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!