Saturday, January 5, 2013

Why Investor lost money!


Many research report shows that only about 10% of investors are making money in stock market. Meaning to say, most of the investors are losing money in stock market! Few years back, I was not quite agreed with this statement. However, after I became a Dealer, from the record, seem it's true that almost 80% of “investors” are losing money.

Beside my personal experience, (listen to the rumours and buying the troublesome company), I think most of the “investors” have no idea if they are investing or speculating. For instant, rumours about ABC stock having some good news to be announced, people will rush in to buy ABC stock. However, ABC stock never go up, but XYZ stock going up. In this case, investor will change horse, by selling ABC stock and buy XYZ stock.

After buying, XYZ stock price become stagnant, but ABC stock price start to go up. In this case, should you change horse again or wait? This is the problem faced by most investors, what they buy never go up, but what never buy go up in price! In fact, if you keep on changing horse, this is not investing but speculating... nothing wrong with speculating. The problem is, the investor use the method of investing apply on speculating, that's the killing part, every goes wrong!

Investing is long term process, where one need to study the company's profit and agreed with company's management style then only put in the money to invest. After invest, if the stock price fall in price, investor dare to put more money to invest more shares at the low price. In this case, investors need few years to grow with the company. When the company start to bear fruit, the stock price will double or triple, and of course, follow by handsome dividend too!

However, speculating is the process of hit the right horse. If jump on a wrong horse, then change immediately and find another black horse. Once you find the right horse, stick to it until last drop of blood, jump down when the horse is tired. Meaning, for a speculator, he need choose the right stock, and let the profit run until momentum slow down, before decide to sell!

A friend of mine had brought a stock which went up nearly 200% recently. That day I meet him and I thought he earn a lot for this stock. But guess what? He sold the stock when it just move up 50%... the reason? He couldn't stand the “shaky horse” so he get out quickly. Oh boy! If you take a plane to US and weather is not so good, the plane will become shaky as well, do you jump down the plane before it reach the destination? Whether speculating or investing, as long as you know what you are doing, then it's fine. After all, they have the same goal, that is making money. “We don't care it's a black or white cat, as long as it's able to catch mouse, it's a good cat!”  
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