Wednesday, July 4, 2012

STI Index vs Performance of Stock Calls

The STI has risen some 6.9% (2960 on 4 July from 2770 on 25 May). To put it into perspective, by purely punting into an STI ETF on 25 May, one would theoretically have a $69 gain for every $1000 invested. In another light, an annualised 8-9% yield is probably the higher end of what fund managers aim to achieve before calling it a day for the year. In reality, this 2-3 weeks bull run, if you had predicted correctly and invested fully at the start, will have almost gotten you done for the whole year's investment's worth.

Nonetheless, we learned to ease into opening positions and not plonk everything totally in so realistically the yield that we expect to get together with our emotional market timing would be slightly lesser, probably 5-6% on the optimistic side. And in this light, I am pretty satisfied with the performance of stock calls that I have made in this period.

A quick check on my stock calls over this period, excluding those made earlier today, shows 
  • a geometric (equally weighted) averaged return of 4.8%
  • highest return was a buy call on NOL on 4 June that has a current (4 June 4:40pm latest price) unrealised gain of 10.10%
  • Capitaland and Ho Bee where both have a realised and unrealised gain of 8.8% respectively
  • the most underperforming decision was Kreuz at -3.39%
  • winners to losers percentage is 80% (8:2).

On hindsight, satisfied I may be on the risk-reward structure and the guiding trading principles that I have been recursively employing, I still realise that the mathematics show that I have yet to beat the STI benchmark. Which struck a chord with me on the adage "You cannot beat the market" with the efficient market hypothesis. Some truth to it, but I still have firm belief that the efficient market hypothesis is not entirely applicable especially in the Singapore market where liquidity is still an issue across the lesser-known stocks while information flow is not anywhere near the coverage of US stocks. So, I still believe that there can be more to be done in my pre-call mathematical analysis such as a stock's historic beta to the STI that I have yet to properly employ in my articles. I look forward to employing that knowledge to complement my trading principles.

Nonetheless, this is clearly a good start and a healthy validation of my trading principles in making any technical or fundamental analysis recommendations on my blog. 

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