Thursday, December 22, 2011

The different between Fundamental and Technical Analysis

Just read one article, you know how the author describe Fundamental and Technical Analyst? In a shopping mall, a fundamental analyst would go to each store, study the product being sold and then decide whether to buy it or not.

A technical analyst would sit on the bench in the mall and watch people go into stores, then he study the patterns or activities of people going into each store.

So, we can actually combine both:
1. Fundamental analysis shows us What To Buy
2. Technical analysis shows us When To Buy
Below two eBook from CIMB, feel free to download:

1. Fundamental Analysis
2. Technical Analysis 

Sunday, December 18, 2011

Flipping the Stock

My friend ask me, how to make money in stock market? Actually, making money in stock market is not so difficult, there are many tools available today. Investment is all about plan with goal, strategies and follow by action. One of the easy strategy use by many is Buy and Hold. Some suggest to buy only when market crash.

It's true, timing and opportunity! While waiting market to crash, sometimes, we may use small percenage of our money to trade the stock. All the business actually involve in trading, buy low and sell high. The manufacturer buy raw material, process and sell at higher price to make profit The agent buy from factory and sell to consumer with higher price to make profit. Sometimes we also call this method as Flipping Strategy-  buy the stock for short term, with intention to sell it quickly on same day or few days.

The best time to trade is during the uptrend formation. We know something is hard to move, but once move, it's hard to stop! Yes, momentum, stock price also observe the same movement. Many investor would like to ask, why the stock move up? Sure got something! But it doesn't matter for investor like us, we only care how to ride on the trend and make the profit.

As I always advise my friend, stock can talk! Listen to them carefully, volume and price movement will tell you everything! For example, before the party end, usually it will follow by big volume and the price is flag or down. If you happen to buy the stock, get out of it before the music stop! Every stock can talk, if you DO Not understand their meaning, better stay out until you study and understand their language.

Saturday, December 10, 2011

Single Tier Dividend - Good or bad for retail investor?

Two years ago, Malaysia government introduce the system of Single Tier Dividend. There will be a transition period of 6 years until 31 Dec 2013 for the existing company to comply with this system. Many are so excited, because they say, oh... nice... now dividend receive no need to pay tax and no need to declare as well. Few weeks back, when I discussed with my team here and I noticed that many still unaware that we, as individual investor will lose a bit, especially for retiree. Why?

Let look first why government want to introduce this system? Many reasons given, the main one, save administration cost to refund tax to individual and individual no need to pay tax as the tax under company is a final tax. By doing that, Government can boost their tax income and save a lot of follow up work!

Imputation System
The current system for dividend pay out is call Imputation System. For example, when a company make a profit of $100, government will take $25 (25% of tax) so the profit after tax is $75. Let say, now the company want to pay out all the profit as dividend (usually the company seldom payout 100%), so the tax paid by company are passed to share holder as tax Credit. (S110) In this case, the company will have Imputation Credit of $25.

Share holder receive $75 as net, but need to declare RM100 as gross income with 25% tax deducted. In this case, many still assume they will receive gross dividend as $75, but actually the gross is RM100 and you can claim back 25% if your tax bracket below 25%...

Let study the actual case under Dutch Lady (Dlady) annual report :

In Dlady's case, the 2nd special interim gross dividend is 40 sen, but 30 sen was recorded in company's statement. So the total paid out is: 64,000k (total shares) x 30 sen = $19,200k.

For the year of 2010, total payout was $46,400k and was recorded in P&L Statement:

In above case, if investor bought the share just before Dlady declare the 2nd special interim dividend, he will receive net 30 sen, the dividend voucher will record as gross 40 sen, tax deducted 10 sen(25%). If the share holder fall under tax bracket of 19%, he is entitled to a refund of 6%.

Single Tier System
Under this system, tax paid by company (25%) is final tax. When a company make a profit of $100, government will take $25 (25% of tax) so the profit after tax is $75. Let say, now the company pay out all the profit as dividend, there will be no more Imputation Credit.

Share holder receive $75 as net, no need to declare as income.

Assume after 2013, Dlady still pay the same amount of 2nd special interim dividend, under the company's statement, it will mention as 30 sen under Single Tier Dividend. (same under company's statement)

Share holder will receive net 30 sen, it's tax exemption and not require to declare.
So, now you know the reason why no need to declare dividend under Single Tier System?
Share holder is unable ask for refund of 6% in the above case. (low income tax payer is main loser in this case)


Monday, December 5, 2011

What you have learnt from Stock Market?

One of my friend told me, he dare not invest in stock market, because he feel that market is unstable at the moment. Some day up and follow by few days down, he was unable to sleep well when he involved in Stock Market last time.

Why we invest in stock market? If a company's stock selling at one dollar today, tomorrow and one year later, what's the fun to invest in stock market? We know one thing, inflation always happen, today's asset worth 1 million, it can become 1.2 million one year latter. Yes, we want Capital Gain! This is true only for investment grade stocks! We need market up and down to make money.

The second thing I like to invest in stock market is because of liquidity. You can sell the stock you buy and take the cash within 3 working days. Hence, you need to select the right stock to invest, avoid those stock with low liquidity, unless you are very rich and willing to wait for years.

Stocks do pay dividend, if you know how to “save” high dividend stocks. We particularly like the stocks which pay dividend with the increase dividend rate every year. Many still don't know they can sleep well if choose this kind of stocks.

