Saturday, July 19, 2008

The market is always wrong?



In the recent market crashes, the KLSE fell about 1150 points, a drop of 350 points within 6 months. When the overall market is coming down, analysis tend to lower the target selling price of a company and increase the target selling price when the overall market is trending higher.

Whenever stock market has a lot of uncertainties, all stocks good or poor fundamental stocks will hammered down. However, we always believe crisis means opportunities. The recent drop in market prices creates magnificent investment opportunities. Even though the market may drop further as there are still a lot of uncertainties and outstanding negative news pending announcement, we believe there is great opportunity for long-term investment.

Warren Buffer believes that stock market is manic depressive, it always overreacts to positive as well as negative news. If the overall market sentiment is good, the stock price may surge sky high. However if the stock market is depressive, the stock market may go down to very cheap price. The market is there to serve you and not to instruct you. It is not telling you whether you are right or wrong. The business results will determine that.” The key factor is to purchase right business at the right time.

As a investor, we should hold good quality stock for long term, as a result of recent market crash, these stock are not expensive anymore and the price now become quite attractive. We need to prepare ourselves by understanding the intrinsic value of the stock. We should stop predict when market will reach its bottom (as no one will know until it reach its bottom) and take the advantage of uncertainty.

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