When I started out in the market, I had no clues what is FA (fundamental analysis) and TA (technical analysis). I basically just buy based on broker's reports and hearsay. I remember scanning through CNA forum everyday to pick out those hot counters that people are punting on. Eventually I noticed that the top 30 volume in sgx are these weird little counters that looked like this: STI2750SGAeCW100128 and their % changes each day are superb. I started buying and selling these and eventually started out on TA so that I can understand better the movements of these warrants (notice the order that I learnt TA).
So I started on TA, work out alright and not as magical as I thought. You know, when you just started on TA, I'm looking out for the magic parameters, the magic indicators so that if I knew what those were, I could predict the market. I didn't realise that TA is just a way to see the market. There's no magic parameters and magic indicators to make big bucks. I gave up on it after some time when someone introduced me to value investing.
Hey, I know nuts about finance. I took an accounting module which I had no memory of having done before. I had to start from scratch. I started reading up on accounting and on general principles of investing. Again, I was looking out for some magic ratios to calculate the intrinsic value. Why am I looking for the intrinsic value? So that I can see if the price is below value and above value. Buy below value and sell above it, isn't it what this is all about?
There is no magic formula, no magic ratios to compute that illusive intrinsic value. You can easily be fooled by value, if you ask me. Can charts show you where the prices will be, 100%? Of course not. How about 50%? I don't know. In real life, the uncertainty is unknown and the probability undefined, so it might be for the best that we don't kid ourselves with the certainty and assurance of mathematics. Can you ascribe a certainty as to whether a fundamentally sound company will work out fine 30 years down the road too? We do what we can and hope for the best.
A trader can be conservative and an investor can be risky. The general literature seems to ascribe the fact that investors are safe. As long as you are a "long term investor" (you've no idea how much I'll cringe when I hear those words), you'll make money in the "long run". Nothing is further from the truth. The truth is, it depends on many things.
What I'm really trying to say here is that I've stopped trying to figure out where the next bagger is, where the next hot counter is and whether this school is better or that school is better. I'm in the market to make my returns better than safer instruments out there and I'm under no illusion that I'm doing this for any other reasons. I'm willing to try it out for myself to see if something works for me or not.
Personally, I like doing a bit of charting and a bit of analysing. A bit more of charting these days. I try my best not to be one of the blind men who tried to feel the elephant. The best trader I've seen tries to find out if the company is doing well now and in the future. The best investor I've seen tries to see if there is a bad signal in the charts before buying.
Whichever paths you take, I wish you well in the market. As my friend Panzer would said, be well and prosper. I couldn't agree with him more .
28 comments :
Well said bb, bang on in most aspects, especially about the long run, i get sick and tired of hearing that line, since in the long run, one can end up broke, waiting for the stock to go up.
V
Hi LP,
Yes, there's no such thing as a "long-term investor" actually. All investors are long-term by default. If not, you are considered a speculator.
And yes no guarantee on making money in the "long-run" just because you hold "long-term". It depends on margin of safety and corporate prospects and fundamentals. Impossible to articulate in one small comment. :P
Cheers,
Musicwhiz
so good....so much wisdom. by the way, which part of the elephant did you touch?
Gosh. Did u touch elephant's ball? Surely u tell it is elephant's balls even u are blindfolded. Ha Ha
haha...
We are in the market with one objective - to get better returns for risk taking.
The earlier is a joke. Now it is serious biz.
Practise the Five Elements Of Investing:
FA,
TA,
Money Management,
Risks Management,
Emotions Control
You are on the way to your investing Goals.
Hi V and mw,
Thanks for your comments :)
When pple tell me that they are long term investors, my first thoughts would always be that in the long run, we're all dead :)
Hi dream and bro8888,
I think the elephant I touched don't have balls. Might be a female :P
Bro8888, I like your 5 elements of investing. Very balanced, haha
3 M - Money, Method, Mind
Investing isn't that difficult. Good companies are obvious! I think you never need to read any financial statements to find good companies.
For example google, we all know it's a great company! The problem ? Everyone else too. So it is seldom cheap ! But keep it in your radar screen.
When wb bought coca cola, it's not selling at a cheap price, it's selling at a fair price. But he knew, it's ok to buy a great company at a fair price and hold it for more than 20 years.
So now 1st problem, 20 years?? Crazy.
2nd problem, where do you get the money to put aside for 20 years in the 1st place ?
so , at least for me, it's not a finance problem.
Hey LP,
I think TA and FAs works and are not opposing actually.
FA worked wonderfully for me. But haizz its too slow!!! Long term we get old and where got energy or time to spent.
Moving more towards TA now and entering as long as all the risk has been "humanly" accounted for first.
Hope to buy a 1 million freehold condo in 2012 and drive a porsche. No compromises.
