Panzer’s Return on Investments for 2008
Posted: 28 Dec 2008 10:32 PM CST
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- Image via Wikipedia
As we draw ever closer to the end of 2008, Panzer invites you to sit down near the cosy (and imaginary!) fireplace, where the sound of crackling logs of the fire that warms your little toes and mesmerises you with the way the light from the fireplace flickers, casting interesting shadows in his virtual living room.
Panzer sips his warm 3-in-1 (reduced sugar) coffee and starts to count the hits and misses of his investments in 2008.
Investment Highlights for 2008
A picture tells a thousand words, and Panzer’s journey in equity investing as well as returns from interest, dividend, treasury-bill yield is aptly shown here (minus the actual figures) of course! 
Panzer’s Return on Invesment 2008It can be seen that since Panzer started tracking separately capital gains and dividends (in 2005), dividend income has been steadily increasing. Panzer now ploughs money into buying blue-chips that pay dividends for increasing portion of passive income that doesn’t need too much active management. The other interesting bit about the graph is that 2008 saw Panzer eating humble pie with realised capital losses from trading. This dragged his total gains down.
His gains from dividend income was big enough to offset capital losses so overall, Panzer still gained about 4%+ return on investments. This is decent but reflects how trading effectively destroyed value in his portfolio. Total gains also reflects non-dividend income such as interest from bank deposits, yields from treasury bills and an increasingly significant chunk of alternate income, returns from blog monetisation.
The returns from blog monetisation was in very low 4 digits but still significant that it breached the $1,000 mark with some to spare. This would have required a capital of $100,000 yielding at 1% in Fairprice Plus Savings to achieve the same returns. However, it is not strictly passive and time and effort is spent doing so but it gives Panzer more options to grow his means.
2008 was Panzer’s worst year in terms of the returns on investment since he started tracking in 2003. It was his own “annus horribilis” or latin for horrible year. Whilst Panzer’s portfolio, or more accurately, Panzer himself performed poorly in his investment returns, he still managed to squeeze out a 4% positive realised returns. In reality, unrealised capital losses of 55% would more than wipe out the puny 4% realised returns. However, Panzer has marked-to-market his net worth and it is still positive.
What Panzer Learnt
1. Diversification has its benefits
Panzer learnt that market timing and trading is subject to the black swans that Nicholas Nassim Taleb describes in his books. He also gained more hands-on insight on how a potential black swan could have potentially wiped out his net worth. Fortuantely, there was some diversification as Panzer’s net worth is also parked in insurance policies with cash surrender values, the central providend funds as well as cash besides stocks and shares (equities). Thus, Panzer learns first-hand why you shouldn’t put all your eggs in a basket. Of course, if your eggs are NTUC fairprice $1.80 for 10, then it’s not too bad as a $1.80 loss is more bearable than a $1,800 or $180,000 one!
2. Trading can destroy investment value
Panzer learnt this first-hand on a small scale even as the “masters-of-the-universe” types on Wall Street learnt the hard-way and taxpayers in the US have to bailout the US financials who helped bring about the global financial crisis that has its roots in US sub-prime mess. Panzer’s luck in picking stocks for short-term gains is as accurate as his 4D predictions. So short-term punts are pure speculative plays and should be seen in that light.
3. Slow and Steady Dividend Plays Win Small
Grinding out dividend gains over time requires patience, holding power and an eye for good blue chip companies. Panzer realises that this strategy is more suited to his temperment and and investment style. This needs to be balanced with the realisation that you cannot rely on your equity portfolio to fund your retirement because markets can collapse and collapse very quickly. If Panzer were to retire in 2008, it would be tough to exit his equity portfolio without significant realised losses. Luckily (or not?!) Panzer is looking forward to 20 more good years of being a salaryman.
4. Return of Investment in Applied Knowledge
Perhaps the other more important return on Panzer’s investment for 2008 has been in terms of return on his applied knowledge. His blog monetisation forays allow him to learn new skills, apply them in the real (virtual) world but reap actual realised gains that help grow his means.
Learning something new everyday is what Panzer seeks to achieve. His work does allow his to do so in a way. But learning something new to grow his means and seeing the results makes him more motivated to learn, apply and learn more from trying out new things.
New knowledge when applied profitably grows the mind, spirit and bank account.
What will 2009 Bring?
The economic picture going forward is somewhat gloomy. But Panzer is quietly optimistic about 2009 because he believes the lessons learnt will stand him in good stead to fight an even better fight in 2009 towards financial freedom.
What 2009 bring you?
Only time will tell.
Be well and prosper.
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