Dear Readers,
Thank you for coming here.
It is the end of the month, which means it is time for another monthly Net-Worth update.
Net-Worth increase from last month: ~17K SGD
The increase was mainly due to capital gain from overseas stock market, and additional CPF contribution from my leave encasement last month.
For stock market, the increase was mainly from China market. For the World market, the recent fall of the market was more or less offset by the strengthened USD against SGD, as of yesterday. So the fall today (Feb 26 2020) was not considered.
I was quite surprised by the increase in our Net-Worth, since I did not have my salary this month. Due to the virus, my offer and on-boarding was delayed at least to next month. The work I delivered this month will be considered as free-lance. Hopefully, I will get paid later. No big deal if I wont.
Investment: 7.83% annualized return, incl. dividend
Compared
to the annualized return of 6.04% last month, it is an increase.
I have no idea why China Market is increasing despite the virus.
As mentioned in my previous entry "Basics 03: My investment journey and outcome", we have stopped putting money into the market in the 2nd half of 2019. We are not sure what to do now and I really do not have much time to think about it. So I guess we will just wait and see.
Till the next time.
Wednesday, February 26, 2020
Friday, February 21, 2020
The real meaning of "Commitment"
Dear Readers,
Thank you for coming here.
From my failed attempt to publish a big blog entry, which I described in my previous entry, I did manage to extract one view point. I want to share it with you in this entry.
The takeaway is that "Commitment" means doing all you can to achieve your goal. While everyone knows that, few can grasp the real meaning of it in different context and even fewer can exercise it all the time in all circumstances.
While it would be quite impossible to list out all actions we need to take in different situations to "do all we can", below are the ones that I can remember I have failed to take. And I have definitely suffered the consequences, some of which I am afraid I still have not realized. Of the ones I do realize, the latest is the loss of a 300KSGD+ job offer.
So here comes the "not exhaustive" list. "Doing all we can" means:
Thank you for coming here.
From my failed attempt to publish a big blog entry, which I described in my previous entry, I did manage to extract one view point. I want to share it with you in this entry.
The takeaway is that "Commitment" means doing all you can to achieve your goal. While everyone knows that, few can grasp the real meaning of it in different context and even fewer can exercise it all the time in all circumstances.
While it would be quite impossible to list out all actions we need to take in different situations to "do all we can", below are the ones that I can remember I have failed to take. And I have definitely suffered the consequences, some of which I am afraid I still have not realized. Of the ones I do realize, the latest is the loss of a 300KSGD+ job offer.
So here comes the "not exhaustive" list. "Doing all we can" means:
- Accessing all the potential risks beforehand
- Having a clear mind on the options you have and others have going forward and make a action plan that considers both
- Never assume
- Never allow yourself to be complacent
- Conducting self-assessment and reflection all the time
- Staying humble and attentive
- Asking for necessary advice, even from people you do not like or even respect
- Never listening to any advice without assessing the interest of the people who gave them
- Making your own decisions and be fully responsible for them
- Figuring out the next 3 or 5 steps
- Taking the risk and liability all on yourself if that is the best way to achieve your goal
- Not allowing "small matters" to pull your off the right track
- ... ...
Thursday, February 20, 2020
Thinking vs Writing
Dear Readers,
Thank you for coming here.
"Writing is not the outcome of thinking; it is the medium in which thinking takes place"
-Quote of the day
I had been thinking about a big blog entry on a somewhat controversial topic since last Sunday. For some time, I was really into the logic and conclusion of it. I even thought quite a bit about the structure of the entry.
However, when I started putting it down on paper (well, on screen) yesterday, the more I wrote, the less the whole thing appealed to me. The logic did not sound as exciting; The conclusion seemed boring; The whole issue felt like a specific case of another widely discussed topic.
Right before I stopped writing, I was literally asking myself how come it interested me that much and how come I did not see its "uninteresting" side until then.
Maybe I was tunnel-visioned by my emotional state initially; Maybe there was some perspective that I later forgot about; Maybe I did not manage to pick up the conflicts in my logic or the similarity of the issue with other topics in my initial thinking.
Whatever the reason, I believe writing it down as soon as possible will solve the problem to the extend possible.
So this is my strong suggestion to you, my dear Readers!
- If you have some ideas, write them down as soon as possible. It could be just the key points. This will help you:
Thank you for coming here.
