Make Market Cycles work for you

Make market cycles work for you
By Dennis Ng

Observing nature, we will notice cycles.
There are, for instance, four seasons, with the cold winter followed by blossoms in the spring. And just when everyone is having fun in the sun, it is good to be mindful that temperatures will drop as autumn approaches. Those who are not prepared with sufficient clothing might freeze when winter returns.
Similarly in the financial markets, there are market cycles where busts follow booms and vice versa. That is why the 'party' ended with a market crash last year, after global stock prices shot up by between 200 and 500 per cent in the last four years.
According to historical analysis, 2008 was one of the worst years for stocks since 1937. For many, this might be depressing news but for me, this is exciting news. By observing market cycles and investing accordingly, one can try to time the market.
I would say that in the short term, it is difficult to time the market correctly on a consistent basis. However, it is definitely possible to roughly estimate at which stage of the market cycle we are in.
For instance, in 2007, the stock market was in its fourth bullish year. Back then, the Straits Times Index (STI) had risen about 200 per cent from a low of 1,226 in March 2003 to over 3,600 points.
As far as I remember, the Singapore stock market has never had a bull market that lasted more than five years. Believing back then that we were near the tail end of a bull market, I sold most of my stocks and avoided the market carnage that followed a few months after that.
The steps to 'market cycle investing' are simple.

First, we try to estimate at which stage of the market cycle we are in.

Secondly, we try to identify the major trend direction - upwards or downwards.

Finally, we position ourselves accordingly; basically, the strategy to take is to go with the trend instead of going against the trend.

For instance, if you bought stocks during 2004 when the stock market was on an uptrend, it was easy to make money since most stocks were moving up in price. However, when stock markets were in retreat last year, it was very difficult to avoid losing money on stocks, simply because most stocks fell in price in accordance with the general market direction.
Some people firmly believe in the 'buy and hold' strategy, holding on to their stocks through thick and thin, whether the stock market is moving up or down.
I used to be one of them until I realised I lost out on a lot of opportunities by not selling out when markets were high and buying back again when markets were low. We do have to be mindful of opportunity costs. In the last bear market from March 2000 to March 2003, I also observed that when the tide turned, almost all stock prices went down, including blue chips.
Let me give an example: DBS Group Holdings' share price was as low as $8 in 2003; it hovered between $8 and $10 for close to one year. If you practised market cycle investing, and even if you had missed the bottom, you could have easily bought the bank's shares at about $10.
In 2007, after four years of bull runs, DBS' share price shot up to as high as $25 and hovered between $20 and $25 for more than one year.
Again, even if you missed the top, you could have easily sold DBS shares when the price was about $20. By buying at $10 and selling at $20, you would have easily pocketed a 100 per cent return over four years. Not bad at all.
Similarly, by practising market cycle investing, after selling out at $20, and after one year of a bear market, you can now easily buy back DBS shares at less than $10 again.
On the other hand, if you had bought DBS shares at $10 in 2003 and steadfastly held on to them through 'thick and thin', you would have basically enjoyed the 'roller-coaster ride' of the market but would have no profits to show after five years.
Of course, nobody knows when the market will bottom. My experience is that I was early and invested all my money by early 2002. However, I was one year too early as the Singapore stock market bottomed only in March 2003.
Despite missing the bottom by 12 months, I still managed to achieve over 200 per cent in returns riding the four-year bull market that followed.
Thus, by practising market cycle investing, one would inevitably buy when prices are low, and sell out when prices are high.
By doing so, you have also reduced your risks of losing money.

