There has been many times when I look back at posts I wrote and assignments I did, and for a particular few which I am quite happy with, I question myself whether I could reproduce something like that again.(Yes, I tell myself, don't be silly of course I can). Many years ago, I wrote an extremely long essay about football and a few years back, an essay about Dubai. I got some good praises for them and I would love to back and look at what did I do back then. The only explanation I could find is,doing something in the moment you feel like doing it. I think it works particularly well for me.
By the way, I would reiterate, not everything I said can be backed up by documentation and the things I write about is based on what have learned along the way. I always ask myself what sort of contribution I can make in general. All I can think of is to educate people and create better people. Am I making a significant contribution? Not at the moment, but I think it's the least I could do. It would be great if someone actually benefits from the things I write. But at worst , I am summarising what I know.
This post will talk about a few important areas outside investment decisions. Yes, the book tells us that our investment decisions should be independent of other decisions we make, hence preventing it from bias. But in the actual situation, as an individual investor (in most of our cases), we do everything ourselves. A-Z, we need to know our stuff. It is a privilege to have someone guiding us but in most situations we are on our own.
The first is not actually not related to the topic I just mentioned but rather just an opinion based on experience. Investing in mutual funds.
If you're familiar, it is also known as unit trust or managed funds. The investment simply happens when people hand over their money to a fund manager and expects him/her to invest them for a better return compared to market returns. Firstly, I will say there are many fund managers who have delivered very good returns in the past and many are consistently "beating the market". It has been a good investment for some people, especially for those who aren't involved in investing. On the contrary side, I don't invest in mutual funds and I won't recommend them. Why? Because I believe we should be in control of our money and we can make the best decisions for ourselves.
A few key disadvantages
- A huge chunk of the profits made goes to the mutual fund company
- You play no part in the investing decisions
- Having a large pool of money doesn't give the fund manager any advantages being an investor.
- "An advantage of being able to have a large porfolio"....it really means nothing.
In short, if you want to become a good investor, mutual funds are no good for you. I don't think you'll learn much. You can't actively track what the fund manager does and the closest you get is a the price of the mutual funds and the summary of the holdings at a few points of time. I think it is very possible to deliver above returns on your own and you don't even need to be in the a investment field to do it.
Alright, now we go to a few areas outside the investing decisions. It will be independent of which investment you think is good but it may change the pattern and considerations. First, taxation. Always be familiar with the rules in taxation because it will affect your money. Different countries have different rates and rules, so make sure you know them well.
In Australia, you declare ALL your capital gains of stocks within a year of purchase and only half if you held it for more than a year. And as Australia has high tax rates, you might make certain considerations to your strategy. For dividends, some corporations have dividend reinvestment plans, you still pay taxes on them so do you take them up, look at the pros and cons? You also need to consider whether dividends are fully franked as this will also affect tax paid.
In Malaysia and Singapore, there are no capital gains tax. This makes it more attractive right? So ditch the Aussie market then? Well,you think about it. So this might alter the strategy of being able to buy and sell more frequently ?(I am neutral on this strategy). Tax rates on dividends are different too, so there's when you need to do your homework.
Brokerage charges. Firstly, the market is competitive but its not efficient, some firms CLEARLY charge a higher rate and yet provide exactly the same thing, you wouldn't want to pay more, would you? Are the brokerage fees based on per trade or as a percentage of the trade amount? This is certainly different in Malaysia, Singapore and Australia. Over the phone orders? Are they charged the same rate as online orders? Well most firms do charge a higher rate, but some actually don't. If firms charge the same rate, are their services comparable, do they place trades for you in less time, how much research do they provide, is their trading interface user-friendly, are their customer service helpful? Those questions got nothing to do with what stocks you buy but there's a definite need to find out. I am rather less helpful on which firms to recommend because I've only used the least required. But I hope I gave a useful guide.
Those are just the few niggly things you just need to do and know once and for all. After that, it's all up to you doing what you can. If anything else comes up, I will put it in future writings. I hope it made sense and tell me if I haven't. Sorry it is not that interesting to read.
Thanks for stopping by and reading.
~deyao~
