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.