BIG INVESTOR BUT FRUGAL SPENDER

Big investor but frugal spender
By Lorna Tan
Despite being a multimillionaire, entrepreneur-cum-motivational speaker, Adam Khoo still hesitates before spending on consumer products like his iPhone.
However, when it comes to investments, the founder of Adam Khoo Learning Technologies Group wouldn't even think twice when investing, say, $50,000 in stocks. This is because stocks are expected to potentially generate more money, he says.
A conservative and long-term investor, he prefers to invest in cash-rich, large-cap companies that have low debts and the potential to consistently increase their earnings.
His group, which focuses on education, comprises 16 firms in seven countries with an annual turnover of $15 million. He also took over his father's advertising firm, Adcom, in 1999.
A business administration degree holder from the National University of Singapore, Mr Khoo - who is all of 34 - is also known for his motivational books. Last month, he launched his ninth book, Profit From Panic, which gives practical tips on how to deal with the current economic crisis.
He is married to Ms Sally Ong, 38, who is a director at one of his firms. The couple have two daughters - Kelly, five, and Samantha, three.
Q: Are you a saver or spender?
One of the factors that helped me build up my wealth over the years is that I am relatively frugal.
I have always saved at least 50 per cent of my income and I don't believe in spending a lot of money on luxuries. I buy clothes once a year only when I'm in Bangkok or Indonesia. Usually I visit a shop for half an hour and pick up 10 shirts and trousers at one go. I am a person of simple taste, except when it comes to cars. I like fast cars.
I invest 100 per cent of my savings consistently. But when the market gets too overvalued, I hold a larger proportion in cash as a precautionary measure.
Q: How much do you charge to your credit cards each month?
I have three credit cards but I use only one regularly for my personal expenditure. I chalk up about $2,000 to $3,000 every month. I use my credit card instead of cash whenever I can for easy tracking purposes. I withdraw about $200 from the ATM each time.
I pay my credit card bill every month and if I get charged 10 cents for late payment interest, I will scream. I don't believe in paying the annual fee too and will ask the bank to waive it.
Q: What financial planning have you done for yourself?
My portfolio, which I manage myself, is made up of the following investments: property that I rent out, private businesses, Singapore stocks, US stocks and exchange- traded funds (ETFs). My investments have generated an average return of over 20 per cent per annum.
Currently, I have about US$400,000 (S$611,000) in US stocks, such as Boeing, Google, Nike, Pepsico, and ETFs, and another $400,000 in Singapore stocks, such as CapitaLand, OCBC Bank, the Singapore Stock Exchange, Bestworld and STI ETF.
When it comes to insurance, I believe in buying term and investing the rest. Still, I bought seven traditional plans such as whole life and endowment when I was young, because my wife is a former AIA agent and I had bought them from her. About four years ago, I bought a term with cover of $1 million which brings my total life cover to about $2 million.
Q: What property do you own?
In 1998, I bought a 1,300 sq ft condominium in East Coast for $480,000 and rented it out for about $3,000. I sold it for $650,000 in 2004.
I also have a 5,000 sq ft semi- detached house in East Coast which was bought four years ago for $1.3 million.
Early last year, I bought a 900 sq ft condo at Robertson Quay for $1.3 million. I'm renting it out at $4,000.
Q: Moneywise, what were your growing-up years like?
I come from a wealthy family where my father and uncles are savvy business people and investors. That background influenced my values, beliefs and attitudes towards the possibility of building immense wealth when one is prepared to work hard and educate oneself.
My father started his advertising firm Adcom in 1972 and mum was editor of the women's magazine, Her World. I was the only child. We lived in a bungalow in Changi.
However, what gave me the drive to build my own wealth and to value money is that my father is an extremely frugal man, and that rubbed off a lot on me. In those days, my dad would not even buy a brand-new car despite his wealth. He would compare prices of toilet paper and toothpaste all over the supermarket before deciding what to buy.
Q: How did you get interested in investing?
Every Chinese New Year, from the time I was 15, my grandfather would give me hongbao with cash plus Malaysian shares like Genting, Kuantan Flour Mill and Hicom.
When I was in the army, I started dabbling in shares.
At about that time, I was inspired by a book I read, Buffetology, based on the success and work of Warren Buffett. I was amazed by a man who was able to build his wealth purely through investing.
Q: What's the most extravagant thing you have bought?
A $230,000 red Lotus bought last October. It's a reward for myself.
Q: What's your retirement plan?
My passive income from book royalties, dividends and business profits is enough to cover my expenses so, technically, I can stop working if I really wanted to.
Q: Home now is...?
I live in the semi-detached house in East Coast.
Q: I drive...?
A red Lotus Elise and a red BMW convertible.
This article was first published in The Straits Times.

