Tuesday, January 26, 2010

Begone idealistic youth!

When I was younger, I was quite idealistic. This kind of idealism must have come from a limited world view due to underexposure to reality, or simple a sheltered kind of environment. As I get older, I realised that things don't always go according to what I think. Here are some things that was idealistic about:

1. I wanted to get 10-12% returns from the market per year, because I read from books that the equity returns over the long term is around 8% for average investors. And I'm above the average investors.

2. I thought that the market only have two kinds of stocks - dividends or growth stocks. Dividend stocks means that there is no growth anymore while growth stocks means that there is a huge chance of capital gains. I used to like growth and detest dividend stocks.

3. If you do your due diligence in FA, things will work out fine. Value is determined simply by certain key ratios like NAV. As such, I spend a great deal of time and energy to find out the perfect way to analyse a stock. I go around asking what are the ratios they use to determine value.

4. If you do your due diligence in TA, things will work out fine. Support is a good place to buy stocks and resistance is the good place to sell stocks. The problem is knowing a little bit of TA makes you yaya and cocksure. I can replace the word TA by FA and it's the same thing. I spent a good amount of time energy to find out the perfect setup that people use, the indicators and patterns that people see.

As I get older and wiser from the constant humbling experience from the market, I realise that besides black and white, things are usually grey. In fact, different shades of grey. Even though the examples I used are market specific, the same lessons can be applied to life. Actually, after reading so many books about the market, I really do not find any difference between the market and life in general.

The stock market is a faster tempo, rap version of life.


PanzerGrenadier said...


Don't give up that idealism. It should be tempered by reality but don't let your flame of idealism be completedly smothered.

Life becomes quite meaningless if you lose your ideals. :-)

Be well and prosper.

la papillion said...

Hi PG,

Hmm, idealism tempered with reality. Very interesting idea - never thought of that. I would associate idealism with naivety, not with dreams or goals.

Still, thanks for your feedback :)

Musicwhiz said...

Hi LP,

I guess time mellows all our expectations. What's most important is health, and a decent constant rate of return over the long-term!


Createwealth8888 said...

To make money from the stock market, you need to master 醉拳 and see the market in its drunken form and profit from it.

If market is just FA, all analysts are millionaires.

If market is just TA, Microsoft will be selling SmartChart 7 instead of Windows 7

Kyith said...

Drizzt here. hit the right spot there. and really health is important. sometimes in reality you realize your behavior is one part of the equation that books cannot teach.

Thien Rong said...

Interesting because I am still in the stage that still detests dividend stocks.

However, I am seeing more interviews on Sunday Times, websites where people are doing really well with conservative policy hunting dividend stock.

la papillion said...

Hi Drizzt and mw,

Ya, I believe health is impt too. Without health, I think all the money in the world is quite meaningless. I can imagine having a lot of money but no appetite to spend, haha

Cheers to gd health :)

la papillion said...

Hi bro8888,

Well said. Some pple are too scared to get at bottom and some are too happy to buy at the top. If you go drink together with the market, I think it's hard to make money. Must go drinking with mr.market, haha

la papillion said...

Hi Thien Rong,

Hmm, u might want to relook again. I find that stocks with dividends, you are not afraid to hold for extended periods of time because the dividends can be used to square off your capital.

Think about it, don't make the same mistakes as do I :)