Try to make money when you buy. Buy on the day when market crash! Cheap sales are every where. Find the value stock, buy the value of 1 dollar with 50 cents, then you know at the time of buying, you had earn 50%.

There's no secret of creating wealth in stock market. All you need to do is find the investment grade stock, buy when market go down. Make sure the stock pay dividend of more than bank's FD rate. Invest in Stock market is high risk only in the case of you do not know what you are doing!

Sunday, November 6, 2011

Some Stock Market Trading Tips

  1. Volume – If the stock continue to make record high (up trend) for few days (or weeks), beware of sudden increase in volume (3x more than previous 3 days). Check the price, if the price stagnant or go down a bit, sell the stock immediately. This is the sign of “Big Leg” unload their stock.
On the other hand, if the stock go down (down trend) for few days (or weeks) and the price already stagnant then suddenly the price go down with volume increase, then take a look at the price. If the price not going down further, buy some at this point, it will rebound soon.
  1. Buy up trend stock - If you want to go north, then find the train go to north. If you accidentally take the train that go south, jump down (Cut Loss) immediately before it's too late. The logic is simple, if you want to buy stock that can moving up, then buy the stock that start to move up. Many investor seem doing the opposite, they did not buy the up trend stock, then always ask, why the stock can not go up?

  2. Do not expect to buy at lowest – I will not buy the stock that making the lowest record, because you may find tomorrow's price lower than today. However, you can put this stock in your buying list, buy some when the down trend reverse. The best is when the price start moving up 5% or 7% from lowest, bear in mind to follow above strategy in point 1 & 2.

  3. Do not predict the market – Trade according to market's trend, not only buy the uptrend stock, we need to listen to the market. If you notice the top loser, the gap down is very big and the top winner, the gap up is smaller, then try to hold more cash than share. If you happen to trade the stock at this period, try not to hold too many share, as now cash is king. But remember to pick up the share when it reach bottom by using the above strategy.

  4. Market Crash – Market crash is an opportunity, this will happen 2 or 3 times every year. This may due to sudden incident or some bad news. Don't panic, this is time to collect Blue Chip. Let the price fall for few days (or weeks) when it stable, just use the above strategy to buy it.

  5. Keep your winning stake – Beside using stop loss and lock in profit, we need to know when to keep cash. I keep the same amount of fund for trading, the winning part will buy more REIT or some stable Blue Chip stock. This will ensure we do not vomit out what we have made from stock market when market suddenly crash. Though you may have proper cut loss plan, but when your fund grow big it may become hard to control, hence I maintain the same amount (or only increase small percentage) in trading. In case if market crash, I can always sell REIT and buy those good stock when opportunity arise.

Saturday, November 5, 2011

Regret Now or Regret Later

Investing is about decision. Many people know asset/ shares will increase in value. When the market go down and the opportunity come, how many people dare to take action? Many people afraid to make decision because of fear. They fear of doing something that they will later regret. Because of this, many people fail to make the decision to restructure their portfolio, end up holding too much cash!
By avoiding the tough decisions, sooner or later, we must face second forms of regret – the regret of not taking any action, when we look back, things we do not done cause greatest regret.
In fact, we can always deal with regrettable decisions by repairing our action. Our regret only intensifies as we realized the price we've paid by delaying important investment decision.
In the journey of life, we are likely to evaluate our choices differently. We can improve our financial or life decision when time come. We can invest regularly or invest when opportunity arises. If your existing portfolio is not optimally positioned, take action to fix it now. If your stock or portfolio not making any money, plan to cut loss to avoid further regret. Do not delay the important decision or allow fear of potential short term volatility to derail your important investment decision.
Don't come one day you say, “if I know earlier...”, Chinese say, if you know earlier, there will no beggar in the world any more.

Wednesday, October 12, 2011

How many hunting dogs do you have?

Just read about one article, illustrate investment as hunting. You can hunt in group, or alone. Smart hunter always hunt with dog or group of hunting dogs to reduce their effort. 

Traders who trade every day is similar to hungry hunter who kills every day. It's better to train many dogs that can help in hunting job. Let the money work hard for you, money hunt for more money.

Whereas some hunters seldom hunt, but he bleed the dogs and sell to those hunters who need it. He 's business owner or Investor who create the businesses and looking for passive income. When the hunting seasons come, many hunters looking for dogs, they willing to pay high price, especially those dogs can run very fast.

Times come when winter season approach... many hunters will sell their dog as they do not know how long the winter last, it could be one month or one year, nobody know. “Winter season” is very scary for those hunter who never prepare, sometime they need to eat the dog if want to survive as nobody want to buy their dog because all the hunters can not hunt too and they are out of money. This is the time when smart investor make their profit... they will buy those good quality dogs with reasonable price, keep it in the safe place, feed it and grow it. They hope one days, after the winter end, they can sell the dogs with good price. The only conditions is they need to have extra fund, as nobody know when the winter will end.

One day, the sun coming out and winter end. All the hunters coming out again and look for dogs to help them. Those hunters who own dogs now can sell with very good price, this is how they make the money. Of course, they will hunt too because now they have many good quality dogs can help them. Have you prepared to be a smart hunter?

Friday, September 23, 2011

Market Crash... buy more or cut loss?