"Writing is not the outcome of thinking; it is the medium in which thinking takes place"
-Quote of the day
I had been thinking about a big blog entry on a somewhat controversial topic since last Sunday. For some time, I was really into the logic and conclusion of it. I even thought quite a bit about the structure of the entry.
However, when I started putting it down on paper (well, on screen) yesterday, the more I wrote, the less the whole thing appealed to me. The logic did not sound as exciting; The conclusion seemed boring; The whole issue felt like a specific case of another widely discussed topic.
Right before I stopped writing, I was literally asking myself how come it interested me that much and how come I did not see its "uninteresting" side until then.
Maybe I was tunnel-visioned by my emotional state initially; Maybe there was some perspective that I later forgot about; Maybe I did not manage to pick up the conflicts in my logic or the similarity of the issue with other topics in my initial thinking.
Whatever the reason, I believe writing it down as soon as possible will solve the problem to the extend possible.
So this is my strong suggestion to you, my dear Readers!
- If you have some ideas, write them down as soon as possible. It could be just the key points. This will help you:
- Record down all your perspectives and logics at that time
- More importantly, test your thinking through writing
Sunday, February 9, 2020
Basics 03: My investment journey and outcome
Dear Readers,
Thank you for coming here.
This is going to be the third post in the "Basics" series. And I am going to briefly describe my investment journey and the path we intend to take going forward.
A bit of history
My investment journey really started from beginning of 2018.
Before that, I was buying stock based on what I heard without knowing anything else.
Thank you for coming here.
This is going to be the third post in the "Basics" series. And I am going to briefly describe my investment journey and the path we intend to take going forward.
A bit of history
My investment journey really started from beginning of 2018.
Before that, I was buying stock based on what I heard without knowing anything else.
Not surprisingly, the stocks I bought did not perform well. One of them remains the counter with biggest loss both in percentage and absolute value after almost 3 years, even though the amount I invested was very very small compared to my portfolio now. Just an idea, the stock price has dropped 62% by end of Jan 2020.
Coming to 2017, I switched to a stable job from management consulting. After the initial few months, I started to have spare time. And the pay was enough for us to have savings every month. Combined with the fact that stock market was doing super well in 2017, we decided that it was high time for us to take investment seriously.
We started by reading quite a bit. Special thanks to "Hardware Zone" "Money Mind" forum, especially the two active "Teachers" in that forum, "BBCWatcher" and "Shiny Things". We find the theories of the two teachers agreeable given our circumstances and the time we wanted to put into investing.
So we were quick to decide on our investment strategy:
Take a long term approach and avoid timing the market.
The way we do it:
Dollar Cost Averaging (DCA) into World ETFs on a monthly basis
Specifically, we decided to divide our investment into two parts based on the currency our cash was in:
- SGD: DCA into DevWorld ETF (80%) [IWDA] and SGD ETF (20%) [ES3]
- RMB (on-shore): DCA into A-share ETF
I thought the strategy was good and I still think so now. However, the execution was, well, pretty bad.
First, we first bought ES3 at the beginning of 2018 and soon afterwards, the stock market went into correction mode.
Initially, every time we saw a drop in ES3 prices, we treated it as an opportunity to buy. And the more it dropped, the bigger amount we invested, trying to bring our average price down.
Before we realized it, our war chest run dry around May 2018 and we had not started buying IWDA. By the way, May 2018 was way before the ES3 reached the bottom at the end of 2018 or the very beginning of 2019.
Then we decided that it was more important to widen our portfolio. So we stopped investing in ES3 and started in IWDA, trying to come back to 80/20 split.
So that was pretty much what happened in 2018. Our portfolio performance in 2018 was btw -13% and -1%, with no month with positive performance.
Coming to 2019, we pretty much stick to the "DCA into IWDA" plan, well for the first few months. And as the stock market started to recover, our portfolio performance finally entered into the positive area.
However, as the market continued to go up, we started to feel IWDA was getting too expensive and we again violated our strategy and stopped buying in the 2nd half of 2019. Well, the market continued to go higher.
So now we have some cash. And our portfolio time-weighted performance was ~6% for 2019.
Going forward
From a long-term perspective, we would like to stick to our strategy and benefit from the development of the world.
