Winning The Loser's Game

Re-reading Winning The Loser's Game by Charles D. Ellis (5th edition). I recall that when i was first getting started in learning about investing, Chales Ellis' book - The Investor's Anthology, opened my eyes to many different ways people get rich through intelligent investing. It includes original insights from people like Warren Buffett, Barton Biggs, Benjamin Graham, John Templeton and T. Rowe Price. Go read it!

In Winning The Loser's Game (5th edition), Ellis guides us to build the foundation knowledge of why Indexing is the way to go for most investors. The book is both intellectually stimulating and practical.

And i love the part where he compares investment returns from 1980 - 2008.

When we subtract the returns of the best 30 days over the period, annual returns over the years dropped from a 11.1% to 5.5%.

Over 19 years, a 10 k investment will yield a total return of $73,887 vs. $27,656!!!

In Singapore, the best way to invest in a cost effective manner is through ETF. It is sad that major index fund like Fidelity and Vanguard is not available to the retail public. I would gladly sign up with them if there's such a scheme. But i guess even if the WHOLE of Singapore retail public investable assets goes to indexing, it will barely make a dent in the total asset under management of Vanguard.

A good starting point is by going through SGX's website on ETF.

A simple portfolio could be:

60 % invested db x-trackers MSCI World TRN Index ETF or Lyxor ETF MSCI World
30% in a mixture of Lyxor ETF MSCI Emerging Markets & db x-trackers MSCI AC Asia-Pacific Ex Japan TRN ETF;
5 % Lyxor ETF Commodities CRB
and the rest in a cheap money market fund.

Trading cost will be a key concern, as most broker charge almost $25 per trade,try to keep your commission charges to less than 1%, ie invest about $2,500 every time.

If you do not have too much cash to start with, you may want to start by building up your portfolio over time. For instance, you can try to save about $800 bucks per month and invest every 3 moths into the MSCI World index. Over a few years, you can build up a decent portfolio size and then bring in more variety of ETF to have a better balanced portfolio.

If you are 35 years away from retirement, this 800 dollars per month will work out to a substantial portfolio at retirement.

At 7% return per annum, in 35 years the portfolio will be worth about $1.44 million

At 8% return per annum, in 35 years the portfolio will be worth about $1.83 million

at the historical 10% rate, it will be worth $3.037 million!!!

The hard part of the above scheme is NOT the percentage return but the dedication to put 800 dollars aside to work month in month out, and that in the assumption, i've let the numbers of years be 35, which for working adults in the 30 - 50s, it means a late retirement age.

The true enemy of sound investing is ourselves. Let us not be our enemy.