Last few days, we saw the market having fun, crash like crazy, people panic selling like no tomorrow. Yesterday we saw US Dow Index down by 283 points, at the time I write this notes, it's down by another 350 points, Dow Index currently stand at 10,774. Many investors force to shake out in this volatile market with one of question in their mind, if the market go down further, should he continue to average down, or should he cut loss?
To a new investor, he will confuse, as many will suggest to “Cut Loss”, whereas, someone might say, no, it's time to buy more so that you can average down to reduce the cost. I think in order to do the right thing (let do not care if this's correct way or not), one must understand what's the purpose or intention when he bought the stock. Is it for short term speculating purpose? Or is it for long term investment purpose? Also, he may want to find out if the share he bought is mean for speculate or investing grade.
You should “Cut Lost” or sell first and think later if you fall under the below categories:
  1. Initially you just plan for short term to earn fast money, but something reverse happened.
  2. You can not afford to lost more that 5% of your principal.
  3. You believe the momentum theory which say that something hard to move, if move hard to stop.
  4. You are more to Technical Analysis which say that once the support line is break out, the share price will move down to next level
  5. You do not understand the company, don't know what they are doing, basically know nothing about their profit record, so better cut first and regret later
However, you can average or buy more if you believe the below:
  1. You have proper long term plan and strategy for investment.
  2. You are prepared if tomorrow market close for few months and you fund is stuck there and you can still sleep well and enjoy life.
  3. You believe people are fearful and you want to be greedy to buy cheap now
  4. You like the Fundamental of a company and it's a 5 star investment grade.
  5. You know the company well and have done enough home work which lead you to believe that their earning is proven, consistent and having room to grow
Every trade is a new separate decision, it got nothing to do with previous trade. "Average down" is not to be used as a reason to reduce cost. For me, if I bought a stock and it's share price went down out of my expectation, I will sell first if it's a speculate stock. Especially when I read the news on the Edge yesterday, one of the title read, "Swee Joo is to be delisted on 26 Sep 2011", just think if someone own this stock without cut loss at 5%, it will become a total loss now.
If the stock I bought is an investment grade, I will not cut loss. However, I will not average down either, instead I will use my investment style which I feel safer in the way, see my previous post, Buy when price down or when price up?

It's a waste of time to ask why the share price going down, as there are simply too many reasons. It's better to know your position, intention or purpose of investing and the condition of the target company.

Saturday, September 17, 2011

Do you like the stable market?

In natural science, the balance environment always see something like this:
Electron = Proton, or what we say, Positive is equal to Negative.
Similar in stock market, if nothing happen:
Buyer = Seller
In this case, technically the stock price will remain the same all the time. (this is boring ya, just imagine if a stock just remain the same price today, tomorrow or next year) Once a while, some kind of news will spark the imbalance, like what we faced in 2008, the financial crisis which caused few big banks to meltdown, making seller more than buyer. Sometimes, the seller became panic and want to sell stock like no tomorrow and dump the share price at what even price.
Recently, market seem to encounter the similar imbalance again. It's full of negative news every where. It remind me of one famous quote:
It's a mistake to sell something worth 1 dollars for 50 cents with the hope to buy it back at 30 cents.
It's also a mistake if you refuse to buy something worth 1 dollars which now sell at 50 cents because you believe that it will drop further to 30 cents.
It's definitely a mistake if you buy something at 1 dollars if it only worth 50 cents with the hope to sell it above 1 dollars.
It's time for value investor to act and use their wisdom again.

Tuesday, September 13, 2011

What cause the share price going down?

Every day, share price change up, down or stay side way. What cause the share price to change? In fact, nobody really know the answer, even the experience traders.
Some special event, like financial crises, those experience know share price will go down, but they can not predict how much it will go down and when it will end.

If you treat share as “goods”, most probably the supply and demand cause the share price to change. More buyer will create higher demand, then the price will going up. In the normal circumstances, demand = supply, hence share price will stay flat. In the event if the market is full of negative news, it create more seller, meaning supply more, the price is under selling pressure and tend to move down.

The funny thing is, share is not something necessity, it's not something everybody need in daily life. Today's buyer can become tomorrow's seller. If a country spark a war, everyone will become panic as because they only want to hold cash. This will hammer share price to become historical low.
There are many events such as politic, economy, investment opportunities available, currency change, company's profit and loss status, inflation and interest rate will give impact to share price. All these will give marks to a share price, be it positive or negative marks. Since every thing is unpredictable, hence, predict the market's moving is a waste of time.

Share market is a big ocean, it's full of jaws and crocodile, don't ask me who they are? They could be you or me or any business men. Times come, the business man would like to press down the price to force you sell him at low price. Some other time, the business man would raise the price to ceiling high in order to sell you at high price. Investor need to act like a business man, investment is actually similar to doing business, price is what you pay, value is what you get. Sell to others when the price is high and buy from others when the price is low. If you can do that, then your journey of life is full of gold along the way.