Missed ! Now, How to pick yourself up ?

Missed! Now, how to pick yourself up?
BUYERS now have another 'beware' to add to their long list. Beware of those who call themselves financial advisers.
Well, with faith in banks shattered, what else would you expect?
Trust no one now?
Mercifully, it's not that grim. You can still turn to the Financial Industry Dispute Resolution Centre (FIDReC) for help.
When contacted, former NTUC Income CEO Tan Kin Lian, who has been helping affected investors in his private capacity, feels that brokerages and financial advisory firms should share the responsibility, together with their clients.
He said: 'How can brokerages sell a risky product, then say that they are merely order-executors? Similarly, the financial advisers cannot make themselves out to be advisers, yet not make their roles as introducers clear to their clients.
'I cannot sell a drug which causes the people who take it to die, then say that it is not my fault. I have to make sure that the medicine I sell is okay.'
He said: 'It would be fair if the customer bears 50per cent, while the brokerage and the financial advisers bear 25 per cent each of the losses.'
Can't afford, don't buy
Mr David Gerald, president and chief executive of the Securities Investors Association of Singapore, said: 'We live in a buyer beware market, people have to be responsible for the choices they make.
'So, I always advise investors that if they do not understand the product, don't touch it. If they cannot afford it, don't buy it.'
He said that the elderly couple mentioned in the report on page 2 have two means of recourse: FIDReC or a civil suit.
At FIDReC, mediation is free, and legally-trained people will be able to advise the couple, said MrGerald.
They could also engage a lawyer, he said, but he felt it was not advisable to do so, as it was an expensive process, and they might end up paying the legal costs of the other party if they lose the suit.
The learning point is that it's not enough just to know the product you are buying now.
You also need to know who you are buying from.
Ask if independent financial advisers are only 'introducing' you to a product.
Compare this to, say, bank relationship managers who 'advise' you to buy the same product.
Not knowing the difference between the two roles can really cost you.
Getting your money back is about proving mis-selling.
Put simply, it's about proving you were given bad, wrong, or unsuitable advice.
Some independent financial advisers may even produce a document you signed, confirming they were 'introducers' - a document which, you realise too late, actually absolves them from responsibility if things go wrong.
What if you argue that some of the things said to you during the 'introduction' sounded like advice?
Well, it's your word against theirs, always difficult on either side to prove.
So how about the brokerage companies that these clients get 'introduced' to, to buy the product from?
Sorry, we were just 'executing' the order, say some of the companies. We didn't 'advise' you either. So don't blame us.
The numbers are telling. Among those who bought from stockbroking firms, only just over 10 per cent received any settlement.
The lesson for the small-time investor is this: Make it clear that you're seeking advice. Put it in writing. Fill the questionnaires to make your concerns known. Keep copies.
Trust no one, I say.

