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!
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