Wednesday, August 31, 2011

Investment Note Book

Do you have the habit to write a diary? I wrote investment diary, record down every trade done in stock market, buy or sell, in a note book. This keep remind me, every trade need proper planing start from research, monitor, set target price, list the Main Factors, execute the trading and sell strategy including if something went wrong.
Planing – Before buying a stock, have a plan, be it for short term trade (speculate) or invest for long term. List down the reasons why want to buy this stock. Invest in a stock is not as simple as buying 'kuih' at night market, you are not paying few dollars but thousand, hence need to be serious and careful.
If there is no reason of buying a stock, meaning you could have know nothing about the company or haven't done enough research. Usually I like to ask, “do you dare to buy more share if the stock price go down further tomorrow?” If the answer is “No” or “Not Sure”, then better think twice, maybe it's not good time to buy. Another question I like to ask, if tomorrow Stock Market close for 3 years, do you still want to buy the stock? What happen if tomorrow US market crash 1,000 points due to what even reason?
After doing some research to come out few points to support the trading, it's time to monitor and set target price. Just wait for months, once a while, sales will come. Some day, you may find there are many stocks falling in price, some discount 10%, 20% or even 30%. (like what's happen last few weeks) Soon you will notice many negative news in news paper or internet. It's time to test your skill and ability to act differently from others. How firm are you stand still with your original plan?
In this situation, I find my note book very useful, I will read through all the mistake done in the past and other investors experience, it's the time to use logic thinking plus the experience to conclude the decision. "Money is similar to rain, there are million and trillion of it, it need to go some where, build a pool to prepare for the rainy day to keep this water, if not, it would be a waste to let it go some where" - one of the quote from a experience investor.

Tuesday, August 23, 2011

Some snippets about TENAGA (TNB)

TNB is the only electric power provider in Malaysia, the business is monopoly but they can not simply raise the price. My father was ex-worker from TNB, hence I know TNB since the first day of listing when I was studied at form six. Bursa market was so hot during 1992 bull run (that time know as KLSE), it came to record high of 1300+ points in one year. TNB IPO price was $4.50, it went to $7.20 on first day of listing. In few months time, TNB went to record high of $20. Then one day, out of sudden, it drop to RM15.50. One week later, TNB close at RM10. In the next one to two year, TNB ranging from $7 to $10.
One of my father's friend, Mr Lim, he bought some TNB share at $9. He added more when it drop to $8. When TNB drop to $7, he bought again but with more lots than before. That time, I don't understand the method, but later I noticed this is call Cost Average Down. In 1994 to 1995, people seem to forget about previous pain, TNB share price reached $12+ again and Mr Lim disposed all TNB shares after holding for 1 and half years.
The market was almost flag till 1997 when a currency crisis occurred. One day morning, rumors came from Thailand and spread all over Asia countries. During that time, we noticed a group of fund managers started to create panic environment in the country by keep on selling and caused KLSE index drop 40 to 50 points in 2 days. One week later, market started feel the panic and fell even more. Add to the worse, Ringgit kept on falling against USD, until one time reached $4.50 per USD. Many people panic, worry and start to dump shares at what ever price available. Some even ask if value of share can fall to Zero?
TNB started to fall from $10, people buy at $8, some at $7. One month later, the price was $6.50, where Mr Lim started to place buy order with minimum lots. The following few months, more people feel the pain and dump the shares like no tomorrow. Mr Lim continued place buy order at $5.50, $4.50, $4, $3.50 till the lowest price $2.50. On 1 September 1998, ex PM Dr Mahathir announced several action and economy stipulated package, including peg Ringgit at 3.80 / USD and arrested Anwar. KLSE suddenly reversed and surged more than 100 points. TNB also surged from $4.50 to $5.60. The next day, TNB closed at $6.50. Those who cut loss already missed the boat as they dare not buy at $2.50 or even $4.00. Also, they have no chance to buy back as the market turn was unexpected and fast.
Mr Lim started to disposed TNB in 2001/ 2002 when the price range from $10 to $12, with the holding period of 3 years plus. There was no other big event until 2008, US trigger another financial crisis. The Dow index fell from 12,000+ to 6,000+. Nobody really believed that the market can fall continuously for 7 days which sent Dow to 9,000+. Market follow by few days up and few days down, but the overall trend was down. The down trend continue for about 11 months plus in the whole world. TNB also fell from $10+ to $4+, but this time I loss contact with Mr Lim, as he already migrated to other country and I did not know if he bought any shares.
Base on last few time's trading record, seem Mr Lim will start to buy TNB if it fell 40% from the average price before big fall. Let say $10 was average price before the fall, the 40% is about $6, assume he averaging down till $4.50, his average price would be around $5. He then will sell the share during the next cycle bull run. If this is true then he could have sold TNB around $7+ in the last 2 years.
Recently, there's another new crisis trigger by US, as of today Dow Index already fell continuously since beginning of August 2011 from 12,000+ to 10,855. TNB also fell from $7 to $5.55 right now. We may not know when is the highest and lowest for every cycle, but we can know near the bottom once it start to stable or rebound. I am sure the history will repeat again this time!

Saturday, August 20, 2011

Happy Investing

Stock market is the great place! 
But for some, it could be a pain, especially when people loss money. As the rules always come to say that losing money is 10 times more than winning. The feeling of losing one thousand is equal to earning ten thousand. 
With this volatile market which expect to continue in next few months, some people come out an idea of selling all your stocks and buy Gold. This has caused Gold price hitting highest record at $1854, when more people believed the story. Nobody can tell if Gold will continue to break higher record, but what we can tell is the trend is coming now. You can switch to Gold if you feel happy, the worst case if it's wrong, just switch it back, not a big deal.
The most important is your feeling, you need to feel happy when you invest. We feel happy when we are free from tensions and relax, love the way of living and love everything around us.
Happiness is a choice, every second of everyday, you make a choice. You can choose to buy shares for dividend, if this way you feel more relax and less tensions, especially when receive a pay cheque, feel graceful for making the right decision. Do you feel happy?

