Undervalued is slow. Speculating is fast.

If we buy undervalued stocks (shares), its prices would soon reflect its business. This is a famous quote from Warren Buffet. I think he is a minority because majority of the investors cum speculators today are thinking of ‘quick money’, ‘fast money’ and when someone buys today, the thinking would be that it will go up tomorrow. This is the main reason why I dislike it when my friends told me how much they earn from the FOREX market. When asked what do they understand about the currency they are buying, none knew and said that as long as they are careful they can earn a lot every night. That’s no longer investing. That’s called gambling. Apologies but when we know nothing about what we are investing, it’s called speculating too.

These days, there are a lot of things which are happening in the world which can affect us within hours and even minutes. Imagine the stock market in USA crashing and within hours, the markets in Asia opens. The frantic selling may start and does it mean that the fundamentals of all these companies changed overnight?  Do you know that you can even ‘short’ or ‘long’ a pair of currencies and somehow ‘control’ some of its direction through your actions? The financial players in the market are not just getting bigger, they are getting more speculative too because money can be made in seconds while the retail and small investors never even knew what happened. That’s the reason why all the uncles and aunties and even the first time investors trying to ‘catch’ the market would always be the last to know and the first to fall.

It is thus so important that we remind ourselves again of Warren buffet’s wise words. In brief, think fundamental. Just days ago, some friends shared about a project which is said to be going for RM1,800 psf next year. I have zero comments on such awesome predictions. Is RM1,800 psf high? Well, in comparison to Singapore or even Hong Kong, it is considered low. I wish everyone would gain from property investments. However, when the crunching time comes, just be reminded that property investment is very sticky and most of the time, the first to fall would be the higher ones first. The only consolation may be that the buyers of such properties probably have a deeper pocket than many and thus may be able to hold longer until the storm goes away. When we buy undervalued, the price would soon reflect its actual value. It’s normally much slower than predictions and fast money. I think this is true always no matter what we invest in. Happy investing.

written on 4 Feb 2015

Next suggested article: Property Investment? – Focus is key

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