SN Finance Blog

Disclaimer: Please note that all content and information in this blog are for educational and informational purposes only and should not be taken as professional investment advice. ────────────────── What is risk?  Risk is often defined as the probability of loss. Everyone has a different view and definition of risk. Personally, I view risk as our expected loss. Expected loss is made up of two components:  1. Probability 2. Impact Probability x Impact = Expected Loss And depending on how you quantify risk, I believe expected loss is a crucial aspect of risk, and can be a quantification of risk. You may wonder: If our expected return on an investment is a loss, why invest in it? To be specific, expected loss does not refer to the overall return of an investment as a whole, but rather a specific event. In other words: "If X happens, what is my expected loss?".  Our expected loss is based on the occurence of a singular event, rather than a combination of ev...

Disclaimer: Please note that all content and information in this blog are for educational and informational purposes only and should not be taken as professional investment advice. ────────────────── An Unpopular Opinion: Overvaluation of US Equities Most people would have heard of ETFs by now. And many have invested in it or are looking to invest. With many people looking to add positions in US equities, it will take a major event to trigger a US market crash. And when it happens, it will likely happen really fast. In this age of information technology, markets are getting more efficient, and this means markets are quicker to price in changes, whether good or bad. As such, markets will remain volatile and are likely to become more volatile over time. And this means as investors, we need to be able to stomach this greater volatility. In conventional finance, volatility = risk, and risk must be commensurated with returns. Following this, as markets get more efficient, they g...

Disclaimer: Please note that all content and information in this blog are for educational and informational purposes only and should not be taken as professional investment advice. ────────────────── How to achieve above average results? To achieve above average results, one needs to go above and beyond what the average does. But you can also achieve above average results by avoiding average mistakes. Learn from the mistakes of others and avoid them. This way, you can avoid making the mistakes the average person makes, and in doing so, you can achieve above average results. In short, above average results can be achieved by: 1. Going above and beyond 2. Avoiding average mistakes How does this apply to investing? In recent years, ETF investing, specifically US ETFs of the S&P 500 index have grown extremely popular. ETF investing is mainstream today. In other words, the average investor today would be achieving the returns of ETF, which is basically the market return. So ...

Disclaimer: Please note that all content and information in this blog are for educational and informational purposes only and should not be taken as professional investment advice. ────────────────── People avoid buying highly priced assets for fear of looking really stupid if they lose money. Likewise, people buy lowly priced assets to look less stupid if they lose money. Being averse to highly priced assets and drawn to lowly priced assets can be both good and bad. If you buy an undervalued highly priced asset, you will not lose money. But if you buy an overvalued lowly priced asset. you will lose money. It's not a matter of whether the asset is highly or lowly priced but whether it is under or overvalued. Many highly priced assets can be undervalued while many lowly priced assets can be overvalued. We should strive to buy undervalued assets regardless of whether they are highly or lowly priced.  People often associate lowly priced assets with undervaluation but this ...

Disclaimer: Please note that all content and information in this blog are for educational and informational purposes only and should not be taken as professional investment advice. ────────────────── What about money is important? I believe it is the ability of money to generate more money for you, without you having to do anything. The value I see in money is the value I can get out of it without having to do anything. In other words, what money my money can generate me. And we can quantify the value of money with the risk-free rate. Currently, the risk-free rate is hovering around 3%. In other words, a year later, my money today would have generated 3% more money. For perspective, 3% of $1,000 is $30 a year or $0.08 a day. It may seem small but if we scale it up by x100, it's $8 a day for $100k — about 1-2 meals at a hawker centre each day, completely free. And not just free but risk-free , as the income we generate from our capital is risk-free. If we x10 tha...

Disclaimer: Please note that all content and information in this blog are for educational and informational purposes only and should not be taken as professional investment advice. ────────────────── Is more experience necessarily good? Oftentimes yes, while occasionally no. If the experience taints our perspective of life, it is not good. If not, the experience is good. But is the issue with the experience or with our perspective? I believe both. We cannot blame an individual for ending up in a bad situation. Neither can we blame how they react to it, although our reaction is within our control. Sometimes life throws us things beyond our control. But it's a matter of how we deal with it — we cannot control what happens to us but we can control how we react.  We can take failure as a learning opportunity rather than the final end — life is what we make of it. While not all experiences will be positive, we should make the best of the positive ones. Likewise, we should ma...