Sunday, August 14, 2011

Learn How to Play the Money Game

What is money? Everyone know the answer... but do you know money is one of the biggest pain in most people's life? Some will think how nice if I do not need to work every day. What's the key principal for lasting Wealth ?

  • The key to wealth is positive Cash Flow
  • Anything reduce the amount of Cash is Expenses
  • Anything that increase your Cash Flow is going to expend your level of Wealth. 
  • Time can change for Money, but Money can not buy Time (Everyone is equal, 24 hours a day and will expiry if you don't use it)
  • Cash can be generated from 2 main source, Passive and Passion.
  • The aim is to build the Money Making Machine to generate Passive Income, let the money working for you.
  • Money Making Machine need time to grow and generate income.
  • Money management is to balance Expenses and Income (Expense = Income)
  • The key to Financial Freedom: Income > Expenses

In summary, learning how to play money game is important, it's involve certain skill and strategies to accelerate your income. Once you have more income, you may need to learn the skill of manage the money. Final stage is know how to invest the money effectively.

Once achieve Financial Freedom, you may stop working as the money lasting is forever (or you choose continue to work). Remember, the GOAL of creating wealth is to help you grow yourself into the best person. Have a lot of money is not the principal goal... nobody can take the money along with them when they leave in the end... it took me years to understand this!

Sunday, July 24, 2011

Back to basic - Invest in a business

Nothing is so hot! ... Apple, everyone is talking about it right now, because of iPhone and iPad sold like hot cake! That's why the share price jump to history record, close at US390! Many analysis give the target price range from $480 to $525, do you think it's a good buy?

You can find the answer by referring to 3 basic financial reports. How you know if a company is making money? Just look at the Income Statement or sometime we call it Profit and Loss Statement. The top part is Revenue and Expenses. Well the most important data is profit... Yes, the profit is real, without profit, the rest no need to see, not even think about buying the stock.

Want to know how much the Asset? Just look at Balance Sheet. Why call this Balance Sheet? Because you always find this report Asset = Liability, balance at both side. As a share holders, the company actually borrow money from you, but the company no need to return it. That's why the formula look like this:
Asset = Liability + Equity 

Sometime Equity we also call it Share Holder's Fund. If the company borrow money from the bank, it need to pay interest, but if it borrow from Share Holder, it does not require to pay back or give any interest.  Only some companies is kind enough to give out some dividend. This is a disadvantage to share holder and as a share holder, he can only sell this "ownership" / shares in the Stock Market. That's why for the reason, investor should invest the company with a lot of profit as only with profit can help the company grow big in term of Asset and Share price will eventually being reflected. In theory, we need company with minimum Liability, so that ROE and ROA almost the same and balance formula look something like below:
Asset = Liability + Equity 

Finally, the last report, Cash Flow. The company must able to generate positive cash flow in order to fund and continue to grow big. Beware of financial fraud too, the account Receivable and Liability should not grow bigger and bigger, if any, should read as a red flag, avoid it no matter what.

Once you understand these simple report, you will know the answer if Apple is worth to buy or not!

Sunday, July 10, 2011

Malaysia REIT report – June 2011

The portfolio still generate positive return against FD rate for past 6 months. We received dividend of RM5,211.58 for 6 months of 2011. This dividend is slightly more, as we only received RM4,392 on previous 6 months.

The whole portfolio is starting to generate very stable dividend of slightly more than 10% per year. We also achieved more than 50% return base on original investment amount of RM100,000 since Jun 2009, but this is meaningless since we do not want to sell our shares in next few years.
Our investment purpose is to build a “Portfolio” which able to generate positive dividend / income, and we continue to increase this percentage of return every year. (currently this return rate is 10%, compare to 8.5% since we started)

Together with dividend of RM5,211.58, currently we have total cash of RM9,604.16. As per plan, we wanted to buy some consumer related stock, but we did not do so, as there will be another new REIT counter going to list next month. We keep the cash for now and going to buy this new REIT or maybe some other REIT if they fall in price.

Thursday, July 7, 2011

Sharing with others - Make You happy

Nothing is so great in life by making others happy and making all people happy. Many success and rich people like to shares with others. Life is no meaning, the meaning is what you "Give" it. There's why the more you give, the more you will expect in return. How I can help others to enjoy happy life? Money is important, but doesn't mean having a lot of money equal to happy life. Sharing with people to turn their dream into reality is going to make you more happy once you have reach the level. 
Investing will become simple if you write down the purpose and strategy. Once these points properly spell out, the direction is very clear, you will know why taken certain action. The strategy will help you making money in relax way, much simple, easy and less worry.
Just like journey of life, stock market going up and coming down every day.  Some day it will continue to go up for few months, whereas some months it will go down. This is the beauty of the stock market, try to take advantage of it, don't let it become your pressure, let it become your pleasure and your friends. This is how the experience look at the trending of stock market.
With the proper planing, making money is easy and simple, kind of "Money Making Machine". Just appreciate and happy what you have obtained, this will create feel good emotion in daily life. As long as invest in right direction, making money is not a big deal, since we already know the way, if it's not happen today, it will happen tomorrow or in future. The next stage is making profit or losing money will not matter you anymore. That's the highest level or the experience level in stock market, once you have reach this level, making profit in stock market is not that difficult anymore.  

Friday, June 17, 2011

Why I like to play Monopoly?

