Review for 2010

Conducting a review of my virtual portfolio for 2010, I concluded that the annualized return of 28.3% is merely satisfactory and largely based on the bullish market sentiments. Although most investment professionals fail to outperform the benchmark Straits Times Index, beating the market by 18.2% is only marginally better, considering it is only a year's record. Successful application of sound investment principles should enable the investor to consistently outpace the market for the long term.

In the words of Warren Buffett, "We will now settle for one good idea a year." Since the beginning of 2009, I find it increasingly difficult to seek out bargains in the Singapore stockmarket. Fortunately, I have had the luck to conceive an idea each in 2009 and 2010 respectively, but these ideas came after much patience and research. I feel more comfortable with the underlying business than their stock prices... In the market, you don't get paid for activity (brokers do), you get rewarded for being right. And being right or wrong does not depend on the number of people who share the same view as you, the outcome relies on the amount of intellect and type of temperament you bring to evaluating selected business within your circle of competence.

If you are planning to buy stocks in the next few years, it is simply insane to hope for a rising stockmarket. Yet today's newspapers joyfully claimed that the total market capitalisation of companies listed on the Singapore Exchange has jumped 22.7% in 2010. Remember that in investing, pessimism is your pal and euphoria the enemy. I only attempt to be fearful when the other are greedy and greedy when the others are fearful. Right now, optimism prevails: Who wouldn't like the STI at grow at 10% annually? According to the rule of 72, you can double your principal by earning a 10% return for approximately 7.2 years. Investors pay a costly price for a cheery consensus.

It's getting kind of boring to focus only on stock investing: Sitting down and reading annual reports only to discover fairly or overpriced businesses is not my idea of fun. School is starting soon, at least it will keep me distracted from the markets and prevent me from making some capital allocation mistakes.