Tay Shi'an
Mon, Feb 02, 2009The New Paper

HOW TO MAKE MONEY in 2009

How to make money in 2009
By Lorna Tan and Michelle Tay

What a roller-coaster ride the year 2008 has been.
Stock markets have tanked, rallied, then tanked again. Home prices are dipping, the economy is shrinking, and wages have hit a plateau.null
And let's not even talk about the people who have lost millions and millions in Lehman Brothers- linked structured products.
While the peaks have been few and far between, the troughs have left people scrambling to find the bottom - and everybody is tightening their (seat)belts and hanging on for dear life.
Yet, despite the projected gloom in 2009, the new year represents a new start for many.
If you still have the funds to invest, should you buy stocks, a car or a house?
What lessons have financial experts learnt that you can also glean wisdom from?
Invest brings you the best investment advice from 10 savvy investors.
Mr Jim Rogers, Singapore-based American investor, author of A Bull In China: Investing Profitably In The World's Greatest Market, and creator of the Rogers International Commodities Index
What was the best and worst thing that happened to you financially this year?
Best: Being short on Fannie Mae and the United States investment banks. These stocks collapsed, some by 100 per cent, so I made huge percentage gains on them in 2008.
Worst: Being long on anything at all.
How do you see 2009 panning out?
Most economies and financial markets will get worse as the year progresses.
We are in a historic period of forced liquidation which has happened only eight or nine times in the past 100 to 150 years. There is a forced reversal of positions with no regard to the fundamentals. One makes money in times like this by finding things with unimpaired fundamentals because they will become market leaders.
The only thing I know with unimpaired fundamentals are raw materials and commodities. In fact, their fundamentals are enhanced. Reserves and inventories of everything are declining while governments worldwide are printing huge amounts of money, which has always led to higher prices down the road.
So commodities are the best place to be.
Some parts of the Chinese economy will do well too.
What is one piece of financial advice you would give a person looking ahead in 2009?
Learn about real assets, raw materials and commodities as the fundamentals are improving there, while the fundamentals are deteriorating in most other sectors.
Would your answer be different for a) a single, working person; b) a married couple with school-going children; and c) a retiree?
No.
Is it a good time to buy a car or property?
I am not buying either.
One can get great deals on cars now so I guess it is a good time to buy a car, if one really needs one. Otherwise, I would wait. My view is that property will still be declining in much of the world for at least another year or two. There will be some special places in the world where property will be okay, but they will be few.
Mr Ben Fok, chief executive of Grandtag Financial Consultancy
What was the best and worst thing that happened to you financially this year?
Best: My equity portfolio was down by only less than 15 per cent. I had lightened the majority of my stock portfolio in September when the Fed was taking over Fannie Mae and Freddie Mac. I sold part of my equity portfolio bit by bit as the bad news was revealed one by one. Now I am very light in equities and heavy in cash. I also did not invest in, or advise my clients to invest in, any structured products.
Worst: I totally forgot about my Supplementary Retirement Scheme (SRS) account. I did nothing to it and it was down by at least 40 per cent.
How do you see 2009 panning out?
It will be an uneventful year for the financial markets. There will be bad news as the world slips deeper into recession and then tries to recover from it. Some people are calling a market bottom but I think, at best, the stock market will be in a tight trading range until there is strong evidence from macroeconomic indicators that growth is beginning to stabilise. But that does not mean ignoring the market at all. On the contrary, I believe it is time to take calculated risks as equities tend to react ahead of an improvement in the economy.
What is one piece of financial advice you would give a person looking ahead in 2009?
Proceed with caution when entering the stock market. While many stocks are heavily sold down and are looking very attractive, the world macroeconomic picture is not that bright.
Therefore, attractive valuations of certain stock markets must be weighed against the risks stemming from a global recession that will trigger a cyclical contraction in corporate earnings.
The world economy will take at least a year to recover from this financial shock and we cannot rule out further corrections in the coming months. Invest with what you can afford to lose and remember the stock market has no human emotions.
To protect yourself from downside risk, look to invest in undervalued stocks or stocks that are selling below net asset value. Look also at sectors with stable earnings.
Would your answer be different for a) a single, working person; b) a married couple with school-going children; and c) a retiree?
a) Now is the best time to stock-pick. Usually, this group of people has fewer liabilities and a longer time horizon to hold on to fundamentally sound stocks. The recommended asset allocation is 100 per cent equities.
b) Invest in the stock market, with some exposure in bonds. Currently, corporate bonds are attractive despite rising default rates. The recommended asset allocation is 60 to 70 per cent in equities and 30 to 40 per cent in bonds.
c) As they need to create an income stream and have a shorter time horizon, investing in bonds is the best asset class and the least volatile. However, a small exposure to stocks is also recommended. I would recommend 20 to 30 per cent equities and 70 to 80 per cent bonds.

Given the financial situation, is it a good time to buy a car or property?
Certificate of entitlement (COE) prices are down substantially...and interest rates are at rock-bottom prices. However, bear in mind that a car is a depreciating asset and the benefits of convenience also come with price tags. So before you buy that car, ask yourself if you really need one.
If you are looking for a home or even an investment property, now is the best time to shop around and you may get it at bargain prices from a fire sale. Again, before you do that, review your financial situation, make sure you can afford the monthly instalments and remember that this is a big ticket item. Buying a car and a property requires a loan which adds to your financial burden.