Playing Monopoly is fun, I think one will doing good in stock market if understand the meaning of the game.  Start with 10 thousand, one may end up become very rich or bankrupt. Each time, when past the “Go Starting Point” the player can collect some money, I call it monthly salary. 
So, how to become rich in this game? By collecting “monthly salary”? No. The purpose of the game is to generate passive income with the “Asset” that can collect “rental” or “income” when you upgrade it. But, the “Asset” can not be bought, it need to wait for opportunities. We may not know when opportunities will come, hence some extra money on standby basis is very important. 
When it's you turn, you need to move or take action but the outcome is depend on luck and opportunities. Some time you exchange or trade with other user certain “asset”. The purpose is try to keep the best Asset that you feel good to generate the passive income. The priority here is passive income instead of capital gain.
Similar in life, most of us start with salary income, each month collect some hard earn money. We start to invest certain “Asset” that can generate regular passive income. These assets can be properties or shares. Beside protection against inflation, properties can generate regular rental income as well. We can opts to buy physical properties or REIT in stock market. Stock market provide a very good plat form for all investors to sell or buy the company in the form of shares. This is a convenience way, as one no need to trade the whole company. The only problem is you need to choose the good asset so that the asset can be hold for long term and will not go burst. (never buy the bad asset – the company's with negative earning)
We have option to choose, buy, sell, wait or ignore the price on Stock Market that offer to us every day, hence luck is at our side. We see so many people like to trade the 'asset' and thinking of able to generate some capital gain. This is the beauty of stock market, it create opportunities for one to buy the “good asset” and sell the “bad asset”. If you still think the only way of making money is stock market is “buy low and sell high”,  you may not understand the meaning of investment and concept.
Of course, “buy low and sell high” is everybody intention to make money in stock market. Sometime I do that as well. I always remind myself the concept of investing, “buy good asset, dispose bad asset”, never buy any 'bad asset” no matter how cheap the price, as it's the value that we are looking for instead of price that somebody willing to pay. If I were to sell one stock, the reason should be one of the below:
1. the stock is too high in price versus it's value
2. or it already turn bad, or 
3. I have discover another better asset, hence would like to exchange it. 
You can not find below in the game: 
Advantage of waiting, wait for opportunities to come. Once a while, “cheap sales” will come, everyone turn panic, through the shares like no tomorrow. This is the time to collect the “good asset” in cheap price. Then time is your friend, let the compound interest doing the job - a simple 7% will double your money in every 10 years. What if you obtain 14%? It would double your money in every 5 years.
Last if you ask me why play Monopoly, the reason could be passing time, may be tried to keep on remind the meaning of life, enjoy the walk through process. It's very similar to journey of life, once you know the meaning, you will appreciate and enjoy what you are doing everyday.

Monday, June 13, 2011

How good is your knowledge as speculator?

I have gather some of the below points, especially for those who like to trade a lot in Stock Market, at least you need to know the answers for below questions:

1. Is stock market a kind of game?

Stock market always change, we need to follow the condition, make decision base on the card on our hand. If you take the bad card, try to minimized the loses, in this case, good card will win more, whereas bad card will lost less.

2. How do you decide when to buy or sell?Look at stock market as a forest instead of a tree, when stock market down, almost all the stocks will follow.

3. What is most important when buying a stock?
Timing – if you buy at wrong timing, even the good stock will not going to make any profit.

4. What contribute to stock market's short term movement?
What others think - it's technical condition base on buyer and seller's decision, if more buyer than the seller, the price tend to go up.

5. What contribute to stock market's mid term movement?
Interest Rate will give impact to stock market in mid term, normally it will take some time to see the impact. When the return of bond is low, more fund will move to stock market.

6. What contribute to stock market's long term movement?
The economy's growth rate will impact long term movement of stock market. Whoever can predict the industry's direction, he will make a profit.

7. When is the time to sell a stock?
Do not care about profit or lost, the time to sell come, just sell it. The price you pay should not determine if you want to sell a stock. The future earning of a company will going to reflect on the stock price.

8. When the volume is small, but the stock price moving up, is this good or bad?
It's safer to buy a stock when volume is small, as the stock move from weak holder to strong holder. On the other hand, when the price is high, the stock move from strong holder to weak holder, it's bad news to stock market. 

9. When the market having good news, but a stock price is flag, should you sell or buy?
You need to sell the stock, as there's always a reason for the price not moving up.

10. Market participate should think like Doctor, Engineer, or Maths Teacher?
Doctor, who need to observe the symptom, think for the next course of action. If realize the decision wrongly make, find for solution immediately. Flexible is very important, take the logic combine with imagination. Do not hesitate or insist you are right at the beginning.

11.  What is most dangerous things you may do? 
Make use of the news but judge incorrectly.

12. What's the different between Trader and Speculator?
Speculator observe and analyze the situation, then decide if want to buy or sell. He believe there's a reason for a stock to go up or down. The inexperience sell a stock because he want to take profit without consider if the stock will go up, he only look at profit or loses. 

13. Will you buy a stock that you already sold at lower price?
Every trade should be a new trade, nothing to do with the history trading price.

14. What's most important thing for investor?
Planing – if buy for long term capital investment, today or tomorrow's price movement is not important. 

15. If all investment bank recommended a stock, you will:
Be careful, somebody going to sell the stock, you better sell before it.

16. If insider recommended a stock, you will:
Sell it, just act opposite what they do, they will not tell you what they going to do.

17. Is the politic impact stock market?
Yes, Interest Rate and Tax policy will give impact to investor decision making and influence the future earning of enterprise.  