Coming to 2017, I switched to a stable job from management consulting. After the initial few months, I started to have spare time. And the pay was enough for us to have savings every month. Combined with the fact that stock market was doing super well in 2017, we decided that it was high time for us to take investment seriously.
We started by reading quite a bit. Special thanks to "Hardware Zone" "Money Mind" forum, especially the two active "Teachers" in that forum, "BBCWatcher" and "Shiny Things". We find the theories of the two teachers agreeable given our circumstances and the time we wanted to put into investing.
So we were quick to decide on our investment strategy:
Take a long term approach and avoid timing the market.
The way we do it:
Dollar Cost Averaging (DCA) into World ETFs on a monthly basis
Specifically, we decided to divide our investment into two parts based on the currency our cash was in:
- SGD: DCA into DevWorld ETF (80%) [IWDA] and SGD ETF (20%) [ES3]
- RMB (on-shore): DCA into A-share ETF
I thought the strategy was good and I still think so now. However, the execution was, well, pretty bad.
First, we first bought ES3 at the beginning of 2018 and soon afterwards, the stock market went into correction mode.
Initially, every time we saw a drop in ES3 prices, we treated it as an opportunity to buy. And the more it dropped, the bigger amount we invested, trying to bring our average price down.
Before we realized it, our war chest run dry around May 2018 and we had not started buying IWDA. By the way, May 2018 was way before the ES3 reached the bottom at the end of 2018 or the very beginning of 2019.
Then we decided that it was more important to widen our portfolio. So we stopped investing in ES3 and started in IWDA, trying to come back to 80/20 split.
So that was pretty much what happened in 2018. Our portfolio performance in 2018 was btw -13% and -1%, with no month with positive performance.
Coming to 2019, we pretty much stick to the "DCA into IWDA" plan, well for the first few months. And as the stock market started to recover, our portfolio performance finally entered into the positive area.
However, as the market continued to go up, we started to feel IWDA was getting too expensive and we again violated our strategy and stopped buying in the 2nd half of 2019. Well, the market continued to go higher.
So now we have some cash. And our portfolio time-weighted performance was ~6% for 2019.
Going forward
From a long-term perspective, we would like to stick to our strategy and benefit from the development of the world.
Short term, I really do not know.
For a start, with all the changes and uncertainties with my career, we intend to keep some cash.
Secondly, my wife is abssessed now with some A-share active investment course. She has paid quite a bit tuition and is really eager to try. I don't know how to stop her. Guess I will just let her try it out.
However, whatever we do, you will read it in this blog.
Till next time.
Wednesday, January 29, 2020
Monthly Net-Worth Update - Jan 2020
Dear Readers,
Thank you for coming here.
Happy and Healthy Chinese New Year!
It is the end of the month, which means it is time for another monthly Net-Worth update.
Net-Worth increase from last month: ~73K SGD
The increase was mainly due to salaries, bonuses, leave encashment, company stock program, CPF contribution and interest.
Our investment value and gain did not change due to the recent drop.
I wish we could have this kind of increases every month.
Over 2019 or more preciously the past 12 months, our average monthly net-worth increase is about 16KSGD.
From next week, I will be on a new job, one with likely lower net income, less stability, more stress, heavier workload, less free time and much more traveling. Hopefully, it will also provide more learning opportunities and in time, opportunities to advance in career and income.
I totally expect our net-worth increases to slow down going forward. However, I target to increase that number to 40KSGD by the time I turn 40, i.e. our average monthly household net-worth increase needs to reach 40K during the calendar year which my 40th birthday falls in, after all reasonable expenses without sacrificing quality of life, OR I need to reach the equivalent income level (sorry, not to disclose that here now).
That is my goal and I call it "40/40".
Investment: 6.04% annualized return, incl. dividend
Compared to the annualized return of 6.47% last month, we see a dip.
The start of 2020 is not a particularly good one, both on a Macro level and a Micro level.
On a Macro level, the virus and the pass of Kobe does not only hurt people's pocket, but also their feelings.
On a Micro level, well, I am not in a great situation either and a bit worsened by the Macro level as well.
However, it is not really too bad either.
The virus will be contained and life will resume. And I still have a job and there is still hope.
Again, the only easy day was yesterday. No more illusions! Lets Fight!
Till the next time.
Thank you for coming here.