THRIFTY IS NIFTY

Cheng Zi fell under the banner of "kou kou zu", or the "stingy group", soon after she went to university.
"I realised it was wrong for us students not to care about our finances just because we don't work," she says.
"Actually, we do have a job. We take classes and our parents pay for it."
Cheng, a senior university student in Shaanxi province, says that "kou kou zu" means maintaining a high standard of living for the cheapest cost.
For instance, she only buys new clothes when she has sold some of her old ones. She also shops online, where clothes are much cheaper, discounts are always on offer and delivery is often free. She normally eats in the school canteen and rarely eats out in decent restaurants.
She has also learned many cost-cutting ideas from "kou kou" people in the workforce.
"Students are not suffering from the financial crisis as much as those in work," she says. "Many of my schoolmates worry about how much money their families have lost or will lose in the stock market."
What really worries Cheng and other students is the impact of the global recession on their job prospects. They are being as frugal as they can to prepare for rainy days ahead.
Other "kou kous" are using more public transport, downloading free books and music instead of buying them, using credit cards less and eating homemade lunches.
Cheng adds: "They've also taught me how to pay less for electricity and water bills, by washing small clothes like underwear and socks by hand, unplugging electrical outlets before leaving the room and using leftover water to flush the toilet. I've started to implement some of these tips. It is good to prepare early for my independent days ahead."
Money savers like Cheng counter the notion that China's post-80s generation is full of spoiled, free-spending youngsters and while other students around the world face a tough Christmas, they are benefiting from their thriftiness.
Some, like Cheng, changed their lifestyles some time ago but the worldwide crisis has swelled the number of 20-something "kou kou zu".
Online communities are cluttered with their mantras: "We don't take taxis we don't go shopping there is no eating out we can manage the housework ourselves."
Once upon a time Cheng's parents gave her 700-1,000 yuan (US$100-143) a month and she would spend it all before she had realised it and couldn't figure out when and where. Now she limits her monthly outgoings to about 300 yuan and last year opened an online store selling clothes and ornaments.
The business makes a profit of 600-1,000 yuan a month and has been a life-changing experience. "My parents were taken aback one day when, instead of asking them for money like I used to, I told them that I could live on my own," she says. "Now I have several thousand yuan in the bank, 80 per cent of which comes from my online shop. Sometimes I buy them presents. I'm so proud of myself."
In Fujian province, Zhang Yan has persuaded some of her friends to become a "kou kou" but had more trouble with others. "They are lukewarm about it, since they feel little pressure from the crisis," she says. "They don't think it's necessary to be so stingy.
"But I tell them this is not just a response to the crisis--it's something you can benefit from your whole life. Plus, it is environmentally friendly and represents a healthy and positive life attitude."
Others find having a handle on their spending ensures they always have some available.
Every night for the last year, Zhang has been punching her expenses into an online accounting system to determine if she has spent her money wisely or not. Now her savings are steadily rising.
"In previous years I invested in stocks and funds because I thought saving money in the bank was quite silly," she says. "But when the bubble burst, I came to realise the importance of stable savings accounts."
Zhang's conviction grew even stronger when she read that Americans on average save at best 1 per cent of their monthly incomes. "Now they're suffering from both the economic crisis and the consequences of low savings."
Zhang's online accounting system, www.qian8ao.com, has received about 2,000 new users each day for the last two months, a 50 per cent increase on previous months.
While high street shops fear the harshest conditions since the Great Depression of the 1930s, online retailers are more upbeat, on the back of an upsurge in website shopping over the past year.
"Online products are much cheaper than those in shopping malls and are often of good quality," says Zhao Li, a young mother in Suzhou, Jiangsu province.
She also hedges her bets. "Sometimes, if I want a pair of luxury brand shoes, I will try them on in a shopping centre and then order them online, where they cost much less."
Statistics from the Chinese Academy of Social Science show that by last June there were 162 million netizens in China, 70 percent of them under 30. The Internet Society of China, meanwhile, noted in its annual China Netguide 2008 that an average netizen spent 186.6 yuan online in 2007, expected to rise to 198.6 this year.
"Consumers are shopping more on the Internet, where they can both save cash and live a high-quality life," says Zhang Lingxiao, from www.taobao.com, a major Chinese online retailer.
"Chinese people still represent great buying potential," says Zhang, "and we believe that online retailing may help businesses survive the financial winter."
by: China Daily ANN

