Pros and Cons of Delaying Instant Gratification in Value Investing

Delaying instant gratification in value investing aligns with the principles of buying undervalued assets and waiting for the market to recognize their true value, potentially leading to higher returns and reduced risk. However, it also comes with challenges such as opportunity costs, market risks, psychological stress, and liquidity issues. Successful value investors must balance these pros and cons, maintain patience, and stay disciplined to achieve their long-term investment goals.

Pros:

1. Higher Potential Returns:

   - Compounding: 

Delayed gratification allows investments to benefit from compounding, potentially leading to higher returns over time.

   - Market Corrections:

Value investing often involves buying undervalued stocks and waiting for the market to recognize their true value, which can result in significant capital appreciation.

2. Reduced Risk:

   - Market Volatility:

Long-term investing helps smooth out short-term market volatility, reducing the impact of market fluctuations on the portfolio.

   - Informed Decisions:

Taking time to thoroughly research and understand investments leads to more informed and potentially less risky decisions.

3. Cost Efficiency: - Lower cost:

Long-term investments often benefit from fewer transactions compared to short-term trading, enhancing net returns.

4. Behavioral Benefits

   - Reduced Emotional Trading:

 Delaying gratification reduces the temptation to make impulsive trading decisions based on short-term market movements.

   - Focus on Fundamentals: 

Encourages investors to focus on the underlying fundamentals of their investments rather than short-term price movements.

5. Consistency with Investment Philosophy: - Value Principles:

Delayed gratification aligns with the principles of value investing, where the goal is to buy undervalued assets and wait for the market to recognize their true worth.

Cons:

1. Opportunity Cost:

   - Missed Opportunities:

Waiting for long-term gains might result in missing out on short-term profitable opportunities in other investments or markets.

   - Capital Tied Up:

Funds invested in long-term positions are not available for other potentially lucrative investments.

2. Market Risk:

   - Economic Cycles:

Long-term investments are exposed to economic cycles and market downturns, which can adversely affect returns.

   - Company-Specific Risks:

 Prolonged holding periods expose investments to company-specific risks such as management changes, regulatory impacts, and industry disruptions.

3. Psychological Challenges:

   - Patience Required:

Delaying gratification requires significant patience and discipline, which can be challenging for many investors.

   - Emotional Stress:

 Watching investments fluctuate without taking action can be stressful and emotionally taxing.

4. Liquidity Issues: - Illiquidity:

 Long-term investments may be less liquid, making it harder to access funds quickly in case of emergencies or unforeseen expenses.

5. Performance Uncertainty: - No Guarantees:

Despite thorough research, there are no guarantees that an undervalued stock will appreciate as expected. The market may remain irrational longer than an investor can stay patient.

That's all for today. More fascinating articles and sharing will be updated weekly in Xaivier Blog. So, you are welcome to subscribe our feed to receive our weekly updates

P/S: The above sharing is solely based on personal insight and information that believed to be reliable. Your valuable feedback are very welcome.

Value Investing: Navigating the Market with Wisdom

In the realm of value investing, patience and prudence are paramount. One of the core principles I adhere to is the balance between opportunity and risk. Understanding this balance is crucial in making informed investment decisions. Here’s a deeper dive into how I approach the market with this principle in mind.

Observing the Market

When opportunity and risk are equal, it signals a time for caution rather than action. During these periods, I focus on observing the market rather than making impulsive moves. This involves:

• Monitoring Trends: Keeping an eye on broader market trends, sector performance, and individual stock movements.
• Evaluating Fundamentals: Continuously assessing the fundamental health of companies on my watchlist. This includes analyzing financial statements, understanding business models, and staying updated on industry news.
• Understanding Sentiment: Gauging market sentiment through various indicators and news sources to understand the prevailing mood among investors.

By maintaining a vigilant yet patient stance, I ensure that I am well-prepared to act when the time is right.

