Wednesday, March 31, 2010

Fire and forget...the past will haunt you one day

I knew about Chartered semi conductors's delisting procedure since last year, when it was splashed across the newspaper. I did not think much of it until this week, where I learned that my parents actually had 1 lot of it bought @ 14? Why the question mark? It's because they did not know how much they had bought it since it was so long ago.

Since Sept 09, they had a lot of corporate activities. First a 27 rights for every 10 shares held. Then immediately after the rights, a share consolidation where every 10 shares will be reduced to 1 share. I just know that after all the activities, the initial 1000 shares turned into 300 shares (I do not know how come, but since my parent's can't be bothered, I'm also not bothered. Anyway, too late to do anything now). Finally, there is a cash offer to delist it at $2.66 per share.

The key point here is that an investment of $14k turned into $800. It's just plain negligence if you asked me.

The lessons are:

1. The market is not your mother. She is not here to give you milk but is here to milk you if you're not capable of it.

2. If you do not have any interest in stocks and shares nor is capable of updating yourself with market/business news, then it's better not to be greedy over the potential higher gains of having an equity position. It's wiser to be fearful over the potential losses of having an equity position.

3. Do not trust others to do the job for you. Others might not have the same purpose as you in investing. It's infinitely better to be in a position to make your own decision when the time calls for it.

4. Buy and forget is just plain stupid. You can quote people saying that the market will trend upwards. Yes, but did they also mention they are talking about market index, where the bad companies are weeded out and replaced by better companies constantly? If you're buying individual companies, you better buy and watch constantly, lest the pot of honey is stolen right under your very nose.



I always find the idea of Winnie the pooh dipping his paws into a pot of honey very fascinating. I wonder whose honey Winnie the BEAR had stolen it from. The bees? Imagine the bees cursing and swearing at this giant bear stealing their hard earned honey.

26 comments :

Anonymous said...

Hi LP,

Sound advise! Thankfully, there are index etfs now :)

The problem is, many still prefer the thrill of share picking, even though most of the time perform worse than index. And tend to take small profit and let loss escalate.

So much to learn in investment.

I held chartered and cut loss in 2007 at 1.42. It was during the launch of IPO of capital mall reit? I decided to take out some money from FD to buy it, it was within days I made 7% and switch to chartered. haha, by 2007, the reit went up to 4? 5? times? and I cut loss of chartered.

I managed to rid of almost all my stocks in spore and malaysia in 2007. That's when I realised most of the index stocks were the ones that saved my day. (ops, chartered was in the index too).

Then I made another mistake by changing my investment philosophy for years to follow my mentor partially. hahaha.. so much to learn abt self in investment.

Cheers!
HH

AK71 said...

Hi LP,

Chartered, I lost some money too. Had some at 60c... Wah, $14? OUCH! Make that a double OUCH!

financialfreedom said...

Ouch. That is quite a big loss for your parents.

I guess it is a lesson learnt for all of us. Thanks for sharing.

These were the exact thoughts that went through my head when the global financial crisis hit. Buy and hold strategy just seems so wrong to me sometimes...

CreateWealth8888 said...

No minimum experience or qualification is needed for investing or trading. It is so simple to do it and that may become a potential personal financial crisis to some.

Createwealth8888 said...

http://createwealth8888.blogspot.com/2010/01/where-does-money-in-stock-market-come.html

la papillion said...

Hi HH,

You're in chartered too? haha :) I think we should compile all our mistakes, should be a good guide for newbies and for self reference :)

Nah...I think some lessons are better learnt the hardway, haha

la papillion said...

Hi Ak,

You lost money on chartered too? Not as bad as my parents, I hope? :)

la papillion said...

Hi FF,

Buy and hold must have a certain reason behind the hold part. For my parents, I think they are buy and forget...pure negligence..

Hope I don't follow their mistakes, haha :)

Hi bro8888,

Thanks for sharing your articles with me :) You're right, it's so easy to start trading/investing that many are just leaping into the fire. Not wise not wise...

Anonymous said...

Hi LP,

Yes I was.. bought using that capital mall reit, 53K, at 2.6, dropped to 1.6 within days. I desperately cut loss, lost 20k. bought back all the way to 0.6, average cost 1.9, cut loss 1.42. Greedy & indecisive, touched 1.9+ few times but failed to cut then until start following news and read reports. realised mgt not honest, so whatever the price I had to let go. It was timely switched to good stock. on hindsight, its just plain luck. (timing).