Let Finance Crisis "Drive you to Drink"

Let finance crisis 'drive you to drink'

Whisky
Why you should invest: The value of whisky has not dropped in the last 720 years since they started making it in Ireland, said Mr Bill Hedman, managing director of venture capitalist firm Delemere Enterprises, which has its own distillery in Australia.
'At the very worst, if your investment crashes, you can go and get drunk on very good whisky, instead of holding on to a worthless piece of paper,' he added.
How to invest: You can buy whisky by the bottle or by the barrel.
What you should consider: The taste, rarity and reputation of the whisky, based on reviews by critics.
Investor tips: General manager of La Maison du Whisky Emmanuel Dron, who also invests in whisky, advises investors to buy only award-winning or limited-edition whiskies if they wish to get a good return on their investment.
Some bottles Mr Dron thinks are good buys - if you can still get your hands on one - are the limited-edition Laphroaig single-malt scotch whisky from 1974, which had only 910 bottles released worldwide.
The whisky won the award for the best whisky in the world in 2003.
A bottle cost $700 two years ago, but the price has shot up to $2,500 and will 'carry on increasing', Mr Dron said.
How much you need: If you are buying whisky by the bottle, the cheapest ones start at $80. If you are buying by the barrel, you need to set aside $30,000, which would include insurance, storage and bottling costs.
Wine
Why you should invest: Fine wine has been known to outperform stocks for the last three to five years, said Mr Andrew Bassett, trading director at the Australian Wine Index.
'The price of fine wines rarely goes backwards,' he said, adding that investors can look at returns of between 1 to 12 per cent per annum.
How to invest: You can buy wines by the bottle as an individual investor, or look for brokers like the Australian Wine Index to manage your portfolio.
What you should consider: Price of the wine, the vintage report containing details of how the grapes grew that year and whether it was a good crop, and critics' ratings.
You also need to be prepared to hold on to your wines for at least three years for more attractive returns.
Mr Bassett said: 'The worst market situation we have now is that people are selling their wines at 11 per cent profit instead of their expected 28to 32 per cent profit because it is a buyer's market now, and everyone is pushing prices lower.'
Still, Mr Bassett feels that wine is a 'good, solid investment' because while the prices of stocks and shares can drop by as much as 80 per cent, the worst that wine prices can do is to stagnate.
Investor tips: Mr Bassett feels that it is a 'great time' to buy Australian wines now, especially since the exchange rate has dropped by about 30per cent, so you can get good value for money.
Two years ago, one of Mr Bassett's clients bought a bottle of 2005 Mollydooker wine. It cost $125 a bottle then, but his client sold it this year for $350 a bottle.
Mr Bassett said that investors should maintain a portfolio of 70 per cent 'blue chip' wines and 30 per cent cult and emerging wines, which are more risky but have the potential for very high returns.
Art and antique furniture
Why you should invest: For a good collectible item, the price will never come down, said The Tomlinson Collection's regional manager Jack Thew.
How to invest: Buy art pieces and learn the tricks of the trade through personal experience, or find a respectable dealer.
What you should consider: Investing in art and antiques, unlike the stock market, is not purely about money.
Potential investors should understand trends in art and appreciate the beauty of the pieces in their own right, instead of buying them just as pure investments, said Mr Thew.
Investor tips: Chinese classical designs are an all-time favourite, said Mr Thew, with hard wood furniture made of Zitan wood and Huanghuali wood fetching the highest prices, sometimes more than $100,000 a piece.
Describing them as the blue chips of furniture investment, Mr Thew said: 'The prices of furniture made of those types of wood have increased like crazy.
'This is because they are imperial wood, which was used by the rich and famous. It is also a precious timber, because it takes more than 100 years just to grow six inches of the wood.'
However, not all pieces made of Zitan or Huanghuali wood may fetch the same value because of the different styles and designs of the subject, cautioned Mr Thew.
Investors can also look at buying thousand-year-old terracotta art pieces due to their rarity, said Mr Thew.
High-end watches
Why you should invest: People who put their money in watches are holding value that is better than what they have put into their stocks, said Mr Patrick Tan, executive vice-president of Sincere and head of the Sincere Watch Academy.
One such example is the Patek Phillippe Calatrava, which has doubled in price since it was produced 15 years ago, said Mr Tan.
Prices of watches increase because the cost of producing watches has gone up, explained Mr Tan.
However, it is difficult to determine how much watches appreciate by as consumer tastes are always changing, he added.
What you should consider: Look at the heritage of the brand, the craftsmanship and the engineering of the watch.
More established brands include Patek Phillippe and A. Lange & Sohne.
However, Mr Tan was quick to add that watches are not like durians, and there are no quick tips or 'bao jia' (sure win) guarantees for investors.
The key to investing is still having a good knowledge of watches and doing intensive research.
Investor tips: Buy innovative watches and special-edition watches, such as those released by watchmakers when they celebrate their anniversaries.
However, these are available only to a select few collectors who can 'justify that they are supporters of the brand', Mr Tan said.
One such watch, the Sincere Jubilee A. Lange & Sohne Double Split, released by Sincere during its 50th anniversary celebrations, fetched its owner a 40 to 50 per cent return when he auctioned it off six months later.
Only five of the limited-edition watches were made available to customers.
But Mr Tan's most important tip is for investors to buy what they enjoy.
'It would be a sad situation if people buy the watches purely for investment, but do not enjoy the watches,' he said.
This article was first published in The New Paper on November 2, 2008.