Buying When Risk is Overrated

In value investing, one of the most lucrative opportunities arises when Mr. Market overrates risk. This occurs when fear and uncertainty drive stock prices below their intrinsic value, creating a buying opportunity. Here’s how I capitalize on these moments:

• Fear-Based Discounts: When a stock is undervalued due to temporary issues or market overreactions, I assess whether the underlying business remains strong. If the core fundamentals are intact, I consider this an opportunity to buy at a discount.
• Margin of Safety: I always ensure there is a significant margin of safety in my purchases. This means buying stocks at prices well below their calculated intrinsic value, providing a cushion against potential losses.
• Long-Term Perspective: Recognizing that the market’s short-term fluctuations do not necessarily reflect a company’s long-term prospects. This long-term view allows me to hold through volatility, confident in the eventual realization of value.

An example of this is during market downturns or specific company setbacks that are temporary in nature. These periods often provide excellent entry points for value investors.

Selling When Opportunity is Overrated

Conversely, when Mr. Market overrates opportunity, it’s time to consider selling. This happens when exuberance drives stock prices above their intrinsic value, often due to hype or unrealistic growth expectations. My approach to selling includes:

• Recognizing Overvaluation: Identifying when a stock’s price significantly exceeds its intrinsic value. This can be detected through high price-to-earnings ratios, overly optimistic growth projections, and unsustainable market conditions.
• Locking in Gains: When a stock I hold reaches a level where its price is no longer justified by its fundamentals, I evaluate the potential for future growth against the risk of a price correction. If the downside risk outweighs the potential upside, I opt to lock in gains by selling.
• Reallocating Capital: Selling overvalued stocks frees up capital that can be reinvested in undervalued opportunities, thereby continuously optimizing my portfolio for maximum returns.

An instance of this would be during market bubbles or when a company’s stock price surges due to speculative buying rather than substantive improvements in its business.

Conclusion

The essence of value investing lies in the disciplined evaluation of opportunity and risk. By observing the market when these forces are balanced, buying when risk is overrated, and selling when opportunity is overrated, I navigate the complexities of the market with a steady hand. This approach not only helps in mitigating losses but also in maximizing gains over the long term. Remember, in value investing, patience and prudence are as valuable as the investments themselves.

That's all for today. More fascinating articles and sharing will be updated weekly in Xaivier Blog. So, you are welcome to subscribe our feed to receive our weekly updates

P/S: The above sharing is solely based on personal insight and information that believed to be reliable. Your valuable feedback are very welcome.

Stock Market 2021 End Year Review: Top loser: Glove; Top Winner: Defensive; Potential: Steel counters;

Year 2021 was another exciting year for me in stock market investment. Many lessons and experiences are worthy to be recorded. Let's start from lessons with negative return to positive.

1. Top loser: Glove counters
Without be specific, for those who held glove counters at the beginning of year 2021 until the end of the year, the experience is very hard and valuable. From the mixed of opinions about Glove industries until the recent EPS that clearly shows how quickly supply-and-demand can be balanced in a short period of time in this world. As there is a possibility that the supply will more than the demand, the PEs of glove counters are in historical low level. This shows that Mr Market is pessimistic about the near future performance of glove counters as many new players have joined the parties recently. However, if the price (or valuation) is cheap enough while the products are demanded in the future, this may be a better option to buy related shares instead of kick-start own glove business for those who want to kick-start a glove business now. (p/s: as my quota for glove counters is full, I have no plan to in more in current situation/valuation).

As an individual who needs to wear mask, we experienced the price of mask from RM80++ per a box until RM12+- in few months. This is the benefit of economic scale for consumers!! Hopefully with economic scale, glove industries players can continue to produce affordable gloves with good net profits for their contribution to this world.   

2. Potential: Steel counters
Recently, the increase of steel price caused related players who are well positioned have reported attractive profits. Nevertheless, with relatively low PEs in Steel counters, Mr Market may still believe that the increase of steel price are temporary. Due to relatively low PEs and well balance sheet, I still hold my steel counters even though they are around 25% discount from their recent peak prices. Nevertheless, I will keep find sufficient convincing reasons to divest this investment from time to time. 
(p/s: similar investment situation happens to plantation counters)

3. Top Winner: Defensive
Consumer counters were the top winners in my portfolio 2021. They were not only providing steady dividend incomes during this uncertainty period; but also achieved attractive capital gains. As the interest rate is still low now, I still have no plan to realize these unrealized gain from my portfolio as the dividend yield is still much much higher than interest rate now. 