My malaysia counters which I wrote off also bounced back, as I had bank & genting & few companies that did not go bust. (Its sheer luck as I didn't really know what I bought and lazy to liquidate it then)

The Singapore companies that I bought on recommendation that made a come back were st eng, kep corp, metro, smrt, citidev, kepple L,dairy farm. Most happen to be divy counters.

Those flushed down the drain were recommended from a friend who became a trader then: popular, samudera, Ljacob, (popular counters of the days then) and pennies from Kelvin han.

:) lots to learn from these "gurus" haha..

I have since reallocated my capital
. 5-10 yrs would be a good time to look back.

Cheers!
HH

Createwealth8888 said...

Kelvin Han has faithful followers but never follow his advice to cut losses?

If want to follow Guru, muust follow to the dot.

la papillion said...

Hi HH,

I think divy counters can ride the storm. Afterall, when it's a stable company giving dividend, the price will not drop too much because the yield will shoot up so much as the price comes down. It will be supported by investors gng for blue-chip yields, like bro8888 :)

Didn't know you follow kelvin han :)

Gosu Warrior said...

everything at the right price rides a storm

wealthyhabits said...

Great post. I lost about $10k previously because I invested with little knowledge. Now, I know better and am learning how to do it properly all over again.

Createwealth8888 said...

http://createwealth8888.blogspot.com/2010/04/losing-money-in-investing-or-trading-is.html

Createwealth8888 said...

Bees after losing their honey to the bear will still continue work hard to make honey and it may get stolen again by the bear. So are you the bees?

Anonymous said...

Hi LP,

I did :) thankfully on very small capital outlay just to see if he is "chun".

I also followed you and MW :) bought swiber,Honguo & pac andes.

As a novice, I still prefer to diversify & put the honey in different places.

Cheers!
HH

la papillion said...

Hi Gosu warrior,

Yea, price price price :)

Hi wealthyhabits,

We all lost money before. It's okay to be wrong but not okay to stay wrong :) I'm sure you're wiser now :)

la papillion said...

Hi bro8888,

Hopefully I'm no longer that kind of bee! I've sting now, and I'm not afraid to use it :)

Hi HH,

Wah, don't follow me lah. Follow mw is okay haha!

Createwealth8888 said...

hmm.. how to follow MW? He only announced after he accumulated enough. May be too late liao to follow. Best to do your homework.

Anonymous said...

Hi LP & createwealth8888,

You are right! cannot follow others blindly! even tho my purcahse price is lower than MW and LP because I waited. I had since sold most of them.

LP, that 330K massionette went up to 450K and above within 3 months .. Like u, I am waiting to get another place too. It can be a hdb massionette or a mickey house apt at 800sf. I think this time round, may have to wait quite long.

Cheers!
HH

Dou said...

No matter wat stock u play, it is always risky.

When u learn how to drive a car, the first thing the instructor teaches u is how to BREAK.

Therefore the first thing u should learn before buying stock is how to CUT LOSS. Trading is like possibility...no one is 100% accurate..no even Warren Buffet

la papillion said...

Hi HH,

Serious ah? So short a time can cheong so fast :) Really bull market for property..

la papillion said...

Hi Dou,

Haha, you're right :) Cut loss cut loss...preserve capital first and foremost :)

Createwealth8888 said...

It is not break but Emergency Break that the instructor teaching. If you can drive carefully and keep a good safety distance, you may not even need to apply any Emergency break as Break slowly is good enough.

Musicwhiz said...

Hi LP,

Sorry to hear about your parent's loss. Well look on the bright side at least it was only 1 lot and not more than that, as I read in the news that others had bought tens of lots back during the IPO and lost something like 6-digits!

Take it as a lesson learnt from your parents. It's better to learn from other's mistakes instead of your own.

Buy and Hold is a fallacy, as I've often said. It should be "Buy and Monitor", then SELL if the company cannot fulfill your screening criteria. It's a constant rebalancing act and one cannot afford to be complacent and rest on his laurels.

By the way, I think it should be "Emergency Brake", not "Break".

Cheers,
Musicwhiz

la papillion said...

Hi mw,

Yes...indeed a lesson for me.

I hope I won't repeat my parent's mistakes :)