BULL or BEAR Market, you can make money

Bull or bear market, you can make money
By Lorna Tan
For the past months, many stock investors have been caught in a roller-coaster ride, no thanks to the current financial turmoil.
It is common to hear investors lamenting about how much they have sunk into the stock market, only to see the value of their stocks plummet.
If you have a stock portfolio and are bearish on where the market is heading, there are two things you can do: sell your stocks now, which may mean a loss, or just hope for the best.
Rather than do nothing, you may also want to check out the recently relaunched Straits Times Index (STI) Futures, which provide retail investors an opportunity to profit even from a falling market.
For those unfamiliar with the topic, the benchmark STI represents the performance of the top 30 stocks of the Singapore market, based on market capitalisation. They include Singapore Press Holdings, Singapore Exchange (SGX), SingTel and the local banks.
STI Futures are contracts or agreements between buyers and sellers to buy or sell the STI portfolio of 30 stocks at an agreed price (futures price) to be settled at a specific future date.
STI Futures were launched in 2000 but not many retail investors were aware of this tool. With the relaunch last Thursday, there will be firms that provide ready buy and sell prices for STI Futures. This will lead to greater liquidity of the product.
It is a useful tool for investors who wish to take a position on where the local market is heading - that is, whether they believe that the STI will trend up or down - by buying or selling STI Futures contracts.
This means trading based on broad market movements instead of single stock movements. This reduces the need for individual stock selection; your risk is also diversified over 30 stocks instead of being pegged to a single stock.
At the same time, it can help to protect you against, or help you profit from, fluctuations in the stock market.
Here are some things you need to know about STI Futures:
What is the value of one STI Futures contract?
The value of each STI Futures contract is equal to $10 multiplied by the current index trading level.
For instance, if the index is trading at 2,300, holding a futures contract will be equivalent to investing $23,000 in the stock portfolio of the 30 listed companies.
This means that when a STI Futures contract is traded, the seller has, in essence, agreed to sell $23,000 and the buyer has agreed to buy $23,000 worth of stocks, as measured by the STI.
How are STI Futures transacted?
You are not required to cough up the full payment equivalent to the contract value. But the buyer or seller must each put up an initial margin deposit with the broker in order to secure the contract.
This margin, which is decided by SGX, is typically about 5 to 15 per cent of the contract value. The prevailing initial margin is $1,625 for one contract.
The margin essentially means that the STI Futures allow the investor to trade a portfolio of 30 stocks at a mere fraction - about 5 to 15 per cent - of its value.
At the end of each trading day and all following days that your position remains open, the contract value is "marked-to-market".
Your account is credited or debited based on that day's trading session. If your margin deposit falls below a certain maintenance level - currently set at $1,300 - your broker will request additional funds to replenish your trading account. If your position generates a profit, you may withdraw any excess funds from your account.
Margin levels prescribed by SGX are based on the movement of the underlying stock market as represented by the STI. The margin levels, therefore, will fluctuate depending on the historical and prevailing movement of the STI.
Do I need to own any of the stocks included in the STI in order to trade the futures contract?
You do not need to own any stock in order to trade the STI Futures. In stock index futures trading, you do not actually deliver or receive any stocks.