4. Overall of my portfolio
Even though the net unrealized return from my portfolio 2021 was in net -2.34% loses on 31/12/2021, overall it should be positive after including dividend incomes and other realized profits. Hopefully next year my investment performance will be sustained as what I did in last decade. 

Everything is uncertain in this dynamic world. Thus, portfolio investment is suitable for me who aims to have a good sleep while protecting the purchasing power of my hard earned money. All the best to my reader too.


That's all for today. More fascinating articles and sharing will be updated weekly in Xaivier Blog. So, you are welcome to subscribe our feed to receive our weekly updates

Written by: Xaivier Chia

P/S: The above sharing is solely based on personal insight and information that believed to be reliable. Your valuable feedback are very welcome.

A Review of Zebra AI Class - Value of Money, Learning method

This review of Zebra AI Class is based on my observation on my kid (5 years old++), who has joined Zebra AI class for almost 2 months. We have subscribed to three subjects, which are Thinking (or Mathematics), English and (Chinese) Reading.

1. Costing / Fee

First, cost is everything - one course was 3000RMB (before special discounts) for 240 lessons (to be completed in 48 weeks), which is equivalent to only 12.50RMB per lesson. This is relatively cheap for a good quality lesson or tuition. Even though we need to use our space, electricity, and internet, I still consider this online course value worthy for my family as I can avoid unnecessary traffic jam to send my kid to physical learning places, and most importantly, my kid enjoys this remote learning method, which can be done anytime and anywhere.


2. Value of Money

As an international subscriber in Malaysia, if I chose the electronic version, then I would missed many good deals (i.e. hardcopy learning materials and gifts). As shipment service from China to Malaysia is available with affordable fees, hardcopy version is chosen. I am very satisfied with the quality and the content of the learning materials. Particularly, this saves my time from searching learning materials for my kid as a structured learning program is provided by Zebra AI class.

3. Nurture learning habit - Feasible learning time

Before that, I was considering the value of sending my kid to tuition class as there are many hidden costs,  e.g. travel cost to fetch my kids, and the time required for my kid to integrate into the learning environment. The cost mentioned here also includes time. My aim is to nurture pro-active learning habit of my kid. Zebra AI class suits my aim as my kid can explore different learning time until my kid finds the most suitable learning time for herself. Besides, while trying different schedules, this gives my kid a chance to manage her time daily. This is a very important lesson for kid, in my perspective.

3. Remote learning - Benefits

By avoiding unnecessary travel time, my kid has more time to explore other activities at home. One thing that makes me happy everyday is to observe my kid who can independently learn, draw, and  do art works (as follows). Another entertainment for me is to listen to her exciting sharing about what she learnt.

Art work by YJ 2021

4. AI class - Benefits - learning performance

All learning performance appears to be analyzed by AI in Zebra AI class so her designated teachers can quickly figure out the areas to be strengthen. Feedback from her teachers is timely as the feedback is received on the same day. As the feedback is recorded and can be repeated, I can achieve a very good understanding about the learning performance of my kid.

Since we are very satisfied with Zebra AI class, my wife has decided to join their program to promote this class. You can now get a free trial Zebra AI class (including 3 subjects, 15 lessons (5 lessons for each subject) to be completed in 5 days and many other free resources) through her referral link, https://yfdurl.com/opGsY1 as long as the promotion is still valid. No hidden cost. The class will automatically stop renew after the free trial class if you do not subscribe to the full course or other trial  courses. There is no need to unsubscribe from the class. There will be no charges to you in whatsoever method.  If you feel Zebra AI class does not suit your kid but receive follow-up messages or calls from the teacher, you can choose to ignore or tell the teacher frankly. It's free and easy to try this new remote learning method. 

Thanks to my neighbor who introduced Zebra AI class to my family. 

Any question about this free trial class can be emailed to xaivialim@gmail.com. 

That's all for today. More fascinating articles and sharing will be updated weekly in Xaivier Blog. So, you are welcome to subscribe our feed to receive our weekly updates

Written by: Xaivier Chia

P/S: The above sharing is solely based on personal insight and information that believed to be reliable. Your valuable feedback are very welcome.

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In Chinese - Other referral links:
Any question about this free trial class can be emailed to xaivialim@gmail.com.

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