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When you do not know enough, it’s more gambling than investing.

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There is one very important lesson I learnt on Sunday (16th Nov) on the second Penang Bridge. If you did not train enough, do not try and run the FULL Marathon! It’s 42.195km. Three years ago, I completed the half-marathon barely. Gotten the medal of completion and I thought, surely full marathon is similar, just x 2. I totally underestimated it and on Sunday, though I had passed the ‘3km to go sign’, I was in too much pain on my feet to continue. I gave up. In my mind, I regretted for signing up. If only I had signed up for half-marathon instead, I would have returned with a medal of completion. Well, as usual, if only. Sometimes, the even when the mental is ready, the body may not be. This brings us back to the investment world. I did a survey the other day, around 20-odd people, all professionals ranging from 28 to 45 years old. I asked them if they have invested in the stock market before. My expectation was that most of them would not have had any experience. The answer was half actually did but majority NO LONGER invest in the stock market. It meant, as at today, nearly none of them buy any stock in the Bursa Malaysia. Main reason was that they lost money. Some said, it’s so tough to keep looking at the stocks or must watch them everyday.

Personally, I started to buy stocks when I was 23 years old, 2 years after I have started working. I flipped the newspaper, look at the top 10 most active stocks, see which ones I like and buy. After that, nearly every hour I kept track of the stock price movements. Sometimes it went up, sometimes it came down. Honestly, by the end of a few months, I was losing more than winning. Haha. This went on continuously for over 1 year before I realise that perhaps I needed to change my strategy a bit. I started reading a bit more about the stocks, then the business news, then The Edge on and off and soon became familiar with a lot of the happenings in the business world. I came to know about a famous investor called Warren Buffett too. After that, I started to buy only a few stocks, keep them and sell when it goes up and hit my target price or hold them until their business fundamental changes. I realised that I am suddenly better. I think the profits were slightly better than FD. Again, it was so-so.

For the past few years, I love the stocks I buy. They have performed pretty well and even during the recent sell down, the stocks I bought was still up versus the price I paid for them. What has changed? Well, the capital that I invest has changed to bigger. The stocks I bought are also stocks which I have personal knowledge about, either because of work or one that I have been following or they have a strong fundamental; undervalued, cash rich and not many have interest in them. 🙂  Yes, there are still many of these stocks in Bursa Malaysia even today. The issue is that these stocks would only move every time they report a profit. Otherwise, the volume goes to sleep. I no longer track them on daily basis. The surprising thing is, once I take this approach, I am much more careful about the stocks I buy and thus far, returns has been exceptionally good. They say, buy when lots of people sell and sell when way too many people are selling. I would prefer to buy whenever I see value and sell whenever everyone sees the value and pushes the price to a Price Earning Ratio that I personally feel way too high. Then, I sell and buy another stock. Again, good fundamental with low or no debts in a business which is easy to understand. It’s very boring but at this point it works, so will be keeping to this.

To me, stock market is still safer than property market because it’s faster and easier to buy and sell. Thus, your loss may be minimised. With a property, most of the time, the losses may be huge because you may not be able to sell within a short period of time. Plus, stocks allow you to buy based on your affordability while a property may be too expensive for you to invest in more than one. I always encourage my friends to buy stocks but as soon as they ask me how much can they earn within a short period of time, I would advise them against entering the stock market. It meant they have the same mindset as me when I first entered the market and suffered losses previously. Remember, whenever we do not know enough, it’s more gambling than investing. Happy ‘stocking’.

written on 18 Nov 2014

Next suggested article: Overweight on property sector – buy property stocks now?

 

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