Happy and Healthy Chinese New Year!
It is the end of the month, which means it is time for another monthly Net-Worth update.
Net-Worth increase from last month: ~73K SGD
The increase was mainly due to salaries, bonuses, leave encashment, company stock program, CPF contribution and interest.
Our investment value and gain did not change due to the recent drop.
I wish we could have this kind of increases every month.
Over 2019 or more preciously the past 12 months, our average monthly net-worth increase is about 16KSGD.
From next week, I will be on a new job, one with likely lower net income, less stability, more stress, heavier workload, less free time and much more traveling. Hopefully, it will also provide more learning opportunities and in time, opportunities to advance in career and income.
I totally expect our net-worth increases to slow down going forward. However, I target to increase that number to 40KSGD by the time I turn 40, i.e. our average monthly household net-worth increase needs to reach 40K during the calendar year which my 40th birthday falls in, after all reasonable expenses without sacrificing quality of life, OR I need to reach the equivalent income level (sorry, not to disclose that here now).
That is my goal and I call it "40/40".
Investment: 6.04% annualized return, incl. dividend
Compared to the annualized return of 6.47% last month, we see a dip.
The start of 2020 is not a particularly good one, both on a Macro level and a Micro level.
On a Macro level, the virus and the pass of Kobe does not only hurt people's pocket, but also their feelings.
On a Micro level, well, I am not in a great situation either and a bit worsened by the Macro level as well.
However, it is not really too bad either.
The virus will be contained and life will resume. And I still have a job and there is still hope.
Again, the only easy day was yesterday. No more illusions! Lets Fight!
Till the next time.
Thursday, January 23, 2020
A quick update on life
Dear Readers,
Thank you for coming here.
In this post, I would like to share a quick update on my life.
First of all, I secured, kind of, my next job.
I will work as free lance for a project in China first and hopefully that can lead to a full time job in the consulting company.
I will need to travel a lot and face much more stress, but that is what I was looking for, at lease the second part. So that is ok.
The money is good. However, with China tax and expense I have to incur, I will be quite a bit worse off financially. I guess I will have to live with it and hope that I will eventually be better off in the long-term perspective. That of course depends on how well I can extract value from this experience and improve myself to a point where I will be good enough to make my next leap in my career.
One thing is for sure - the experience is going to be tough and heavy, as I am not the only one paying for it. My family is paying for it as well because my wife has to take care of my two kids, which is already touch with me around, while I am absent and I wont be able to spend as much time with my kids. I just need to always remember that professionally, I need to keep growing; and family wise, I need to make up for lost time as much as I can.
However, that is no reason why this experience cannot be enjoyable as well. With good planning, I can achieve the professional development I seek and at the same time be as present with my family as possible.
I need to keep the right cadence, which is critical. Even though I need to achieve professional development, preferably in a fast manner, I wont be too eager or trying too hard. I have increasingly realized that cadence is important and it is necessary to prove my worth before asking for anything. Keeping learning and being alway vigilant, deeply involved and energetically committed is key. The rest I guess I have it leave to time.
Keeping the cadence will also prevent me from being burnt out, which will help with my presence with my family. I will save enough energy so that I can be fully present with my family when I am with them. Now that I can only spend limited time with my family, I will make sure that the quality makes up as much as possible.
So how do I view this new chapter of my life?
I cannot say that I am looking forward to it. It represents a worse-off reality for me and my family in the short term, both from the financial and quality of life perspective. However, it does bring the opportunity for self-improvement and potentially can prepare me for bigger and greater opportunities in the future. And frankly, I do not have any other options in sight right now.
I will go and make the most of the opportunity.
Secondly, I realized that I needed to care more about people.
I felt quite depressed yesterday, partly because I was not looking forward to the new chapter of my life and partly because of the 300KSGD offer I lost.
My wife was really supportive and encouraging which helped a lot.
In the evening, I was browsing through my old Facebook posts and found a few surprises there. The discovery that really strike me was that how much I cared about my friends in the past.
There was this case where I saw a picture of a friend where he looked sad and I sent him a message asking how he was and whether anything happened. Of course, he replied with a very warm message, not only explaining what happened but also expressed his sincere appreciation for my attention.
