My friend Melvin always tells me its great to make money no matter how little you make. I think that’s partially true.
The number 1 rule is not to lose money. The number 2 rule is not to forget the first rule.
I would like to add another permutation to this.
What matters is how much money you are invested in a good trade and how much little money you are invested in a bad trade.
Don’t understand this? Perhaps this case study is best.
Noble Group
I got invested in this at $1.70 when it corrected and I thought Noble was one of the well managed companies around with excellent investor relations. A supply chain commodities manager like this would do well.
Alas I made up to date 35% from this. I should be happy but I am not. Why? I only got 1000 bloody shares in there.
Singtel
Contrast this to my recent purchase of Singtel. It is 10 times as large as this Noble purchase. Sure the worse it hit during the 2007-2008 recession was 2.30 to 2.40. that’s 23% below current price of 3.07.
But my losses will be much larger than the Noble Group explained above.
Granted, Singtel is not a trade but rather more of a passive income dividend play, but you get my point. I could be frustrated with how little I made from the lesson learn about that Noble trade that I plonk in SGD $20k and it turn out to be a bad trade.
Perhaps the way to solve this is to use a uniform trade size. Not too little to really not make an impact and not too large that you will kill yourself over it.
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