SGDividends
Hi anon,
I read and re-read, but not sure what points you're trying to make across. Care to clarify? :)
Hi SGD!
I love the way you put it - "humanly accounted" for :) Wah, big ambitious eh?
Gd luck!
hi LP,
You need to differentiate between TRADING and INVESTING. Invest is for the long term, trading is for the short term.
I have a portfolio of stocks for investing. Selected through FA and enter/exit based on simple TA strategies that only give signals like once/twice a year.
Then a small portion with capital I can afford to lose, I have fun with trading, scalping, holding positions for less than a week. Analyzing through TA and honing my trading psychology.
But that's just my personality and style. In the LONG run, markets move up. It has been doing that since the markets started, and i don't see any reason it should stop doing that. So for most that do not bother to do home work, go for simple dollar cost averaging into a good index ETF. Safety in timing and diversification. In the long run, it will give pretty decent returns.
Hi La Papillion,
Good post. I should get down to learning TA as I only know FA.
By the way, I wonder if you'd be interested in an idea I have on the investment community in Singapore. I can be reached at js7970 (at) gmail.
Hi LP,
I agree with Lau.
http://en.wikipedia.org/wiki/Stocks_for_the_Long_Run Good data crunching by Jeremy Siegel. Historical data, of course.
Cheers!
HH
Hi Lau,
I concur with you on most points :) Thanks for sharing.
Regarding the portion of the capital for which you can afford to lose, well, let's just say that all my capital is precious and I've no capital that I can afford to lose, haha :)
Regarding the fact that historically, the markets had always gone up...Just want to pose a question. No need answers :) If a 80 yr old man said that in the past 80 yrs, he had never died before, so he expects that he would live for another 80 yrs, what do you think?
Hi HH,
Read his book...don't really like his data crunching actually, haha
Haha, good one LP.
If you can't lose, best not to trade, else your emotions will affect your profitability. Anyway, even investing also involves losses, before even making money already lose to commission, admin, handling, brokerage, GST, etc.
You can't compare apples with oranges. :) If in a world where death is a random occurrence, his expectations may not be wrong. He might be doing something right to survive 80 years and if he continues to do it correctly for the next 80 years, it is highly likely he will carry on to survive.
For good health, eat well with balanced diet, plenty of exercise, relax and sleep well.
For consistent investment return over your time frame,
Practise the Five Elements Of Investing:
FA,
TA,
Money Management,
Risks Management,
Emotions Control
At the end of your investing time frame, you may not regret what you have done.
Hi Lau,
haha, just kidding with you :) I'm just trying to say what you already knew - that the past does not necessarily lend itself to the future. Didn't they always say, that the trend is your friend, until it bends?
Hi LP,
Really? its one of my favourites :) haha, maybe because it supports my "long term" portfolio.
Been 40 yrs? I still drink coca cola.
Cheers to GDP & corporate growth!
HH
hey thanks for dropping by at my new blog :) i like ur choice of metaphor. helps newbie like me to understand a complex concept slightly easier, only limited by my own intelligence haha. just find ur site a little bit "dark" heheh.
btw, would u like to exchange links? my blog is new if u don't mind.
Hi lattemoney,
Sure, will do up the linkup with you. What do you mean by 'dark'? as in the contents or the choice of background? haha
thanks! i meant the background. it looks cool overall, but when i try reading the words, i find the background too dark and strenuous on the eyes. just my 2 cents :)
Hi Lattemoney,
Sorry, I'm a dark and disturbed person. Bright background dilates my eyes too much to read for me :) So sorry!
Hi LP
I tend to agree that LONG TERM is more a koyok line for financial intermediaries to move more sales of whatever instruments and asset classes that are "hot" and earn commissions for them.
Whilst value investing is important, I think one still has to practice some form of "timing".
The recent subprime fiasco revealed that if you are near retirement and need to cash out at the time when subprime hit, then where is the LONG TERM?
The reality is that you want to exit a significant amount of your portfolio NOW and to do so would be to suffer realised losses.
To not exit would be to eat grass or carry on working.
Thus, one still has to actively manage one's portfolio bearing in mind cash flow needs do change with age and lifestyle conditions.
In short, I think dogma and "LONG TERM" type of koyok doesn't provide sufficient nuances about the realities of proving income post working career.
Nowadays, I'm also keeping an eye out for a second career post 62, that is part of "investing" that is not just about picking stocks and putting aside money in investments but in developing skills that can feed us post 62.
Be well and prosper!
Learn to be a trader post 62 and by that time we may have little family financial commitment so we will be happy just to make enough money for weekly or monthly kopi and nasi lemak. It is not too difficult to make that kind of money from the market.
Post a Comment