Looking back the last few years, I was either busy with feeling superior due to my "success" or busy with feeling the "anxiety" because I always believed that I should have progressed even faster and I was doing what I thought would help. I really did not manage to care much about my friends, even close ones or those who used to be close.
I should start caring about others more. After all, we all live in the network.
That would be the change I will embed in every thing I do in the new chapter of my life.
Thank you for your attention.
Till the next time!
Thank you for coming here.
In this post, I would like to share a quick update on my life.
First of all, I secured, kind of, my next job.
I will work as free lance for a project in China first and hopefully that can lead to a full time job in the consulting company.
I will need to travel a lot and face much more stress, but that is what I was looking for, at lease the second part. So that is ok.
The money is good. However, with China tax and expense I have to incur, I will be quite a bit worse off financially. I guess I will have to live with it and hope that I will eventually be better off in the long-term perspective. That of course depends on how well I can extract value from this experience and improve myself to a point where I will be good enough to make my next leap in my career.
One thing is for sure - the experience is going to be tough and heavy, as I am not the only one paying for it. My family is paying for it as well because my wife has to take care of my two kids, which is already touch with me around, while I am absent and I wont be able to spend as much time with my kids. I just need to always remember that professionally, I need to keep growing; and family wise, I need to make up for lost time as much as I can.
However, that is no reason why this experience cannot be enjoyable as well. With good planning, I can achieve the professional development I seek and at the same time be as present with my family as possible.
I need to keep the right cadence, which is critical. Even though I need to achieve professional development, preferably in a fast manner, I wont be too eager or trying too hard. I have increasingly realized that cadence is important and it is necessary to prove my worth before asking for anything. Keeping learning and being alway vigilant, deeply involved and energetically committed is key. The rest I guess I have it leave to time.
Keeping the cadence will also prevent me from being burnt out, which will help with my presence with my family. I will save enough energy so that I can be fully present with my family when I am with them. Now that I can only spend limited time with my family, I will make sure that the quality makes up as much as possible.
So how do I view this new chapter of my life?
I cannot say that I am looking forward to it. It represents a worse-off reality for me and my family in the short term, both from the financial and quality of life perspective. However, it does bring the opportunity for self-improvement and potentially can prepare me for bigger and greater opportunities in the future. And frankly, I do not have any other options in sight right now.
I will go and make the most of the opportunity.
Secondly, I realized that I needed to care more about people.
I felt quite depressed yesterday, partly because I was not looking forward to the new chapter of my life and partly because of the 300KSGD offer I lost.
My wife was really supportive and encouraging which helped a lot.
In the evening, I was browsing through my old Facebook posts and found a few surprises there. The discovery that really strike me was that how much I cared about my friends in the past.
There was this case where I saw a picture of a friend where he looked sad and I sent him a message asking how he was and whether anything happened. Of course, he replied with a very warm message, not only explaining what happened but also expressed his sincere appreciation for my attention.
Looking back the last few years, I was either busy with feeling superior due to my "success" or busy with feeling the "anxiety" because I always believed that I should have progressed even faster and I was doing what I thought would help. I really did not manage to care much about my friends, even close ones or those who used to be close.
I should start caring about others more. After all, we all live in the network.
That would be the change I will embed in every thing I do in the new chapter of my life.
Thank you for your attention.
Till the next time!
Sunday, January 19, 2020
Basics 02: The tracker tool I built and am using
Dear Readers,
Thank you for coming here.
This is going to be the second post in the "Basics" series. And I am going to introduce the tracker tool I built and has been using to track both of our net-worth and investment portfolio.
Brief introduction to the tool
First, the tool is google sheet based. Why google sheet?
I guess it was mainly because I had not really used google sheet when I started to build this tool and wanted to give it a try, and liked the feature that I could access the tool anywhere on any platform.
If I could choose again, I would probably choose Excel. You can also access Excel anywhere on any platform by saving the file in Google Drive, provided you have the software installed. Furthermore, it has become a pain not being able to use table and some graph features, like having two vertical axis in a chart with common 0 on the horizontal axis, in Google sheet.
Can I convert my tool to excel? Absolutely! And I guess it wont take too much efforts. I am just too lazy to do that.
Second, the tool consists of mainly 5 tabs split into 3 levels, with lower levels being the input for higher-levels:
Why did I build my own tool, instead of using something in the market?
I spent at least 20 hours, probably many more, building and improving the tool. The tool has undergone 2 major evolution since created.
