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. 
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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.
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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)
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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.
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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. 
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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.
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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.
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