There are too many knowledge in investing. Somehow, I found it quite interesting to
learn. For me, investing is considered as an art. It consists of different
element and the one of the element is to pick a good counter.
Besides than choosing a good stock, the most important part
is the process of handling and monitoring during the holding period. Look at
the INARI chart above. If you hold Inari since 2013, you will gain more than
300% return! It is a lot. The chart above is what normally a SIFU will share
with you for their successful investment.
However, how many of them will share with you how did they
handle the up and down of the whole holding period. Look at the chart below. I
had zoomed into the blue circle part which is during a huge correction and removed the candlesticks after the correction. Now, imagine you are facing
a major downtrend as the chart below, how will you handle this situation? The
stock price dropped from MYR3.00 to nearly MYR2.00! The downtrend last for more
than 1 month! Will you sell in fear? Or will you still continue to hold?
Nowadays, I believe there are very less investor who will
hold their stocks for more than a year. They are lack of discipline, either sells
in fear or affect by surrounding. On the hand, there are also many investors
who are not able to maximize the profit from the huge uptrend. Some had take profit after the stock drops for
few days, some at 20% gain, some at 50% gain and maybe some at 100% gain.
To become a very skillful
investor, it needs a lot of experience and practice. Frankly speaking, even
though if I was given a chance now to back to when INARI was only MYR0.60, I am
still not sure whether I can hold through the whole period. Ask yourself, can
your heart strong enough to handle the downtrend?
However, after you are able to survive through the downturn
of the share market, you will see the bright side once again. But, whether you
had enough bullets to come back again is another story.
Just to share some knowledge to help you to survive in
current market.
1) Capital management
In current volatile market, it is very hard to hold for long
term if you bought your stocks since last year. Even a very good fundamental
stock was also going down. In order to minimize the risk, you may lower down
the cash and shares holding ratio to around 50:50. If you are not confidence,
then you may choose to stay aside from the stock market. However, there are
still opportunities to earn money in current market, just that the possibility is
lower. There are still companies which act very strong, for example Lii Hen,
Top Glove, etc.
The first thing you need to do before stepping into shares
market is to PROTECT YOUR CAPITAL. It is the most important and essential part!
2) Stock selection
After you had your portion of fund ready, choose stocks
wisely. Think like a business man and
try to pick stocks with good catalyst. Focus Lumber is a good example. It is an
export oriented company which benefits from weakening of MYR. Even though its
price dropped from MYR1.70 to MYR1.20 in July, but now FLB come back to the
level of MYR1.65 again. Currently, there
are three sectors which you can consider to look into.
- Gloves
- Furniture
- Semi Conductor
When you pick a stock according to the current economy, you
are able to minimize your risk once again.
3) Cut loss
I believe this is the most crucial part where most investors
are not able to do it. After you bought in a stock, make sure you monitor it
from time to time and ALWAYS set a cut loss point. My preference cut loss point
is at around 5-7%. By setting cut loss point, at least you are able to protect
your capital and your capital will not be lock!
During 2008 economy crisis, I believe there are many people
hold their portfolio from beginning to the ending and then wait for the market
to recover. They will wait for their stocks to back to the breakeven price. It
might be half year, one year or even two years. Of course, there is no right or
wrong. Everyone had their own method of investing. But for me, you had wasted your time for few
years without getting anything. Time is money; I believe if you can choose
again, you will put all the money into fixed deposits.
On the other hand, those who manage their portfolio well
will have enough funds to collect when market started to recover. They can
easily gain more than 100%. FYI, GENTING dropped from MYR9+ to around MYR3
during 2008 and yet it managed to climb to MYR11+ after market recover. The
opportunity is just in front of you. It is just depends whether you have fund
to catch it or not. I believe those experienced and skillful investors are more
excited to wait for the market to crash, rather than in fear. It is a very good
opportunity for them.
Indeed, cut loss needs a lot of practice and discipline to
execute. Some people not willing to lose even just 0.5 cent. Cut loss is a must
in order to survive and protect your capital. FYI, the theory of 8:2 is
actually exists, whereby out of 10 investors, 8 are losing and only 2 are earning.
One of the reasons behind is they sell all the profitable stocks and keep all
the losing one.
Two scenarios:
ABC is holding 5 stocks and he sells 3 of them when it gains
10% profit. He keeps another 2 and it had accumulated up to 20% losses. Even
though his trade is 3 win 2 lose, but overall he is still losing 10%.
CDE is holding the same stocks as ABC but indifferent with
ABC, he cut loss when 3 of them drop 5%. He continues to keep another 2 profitable
stocks to maximize its return and now it paper profit had up to 25% each.
So, can you see the difference between ABC and CDE now?
As a conclusion, if you are able to apply the above three
things, I believe you had minimize your risk to the minimum level. So, start
from today let’s learn to become a discipline investor. If you are not satisfied
with your portfolio, stop hoping for the market to turn good. It’s time to
evaluate and make some changes to your portfolio.
Bear in mind, the opportunity only wait the person who is
ready! Hopefully it is useful.
Just for sharing.
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