018-06-15 12:46


datuk ooi now lionind already up so much how to make 1 mil? I wanna make 1 mil then 10 mil then 100 mil like u datuk ooi.....hehe

2018-06-15 12:46


No for commodities related stock for me. Already started bull run since early 2016. Where I bot Pmetal at 0.70, Annjoo at 0.65. Cyclical cycle already hitted the peak. Wait for next lowest cycle.

2018-06-16 14:45


you think industry cycle is like the cycle tyre...perfect round kah?

2018-06-16 14:48


Short term can try XDL technical play. Safe for those who knows to play this kind of stock.

2018-06-16 14:49


It all depends on China'decison...it can deflate your tyre or replace with giant truck tyre if it wants...

important thing is to know what is the driving force behind the wheel?

the causes thats dragging it...and at which direction? uphill or downhill?

do not close your eyes to the mega macro effects of China's decisions..policies....

2018-06-16 14:52


Mid to long term:
1. Binacom
2. Sendai
3. K1
4. Mmode
5. Sasbadi
6. Media

Short term and speculative stock:
1. Iris
2. XDL
3. Kstar w

2018-06-16 15:02


Post removed.Why?

2018-06-16 15:13


Post removed.Why?

2018-06-16 15:17


Haha....Lionind, Hy and etc. Those buy stock base on figure in the q reports, will be slaughtered by big players and insiders.

2018-06-16 16:04


money, u also know what they r up to

2018-06-16 16:05


For example, lme aluminium avrg for 1st q is 2150, avrg for 2nd is 2280 to date. Apparently Pmetal earning and share price will be better coming q. Those half cook experts will recommend to buy. But they don't know market is always looking forward. Some time up to six months or more. Big players or insiders will spread the ticket within this time of period. At the end share price not tally with earning. It might also worse earning amid good fundamental, in this case higher lme price. They can make it also for what ever reason.

2018-06-16 16:32


Meaning you must buy at market price to push up the counter ma haha.

Posted by apolloang > Jun 15, 2018 12:42 PM | Report Abuse
where got 70cts now? already 89cts

2018-06-17 03:49


WOW, see so many Sifu like OTB, paperplane, Icon8888 and probability buy lionind. Will buy big tomorrow.

2018-06-17 16:56


qqq3 Ooi Teik Bee > Jun 15, 2018 12:39 PM | Report Abuse

You buy 2 million shares of Lionind at 0.70, you will make 1 million if the price hits 1.20.
Best of luck to you, apolloang.

Thank you.

this OTB always manages to buy at the lowest and always manages to sell at the highest....go figure......

to early to say 70c is the lowest

2018-06-20 10:07


This thread is started and promoted by industry players.

Do not be fooled.

Know the difference between investing, speculating and gambling.

Know the games you wish to be in: positive sum games vs zero sum games vs negative sum games.

Those making money in investing need not have to rely on fees or commissions in general.

2018-06-20 15:15


thanks icon and Ayoyo for sharing

2018-07-21 17:49


Post removed.Why?

2018-10-09 20:13


Post removed.Why?

2018-10-09 20:15

Fabien Extraordinaire

i have re-read this article few times and printed a copy for reference, thanks Icon...

2018-12-04 10:47

Jon Choivo

This was interesting.

2018-12-04 10:52


Hi @moneykj,

U still holding for BINACOM stock?

2018-12-05 18:35

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