18. Is international politic impact on stock market?
Yes, for instant, Gulf war directly impact on stock market, as those fearful sold the stock. It will also give impact to industries earning, the country's income balance and trading contract. 

19. Do you think speculator can sell at high and buy at low? 
He lied if he told you he can always do that.

20.  You should read the trend once a week, a month or everyday?
Looking at the price chart every day will not going to help you, but you need to keep update on the latest news. Weekly chart is just nice to capture the trend and give you a peaceful mind. 

21. Do you think it's important to analyzed history record?
Yes, because you can not predict the future, at least need to learn the history, built the experience so that you can think in different way for future decision. 

22. A big company sue a small company, if you will be buy, which one to buy?
Buy the small company, as this small company must be doing very good until big company want to take some action to protect the earning.

Tuesday, May 31, 2011

Why people loss money in Stock Market!

Few days ago, one customer from Bank told me that he lost few hundred thousand in stock market few years ago. Until now he dare not buy any stock, but the market keep on going up. I told him making money in stock market is very easy provided you know what you are doing and having the right strategy, but he choose not to believe me, but unfortunately I do not bring my record to show him the proof. 

This remind me, after understand his situation I try to summary why people loss money in Stock Market, some of the points was my personal experience in years:
  1. Do not have clear direction about investment, just follow tips or buying Unit Trust recommended by Bank staff who not even invest into it... in other words, they do not know what they are doing... OMG!
  2. Never having plan to calculate the risk verses return. Do you dare to jump down the train if you expect it to go North, but instead it went to South?
  3. Greed and Fear – do not let it control you, but use this as weapon to take advantage of others.
  4. Protect your fund – having margin of safety before buying a stock, always ask if you buy near the high end record?
  5. Make compound interest as your best friends – always buy the industry leader and ride on them over time to see the result in long term
  6. Know your position – are you a Investor, Speculators or Trader or mix... all of them having different method and strategy, do not confuse with each others.
  7. Respect the market trend, Tsunami never give face / chances to anyone...

Market is unpredictable if you buy for speculation. If below is true:
Stock = Business
Then buying a Business always looking for predictable profit. If the profit is predictable, then the business is predictable and of course, Stock price is predictable too!

Tuesday, May 17, 2011

Anyone can be a millionaire!

My father was not a millionaire, it doesn't stop me to become a millionaire. If you are not a millionaire, it doesn't mean your child can not be a millionaire. Teach them nothing wrong being “rich” and the “concept” of being wealthy. Money is not everything, but almost everything needs money. 

Start from your child's first born and save $300 for him every month until he reach 18, then stop contribution and untouched the money until reaching 55, with a minimum of 6% return every year, he will become millionaire at 55. Yes, only 18 years and doing nothing.

If you increase the contribution from $300 to $600, then will shorten 14 years to wind up with $1 million. Similarly, if you increase the return rate of 6% to 12%, it will also shorten 14 years. What happen if you combine both? (contribution of $600 and earn 12%) Just do the calculation yourself.

I only start this method after having my first job, luckily never too late. My dad never teach me this concept or contribute pocket money into special account. To have a 12% return in stock market and save money every month is something very easy and achievable. All it takes is save money, invest in right company and let time be your friend. Understand your spending, aware where you are now, where do you want to be and what are you willing to do to get there is the basic of achieve the target. 

Tuesday, May 3, 2011

Are you invest in the Best Company

Not long ago, I shared about rotten company (just click on Rotten if want to view the article) and there are at least 5 of them since then. Today's local news paper announced, “Sumatec Resource Bhd fell after being told by Bursa Malaysia to restore its finances or risk being delisted”. It share price down almost 50%, at the close was 13 cents only, all time low.

I foresee this counter will going to drop in next few days. Many people fail to realize the fact, they just speculate the counter and think it is very 'cheap'. I can tell, you will find tomorrow's price is even cheaper. Investment is similar to doing business, not just buy or sell share, at least you need to know what sort of company you are buying.

Today, if your friend ask you to join him open a restaurant, would you just simple give him the money, without asking any question? One must try to understand what's the return, is the restaurant can survive in next few years, the profit margin and try to find out others relating matter. Hence, investment should also base on business concept.

I noticed some of my clients trading into this company few months back, which I have also made know to them try not to invest in this type of company, but they did mention that they can cut loss if the company turn bad. Really, are you sure? Can you cut lost today at 50% of yesterday's price?  Anyway, we all have freedom to choose, if want to trade (buy or sell) a profit company, or company not making any profit or not sure if making any profit, but selling at “cheap” price. 

Tuesday, April 19, 2011

Dividend Reinvestment Plan

Dividend Reinvestment Plan (DRP) is very new concept in Malaysia, till now, only two company provide DRP,  namely Maybank and AMMB (one more REIT company going to implement DRP soon). This is suitable for those who think they do not have time to monitor the stock market or read through the research reports and ideally want to keep on invest the great company for next few years.

From the history record, in US, if someone invested Pepsi in 1980, $2000 with became $150,000 at 2004. (start with 80 shares will become 2800 shares through DRP)   

If invested Philip Morris in 1980, $2000 will worth $300,000 at the end of 2004. (start with 58 shares, turn to 4300 shares) - data took from Ibbotson Associates:

What is the advantage DRP to investor?
Since last year, Maybank gave share holder an option to choose, share or cash during dividend announcement. Those who opt for DRP will entitle to buy share with the dividend pay at 10% discount from VWAP. For example, current share price for Maybank is RM8.70, those who opt for free share is base on RM7.70. Hence, every dividend you can reinvest with 10% discount and no need to pay brokerage. Sound great? 

