Trading Techniques   

Simple Reminders for Profitable Investing

Hi tiandi,

I am glad to hear that you have found my posts useful! Yah, you are right..... do not take any advice at face value even if it comes from a "professional". The best person to rely on is yourself.  

 

At the risk of sounding bearish (actually there's nothing wrong with being bearish), one must bear in mind that the 'backdrop' of todays market is rather sinister, considering the underlying financial situation (apart from China, of course).

A healthy bull market needs good sentiment all round to fuel a goodly sustained climb, as what happened during the bull phase...

 

Heard that a well known local  guide which is usually published and circulated around september every year, is this time publishing and circulating this year edition some were end of october.Guess there maybe a super correction around september and october,-i guess so that's why the delay.what are others veiw on this.

 

If one keeps on holding a stock, it is in effect the same as buying, though you have already bought it earlier.

For example, by holding a stock while it is falling all the way to half it's purchase price, the holder of  the stock refuses to sell... this refusal to sell has the effect of actually buying (ie. the opposite of sell).

And if the holder had sold it earlier as soon as the danger signs appear, he would have benefitted by:

a) not losing and
b) being able to buy back the same stock at lower prices....

 

Does it apply to getting out of the market too?

 

Many people see trading opportunities all over the place and are always itching to get in...
Actually, trading opportunities only come once in a while...
And not having a position is also a position in itself... 

 

KiLrOy

Yes i am prepared for that when I have free cash so I must have a lot more spare cash... For last month my cash was low ' so I would not trim cash position to lower than my tolerance. I believe I need to follow some priciple of 'several months of expenditure' to cater for situations that suddenly demand cash.

As I did not practice cut loss , this time  to practice cut loss and get emotional stronger, I also sold a counter at a loss and switch to another " thought to be better counter "( just my own sense, hard to justify)  so that I can test out my thinking.. too bad I do not have too much FA background. So I use chart to compared the downward trends of both and make a decision to switch. Hope that will be Ok in 6 months time. 

Thanks for your posts

 

Tiandi,

If you have believed that the said company is/was solid, you should not have ignore (...stock dropped som 40% I really did not bother at all...) the opportunity to buy more at a discounted price.  Your stock would have appreciate 5 times + MULTIPLYING by the number of discounted price stock you would have bought.  I am sure the same moment will come again so remember to sieze it when it happens.

Have a great weekend~

 

Singaporegal, 

haha, your point made applied several time for my home finance manager, who love certain stock and ask me buy buy.. but fortunately, after joinging SJ I started to use the TA charts and learn some tricks from many of your posts. then I told the home finance manager that the trend is dropping... till some conditions ( using your guideline plus some other forumer's ideas) I buy those stocks at a discount..

Thanks for your tips on many posts.

Regarding point 7. Ignore short-term fluctuations

I find it take a long while to learn the emotional part. Also I learnt from one fact, just HOLDing power and the strength of the company. Got stuck with some stock some years ago when market crash badly. Could not let go since the company was solid so we decided to HOLD and Forget about it and ignore for many years. Now these stocks become multi-bagger. and company is so strong that it is world number one in term of certain business... So I learn this lesson of picking good company, then can handle the fluctuation. Recently when this stock dropped some 40% I really did not bother at all since it had appreciated 5 times so it is very green anyway. Now this stock return half of its 40% drop..Hope I learn more so that I can invest for retirement and live happily hahaha 

 

 

 

Guess Monday STI may be disappointed.

Mentioned that bourses already priced in rate cut

CNN:

Stocks gave up some of their early gains Friday after investors were somewhat disappointed Bernanke did not indicate that a cut in the benchmark federal funds rate was imminent.

 

I totally agree with point 5 and would like to expand on it.

Sometimes I feel that some people are just addicted to the stock market. If they are not invested in some counter, they get itchy and can't wait to get in. However, there are times when it is best to sit it out. If there is not stock worth buying at the moment, don't buy!
 

 

End of August. For some, a relief (full moon makes people react unrationally), for some, joy (volatility means kopi $$).  Market pause. Go back to basic and start Sept afresh and be the Intelligent Investors (pt 7).

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As in most disciplines, it is wise to go back and cover the basics from time to time, if only to strengthen the foundation. As we move into the month that has been, historically, the worst for stock market performance, these helpful reminders are designed to do just that. They can help to empower you to keep your cool, manage your portfolio with confidence, and avoid unnecessary and costly mistakes. Print this article, grab a cup of coffee, sit in your favorite chair and read each point out loud.

 

1. A corporation is merely a conduit through which the owners of the business (the shareholders) manage their collective capital

Disney World is not owned by the Walt Disney Corporation per se; instead, it is owned by the stockholders - everything from the original Pirates of Caribbean ride in Anaheim to the pencils in the desk of the company?s executives.

The result of this business-oriented thinking is that you are likely to make more rational decisions. If you owned 300 shares of Yankee Candle, for example, you need to think of yourself as owning 100 percent of an enterprise that earned $504 during fiscal year 2005. This approach can reduce the tendency to panic in the event of short term shocks such as a recession or bear market.

2. Overall growth is meaningless

The overall growth of the company is meaningless. What truly counts, as we have been reminded by the great minds of finance over and over again, is the per share growth. Too many companies forget this and it is the shareholders who suffer the consequences; Krispy Kreme is the latest example.

3. Don?t pay for hope

Any time the success of your investment depends upon above average rates of growth for long periods of time, you?ve stripped away the MARGIN OF SAFETY that could otherwise protect you in the event of short-term unfavorable developments in the business. If you?re fine with this sort of precarious situation, so be it; just make sure you don?t commit money you require for important life milestones such as funding an education, purchasing a home, or supporting the retirement of your dreams. You won?t fine very many opportunities where the growth isn?t factored into the price of the stock, but if you look long and hard enough, you will encounter a few in your lifetime. Lucky for us, that?s all it takes to become wealthy.

4. Although it is often true, risk and reward are not always correlated

For example, a middle manager at a refining company would have known in the late 1990?s that $10 per barrel oil was not sustainable. As a result, he could have made a large investment in oil production companies and refiners ? businesses such as Exxon Mobile or Valero ? and reaped huge profits without taking on any excess risk. Today, it is likely that he would have made many hundreds of thousands, if not millions, of dollars. Contrast that to a situation such as USG where the business will be extremely profitable if Congress solves the asbestos crises.

5. If you are uncertain about an investment, sit it out

There is no shame in admitting that you do not understand an investment. In fact, billionaire investor Warren Buffett once mentioned that he didn?t invest in Enron because he couldn?t understand the footnotes in the financial statements. That ability to recognize his lack of knowledge and willingness to move on to the next opportunity saved the shareholders of his holding company, Berkshire Hathaway, from suffering loss.

6. Steer clear of managements of questionable integrity

No matter how attractive the issue, it is almost always a mistake to go into business with dishonest people. It may be okay to wade into the water once those responsible for corporate malfeasance have been rooted out and discarded, but be reasonably certain that the corporate culture that gave rise to such actions is no longer at work.

7. Ignore short-term fluctuations

Movements in the quoted price of your investments are meaningless except in that they allow you to add to your holdings at attractive, lower valuations and sell your holdings at rich, higher valuations. As Graham said in The Intelligent Investor, to allow yourself to become perplexed by these movements is to become emotionally tormented by mistakes in other peoples? judgment!