So why did I choose to spend so much effort to build something that may not even work because I could not even score well for Finance in School and never had any experience in that domain? Why didn't I just pick a software or app built by Pros?
Well, I guess it came down to below 4 reasons.
First, I really had a lot of time to kill.
My work at that time was really good. I can spend 2-3 hours each day to complete the work and I can use the rest of the working time to build the tool. I know it may sound too good to be true, even more so if I tell you that it actually pays really well with superb benefits.
I got a bit too free and needed something to fill my time. It eventually led me to quit in face of a missed promotion. And then I screwed up. And now my last day on this job is end of the month and I have not found my next job yet. This experience not only ruined my holiday season, but also may haunt me for a much longer duration. Now I could not help thinking how good it would be if I had just stayed in the job and relaxed. But anyway, life has to go on. I guess that job is not meant for me after all.
Second, I wanted to understand everything.
The options in the market present results in beautiful graphs and different aspects with little-to-no efforts, and I am sure that the results would be correct and according to finance best practices. However, I do not seem to understand some of the explanations. For example, XIRR gives you the return assuming all dividends are reinvested immediately with the same return. What does that mean? I know my dividend is not immediately reinvested. Does this formula still apply to me?
If I build my own tool, I can be sure (almost) that I understand everything about it. My solution to derive a time-weighted annual return is to calculate the weighted average of the time in the market of my portfolio on the transaction level and use the "root" calculation to derive the annualized return.
Well, is my solution more "correct" or "accurate" than XIRR? Is it more resource-efficient? I do not know. Even if it is, would that make a difference in the grand scheme of things? I do not think so. Is it worth the efforts? Well, as I said, I had too much free time to kill.
Third, it is about the actual exchange rate and the actual timing of transactions.
I wanted to use the actual exchange rate incurred on my money when I bought or sold. The options in the market do not seem to support that or at least do not explain explicitly that they do. And often, it is hard to verify what exchange rate they used to derive the results shown to me.
So I built my tool in such a way that the exchange rate is an output to be calculated based on actual money in and actual money out, instead of an input as most tools do.
Similarly, I wanted to record the actual timing (I mean date) of receiving the dividends. The options in the market are able to track the dividend pay-out date. However, due to the broker or bank, I may receive the dividend a bit later. So my tool enables me to track the actual date and actual amount in the currency I want based on the bank transaction record, so that I am able to track both the actual timing and the actual exchange rate.
Again, is this necessary or even useful in the grand scheme of things? Probably not. Again, I was too free.
Fourth, I kind of enjoy updating the tool.
In the process of updating, I pick up details to help explain the changes in the high-level results. And so far at least, I still have the time to do it. If my next job makes me so occupied that I am not able to update the tool monthly or start to feel updating it a drag, I may ditch it for something requiring less work.
Thank you for coming here.
This is going to be the second post in the "Basics" series. And I am going to introduce the tracker tool I built and has been using to track both of our net-worth and investment portfolio.
Brief introduction to the tool
First, the tool is google sheet based. Why google sheet?
I guess it was mainly because I had not really used google sheet when I started to build this tool and wanted to give it a try, and liked the feature that I could access the tool anywhere on any platform.
If I could choose again, I would probably choose Excel. You can also access Excel anywhere on any platform by saving the file in Google Drive, provided you have the software installed. Furthermore, it has become a pain not being able to use table and some graph features, like having two vertical axis in a chart with common 0 on the horizontal axis, in Google sheet.
Can I convert my tool to excel? Absolutely! And I guess it wont take too much efforts. I am just too lazy to do that.
Second, the tool consists of mainly 5 tabs split into 3 levels, with lower levels being the input for higher-levels:
- Top-level: a summary sheet with graphs and necessary numeric values to show the evolution of our net-worth and investment performance against time, on a monthly basis, because I update the next level, which is the input for this sheet, once a month, towards the end of each month.
