Sunday, September 09, 2007

Investment Philosophy

Sorry for the lack of posts, I actually managed to get my hamstring "strained" during some exercise and was forced to rest in bed; thus really did not have the mobility to move around and was thus even less inclined to do a posting. Fortunately, I am feeling better now and can do a short posting for the weekend.

While reading a book called "Warren Buffett Wealth" by Robert P. Miles during my temporary "break", I was quite fascinated about the section on developing one's personal investment philosophy. Just what is an investment philosophy and why is it so important to help us achieve our investment goals ? Let me explain and elaborate....

An investment philopsophy is a set of rules one should live by with regards to his or her investment, and it sets the tone for how you invest, how you evaluate your investments in order to decide on what to invest and also how you measure your performance. This also includes your expectations on your expected return per annum and whether it can help you to achieve your long-term financial planning goals. Thus, an investment philosophy encompasses many key aspects of wealth planning for the future and helps one to steer and navigate through the treacherous waters of money management.

One should plan their philosophy based on realistic expectations and this is also dependent on his age and status in life, taking into account family factors as well. For instance, an old man would tend to be less "risky" than a younger one as he has a shorter time horizon, while a married lady with 2 children will have different priorities and wealth goals as compared to a single lady of the same age. One has to be realistic meaning your expectations for growing your wealth through investment cannot be too ridiculous. There is no such thing as growing your wealth 100% compounded per annum (even though it sounds so fantastic !); a more realistic goal would be 10% per annum on average for 20-30 years.

The importance of having a philosophy cannot be over-stated. It helps you to focus on your long-term goals and gives your wealth planning meaning and direction. Most people have a fuzzy and vague idea of how they want to grow their wealth but they tend to approach it in a haphazard way. A philosophy will help you to stay focused, temper any unrealistic expectations and keep you firmly grounded in reality.

I admit this post is rather "summarized" as there is a lot more to say about investment philosophy, but I would rather just leave readers with this for now. Perhaps when I have more to add in future, I will do so accordingly.

Business Trip to Cambodia

Dear readers, please note I shall be away on Biz Trip to Cambodia from Sep 11, 2007 (yeah, what a day to fly huh ?) till Sep 14, 2007 (close to midnight). Thus, I will do my portfolio review post over the weekend, and my posts would be minimal during this period due to poor internet connectivity over at Phnon Penh. Thanks !

6 comments:

Anonymous said...

Dear musicwhiz,

Hmms wish u smooth flight on this special day, hehe.

I have been in phnom Phen 3 yrs ago, accompany friend for a Biz survey trip. However, the result was negative, we were thinking of starting a LPG bottle gas distibutor there, though rental and labour are cheap but plenty of red tape (under table). so we called of the idea.

Friend can reveal what business opportunity there?

musicwhiz said...

Hi Anonymous,

Thanks for sharing on your Phnom Penh business survery trip. Suffice to say that my company has an investment over in Cambodia and I cannot reveal too much as I wish it to remain private and confidential. All I can say is that I do the investment and financial analyses there in order to make financial decisions.

Cheers and thanks for your good wishes....musicwhiz :)

Anonymous said...

hi MW

i wonder if you and fellow readers ever consider the ethical side to investing in our investment philosophy. for eg, i wont touch the various plantation companies for alleged land-clearing activities or hospital reits - do they simply increase bed charges for organic growth? safe trip to cambodia. i was in angkor at the beginning of the year. simply breath-taking!

fishman said...

Hi musicwhiz,

I recently did my first ever financial analysis and valuation exercise of a company. Posted my results on my blog. Hope you could drop by, take a look and give me your comments. Thanks!

Hope you have a safe trip!

musicwhiz said...

Hi Anonymous,

Thanks for your best wishes ! Sadly, I am going to Phnom Penh which is the business district, and not Siem Riep. Perhaps one day I will have the chance to tour Angkor Wat. :)

Frankly, I also won't touch any company which does ethically questionable practices....such as forest burning or constant pollution of water or air. Same sentiments there....

musicwhiz said...

Hi fishman,

Yep, I saw your SingPost valuation on your blog but as I am rushing to pack for my trip (my flight leaves at 7 a.m. !), I am afraid I can't spend more time looking at it tonight. Perhaps after I come back from my trip, I will comment on it.

Thanks too for your best wishes !