What Question Do You Ask When Buying A Stock?

A friend of my saw me queuing up for a stock recently and asked: "Why you buy ah? Will it go up?"

At that moment, I realized something.

That's not really the question I asked when I buy a stock. As least, not the first nor most important question.

The first question I ask is "What does this company do? Can it make money? Will it go kaput? Can it keep paying me in bad times?"

Only after that do I ask, "Is this a good price to pay for it?"

Whether it goes up or down right after I buy is not really on my mind. Of course, we all wish we can "catch the bottom". However, with that comes the risk of "missing the boat". It's a tug of war situation and there's really no way out of it. I have been on both sides of it and both hurts a lot.

For me, I stick with a price and go with it.

I guess that the fundamental difference.



Afternote:

Came across this article on Motley Fool which I felt really describes the core of long-term investing in layman terms.

If I share this with my friend he will probably think that I am stupid, or I am laughing at him (for losing $ recently). Perhaps they have gone too deep to turn back.

When you used to make $30 every month in dividends, and now you are punting $100K on a single stock. When now you are making/losing $500 for every 1% movement of the stock. When now the interest fee you occur each month is more than the dividends you used to received for an entire year.

Do you think you can go back?

My Financial Business Intelligence

At the end of 2014, I made a resolution to dutifully track ALL my income and expenses for 1 year.

I am really glad I followed through and did exactly that. 5 months onwards, I finally have some results to show for it!

What's more - Hey, I'm in the Business Intelligence field.

This is only for a 5 month period (actually only till 29th May), so I'm really looking forward for the full year results!

*All figures excludes CPF, investment gains/losses (but includes dividends).

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Total Income VS Expenses



My 5 months cashflow statement is summarized by 2 simple graphics. The huge spike in February was of course due to my major mattress hoot.

Yes. I have only spent 16+% of my income so far!!! Sick!

Of course, this is largely bias due to the bonus income in March - That expense % will slowly increase for the rest of the year. There are also some other major expenses I am preparing for the 2nd half of the year (e.g. Vocation!).

I reckoned it'll be in the region of 20% to 25% by the end of the year.



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Recurring Income VS Recurring Expenses
- Income excludes 'one-time' items like lottery, CNY angbaos, SAF allowances, bank special promotions, etc.
- Expenses excludes 'one-time' major hoots




Again, this is largely bias due to the bonus income. If I normalize it, my expenses is around 20% of my monthly income.



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Expenses Breakdown
Food: Breakfast, Lunch, Dinner, Supper, Snack, Groceries
Entertainment: Toto, 4D, KTV, Video Games, Movies, Etc
Healthcare: Doctor, Dentist
Household: Household Items
Personal: Clothing, Personal Care Items
Social: Wedding, Social Functions
Travel: Public (e.g. EZ-Link Topup), Taxi
Treat: Non personal expenses
Utilities: Telephone, Internet

 

I was quite surprised when I first saw this breakdown. Nearly 50% of all my expenses are on food.

The absolute essentials, Food, Utilities and Travel expenses already make up 70% of all my expenses.

I don't spend a lot of food, that means I'm spending too little on entertainment and life. Life of otaku. :(



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Passive Income VS Active Income

 

The most important chart of them all, and the best measurement to my ultimate goal - financial independence.

My short-mid term goal is to have passive income form 10% of my overall income.

Since I spend around 20% of my income... If I can increase my passive income to 20% as well... does that mean.... !!!

...

Long way to go man. Long way to go.


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Miscellaneous

Some other interesting facts...

I spend $2.46 on Breakfast, $4.96 on Dinner, and $5.15 on Lunch on average.

The approximately cost per restaurant visit (includes low-end ones also) is $19.14.

I also spend approximately $8.6 per month on lottery. And no, I haven't won back any for the year. :(

I highly encourage people to take up this challenge of recording your expenses.

It's a huge pain at first, but it becomes habitual very fast.

And the insights you gain can be quite invaluable.