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Someone once asked John D Rockefeller, how much money is enough. Rockefeller reputedly said: “Just a little bit more.”

There you have it… a pretty good definition of greed. ALWAYS NEVER ENOUGH.

I am quite AMAZED BY this stockmarket run. My portfolio value has moved past its peak (which was mid-last year when Bursa Malaysia KLCI was 1,400+ points).

But how do we repeat our investment performance from here on? Experts are saying that the easy money has been made, valuations are not excitingly cheap and the bull run has come too fast, too furious.

As I reflected on this for the past two weeks, several things came to mind.

1) Firstly I am truly AMAZED WITH the truth of God’s word in the way I choose to invest. From my past experience:

When I bet big, I usually loose
When I bet small, I usually win

OK before you conclude that I’m a total loser, let me share some insights with you…

When I bet big I usually loose
It’s not the amount that counts, but it’s actually where your heart is. The Bible tells us that God knows our hearts and He is greater than our hearts (1 John 3:20). In the past on occassions when I added to my position in a bigger way, I may or may not know it, but most of the time I was probably going for fast money. This is greed.

What about Warren Buffett? Didn’t he say: Be fearful when others are greedy, be greedy when others are fearful? Well I hope he was speaking figuratively. Look at what Jesus says:

Be on your guard against all kinds of greed; a man’s life does not consist in the abundance of his possessions.
Luke 12:15

this is one of those few occassions where I’d say don’t listen to Buffett.

When I bet small, I usually win
Recently I’ve had the privilege to add to some of my holdings at dirt cheap prices. I had not finished adding to it when the market started running. But with the little that I did invest, it helped to produce nice percentage returns in just a few months.

I’m probably 30% under-invested now. I made some wrong calls. I thought the banks were going to go lower first before recovering. But I’m glad I had the courage to buy AMMB around at RM2.00 to 2.50 when some analysts were prophesying end of the world.

I thought that Sime Darby was way overvalued at RM5.00 and IOI Corp was not cheap at RM2.50. I still hold that view but obviously the market doesn’t agree. I had lost hope on my Bumiputra Commerce shares at RM5.00 after entering at around RM9.00. So captured was I by the drumbeat effect that I had failed to seize the opportunity as a value investor.

But Peter Lynch was right. You can make mistakes, but even if you get 6 out of 10 calls right, you’d be smiling.

Fund Managers do have one advantage over us private investors…. they don’t invest their own money. Think about it…. this means they are not as emotionally tied to the money. They are not trying to get rich fast with their investment fund. But they are managing it in accordance with the investment mandate given to them. And most of them will be glad to flip out their fancy charts showing you how they outperform their benchmarks.

In truth, we should cultivate this attitude. The Bible tells us that all the money that we have belongs to God. In Mathew 25, Jesus tells a parable of 3 servants to whom are given different amounts of talents to invest. The story is much like our own lives where God has given each of us different talents and resources. If we are faithful and invest with the right heart, then we can claim God’s promise:

He who gathers money little by little makes it grow.
Proverbs 13:11

2) Secondly I need to cultivate a habit to keep improving as an investor.

Some commentators say that “the easy money has already been made”.  But one truth I learned long ago is that there will always be opportunities in the market. What it means now is that I need to work harder to uncover such opportunities, compared to 6 months ago.

I have several bad investment habits. I like to buy at super cheap prices and tend to hold on forever. Most people don’t have this problem. I am resolving to develop good habits – I will continue to buy little chunks of good stocks at fair prices… even when I won’t get them dirt cheap.

I’ve got some smaller holdings in stocks like NCB Holdings, Starhill REIT, Tower REIT and so on. These are very nice yield plays and I will add to them at the right time (as I have more savings). I am keeping a slightly defensive stance for now.

I will also need to sell stocks and take profit sometimes. Buy and hold may not always work.

We first make our habits, then our habits make us.
John Dryden

The Right Focus
Don’t look at your portfolio value every day. It is a meaningless figure. If you had asked me about my portfolio in January 2009, I would have gone away and buried my head in the sand. Never would I have imagined that 7 months later, it would look better than ever. GOD IS FULL OF SURPRISES!

As a private investor, we have one key advantage over fund managers. We need not be so concerned with fluctuations in our portfolio value. Even if I were to lose 20% in my portfolio value when I still have some cash to invest, I wouldn’t be too upset. If you continue to build an increasing stream of dividends, then your portfolio will go north in the long term.

Notes:

John D Rockefeller (1839 – 1937) – although regarded by some to be a ruthless capitalist, he was reputedly the world’s first philanthrapist. According to Wikipedia, Rockefeller had been tithing to his church since his first paycheck. His giving grew in enormous proportions as his wealth grew. Some estimates have it that he gave away more than $500 million in his lifetime to various causes in education, medicine and scientific research.