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Wealth Management System Limited

Wealth CampusWealth Campus

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Portfolio Management TechniquePortfolio Management Technique

Present toPresent to

State Securities Commission State Securities Commission

The Vietnam Securities Research and Training CenterThe Vietnam Securities Research and Training Center

November 22-23, 2007November 22-23, 2007


Chapter 1Chapter 1

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Portfolio Management Technique

Course Objective : To develop the practical portfolio management skill required such as

the overview of fundamental analysis, technical analysis, money management, risk

management and the most crucial key success factor of portfolio management….the winning

psychology.

Course Content : The course will present various aspect of portfolio management

techniques by presenting the trading system based on many technical analysis techniques,

how to apply the money management by identify the stop loss, lock in profit level and reward to risk ratio , comparing various technical analysis upon each market condition, stock selection method based on fundamental analysis,

setting up the portfolio position limit by apply the PV01 and VaR concept, interesting articles, workshops and presenting the important of the psychology aspects as the most crucial key success factor of portfolio management.

Participant : The course is designed not to concentrate on in dept technical analysis and fundamental analysis but how to apply the said analysis in real life practical portfolio management, hence it is required that the participant has at least 2 years portfolio management experience with both technical and fundamental analysis background.

Course Length : 2 days

Portfolio Management Technique (Day 1)

Course Agenda : Day 1

• The Psychology of Trading

Introduction – Trader Evaluation Profile 1

• Investment Process Technical Analysis Overview Fundamental Analysis Overview Trading System

• Money Management Reward to Risk Ratio• Risk Management Stop Loss Lock in Profit Position Limit (PVO1/VaR)• Workshop 1 : Identify Stop Loss / Lock In Profit / Reward to Risk Ratio

• Workshop 2 : VaR Calculation for Equity and Fixed Income Portfolio



• Overview of Day 1

• Workshop 3 : Position Limit Setting • Interesting Issues CANSLIM Some Famous Number (Fundamental Analysis)

The Investment Clock Astronomical Cycle (vs various Technical Analysis)

The Pick of the Mix ( Various Option Pricing Model)

Time not Timing Casino Strategies (Trading System)

• Workshop 4 Trader Evaluation Profile 2

The Investor’s Quotient The Psychology of Successful Investing in Commodities & StocksJake Bernstein

Market WizardsInterviews with Top TradersJack D. Schwager

Martin Zweig’s Winning On Wall StreetMartin Zweig

Trading For A LivingPsychology Trading tactics Money ManagementDr.Alexander ElderDirectorFinancial trading Seminars, Inc.

Stock Market WizardsInterviews with AMERICA’S TOP STOCK TRADERSJack D. Schwager

The New Market WizardsConversation with America’s Top TradersJack D. Schwager

45 Years In Wall StreetWilliam D. Gann

One Up On Wall StreetPeter Lynch

Reference Books

How to Make Money in StocksA Winning System in Good Times or BadWilliam J. O’Neil

The Big HittersKevin Koy

Reminiscences Of A Stock OperatorEdwin Lefevre

Stock Market Trading SystemsGerald Appel and Fred Hitschler

High Performance Futures TradingJoel Robbins, Editor

Managing Risk in the Foreign Exchange, Money, and Derivative MarketsHeinz Riehl

Technical Analysis of the Futures MarketsA comprehensive Guide to trading Methods and ApplicationsJohn J. Murphy

Working Experience

Year Responsibilities / Department / Institution

1999 - Present Chief Executive OfficerWealth Management System Limited

Aug. 1995 - 1999 Senior Consultant / System Design & Model Wealth Management System Limited1994 - 1995 Treasurer

Citibank Private Bank1990 - 1995 Investment Advisory Unit Head

Private Bank (Vice President) Citibank Private Bank

1985 Trainee / Provident Fund Dealer / Fixed-Income Dealer / Equity DealerCitibank Bangkok

Somkiat Chinthammit

Somkiat Chinthammit

Investment / Treasury Experiences :

Investment Committee / Flexible Asia Performance / Citibank Hong Kong (1993-95) Asian Account Review Committee / Investment Committee / PBG - Thailand (1990-95) Treasurer / Citibank Private Bank (1994-95) Investment Advisory Unit Head / Citibank PBG (1990-95) Fund Management Advisor / Aitco / Social Security Fund (1996-04)

•Guest Speaker : - Citibank Japan/Citibank Taiwan/Citibank Singapore, etc. (1992-94) S.E.C. (Private Fund Management under U.S. Law) (1994) Thammasat (Investment Objective Setting) (1995) Thai Sky (Private Fund Management) (1994) TRIS / Banks / AMC’s / SEC / MOF / Universities.. etc.......... (1993-Present) Executive Director / Faculty of Accounting & Business Admin / Mahasarakarn University (2004-Present)