- Middle-level: two sheets to track our latest net-worth (See Basics 01 for how we calculate our net-worth) and investment portfolio and performance respectively, updated once a month, towards the end of each month. These sheets also include graphs to show certain information, such as split of net-worth, emergency fund status, the performance for each counter etc
- Lowest-level: two transaction-level sheets tracking my buy/sell transactions in the market and dividend respectively, updated as and when each transaction happens. These sheets include high-level sanity check to ensure that model is working properly and also include graphs to track transactions, such as number and value of transactions each month, dividend per month/year etc. If you are wondering why I did not combine these two sheets into one, i.e having one sheet tracking both buy/sell and dividend transactions, you are absolutely right. I would prefer that as well. However, the tool was built that way and again I am too lazy to change it.
Why did I build my own tool, instead of using something in the market?
I spent at least 20 hours, probably many more, building and improving the tool. The tool has undergone 2 major evolution since created.
So why did I choose to spend so much effort to build something that may not even work because I could not even score well for Finance in School and never had any experience in that domain? Why didn't I just pick a software or app built by Pros?
Well, I guess it came down to below 4 reasons.
First, I really had a lot of time to kill.
My work at that time was really good. I can spend 2-3 hours each day to complete the work and I can use the rest of the working time to build the tool. I know it may sound too good to be true, even more so if I tell you that it actually pays really well with superb benefits.
I got a bit too free and needed something to fill my time. It eventually led me to quit in face of a missed promotion. And then I screwed up. And now my last day on this job is end of the month and I have not found my next job yet. This experience not only ruined my holiday season, but also may haunt me for a much longer duration. Now I could not help thinking how good it would be if I had just stayed in the job and relaxed. But anyway, life has to go on. I guess that job is not meant for me after all.
Second, I wanted to understand everything.
The options in the market present results in beautiful graphs and different aspects with little-to-no efforts, and I am sure that the results would be correct and according to finance best practices. However, I do not seem to understand some of the explanations. For example, XIRR gives you the return assuming all dividends are reinvested immediately with the same return. What does that mean? I know my dividend is not immediately reinvested. Does this formula still apply to me?
If I build my own tool, I can be sure (almost) that I understand everything about it. My solution to derive a time-weighted annual return is to calculate the weighted average of the time in the market of my portfolio on the transaction level and use the "root" calculation to derive the annualized return.
Well, is my solution more "correct" or "accurate" than XIRR? Is it more resource-efficient? I do not know. Even if it is, would that make a difference in the grand scheme of things? I do not think so. Is it worth the efforts? Well, as I said, I had too much free time to kill.
Third, it is about the actual exchange rate and the actual timing of transactions.
I wanted to use the actual exchange rate incurred on my money when I bought or sold. The options in the market do not seem to support that or at least do not explain explicitly that they do. And often, it is hard to verify what exchange rate they used to derive the results shown to me.
So I built my tool in such a way that the exchange rate is an output to be calculated based on actual money in and actual money out, instead of an input as most tools do.
Similarly, I wanted to record the actual timing (I mean date) of receiving the dividends. The options in the market are able to track the dividend pay-out date. However, due to the broker or bank, I may receive the dividend a bit later. So my tool enables me to track the actual date and actual amount in the currency I want based on the bank transaction record, so that I am able to track both the actual timing and the actual exchange rate.
Again, is this necessary or even useful in the grand scheme of things? Probably not. Again, I was too free.
Fourth, I kind of enjoy updating the tool.
In the process of updating, I pick up details to help explain the changes in the high-level results. And so far at least, I still have the time to do it. If my next job makes me so occupied that I am not able to update the tool monthly or start to feel updating it a drag, I may ditch it for something requiring less work.
Additions on Feb 01 2020
I am now inclined to advise you, my readers, to build your own template if you can.
I was reading a book about building a template to track your network and the author emphasizes that the key to effective relationship management is to keep using it.
And it just came to me that I had given up on many things that require long term commitment to show impact. However, I have never missed one update for this template. I believe a big reason is that I built this tool and I am committed to keeping using it.
In summary, I will continue to use the tool for now as it gives me a (maybe false) feeling of being in control and being more accurate.
This turns out to be a much longer post than I intended. If you have any questions or wish to understand more about the tool or wish to get a free copy of the tool, leave a comment below. I will be sure to respond as soon as I can.
Till next time!
In summary, I will continue to use the tool for now as it gives me a (maybe false) feeling of being in control and being more accurate.
This turns out to be a much longer post than I intended. If you have any questions or wish to understand more about the tool or wish to get a free copy of the tool, leave a comment below. I will be sure to respond as soon as I can.
Till next time!
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