Saturday, November 23, 2013

It's a bull market, why investor lost money?

We all know, the stock market all over the world is currently in the bull run (up tread) for more than 3 years since 2009. However, still we found many investors not making money, some even lost the money during this period. What's the reason?
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In the bull market, not all stock are in the same up tread. The reason is not all the business are making profit, some with good profit but some of them with profit decline, or even continue to make lost for few quarter. As an investor, don't forget when we buy a stock, we are actually buying part of the business. If you buy a business that was making loses, even the stock market continue to climb up, you may end up losing money.
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Predict the market. Many investor think that they can predict the market, they buy when stock index near 1,000 point, sell when the stock index hit 1,300. That's was 30% profit and hope to wait it come down to 1,000 point again. But the market is not going down, it when all the way to 1,500 points! Then he try to find another stock. Looking for new opportunity, however, most of good stocks are breaking record high, the only left, the penny stocks. Then he try to buy some of them. Few months later, the stock index up till 1,800 points, but the penny stocks, came with mix result, some going up and some going down.

The bull market is only happen after maths... you may say, “if I know the stock index will up from 1,000 to 1800 points, I will not sell my blue chip stock”. I can tell you, not many have the will to hold it even for one year. For example, when I recommend my client to buy Maybank at 2012, some of them start to buy. (http://bursastory.blogspot.com/2012/05/some-snippets-about-maybank.html) When the stock move till $9.00, many start to sell it already.
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Do you want know how long I hold my Maybank stock? Five years? Ten years? Let me tell you, it's longer than that, I started invest into Maybank since I was at Form Six, though I only have my small pocket money. Over the year, when the market went down, if I had extra cash, I will turn it into Maybank stock and never sell it, or sell very small % if the stock went up a lot. I don't remember how many times Maybank stock hit above $10 and went below $5... I also not remember how many times it gave bonus shares or how many times it gave Dividend and recently through Dividend Reinvestment Plan.

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This is one of the secret how to make money in long run, let the good business appreciate in value over the year and you will notice their dividend keep on increasing. If you are patient investors and would like to invest over the year, do come out a plan and consistently buying a stock every month or every quarter no matter stock price up or down. Of course, you may buy more if the stock price going down on that year. Try not to sell it, as the good business will keep on growing, you will know what's the meaning of investing after 5 or 10 years later!
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