•Trainer : Product Knowledge (Investment / Treasury Products) / Citibank BKK (1992-95) Investment Management Technique/ Citibank Hong Kong (1994)

Award Score first place in “Operation in S.E.T.” presided over by S.E.T. chairman Teacher of the year 1994 : Citibank

Adirek Pratipatpong

Education Bachelor Degree of Commerce & Accountancy, 1993Major: Banking and FinanceChulalongkorn University

XMBA , Thammasat University 2006

Experience Citibank, N. A. Bangkok

Treasury Operation Unit April 1993 – August 1996

• Processing all Treasury Products such as Money Market, Foreign Exchange, Fixed Income Securities and Derivatives Product with correctness, timeliness, and ensure all the process comply with bank’s operation manual.

• Control over the workflow in product program to ensure that all processes are correct and comply with audit policy.

• Prepare accounting entry, accounting proof and reconcilement.• Development the process and working environment to make work flow more efficient.• Monitoring risk on each products by prepare management report for management awareness.• Assisting price risk management as daily MTM on trading products, comparison of position reports to

the bank, reconcile outgoing and incoming confirmation.

Treasury Interbank Unit August 1996 – August 1999

• Managing Foreign Exchange (FX) position and Interest Rate Exposure (FX Swap).• Managing Long-Term Swap and Interest Rate Derivatives position.• Implementation Derivative system “PRISM” for pricing and booking all derivative product.

Adirek Pratipatpong

Securities Trading and Distribution Unit August 1999 – October 2002

• Managing Fixed Income Portfolio for both local and foreign currency with strict adherence to standard as set out on bank’s policy and risk management standard.

• Coordinate with derivative unit to launch structure products to customer such as Puttable BE’s, Credit Linked Note and Asset Swap.

• Provide useful interest rate information to all required unit to reserve the bank’s client satisfactory.

• Advising offshore investor for investment in THB bond market.• Coordinate with Corporate Finance Department on primary market function to do market

testing, pricing, and distribution for the new issued corporate debenture.

UOB Radanasin Bank

Fixed Income Department November 2002 – November 2004• Managing Fixed Income Portfolio with strict adherence to standard as set out on bank’s

policy and risk management standard.• Advising issuer to raise fund in capital market by do market testing and distribution for new

BE issue.• Development the process, workflow and risk control of fixed income products to be more

efficient and more productive.

MissionMission The Best R&D and Software House for Asset Management, Treasury and Risk Management in Asia Pacific.

Software Development / Training / Consulting

Boutique software house + Citibank Bank 's management concept

FounderFounder Experienced Professional from Global Bank & Corporation.

CredentialCredential • Best Financial Software (TICTA 2005 - 6)• Local Hero (IDC USA-2000)• FRIT PRIZE Award 2005 ( Nationwide IT Contest )• Highest Market Share of Asset Management Software since 2004• Class A Consulting Company by Ministry of Finance• BOI Promoted Company (2001 – 2016)• Risk Management Projects – BASEL II 2004-6

Y2002Services Services

Professional Best

BONANZABONANZA

Quality of Technology : Content & StandardsQuality of Technology : Content & Standards

TICTA (Thailand ICT Award) Bonanza Family : Winner 2006

• Bonanza Investment• Bonanza Selling Agent• Bonanza @Risk

Bonanza Investment : Winner 2005Bonanza @Risk : Runner-up 2005

Bonanza Investment : FRIT Prize Winner 2005 Highest Prize for Software Company in ThailandNationwide Competition17 Months Evaluation75 Judges (25x3 Rounds)The FRIT Prize Runner-up was APICTA 2004 Winner

2002 CMM Level 2 / Class A Consultant2001 LOCAL HERO (IDC-USA)

Reference Site Risk consulting plus Bonanza Software

Public Debt Management Office : Ministry of Finance

Risk Model / Risk Manual / Review Risk DatamartCredit Rating Model / Datamart

Government Savings BankMarket & Liquidity Risk System / Credit Scoring WorkshopBASEL II / BOT / MOF

Government Housing Bank BASEL II / ALM

Bank Thai Market & Liquidity Risk System / Consult

Ayudhya Investment and Trust Plc. Market & Liquidity Risk Consult / Manual / Credit Scoring Model

Social Security Office Risk Management Consulting / Market Risk

SPL : Car leasing Credit Scoring Model

Airport Authority Of Thailand Exposure Management (Price / Interest Rate Risk)