DRP will also cause share price become more volatile. Just monitor the stock price before dividend announcement, after Ex Date and Payment date. This is another opportunity for those who would like to trade on this stock.

DRP work best if you want to invest in great company and don't foresee to sell for few years - the convenience, easy and cost effective way to build share holding by using cash dividend to buy additional shares. 

Monday, April 4, 2011

After you have million dollar!

Have you ever think of what are you going to do if you already save and achieved one million? Let the passive income always more than expenses, it will turn you become financial freedom, if not a millionaire, it's just timing issue, whether you reach destination earlier than others. It really does not matter, if you know this is achievable target, sooner or later you will be there, what's the point to rush and give yourself pressure? Do you really feel more happy after having one million? 

Most of people think that they will feel more happy if they are millionaire. May be you should ask those millionaire, they will say, you wear the same cloths as yesterday, eat more or less the same meal, live in the same house. You may not feel extra happy as when you have 900 thousand, 800 thousand or even 500 thousand previously when you first achieved that target. Perhaps you may go out to celebrate with friends, travel to some places, but after some time, everything back to normal. 

Happy or not is just a feeling, the way how you look into your life. Perhaps more mature, the way look into the money is different, the way how to spend the money to obtain the happiness. Like the journey of life, one million is just like a “road mark” at road stated 10,000km from the destination. There's not much meaning looking at the mark when you pass through, may be we need to enjoy waterfall, the green trees, beautiful birds singing and many more along the journey.  

Sunday, March 27, 2011

Buy a business with reasonable price

As long as there's profit, you will not go bankrupt. This is the only way to survive in any business, similar for business buyer. The business you buy or planing to buy must be able to generate better return than cash, if not, why bother about invest in the business, isn't it more safer to put money in bank to earn interest? Hence, the reasonable return of any investment should be able to generate at least 3 times Fix Deposit can provide.

Buying a business, we may want to ask how much the return can we obtain per year after deducted the expenses. Use the profit figure divided by the principal, we will get to know how much of return in percentage per year. Today, if we are not buying the whole business, instead buying a few shares of the company, it work the same way.

I came to know a company, Mithril, listed 7 years ago, never seem to make any positive income, every year incurred losses. The boss should close down the business, better put money in bank, where can earn some 3% of interest every year. Wonder why still a lot of people willing to buy this stock everyday, the price is 6 cent now. If anyone still want to buy Mithril, I think it's better to buy it's loan stock, Mithril-LA, it will mature next year, having 1.5 times securities value, hence no need to worry if the company can not repay full value of RM0.78 plus 3% for 2 years.

Wednesday, March 9, 2011

Aware of the Trend, chase the up trend, cut the lost trend

The bull run market already reach 2nd years aniversery, nobody know when is the end of bull run. Hence, if anyone going to continue trading in the stock market, he should at least know the company before invest. Read news paper, blogs, research and come out conclusion on which industry having the greatest potential to continue the up trend for the next 6 months. Technically, in 5 years time, if you can hit right only 6 times, with 100% profit every time, 50 thousand become 1 million is not a problem.

Cut loss is very important strategy, this may cause you miss a chance of making some money in certain time, but it will help to protect the pricipal from bigger loses in most of the case. Some people would like to know how much percent to cut loss, I think it would be wise to cut lost if a stock already down 10% from the peak. 

Also, need to learn the opposite way, chase the up trend, do not cut the profit, let the profit run. Once you understand concept, you can apply "buy the up and not buy the down" investment strategy. Only buy the up trend stock (the stock that making profit) will ensure you continue making profit. Buying a losing stock (down trend stock) may only incurred more loses, as you might already making the wrong decision to buying company that going to turn bad or management is not honest. The strategy can combine with 10 days moving average buying method, do not buy those stock below 250 days or 50 days moving average.  

Let the profit holding continue remain in your portfolio, no need to take the quick profit, there's nothing to worry for the winning stock. This will ensure you having the greatest profit in the bull run. 

Invest in stock market is similar prepare a war, preinvestigation on current scenario is a must, knowing when is the right time to trade, what's the current trend, plan and execute the strategy, combine with technical and fundamental analysis, do not panic or fear when something unexpected happen. This will increase your successful rate. 

Monday, February 28, 2011

Know the Company before you invest

Seven years ago, Petronas published an ad at one of local news paper, looking for someone who interested to run a petrol station. So I applied for one too. After several interviews, finally I was told my application was rejected (due to government's policy, they are more encourage "bumi" to become partner with them, as one of the interviewer told me) One of my friend told me that time, "why so difficult go and apply, just buy their shares, since you know they going to expend their business, few years later, you might earn more than what you earn from a petrol station operator.  At that time, PetDag share price was around RM4.50, and today the price is RM13.++, after one round of one for one bonus issue. 

Let's do the calculation, with principal of RM150,000, bought PetDag shares at RM4.50, I can buy 33,300 shares. Today, after bonus issues, the total shares will become 66,600. With last Friday's closing price of RM13, the total market value is RM865,800, yet to include yearly dividend. That is RM102,000 per year or RM8500+ per month. This is actually better than operate a petrol station, unfortunately I did not invest into PetDag's share though I had study the company and know them well from management to financial result. Currently they are the top retail petrol station at Malaysia, after overtook Shell's position last year.