How can I profit from trading the STI Futures?
Like trading stocks, the point is to buy low, sell high.
The STI Futures offer the flexibility of buying and selling in whatever order you want.
That is, you can "buy first, sell later" or you can "sell first, buy later". If you think prices are going up, you may establish a "long" (buy) position, and if you think prices are going down, you may initiate a "short" (sell) position.
In addition, with the STI comprising a portfolio of 30 stocks, you can effectively participate in the broad market movements without the hassle of stock-picking. Each index point movement has a value of $10.
In other words, you gain $10 per index point rise if you have a long position or per index point fall for a short position.
Below are two trading scenarios:
Scenario A
Day 1: You are bullish about the Singapore stock market and decide to buy a September STI Futures contract at 2,400.
Contract value = 2,400 x $10 x 1 contract = $24,000
Initial margin required (at $1,625 per lot) = $1,625
The STI rises that day.
End-of-Day 1 settlement price = 2,425
Daily marked-to-market profit = (2,425 - 2,400) x $10 x 1 = $250
You now have a paper profit of $250.
Margin account balance = $1,625 + $250 = $1,875
As you have not liquidated your contract, you have one lot of open position.
Day 2: Market rallies further to 2,438. You feel the price is good and decide to take profit, selling your September STI Futures contract at 2,438.
Daily marked-to-market profit = (2,438 - 2,425) x $10 = $130
Margin account balance = $1,875 + $130 = $2,005
Total net profit = $130 + $250 = $380
In this scenario, your bullish outlook holds and you ultimately make a net profit of $380 when you liquidate your position.
Scenario B
Day 1: You are bearish about the short-term prospects of the Singapore market and decide to sell a September STI Futures contract at 2,400.
Contract value = 2,400 x $10 x 1 contract = $24,000
Initial margin required (at $1,625 per lot) = $1,625
Contrary to your initial bearish view, the market turns bullish; the STI closes higher.
End-of-Day 1 settlement price = 2,435
Daily marked-to-market loss = (2,435 - 2,400) x $10 x 1 = $350
You now have a paper loss of $350.
Margin account balance = $1,625 - $350 = $1,275
Maintenance margin required (at $1,300 per lot) = $1,300
You have a margin call and must deposit additional funds now because your margin account balance of $1,275 is below the maintenance margin of $1,300.
You need to top up $350 to bring it back to the initial margin level of $1,625.
Day 2: The market shows a decline.
You want to cash in on this move by liquidating your position by buying a September STI Futures contract at 2,388.
Daily marked-to-market profit = (2,435 - 2,388) x $10 = $470
Total net profit = - $350 + $470 = $120
In this example, you ultimately make a net profit of $120 on Day 2 when you liquidate your position.
How long should I hold on to a position?
As stock markets can be volatile, you take advantage of price movements by getting in and out quickly. Depending on your personal preference and perspective, you may wish to adopt a short-term trading approach (taking a position for one day, one hour, or even just a few minutes); or medium-term approach (several days to several weeks); or long-term (months at a time).
What are the risks?
The initial margin deposit is relatively small compared to the contract's value. The transaction may lead to quick and substantial profits, but the reverse is true for losses too when prices do not move in the expected direction. Investors should also be mindful of margin calls if the margin account falls below the maintenance margin.
It is possible that you may lose more than the amount you have in your margin account under circumstances of extreme market movements. Investors are strongly advised by financial experts to use only excess funds that they can afford to invest.

This article was first published in The Straits Times on October 5, 2008.