SME Bank (Outsource from AT Kearney : EDS (USA) BASEL II / BOT / MOF

Credit Foncier Asia BASEL II / BOT

LH BANK BASEL II / BOT

THAI CREDIT BANK BASEL II / BOT

AIG BANK : AIG Group (USA) BASEL II / BOT



The Psychology of Trading

Market WizardsInterviews with Top TradersJack D. Schwager

PSYCHOLOGY OF WINNING INVESTMENT PSYCHOLOGY INVENTORY

BASIC THEORY : TEACHING WINNING TRAITS

↓ IMPROVE THE

PERFORMANCE

10 AREAS → 3 GROUP

1) PSYCHOLOGICAL FACTOR2) MANAGEMENT & DICIPLINE FACTOR

3) DECISION – MAKING AREA TECHNICAL ≠ SUCCESS

DR. VAN K. THARP (1)DR. VAN K. THARP (1)

The Psychology Of Trading

CHARACTERISTICS OF THE LOSER


HIGHLY STRESS NEGATIVE OUTLOOK LOT OF CONFLICT (PERSONALITY) BLAMES OTHERS DISORGANIZED IMPATIENT

The Psychology Of Trading

DUPLICATE THE 3 FACTORS OF TOP TRADERS USED then You can duplicate their results.



3 FACTORYS :

1) BELIEFS

2) MENTAL STATES (blame other/angry/ impatient)

3) MENTAL STRATEGIES

SEE SIGNAL SEE SIGNAL

RECOGNIZE RECOGNIZE

MIGHT GO WRONG FEEL GOOD

FEEL BAD

BELIEFS DIFEFERENCE → RESULT DIFFERENCE


THE U.S. SHOOTERS CASE GUNS ARE EVIL; THEY KILL PEOPLE SHOOT TOO MANY; MIGHT GO DEAF IF MISS TARGET; WRONG WITH GUN

SHOOTH WELL : SURVIVAL HUNTING IS FUN MENTAL REHEARSAL IS IMPORTANT IF MISS; IMPACT PERFORMANCE


BELIEFS :


MONEY IS NOT IMPORTANT

IT IS OK TO LOSE IN MARKET

TRADING IS A GAME

MENTAL REHEARSAL IS IMPORTANT

WON THE GAME BEFORE THEY START


BONANZABONANZA

“PROFESSIONAL BEST” makes WMSL the best R&D and software house for asset, treasury and risk management in Thailand.

WWW.Wealth.co.th






Participant Introduction / Self Evaluation

Help me make the course better :Help me make the course better :

Your name……………….Your name……………….

Your career……………..Fund Mgr / Stock Analyst..etc.,Your career……………..Fund Mgr / Stock Analyst..etc.,

Technical Analysis……….1 year / more than 2 yrsTechnical Analysis……….1 year / more than 2 yrs

Fundamental Analysis......1 year / more than 2 yrsFundamental Analysis......1 year / more than 2 yrs

Participant Introduction / Self Evaluation

Trader Evaluation Profile 1…Trader Evaluation Profile 1…

Evaluating your attitude, Opinions, and Evaluating your attitude, Opinions, and ResponsesResponses

Only you can improve your performanceOnly you can improve your performance

Where / What should be improved?Where / What should be improved?

What are you right now not what you feel right answerWhat are you right now not what you feel right answer








Investment Process – Technical Analysis Overview











Technical Analysis Overview – Trending & Trading

Investment Process – Technical Analysis Overview : Oscillator

Investment Process – Technical Analysis Overview : Volume









Investment Process – Fundamental Analysis Overview

• Intrinsic Value

• P/E Ratio Vs Discount Cash Flow

• Cost of Equity / Cost of Debt / Risk Free Rate

One Up On Wall StreetPeter Lynch

SOME FAMOUS NUMBER : GROWTH RATE

Growth Rate (G = 20% + P/E 20x) vs (G = 10% + P/E 10x)

Com A (20%) Com B (10%)

Base $1.00 $1.00

Year 1 $1.20 $1.10

Year 3 $1.73 $1.33

Year 10 $6.19 $2.59

Base 20*1 = 20 (P/E 20) 10*1 = 10 (P/E 10)

Year 10 20*6.19 = 123.80 (P/E 20) 10*2.59 =26 (P/E 10)

Year 10 15*6.19 = 92.85 (P/E 15) 10*2.59 = 26 (P/E 10)

Year 10 15*9.31 = 139 (G25 P/E 15) 15*2.59 = 39 (P/E 10)


SOME FAMOUS NUMBER : PROFIT MARGIN

• PROFIT BEFORE TAX: Profit Margin

• PROFIT MARGIN: Vary to Industry

Retailers (Alberton) 3.6%Drugs (Merck) 25%

: Highest means lowest cost (same industry)means staying power



COMPANY A

COMPANY B

Status Quo Business Improves

$100 in Sales $110 in Sales (price up 10%)

$ 88 in Costs $ 92.40 in Cost (up 5%)

$ 12 in Pretax Profit $ 17.60 Pretax Profit$100 in Sales $110 in Sales (price

up 10%)

$ 98 in Costs $102.90 in cost (up 5%)

$ 2 in Pretax Profit $ 7.10 Pretax ProfitCOMPANY A’s Profit UP 50%But COMPANY B’s Profit UP > 3 times

Investment Process : Trading SystemInvestment Process : Trading System

Rules For Trading In stocks

1. Determining the Trend

2. Buy at Single, Double and Triple Bottoms

3. Buy and Sell on Percentages

4. Buy and Sell on 3 Weeks’ Advance or Decline

5. Market Moves in Sections

6. Buy or Sell on 5 to 7 Point Moves

7. Volume of Sales

8. Time Periods

9. Buy on Higher Tops and Bottoms

10.Change in Trend in Bull Market

11.Safest Buying and Selling Points

12.Price Gains in Fast Moves 45 Years In Wall StreetWilliam D. Gann


Twenty-four never-failing rules

1. Amount of capital to use : Divide your capital into IO

equal parts and never risk more than one-tenth of your

capital on any one trade.

2. Use stop loss orders. Always protect a trade when you

make it with a stop loss order 3 to 5 points away.

3. Never overtrade. This would be violating your capital

rule.

4. Never let a profit run into a loss. After you once have

a profit of 3 points or more, raise your stop loss order

so that you will have no loss of capital.

5. Do not buck the trend. Never buy or sell if you are not

sure of the trend according to your charts.


6. When in doubt, get out, and don’t get in when in doubt.

7. Trade only in active stocks. Keep out of slow, dead ones.

8. Equal distribution of risk. Trade in 4 or 5 stocks, if possible. Avoid tying up all your capital in any one stock.

9. Never limit your orders or fix a buying or selling price. Trade at the market.

10.Don’t close your trades without a good reason. Follow up with a stop loss order to protect your profits.

11.Accumulate a surplus. After you have made a series of successful trades, put some money into surplus account to be used only in emergency or in times of panic.

12.Never buy just to get a dividend.13.Never average a loss. This is one of the worst

mistakes a trader can make.14.Never get out of the market just because you have

lost patience or get into the market because you are anxious from waiting.


15. Avoid taking small profits and big losses.16. Never cancel a stop loss order after you have placed

it at the time you make a trade.17. Avoid getting in and out of the market too often.18. Be just as willing to sell short as you are to buy. Let

your object be to keep with the trend and make money.

19. Never buy just because the price of a stock is low or sell short just because the price is high.

20. Be careful about pyramiding at he wrong time. Wait until the stock is very active and has crossed Resistance Levels before buying more and until it has broken out of the zone of distribution before selling more.

21. Select the stocks with small volume of shares outstanding to pyramid on the buying side and the ones with the largest volume of stock outstanding to sell short.


22.Never hedge. If you are long of one stock and it

starts to go down, do not sell another stock short to

hedge it. Get out at the market; take your loss and

wait for another opportunity.

23.Never change your position in the market without a

good reason. When you make a trade, let it be for

some good reason or according to some definite plan;

then do not get out without a definite indication of a

change in trend.

24.Avoid increasing your trading after a long period of

success or a period of profitable trades.45 Years In Wall StreetWilliam D. Gann








MONEY MANAGEMENTMONEY MANAGEMENT

ASSET ALLOCATIONTYPE : Cash/ Stock/ Fixed Income/ CommodityLOCATION : Markets/ Countries

MODEL PORTFOLIOSector DiversificationTrading System Diversification

REWARD TO RISK RATIO (RTR)

Money Management

Technical Analysis of the Futures MarketsA comprehensive Guide to trading Methods and ApplicationsJohn J. Murphy

MONEY MANAGEMENTMONEY MANAGEMENT

Money Management

Each Stock Market Cycle

5% Profit15% Break Even80% Loss

FUTURE MARKET : TOP TRADERFUTURE MARKET : TOP TRADER

WIN RATIO

BUT

THEN

NET NET

Win 40 Loss (60)

RTR 3 : 1

120 : (60)

+60

Money Management

Exercise : Stop Loss / Lock in Profit / RTR


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